Unformatted text preview: quot; Gray, Q.C. relied upon support from Wadsworth v Lydall (1981),
examined in Chapter Four, and Sanrod v Dainford (1984). The Court's Judgment
Mason CJ. and Wilson J., in a joint leading judgment, dealt with the points asserted by
counsel for the accountants in a systematic fashion. They acknowledged early common
law hostility to the award of interest,15 and noted the tension in the common law position
of prohibition of interest awards on overdue debts and damages from the time of Page v 10 (1989) 171 C.L.R. 125 at 130.
 9 Ex. 341; 156 E.R. 145.
(1989) 171 C.L.R. 125 at 131.
 2 All E.R. 401.
(1989)171C.L.R. 125 at 137.
11 318 Newman (1829), w hich led to the enactment of Lord Tenterden's Act in 1833.17 Then- Honours noted the restrictive circumstances in section 28 of that Act upon which cour
were allowed to give interest. Noting that it was upon this ground that the House of
Lords had refused relief in London, Chatham & Dover Railway Co. v South Eastern
Railway Co. despite being dissatisfied with the (then) state of the law on awards of interest, they further observed that Hadley v Baxendale had been conspicuously absent
from the judgment in London, Chatham & Dover Railway case. This was, in their
Honours' opinion, "no doubt"19 because the House of Lords in the London, Chatham
case had considered that the awards of interest had stood apart in their Lordships'
opinion from the general principles of damages. This conspicuous lack of comment on the major damages cases decided in the 19 century on the part of the House of Lords i
London, Chatham &Dover Railway was mentioned in Chapter Four. Mason CJ and Wilson J then turned to consider the cases which were decided after
World War II which reflected a different judicial approach to the award of interest.
succession, their Honours considered Trans Trust S.P.R.L. v Danubian Trading Co.
Ltd.20, Wadsworth v Lydall21, and La Pintado22, where the House of Lords approved
Wadsworth v Lydall, and ruled that the consequential damage caused by a defendant's action upon which interest was claimed could fall under the second limb of the rule i
Hadley v Baxendale. This brought their Honours to the conclusion that the House of
Lords in La Pintada had been able to flee the restrictive chains of stare decisis by
concluding that London, Chatham & Dover Railway was concerned solely with ike first 16 (1829) 9 B & C 378; 109 E.R. 140. This case was extensively examined in Chapter Four.
Civil Procedure Act, 1833 (U.K.), 3 & 4 Will. 4, c. 42, was examined in Chapter Four.
 A.C. 429.
(1989) 171 C.L.R. 125 at 139.
 2 Q.B. 297.
 2 All E.R. 401.
17 319 limb of the rule in Hadley v Baxendale and not the second. This allowed M a s o n CJ and
Wilson J to turn to the issues which would dispose of the case at hand, and apply the
second limb of the rule in Hadley's case to the present facts. It is significant to note that the High Court referred to the migration of recovery of
opportunity cost from the second limb of the rule of Hadley v Baxendale, to the first
limb. M a s o n CJ and Wilson J questioned whether a loss that falls under the second limb
of the rule in Hadley23 will always fall under the second limb:
[T]he circumstances which are n o w held to attract the second limb in Hadley v Baxendale - take,
for example, those in Wadsworth v Lydall - are very often circumstances which in any event
would attract thefirstlimb. If a plaintiff sustains loss or damage in relation to money which he has
paid out or foregone, w h y is h e not entitled to recover damages for loss of the use of money when
the loss or damage sustained was reasonably foreseeable as liable to result from the relevant
breach of contract or tort? After all, that is the fundamental rule governing the recovery of
d amages, according to thefirstlimb in Hadley v Baxendale24 ... and subject to proximity, in
negligence.25 Mason CJ, and Wilson J noted the inconsistencies which arise when the strict division of
the limbs of the rule in Hadley are applied:
If the distinction between the two limbs is to be rigorously applied in claims for damages for loss
of the use of m oney, a plaintiff w h o actually incurs the expense of interest o n borrowed money to
replace m o n e y paid away or withheld from him will be entitled to recover that cost, so long as the
defendant was aware of the special circumstances, but not otherwise. T he expense must fall within
the second limb of Hadley v Baxendale in order to be compensable. It cannot fall within the first
limb because the defendant cannot be fixed with imputed knowledge of the plaintiffs financial
situation and of his n eed to incur expense by borrowing money. Furthermore, a plaintiff w h o is
not compelled to borrow m o n e y by w a y of replacement of money paid away or withheld will not
be entitled to recover for the opportunity lost to him, i.e., lost opportunity to invest or to maintain 22 [ 1985]A.C. 104.
D amages which are recoverable under the second limb of the rule i...
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