WASTED EXPENDITURE AND CONTRACT DAMAGES

THE High Court of Australia has decided many of the common law's leading cases involving "reliance damages" for breach of contract, with the latest in the series being Cessnock City Council v 123 259 932 Pty Ltd. [2024] HCA 17 ("Cessnock").This note focuses on whether "reliance damages" are a separate independent category of loss, as suggested by Coulson L.J. in Soteria Insurance Ltd. v IBM United Kingdom Ltd. [2022] EWCA Civ 440, [2022] 2 All E.R. (Comm) 1082, at [84], [85].Although Gageler C.J. agreed with that suggestion, the other six judges of the High Court of Australia disagreed and found that these damages are based upon an evidentiary presumption or principle which arises in certain circumstances to allow the measurement of expectation loss by reference to wasted expenditure, reaching a position equivalent to that in orthodox English law (at [152]-[154]) (see e.g.Omak Maritime Ltd. v Mamola Challenger Shipping Co. [2010] EWHC 2026 (Comm)).The dispute arose when Cessnock granted 123 259 932 Pty Ltd (formerly known as "Cutty Sark") a 30-year lease over a portion of Cessnock Airport, to operate from the date of subdivision of the land.In the contract, Cessnock promised to take all reasonable efforts to obtain permission to subdivide by 30 September 2011.It was also the authority responsible for approving the plan of subdivision.In the meantime, Cutty Sark was given a licence to occupy the land and the council gave it permission to build an aircraft hangar.The hangar was constructed at a cost of over A$3.6m, and Cutty Sark began to operate a business conducting joy flights and acrobatic training