Commonwealth v Chessell

30 FCR 154
101 ALR 182; FED No. 360; No. G433 of 1990

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(Judgment by: Wilcox J)

Re: Commonwealth of Australia
And: Keith William Chessell

Court:

Judges: Sheppard J

Wilcox JEinfeld J

Subject References:
Damages

Judgment date: 28 June 1991

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Judgment by:
Wilcox J

I have read in draft form the judgments of both Sheppard and Einfeld JJ. On all matters except the allowance of interest on past economic loss, they are at one in rejecting the appellant's submissions. I also would reject those submissions; and there is nothing which I can usefully add.

The question of interest on past economic loss is one of some difficulty. It is a question which requires a close reading of the two majority judgments (Mason C.J. and Wilson J, and Brennan and Deane JJ) in Hungerfords v Walker (1989) 63 ALJR 210 . Sheppard J has set out the relevant passages in these judgments. I need not repeat them.

It is obvious that the four members of the majority, in Hungerfords, were concerned to make clear that there are circumstances under which, at common law and not pursuant to a statutory provision such as s.51A of the Federal Court of Australia Act 1976, courts may include an interest component in damages. For the reader of their judgments the problem is to determine the extent of those circumstances.

In their joint judgment, Mason C.J. and Wilson J described in some detail (pp 212-218) the course of the relevant authorities. They made plain their view that the common law policy, which usually excludes an interest component in damages, was both contrary to fundamental principle and unjust. They put their propositions in general terms, making no distinction between contract and negligence claims or between claims for debt and claims for unliquidated damages. A reader of this discussion might reasonably expect that, if interest was to be allowed, it would be allowed in all cases. Their Honours, themselves, were attracted to that conclusion. At p 218 they described the admiralty model, which permits interest in all cases, as having "obvious attractions". But they went on immediately to say that "the common law has steadfastly declined over a very long time to adopt the admiralty approach in awarding compensation for late payment of damages in the general run of cases". I read this as a statement that, despite the temptation to follow the admiralty rule, there was a powerful constraint, in the form of common law authorities, upon their doing so.

As I understand their judgment, at this point and for that reason, their Honours rejected the course to which they were attracted by considerations of principle and fairness. Yet they did not wish entirely to exclude interest. They were prepared to admit a limited exception to the general common law rule: "But we see no reason for allowing the reluctance of the common law to extend to cases where the defendant's breach of contract or negligence has caused the plaintiff to pay away or the defendant to withhold money and, as a result, the plaintiff has been deprived of the use of the money so paid away or withheld. The recovery of compensation for the loss may be ascribed to the operation of the second limb in Hadley v Baxendale. However, we would prefer to put it on the footing that it is a foreseeable loss, necessarily within the contemplation of the parties, which is directly related to the defendant's breach of contract or tort."

Upon my reading of the reasons of Mason C.J. and Wilson J this was as far as they were prepared to go. If I have read them correctly, they would concede that the result is anomalous and unfair; but they felt unable totally to abrogate the common law rule. If my understanding is correct, their Honours held that interest may be awarded only where a proved loss has arisen out of one of the two circumstances they stated; viz. the plaintiff has been caused to pay away money or the defendant has been caused to withhold money. It is obvious that the present case does not fall within either of these two situations. To award interest in the present case would be entirely to abrogate the common law rule, a course which their Honours were clearly unwilling to take.

In the judgment of Brennan and Deane JJ there is language which might be read as suggesting a wider principle than that propounded by Mason C.J. and Wilson J. But, upon analysis, I do not think that their Honours did intend to postulate a wider rule. In the first place, they expressed their general agreement with Mason C.J. and Wilson J. Secondly, the critical sentence in their reasons at p 219, is: "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 cause to be paid away or withheld, they are contrary to principle and commercial reality and should not be followed."

Upon my understanding of the approach adopted in Hungerfords, a plaintiff in a personal injuries claim will be able to recover damages by way of interest at common law only where it is proved that he or she was caused by the defendant's negligence to incur expense in borrowing money. The result is to add an additional potential issue to trials. Moreover, the distinction discriminates between plaintiffs who are sufficiently endowed with assets to enable them to borrow money to tide them through a post-accident situation and those who are not. I think that both these effects are unfortunate. My only solace is that, by now, there are probably few claims so old that s.51A, or its State equivalents, will not apply.

I agree with the orders proposed by Sheppard J.