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Reliance Damages General Principles Loss Of Chance Restitution Causation Remoteness Notes

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Reliance Damages, General Principles, Loss of Chance, Restitution, Causation, Remoteness The right to damages

* Whenever a party to a contract breaches it, the other party will be entitled to an award of damages as monetary compensation

The compensation principle (as above) Reliance Damages Commonwealth v Amann Aviation Pty Ltd (1991) 176 CLR 64 Relevant Facts: On 31/3/87 the two parties entered into a contract under which A was to provide coastal surveillance services for C. On 12/9/87 A commenced flights but it was obvious that they didn't have all the aircrafts required to perform their obligations nor that they complied with the specifications of the contract. On this date C terminated and 3 days later A treated this as repudiation, elected to terminate and sued for damages for breach. They were awarded 410k at trial but appealed to the FCA who increased it to 6.6m. C appealed to the High Court. The questions on appeal were how to treat A's prospect of having the contract renewed as well as the expenditures they incurred. These expenditures could not be easily recouped because the market value of the aircraft differed markedly from their cost due to being made for very specific use. Ratio (Deane J): The relevant principles ('reliance damages'): Where a plaintiff has incurred expenditure but it is impossible or difficult to establish the value of any benefits which the plaintiff would have derived from performance, considerations of justice demand that:


A plaintiff may rely on the presumption that the value of benefits obtained under the contract would at least be equal to total detriment which has been sustained in doing whatever was reasonably necessary to perform the contract


In cases where proof of value is impossible/difficult, it is presumed that the future net benefits which would have been derived from performance would be a value sufficient to recoup past next expenditure reasonably incurred in performance


This presumption will be rebutted if it is established that the plaintiff would have derived no financial benefit from performance or that financial benefit would be insufficient to recoup past expenditure


This presumption will not be rebutted by the fact that the benefit is may have included the chance of another remote benefit and it is speculation whether this would have been obtained OR if the perceived benefit is something of vaue only to the plaintiff (e.g. not in monetary terms)


If it is established that there would be no benefit derived would not be able to recoup expenditure - recovery will be limited to the extent it has not been established that expenditure would not have been recouped (i.e. reliance damages can be recovered in respected of wasted expenditure if the past expenditure exceeds ultimate loss)

? IF repudiation causes unforeseen detriments, these too are recoverable since they would not have been incurred

The appeal - The claim for reliance damages


Amann would have had a very good chance of having the contract renewed (considering it would have an advantage over all other competitors and the capital required) BUT it is impossible to speculate about the value of the contract if renewed or the value of the equipment if the Commonwealth performed.


Hence Amann is entitled to the presumption that the value of benefits would at least be equal to the expenditure incurred in obtaining the contract and performance on its part.


The difficulty in assessing chances of contract or resale makes it impossible for C to demonstrate the value of benefits derived - that being so Amann is entitled to recover reliance damages equivalent to wasted expenditure

Amann's loss of an 80% Chance


There was a 20% chance of cancellation by the secretary, but this, unlike the chance of the future contract, has not been factored as a contingency into net benefits. It is a superimposed risk that does nto flow from performance but from their breach.


In such a case the court must make an estimate as to what are the chances that a particular think...would have happened and reflect those changes


Hence the amount awarded to Amann must be reduced by 20%

Order: Appeal dismissed

Reliance damages - Where a plaintiff is unable to prove the value of the benefit expected to be gained the courts have held that the plaintiff can instead recover damages compensating the plaintiff for expenditure incurred in reasonable reliance on the contract being performed.

Damages for loss of a chance

* Courts have awarded damages compensating a plaintiff for the loss of a chance or opportunity of obtaining a benefit. Howe v Teefy (1927) 27 SR (NSW) 301 Relevant Facts: H leased a racehorse to T for three years. After three months H removed the horse from the plaintiff without justification. T brought an action for breach of contract, claiming for loss of opportunity to win prizes and to win bets placed by himself on the horse and to make profits supplying information to others. The jury awarded PS250, the plaintiff appealed. Ratio (Street CJ):


Damages for prospective winnings cannot be said to be too remote - they were within the reasonable contemplation of the parties since it was the sole object of the agreement to make money by racing the horse


Chaplin v Hicks - everything depends on a contingency, this is no reason for not awarding damages; this would deprive a plaintiff of anything beyond nominal damages where damages

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