Commonwealth v Amann Aviation Pty Ltd
High Court of Australia · 1991
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
A contractor spent $5.3 million on aircraft for a three-year contract that, on the figures, would never have paid for them. The Commonwealth repudiated it. Could the contractor still recover its outlay?
The joint reasons of Edelman, Steward, Gleeson and Beech-Jones JJ said the legal onus to prove loss stays on the plaintiff, but that where the breach caused or increased uncertainty about the plaintiff's position, proof is facilitated by assuming or inferring that expenditure reasonably incurred would have been recovered, the strength of the inference depending on the uncertainty (at [61]). They said the Amann reasoning resting on a presumption that a party would not contract unless its costs were recoverable is unnecessary and cannot be accepted, and that there is no presumption of fact (at [149]-[150]). Gageler CJ, Gordon J and Jagot J wrote separately, and each still put some burden on the defendant. So do not present the presumption of Mason CJ and Dawson J as current law: for the onus, cite Cessnock and say whose reasons you rely on. That each member of the Amann majority rejected reliance damages as an elective alternative is recorded in Cessnock at [145], not disturbed.
What happened?
The Commonwealth had to keep up regular aerial surveillance of Australia's northern coastline, and let the work to private contractors. Amann Aviation won a three-year tender in March 1987. It bought and fitted out specially equipped aircraft, at a cost of $5,281,521 against a resale value of only $917,329, and incurred a further $854,943 in pre-operational expenditure. On 12 September 1987 the Commonwealth gave notice terminating the contract. By the time of the appeal it accepted that the notice was invalid, so the only live question was the assessment of damages.
Two features complicated that assessment. The contract's own figures suggested Amann would not have recovered its outlay over the three years, and the real commercial prize was the strong prospect of winning the renewal. And on 12 September Amann was itself in breach, which left open the chance that the Secretary of the Department of Transport would have cancelled under the contract's show-cause clause (cl 2.24). The trial judge assessed lost profits of $820,000 and halved them to $410,000; the Full Court of the Federal Court awarded $6,600,207, built on Amann's wasted outlay.
What did the Court decide?
The appeal was dismissed with costs. Seven Justices sat and wrote six sets of reasons: Mason CJ and Dawson J jointly, and Brennan, Deane, Toohey, Gaudron and McHugh JJ each separately. The appeal was dismissed by Mason CJ and Dawson J, Brennan J and Gaudron J. Deane J would have reduced the award by one fifth, Toohey J by half, and McHugh J would have made an award on a different footing. A student citing the case needs to say whose reasons they are using.
Proposition
What is the principle?
Not an election. The joint reasons of Mason CJ and Dawson J treated damages for loss of profits and damages for expenditure reasonably incurred as "simply two manifestations of the general principle enunciated in Robinson v. Harman", and said 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". Brennan J called them "alternative methods of assessing damages" but said "the plaintiff does not have an election as to the method". Gaudron J said "it is not correct to characterize damages assessed by reference to wasted expenditure as damages to be claimed by election or in the alternative to damages for loss of profits", and McHugh J, dissenting on the result, said "it is a mistake to speak of the plaintiff having a right to elect between expectation damages and reliance damages". Toohey J likewise disagreed with the English statements of an option. McHugh J added that whether a plaintiff can claim wasted expenditure depends on the facts and not on any right of election. The joint reasons, Brennan J, Gaudron J and Toohey J each also said recovery is capped by what performance would have yielded.
Wasted expenditure and the onus. Six Justices accepted that on these facts Amann's damages could be measured by its wasted expenditure; McHugh J would have measured them by expected profit. The reasons did not agree on the burden of proof. The joint reasons put the onus on the Commonwealth, partly through a presumption that a party would not enter a contract whose costs were not recoverable. Brennan J justified reversing the onus only where the breach itself prevents assessment on the ordinary basis. Gaudron J described an assumption and a practical or evidentiary onus. Toohey J found no strict onus on the defendant, and Deane J a rebuttable presumption for the plaintiff. McHugh J rejected the inference. There is no ratio on the burden that a student can attribute to "the Court".
Why does this case matter?
Amann Aviation is the High Court's main treatment of how the three interests in contract damages relate, and it is the case a student should reach for, after McRae, on any question about expenditure wasted by a breach. It is also a useful lesson in reading a fractured judgment: six sets of reasons, a four to three result, and three different damages figures among the dissentients. A later High Court described the case as one from which it is not easy to identify a ratio at any level of specificity. The practical skill is attribution: the passages a textbook quotes come from particular Justices, and the later history of the case differs for each of them.
Exam and application relevance
Cite the case for the relationship between expectation and reliance damages, naming Mason CJ and Dawson J, Brennan J or Gaudron J as the source of the particular sentence you use.
State the ceiling from the case when you claim wasted expenditure: if performance would not have recouped the outlay, the plaintiff does not recover the whole of it.
On the onus, rely on Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17 and say whose reasons you use; do not present the presumption of Mason CJ and Dawson J as the current rule.
Do not attribute the renewal-prospect reasoning to "the Court": the joint reasons, Brennan J and Gaudron J reached the result by different routes, and McHugh J rejected it.
Check your understanding
1. Whose reasons describe expenditure damages and loss of profits as two manifestations of one principle, and which Justices who wrote separately reached the same view on election? 2. Brennan J calls reliance and expectation damages "alternative methods". Does he accept an election between them? 3. Which Justices put a formal onus on the Commonwealth, and which spoke only of an evidentiary one? 4. What did the joint reasons in Cessnock say about the presumption of Mason CJ and Dawson J? 5. What was the order, and how many Justices would have disturbed the award?