When to Assess Damages for Breach of Contract

The NSW Court of Appeal considered this issue in the recent decision in Tok v Rashazar [2025] NSWCA 94 (7 May 2025).

Such an assessment will normally be assessed as at the date of breach, but that rule may yield in certain circumstances, as discussed by Stern JA (with whom Payne and Kirk JJA agreed).

The topic of using wasted expenditure in such an assessment was also considered.

Stern JA said:

Date of assessment of damages for breach of contract

50. An important predicate of the primary judge’s reasoning at [102] (set out at [31] above) was that the value and profitability of Rashazar on the counterfactual that it had become a 30% shareholder of Fresh Cut were relevant to the assessment of damages for breach of contract. Implicit in this was a finding that events after the date when the obligation of Mr Tok to transfer the shares crystallised would be relevant to the assessment of damages. The correctness of this finding was implicitly raised in ground one, as the appellants contended that they could have put evidence before the Court as to the value of the 30 shares in Fresh Cut as at the date of breach.

51. In considering this contention, the starting point is necessarily “[t]he rule of the common law … that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed”: Robinson v Harman [1848] EngR 135; (1848) 1 Exch 850 at 855 (Parke B); Tabcorp Holdings Ltd v Bowen investments Pty Ltd (2009) 236 CLR 272; [2009] HCA 8 (“Tabcorp”) at [13] (French CJ, Gummow, Heydon, Crennan and Kiefel JJ). As to when damages are assessed, ordinarily, as was held in Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351 at 367; [1988] HCA 64, damages for breach of contract are assessed as at the date of the breach, however:

“The rule will yield if, in the particular circumstances, some other date is necessary to provide adequate compensation: see, for example, Wenham v Ella [1972] HCA 43; (1972) 127 CLR 454; Dodd Properties Ltd. v Canterbury County Council [1979] EWCA Civ 4; [1980] 1 WLR 433; [1980] 1 All ER 928; County Personnel Ltd. v Alan R. Pulver & Co. [1987] 1 WLR 916; [1987] 1 All ER 289.”

52. Wenham v Ella (1972) 127 CLR 454; [1972] HCA 43 (“Wenham”), cited in the extract set out above, involved a breach of contractual obligation of the appellant to transfer shares which would have given the respondent a 6/20 undivided share in a profit-making property. The High Court, upholding the trial judge’s award, held that the respondent’s compensable loss included the loss of “the product of the interest in the land” from the date of the failure to transfer to the date of judgment: at 461 (Barwick CJ; see also Menzies J at 463, Walsh J at 464-465; Gibbs J at 472-4; Stephen J at 474). Menzies J observed that the “rules which operate satisfactorily in cases where purchasers have not paid money, cannot be applied automatically to cases where purchasers have paid money for what has not been delivered to them”: at 464 (see also Barwick CJ at 463 and Gibbs J at 473). Walsh J at 466 (cited with approval by Steward J in Elisha v Vision Australia Ltd [2024] HCA 50; (2024) 99 ALJR 171 at [82]) described an error in the appellant’s contention as:

“treating rules which constitute useful guidance in the ascertainment of damages as rigid rules of universal application, instead of treating them as prima facie rules which may be displaced or modified whenever it is necessary to do so in order to achieve a result which provides reasonable compensation for a breach of contract without imposing a liability upon the other party exceeding that which he could fairly be regarded as having contemplated and been willing to accept.”

53. In a passage recently cited with approval by Ward P (Meagher JA and Griffiths AJA agreeing) in Khattar v Khattar [2023] NSWCA 133 at [215], Gibbs J observed at 473-4 that:

“The general principle that damages are normally measured by reference to the circumstances at the date of the breach of contract does not mean that events that have occurred after that date may never be considered. The appellants’ contention on this point, if correct, would mean that evidence could never be given of the amount of profits lost as the result of a breach and that the every-day practice of receiving evidence as to the damage that had in fact flowed from a breach and as to steps that were or could have been taken to mitigate a loss is erroneous. However, the evidence as to the income in fact lost by the breach was in my opinion plainly admissible. As to the contention that it was wrong that the amount of damages should have depended on the time that elapsed until judgment, the answer simply is that until that time the respondent was kept out of his profits as well as deprived of his asset and its value.”

54. To similar effect, the link between the date at which damages for breach of contract are assessed and the duty to mitigate was explained by Oliver J, in Radford v de Froberville [1977] 1 WLR 1262 at [1285] (referred to by the High Court in Tabcorp and cited with approval in Renown Corporation Pty Ltd v SEMF Pty Ltd (2022) 110 NSWLR 246; [2022] NSWCA 233 at [11] (Brereton JA, Meagher and Mitchelmore JJA agreeing)):

“It is sometimes said that the ordinary rule is that damages for breach of contract fall to be assessed at the date of the breach. That, however, is not a universal principle and the rationale behind it appears to me to lie in the inquiry — at what date could the plaintiff reasonably have been expected to mitigate the damages by seeking an alternative to performance of the contractual obligation?”

(See also H G Beale, Chitty on Contracts (35th ed, 2023, Sweet & Maxwell) at [30-107] and E Peel, Treitel, The Law of Contract (15th ed, 2020, Thomson Reuters) at p 1162.)

55. Consistent with this, Wenham was distinguished in CH Leahman Investments Pty Ltd v Tuesday Enterprises Pty Ltd [2024] WASCA 142 (“CH Leahman”) at [274] (Buss P, Vaughan JA, Lundberg J) on the basis that in Wenham the purchaser had paid the full purchase consideration whereas in CH Leahman “[a]t all times the appellant continued to be in a position to deploy the resources that it would otherwise have had to commit to the completion of the purchase of the Rexwells’ share”.

56. Further, in the passage set out at [53] above, Gibbs J recognised that events after the date of breach may be relevant to the assessment of damages even when assessed as at the date of breach. To similar effect, in Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 at 163; [1989] HCA 8, Dawson J held:

“That is not to say, however, that when damages are assessed as at the time of the wrong, foreseeable future losses which flow from the wrong, and not merely from delay in compensating for the wrong, may not be included in any award. … Moreover, the quantification of future losses may be made by reference to events which have occurred between the time when the cause of action arose and judgment upon the basis that actual facts are preferable to speculation: Willis v. The Commonwealth. Damages so assessed nevertheless form part of the loss flowing from the breach and are not damages for delay in the payment of damages.” (footnotes omitted)

57. Having regard to this authority, the primary judge did not err in finding events after the breach of contract were relevant to the assessment of damages for breach given that Rashazar paid in full for the 30 shares in Fresh Cut in 2016 and none of the respondents were aware of the breach of contract until some years after it occurred.

Using wasted expenditure as the basis for assessing damages for breach of contract

58. A second critical premise of the primary judge’s conclusion at J[102] is that this was an appropriate case in which to assess damages for breach of contract by reference to wasted expenditure. The primary judge’s key finding in this regard was predicated both upon the lack of information available to the respondents and the Court and upon her Honour’s finding that the question of what might have happened to Fresh Cut if Rashazar had been a 30% shareholder was imponderable.

59. The plurality judgment of Edelman, Steward, Gleeson and Beech-Jones JJ in Cessnock at [61] explained when it is that damages for breach of contract can properly be calculated by reference to wasted expenditure:

“The legal onus to prove loss arising from a breach of contract rests on the plaintiff as the party seeking to recover damages. However, where a breach of contract has resulted in (namely, caused or increased) uncertainty about the position that the plaintiff would have been in if the contract had been performed, then the discharge of the plaintiff’s legal burden of proof will be facilitated by assuming (or inferring) in their favour that, had the contract been performed, then the plaintiff would have recovered the expenditure they reasonably incurred in anticipation of, or reliance on, the performance of the contract. The strength of this assumption or inference, and thus the weight of the burden placed on the party in breach to adduce evidence to rebut the inference in whole or in part, will depend on the extent of the uncertainty that results from the breach. Expressed in this way, this facilitation principle is tied to its rationale, namely the uncertainty in proof of loss occasioned to the plaintiff by the defendant’s breach.”

60. At [139], the plurality further explained:

“In summary, the facilitation of the plaintiff’s proof arises in cases where the defendant’s breach of an obligation results in uncertainty and difficulty of proof of loss for the plaintiff, who has incurred expenditure in anticipation of, or reliance on, the performance of the obligation that was breached. The facilitation of proof that reasonably incurred expenditure would have been recovered has been described by Leggatt J as an example of courts doing the ‘best they can not to allow difficulty of estimation to deprive the claimant of a remedy, particularly where that difficulty is itself the result of the defendant’s wrongdoing’. In applying the principle ‘reasonably … according to the circumstances of each case’, the plaintiff is given an evidential ‘benefit of any relevant doubt’ that expenditure would be recouped to the extent that it was reasonable, with the practical effect of giving the plaintiff ‘a fair wind’ to establish loss. The strength of the wind will depend upon the extent of the uncertainty resulting from the breach by the defendant. And all of the circumstances, including any evidence led by the defendant, must be considered. The plaintiff is given a ‘fair wind’ but not a ‘free ride’.” (footnotes omitted)

61. Having regard to these principles, the appellants’ contention that the primary judge erred in assessing damages for breach of the share sale agreement by reference to wasted expenditure should be rejected. The primary judge correctly identified that integers relevant to the assessment of damages premised upon Mr Tok’s compliance with the share sale agreement were “imponderable”. As I explain below, that plainly flowed from Mr Tok’s breach. That, together with the obvious difficulty in obtaining reliable financial information about the financial performance of Fresh Cut, justified the primary judge facilitating the respondents’ burden of proof by assuming (or inferring) in their favour that, had the contract been performed, they would have recovered the expenditure they reasonably incurred in anticipation of, or reliance on, the performance of the contract.

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The link to the decision is here.