Reliance Damages in Australian Contract Law: The Case of Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17 and Its Implications
Abstract: This article reviews the landmark High Court case of Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17, which has significant repercussions for the doctrine of reliance damages in Australian contract law. It contrasts this case with the seminal Commonwealth v Amann Aviation Pty Ltd decision, delineates the practical implications for businesses, and explicates the judicial methodology in assessing reliance damages.
Introduction: The High Court of Australia’s judgement in Cessnock City Council v 123 259 932 Pty Ltd has thrust reliance damages into the epicentre of contract law discourse. This case clarifies the recovery of costs incurred in anticipation of a contract that was ultimately breached, setting a precedent for future claims.
Background: Reliance damages are sought when a party incurs expenses in anticipation of a contract that is later breached. The injured party seeks to be restored to the position they were in before the breach. The Cessnock City Council case involved a dispute over a failed development plan for an airport, leading to significant legal debate on reliance damages.
Comparison with Previous Cases: The Cessnock City Council case builds upon the principles established in Commonwealth v Amann Aviation Pty Ltd, where the High Court awarded reliance damages for wasted expenditure due to the Commonwealth’s repudiation of a contract. The Cessnock case further clarified the presumption of recoupment and the burden of proof, making it a notable development in contract law.
Implications for Contract Law: The decision has several implications for contract law in Australia:
It reinforces the availability of reliance damages.
It establishes a presumption that the claimant would have recouped their expenditure had the contract been performed.
It emphasises the burden on the defendant to prove that the plaintiff’s expenditure would not have been recouped.
Practical Implications for Businesses: Businesses must take note of the clarified legal position on reliance damages. They should ensure contractual clarity, conduct risk assessments, maintain detailed records, review insurance policies, and seek legal advice when drafting contracts.
Protecting Against Reliance Damages Claims: To protect against reliance damages claims, businesses should:
Draft clear contractual terms.
Conduct thorough risk assessments.
Keep detailed documentation.
Obtain appropriate insurance.
Include dispute resolution clauses in contracts.
Common Scenarios for Reliance Damages Claims: Reliance damages claims often arise in scenarios such as breach of contract, misrepresentation, failed transactions, cancelled projects, promissory estoppel, construction disputes, technology and software development, franchise agreements, employment contracts, and inheritance promises.
Assessment of Reliance Damages by Courts: Courts assess reliance damages by:
Establishing that the claimant incurred expenses in reasonable reliance on the contract.
Calculating the total wasted expenditure due to the breach.
Assessing whether the claimant would have recouped the expenditure had the contract been performed.
Applying the rebuttable presumption of recoupment.
Evaluating the reasonableness of the expenditure.
Considering the claimant’s efforts to mitigate their losses.
Conclusion: The Cessnock City Council v 123 259 932 Pty Ltd case represents a significant evolution in the understanding of reliance damages in Australian contract law. It provides greater clarity for businesses and legal practitioners, facilitating the recovery of reliance damages and underscoring the importance of careful contract management.
Note Not Legal AdviceYou acknowledge and accept that nothing on our website or this article is intended to be, or should be treated as, legal advice. All content is of a general and non-specific nature which is not tailored to your specific circumstances and therefore may not be suitable to you. We do not warrant or guarantee that any material or information appearing on our website from time to time is up to date, complete or accurate. Before acting on information or content observed our website you must obtain independent legal advice from a qualified practising Australian Lawyer.