Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1992) 174 CLR 64 (12 December 1991)
HIGH COURT OF AUSTRALIA
THE COMMONWEALTH OF AUSTRALIA V. AMANN AVIATION PTY. LIMITED [1991] HCA 54; (1992) 174 CLR 64
F.C. 91/043
Contract
High Court of Australia
Mason C.J.(1), Brennan(2), Deane(3), Dawson(1), Toohey(4), Gaudron(5) and McHugh(6) JJ.
CATCHWORDS
Contract - Breach - Damages - Wasted expenditure - Reliance damages - Impossibility of predicting innocent party's position if contract performed - Onus of proof - Whether innocent party may elect between recovering loss of profits and wasted expenditure - Government contract - Power of department head to require contractor to show cause why contract should not be cancelled where not carried out to his satisfaction - Power to cancel contract if cause not shown - Function of department head.
HEARING
1991, February 13, 14; December 12. 12:12:1991
APPEAL from the Federal Court of Australia.
DECISION
MASON C.J. AND DAWSON J. Amann Aviation Pty. Limited ("Amann"), the respondent in these proceedings, brought an action in this Court's original jurisdiction for damages for breach of contract against the Commonwealth of Australia. The action, which was remitted for hearing to the Federal Court pursuant to s.44(1) of the Judiciary Act 1903 (Cth), was heard by Beaumont J. He delivered judgment in favour of Amann, assessed damages in the sum of $410,000 and ordered the Commonwealth to pay one half of Amann's costs. Amann appealed to the Full Court of the Federal Court on the grounds that Amann was entitled to a substantially higher award of damages than that awarded at first instance and that it should not have been deprived of one half of its costs. The Commonwealth cross-appealed on the grounds that judgment should have been given in its favour and, if not, that the damages awarded should have been nominal only.
2. The Full Court (Davies, Sheppard and Burchett JJ.) allowed the appeal and varied the orders made by the trial judge by substituting the following orders:
(a) that the Commonwealth pay Amann the sum of $6,600,207; and
(b) that the Commonwealth pay 90 per cent of Amann's costs of the
proceedings before the trial judge.
and dismissed the cross-appeal with costs. The Commonwealth has appealed to this Court seeking in effect that its cross-appeal to the Full Court be allowed.
The history of relevant events
3. For various purposes, of which the primary purpose is quarantine, the Commonwealth must maintain regular aerial surveillance of Australia's northern coastline from Karratha in Western Australia to Cairns in north Queensland. The object of the surveillance is the detection and reporting of vessels, aircraft and unauthorized landings. In recent times, the aerial surveillance has been undertaken, in accordance with government policy, by a private contractor.
4. Skywest Airlines Pty. Ltd. ("Skywest") had a contract for the provision…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54
Case
[1991] HCA 54
Decision Date
CaseChat Overview and Summary
The High Court of Australia considered the appeal in *Commonwealth v Amann Aviation Pty Ltd*. The dispute arose from the termination of a contract between the Commonwealth and Amann Aviation for the provision of aerial surveillance services. Amann Aviation alleged that the Commonwealth had breached the contract by wrongfully terminating it, and sought damages for loss of profit. The Commonwealth contended that it was entitled to terminate the contract due to Amann Aviation's failure to meet certain contractual obligations.
The central legal issues before the High Court were whether the Commonwealth's termination of the contract was lawful, and if not, what damages were recoverable by Amann Aviation. Specifically, the Court had to determine the proper interpretation of the termination clauses within the contract and the consequences of a wrongful repudiation by the Commonwealth. A key question was whether Amann Aviation was entitled to recover damages for loss of profit on the unperformed portion of the contract, even though it had not yet incurred significant expenditure in reliance on the contract.
The High Court, by majority, held that the Commonwealth's termination of the contract was wrongful. The Court reasoned that the Commonwealth's actions constituted a repudiation of the contract, and that Amann Aviation was entitled to accept this repudiation and claim damages for breach. Crucially, the Court affirmed the principle that a party who has not yet incurred expenditure in reliance on a contract may still recover damages for loss of profit if the contract is wrongfully terminated. This principle is based on the expectation measure of damages, which aims to put the innocent party in the position they would have been in had the contract been performed. The Court rejected the argument that Amann Aviation's claim was limited to reliance damages, finding that the loss of profit was a direct and foreseeable consequence of the breach.
The High Court allowed the appeal in part, setting aside the judgment of the Full Federal Court and remitting the matter to the Federal Court for assessment of damages in accordance with the principles laid down by the High Court.