Cessnock City Council v 123 259 932 Pty Ltd

HIGH COURT OF AUSTRALIA

GAGELER CJ,
GORDON, EDELMAN, STEWARD, GLEESON, JAGOT AND BEECH‑JONES JJ

CESSNOCK CITY COUNCIL  APPELLANT

AND

123 259 932 PTY LTD  RESPONDENT

Cessnock City Council v 123 259 932 Pty Ltd

[2024] HCA 17

Date of Hearing: 13 February 2024
Date of Judgment: 8 May 2024

S115/2023

ORDER

Appeal dismissed with costs.

On appeal from the Supreme Court of New South Wales

Representation

J T Gleeson SC with L G Moretti for the appellant (instructed by Holding Redlich)

D L Williams SC with B D Kaplan for the respondent (instructed by Dentons Australia)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Cessnock City Council v 123 259 932 Pty Ltd

Damages – Contract – Where appellant owned land on which airport located – Where appellant and respondent entered into agreement by which respondent to lease prospective lot at airport – Where appellant breached obligation in agreement to take all reasonable action to apply for and obtain registration of plan of subdivision – Where respondent spent considerable sums in anticipation of or reliance on appellant's performance – Where expenditure wasted due to breach of contract by appellant – Where respondent entitled to be placed in the position it would have been in had the contract been performed – Whether respondent entitled to recover wasted expenditure – Proper approach to method of proof for plaintiff to establish position plaintiff would have been in if contract performed, where plaintiff incurred expenditure in anticipation of or reliance on performance of defendant's contractual obligation and defendant's breach has effect that expenditure wasted.

Words and phrases – "anticipation of", "assessment of damages", "breach of contract", "consequential loss", "contract", "damages", "expectation damages", "facilitation of proof", "facilitation principle", "fair wind", "loss", "onus of proof", "presumption", "presumption of recoupment", "reasonably incurred", "reliance damages", "reliance on", "uncertainty of proof", "wasted expenditure".

1. GAGELER CJ.   This appeal concerns the recoverability in damages for breach of contract of expenditure incurred by an innocent party (a plaintiff), in reliance on an expectation of performance of a contract, rendered futile as a result of non-performance of the contract by a defaulting party (a defendant).

2. The principle governing recovery of such "wasted expenditure" was stated in the decision of the Court of Appeal of the Supreme Court of New South Wales under appeal as follows:[1]

   "To sum up: a plaintiff who is unable or does not undertake to demonstrate whether or to what extent the performance of a contract would have resulted in a profit may claim its wasted expenditure. In such a case, expenditure incurred by a plaintiff in reliance on a contractual promise made by the defendant and 'wasted' because of non-performance by the defendant is recoverable, except to the extent that the defendant shows that the plaintiff would not have recouped its expenditure had the contract been performed."

   The Court of Appeal emphasised that recovery is limited by the principle of remoteness of damage associated with Hadley v Baxendale,[2] in respect of which the Court of Appeal added:[3]

   "[T]he proper application of Hadley v Baxendale as a control on remoteness of damage in a claim for wasted expenditure is whether, when the contract was made, it was within the reasonable contemplation of the parties that the relevant expenditure would be incurred and, if the contract were breached in the relevant manner, wasted."

   [1]123 259 932 Pty Ltd v Cessnock City Council (2023) 110 NSWLR 464 at 487-488 [73].

   [2](1854) 9 Exch 341 [156 ER 145].

   [3]123 259 932 Pty Ltd v Cessnock City Council (2023) 110 NSWLR 464 at 513 [146].

3. In my opinion, the Court of Appeal was correct. The principle governing the recovery of damages for wasted expenditure can be generalised as follows. A plaintiff establishes a prima facie entitlement to recover damages for breach of contract if and to the extent that the plaintiff establishes that expenditure it has incurred in reliance on an expectation of performance of the contract has in fact been wasted upon breach of the contract by the defendant. The prima facie entitlement of the plaintiff prevails unless and except to the extent that the defendant establishes the counterfactual that the expenditure would still have been wasted even if the contract had been performed. Beyond the limitations imposed through the application of standard limiting principles, such as remoteness and mitigation, no further limitation on recovery should be imposed.

4. Specifically, the principle governing the recovery of damages for wasted expenditure is not erroneous or deficient insofar as the principle as so stated: does not require the plaintiff to establish an evidentiary foundation for presuming that the plaintiff would have recovered the expenditure had the contract been performed; does not have a threshold requirement that the defendant has somehow made it "difficult" for the plaintiff to prove that the plaintiff would have made a profit from performance of the contract; does not distinguish between expenditure incurred by the plaintiff in the course of or for the purpose of performing its own obligations under the contract and other expenditure incurred by the plaintiff in reliance on an expectation of performance of the contract; and imposes a legal onus on the defendant to establish the counterfactual that the expenditure would have been wasted even if the contract had been performed.

5. In the balance of these reasons for judgment, I explain my understanding of the justification for the recoverability of damages for wasted expenditure according to the stated principle of recovery: first at the level of legal principle, and second by reference to precedent in this Court. I undertake that task aware of a vast academic literature,[4] without seeking to engage with all competing academic perspectives.

   [4]Including, most recently, Winterton, "Reassessing 'Reliance Damages': The High Court Appeal in Cessnock City Council v 123 259 932 Pty Ltd" (2024) 46 Sydney Law Review (advance).

   Legal principle

6. The "ruling principle"[5] with respect to the recovery of compensatory damages for breach of contract at common law is that stated in Robinson v Harman:[6] "where a [plaintiff] sustains a loss by reason of a breach of contract, [the plaintiff] 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". The principle is universally recognised to prevent a plaintiff from being placed by an award of compensatory damages in a better position than that which the plaintiff would have been in had the contract been performed.[7]

   [5]Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 at 286 [13].

   [6](1848) 1 Exch 850 at 855 [154 ER 363 at 365].

   [7]Haines v Bendall (1991) 172 CLR 60 at 63.

7. But the statement of principle in Robinson v Harman does not in one sentence encapsulate the totality of the necessary analysis. Critical to the operation of the principle is to distinguish between the "damages" ultimately to be assessed and the "loss" or "damage" which the plaintiff has sustained by reason of a breach of contract: "damage" being "the phenomenon in respect of which an assessment of damages is made".[8] For there to be compensatory damages, there must first be damage.[9] The damage in respect of which a plaintiff is entitled to be compensated by damages does not lie in mere non-performance of a contract but in the legally cognisable respect or respects in which the position of the plaintiff has been made worse by non-performance of the contract in comparison to the position which the plaintiff would have been in had the contract been performed. Non-performance of a contract has the potential to make a plaintiff worse off in different respects, with the consequence that "[d]ifferent, even cumulative, heads of damage may be pleaded by a plaintiff, depending on the type of contract involved and the kinds of breach and damage occasioned, provided there is no double recovery".[10]

   [8]Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 367. See also Paciocco v Australia & New Zealand Banking Group Ltd (2016) 258 CLR 525 at 616 [283].

   [9]Seddon and Bigwood, Cheshire & Fifoot Law of Contract, 12th Aust ed (2023) at 1223 [23.2].

   [10]Clark v Macourt (2013) 253 CLR 1 at 11 [26].

8. The principle in Robinson v Harman operates both: (1) to set the framework for determining the category or categories of damage which a plaintiff has sustained by reason of a defendant's non-performance of a contract; and (2) to set a ceiling on the overall damages to which a plaintiff is entitled. Distinguishing the damage from the ceiling on damages is important to understanding the justification for and limit of the recoverability of damages for wasted expenditure.

9. Expenditure incurred by a plaintiff in reliance on an expectation of performance might well be seen to be indicative of the minimum benefit or gain which the plaintiff might be taken to have expected from performance of the contract. Damages for wasted expenditure might on that basis be seen to be a "proxy" for damages attributable to a category of damage constituted by the benefit or gain from performance which the plaintiff might be taken to have lost by reason of non-performance.[11] But it is more than that. Wasted expenditure is itself a category of damage.

   [11]See Kramer, The Law of Contract Damages (2014) at 482; Barnett, Damages for Breach of Contract, 2nd ed (2022) at 81 [3-007].

10. That much was long ago explained by the Supreme Court of the United States in United States v Behan,[12] in a passage quoted and applied by the Full Court of the Supreme Court of New South Wales in Banks v Williams:[13]

    "If the breach consists in preventing the performance of the contract, without the fault of the other party, who is willing to perform it, the loss of the latter will consist of two distinct items or grounds of damage, namely: first, what he has already expended towards performance (less the value of materials on hand); secondly, the profits that he would realize by performing the whole contract. The second item, profits, cannot always be recovered. They may be too remote and speculative in their character, and therefore incapable of that clear and direct proof which the law requires."

    Further:[14]

    "[T]he primary measure of damages is the amount of the party's loss; and this loss, as we have seen, may consist of two heads or classes of damage – actual outlay and anticipated profits. But failure to prove profits will not prevent the party from recovering his losses for actual outlay and expenditure. ... The claimant ... might stop upon a showing of losses. The two heads of damage are distinct, though closely related."

    [12](1884) 110 US 338 at 344. Insofar as United States v Behan (1884) 110 US 338 at 345-347 can be read to suggest that a defaulting party is "estopped" from asserting that the value of performance would not have equalled the expenditure towards performance, it must be read in light of L Albert & Son v Armstrong Rubber Co (1949) 178 F 2d 182 at 189.

    [13](1910) 10 SR (NSW) 220 at 227-230, 231, 234-236.

    [14](1884) 110 US 338 at 345.

11. To similar effect is the relatively recent explanation of the distinction between damages for wasted expenditure and damages for loss of profits by the Court of Appeal of England and Wales in Soteria Insurance Ltd v IBM United Kingdom Ltd.[15] The distinction was applied in that case to hold that damages for wasted expenditure were recoverable even though damages for loss of profits were excluded from recovery by the terms of the contract.[16] A submission "that there was no such thing as wasted expenditure or even reliance loss" was rejected: it was said in response that "wasted expenditure is a recognised and recoverable type of loss, well within the compensatory principle".[17]

    [15][2022] 2 All ER (Comm) 1082. Permission to appeal was refused by the Supreme Court of the United Kingdom.

    [16][2022] 2 All ER (Comm) 1082 at 1095 [40], 1103-1104 [69]-[73].

    [17][2022] 2 All ER (Comm) 1082 at 1104 [73]. See also at 1105-1106 [84].

12. To characterise wasted expenditure as a distinct category of loss or damage, it is unnecessary to go as far as Fuller and Perdue did when they famously wrote of the plaintiff in an action for breach of contract having a "reliance interest" as well as an "expectation interest" and postulated the availability of an award of reliance damages having as its object "to put [the plaintiff] in as good a position as [the plaintiff] was in before the promise was made".[18] Within the framework set by the principle in Robinson v Harman, a sufficient conceptual basis for characterising wasted expenditure as a distinct category of damage lies in recognising that wasting of past expenditure upon failure of performance is a legally cognisable respect in which the plaintiff is worse off as a result of non-performance in comparison to performance.[19] The phenomenon in respect of which the plaintiff is entitled to be compensated is the fact that non-performance by the defendant has caused expenditure incurred by the plaintiff to have been thrown away. Compensable damage lies in the simple fact that the plaintiff has incurred expenditure which, because of non-performance, is incapable of yielding any benefit or gain to the plaintiff.

    [18]Fuller and Perdue, "The Reliance Interest in Contract Damages: 1" (1936) 46 Yale Law Journal 52 at 54.

    [19]See Owen, "Some Aspects of the Recovery of Reliance Damages in the Law of Contract" (1984) 4 Oxford Journal of Legal Studies 393 at 396. See also Chitty on Contracts, 35th ed (2023), vol 1 at 2238 [30-025] and Seddon and Bigwood, Cheshire & Fifoot Law of Contract, 12th Aust ed (2023) at 1235 [23.11].

13. Difficulty of proof of any benefit or gain which the plaintiff might have expected from performance of a contract might well furnish a practical explanation for why a particular plaintiff might choose to frame a claim for damages wholly or partly as a claim for wasted expenditure in a particular case. The reality that difficulty of proof of such benefit or gain is frequently encountered in practice by plaintiffs in a variety of different factual scenarios is a reason for recognising wasted expenditure as a distinct category of compensable damage. Not all contracts are entered into with a view to direct and immediate profit: some contracts are loss-leading, some are speculative, some are integers in a larger commercial enterprise, some are entered into not with a view to profit at all but in pursuit of a non-commercial benefit or gain as in a case of government procurement.

14. But difficulty of proof of such benefit or gain as might have been expected from performance of a contract, on this analysis, is neither a precondition to nor a justification for awarding damages for wasted expenditure in the circumstances of a particular case. The potential for damages to be awarded for wasted expenditure in the circumstances of a particular case arises because wasted expenditure is without more a recognised category of compensable damage.

15. Wasted expenditure is easily proved and quantified. The damages attributable to that damage are ordinarily established by nothing more than the plaintiff proving the quantum of the expenditure it has incurred in reliance on an expectation of performance of the contract whilst giving credit for any benefit or gain it has obtained from the expenditure despite non-performance of the contract.

16. The outworking of the Robinson v Harman principle in its operation as a ceiling on the overall damages recoverable nevertheless requires that the defendant be afforded an opportunity to prove that the expenditure which the plaintiff has established is in fact incapable of yielding it any benefit or gain by reason of non-performance of the contract is expenditure which would have yielded it no benefit or gain even if the contract had been performed. For, if one thing should be uncontroversial in this theoretically fraught area of the common law, it is that "[w]e will not in a suit for reimbursement for losses incurred in reliance on a contract knowingly put the plaintiff in a better position than [the plaintiff] would have occupied had the contract been fully performed".[20]

    [20]Fuller and Perdue, "The Reliance Interest in Contract Damages: 1" (1936) 46 Yale Law Journal 52 at 79. See Burrows, "Damages for Breach of Contract: Expectation Limiting Status Quo" (1984) 100 Law Quarterly Review 27 at 28-30.

17. The soundness of that approach to the outworking of the Robinson v Harman principle in assessing damages attributable to damage constituted by wasted expenditure is illustrated in a case of a contract entered into by a plaintiff as part of a larger profit-making venture by the decision of the United States Court of Appeals for the Second Circuit in L Albert & Son v Armstrong Rubber Co.[21] The correctness of L Albert & Son was accepted in The Commonwealth v Amann Aviation Pty Ltd,[22] about which more will be said below, and has been accepted in courts in other common law jurisdictions.[23]

    [21](1949) 178 F 2d 182.

    [22](1991) 174 CLR 64 at 86-87, 105-106, 126, 138-139, 154, 156.

    [23]See Bowlay Logging Ltd v Domtar Ltd (1978) 87 DLR (3d) 325 at 334 (Supreme Court of British Columbia); Ti Leaf Productions Ltd v Baikie (2001) 7 NZBLC 103,464 at 103,471 [33]; Mega Yield International Holdings Ltd v Fonfair Co Ltd [2014] HKCA 466 at [58]; Soteria Insurance Ltd v IBM United Kingdom Ltd [2022] 2 All ER (Comm) 1082 at 1097 [45].

18. The Court of Appeals was concerned in L Albert & Son with an appeal from a judgment in an action for damages by a buyer against a seller for breach of a contract for the sale of goods constituted by late delivery of certain machines, referred to as "Refiners", for use in the buyer's rubber production operation. The Court of Appeals held that, without needing to prove that timely delivery would have contributed to the buyer making a profit from the rubber production operation, the buyer was entitled to recover expenditure it had incurred in laying a foundation for the machines.

19. Chief Judge Learned Hand said:[24]

    "Normally a promisee's damages for breach of contract are the value of the promised performance, less his outlay, which includes, not only what he must pay to the promisor, but any expenses necessary to prepare for the performance; and in the case at bar the cost of the foundation was such an expense. The sum which would restore the Buyer to the position it would have been in, had the Seller performed, would therefore be the prospective net earnings of the 'Refiners' while they were used (together with any value they might have as scrap after they were discarded), less their price –$25,500 – together with $3,000, the cost of installing them."

    He continued:

    "The Buyer did not indeed prove the net earnings of the 'Refiners' or their scrap value; but it asserts that it is nonetheless entitled to recover the cost of the foundation upon the theory that what it expended in reliance upon the Seller's performance was a recoverable loss. In cases where the venture would have proved profitable to the promisee, there is no reason why he should not recover his expenses. On the other hand, on those occasions in which the performance would not have covered the promisee's outlay, such a result imposes the risk of the promisee's contract upon the promisor. We cannot agree that the promisor's default in performance should under this guise make him an insurer of the promisee's venture; yet it does not follow that the breach should not throw upon him the duty of showing that the value of the performance would in fact have been less than the promisee's outlay. It is often very hard to learn what the value of the performance would have been; and it is a common expedient, and a just one, in such situations to put the peril of the answer upon that party who by his wrong has made the issue relevant to the rights of the other."

    He concluded:

    "On principle therefore the proper solution would seem to be that the promisee may recover his outlay in preparation for the performance, subject to the privilege of the promisor to reduce it by as much as he can show that the promisee would have lost, if the contract had been performed."

    [24](1949) 178 F 2d 182 at 189.

20. Whether affording such an opportunity or "privilege" is properly regarded as imposing a legal onus on the defendant perhaps matters little. The defendant bears a legal onus of proving that the expenditure, which the plaintiff in fact incurred and which was in fact wasted in the event of non-performance, would still have been wasted in the counterfactual of the contract having been performed in the sense that the claim of the plaintiff will prevail if the defendant does not so prove.

    Precedent

21. The foregoing explanation of legal principle is consistent with unanimous reasoning in each of McRae v Commonwealth Disposals Commission,[25] Carr v J A Berriman Pty Ltd,[26] and TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd.[27]

    [25](1951) 84 CLR 377.

    [26](1953) 89 CLR 327.

    [27](1963) 180 CLR 130.

22. McRae concerned an action for damages for breach of a contract for the sale of a stranded oil tanker of indeterminate size and value. The plaintiffs were the putative buyers and intended salvagers of the tanker. The first defendant was the Commonwealth Disposals Commission. The breach of contract found was constituted by breach by the Commission of a promise that such a tanker existed at or near a specified location.[28] Dixon and Fullagar JJ (with whom McTiernan J concurred) observed:[29]

    "The practical substance of the case lies in these three factors – (1) the Commission promised that there was a tanker at or near to the specified place; (2) in reliance on that promise the plaintiffs expended considerable sums of money; (3) there was in fact no tanker at or anywhere near to the specified place. In the waste of their considerable expenditure seems to lie the real and understandable grievance of the plaintiffs, and the ultimate question in the case (apart from any question of quantum) is whether the plaintiffs can recover the amount of this wasted expenditure or any part of it as damages for breach of the Commission's contract that there was a tanker in existence."

    [28](1951) 84 CLR 377 at 410-411.

    [29](1951) 84 CLR 377 at 412.

23. The wasted expenditure which the plaintiffs had incurred and were held to be entitled to recover comprised the cost of fitting out a salvage expedition and proceeding to the place where no tanker was to be found.[30] Having concluded that the wasted expenditure was within the reasonable contemplation of the parties at the time of entering into the contract of sale and so was not too remote,[31] Dixon and Fullagar JJ turned to address an argument of the Commission to the effect that the plaintiffs had failed to discharge their onus of proving that their expenditure had been wasted given that the tanker might still have been found to have been incapable of profitable salvage even if it had existed at or near the specified location.[32] The denouement was as follows:[33]

    "The argument is far from being negligible. But it is really, we think, fallacious. If we regard the case as a simple and normal case of breach by non-delivery, the plaintiffs have no starting-point. The burden of proof is on them, and they cannot establish that they have suffered any damage unless they can show that a tanker delivered in performance of the contract would have had some value, and this they cannot show. But when the contract alleged is a contract that there was a tanker in a particular place, and the breach assigned is that there was no tanker there, and the damages claimed are measured by expenditure incurred on the faith of the promise that there was a tanker in that place, the plaintiffs are in a very different position. They have now a starting-point. They can say: (1) this expense was incurred; (2) it was incurred because you promised us that there was a tanker; (3) the fact that there was no tanker made it certain that this expense would be wasted. The plaintiffs have in this way a starting-point. They make a prima-facie case. The fact that the expense was wasted flowed prima facie from the fact that there was no tanker; and the first fact is damage, and the second fact is breach of contract. The burden is now thrown on the Commission of establishing that, if there had been a tanker, the expense incurred would equally have been wasted. This, of course, the Commission cannot establish. The fact is that the impossibility of assessing damages on the basis of a comparison between what was promised and what was delivered arises not because what was promised was valueless but because it is impossible to value a non-existent thing. It is the breach of contract itself which makes it impossible even to undertake an assessment on that basis. It is not impossible, however, to undertake an assessment on another basis, and, in so far as the Commission's breach of contract itself reduces the possibility of an accurate assessment, it is not for the Commission to complain."

    [30](1951) 84 CLR 377 at 413, 415, 417-418.

    [31](1951) 84 CLR 377 at 413.

    [32](1951) 84 CLR 377 at 413-414.

    [33](1951) 84 CLR 377 at 414 (emphasis added).

24. Three points in this reasoning need to be highlighted. The first is that the expenditure which the plaintiffs proved in fact to have been incurred and in fact to have been wasted by reason of non-performance of the contract was said itself to constitute compensable damage. The second is that proof by the plaintiffs of that compensable damage was said, as in L Albert & Son, to shift to the Commission the onus of establishing that the expenditure would still have been wasted had the contract been performed. The third is that no part of the reasoning depended on any assumption or presumption that the plaintiffs would at least have recovered their expenditure had the contract been performed. To the contrary, the prospect of successful salvage was accepted to have been uncertain even if a tanker had existed at or near the contractually specified location.[34]

    [34](1951) 84 CLR 377 at 414. See The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 89.

25. J A Berriman and TC Industrial Plant both illustrate the proposition that a plaintiff is entitled to frame a claim for damages for breach of contract to include a claim for wasted expenditure distinctly from and in addition to any claim the plaintiff might make for loss of profit up to the ceiling set by the principle in Robinson v Harman.

26. J A Berriman relevantly concerned an action by a builder for breach of a construction contract constituted by delay in making a site ready for construction to commence. Fullagar J (with whom Dixon CJ, Williams, Webb and Kitto JJ concurred) referred to the builder's damages having been assessed "under three heads": "loss of profit on the contract"; "expenditure incurred and wasted in 'keeping a team of men together in anticipation of being able to start work on the job'"; and an amount for which the builder was liable to a subcontractor.[35] As to the second of those identified heads of damage, his Honour remarked that "[e]xpenditure so incurred and wasted would be recoverable by way of damages, and the amount awarded under this head was not challenged".[36]

    [35](1953) 89 CLR 327 at 352.

    [36](1953) 89 CLR 327 at 352.

27. TC Industrial Plant concerned an action by a buyer against a seller for breach of a contract for the sale of a stone crushing machine constituted by breach of an implied condition that the machine would be fit for the purpose of supplying crushed aggregate to fulfil a contract with the Commonwealth. The primary judge awarded damages in the sum of (1) the "expenditure and liabilities incurred by the plaintiff in the course of and for the purposes of carrying out its contract with the Commonwealth less the amounts paid to it by the Commonwealth under that contract" and (2) the estimated profits which the plaintiff would have made had it been able to carry out its contract with the Commonwealth and a further contract.[37] Kitto, Windeyer and Owen JJ rejected an argument of the seller that "the plaintiff could not recover under both the heads of damage upon which the [primary] judge based his award but was bound to elect whether it would pursue its claim for expenditure uselessly incurred as a result of the defendants' breaches of contract or, in the alternative, its claim to recover for the loss of the profits it would have earned had the crusher been fit for the purpose for which both defendants knew it was required".[38] Their Honours said:[39]

    "To sum the matter up, the seller (in effect) promised the buyer that the machine was such that upon the buyer laying out £X in acquiring and installing the machine he would be able to get £X + Y by working it. For breach of the promise the buyer, having laid out his £X, may recover, if he chooses, what the machine would have been worth to him if it had been as promised (presumptively £X) minus the actual value of the machine. Alternatively he may recover £X+Y".

    What was said to be "perfectly clear" was that "the plaintiff could not have damages assessed on the one basis plus damages assessed on the other basis".[40]

    [37](1963) 180 CLR 130 at 136.

    [38](1963) 180 CLR 130 at 138.

    [39](1963) 180 CLR 130 at 141.

    [40](1963) 180 CLR 130 at 141.

28. Turning now to Amann Aviation,[41] to say that any explanation of the principle governing the recoverability of wasted expenditure is wholly consistent with the reasoning of the majority (Mason CJ and Dawson J, Brennan J, and Gaudron J) would be impossible given the notorious difficulty of extracting a ratio decidendi from the various reasons for judgment in that case.[42] The most that can properly be said is that the explanation I have given can be seen to be concordant with the core dispositive reasoning of Mason CJ and Dawson J.

    [41](1991) 174 CLR 64.

    [42]See Treitel, "Damages for Breach of Contract in the High Court of Australia" (1992) 108 Law Quarterly Review 226; Lücke, "The So-Called Reliance Interest in the High Court" (1994) 6 Corporate & Business Law Journal 117.

29. Amann Aviation concerned an action by a private contractor against the Commonwealth for damages for repudiation of a contract to provide aerial coastal surveillance services for a specified period subject to the prospect of renewal and to the possibility of early termination for cause.[43] Without needing to prove that it would have profited from the contract, the plaintiff was held to be entitled to recover damages in the amount of the expenditure it had incurred in reliance on an expectation of the Commonwealth performing the contract.[44] The critical aspects of the joint reasons for judgment of Mason CJ and Dawson J for the present purposes are the following.

    [43](1991) 174 CLR 64 at 72-74.

    [44](1991) 174 CLR 64 at 97-98, 115, 157-158.

30. Mason CJ and Dawson J were clear in emphasising that the principle in Robinson v Harman provides the framework for determining the category or categories of compensable damage which a plaintiff might be found to have sustained by reason of a defendant's non-performance of the contract and the ultimate measure of compensatory damages to which a plaintiff might be found to be entitled. So much is encompassed within the generality of their statement that "the expressions 'expectation damages', 'damages for loss of profits', 'reliance damages' and 'damages for wasted expenditure' are simply manifestations of the central principle enunciated in Robinson v Harman rather than discrete and truly alternative measures of damages which a party not in breach may elect to claim".[45] That the principle sets a ceiling on compensatory damages was made clear by them in emphasising that "[t]he corollary of the principle in Robinson v Harman is that a plaintiff is not entitled, by the award of damages upon breach, to be placed in a superior position to that which he or she would have been in had the contract been performed".[46] TC Industrial Plant was said by them to illustrate those propositions.[47]

    [45](1991) 174 CLR 64 at 82.

    [46](1991) 174 CLR 64 at 82.

    [47](1991) 174 CLR 64 at 85.

31. Mason CJ and Dawson J were also clear in stating, with specific reference to L Albert & Son and McRae, that "a plaintiff has a prima facie case for recovery of wasted expenditure once it is established that the expense was incurred in reliance on the promise of the party in breach, there being a failure of performance by that party"[48] and that establishment by a plaintiff of a prima facie case for recovery of wasted expenditure shifts the onus to the defendant "to establish that such expenditure would not have been recouped even if the contract had been fully performed".[49]

    [48](1991) 174 CLR 64 at 89.

    [49](1991) 174 CLR 64 at 82, 86-87.

32. Their Honours recognised that the recovery of damages for wasted expenditure under a contract from which no net profit would have been realised not only places the plaintiff in the position the plaintiff would have been in had the contract been fully performed but also restores the plaintiff to the position the plaintiff would have been in had the plaintiff not entered into the contract.[50] Distancing themselves from the view of the recovery of damages for wasted expenditure vindicating a "reliance interest" in the sense defined by Fuller and Perdue,[51] they noted that "[i]n this particular situation it will be noted that there is a coincidence, but no more than a coincidence, between the measure of damages recoverable both in contract and in tort".[52]

    [50](1991) 174 CLR 64 at 85-86.

    [51](1991) 174 CLR 64 at 82-83.

    [52](1991) 174 CLR 64 at 86.

33. With reference to TC Industrial Plant, Mason CJ and Dawson J rejected the notion that a plaintiff has an election, in the sense of an unconstrained choice, as to whether to frame its claim for damages as one for the recovery of wasted expenditure.[53] The gist of their explanation was that how a plaintiff frames its claim for damages within the framework set by the principle in Robinson v Harman can be expected to turn on the nature of the contract (which might or might not have been entered into with a view to direct or immediate profit) and on the plaintiff's appraisal of the practical exigencies of proving and quantifying categories of damage that might potentially be available to be claimed.[54]

    [53](1991) 174 CLR 64 at 85.

    [54](1991) 174 CLR 64 at 85.

34. True it is that their Honours said that in a case of damages assessed by reference to wasted expenditure "the law assumes that a plaintiff would at least have recovered his or her expenditure had the contract been fully performed" and observed that the approach taken in L Albert & Son and McRae "amounts to the erection of a presumption that a party would not enter into a contract in which its costs were not recoverable".[55] And true it is that their Honours observed that the plaintiff in Amann Aviation faced "difficulties" establishing "what its profits (if any) would have been had the Commonwealth not repudiated the contract".[56] But the point to which these observations ultimately led was that the case was one "in which, it being natural and appropriate for [the plaintiff] to sue to recover its wasted expenditure by way of reliance damages, the onus rested on the Commonwealth of establishing that the reliance expenditure would have been wasted even if the contract had been performed".[57]

    [55](1991) 174 CLR 64 at 86-87 (emphasis omitted).

    [56](1991) 174 CLR 64 at 89.

    [57](1991) 174 CLR 64 at 90.

35. The reasoning of Mason CJ and Dawson J cannot be taken to impose, as a condition of a plaintiff succeeding on a claim for damages for wasted expenditure, that the plaintiff must establish a factual basis for assuming or presuming that the plaintiff would have recouped the expenditure had the contract been performed. Nor can that reasoning be taken to impose, as a condition of a plaintiff succeeding on a claim for damages for wasted expenditure, that the plaintiff must demonstrate that it meets some objectively demonstrated threshold of difficulty of proving loss of profit.

36. The reasons for judgment of Mason CJ and Dawson J are in those latter two respects to be contrasted with those of the other two members of the majority: Brennan J and Gaudron J.[58] Brennan J and Gaudron J each saw the approach taken in L Albert & Son and McRae as directed to the establishment and quantification of damage constituted by loss of the contractually expected benefit or gain to which the wasted expenditure was directed and each saw the approach as involving a reversal of the onus of proof of that damage. They differed, however, as to the justification for that reversal of the onus of proof.

    [58](1991) 174 CLR 64 at 104-108, 155-157.

37. Brennan J explained the sufficient and necessary justification for the reversal of the onus of proof as being that "the breach of the contract itself makes it impossible to undertake an assessment on the ordinary basis" in the sense that it "is the defendant's repudiation or breach which denies, prevents or precludes the existence of circumstances which would have determined the value of the plaintiff's contractual benefits".[59] His Honour would accordingly have restricted application of the approach to a case in which non-performance by the defendant was demonstrated to have that practical effect.[60]

    [59](1991) 174 CLR 64 at 106-107.

    [60](1991) 174 CLR 64 at 104-108.

38. Gaudron J, in contrast, saw the reversal of the onus of proof as a reversal only of an evidentiary onus. Her Honour saw the justification for that reversal of evidentiary onus as lying in an assumption that the loss occasioned by repudiation or breach of contract is no less than the expenditure that has been wasted, an assumption which might or might not be justified on the facts of a particular case.[61] Her Honour said that "[a]n assumption to that effect is no more than the recognition of the ordinary expectations of the world of commerce that the value of a contract will be no less than the cost of its performance".[62]

    [61](1991) 174 CLR 64 at 157.

    [62](1991) 174 CLR 64 at 156.

39. For reasons I have given in explaining my understanding of the underlying legal principle, I consider that the assessment of damages according to the approach taken in L Albert & Son and McRae is directed to the establishment and quantification of a distinct category of damage constituted by wasted expenditure and I do not consider that the approach needs other justification or is otherwise restricted. The reasons of Brennan J and of Gaudron J express competing justifications for the approach, each of which would entail a concomitant restriction. Neither of those competing approaches is compelled by the doctrine of precedent.

40. The appellant draws attention to the observation by Bell, Keane and Nettle JJ in Berry v CCL Secure Pty Ltd[63] to the effect that Amann Aviation could be seen as an illustration of the general principle that a wrongdoer should suffer such uncertainty of proof as might result from its wrongful conduct. The observation was made with specific reference to the reasoning of Brennan J and unquestionably reflects his Honour's justification for the approach taken in L Albert & Son and McRae. However, the appellant overstates the significance of the observation in seeking to treat it as an authoritative distillation of the reasoning underlying the holding in Amann Aviation. No issue concerning the recovery of wasted expenditure arose for consideration in Berry.

    [63](2020) 271 CLR 151 at 169-170 [29].

    Application

41. The essential facts of the present case are as stark as they are uncomplicated. The appellant entered into a contract with the respondent under which the appellant promised to take all reasonable action to apply for and register a plan of subdivision and to grant the respondent a 30-year lease of land. Having obtained a licence to enter upon the land in the interim, the respondent proceeded to spend $3.7 million constructing a commercial building on the land. The appellant repudiated the contract, leaving the investment in the building stranded.

42. Those facts are alone sufficient to establish the prima facie entitlement of the respondent to recover in damages for breach of contract the $3.7 million it had spent which was wasted because of the repudiation of the contract. The appellant failed to discharge its onus of establishing that the respondent would have wasted the expenditure even if the contract had been performed.

    Disposition

43. For these reasons, I agree that the appeal should be dismissed.

44. GORDON J.   The appellant, Cessnock City Council ("the Council"), entered into an agreement for lease with the respondent, 123 259 932 Pty Ltd, formerly Cutty Sark Holdings Pty Ltd ("Cutty Sark"), for a 30-year lease over part of Cessnock Airport, to operate from the day after the registration date of the plan of subdivision of the land ("the Plan"). Under the agreement for lease, the Council promised to take all reasonable action to apply for and register the Plan by 30 September 2011 ("the Sunset Date"), and in the meantime granted Cutty Sark a licence to occupy the proposed Lot 104.

45. While in occupation of Lot 104, Cutty Sark built an aircraft hangar, at a cost of over $3.6 million, from which it intended to operate a business conducting joy flights and advanced aerobatic training for pilots. In breach of the agreement for lease, the Council did not take reasonable action to register the Plan. Consequently, the Plan was not registered, either by the Sunset Date or at any later time, and the proposed 30-year lease was not granted. Cutty Sark sued the Council for breach of contract, seeking "reliance damages" – namely, damages for losses suffered as a consequence of relying upon the Council's contractual promise which was breached. In this appeal, Cutty Sark sought to recover the expense of constructing the hangar.

46. The primary judge held that Cutty Sark was not entitled to reliance damages, on the grounds that the "presumption of recoupment" did not arise and was, in any event, rebutted, and awarded Cutty Sark nominal damages only. The Court of Appeal overturned the primary judge's decision and awarded Cutty Sark $6,154,459.40 (inclusive of interest).

47. The detail of the relevant background is set out in the reasons of Edelman, Steward, Gleeson and Beech-Jones JJ. For the reasons that follow, I agree that the appeal should be dismissed. I prefer to express the applicable principles in the following terms.

    Damages for breach of contract

48. The general rule at common law is "that where a party sustains a loss by reason of a breach of contract, [they are], 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".[64] The corollary is that a plaintiff is not entitled, by an award of damages, to be placed in a superior position to that which they would have been in had the contract been performed.[65] This compensatory rule is fundamental to the assessment of contract damages; its status as the "ruling principle" has been repeatedly confirmed by this Court.[66] And, of course, the plaintiff bears "the legal burden of establishing the existence and amount of the loss or damage" suffered by reason of a breach of contract.[67]

    [64]Robinson v Harman (1848) 1 Ex 850 at 855 [154 ER 363 at 365]. See also Wenham v Ella (1972) 127 CLR 454 at 471; Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653 at 667, 672; The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 80, 98, 161; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 at 286 [13]; Clark v Macourt (2013) 253 CLR 1 at 6 [7], 11 [26], 19 [60], 30 [106].

    [65]Haines v Bendall (1991) 172 CLR 60 at 63; AmannAviation (1991) 174 CLR 64 at 82, 136, 155, 163; Clark (2013) 253 CLR 1 at 11 [27], 19 [60].

    [66]Tabcorp Holdings (2009) 236 CLR 272 at 286 [13]. See also Johnson v Perez (1988) 166 CLR 351 at 355, 386; Haines (1991) 172 CLR 60 at 63; Amann Aviation (1991) 174 CLR 64 at 98, 116, 161; Clark (2013) 253 CLR 1 at 6 [7], 11 [26], 19 [60], 32 [111].

    [67]Berry v CCL Secure Pty Ltd (2020) 271 CLR 151 at 168 [28], citing Amann Aviation (1991) 174 CLR 64 at 80, 88, 99, 118, 137. See also Clark (2013) 253 CLR 1 at 11 [27].

49. The measure of damages for breach of contract is calculated by reference to the value of the promised performance, sometimes referred to as "expectation loss"[68] or "expectation damages".[69] "Losses directly incurred, as well as gains prevented", may be a legitimate basis for compensation.[70] Losses directly incurred include expenditures reasonably incurred in preparation for performance or in part performance of the contract (where such expenditure is not otherwise reimbursed), such expenditures being "in anticipation of the advantage that will come to [the injured party] from completed performance".[71] Gains or advantages prevented are, of course, loss of profits.[72] Damages for lost profits are any amount by which gross receipts would have exceeded expenses reasonably incurred.[73] There can be no double recovery. Where a plaintiff establishes a loss of profits, that calculation necessarily accommodates the expenditures reasonably incurred.

    [68]Amann Aviation (1991) 174 CLR 64 at 80-81, 98-99, 117, 134-135, 148, 161; Tabcorp Holdings (2009) 236 CLR 272 at 286 [13]. See also L Albert & Son v Armstrong Rubber Co (1949) 178 F 2d 182 at 189; Omak Maritime Ltd v Mamola Challenger Shipping Co [2011] 1 Lloyd's Rep 47 at 50 [15].

    [69]AmannAviation (1991) 174 CLR 64 at 80-82, 137, 161.

    [70]Holt v United Security Life Insurance & Trust Co (1909) 72 A 301 at 306. See also Amann Aviation (1991) 174 CLR 64 at 99.

    [71]Holt (1909) 72 A 301 at 306.

    [72]Amann Aviation (1991) 174 CLR 64 at 99.

    [73]Amann Aviation (1991) 174 CLR 64 at 81.

50. It is sometimes impossible,[74] impossible with any certainty,[75] or difficult[76] to establish the value of the promised or lost performance. In such cases, a plaintiff is not left remediless or confined to nominal damages. A plaintiff may seek to establish, and recover, the losses directly incurred[77] – sometimes referred to as "reliance damages" – being the expenditure reasonably incurred in anticipation of, or reliance on, the promise of another party to the contract that was wasted as a consequence of the breach by the wrongdoer. That expenditure is made in anticipation of the advantage that will come to the injured party from completed performance, consistent with the rationale that ordinarily performance of a contract "results in advantage to both parties over and above that with which they part in the course of its performance".[78] In some cases, not inconsistent with that rationale, recovery of reasonable expenditure (the directly incurred costs) has been assessed by reference to a presumption or "the presumption of recoupment".[79]

    [74]AmannAviation (1991) 174 CLR 64 at 81, 85-86, 89, 105‑106, 126, 130-131, 137. See also McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 411, 414.

    [75]AmannAviation (1991) 174 CLR 64 at 83, 89, 137. See, eg, L Albert (1949) 178 F 2d 182 at 189-190; Anglia Television Ltd v Reed [1972] 1 QB 60; Omak Maritime Ltd [2011] 1 Lloyd's Rep 47 at 53-54 [33]-[34]; Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] 1 Lloyd's Rep 526 at 553 [188]-[189].

    [76]AmannAviation (1991) 174 CLR 64 at 89, 126; L Albert (1949) 178 F 2d 182 at 189. See also Omak Maritime Ltd [2011] 1 Lloyd's Rep 47 at 51 [22].

    [77]McRae (1951) 84 CLR 377 at 414-415; Amann Aviation (1991) 174 CLR 64 at 86, 89, 106-108, 126-127, 154. See also L Albert (1949) 178 F 2d 182 at 189.

    [78]Holt (1909) 72 A 301 at 306. See also Amann Aviation (1991) 174 CLR 64 at 89.

    [79]See Amann Aviation (1991) 174 CLR 64 at 87-90, 126; Berry (2020) 271 CLR 151 at 169 [29].

51. Damages for wasted expenditure are not a separate measure or category of expectation damages but a method of calculating damages consistent with the compensatory principle that a party is entitled to damages equivalent to the amount of money required to put them in the position they would have been in had the breach not been committed or, put another way, in the position they would have been in had the contract been performed.[80] As was said in this Court more than 30 years ago: "the expressions 'expectation damages', 'damages for loss of profits', 'reliance damages' and 'damages for wasted expenditure' are simply manifestations of the central principle enunciated in Robinson v Harman rather than discrete and truly alternative measures of damages which a party not in breach may elect to claim".[81] No question of election arises.[82] That is, this is not a plaintiff choosing between competing remedies.[83]

    [80]See, eg, AmannAviation (1991) 174 CLR 64 at 82, 108, 134, 162-163. See also TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd (1963) 180 CLR 130 at 142; Omak Maritime Ltd [2011] 1 Lloyd's Rep 47 at 55 [42]; Yam Seng [2013] 1 Lloyd's Rep 526 at 552 [186]. cf American Law Institute, Restatement (Second) of Contracts (1981), §344, §347, §348.

    [81]AmannAviation (1991) 174 CLR 64 at 82, 108, 134, 162-163.

    [82]Amann Aviation (1991) 174 CLR 64 at 85, 108, 136-137, 155, 162.

    [83]cf United Australia Ltd v Barclays Bank Ltd [1941] AC 1 at 18‑19; Sargent v ASL DevelopmentsLtd (1974) 131 CLR 634 at 641-642.

52. The value of damages for wasted expenditure is the quantum of the relevant expenditure, less any retained benefit accruing to the plaintiff from the expenditure.[84] The plaintiff must establish that, but for the promise, they would not have spent the money. The plaintiff is not worse off just because they spent money. The "wasted" expenditure must be linked to the breach of the contractual promise. That is, the plaintiff will recoup the expenditure reasonably incurred in reliance on the defendant's promise that was wasted as a consequence of the defendant's breach and their failure to perform the contract.[85] Expenditure which would have been made anyway is not recoverable.[86]

    [84]Amann Aviation (1991) 174 CLR 64 at 79, 127-128.

    [85]McRae (1951) 84 CLR 377 at 412-413; Amann Aviation (1991) 174 CLR 64 at 84, 86, 88-89, 104-105, 106, 107, 127, 129, 139-140, 154, 158, 161, 166-167. See also Anglia Television Ltd [1972] 1 QB 60 at 63.

    [86]See, eg, McRae (1951) 84 CLR 377 at 416.

53. There is no distinction to be drawn between incidental and essential expenditure.[87] The remoteness limit is sufficient. As the Court of Appeal held, there is no principled basis for confining the notion of expenditure incurred "in reliance on the defendant's contractual promise" to expenditure required by the contract or required to enable the plaintiff to perform their contractual obligations. The notion that one would incur expenses only if it were reasonable to suppose that they would at least be recouped applies equally to moneys expended in reliance on the promised performance as to those expended in performing or preparing to perform the contract.

    [87]See, eg, McRae (1951) 84 CLR 377 at 412-413; Amann Aviation (1991) 174 CLR 64 at 86, 88, 89, 104-106, 107, 127, 129, 139, 140, 154, 158. cf Fuller and Perdue, "The Reliance Interest in Contract Damages: 1" (1936) 46 Yale Law Journal 52 at 73-74, 78, 79.

54. The references in The Commonwealth v Amann AviationPty Ltd to expenditure in preparation for or in performance of a contract do not confine the award.[88] While such a description sufficed to capture the relevant expenditure in Amann Aviation, it would not capture the kind of expenditure held to be recoverable, for example, in McRae v Commonwealth Disposals Commission.[89] That expenditure was not required by the contract or incurred in performance of, or in preparing to perform, any contractual obligation. The plaintiffs' only contractual obligation was to pay the purchase price; they were not obliged to salvage the tanker.[90] The expenditure was incurred so that the plaintiffs could acquire and exploit the property they acquired under the contract – the (non‑existent) tanker – or, put differently, so that they could derive benefit from the contract.

    [88]See, eg, (1991) 174 CLR 64 at 126, 135.

    [89](1951) 84 CLR 377.

    [90]McRae (1951) 84 CLR 377 at 381-382, 414-415.

55. However, not all wasted expenses are recoverable. There are necessarily some limits. As earlier noted, the expenditure must be reasonable. Reasonableness applies to the nature and extent of the expenditure, not to the reasonableness of the reliance on the promised performance.[91] Reasonable expenditure extends to expenditure that might naturally be incurred in preparing for, performing, or exploiting the benefit of the contract, or that is or ought to have been contemplated by the defendant. In other words, it is assessed by considering whether the expenditure was in the contemplation of the parties. It is not a form of insurance.[92]

    [91]McRae (1951) 84 CLR 377 at 413.

    [92]L Albert (1949) 178 F 2d 182 at 189.

56. The wrongdoer, however, can seek to establish that the plaintiff should not recover the wasted expenditure by reference to type and amount of expenditure (it not being reasonable on one or both of the bases just identified) as well as adducing evidence of what would have happened, recognising that the latter may be difficult if not, in some cases, impossible. That is, "[i]t will still be open to a defendant ... to argue that, notwithstanding the fact that it is impossible to assess what profits, if any, the plaintiff would have made had the contract been fully performed, the expenditure claimed by a plaintiff would nevertheless not have been recovered even if" the defendant had performed their obligations.[93] Put another way, it is open to the wrongdoer to prove that the plaintiff's expenditure was, on the balance of probabilities, wasted anyway. It is just and fair that the wrongdoer, who caused the difficulty in proof, should bear the onus of showing that the party not in breach would have made a loss on the contract.[94] As Chief Judge Learned Hand said, "it is a common expedient, and a just one ... to put the peril of the answer upon that party who by [their] wrong has made the issue relevant to the rights of the other".[95] That is, where the wrongdoer's breach has rendered assessment of damages on the basis of lost profits impossible or very difficult, principles of justice and fairness dictate that it should be for the wrongful party to prove that the plaintiff would not at least have recovered their expenditure had the contract been fully performed or, put another way, would have made a loss on the contract.[96]

    [93]Amann Aviation (1991) 174 CLR 64 at 86.

    [94]Amann Aviation (1991) 174 CLR 64 at 89, 105-108, 156. See also Omak Maritime Ltd [2011] 1 Lloyd's Rep 47 at 51 [22], 52-53 [33], 55 [47]; Yam Seng [2013] 1 Lloyd's Rep 526 at 553 [188].

    [95]L Albert (1949) 178 F 2d 182 at 189.

    [96]McRae (1951) 84 CLR 377 at 412; Amann Aviation (1991) 174 CLR 64 at 86, 89, 105-108, 154, 157. See also Omak Maritime Ltd [2011] 1 Lloyd's Rep 47 at 51 [22], 52-53 [33], 55 [47]; Yam Seng [2013] 1 Lloyd's Rep 526 at 553 [188].

57. The creation of rules the application of which depends upon what findings of fact can be made about what benefit or benefits performance of the contract would have realised to the plaintiff is unhelpful. It is unhelpful because the determinative question will always be what sum will put the plaintiff in the position the plaintiff would have been in had the contract been performed. That assessment must be made in light of all relevant evidence adduced in the particular matter. If, as here, all that is known is that: the plaintiff outlaid money in the expectation of performance by the defendant; the defendant did not perform; the plaintiff has not shown that they would have made a profit over and above the expenditure; and the defendant has not shown that the plaintiff would have made a loss if the contract had been performed, then the expenditure may be recovered.

58. Damages for wasted expenditure are not awarded on the basis that their award facilitates proof of damage. There is no relaxation of proof. The trial judge reaches a concluded view on the quantum of damages based on findings that the plaintiff did make outlays in reliance on the defendant's promise that were wasted as a consequence of the defendant's breach and non-performance, the plaintiff did not show that they would have made a profit and the defendant did not show that the plaintiff would have made a loss, because predicting the outcome of the performance of the contract is "impossible", "impossible with any certainty" or "difficult" in the manner described above.[97] Other than proof of those facts, the trial judge does not undertake a forensic assessment of the gravity of the wrongdoer's conduct. Nor does the trial judge assess the extent of the uncertainty that results from the breach and then use that assessment as the basis for adjusting the burden placed on the wrongdoer to adduce evidence to show that the plaintiff would have made a loss. The need for the defendant to show that the plaintiff would have made a loss is not proportionate to the extent of the uncertainty caused by the defendant. The trial judge's task remains, as it always has been, to decide what the evidence shows will be the sum that will put the plaintiff in the position that they would have been in had the contract been performed. Put in different terms, if the trial judge makes the findings described, those findings show that awarding the amount wasted will so far as the evidence reveals put the plaintiff in that position.

    [97]See [50] and [56] above.

59. Finally, aleatory contracts,[98] and contracts of chance,[99] are not contracts to which this method of calculation might apply. In those cases, the uncertainty of gain or loss is inherent in the nature of the contract; the uncertainty cannot be said to have been caused by the breach of contract by the repudiating party.

    [98]Amann Aviation (1991) 174 CLR 64 at 88.

    [99]See, eg, Chaplin v Hicks [1911] 2 KB 786.

    EDELMAN, STEWARD, GLEESON AND BEECH-JONES JJ.  

    Introduction

60. It is long-established orthodoxy that damages for consequential loss for a breach of contract are awarded only to place the plaintiff in the same situation as if the contract had been performed. The issue on this appeal is the method of proof for a plaintiff to establish the position that they would have been in if the contract had been performed, where the plaintiff has incurred expenditure in anticipation of, or reliance on, the performance of a defendant's contractual obligation and the defendant's breach of that obligation has the effect that the expenditure is wasted.

61. As will be explained in these reasons, that issue should be addressed as follows. The legal onus to prove loss arising from a breach of contract rests on the plaintiff as the party seeking to recover damages. However, where a breach of contract has resulted in (namely, caused or increased) uncertainty about the position that the plaintiff would have been in if the contract had been performed, then the discharge of the plaintiff's legal burden of proof will be facilitated by assuming (or inferring) in their favour that, had the contract been performed, then the plaintiff would have recovered the expenditure they reasonably incurred in anticipation of, or reliance on, the performance of the contract. The strength of this assumption or inference, and thus the weight of the burden placed on the party in breach to adduce evidence to rebut the inference in whole or in part, will depend on the extent of the uncertainty that results from the breach. Expressed in this way, this facilitation principle is tied to its rationale, namely the uncertainty in proof of loss occasioned to the plaintiff by the defendant's breach.

62. The appellant, Cessnock City Council ("the Council"), is the registered proprietor of land on which the Cessnock Airport is located. Against a background where the Council had hoped to develop the airport and accompanying land, the Council entered an agreement with the respondent corporation to lease a prospective lot at the airport to the respondent. The grant of the lease required subdivision of part of the Council's land. So a condition of the agreement for lease was that the Council would take all reasonable action to apply for and obtain registration of the plan of subdivision by 30 September 2011. As events transpired, that action required the Council to spend around $1.3 million. Not wishing to incur that cost, the Council breached the condition and repudiated the agreement for lease. The respondent never obtained a lease.

63. Prior to the Council's repudiation, and in anticipation of, or reliance on, the agreement for lease, the respondent spent almost $3.7 million constructing an "iconic" hangar on the land. But the respondent was not successful in conducting businesses on the site of the proposed lease. The respondent's businesses failed. Following the Council's repudiation, the agreement for lease was treated as terminated and the Council acquired the hangar for $1. It is common ground that by this time, at the latest, the respondent's expenditure was wasted, in the sense that the respondent could not recoup any of the expenditure.

64. The respondent faced great difficulty in proving the consequential loss that it suffered by reference to the position that it would have been in if the Council had performed its contractual obligations. The respondent's difficulties of proof arose from multiple uncertainties: if the Council had obtained registration of the plan of subdivision, would the Council have further developed the airport and accompanying land? How soon would that development have occurred? If development occurred, how much more business would have been attracted to the airport precinct? How would the respondent have responded to any increase in business and operations at the airport?

65. Faced with these potentially insurmountable uncertainties, the respondent relied upon the principle described above that facilitated its proof of loss by treating its wasted expenditure as "prima facie" evidence of the amount that it would have recouped or as the "presumed" amount that would have been recouped. The primary judge in the Supreme Court of New South Wales rejected the application of that principle to the circumstances of this case and awarded the respondent nominal damages of $1. The Court of Appeal overturned the primary judge's decision, applied the principle, and awarded damages to the respondent of almost $3.7 million.

66. In this Court, there was dispute about the basis for, and the nature and operation of, the principle that the Court of Appeal applied to facilitate the respondent's proof of its loss. Consistently with the manner in which the trial and the appeal to the Court of Appeal had been run, the appeal to this Court was brought on an all-or-nothing basis. The Council did not argue that the respondent would have recovered some lesser amount of its wasted expenditure. And the respondent did not argue that it was entitled to a lesser measure of damages representing merely the reasonable cost of the action of obtaining registration of the plan of subdivision to which the respondent was entitled.[100]

    [100]Bellgrove v Eldridge (1954) 90 CLR 613 at 617; White Arrow Express Ltd v Lamey's Distribution Ltd [1995] CLC 1251 at 1254; Peel, "Excluding Liability for Wasted Expenditure: CIS v IBM" [2021] Lloyd's Maritime and Commercial Law Quarterly 425 at 429-430.

67. Although there was some disagreement between the parties about the effect of the decision in The Commonwealth v Amann Aviation Pty Ltd,[101] the respondent's reliance on the principle that permits facilitation of its proof of the position that it would have been in if the contract had been performed is broadly consistent with the reasoning of Mason CJ and Dawson J, as well as Deane J, who spoke of the principle as a "presumption" in favour of the plaintiff, with Brennan J, who spoke of it as a "reversal of the onus", and with Toohey J and Gaudron J, who spoke of it as placing an "evidentiary onus" on a defendant. The description "facilitation principle" emphasises that the principle is not rigid. All the circumstances must be considered and the strength with which the principle applies to facilitate a plaintiff's proof by treating reasonably incurred, but wasted, expenditure as likely to be recouped will depend upon the extent of uncertainty caused or increased by the defendant's breach. In this case, there was considerable uncertainty as a result of the Council's breach. The principle was correctly applied by the Court of Appeal. The appeal should be dismissed with costs.

    Background

    [101](1991) 174 CLR 64 at 87-89, 94, 106, 126-128, 131, 142, 156. See also Berry v CCL Secure Pty Ltd (2020) 271 CLR 151 at 169-170 [29].

    The Council awards a tender for development of the airport

68. The appellant is a local council which owns land on which the Cessnock Airport is located. The Cessnock local government area, as described by the Council, is "within relatively easy driving distance from Sydney, Newcastle and the Coast" and includes the Hunter Valley wine growing area, "Australia's oldest wine region and one of the most famous". The wine industry employed 2,500 people and the region recorded 737,240 visitors in 1994.

69. In 1998, the Council requested expressions of interest for the development and management of the airport. The Council explained in the request that the airport was located in the "rapidly developing Vineyards area of the Lower Hunter Valley" and that it was one of only two airports in the lower Hunter Valley. The Council said that it considered the airport to have "significant potential to accommodate expanded operations for light RPT/Commuter, charter, general aviation and sports aviation traffic".

70. The request for expressions of interest contained a "Cessnock Aerodrome Development Plan". In that development plan, the Council explained that among its proposals was a lengthened runway to accommodate significantly larger, long-range aircraft, an upgrade of terminal facilities for regular passenger and charter services, and subdivision of some of the airport land into lots for lease or sale, to be used for air-related activity. The Council observed that "the number of major projects before it" meant that it would not be appropriate for the Council to fully fund the airport development from its own resources. The Council said that it may be possible for the development to be funded from a combination of sources: sale of excess land, sale of land within the airport environment for air-related activity, or attaching private investor funding.

71. In November 1998, Aviation & Leisure Corporation Pty Ltd ("ALC"), a company unrelated to the respondent, submitted a response to the Council's call for expressions of interest. ALC sought "to coordinate the development of Cessnock Aerodrome in conjunction with various parties", including the Council. ALC observed that there were "great potential economic benefits from an upgrade of Cessnock Aerodrome which will facilitate increased visitor numbers to the region".

72. A key aspect of ALC's development strategy was "[a]dd[ing] non aviation activities to available land to help pay for the infrastructure costs to upgrade the runway, navaids and terminal". Additional services proposed by ALC included the provision of accommodation, entertainment, hospitality and retail. ALC emphasised that it "[was] ready and keen to move this project to completion very quickly" and estimated the cost of the project as greater than $3.8 million. However, ALC also noted that "[t]he viability of the project will depend on adding a mix of non aviation activities to improve cash flows on top of existing activities which should also be expanded".

73. On 2 June 1999, the Council awarded ALC preferred tender status. Earlier, the Council had invited ALC to submit a tender for its management and development of the airport. In its tender presentation to the Council, ALC reiterated that it wished to proceed with the project as soon as possible. ALC identified the airport as a "prime piece of real estate" with "opportunities to introduce to Australia ... private hangars and 'Aerotel houses'", describing those concepts (referred to by the courts below as "hangar homes") as popular in the United States of America but virtually unknown in Australia.

74. ALC also proposed "an aircraft display hangar ultimately attached to the terminal to house a vintage aircraft through glass sides to the terminal and parking areas". With respect to hangarage, ALC identified opportunities for all of the following: (i) large maintenance hangars as already exist; (ii) smaller "strip" hangars for individual aircraft; (iii) "USA style" Aerotel Units combining accommodation with aircraft and car parking; and (iv) larger USA style houses combining accommodation with aircraft and car parking. ALC identified the "financial imperative to allow sufficient development of the total site to achieve an overall profitability". With respect to the Council's contribution to development, ALC suggested that "the Council should consider an ongoing input as long as its cash contribution can be seen to be reducing each year".

75. ALC's proposal was attractive to the Council because it had been represented as a way to produce an income stream to help the Council pay for the development of the airport, of which registration of the plan of subdivision was the first step.

    The process of development begins

76. In July 2002, the Council resolved that parts of the airport would be leased to ALC with a view to the future development of the airport. In December 2003, the Council, in its capacity as a developer and a registered proprietor, lodged a development application for the consolidation of the airport land into two lots and the subsequent subdivision of Lot 2 into 25 further lots, one of which (proposed Lot 104) was the subject of the later agreement for lease to the respondent.

77. In March 2004, the Council entered a three-year lease and management agreement with ALC. The lease provided that if the plan of subdivision was registered by 30 June 2011, the Council would grant a 25-year lease to ALC upon expiry of the initial lease. The initial term of the lease to ALC was subsequently extended by agreement, with the extension reflecting the time required to register the plan of subdivision.

78. In July 2004, the Council adopted a development control plan for the airport.[102] The development control plan and the development itself had purposes that included: permitting development to capitalise on the advantages of the airport site and its strategic location; facilitating environmentally responsible development to maximise the economic benefits to the Cessnock region; and encouraging appropriate ancillary development.

    [102]Environmental Planning and Assessment Act 1979 (NSW), s 72 (as it was then).

79. As repeated in later Council documents, the development control plan identified the airport's location as one of its developmental advantages. The plan identified zone 1 of the airport as the hangar and development area, which included currently vacant land proposed to be used for additional hangars and related development and for the residential accommodation units, or hangar homes, associated with private hangars. An appendix contained specific guidelines for aircraft storage and maintenance hangar buildings and the plan contemplated production of detailed design guidelines for the private hangar and apartment accommodation as well as development of a motel site. Zone 3, the "[t]erminal area", was identified as including an area proposed for additional airport related development, including airport and tourist related shops. Zone 4 was identified as the "[a]ssociated land uses" area "to be developed for tourist related purposes complimentary [sic] to the airport".

80. On 17 November 2004, the Council, acting in its capacity as an approving authority, approved the development application that it had made in its capacity as developer and registered proprietor of the airport. One condition imposed by the Council, condition 23, was that the proposed lots be "connected to Hunter Water Corporation's reticulated sewerage system". Although the consolidation of the airport land into two lots was registered, the plan of subdivision of Lot 2 into 25 further lots (including proposed Lot 104) was never registered by the Council.

    The respondent enters an agreement for lease

81. Mr Johnston, who became the principal of the respondent, was a property developer with an interest in aircraft. In April 2004, Mr Johnston and his business partner had met with the Corporate and Community Services Manager for the Council to discuss a suitable site for a hangar in which to house aircraft owned by Mr Johnston or entities related to him. Mr Johnston and his business partner thought that the hangar could also incorporate an aviation museum and an entertainment venue for corporate events. Around July 2004, Mr Johnston obtained a copy of the Council's development control plan.

82. In April 2005, a solicitor acting on behalf of Mr Johnston submitted a development application for a proposed hangar on Lot 104 of the Council's proposed subdivision. The application provided that the site would be in operation 24 hours a day, seven days a week. The estimated cost of the work was $560,000. Development consent was granted on 28 July 2006.

83. Between August 2005 and April 2007, the solicitors for the Council and the solicitor for Mr Johnston negotiated the terms of an agreement for lease by which the Council promised to grant a 30-year lease of proposed Lot 104 from the day after the registration of the plan of subdivision. The parties to the agreement for lease were the Council (as proposed lessor) and the respondent (as proposed lessee). The respondent was a corporation which Mr Johnston incorporated on 27 December 2006 as Cutty Sark Holdings Pty Ltd. The agreement for lease was executed by the Council on 26 July 2007, following its execution by the respondent.

84. The agreement for lease contained extensive provisions in relation to works to be conducted by the respondent. The respondent was given a licence, for an increasing annual fee which started at $29,000, to enter the area of proposed Lot 104 for the permitted use of the land as an aircraft hangar. The work contemplated by the agreement for lease included the construction of a hangar which the Council was aware would cost around $1.8 million and would be designed by a renowned architect, Peter Stutchbury. The hangar was described by the primary judge as "iconic".[103] Clause 16.8 of the proposed lease that was annexed to the agreement for lease provided that, on the expiry or termination of the lease, the hangar would be transferred to the Council unencumbered for $1.

    [103]123 259 932 Pty Ltd v Cessnock City Council[No 2] [2021] NSWSC 1329 at [255].

85. The proposed lease to the respondent of prospective Lot 104 was subject to registration of the plan of subdivision. By cl 4.2(a)(2) of the agreement for lease, the Council promised to take all reasonable action to apply for and obtain registration of the plan of subdivision by a "Sunset Date" of 30 September 2011. If the plan of subdivision was not approved and registered by the Sunset Date, then each party had a power to terminate the agreement.

    The respondent builds the hangar and conducts businesses from it

86. From May 2007, after the Council's grant of development consent for the hangar on 28 July 2006 and very shortly before the execution of the agreement for lease by the Council, the respondent began construction of the hangar on proposed Lot 104. Services were connected to the hangar in March 2009.

87. At various times between July 2009 and June 2011, the respondent operated three businesses from the hangar. The first business was an adventure flight business which the respondent operated between July and November 2009. The second business was an aircraft museum which the respondent operated between September 2009 and February 2010. The third business was a corporate venue hire business which the respondent operated between August 2009 and June 2011. In the financial year 2009/2010, the respondent made a loss of $52,185.06 (with a depreciation cost for buildings of $42,292.29 and interest of $88,038.85 on borrowings to build the hangar). In the financial year 2010/2011, the respondent made a loss of $13,909.94 (apparently not accounting for depreciation and interest).

88. By the Sunset Date, and without development of the airport, the three businesses plainly were not profitable. Mr Johnston gave evidence that the businesses were not sustainable because without the subdivision and development of the airport it was difficult to attract business. He said that with his "tenure" (a lease of Lot 104 following subdivision) he "would probably say I think I can make it work. But Council would have had to develop the airport that was also promised."

    The Council chooses not to fulfil the subdivision condition

89. From the time that the Council granted itself the development consent on 17 November 2004, the Council engaged consultants to produce feasibility reports and to obtain quotations for the work involved in fulfilling the Council's conditions in the development consent, including condition 23, which required the proposed lots to be connected to Hunter Water Corporation's reticulated sewerage system. The Council gave the consultants a budget for compliance with the development consent of $789,000.

90. On 1 February 2010, the consultants informed the Council that they estimated a further $1,317,764 was required to comply with the development consent. Within the Council, a bid was placed to the Council's Infrastructure Strategy Section for allocation of $1,317,800 to the "Hunter Valley Airport Development Consent". It was expected that this amount would eventually be offset by income from the airport development. In 2010 the Council's financial position included approximately $79 million expenditure on public works, an operational position (excluding capital income) of $3,292,000 and unrestricted cash and investments of $1,634,000. But the discretionary bid was refused.

91. On 29 June 2011, one day before the expiry of ALC's lease and management agreement, the General Manager of the Council informed ALC that the Council "won't be proceeding with the subdivision of the land at the airport" because the Council had "no intention of spending about a million dollars fixing the sewerage". On 1 December 2011, the Council terminated its agreements with ALC.

92. On 13 September 2011, shortly before the Sunset Date of 30 September 2011 in the agreement for lease between the Council and the respondent, the General Manager of the Council wrote to the solicitor for the respondent saying that the Council had "been unable to achieve the registration of the plan of subdivision within the timeframe anticipated in the agreement for lease". The Council offered the respondent a 25-year exclusive licence on the same terms as the proposed lease or a series of leases for successive terms of five years or fewer.

93. On 20 December 2011, the solicitor for the respondent declined the Council's offer. The solicitor observed that the respondent had spent over $2.7 million on the hangar venue. The solicitor added that the respondent "would not have entered into the Agreement for Lease if there had not been the assurance the subdivision would proceed and allow a 30 year lease to be granted". He emphasised that the respondent entered the agreement "hoping his building would be able to contribute to the Cessnock business and tourism development" and that the respondent was "committed to endeavouring to find new uses of the building".

    The respondent is deregistered and the Council acquires the hangar

222. This argument also involved the proposition that the businesses the respondent operated from the hangar between July 2009 and June 2011 could never have been profitable without the development of the Cessnock Airport otherwise proceeding, the Council never guaranteed that such development would have occurred either by the Sunset Date of 30 September 2011 or at all, and such development depended on the actions of third parties and therefore was outside of the Council's control. By reason of these matters, the Council contended that either the presumption did not arise at all in this case or that, if the presumption arose, it had been rebutted.

     McRae

223. In McRae, Dixon and Fullagar JJ explained the principles that should be applied in a case of claimed wasted expenditure by distinguishing between: (a) a fallacious conception of that case as one of non‑delivery of a contracted‑for item (an oil tanker capable of salvage) which meant that the plaintiffs' expenditure on seeking to salvage the non‑existent tanker could not be "wasted" in the sense necessary to constitute recoverable loss; and (b) the correct conception of the case as one in which "the contract alleged is a contract that there was a tanker in a particular place, and the breach assigned is that there was no tanker there, and the damages claimed are measured by expenditure incurred on the faith of the promise that there was a tanker in that place".[251] On that correct basis, Dixon and Fullagar JJ said that:[252]

     "[The plaintiffs] have now a starting‑point. They can say: (1) this expense was incurred; (2) it was incurred because you promised us that there was a tanker; (3) the fact that there was no tanker made it certain that this expense would be wasted. The plaintiffs have in this way a starting‑point. They make a prima‑facie case. The fact that the expense was wasted flowed prima facie from the fact that there was no tanker; and the first fact is damage, and the second fact is breach of contract. The burden is now thrown on the Commission of establishing that, if there had been a tanker, the expense incurred would equally have been wasted. This, of course, the Commission cannot establish. The fact is that the impossibility of assessing damages on the basis of a comparison between what was promised and what was delivered arises not because what was promised was valueless but because it is impossible to value a non‑existent thing. It is the breach of contract itself which makes it impossible even to undertake an assessment on that basis. It is not impossible, however, to undertake an assessment on another basis, and, in so far as the Commission's breach of contract itself reduces the possibility of an accurate assessment, it is not for the Commission to complain."

     [251]McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 414.

     [252](1951) 84 CLR 377 at 414.

224. Their Honours were not saying that the plaintiffs had to prove that it was impossible to assess damages on the usual basis of returns had the contract been performed before the plaintiffs could recover their loss. They were recognising wasted expenditure as a category of recoverable loss and saying only that it hardly befitted the party in breach to complain about the fact that the plaintiffs could not prove their loss on the usual basis. They also were not saying that the contract had to be within some special class before expenditure in reliance on (not mere performance of) the contract would be characterised as "wasted" by reason of the non‑performance of the contractual promise.

     Amann Aviation

225. It may be accepted that the reasoning in The Commonwealth v Amann Aviation Pty Ltd[253] is not as straightforward as that of Dixon and Fullagar JJ in McRae. But that is no reason to elevate every or any nuance of the Court's reasoning processes to the level of principle.

     [253](1991) 174 CLR 64.

226. Mason CJ and Dawson J concluded that "a plaintiff has a prima facie case for recovery of wasted expenditure once it is established that the expense was incurred in reliance on the promise of the party in breach, there being a failure of performance by that party", it being "just and fair that the repudiating party should bear the onus of showing that the party not in breach would have made a loss on the contract".[254] As they put it, "it was a case in which, it being natural and appropriate for Amann to sue to recover its wasted expenditure by way of reliance damages, the onus rested on the Commonwealth of establishing that the reliance expenditure would have been wasted even if the contract had been performed".[255] This accords precisely with the reasoning in McRae, the only difference being their Honours' observation that, unlike McRae, "it was not impossible, as a matter of theory, for Amann to establish what its profits (if any) would have been had the Commonwealth not repudiated the contract".[256] Again, the point is not that the Commonwealth's breach had to make it impossible or even difficult for Amann to prove loss other than on the basis of wasted expenditure. It is simply that it is hardly for the party in breach to complain about that impossibility or difficulty.

     [254](1991) 174 CLR 64 at 89.

     [255](1991) 174 CLR 64 at 90.

     [256](1991) 174 CLR 64 at 89.

227. The exception to the presumption which Mason CJ and Dawson J contemplated, of "a purely aleatory contract" where "inherent in the entry into such a contract is the contingency that not even the slightest expenditure will be recovered, let alone the securing of any net profit",[257] should not be permitted to be expanded beyond its strict terms. An aleatory contract is one in which the required performance depends entirely on a mere chance event, such as a life insurance contract. The agreement for lease between the Council and the respondent was not of this kind. There is no principled basis available to expand the exception to the presumption which Mason CJ and Dawson J contemplated.

     [257](1991) 174 CLR 64 at 88.

228. Brennan J accepted that "the amount which a plaintiff has reasonably expended in reliance on the defendant's promise and which is wasted by reason of the defendant's breach of his promise is a proper subject of damages for breach of contract"[258] and that while the onus of proof of loss was on the plaintiff a "sufficient and necessary justification for shifting the onus to the party in breach in the assessment of damages for wasted expenditure incurred in reliance on the defendant's promise before rescission for breach is that the breach of the contract itself makes it impossible to undertake an assessment on the ordinary basis".[259] This conception of the justification for the presumption or prima facie case of recoupment also does not make impossibility of an assessment of loss on the ordinary basis a prerequisite to the engagement of the presumption or prima facie case of recoupment.

     [258](1991) 174 CLR 64 at 104.

     [259](1991) 174 CLR 64 at 106.

229. Deane J, quoting an observation of Cooke J, observed that "[i]t has been truly said that the assessment of damages in contract and tort is 'a pragmatic subject ... [which] does not lend itself to hard‑and‑fast rules'".[260] Reflecting that pragmatism, his Honour said that "[i]n a case where a plaintiff has incurred expenditure either in procuring the contract or in its performance but it is impossible or difficult to establish the value of any benefits which the plaintiff would have derived from performance by the defendant, considerations of justice dictate that the plaintiff may rely on a presumption that the value of those benefits would have been at least equal to the total detriment which has been or would have been sustained by the plaintiff in doing whatever was reasonably necessary to procure and perform the contract".[261] Deane J continued, saying that "[w]here that presumption is operative, it enables the recovery by a plaintiff of what are commonly referred to as 'reliance damages', that is to say, damages equivalent to the wasted expenditure which has been reasonably incurred in reliance upon the assumption that the contractual promises of the defendant would be honoured" but that the "presumption will be rebutted if it be self‑evident or established that the plaintiff would have derived no financial or other benefit from performance of the contract or that any financial or other benefit which would have been derived from future performance would not have been sufficient in value to counterbalance the past expenditure".[262] This reasoning is not readily reconcilable with McRae and involves the contradiction of, on the one hand, requiring the assessment of damages on the usual basis (returns from the performance of the contract) to be impossible or difficult and, on the other hand, imposing an onus on the party in breach to disprove the impossible or difficult.

     [260](1991) 174 CLR 64 at 119, quoting Takaro Properties Ltd v Rowling [1986] 1 NZLR 22 at 69.

     [261](1991) 174 CLR 64 at 126.

     [262](1991) 174 CLR 64 at 126‑127.

230. Toohey J considered that the principle in Robinson v Harman[263] – that damages for breach of contract are to place the party who has sustained loss, so far as money can do so, in the same position as if the contract had been performed – accorded with the concept of reliance damages provided that such damages did not exceed the wasted expenditure.[264] Toohey J accepted that "if the plaintiff would not have recouped [their] outlay in any event, [they are] not entitled to reliance damages".[265] His Honour reiterated that "the primary rule is that it is for the plaintiff to establish the damages to which [they are] entitled",[266] but this was "not to say that, in some instances, damage may not be inferred or presumed".[267] His Honour resolved the question of onus on the basis that "[t]here is, in effect, an evidentiary onus on the defendant to show that receipts would not have equalled outlay by the plaintiff, though ultimately the aim is to determine what loss has occurred on the basis of all available evidence. It may be assumed, in the absence of evidence to the contrary, that the plaintiff would have recovered [their] costs."[268]

     [263](1848) 1 Ex 850 at 855 [154 ER 363 at 365].

     [264](1991) 174 CLR 64 at 135.

     [265](1991) 174 CLR 64 at 136.

     [266](1991) 174 CLR 64 at 137.

     [267](1991) 174 CLR 64 at 138.

     [268](1991) 174 CLR 64 at 142‑143.

231. Gaudron J identified that "[t]he present case is one in which the uncertainties are such that it is not possible to make any reliable estimate of the value of Amann's contractual rights. Thus, it is one in which the assessment of damages might properly be approached having regard to Amann's wasted expenditure."[269] Gaudron J said that "[o]nce it is appreciated that damages assessed by reference to wasted expenditure are awarded to compensate for the loss of contractual rights or for loss of profits, it is apparent that what is involved is an assumption that the loss is no less than that which has been outlaid and wasted by reason of repudiation or breach".[270] Gaudron J rejected the notion that the party in breach was subject to a legal onus, but said that "[t]he assumption which underlies the award of damages by reference to wasted expenditure, like all assumptions, is one which, once made, will ordinarily be maintained unless displaced by evidence pointing to the contrary. In a practical sense that may mean that the assumption will often be made and maintained unless the defendant proves otherwise."[271] As a "starting‑point", the assumption had to "give way if there is evidence to the contrary".[272] Further, "the circumstances may be such as to preclude any assumption to that effect. Thus, the assumption will not be made if it appears that receipts would have been less than the amount of the wasted expenditure."[273]

     [269](1991) 174 CLR 64 at 154.

     [270](1991) 174 CLR 64 at 155‑156 (footnote omitted).

     [271](1991) 174 CLR 64 at 156.

     [272](1991) 174 CLR 64 at 156.

     [273](1991) 174 CLR 64 at 157.

232. McHugh J did not accept that McRae was based on a principle "that proof of expenditure gives rise to a prima facie inference that it will be recouped by the carrying out of the contract", that decision being "satisfactorily based on the broad principle of justice that, if the breach of the defendant has made it impossible to ascertain whether or not the plaintiff would have made a profit from the performance of the contract, it is only fair that the defendant should reimburse the plaintiff for expenditure which it has wasted as the result of the breach".[274] Accordingly, his Honour considered that once the plaintiff had proved that it was impossible to assess the outcome of performance of the contract, the plaintiff "is entitled to be compensated for all expenditure wasted in reasonable reliance on the defendant's promise to perform its side of the contract".[275] This approach, like that of Deane J, may also elevate the impossibility of ascertaining damages on the usual basis to a precondition to the engagement of the presumption, contrary to McRae.

     [274](1991) 174 CLR 64 at 166.

     [275](1991) 174 CLR 64 at 166‑167.

     Post-Amann Aviation

233. In Berry v CCL Secure Pty Ltd,[276] in explaining Amann Aviation, Bell, Keane and Nettle JJ said that:[277]

     "While a claimant bears the legal burden of establishing the amount of its loss or damage, the nature and circumstances of the wrongdoer's conduct may support an inference or presumption that shifts the evidentiary burden ... One relevant modern application of that principle is reflected in this Court's decision in Amann Aviation".

     [276](2020) 271 CLR 151.

     [277](2020) 271 CLR 151 at 169 [29] (footnotes omitted).

234. While their Honours referred to Brennan J as having explained that, in the circumstances of that case, "it was just that the Commonwealth should bear the ultimate onus of proving at least a prospect that Amann's returns under the contract would not have been sufficient to recoup that expenditure",[278] their Honours should not be understood as suggesting that a party in breach in such a case will discharge its onus merely by proving a "prospect" of non‑recoupment had the contract been performed. There was no need for their Honours to consider the presumption on the facts of that case,[279] and it is clear from the reasoning in Amann Aviation that the mere prospect of non‑recoupment was not sufficient to defeat Amann's claim for recoupment of wasted expenditure.

     [278](2020) 271 CLR 151 at 170 [29].

     [279](2020) 271 CLR 151 at 170 [30].

235. The approach of Dixon and Fullagar JJ in McRae accords with that of Mason CJ and Dawson J in Amann Aviation. That approach has the advantage of embodying the robust practicality, informed by considerations of fairness and justice, that the common law takes to the assessment of damages for contractual breach. That approach should be applied as indeed the Court of Appeal did.[280]

     [280]123 259 932 Pty Ltd v Cessnock City Council (2023) 110 NSWLR 464 at 487‑488 [73].

     The presumption

236. The applicable principles, if engaged, do not permit the Council's attempts to elevate what are truly matters of the sufficiency of proof – namely, for the party in breach to rebut the presumption by discharging the legal onus on it in a particular case – to the status of preconditions to the engagement of the presumption. Accordingly, leaving aside purely aleatory contracts (where the presumption may not arise at all), the strength of the presumption does not vary depending on the nature of the particular contract or the allocation of risks under it. The presumption is the presumption. It is a presumption that expenditure in reliance on the other party's performance of the contract is wasted expenditure and, therefore, is a recoverable category of loss if the contract is not performed by reason of that other party's breach. What may vary is the evidence necessary to rebut the presumption having regard to the nature of the particular contract or the allocation of risks under it. Similarly, considerations such as the nature and degree of the expenditure and its relationship (essential or incidental) to the contract, the expected source of recoupment of the expenditure (from the contract breaker or otherwise), the degree of speculation inherent in the contract or expenditure, and the actual conditions referable to the contract leading up to the breach – all of which were called in aid by the Council to support its case – do not determine whether the presumption is engaged or not. Nor do such considerations determine the strength of the presumption. But they may be relevant to the question of the remoteness of damage, the reasonableness of the expenditure, and the evidence sufficient to rebut the presumption by discharge of the legal onus of the party in breach.

     Application of McRae and Amann Aviation to the present case

237. No party challenged the correctness of McRae or Amann Aviation in this appeal.

238. The respondent spent the $3,697,234.41 constructing the hangar. There can be no proper suggestion in this appeal that this expenditure was unreasonable. The respondent constructed the hangar relying on the Council's contractual promise to take all reasonable action to apply for and obtain registration of the plan of subdivision by the Sunset Date of 30 September 2011. While that contractual promise did not guarantee registration of the plan of subdivision, it did guarantee that the Council would do everything reasonable to enable such registration. Those actions included satisfying the conditions of the development consent for the subdivision. The loss in the form of the wasted expenditure is within the second limb of the rule in Hadley v Baxendale,[281] namely such loss as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as being the probable result of the breach. The Council has not proved that the respondent would not have recouped the cost of constructing the hangar if the Council had fulfilled its contractual promise.

     [281](1854) 9 Ex 341 [156 ER 145].

239. One problem with the Council's arguments that it rebutted the presumption is that they fail to recognise the difference between: (a) on the one hand, operating the businesses the respondent operated from the hangar between July 2009 and June 2011 in circumstances where the Council was manifestly working towards completing all works required by the development consent to enable registration of the plan of subdivision and obtaining approvals for the Masterplans required by DCP 53; and (b) on the other hand, operating those businesses in circumstances where those works had manifestly stalled due to lack of the commitment of funds by the Council to complete those works. Another problem with the Council's arguments that it rebutted the presumption is that, as is apparent from the Council's own documents referred to above, everything the Council said and did from 1998 in relation to the development of the Cessnock Airport is irreconcilable with those arguments.

240. It is also not to the point that the profitability of the respondent's businesses being conducted from the hangar always depended on the patronage not of the Council but of others. It is obvious that the patronage of others was going to be heavily dependent on the Council fulfilling its contractual obligation to take all reasonable action to obtain registration of the plan of subdivision by the Sunset Date of 30 September 2011. The Council did not guarantee that others would take up the development potential of the other lots to be created by the subdivision. But it did guarantee to take all reasonable action to create those lots by the Sunset Date of 30 September 2011. And, in guaranteeing that, it also guaranteed to satisfy the conditions of the development consent. Had it done so, those proposed lots would have been fully serviced and immediately available for development. That hypothesised circumstance bears no resemblance to the reality of the respondent's business operations from the hangar between July 2009 and June 2011, in which development could not occur on the western side of the Cessnock Airport because the Council was unwilling to spend the money required to service that land in accordance with the development consent for the subdivision.

241. Further, it is not correct to say, as the Council contended, that the respondent's success depends on matters where the key evidence lay with the respondent, namely as to what businesses it would have sought to conduct and how it would have sought to finance them if the Council had fulfilled its contractual promise. The respondent conducted businesses from the hangar, but they failed in the actual situation of the Council not having fulfilled its contractual promise. Accordingly, the "disastrous performance" of the respondent's businesses up to breach, as the Council described it, proves nothing. It is quite unrealistic to infer that the failure of the respondent's businesses in the actual situation in which it found itself between 2009 and 2011 would have been the same had the Council not repudiated the contract. It is one thing to accept that the repudiation did not occur until 13 September 2011, when the Council wrote to the respondent. It is another to assume or infer that the respondent's businesses would have been in the same circumstances between 2009 and 2011 irrespective of that repudiation.

242. The Court of Appeal was correct to conclude that "the fact that there was no promise to develop the airport does not mean that the potentiality of its development is irrelevant when considering whether the Council had shown that [the respondent] would not recoup its expenditure", as "it is permissible to have regard also to potential benefits that might have accrued to the plaintiff, although they are not contractual entitlements, if they may reasonably be supposed to have been in the contemplation of the parties" when they entered into the contract.[282] The Court of Appeal was also correct to conclude that "[p]roof of losses in the early stages of a business or enterprise that was to run for many years does not establish that, over the term of the Lease, [the respondent] would not have earnt sufficient revenue to recoup its costs".[283] This is particularly so in the circumstances identified above, namely that the respondent's businesses were operating in an environment not comparable to the environment in which they would have been operating had the Council fulfilled its contractual promise. Accordingly, the Council did not discharge the onus of proving that the expenditure on the hangar would have been wasted irrespective of its repudiation of the contract. Therefore, the presumption of recoupment was not rebutted.

     [282]123 259 932 Pty Ltd v Cessnock City Council (2023) 110 NSWLR 464 at 505 [126].

     [283]123 259 932 Pty Ltd v Cessnock City Council (2023) 110 NSWLR 464 at 507 [131].

243. For these reasons, the appeal should be dismissed with costs.