CLAIMS FOR CONSEQUENTIAL PECUNIARY LOSS

1
CLAIMS FOR CONSEQUENTIAL PECUNIARY LOSS

• Richard Douglas SC
• John C Faulkner

2

• Introduction
• Character of consequential pecuniary loss
• Contract
• Tort
• (a) Negligence
• (b) Intentional Torts
• Misleading and Deceptive Conduct (TPA)
• Equity

3

• 68    Accordingly s5 (1) of the 1946 Act does not
  affect Oxley's right to recover damages for
  breach of contract. The amount of the damages
  would be measured by the damages and the costs
  Oxley was ordered to pay to the plaintiff and its
  own costs of the proceedings brought by the
  plaintiff against it, less any amount paid by
  Brambles on account of those damages and costs.

4

• 69    Brambles' claim in contract is not so
  clear. It was obliged to carry the goods to the
  Oxley depot and there deliver them on its truck.
  Oxley had the obligation of unloading. No doubt
  it was contractually obliged to do so so as not
  to damage Brambles' property or injure Brambles'
  employee or contractor. But the damages for
  breach of the contract which Brambles now claims
  to recover, being the amount of its liability to
  the plaintiff, were, in my opinion, too remote. I
  say this for the following reasons. The degree of
  probability that Oxley's breach of the contract
  would cause Brambles to suffer loss as the result
  of a claim against it by an employee of Oxley for
  injuries suffered was such as to make the loss
  wholly unpredictable... In my opinion, damages
  for the loss which Oxley suffered as a result of
  the injury to its employee and its liability as
  employer to that employee could fairly and
  reasonably be considered to arise according to
  the usual course of things from Brambles' breach
  of its contractual obligation to load and secure
  the goods with reasonable care and skill.
  However, I do not think that the possibility of
  Brambles' liability to Oxley's employee flowing
  from the consequence of Oxley's failure to unload
  the goods with reasonable care and skill could
  fairly and reasonably be considered to arise
  according to the usual course of things. Nor do
  I think such damages could reasonably be supposed
  to have been in the contemplation of both
  parties, at the time they made the contract, as
  not unlikely to occur .

5

• 70    In Wenham v Ella (1972) 127 CLR 454 at
  466-7 Walsh J said
• "Lord Wright in Monarch Steamship Co Limited v
  Karlshamns Oljefabriker (A/B) 1949 AC 196 went
  on to say that remoteness is in truth a question
  of fact' 1949 AC at 223 and he cited a passage
  from the speech of Lord Haldane in an earlier
  case, to the effect that the apparent
  discrepancies found in the statements of general
  principles governing damages are due mainly to
  the varying nature of the particular questions
  which have arisen in different cases and to the
  need to mould the expression of the general
  principles, in applying them to the circumstances
  of particular cases. Lord du Parcq expressed
  agreement with what Lord Wright had said and
  added 1949 AC at 232
• Circumstances are so infinitely various that,
  however carefully general rules are framed, they
  must be construed with some liberality, and not
  too rigidly applied. It was necessary to lay down
  principles lest juries should be persuaded to do
  injustice by imposing an undue, or perhaps an
  inadequate, liability on a defendant. The court
  must be careful, however, to see that the
  principles laid down are never so narrowly
  interpreted as to prevent a jury, or judge of
  fact, from doing justice between the parties. So
  to use them would be to misuse them.' "

6

• 71  In my opinion, justice between the parties
  requires that the loss suffered by Brambles in
  consequence of Oxley's breach of contract be
  treated as too remote. Accordingly, the claim by
  Brambles against Oxley in contract must fail.

7

• The rule of the common law is that where a party
  sustains a loss by reason of a breach of
  contract, he is, so far as money can do it, to be
  placed in the same situation, with respect to
  damages, as if the contract had been performed.

8

• The award of damages for breach of contract
  protects a plaintiffs expectation of receiving
  the defendants performance. That expectation
  arises out of or is created by the contract.
  Hence damages for breach of contract are often
  described as expectation damages.

9

• Where two parties have made a contract which one
  of them has broken, the damages which the other
  party ought to recover in respect of such breach
  of contract should be such as may fairly and
  reasonably be considered either arising
  naturally, i.e., according to the usual course of
  things, from such breach of contract itself, or
  such as may reasonably be supposed to have been
  in the contemplation of both parties at the time
  they made the contract, as the probable result of
  the breach.

10

• For this purpose, knowledge possessed is of
  two kinds one imputed, the other actual.
  Everyone, as a reasonable person, is taken to
  know the ordinary course of things and
  consequently what loss is liable to result from a
  breach of contract in that ordinary course. That
  is the subject matter of the fist rule in Hadley
  v Baxendale. But to this knowledge, which a
  contract-breaker is assumed to possess whether he
  actually possesses it or not, there may have to
  be added in a particular case knowledge which he
  actually possess of special circumstances outside
  the ordinary course of things of such a kind
  that a breach in those special circumstances
  would be liable to cause more loss. Such a case
  attracts the operation of the second rule so as
  to make additional loss also recoverable.

11

• The crucial question is whether on the
  information available to the defendant when the
  contract was made, he should, or the reasonable
  man in his position would, have realised that
  such loss was sufficiently likely to result from
  the breach of contract to make it proper to hold
  that the loss flowed naturally from the breach or
  that loss of that kind should have been within
  his contemplation. (our emphasis)

12

• (A) type of damage which was plainly foreseeable
  as a real possibility but which would only occur
  in a small minority of cases cannot be regarded
  as arising in the usual course of things or be
  supposed to have been in the contemplation of the
  parties.

13

• (T)here has been a tendency to play down the
  distinction between reasonable foreseeability and
  reasonable contemplation as semantic only.
  However, I think that the difference is a real
  one which results in a significant narrowing of
  liability. The word contemplation seems to be
  used in Koufos in the sense of thoughtful
  consideration or perhaps having in view the
  future. It emphasises that, if the parties had
  thought about the matter, they would really have
  considered that the result had at least a
  serious possibility of occurring. The actual
  decision in Hadley v Baxendale bears out the
  proposition that the contemplation test limits
  the area of potential liability. For it is surely
  reasonably foreseeable as a serious possibility
  that a millshaft was required for the operation
  of the mill and that a launderer and dyer might
  have special contracts with a lucrative profit
  margin. Yet the losses to the plaintiffs arising
  from those circumstances were not recoverable
  (our emphasis).

14

• the defendant in Victoria Laundry, in breach of a
  contract to deliver a boiler to a working
  laundry, may be liable for the loss of use of
  that boiler in the day-to-day operations of the
  laundry or for hiring costs of a replacement
  boiler. But the defendant was not, without
  actual knowledge, liable for the consequential
  loss of profit on a particularly lucrative
  contract with a third party due to the late
  delivery.

15

• in Hadley v Baxendale the defendant was not
  liable for the consequential pecuniary loss of
  profits sustained due to a delay in delivering
  the broken millshaft to the boilermaker to be
  used as a model for a new one, they not being
  aware, nor ought they have been, that the shaft
  was actually required to operate the mill.

16

• (T)he law is conscious of the injustice of
  visiting the party in breach with the
  consequences of a loss that was not within the
  partys reasonable contemplation when
  contracting.

17

• (T)he reason for this is because, were it
  otherwise, the defaulting party may have lost the
  opportunity to make an informed decision as to
  whether or not to have accepted the risk. so
  as to decide whether to accept the risk would
  include having sufficient information to assess
  whether insurance cover for risks concerned ought
  to be obtained.

18

• The requirement of foreseeability is no obstacle
  to the award of damages, calculated by reference
  to the appropriate interest rates, for loss of
  the use of money. Opportunity cost, more so than
  incurred expense, is a plainly foreseeable loss
  because, according to common understanding, it
  represents the market price of obtaining money.
  But, even in the case of incurred expense, it is
  at least strongly arguable that a plaintiff's
  loss or damage represented by this expense is not
  too remote on the score of foreseeability. In
  truth, it is an expense which represents loss or
  damage flowing naturally and directly from the
  defendant's wrongful act or omission,
  particularly when that act or omission results in
  the withholding of money from a plaintiff or
  causes the plaintiff to pay away money. (emphasis
  added)

19

• The point is that the loss of the use of the
  money paid away is so directly related to the
  wrong that the loss cannot be classified simply
  as due to the late payment of damages. See also
  General Securities Ltd. v. Don Ingram Ltd. (1940)
  SCR 670 (the plaintiff recovered a business loss
  incurred as a borrower in consequence of the
  lender's breach of obligation to advance the
  money) and Pelletier v. Pe Ben Industries Company
  Ltd. (1976) 6 WWR 640 (damages awarded on a
  contract to purchase a truck in consequence of
  the defendant's wrongful dismissal of the
  plaintiff from his employment). These cases
  proceed on the proposition that the cost of
  borrowing money to avoid a loss caused by a
  breach of contract is recoverable and not too
  remote. (emphasis added)

20

• It is not necessary for us to say that the
  Liesbosch was wrongly decided. But it is clear
  that the law has moved on, and that the correct
  test of remoteness today is whether the loss was
  reasonably foreseeable. The wrongdoer must take
  his victim as he finds him talem qualem, as
  Lord Collins said in the Clippens Oil case 907
  AC 291, 303. The rule applies to the economic
  state of the victim in the same way as it applies
  to his physical and mental vulnerability. It
  requires the wrongdoer to bear the consequences
  if it was reasonably foreseeable that the injured
  party would have to borrow money or incur some
  other kind of expenditure to mitigate his
  damages. (emphasis added)

21

• 146    The Deceased's suicide in response to the
  proceedings was "quite unlikely according to the
  natural and ordinary course of things". It was a
  fortuitous event, because no reasonable person
  would have thought of it as being within "the
  range of possible consequences" after the 27
  February 1993 accident for a person of normal
  susceptibility. The same is true of the
  Deceased's depression after 24 April 1998.

22

• 147    Counsel for the Plaintiff knew of no
  instance in his experience when a party to
  litigation had committed suicide in consequence
  of the manner in which that party was treated by
  the legal representatives of an opposing party.
  The law reports reveal no instance of a plaintiff
  in civil litigation doing this. Nor do they
  reveal any case in which a plaintiff in civil
  litigation developed a psychiatric illness by
  reason of the behaviour of the opposing legal
  representatives. Since these events happened in
  this case, they are obviously capable of having
  been foreseen, in the sense that they were not
  beyond the realms of all possibility in relation
  to a person of the Deceased's susceptibility. But
  they were not reasonably foreseeable for a person
  of normal susceptibility. They were reactions to
  the hearing, but irrational reactions. They were
  reactions beyond what a person in the Defendant's
  position on 27 February 1993, applying criteria
  of reason to a person of normal fortitude, would
  contemplate. In ordinary experience people of
  normal fortitude only commit suicide because they
  are suffering great physical, mental or emotional
  stress. Litigation generates stress of a kind in
  persons of normal fortitude, but not stress of a
  magnitude or kind making either suicide or a
  psychiatric illness a reasonably foreseeable
  response. Litigation can generate
  disappointment, outrage, distress, worry,
  anxiety, anger and shame in persons of normal
  fortitude, but these reactions are qualitatively
  different from psychiatric illness or suicide.
  (our emphasis)

23

• conversion is a tort of strict liability
  and, as such, is to be found at the lower or less
  culpable end of what Lord Steyn in Smith New
  Court called a sliding scale from strict
  liability to intentional wrongdoing. Negligence
  of course is to be found midway along the sliding
  scale, for it requires fault in the sense of the
  failure to measure up to the standard of
  reasonable care. His Lordship (in whose
  judgement on the measure of damages three other
  members of the House of Lords agreed) was of the
  view that there was a justification for
  differentiating between the extent of civil
  liability for civil wrongs depending where in
  that sliding scale the particular civil wrong
  fitted in. It might, therefore, be said that a
  more stringent test of remoteness, satisfied only
  by express notice or special knowledge, is
  required for conversion than for negligence (our
  emphasis)

24

• Thus some more stringent test of remoteness than
  reasonable foreseeability is required for the
  strict liability tort of conversion. The obvious
  candidate seems to me that stated in France v
  Gaudet, namely, express notice or special
  knowledge.

25

• Certainly, as at present I incline generally to
  the views taken by Batt JA with respect to
  remoteness of damage and in particular his
  opinion that reasonable foreseeability is not the
  appropriate test in the case of conversion. If,
  however, the true test depends rather more upon
  notice or knowledge (as his Honour opines) it may
  be that the formulation of the test as propounded
  by Callaway JA will turn out to be more durable
  than the actual words used in France v Gaudet.

26

• I also agree with his Honour speaking about
  Batt JA that the measure of damages for
  consequential loss in conversion is not
  reasonable foreseeability. Liability in
  conversion is strict like liability for breach
  of contract, which is also strict, it lies at the
  opposite end of the spectrum from deceit and is
  quite unlike negligence, The ordinary measure is
  the value of the chattel and consequential
  damages require some knowledge (or express
  notice) on the part of the defendant of facts
  whereby additional loss of the relevant kind is
  likely to result. To put the point another way,
  the consequential loss must be of a kind that
  should have been within the contemplation of the
  defendant as a likely consequence of having
  regard to the defendants knowledge (or express
  notice) of the facts. There is, to that extent,
  a closer analogy with damages for breach of
  contract than with damages for negligence. The
  dicta in France v Gaudet were well founded
  (emphasis added).

27

• It is not necessary to determine whether notice
  is or is not necessary in trover, in order to
  enable a plaintiff to recover special damage
  which cannot form part of the actual present
  value of things converted, as in the case of
  withholding of the tools of a mans trade, in
  which the damage arising from the deprivation of
  his property is not, and apparently cannot be
  fixed at the time of the conversion of the tools.
  In that case, however, we are inclined to think
  that either express notice must be given, or
  arise out of the circumstances of that case. The
  point is not determined in Bodlley v Reynolds
  but we think that there must have been evidence
  of knowledge on the part of the defendant that in
  the nature of things inconvenience beyond the
  loss of the tools must have been occasioned to
  the plaintiff (emphasis added).

28

• The plaintiffs face a second difficulty in
  attempting to support the assessment of damages
  in reliance upon the loss of profit on sales to
  Mr Taschners company. There was no evidence
  that the defendants were ever informed by the
  plaintiffs that the purlin machine was required
  by the plaintiffs for the purpose of a profitable
  contract with Mr Taschners company. Indeed,
  there is no suggestion that the plaintiffs put
  the defendants on notice at all as to the purpose
  for which the purlin machine was required at the
  time of the plaintiffs demand for the return of
  the goods. In these circumstances, the
  plaintiffs failed to establish a basis on which
  they could be awarded damages for the profits
  foregone in fulfilling any orders from Mr
  Taschner.

29

• Indeed the very fact that ss 82 and 87 may be
  applied to widely differing contraventions of the
  Act, some of which can be seen as inviting
  analogies with torts such as deceit (eg s. 52) or
  with equity (eg. 51AA) but others of which find
  no ready analogies in the common law or equity,
  shows that it is wrong to limit the apparently
  clear words of the Act by reference to one or
  other of these analogies.

30

• This is not to say that no help can be had from
  the common law in deciding what damages may be
  allowed under s. 82 in cases of conduct
  contravening s. 52. Very often, the amount of the
  loss or damage caused by a contravention of s. 52
  will coincide with what would have been allowed
  in an action for deceit.

31

• The remedy does not depend either on the
  principles loss or on whether the principle
  could have earned the gain.

32

• he who bargains in a matter of advantage with a
  person placing confidence in him is bound to show
  a reasonable use has been made of that confidence