E interest payable on borrowed money or interest

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Unformatted text preview: integrum was highlighted by the court. To uphold this conflict as matter of policy, and refuse to recognise that a continuous economic loss was suffered a plaintiff who is waiting for a sum to be paid by a debtor in default was not, in thei Honours' opinion, a defensible position: [S]uch a policy would be at odds with the fundamental principle that a plaintiff is entitled to restitutio in integrum. According to that principle, the plaintiff is entitled to full compensation for the loss which he sustains in consequence of the defendant's wrong, subject to the rules as to remoteness of damage and the plaintiffs duty to mitigate his loss. In principle he should be awarded the compensation which would restore him to the position he would have been in but for the defendant's breach of contract or negligence. Judged from a commercial viewpoint, the plaintiff sustains an economic loss if his d amages are not paid promptly, just as he sustains such a loss w h e n his debt is not paid on the due date. T he loss m a y arise in the form of the investment cost of being deprived of money which could have been invested at interest or used to reduce an existing indebtedness. Or the loss m a y arise in the form of the borrowing cost, i.e., interest payable on borrowed money or interest foregone because an existing investment is realized or reduced.31 This loss, according to their Honours, was "a plainly foreseeable loss because, accordin to common understanding, it represents the market price of obtaining money". As a 29 Kirby J. 1996, pp. 1095 - 1098; M ason, A , 1993, p. 570-571. [1989] 171 C.L.R. 125 at 143. 31 ibid. 32 (1989) 171 C.L.R. 125 at 143. 30 323 result, opportunity cost could n o w be a "loss or d amage flowing naturally a nd directly from the defendant's wrongful act or omission, particularly when that act or omission results in the withholding of money from a plaintiff or causes the plaintiff to pay away money."33 On this view, the distinction between interest on damages, and interest as damages was rejected by their Honours. The artificial distinction between damages for late payment which formed part of the original action, and damages in addition to the principal sum and, therefore, not part of the original action,34 was abandoned. Differentiating between the case where a defendant disputes the action and the situation where the incurred expense and opportunity cost arise from paying money away due to the defendant's wrong, Mason CJ. and Wilson J. held that "they are pecuniary losses suffered by the plaintiff as a result of the defendant's wrong and therefore constitute an integral elem of the loss for which he is entitled to be compensated by an award of damages". The former was concerned with finding a cause of action, and the latter was concerned with the limits of recoverable damages. The fact that the courts did not recognise claims for pure economic loss in tort until w into the 20th century36 did not escape the court's attention.37 The distinction between economic loss attached to injury to a plaintiffs property or person, and economic loss 33 (1989) 171 C.L.R. 125 at 143-4. London, Chatham & Dover Railway Co. v South Easter Railway Co. [1893] A.C. 429; Sanrod v Dainford (1984) 54 A.L.R. 179 at 191; President of India v Lips Maritime Corp. [1988] A.C. 395; Norwest Refrigeration Services Pty. Ltd. v Bain Dawes (W.A.) Ltd. (1984) 157 C.L.R. 149. 35 (1989) 171 C.L.R. 125 at 144. 36 Caltex Oil (Australia) Pty. Ltd. v The Dredge "Willemstad" (1976) 136 C.L.R. 429. This case was examined in Chapter Eight. 37 (1989)171C.L.R. 125 at 140. 34 324 negligently inflicted without attached d a m a g e , seemed an empty distinction. T o M a s o n CJ and Wilson J: Once it is accepted that the cost of borrowing money to replace money paid away or withheld is t not too remote, i is pointless to insist on a distinction between the award of damages for loss of the use of money in the case of a liquidated claim and the award of such interest in an unliquidated claim.38 In their Honours' opinion, there was now no longer any reason to delay in awarding opportunity cost by reference to an appropriate interest rate, for the loss of the use of money. "[T]he argument for denying the recovery of incurred expense and opportunity cost ... [a]s a matter of logic and principle, as well as commercial reality, ...has little to commend it". Brennan and Deane JJ were slightly more ambivalent on this particular point. They incorporated a conservative element in relation to the award of interest in compensation for the delay in obtaining payment, but they concurred with Mason CJ and Wilson J in that: there is no acceptable reason why the ordinary principles governing the recovery of c ommon law damages should not, in an appropriate case, apply to entitle a plaintiff to an actual award of damages as compensation for a wrongfully and foreseeably caused loss of the use of money. T o the extent that the reported cases support the proposition that damages cannot be awarded as compensation for th...
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This note was uploaded on 09/03/2012 for the course LAW 1501 taught by Professor Garva during the Three '12 term at University of Adelaide.

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