Written by The case of Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17 saw the High Court of Australia clarify instances in which reliance losses can be recovered following a breach of contract. This case is particularly beneficial to future claimants in circumstances where there are difficulties in proving the potential profitability of the contract.
Facts of the Case
Cessnock City Council (Council) entered an agreement with Cutty Sark Pty Ltd (Cutty Sark) whereby a lease was granted for a subdivided section of Cessnock Airport. Within the agreement was a requirement by Council to obtain registration of the subdivision. After failing to obtain said registration, the Council was found to have breached their contractual obligations. Cutty Sark, however, sought not to claim wasted expenditure in proving the lease would have been profitable given their already unprofitable endeavors at the Airport. Instead, Cutty Sark sought to recover damages for expenses incurred from their previous development at the Airport. The New South Wales Supreme Court found that the Council was not liable for Cutty Sarks’ expenses despite a breach of contract. The Hight Court, however, overturned this decision due to a misapplication of the case facts to the principles of wasted expenditure and instead suggested that Cutty Sark was entitled to claim reliance losses. The Court concluded that the Council could not have proved that Cutty Sark would not have been able to recover their expenses if the Council had obtained their registration of the subdivision.
The Court unanimously upheld the notion that a wasted expenditure of $3.7 million occurred in reliance on Cessnock City Council’s contractual promise.