Cessnock City Council v 123 259 932 Pty Ltd
High Court of Australia · 2024
Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17
A council promised to take all reasonable action to register a subdivision, then would not spend about $1.3 million on sewerage. The tenant had already built a $3.7 million hangar. What must it prove to get that money back?
What happened?
Cessnock City Council owned the land on which Cessnock Airport is located ([62]). By an agreement for lease executed by the Council on 26 July 2007, it promised to grant 123 259 932 Pty Ltd, the respondent, a 30-year lease of proposed Lot 104 from the day after registration of a plan of subdivision ([83]). By cl 4.2(a)(2) the Council promised to take all reasonable action to apply for and obtain registration by 30 September 2011, the Sunset Date ([85]). The respondent was licensed to enter the proposed lot, and built a hangar there at a cost of $3,697,234.41 ([84], [111]).
In February 2010 the Council's consultants estimated that a further $1,317,764 was needed to comply with the development consent, and an internal bid for that money was refused ([90]). On 13 September 2011 the Council wrote that it had been unable to achieve registration and offered the respondent a licence or short leases, which the respondent declined ([92]-[93]). The plan was never registered and no lease was granted. After the respondent was deregistered, the Council acquired the hangar for $1 in May 2016 ([94]-[95]). The respondent was reinstated and sued in 2017 for damages measured by its wasted expenditure ([103]).
The primary judge, Adamson J, found breach, held that no presumption of recoupment arose and that any such presumption was in any event rebutted, held the expenditure too remote, and awarded $1 in nominal damages ([104]-[108]). The Court of Appeal (Brereton JA, Macfarlan and Mitchelmore JJA agreeing) held that a presumption arose and was not rebutted and awarded the respondent damages including interest of $6,154,459.40 ([109]-[113], [46], [189]). The Council's grounds in the High Court were confined to whether a presumption arose that the respondent would at least have recouped its wasted expenditure and whether it was rebutted ([115]).
What did the Court decide?
The appeal was dismissed with costs. Seven Justices sat and wrote four sets of reasons: Gageler CJ; Gordon J; Edelman, Steward, Gleeson and Beech-Jones JJ jointly; and Jagot J. Each set agreed that the appeal should be dismissed ([43], [47], [187], [243]). The Council had not run any case that the respondent would have recouped only part of its expenditure, and the joint reasons describe the appeal as brought on an all-or-nothing basis ([66], [185]-[186]).
Proposition
What is the principle?
Facilitation of proof (the joint reasons). Edelman, Steward, Gleeson and Beech-Jones JJ said: "The legal onus to prove loss arising from a breach of contract rests on the plaintiff as the party seeking to recover damages" ([61]). Where the breach has caused or increased uncertainty about the plaintiff's position had the contract been performed, discharge of that onus is facilitated by assuming or inferring that expenditure reasonably incurred in anticipation of or reliance on performance would have been recouped, and "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" ([61]). They said the word "presumption" is "best avoided in this context" ([128]). Their Honours treated the reasoning of Mason CJ and Dawson J in Amann Aviation that rested on a presumption that a party would not enter into a contract in which its costs were not recoverable as "unnecessary to support the facilitation principle" and said it "cannot be accepted" ([149]); the facts supporting the inference "are for the plaintiff to establish; there is no presumption of fact" ([150]). Remoteness and mitigation continue to limit recovery ([120]).
The separate reasons. Gageler CJ held that the plaintiff's prima facie entitlement to wasted expenditure "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" ([3]), and that "[t]he defendant bears a legal onus" of proving that counterfactual ([20]). Gordon J said "[t]here is no relaxation of proof" ([58]) and that 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" ([56]). Jagot J held that "a presumption of fact arises that the expenditure is 'wasted' by reason of the other party's breach or repudiation" ([190]).
Characterising wasted expenditure. The Justices did not describe it alike. Gageler CJ: "Wasted expenditure is itself a category of damage" ([9]). Gordon J: damages for wasted expenditure are "not a separate measure or category of expectation damages but a method of calculating damages" ([51]). The joint reasons: a plaintiff's reliance on a contract is "merely part of an alternative way of proving the plaintiff's loss" ([119]).
Why does this case matter?
It is the High Court's most recent extended treatment of a claim for wasted expenditure, delivered on 8 May 2024, so an answer that stops at Amann Aviation is out of date on the burden of proof. It is also an awkward case to cite, because the words used for the burden (legal onus, presumption, facilitation) are not interchangeable. The usual error is to lift one phrase from one set of reasons and present it as the Court's holding.
Exam and application relevance
Say whose reasons you are relying on when you state the rule on the onus. Give the paragraph with the name.
In a problem where a plaintiff proves expenditure reasonably incurred in reliance on the defendant's promise, a breach that left it wasted, and difficulty proving what performance would have yielded, ask what uncertainty the breach caused or increased, and then what evidence the defendant has led. On the joint reasons, the answer to the second question affects how much of the expenditure is recovered ([167], [184]).
Check your understanding
1. On the joint reasons, who bears the legal onus of proving loss, and what does the facilitation principle assist? 2. Which Justices described the defendant's burden as a legal onus, and which described it as a presumption of fact? 3. What did the joint reasons say about the presumption that Mason CJ and Dawson J relied on in Amann Aviation? 4. On what basis was the appeal argued, and what did the joint reasons say a defendant must establish to reduce recovery in whole or in part ([61], [167])? 5. What was the order, and how many sets of reasons supported it?