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Unformatted text preview: onable for the buyers to have
taken the ship on a fresh bargain and, therefore, avoided the loss.47 These cases portray a tacit assumption that it is poor social policy for courts to sanctio
the actions of a plaintiff who simply 'does nothing' to avoid losses. Interpreted through
the issue of causation, any avoidable losses are not caused by the defendant's act or
omission, but are caused by the plaintiff not acting in a prudent and reasonable manner.
The impact of this interpretation upon the recovery of opportunity costs is significant,
does not seem applicable where an injured party is precluded from pursuing a course of
action, despite the reasonableness of the action when considered apart from other
circumstances. One such scenario might be constructed where a company, under a restrictive covenant from a previous bond issue to maintain a debt/equity ratio at a cert 45
46 Bridge 1989,400.
Burns v M.A.N. Automotive (Aust) Pty. Ltd. (1986) 161 C.L.R. 653. 212 level, w ould find itself in breach o f its previous covenant if additional borrowing were
pursued to make up funds wrongfully withheld from it. The result could be a forced
liquidation or additional penalties imposed far in excess of the losses caused by the
defaulting party. In this instance, it is submitted that despite the interpretation of
mitigation as a rule of law the court will consider to what extent mitigation should have
AH taken place as "a question o f fact" in the circumstances o f each case. In the e xample
above it seems prudent to assert that a company who would violate terms of a restrictive
covenant in, say, the contract and trust deed relating to a debenture issue, where a leverage ratio would be exceeded with additional borrowing, resulting in a 'trigger event'
which would expose the company to a winding up, would be under no duty at all to
borrow additional funds and risk winding up where a defendant has withheld funds
causing damages to flow on. In addition, where a plaintiff has other resources which could be used to make up losses
inflicted by a defendant, it does not instantly appear how the loss is actually avoided.
loss is certainly shifted within the financial paradigm of the plaintiff, but it is not alleviated in any sense at all. The opportunity cost of a resource is incurred regardles
origin of the resource. A plaintiff, therefore, incurs an opportunity cost when funds are
redeployed from another investment or account to offset a loss caused by the defendant's
late payment. The loss is incurred and the logic of the defendant's exoneration where a plaintiff fails to borrow or redeploy resources is not cogent. This point was addressed by 47 Sotiros Shipping Inc. andAeco Maritime SA v Sameiet Solholt (The Solholt)  1 Lloyd's Rep 605;
also cited Carter and Harland 1998, Cases and Materials on Contract Law in Australia, 3rd ed., p. 799.
Payzu Ltd. v Saunders  2 K.B. 581. 213 the High Court of Australia in Hungerfords v Walker, w hich is considered in detail in Chapter Nine. Causation, Hypothetical Events and Probability
In one sense, all calculations of damages by courts are hypothetical. The first rule of
damages is restitutio in integrum, or the restoration of a plaintiff to the position s/he
would have been in had the wrong, i.e., breach of contract50 or tort51 not occurred. The
courts are thereby faced with the search for what would have been, and then subsequently
measuring that finding against what the court finds actually happened. If one defines
opportunity cost in general terms as "what would have been if the defendant had not
committed a culpable act" then the hypothetical nature of opportunity cost immediately
confronts the observer, and the question is subsequently removed from the plaintiffs
assertion of what would have been, to a question of the plaintiff s proof of what would
have been, and discussion returns to the evidential burden, the subject of this chapter. If the court is convinced that it was "more probable than not"53 that a culpable past event was caused by the defendant's tort or breach of contract, i.e. theoretically over 50%, then
the plaintiff recovers complete damages,54 subject to the rules of remoteness and
mitigation of damages. This is the all-or-nothing rule in civil litigation. To define a
plaintiffs loss as a chance that an event will occur, such as the chance to win a contest,
be included in a prize draw, or escape an otherwise detrimental event, complicates the 49 (1989) 171 C.L.R. 125.
Robinson v Harman (1848) 1 E x 850 at 855; 154 E.R. 363 at 365; Wenham v Ella (1972) 127 C.L.R.
454; Commonwealth v Amann Aviation (1992) 174 C.L.R. 64.
Livingston v Rawyards Coal Co. (1880) 5 A pp Cas 25.
The restitutio in integrum rule is examined more carefully in Chapter Seven.
Livingstone v Halvorsen (1978) 22 A.L.R. 213; 53 A.L.J.R. 50; also see Luntz and Hambly 1992, pp.
259-60; s. 140 Evidence Act 1995 (Cth).
50 214 logic which has been formerly applied in cases determined on the balance o...
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