Firth Industries Ltd v Polyglas Engineering Pty Ltd

Firth Industries Ltd (the plaintiff) brought proceedings against Polyglas Engineering Pty Ltd (the defendant) in the Supreme Court of New South Wales. The dispute concerned the plaintiff's claim for damages arising from the defendant's alleged breach of a contract for the supply of goods. The plaintiff sought to recover the difference between the contract price and the market price of the goods, which it had to procure elsewhere after the defendant failed to deliver.

The central legal issue before the court was whether the plaintiff was entitled to claim damages for loss of profit on a resale of the goods, or whether its claim was limited to the difference between the contract price and the market price at the time of the breach. The court was required to consider the principles of remoteness of damage and the measure of damages for breach of contract, particularly in the context of a failure to deliver goods.

Stephen J applied the principles established in *Hadley v Baxendale* and subsequent cases concerning the assessment of damages for breach of contract. His Honour found that the plaintiff had failed to establish that the loss of profit on the resale was within the reasonable contemplation of the parties at the time the contract was made. The plaintiff's claim was therefore confined to the difference between the contract price and the market price of the goods at the date of the defendant's breach. The court held that the plaintiff had not demonstrated that the defendant had knowledge of the plaintiff's intention to resell the goods at a profit, nor that such a resale was a natural consequence of the breach.

The court ordered that the plaintiff was entitled to recover damages assessed on the basis of the difference between the contract price and the market price of the goods at the time of the breach, with the quantum to be determined.