Although evidence of a rising social awareness of the

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Unformatted text preview: the refusal to award opportunity costs on sums of money, the common law recognised opportunity costs associated with fixed assets such as land. The widespread view that money was a fungible good, the existence of which was extinguished with its use, constituted an intellectual barrier which created a blindness in the common law. Suits involving land enjoyed curial privilege in that the opportunity costs, in the form of mesne profits, were awarded when proved. Money enjoyed no such privilege. This constituted a classification dilemma in law, where judges did not recognise that money could purchase land, rendering the philosophical justification for the distinctive treatments between the two assets logically indefensible. This double standard, entrenched through the decision in Page v Newman1 in 1829, rigidified the classification dilemma which lasted until trampled by the High Court of Australia in 1989, in Hungerfords v Walker? The longevity of this dilemma is all the more amazing in light of the momentous advancement in economic theory and practice which took place during the same period when the classification dilemma was enforced. The relentless assault of economic doctrine against the prohibition on recovery of opportunity cost began with the pragmatic demands of commercial practices, especially the extension of credit, collateral with the 19th century Industrial Revolution. Although evidence of a rising social awareness of the time value of money and rejection of the court's position came as early as the late 18th century, in the cases before Lord Mansfield momentum was stifled by the decision in Page v Newman and the subsequent statutory compromise erected through the Civil Procedures Act 1833 (U.K.) which awarded simple interest in restricted circumstances and served to obfuscate the underlying tension 1 9 B & C 377; (1829) 109 E.R. 140. 346 b etween the c ommercial a nd the curial worldviews. T he rapidly evolving social economic practices were not long placated by this compromise. Cases in the 20th century show that courts were increasingly uneasy about the enforcement of such an ancient restriction in the light of widely accepted modern practices. Uneasy forced cohabitation between the commercial and the curial positions broke into open conflict as a series of celebrated cases after World War I indicate. Judges found novel ways to award sums which were, in effect, recognizant of the injustice inflicted upon plaintiffs who suffered pecuniary losses from culpable acts of defendants who sought to escape from the liabilities created by their behaviour. As the cases were handed down one by one in the period after 1976, a distinct trend can be discerned which indicates that the High Court was aware that the law in the area of consequential damages recovery was in philosophical disarray. In 1976, in Caltex Oil v the Dredge "Willemstad"3 the doctrine against recovery of pure economic loss without physical damage to property or person was overturned. In 1981, in Pennant Hills Restaurant v Barrell Insurances4 the High Court tacitly recognised inflation as a real economic phenomenon by setting discount rates at a low level, reflecting the underlying economic reality of the effects of inflation on damages awards with future loss components. In 1986 appeals to the English Privy Council and House of Lords were effectively abolished. Finally, in 1989, in Hungerfords v Walker,5 the High Court removed the proscription of curial recognition of opportunity cost as a real loss when it recognised a common law action for the loss of the use of money. 2 (1989)171C.L.R. 125. Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad"; Caltex Oil (Australia) Pty. Ltd. v. De Survey Australia Ltd.; Australian Oil Refining Pty. Ltd. v. The Dredge "Willemstad" (1976) 136 C.L.R. 529. 4 Pennant Hills Restaurants Pty. Ltd. v Barrell Insurances Pty. Ltd. (1981) 145 C.L.R. 625. 5 (1989) 171 C.L.R 125 3 347 T hus, the c o m m o n l aw and economics/finance have been at least partially reconciled. Judicial acceptance of economic theory has increased during the period since 1989, with distinct curial recognition and use of economic theory in a variety of commercial and personal cases where an opportunity cost was considered. These include: intellectual property disputes where opportunity cost was considered as lost profits on products manufactured in contravention of the plaintiffs' patents;6 a family law property settlement dispute where opportunity cost was considered as a price paid for holding cash unreported on tax returns; a commercial contract dispute where only the opportunity cost of the difference in benefits negotiable by contract was awarded and the capital sum g w as precluded from the award. To illustrate the fundamental change in the legal environment regarding damages awards which has taken place in the last two decades, only a short twenty years ago no additional sum, apart from statutory simple interest, could b...
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