Introduction to Damages, Causation and Scope of Liability PDF

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Damages (Introduction, Causation and Scope of Liability) Introduction to Damages: What is a Remedy? (Macquarie English Dictionary, 4th ed) o Something that cures or relieves a bodily disorder; a healing medicine, application or treatment; o Something that corrects or removes an evil of any kind. o Law. Legal redress; the legal means of enforcing a right or redressing a wrong. o Solution to a legal wrong o ubi ius ibi remedium → “wherever there is a right, there is a remedy” o Remedy is the thing that MOST interests the client

o

Policy Objectives of Remedies: o o o o o

Compensation Compulsion (order to perform) Vindication Punishment Restitution

Compensation o o o

Reversing detriment that has occurred Common law damages: available for legal wrongs, such as breach of contract and tort. Equitable compensation available for equitable wrongs (not covered in this subject).

Compulsion o o

Being ordered to perform an obligation or to refrain from engaging in a wrong Specific performance; injunctions

Vindication o o o o

Public recognition and affirmation of legal rights Declarations; nominal damages Punishment Restitution

Punishment o o

The infliction or imposition of a penalty as retribution for certain wrongs. Exemplary damages; aggravated damages.

Restitution o o o

Overlap with compensation. Focus on the defendant gains, rather than plaintiff’s loss. Common law restitutionary principles (unjust enrichment)

Legal source: Common Law: Developed an applied by the courts of common law (King’s Bench, Common Pleas, Exchequer) o Limited remedies: usually just damages. o Consequence: damages are a legal right. Not subject to discretion of the court. o Common law actions and remedies became too rigid o Money paid after the events can only achieve so much

o

Equity (Chancery): • • • •

Informed by religious authority and based on “conscience” rather than formal rules Prepared to look at the substance of the case. Remedies were practical and flexible: specific performance, injunctions, account of profits, rescission on terms, etc. Consequence: the conduct of the defendant scrutinised and remedies are not granted as of right. o Must persuade the court to exercise its discretion in his/her favour o Before doing so the court with scrutinise the conduct of both parties and all the circumstances of the cases to evaluate whether good conscience requires an equitable remedy

Exclusive Jurisdiction: • • • •

Equity acts without any reference to common law Comprised solely of equitable rights and remedies The principles that developed separately from the common law and which are not recognised by the common law (eg, trusts). If a plaintiff asserts an equitable right, the remedy must be equitable; a court of common law cannot provide a remedy.

Auxiliary Jurisdiction (Equity): • •

The principles that developed as a supplement or an alternative to the rigid rules of the common law. In response to a common law wrong à where common law remedy isn’t sufficient to meet the justice of the case o Classic remedies i.e specific performance and injunctions

Judicature Acts/Fusion Fallacy: o o o o

Streamlined the administration of justice by creating the single High Court of Justice It is important to recognise that the jurisdictions are separate, albeit they interact a lot. The Judicature Acts only fused the administration of the principles into a single court. “... the two streams of jurisdiction, though they run in the same channel, run side by side and do not mingle their waters.” o (W Ashburner, Principles of Equity, 2nd ed, Butterworths, London 1933 p18)

Statute: • • •

Developed in response to the remedies of the general law, which had not kept up with modern standards of justice. Typically, very flexible and allow for individualised outcomes not possible at general law. Courts look to the history of the general law to determine how to exercise statutory remedies

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The source of the remedy will determine: o When it is available; and o How it will be applied You must be aware of the differences between the jurisdictions and apply them appropriately.

Theories: Monism: • • • • •

No point in having a legal right if there is no remedy The remedy and the cause of action are inseparable. Promotes thinking of remedies in terms of causes of action. Cause of action determines the remedy available Examples: damages are assessed by cause of action; establishing the cause of action in negligence is bound up in the remedy.

Dualism: • • •

Causes of action and remedies are separable and two-staged. Once the cause of action is proved, then judge can choose a remedial response. Examples: both legal and equitable remedies are available for tort and contract; statutory remedies; litigation practice

Alternative and Cumulative Remedies: • •

•

Another consequence of the piecemeal development of the general law is that the same interest may be protected by multiple causes of action and remedies. Alternate remedies o More than one remedy is available o They are incompatible and one must be chosen by the time judgment. Cumulative remedies o More than one remedy is available o They a complimentary and can both be ordered

Alati v Kruger (1955) 94 CLR 216 • Contract: breach of warranty • Tort: deceit • Remedies: • Affirm the contract and sue for damages for breach of warranty • Rescind the contract and sue for damages for the tort of deceit • Affirm the contract and sue for damages for the tort of deceit • (Post 1974) Misleading and deceptive conduct: statutory remedies

Damages General: Introduction: • • •

Damages for tort or contract are a legal right. Purpose of damages is compensation. The plaintiff must not be put in a position better than they would have been in had the wrong not occurred.

Contract/Tort: •

Contract: the law of voluntarily assumed legal obligation.

• •

Tort: obligations imposed by law. How does the area of law impact on a claim for damages?

Contract: Robinson v Harmon (1848) 154 ER 363 ‘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.’ (365, Parke B) Tort: Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 ‘ … where an injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation." (39, Lord Blackburn) Contract/Tort: Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 ‘In contract, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed – he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss). In tort, on the other hand, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to reliance loss).’ (11 – 12, Mason, Wilson and Dawson JJ) ‘Because the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation. If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods in which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the plaintiff can establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed. … That lost benefit is referrable to opportunities foregone by reason of reliance on the misrepresentation. In this respect the measure of damages in tort begins to resemble the expectation element in the measure of damages in contract, save that it is for the plaintiff to establish that he could and would have entered into the different contract.” (13, Mason, Wilson and Dawson JJ) In either case, it’s necessary to compare: • •

The actual position of the plaintiff after the wrong; with The position that the plaintiff would have been in had the wrong not occurred

then award a sum of money that reflects the difference between the two positions. There is not one unified code of rules that apply to damages in both tort and contract, so it’s necessary to consider them separately. Commonwealth v Amann Aviation Pty Ltd (1992) 174 CLR 64 ‘While the general principle is the same in both contract and tort, the rules governing its application in the two areas may differ in some circumstances. Those differences are largely the

result of historical considerations in that they reflect distinctions between causes of action rather than reasoned development or exegesis of the law … They are of diminishing significance for most purposes … Nonetheless, the stage has not been reached where they can be ignored …’ (116, Deane J)

Imprecision: Assessment of damages can be imprecise and requires putting a dollar value on things that are impossible to value. Examples:  

Loss that may or may not accrue in the future Compensation for pain and suffering, loss of amenities, etc

Consider the context in which a court assesses damages:

  

It is easier to assess loss that has actually accrued between the wrong and the trial, as it has actually occurred. Assessment of likelihood of loss accruing after the trial depends upon the quality of the evidence and prediction. Courts readily acknowledge that their approach will likely be inaccurate.

Lim Poh Choo v Camden and Islington Area Health Authority [1980] AC 174 ‘The course of the litigation illustrates, with devastating clarity, the insuperable problems implicit in a system of compensation for personal injuries which (unless the parties agree otherwise) can yield only a lump sum assessed by the court at the time of judgment. Sooner or later … a court … has to make an award of damages. The award, which covers past, present and future injury and loss, must, under our law, be of a lump sum assessed at the conclusion of the legal process. The award is final; it is not susceptible to review as the future unfolds, substituting fact for estimate. Knowledge of the future being denied to mankind, so much of the award as is to be attributed to future loss and suffering (in many cases the major part of the award) will almost surely be wrong. There is really only one certainty: the future will prove the award to be either too high or too low.’ (182 – 183, Lord Scarman) Fink v Fink (1946) 74 CLR 127 ‘Where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat the only remedy it provided for breach of contract, an award of damages.’ (143, Dixon and McTiernan JJ)

Flexibility: Wenham v Ella (1972) 127 CLR 454 ‘In my opinion the error that is contained in the argument for the appellants consists in treating rules which constitute useful guidance in the ascertainment of damages as rigid rules of universal application, instead of treating them as prima facie rules which may be displaced or modified whenever it is necessary to do so in order to achieve a result which provides reasonable compensation for a breach of contract without imposing a liability upon the other party exceeding that which he could fairly be regarded as having contemplated and been willing to accept.’ (466, Walsh J)

Date of Assessment: Right to damages accrues when the cause of action is complete:   

Contract: day of breach. (Actionable per se.) Negligence and nuisance: when plaintiff suffers loss. (Damage is the gist of the action.) Trespass: when the trespass occurs. (Actionable per se.)

Typically, the damages are assessed at the date the cause of action accrues. Johnson v Perez (1988) 166 CLR 351 ‘There is a general rule that damages for torts or breach of contract are assessed as at the date of breach or when the cause of action arises. But this rule is not universal; it must give way in particular cases to solutions best adapted to giving an injured plaintiff that amount in damages which will most fairly compensate him for the wrong he has suffered. … One established exception to the general rule relates to the assessment of damages for personal injury.’ (355 – 356, Mason CJ) ‘As I noted earlier, the choice of an early date for assessment leaves the injured party exposed to the deleterious effects of inflation. True it is that legal interest may be awarded from the date of breach, but this is often too low to remedy the effects of inflation and the loss of the use of the money … However, the preference for an early date is motivated … by concerns about mitigation. This requirement of mitigation can in turn be explained in part by notions of fairness to the party at fault. Once the injured party learns of the breach, he can minimize the loss for which the other will be required to compensate by immediately purchasing a replacement.’ (356, Mason CJ) Gagner Pty Ltd trading as Indochine Cafe v Canturi Corporation Pty Ltd [2009] NSWCA 413 (16 December 2009) [51] The certainty of that principle concerning the time as at which damages are assessed has now been eroded. … … [54] It follows that, even though a cause of action for breach of contract has accrued at the time the breach occurs, it cannot now be said that there is an accrued right at that time to receive any particular sum of damages. That is because it must await the trial to decide what is the most appropriate way, in light of events then known, to give effect to the compensatory principle of damages. (Campbell JA)

Once and For All: The plaintiff has one chance to plead their case. Once an award is made, it is final and completely disposes of the cause of action. Lim Poh Choo v Camden and Islington Area Health Authority [1980] AC 174 ‘The award, which covers past, present and future injury and loss, must, under our law, be of a lump sum assessed at the conclusion of the legal process. The award is final; it is not susceptible to review as the future unfolds, substituting fact for estimate.’ (183, Lord Scarman)

Types of Damages: Different types of damages     

Nominal damages Contemptuous damages Ordinary damages Aggravated damages Exemplary damages

Nominal Damages: New South Wales v Stevens [2012] NSWCA 415 (12 December 2012) [26] Critically, nominal damages are not "real damages" and, in particular, they are vindicatory, not compensatory. They are awarded because the plaintiff has established the liability issue, being the breach of contract, in the senses explained by Ogus and McGregor, but has not established that any damages flowed from that breach. Accordingly they are not "monetary compensation" and do not fall within the meaning of "an award of personal injury damages" in the Act.” (McColl JA) … [68] In Australia, the amounts awarded as nominal damages have not been uniform, but have always been minimal: see, for example, Luna Park (one shilling); Motium v Arrow Electronics ($100).

Contemptuous Damages: Medic v Kandetzki [2006] VCC 705 (13 June 2006) [62] As I have already stated, I find the plaintiff to be a person unworthy of belief on his oath. I find that the plaintiff has manufactured the florid nature of the assault and battery, and that this proceeding has been maliciously brought by him. I am firmly of the view that this proceeding should never have been instituted. In order to show the Court's disapproval of the plaintiff's conduct, I propose to award contemptuous damages. These damages are appropriate to indicate a technical victory in that the plaintiff has proved that he has been assaulted by being fleetingly put in fear and that, technically, he was the subject of a battery by the defendant placing his hands on the plaintiff's waist, but no injury, loss or damage has flowed from the assault or battery. [63] Contemptuous damages have traditionally been in the sum of "the lowest coin of the realm". In this case I consider it appropriate to order that the defendant pay to the plaintiff the sum of five cents. I also exercise my discretion not to award costs to the plaintiff by reason of his dishonest and vindictive conduct in instituting and prosecuting this proceeding. (Hogan CCJ)

Ordinary Damages: 

Substantial compensation for proved loss

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Necessary to compare the actual position of the plaintiff after the wrong with the position s/he would have been in had the wrong not occurred.

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Multiple “heads” of loss/recovery may be claimed, but they will be scrutinised by the court to ensure that the plaintiff is not put into a better position than they would have been in had the wrong not occurred.

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Typical heads of loss:

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Personal injury

o

Property damage

o

Economic loss

Objective = compensation.

Sharman v Evans (1977) 138 CLR 563     

$150-175,000 for future nursing care; $6,000 for shortened life-expectancy; $25,000 on agreed special damages less than $100,000 for non-economic loss A certain amount (not made clear in the judgment) for lost earning capacity.

Sharman v Evans (1977) 138 CLR 563 ‘Because we conclude that the defendant should not be required to compensate the plaintiff on any basis other than that of a lifetime in hospital it follows that the plaintiff's loss of the enjoyment and amenities of life will be the greater. She must be regarded as wholly deprived of the everyday pleasures of living in the environment of her own home. Instead she will be exposed to a lifetime of institutional life. … [T]his be reflected in the damages to be awarded under the conventional head of pain, suffering and the loss of enjoyment and amenities of life.’ (574 – 575, Gibbs and Stephen JJ) ‘Both principle and authority (Skelton v. Collins) establish that where, as here, there is included in the award of damages for future nursing and medical care the plaintiff's entire cost of future board and lodging, there will be overcompensation if damages for loss of earning capacity are awarded in full without regard for the fact that the plaintiff is already to receive as compensation the cost of her future board and lodging, a cost which but for her injuries she would otherwise have to meet out of future earnings.’ (576, Gibbs and Stephen JJ) ‘What is to be avoided is double compensation and … it is not a question of estimating the plaintiff's likely future costs for board and lodging and treating them as an outgoing which the consequences of the defendant's tortious act have now spared her from making; that is a notion which is as distasteful as it is misconceived. Rather is it a matter of her already having been compensated for future board and lodging as a component of hospital expenses, so that to disregard this and award the full sum for lost earning capacity, part of which would be used to provide the very item of board and lodging already compensated for, would be to award compensation twice over. Accordingly some no doubt fairly arbitrary proportion ...