State of Tasmania v Shaw (No 2)
[2002] TASSC 12
•25 March 2002
[2002] TASSC 12
CITATION: State of Tasmania v Shaw (No 2) [2002] TASSC 12
PARTIES: STATE OF TASMANIA
DIRECTOR OF HOUSING
v
SHAW, Stuart Gordon
TITLE OF COURT: SUPREME COURT OF TASMANIA (FULL COURT)
JURISDICTION: APPELLATE
FILE NO/S: FCA 12/2001
FCA 13/2001
DELIVERED ON: 25 March 2002
DELIVERED AT: Hobart
HEARING DATE: 5 November 2001
JUDGMENT OF: Cox CJ, Crawford and Slicer JJ
CATCHWORDS:
Damages - General principles - General and special damages - Special damages by way of interest - Assessment of loss - Damages to compensate for the delay in obtaining payment of the assessed damages - Whether damages in the nature of interest may be awarded with respect to a claim for unliquidated damages - Action for damages for negligent misstatement - Award based on compound interest.
Hungerfords & Ors v Walker & Ors (1990) 171 CLR 125; Hart v Mossensons & Anor [2000] WASC 295; Duke Group Ltd (in Liquidation) v Pilmer & Ors (1999) 73 SASR 64, followed.
Aust Dig Damages [1]
REPRESENTATION:
Counsel:
Appellants: T J Ellis SC
Respondent: S B McElwaine
Solicitors:
Appellants: Director of Public Prosecutions
Respondent: Shaun McElwaine
Judgment Number: [2001] TASSC 12
Number of paragraphs: 34
Serial No 12/2002
File No FCA 12/2001FCA 13/2001
THE STATE OF TASMANIA & THE DIRECTOR OF HOUSING
v STUART GORDON SHAW (NO 2)
REASONS FOR JUDGMENT FULL COURT
COX CJ
CRAWFORD J
SLICER J
25 March 2002
Orders of the Court:
Appeals dismissed.
Serial No 12/2002
File No FCA 12/2001FCA 13/2001
THE STATE OF TASMANIA & THE DIRECTOR OF HOUSING
v STUART GORDON SHAW (NO 2)
REASONS FOR JUDGMENT FULL COURT
COX CJ
25 March 2002
The Court has already dealt with a number of grounds of appeal in this matter, but was reconstituted to deal with the remaining challenge to the award made by the learned trial judge. That challenge is to the award of damages by way of compound interest on the amount assessed by the learned trial judge as the respondent's immediate loss sustained in consequence of the negligent mis-representations of the appellants' agents. When the property, built at the insistence of the appellants, had been sold in March 1993 and all allowances made, it became clear that the respondent had suffered a loss which the trial judge assessed in the sum of $106,191.91. His Honour accepted the respondent's evidence that throughout the whole period from 1993 to the date of trial, he borrowed various sums of money from banks in order to carry on his business. The evidence was to the effect that at no time since the completion of the shopping complex had the respondent been free of debt. He said that had he received the loss that he made upon the sale of the shopping complex at about that time, he would have used the money in his business, thereby rendering unnecessary the loans that he obtained. He was accordingly awarded, by way of additional damages, a sum calculated by reference to interest on the amount of the loss at bank overdraft rates from time to time capitalised monthly. This added a sum of $171,390 to the damages and resulted in a judgment for $277,581.99.
The first basis of challenge is that the law does not permit an award of interest to compensate for the delay in obtaining payment of what the Court assesses to be the appropriate measure of damages for a wrongful act where those damages are not liquidated damages. The appellant bases this contention on the interpretation of the decision of the justices of the High Court in Hungerfords & Ors v Walker & Ors (1990) 171 CLR 125 (Hungerfords) by L J R Davis in an essay "Interest as Compensation" (Essays on Damages, edited by Professor P D Finn, LBC 1992). At 146, the learned author puts the proposition:
"As the law now stands, in the light of the decision of the High Court, a plaintiff may recover interest at common law if he or she seeks the repayment of a debt, or sues for a liquidated sum of money, but not if the action is for damages in an unliquidated amount."
The same interpretation was adopted by Mr Sydney Jacobs in his work Damages in a Commercial Context, LBC Information Services 2000, where he asserted, at 349:
"As a result of Hungerfords, a plaintiff can now recover interest at common law if it seeks repayment of a debt or sues for a liquidated sum of money but not if the action is brought for unliquidated damages."
In Hungerfords, Mason CJ and Wilson J said at 146:
"Once it is accepted that the cost of borrowing money to replace money paid away or withheld is not too remote, it 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. The award of damages in accordance with Hadley v Baxendale is unrelated to, and free from, any requirement that there is, or should be, any 'wrongful' withholding of money, be it a debt or damages."
At 152, the joint judgment of Brennan and Deane JJ is set out in its entirety. They commenced their judgment with the observation that they were "in general agreement with the reasons given" by Mason CJ and Wilson J for the orders they proposed, and then went on to say:
"There is, in our view, a critical distinction between an order that interest be paid upon an award of damages and an actual award of damages which represents compensation for a wrongfully caused loss of the use of money and which is assessed wholly or partly by reference to the interest which would have been earned by safe investment of the money or which was in fact paid upon borrowings which otherwise would have been unnecessary or retired. On the one hand, there is no common law power to make an order for the payment of interest to compensate for the delay in obtaining payment of what the court assesses to be the appropriate measure of damages for a wrongful act. If such interest is to be awarded at common law, it must be pursuant to statutory authority. On the other hand, there is no acceptable reason why the ordinary principles governing the recovery of common 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. To the extent that the reported cases support the proposition that damages cannot be awarded as compensation for the loss of the use of a specific sum of money which the wrongful act of a defendant has caused to be paid away or withheld, they are contrary to principle and commercial reality and should not be followed."
I do not see that statement as conflicting with the view expressed by Mason CJ and Wilson J that it is pointless to distinguish between an award of damages for the loss of use of money in the case of a liquidated claim and the award of such interest in an unliquidated claim. The distinction which Brennan and Deane JJ made was a different distinction, namely that between the award of interest to compensate for the delay in obtaining payment of general damages for a wrongful act and an award of damages as compensation for a wrongfully and foreseeably caused loss of use of money. In the former case, a plaintiff must be content with such pre-judgment interest as is provided by statute (in this State, unlike most other jurisdictions, there is no such statutory provision); in the latter case, provided there is adequate proof of loss and the loss is not too remote, damages may be awarded by way of compensation and may often take the form of compound interest.
In Hart v Mossensons & Anor [2000] WASC 295, Murray J, having referred to the same passage from the judgment of Brennan and Deane JJ, said at par41:
"There is nothing, in my opinion, in that statement of the law which suggests, as was argued for Mossensons, that there may only be an interest component in an award of damages where the plaintiff seeks repayment of a debt or sues for a liquidated sum, but not if the claim is for damages in an unliquidated amount. That is not the distinction to be drawn. The question is whether interest is properly awarded as a component of the compensation to be afforded to the plaintiff or whether it would be considered to be appropriate to award interest for the late payment of the damages assessed. In the latter case I agree that the interest would be awarded under the Supreme Court Act, s32. The award would be of a flat rate of interest, having regard to the provisions of the Rules of the Supreme Court, O36, r20 and the rates fixed under s 142 of the Supreme Court Act in relation to judgment debts, conveniently set out in Seaman: Civil Procedure WA, par [42.2.3]. In the former case, it will often be appropriate to make an award at an appropriate commercial rate of compound interest."
In that case, Murray J thought it appropriate to make an award of compensation for the negligently caused loss of use of money resultant upon a solicitor's failure to register a bill of sale, the loss of the use of money thereby unrecovered by the plaintiff being, in his view, foreseeable. In this case, it is obvious that the learned trial judge took the same view and, in my opinion, his determination to award damages was not contrary to the decision of the majority in the High Court in Hungerfords.
The second challenge is to the adequacy of the evidence in support of an award based on compound interest. In Duke Group Ltd (in Liquidation) v Pilmer & Ors (1999) 73 SASR 64, the Full Court of the Supreme Court of South Australia said, at 169:
"But an award of damages under this head requires proof of loss, as well as reliance upon the now established rule that such loss is not too remote. The decision of the Full Court under appeal, Walker v Hungerfords (1987) 49 SASR 93, proceeds upon the basis of a finding that the money in question would have been used to pay off loans and would have been used in a profitable business.
There may, in a given case, be difficulties of proof. The Court must recognise such difficulties. It may be, as King CJ said in Walker v Hungerfords, a matter of judgment on relatively sparse material. But in the end appropriate findings of fact must be made before damages can be awarded under this head."
At 170 the court said:
"We accept that the Court may have to engage in an element of speculation. We accept also that allowance must be made for difficulties of proof. But, in our opinion, justice requires that damages be awarded on this basis only if appropriate findings are able to be made."
It is true that the learned trial judge took a somewhat broadbrush approach to the assessment of this component of the respondent's damages, but for the reasons expressed by Slicer J which I have had the advantage of perusing, I am satisfied that there was sufficient material to justify the order made.
The appellants instituted separate appeals in this matter on identical grounds. However, during the course of the hearing of the appeals, application was successfully made to include the Director of Housing as an appellant in FCA 12/2001, the appeal instituted by the State of Tasmania, and the Director's appeal No 13/2001 was not pursued. Both appeals should now be dismissed.
File No FCA 12/2001
File No FCA 13/2001
THE STATE OF TASMANIA & THE DIRECTOR OF HOUSING
v STUART GORDON SHAW (NO 2)
REASONS FOR JUDGMENT FULL COURT CRAWFORD J 25 March 2002
I agree with the other members of the Court that it is not the law that damages in the nature of interest, in accordance with the authority of Hungerfords v Walker (1990) 171 CLR 125, may not be awarded with respect to a claim for unliquidated damages. It was made clear by Mason CJ and Wilson J at 146 that there is no distinction between an award of damages for loss of the use of money in the case of a liquidated claim and such an award in an unliquidated claim. Brennan and Deane JJ at 152 were in general agreement with their Honours and there was nothing in what they added which was contrary on the point raised by the appellants here.
The remaining basis for the appeal was expressed in ground 2.3 as follows:
"2.3The learned Trial Judge erred in law and in fact in awarding compound interest ($170,420.08) on the sum found to be the loss of the respondent as at March 1993 ($106,191.91) in that such award of compound interest as damages was manifestly excessive because:
2.3.1there was no or no sufficient evidence to show that such compound interest was commensurate with the respondent's loss;
2.3.2it was against the evidence in that the same showed that the total interest paid by the plaintiff from time to time after March 1993 was significantly less than $171,420.08."
The learned trial judge found that the respondent's loss was crystallised in March 1993 once he had sold the development, the loss amounting to $106,191.91. In addition to such a loss the respondent claimed damages in the nature of interest at bank overdraft rates from time to time, capitalised monthly in accordance with bank practice. As the learned judge noted, the claim was not really a claim for interest, but for another head of damages, being "compensation for a wrongfully caused loss of the use of money and which is assessed wholly or partly by reference to the interest which would have been earned by safe investment of the money or which was in fact paid upon borrowings which otherwise would have been unnecessary or retired". Hungerfords per Brennan and Deane JJ at 152.
The evidence of the respondent was that throughout the whole period from March 1993 to the date of the trial in July 2000, he borrowed various sums of money from banks in order to carry on his business and that at no time since the completion of the shopping complex had he been free of debt. The learned judge accepted that evidence and also the evidence that had the respondent received the crystallised loss at about the time he sold the shopping complex in 1993, he would have used the funds in his business, thereby rendering it unnecessary to borrow money.
Concerning the respondent's liabilities by way of loans and interest payable thereon from March 1993 until the trial in July 2000, he gave evidence to which I will refer. It was not the subject of serious challenge at the trial.
Firstly, there were loans that the respondent obtained from his father in various amounts between 27 November 1989 and 25 July 1990, totalling $81,351.50. His evidence was that he was contemplating bankruptcy and had borrowed all he could on the shopping development. He had sold two properties including his own home to fund it. He spoke to his father, who undertook to provide him with finance to keep the venture afloat. The loans of various amounts were made (inter alia) to enable him to pay his creditors. His father told him that he could repay the loans at his leisure. His father initially borrowed $50,000 on overdraft from Westpac Bank to enable him to make the advances, the overdraft being increased subsequently. The respondent undertook to his father that he would pay him interest on the loans equivalent to bank overdraft interest, which banks capitalised monthly. Because his father was in need, the respondent repaid $37,589.35 on 15 August 1997. Apart from that repayment, no payments by way of capital or interest were made by the respondent prior to the trial. His calculations of what remained owing to his father at that time were not challenged, as I understand it. Each month the amount owing increased because of interest, which was capitalised, and after allowing for the part-repayment on 15 August 1997, the total outstanding at the time of the trial in July 2000 was $278,357.88. In March 1993 it had been $132,323.23. It was never less than that and after 1995 it exceeded $200,000 at all times.
Secondly, the respondent borrowed $55,000 from the National Australia Bank on 29 August 1997. It was still a current loan at the time of the trial. The respondent's evidence was that he obtained it to make the repayment to his father referred to above. Presumably some of the borrowed sum was used for other purposes. Statements from the bank were in evidence. They established that the respondent regularly paid monthly instalments to the bank and that at the date of the trial about $53,000 remained owing. The loan was advanced by way of a "home loan" and therefore attracted more favourable interest than an overdraft account, the interest varying between 6.7 and 7.25 per cent per annum throughout the period of the loan until the date of the trial.
Thirdly, at all material times until 4 October 1994, the respondent had a cheque account with the Commonwealth Bank, which had an overdraft facility. In March 1993 it was overdrawn by $20,510. Thereafter, the monthly balance fluctuated, sometimes in credit and sometimes in debit. In 1994 it was mostly in credit until it was closed in October.
Fourthly, the respondent had a cheque account with the National Australia Bank from October 1994 until the trial. It also had an overdraft facility. From time to time it was in credit, at other times it was overdrawn. At the respective ends of the 69 months from October 1994 until June 2000 it was overdrawn 40 times and in credit 29 times. The overdrawn balance at times exceeded $90,000. When it was overdrawn, interest was capitalised each month.
Fifthly, from 3 July 1992 until it was repaid in August 1994, the respondent owed money on a "home loan" from the Commonwealth Bank. The drawn down amount at the outset was $80,000 and the respondent made regular monthly payments of capital and interest until the loan was repaid on 12 August 1994 with a payment of $76,778.85. The interest rate varied from time to time between 8.75 and 9.9 per cent per annum.
Sixthly, the respondent had a fully drawn loan account with the National Australia Bank from 27 March 1995 until 19 March 1997. His evidence was that he required it for the purpose of funding building developments, but the loan was in the nature of a "home loan". The amount initially drawn down was $68,000. Regular monthly payments of principal and interest were made and when the loan was repaid the amount required was $66,444.24. The interest payable varied from 8.25 to 10.5 per cent per annum.
An analysis of the evidence establishes that at the end of each quarter year from March 1993 until June 1990, the respondent owed with respect to all of the loans and accounts to which I have referred sums which in total varied between about $157,000 at the lowest and $348,000 at the highest. In respect of only six of those 30 quarters was the total owed less than $200,000 and in respect of eight it exceeded $300,000. In my view that was ample evidence justifying the award of damages calculated upon the basis of overdraft interest rates charged on $106,191, and capitalised monthly, from the time of the crystallisation of the loss in March 1993 until judgment in July 2000.
For these reasons it is my opinion that both appeals should be dismissed.
File No FCA 12/2001
File No FCA 13/2001
THE STATE OF TASMANIA & THE DIRECTOR OF HOUSING
v STUART GORDON SHAW (NO 2)
REASONS FOR JUDGMENT FULL COURT
SLICER J
25 March 2001
The background to this ground of appeal has been set out in Shaw v Director of Housing and State of Tasmania (No 2) [2001] TASSC 2, and requires no restatement. The learned trial judge awarded the respondent the sum of $106,161 as damages for loss caused by the tortious misrepresentation of the appellants. He awarded interest on that amount as and from March 1993 (the date of crystallised loss) in the amount of $170,420. The appellants' claim that the award of interest was wrong in law. The notice of appeal claims error on the grounds that:
"2.3The learned Trial Judge erred in law and in fact in awarding compound interest ($170,420.08) on the sum found to be the loss of the respondent as at March 1993 ($106,191.91) in that such award of compound interest as damages was manifestly excessive because:
2.3.1there was no or no sufficient evidence to show that such compound interest was commensurate with the respondent's loss;
2.3.2it was against the evidence in that the same showed that the total interest paid by the plaintiff from time to time after March 1993 was significantly less than $171,420.08.
2.4The learned Trial Judge erred in law in awarding damages purportedly pursuant to Hungerfords v Walker (1990) [sic] 171 CLR 125 on an unliquidated claim or alternatively on the assessed damages of the Respondent of $106,191.91."
The critique is twofold. At one level, it is that no interest was payable and at a second level the method employed, one involving calculations based on market compound interest, was inappropriate. Central to both contentions is the application or otherwise of the principles stated in Hungerfords & Ors v Walker& Ors (1989) 171 CLR 125. The learned primary judge had considered the use of differing methodologies in his assessment, namely, those of value and loss of use of money. He identified, in his reasons for judgment [2000] TASSC 115, those alternative bases as:
"h the difference between the capital cost of the development of the shopping centre and its market value on completion plus interest on money borrowed until repaid and thereafter interest calculated in accordance with the principles established in Hungerfords v Walker (1989) 171 CLR 125; ('diminution in value' loss)
hthe difference between the capital and consequential costs of the development of the shopping centre and the revenue and capital receipts therefrom plus interest calculated in accordance with the principles established in Hungerfords v Walker (supra); ('reinstatement' loss)."
The learned primary judge correctly assessed damages in tort rather than contract (Gates v The City Mutual Life Assurance Society Ltd (1986) 160 CLR 1; L Shaddock & Associates Pty Ltd & Anor v The Council of the City of Parramatta [No 1] (1981) 150 CLR 225; Marks & Ors v GIO Australia Holdings Limited & Ors (1988) 196 CLR 494), and adopted the second basis for assessment. In doing so, he rejected a submission based on a misunderstanding of the law of election and mitigation, which would have resulted in no award of either damages or interest. The learned trial judge found a crystallised loss as at the date of the sale of the property in question (22 March 1993), being the accrued amount that the respondent "was out of pocket by reason of entering into the contract … as at that date".
The learned trial judge was correct in his approach to the issue. The respondent was a builder who had suffered loss which occurred during his contractual relationship with the appellants. The appellants' claim is that there was no, or insufficient, evidence which permitted an award of interest in commercial terms and, that as a matter of principle, interest cannot be awarded in respect of a claim for unliquidated damages.
The assessment of damages had been made on the basis of calculations of the amounts actually expended on the project, less the amount realised at sale. Those calculations reflected commercial reality and could clearly be identified as a liquidated amount, although the exact amount could not be quantified until after sale. As so often is the case, the quantum of loss was not ascertainable as of the date of the tort. That does not involve the consequence that the final award was in the nature of unliquidated damages as would be the case for non-economic loss in cases involving loss of reputation, loss of amenity, pain and suffering and the like. The loss could be ascertained as of a defined date (date of sale) and became crystallised at that time.
Liquidated damages
The High Court in Hungerfords v Walker (supra), advanced the common law. Although it was dealing with circumstances in which an identified amount of money had been paid away, the Court was concerned with a wider issue of commercial loss. The Court was revisiting legal principle concerning the state of the law existing since Hadley v Baxendale (1854) 9 Ex 341. The appellants' claim that the decision supports the conclusion that damages by way of interest are recoverable only in "circumstances which are known or ought to be known by the party against whom they are claimed" Hungerfords v Walker per Dawson J at 161 (supra), and that no such circumstances were shown in this case. In his reasons for his decision, Dawson J distinguished between late payment of debt (Marine Board of Launceston v Minister for the Navy (1945) 70 CLR 518; London, Chatham & Dover Railway Co v South Eastern Railway Co [1893] AC 429; President of India v La Pintada Compania Navigacion SA [1985] AC 104), foreseeable future losses and loss due to delay in the payment of damages. He concluded, in his dissenting judgment, that the latter distinction precluded a claim for commercial interest. That analysis, accepted by some academic writers (Jacob, S Damages in a Commercial Context, LBC Information Services, 1992; Finn, P D Essays on Damages, Law Book Company Ltd, 1992), was rejected by Murray J of the Western Australia Supreme Court in Hart v Mossensons & Anor [2000] WASC 295. In their joint judgment, Mason CJ and Wilson J preferred a different approach, based both on policy and the fundamental principle of "restitutio in integrum" stating, at 143 - 144:
"The requirement of foreseeability is no obstacle to the award of damages, calculated by reference to the appropriate interest rates, for loss of the use of money. Opportunity cost, more so than incurred expense, is a plainly foreseeable loss because, according to common understanding, it represents the market price of obtaining money. But, even in the case of incurred expense, it is at least strongly arguable that a plaintiff's loss or damage represented by this expense is not too remote on the score of foreseeability. In truth, it is an expense which represents loss or damage flowing naturally and 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.
The truism that there is no cause of action for the late payment of damages is sometimes proffered as a justification for not compensating loss by way of incurred expense and opportunity cost for money paid away or withheld. True, a defendant commits no tort by contesting the plaintiff's claim for damages or for that matter by contesting the plaintiff's claim to recover a debt. But the problem is not concerned with finding a cause of action; rather it is a problem of defining the limits of recoverable damages for an established cause of action. The argument for denying the recovery of incurred expense and opportunity cost in the sense already discussed rests on the more limited proposition that a plaintiff is not entitled to compensation for late payment of damages otherwise than in the form of interest in accordance with the relevant statutory provisions. As a matter of logic and principle, as well as commercial reality, this proposition has little to commend it in the circumstances of the present case.
Incurred expense and opportunity cost arising from paying money away or the withholding of moneys due to the defendant's wrong are something more than the late payment of damages. They are pecuniary losses suffered by the plaintiff as a result of the defendant's wrong and therefore constitute an integral element of the loss for which he is entitled to be compensated by an award of damages. …"
Brennan and Deane JJ, in their joint judgment at 152, expressed general agreement with the reasons of Mason CJ and Wilson J, but maintained the existence of a distinction between general damages and compensation, stating:
"There is, in our view, a critical distinction between an order that interest be paid upon an award of damages and an actual award of damages which represents compensation for a wrongfully caused loss of the use of money and which is assessed wholly or partly by reference to the interest which would have been earned by safe investment of the money or which was in fact paid upon borrowings which otherwise would have been unnecessary or retired. On the one hand, there is no common law power to make an order for the payment of interest to compensate for the delay in obtaining payment of what the court assesses to be the appropriate measure of damages for a wrongful act. If such interest is to be awarded at common law, it must be pursuant to statutory authority. On the other hand, there is no acceptable reason why the ordinary principles governing the recovery of common 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. To the extent that the reported cases support the proposition that damages cannot be awarded as compensation for the loss of the use of a specific sum of money which the wrongful act of a defendant has caused to be paid away or withheld, they are contrary to principle and commercial reality and should not be followed."
This case fits comfortably within the differing rationales stated by the four majority justices. The parties were engaged in commercial dealings and one had suffered loss. The loss was incurred in the making of payments to others for goods and services, together with a lesser return of income than anticipated. Even a person lacking the special skills and knowledge of the Director and his department, would foresee that if the centre of gravity of a residential area was moved or the anticipated population density surrounding a commercial complex was lessened by reason of a decision taken by government, the revenue and capital value of such a complex would be adversely affected. That such occurred was obvious on the evidence adduced at trial. The amount of loss was ascertained at a particular occurrence, namely, eventual sale, and interest awarded as and from that date. The award was one of compensation. The fact that an amount could not be calculated until a particular event does not alter the nature of the award (Pilmer v The Duke Group Limited (in liq) (2001) 75 ALJR 1067; Victorian WorkCover Authority v Esso AustraliaLtd [2001] HCA 53; Hart v Mossensons & Anor (supra)).
Sufficiency of evidence
The respondent's claim was for damages for the loss of use of money. His involvement in the development of the project involved use of capital and borrowings to pay outgoings pending completion, with a return by way of either revenue earned or sale of capital. His expenses were not determined by profitability. As a consequence of the tort of the appellants, the return was not commensurate with that necessary to meet the costs incurred. That such is the case is not uncommon within commerce when market forces or misjudgment produce an unintended result. Here the consequence was caused by tort. The nature of the business required the use of capital and the crystallised loss represented a sum which the respondent could have used in further business. Payment of creditors without compensation deprived the respondent of money which he would otherwise have had. He could have used such moneys to repay two bank overdrafts, his home loan, advanced and instalment loans, or part thereof. The sum of those loans varied between March 1993 and the date of trial, but their sum far exceeded the amount of the crystallised loss. In most of his financial arrangements with banks, the respondent was required to pay interest capitalised monthly. Had he chosen to maintain those loans, the money equivalent to the crystallised loss could have been used in other building projects.
The learned trial judge found, correctly, that at no time since completion of the shopping complex was the respondent free of debt, and had he been compensated for his loss in March 1993, the money would have been used in business, thereby making unnecessary some of those loans.
There was adequate evidence to justify these findings. The interest rate calculations were properly proved by bank records not challenged at trial.
Over compensation
Counsel for the appellants at trial adopted either an "all or nothing" approach to the issue of damages, or sought to show a failure to mitigate loss. He provided no assistance to the Court in an alternate method of assessing interest. Counsel for the appellants on appeal likewise provided little assistance, eventually contending that if error of principle was shown, the matter ought be remitted for recalculation. Initially, he advanced, in written submissions, a set of calculations based on the interest actually paid by the respondent ($52,000), but abandoned that approach during the course of the hearing, presumably because he suspected that it would weaken the force of the grounds of appeal. It might have been open to the learned trial judge to have based his award on the amount of interest actually paid or at a rate of compound interest based on three or six monthly rests. It might have been possible to determine a business/return calculation based on a margin of profit returnable in the normal course of a construction business of the nature conducted by the respondent. He was not asked to do so, nor were any alternatives advanced by the appellants. The amount awarded might be seen to be generous and a lesser amount might have been awarded without error in principle, but it was arrived at within an accepted methodology. The question can be turned around. The appellants have had the benefit of the sum of $106,191 since March 1993. That money could have been invested commercially at a rate calculated on interest capitalised monthly. The learned trial judge used a method which can be described as a "broad brush" approach (Walker & Ors v Hungerfords & Ors (1987) 49 SASR 93), a determination not disturbed on appeal to the High Court, Hungerfords & Ors v Walker & Ors (supra). The approach reflects both the difficulties of precision in economic analysis and the requirement to provide fair compensation (Duke Group Ltd (In Liq) v Pilmer (1999) 31 ACSR 213).
Conclusion
Separate appeals, in identical terms (FCA 12/2001 and 13/2001), were lodged in the names of the Director of Housing and the State of Tasmania. Why this was thought necessary remains unclear and the question remains unresolved. Insofar as is necessary, my proposed order would encompass both.
In my opinion, both appeals ought be dismissed.
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