Unformatted text preview: n Hadley are those in the
contemplation of the parties at the time they executed the contract as liable to result from a relevant known
or contemplated breach of contract.
T he judgment notes the support of Victoria Laundry (Windsor) Ltd. v Newman Ltd  2 K .B. 528 at
23 320 an investment. This is because in the ordinary course of things the defendant appreciates that the
plaintiff will replace from his other resources the money lost, so that opportunity cost falls more
readily within thefirstlimb of Hadley v Baxendale. H o w can the difference in treatment be
justified? In each case the plaintiff sustains a loss and, ex hypothesi, the defendant's wrongful act
or omission is the effective cause of that loss...26 T he reasons given for avoiding the award of opportunity cost in past cases within the
argument from the limbs of the rule in Hadley, w ere, in this view, a contradictory
nonsense. In order to recover through the second limb, which focuses upon what w a s in
the contemplation of the parties w h e n they m a d e the contract, the defendant must be
pinned with the knowledge of the strict financial impact upon the plaintiff, so that the
defendant can fairly be said to have been aware of the circumstances of the plaintiffs
loss. T h e reason for this, according to their Honours, w a s because a plaintiff might be
able to find m o n e y from somewhere else to m a k e up the loss and, therefore, the
opportunity cost from the defendant's actions is avoided. T h e court w a s drawing to
notice that the plaintiffs loss is only shifted where alternative funds are used, and not
really alleviated or avoided at all. T h e compensation for the loss, b y implication, should
be in reference to the loss of the plaintiff and the determination of h o w the plaintiff
accounts for the loss is irrelevant. Their Honours pointed out that if a plaintiff shifts a
loss incurred from the acts of the defendant by m o v i n g funds around, h o w can it b e said
that a plaintiff w h o cannot shift funds around suffers m o r e of a loss than one w h o d oes? 27
T he inconsistencies plaguing this area of law were no longer acceptable to the High
Court. 25 (1989) 171 C.L.R. 125 at 142.
(1989) 171 C.L.R. 125 at 142-3.
26 321 Their H onours w ere, b y implication, ignoring the assumption of stasis tacitly imported
through the doctrine of stare decisis. From their perspective the imputed knowledge which the court will assume to be part of the criteria viewed as 'usual' within the fi limb of the rule in Hadley v Baxendale is not a static assumption. On the contrary, th argued that the imputed level of knowledge is flexible, recognizing the increased learnin
and societal changes in the wider commercial environment.
W e reach this conclusion more readily, knowing that legal and economic thinking about the
remoteness of financial and economic loss have developed markedly in recent times. Likewise,
opportunity cost should not be considered as too remote when money is paid away or withheld.28 This was a courageous statement, given the history of the common law, the restrictions upon the subject by the doctrine of stare decisis, and the length of time the courts h
prohibited the recovery of opportunity cost. The House of Lords in this case, however, was not the final court of appeal. In 1985, the Federal Parliament of Australia and th
U.K. simultaneously passed legislation effectively prohibiting appeal from the High Court of Australia to the House of Lords or Privy Council. In order to appeal to those courts from a ruling emanating from an Australian jurisdiction the High Court must iss
a certificate to do so. No certificates have ever been issued. Judicial hypocrisy which prohibited admission of evidence on opportunity costs of
plaintiffs, including inflationary consideration, yet officially adhered to the doctrine restitutio in integrum based on either the public policy of accuracy or efficiency was
rejected outright by Mason CJ and Wilson J.
If a justification exists for the difference in treatment [for the award of damages for the loss of the
use of m oney] it m ust have its genesis in a policy that encourages recovery of expense actually
incurred and discourages or denies recovery of opportunity cost. Yet it is not easy to see any 28 (1989) 171 C.L.R. 125 at 146. 322 cogent reason for the adoption of such a policy; the award of compensation for opportunity cost
would not expose the courts to insuperable problems in fact-finding.30 This point reflects just h o w far the courts have evolved in the time from Page v Newman, in 1829, to the present. The recognition that courts cannot hide from difficult questio
and that they have a social obligation to those seeking the court's intervention seems underpin the attitude of the majority judgment in Hungerfords. The fundamental conflict between the numerous previous instances of curial policy in refusing evidence pertainin
to intangible economic concepts analogous to opportunity losses and the fundamental rule of restitutio in...
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- Three '12
- Common Law, High Court of Australia