In Australia, monetary relief is available under common law, equity and statute. Determining whether a plaintiff is entitled to a damages award and the quantum of that award will require consideration of those three sources of law, the type of claim being made and the remedial purpose of the award.
i Common law
At common law, damages generally serve a compensatory purpose for the defendant's tort or breach of contract. The monetary remedy normally aims to place the plaintiff in the position he, she or it would have been in had the breach of duty not been committed.
Both equitable compensation and an account of profits are generally available for breaches of equitable obligations. Equitable compensation can be distinguished from damages by the characteristics unique to it, including its discretionary nature. An account of profits focuses on the gains made by the defendant via breach of the relevant equitable obligation rather than on the plaintiff's loss.
Statute will often also provide a monetary remedy. The extent to which common law or equitable principles apply to such a claim is a question of statutory construction. The questions of construction that the court will need to consider will be whether and to what extent the statutory provisions modify the operation of general law principles. As such, the measure of relief will be dependent on the particular statutory provision.
iv Non-compensatory damages
Punitive, gain-based and liquidated damages also may be available in exceptional circumstances where compensatory damages are deemed to be an inappropriate response to the breach.
v Punitive and exemplary damages
Punitive damages are occasionally awarded for certain wrongs recognised by common law to punish the wrongdoer and deter the commission of future wrongs, but the traditional view is that they are not available for breaches of equitable obligations.2
vi Restitutionary damages
The availability of a gain-based award in response to a common law wrong has occasionally been recognised, most often in cases where the defendant tortiously interfered with the plaintiff's right to goods3 or land.4 The term 'restitutionary damages' is sometimes used as a label to describe all such awards for common law wrongdoing, but it has also been suggested that it is necessary to distinguish between two measures of gain in this context: one based on the immediate transfer of value to the defendant that is entailed by the wrong and one based on the consequential profits that accrue to the defendant as a result of the wrong, which is sometimes labelled 'disgorgement'.5 While both measures of gain have also exceptionally been awarded for breach of contract in England, Australian courts have been reluctant to allow for gain-based recovery for contractual breach.6
vii Liquidated damages
At common law, liquidated damages are available where parties contract for a fixed amount of damages to be payable for a breach of contract in circumstances where the predetermined amount is a genuine pre-estimate of the loss likely to flow from the breach rather than a sum intended to punish or deter the breach. Equity may also deem a sum payable on the happening of an event other than breach ('the primary stipulation') 'penal' and hence irrecoverable where it is 'out of all proportion' to the interests protected by the primary stipulation,7 or where it 'is properly characterised as having no purpose other than to punish'.8
II QUANTIFICATION OF FINANCIAL LOSS
The aim of awarding damages, at least in commercial cases, is generally to put the plaintiff in the financial position he, she or it would have been in had the relevant breach of duty not occurred.9 But in upholding this principle, various subsidiary matters arise, including how the plaintiff's counterfactual financial position is to be quantified and which consequences resulting from the breach are included in this assessment. A number of these subsidiary matters are now addressed.
A plaintiff claiming damages is expected to adduce evidence that is available and typically adduced in that type of claim. Where a plaintiff does not adduce such evidence, he or she cannot complain of the non-award of damages or of a lesser quantum of damages than would have been obtained if the evidence had been adduced.10
iii Date of assessment
Typically damages arising from a breach of contract are assessed at the date of the breach, but courts will depart from this general rule 'whenever it is necessary to do so in the interests of justice'.11 Damages arising from a tort are also typically assessed at the date on which the cause of action arose. However, in personal injury cases and death cases, damages are normally assessed at the date of judgment.12
It is important for a plaintiff to identify the applicable date of assessment for its cause of action as it will affect the date from which the court expects a plaintiff to act reasonably and attempt to minimise loss caused by the defendant's wrongdoing.13 If the plaintiff failed to act reasonably, he or she will not be awarded damages for losses that could reasonably have been avoided.14 Plaintiffs who take reasonable steps to mitigate loss are entitled to be compensated for the costs of taking such reasonable steps, even where the costs of taking such action overall increases the loss suffered.15
iv Financial projections
Damages must compensate the plaintiff on a once-and-for-all basis. As such, the lump sum award must encompass not only the loss already suffered by the plaintiff but also any causally attributable losses that the plaintiff is likely to suffer in future. A plaintiff will be entitled to an award of damages to compensate future loss if he or she can establish, on the balance of probabilities, that the defendant's wrongdoing caused loss of a non-negligible opportunity that the plaintiff would have taken advantage of.
In quantifying the plaintiff's loss, a court may be entitled to make certain assumptions about the value of what has been lost or about what would have happened had the breach not occurred. For example, the value of goods tortiously damaged or not delivered in breach of contract is generally measured by reference to the market price, at least where an available market exists, and it may be that, when a plaintiff claims damages following an acceptance of the defendant's contractual repudiation, it is assumed that the plaintiff would have been able to perform its own remaining obligations under the contract.16 It is a matter of debate as to whether these various assumptions are necessarily rebuttable or are sometimes irrebuttable.
vi Discount rates
Above we described circumstances where a plaintiff can claim for loss of opportunity and future losses. If the plaintiff is awarded damages to compensate for loss that has yet to occur, the plaintiff is essentially receiving an advance payment of that loss. An adjustment must be made to account for the accelerated receipt in the form of discounting the damages to present value.17
In commercial cases, market rates of interest will be considered an appropriate discount rate,18 but in personal injury and death cases, state jurisdictions have their own statutory provisions prescribing fixed a discount rate. In the Northern Territory, New South Wales, Queensland, South Australia and Victoria the discount rate is 5 per cent.19 In Western Australia the discount rate is 6 per cent.20
vii Currency conversion
Damages awarded in foreign currency will generally be converted into Australian dollars using the spot foreign exchange rate at the date of judgment.21
viii Interest on damages
Courts in most Australian jurisdictions22 have a statutory discretion to award interest on damages.23 Common to those jurisdictions are three principles that courts must have regard to when exercising their power to award interest on damages.
First, the power is discretionary, and depending on legislation, the court must consider whether or not to award interest, for what period the interest calculation is to run, the rate of interest and on what portion of damages that interest will be applied. Second, the object of the power to award interest is to compensate plaintiffs for being kept out of damages and so the prima facie time for when interest starts to accrue is the point in time when the breach is said to have occurred.24 Third, the statutory provisions regarding interest do not apply to cases of dishonoured bills of exchange.25
Costs generally follow the event, meaning that the successful party is entitled to recover costs from the other side unless there is a good reason to justify a contrary order.26 Reasons that might deprive a successful party from recovering its costs include where the damages awarded are 'nominal',27 where the successful party misbehaved in relation to either the subject of the conduct of the proceedings or where the successful party rejected a settlement offer or offer of compromise, and failed to obtain an order or judgment on the claim no more favourable to such offer.28
Awards of damages may be subject to taxation if categorised as income, indemnity or capital gain. Losses that would have been taxable, but for the wrong, and which then form the basis for an award of damages, will not necessarily still be considered taxable. An example of such losses are those forming the basis for an award of damages in certain personal injury cases.29
III EXPERT EVIDENCE
A plaintiff seeking an award of damages must establish and assess losses suffered with as much certainty as the circumstances permit. Expert evidence can assist in persuading the court whether on balance the threshold of certainty has been met. Expert evidence adduced to assist the court in calculating damages are subject to the same rules of expert evidence in general.
ii The role of expert evidence in the calculation of damages
Expert evidence is particularly useful where scientific, technical or other specialised knowledge might assist the court in understanding evidence or facts at issue.
The common law position is that expert evidence cannot usurp the role of a judge in his or her function in calculating damages. If experts were allowed to answer the 'ultimate issue', and the answer is accepted by the court, then 'the chances of success on an appeal on fact are slight indeed, since there is direct and acceptable evidence on the very point at issue'.30 This 'ultimate issue' rule does not prevent questions being put to the expert witness that causes him or her to consider a hypothetical scenario where he or she is asked to assume the facts stated in evidence to be true.31
The common law's 'ultimate issue' rule has been abolished by statute.32 Although expert evidence cannot be deemed inadmissible solely because it goes to an 'ultimate issue', the rule still has utility as a caution for judges to 'exercise particular scrutiny when experts move close to the ultimate issue, lest they arrogate expertise outside their field or express views unsupported by disclosed and contestable assumptions'.33
iii The court's role in excluding and managing expert evidence
Courts are able to consider and manage expert evidence that goes to proving the quantum of damages in accordance with the same principles in the assessment expert evidence generally. The Evidence Act34 contains provisions addressing the admissibility of expert opinion. Although not all expert evidence is opinion, the rules relating to the admissibility of non-opinion expert evidence are generally analogous to that of expert opinion.
Generally evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed.35 This exclusionary opinion rule does not apply if the person expressing the opinion has specialised knowledge based on the person's training, study or experience, and that opinion is wholly or substantially based on that knowledge.36
Heydon JA's judgment in Makita37 provides a summary of the principles relating to the admissibility of expert opinion:
In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of 'specialised knowledge'; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be 'wholly or substantially based on the witness's expert knowledge'; so far as the opinion is based on facts 'observed' by the expert, they must be identified and admissibly proved by the expert; and so far as the opinion is based on 'assumed' or 'accepted' facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of 'specialised knowledge' in which the witness is expert by reason of 'training, study or experience', and on which the opinion is 'wholly or substantially based', applies to the facts assumed or observed so as to produce the opinion propounded.
If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight.
Where an expert's opinion is admissible, courts are still unlikely to be persuaded by the evidence or to accept the expert's conclusions in circumstances where the expert relied upon flawed assumptions. In Norris v. Blake,38 the New South Wales Court of Appeal considered the differing opinions expressed by a number of experts that related to the respondent's likely life expectancy in a personal injury claim. The economic loss ultimately awarded was dependent on the respondent's life expectancy. The Court held that a relevant factor was the assumption held by many of the experts that the respondent would be in a persistent vegetative state. The Court went on to conclude that the primary judge was entitled to discount those opinions because of his Honour's finding that the respondent was not in fact in a persistent vegetative state.
iv Independence of experts
In most jurisdictions within Australia an expert can be retained by either one or multiple parties to the proceedings, but the expert must remember that his or her paramount duty is to the court and not the parties retaining them.39 Experts are duty bound to assist the court impartially and so must maintain a level of independence.
v Challenging experts' credentials
A party can challenge an expert's credentials by asserting that the expert does not possess 'special knowledge, skill, experience or training about a matter'.
If the expert is found to not possess the relevant special knowledge, skill, experience or training about a matter, his or her evidence will be inadmissible.
In establishing whether or not the expert possesses the relevant special knowledge, skill, expertise or training, first the relevant field of expertise must be identified and then the judge must consider the skill of the witness purporting to be an expert.
Each opinion or piece of evidence adduced must then wholly or substantially fall within the identified field of the witnesses' expertise. A chartered accountant, although able to express opinions about accounting standards, cannot necessarily give evidence relating to the conduct of a company director.40 Another example where opinion is not wholly substantially based on the witness' specialised knowledge is where a chartered accountant is retained to write a report in which he or she restates the books of a publicly traded company, where that company is alleged to have misrepresented its financial position. Assuming that the accountant has no other expertise, he or she cannot then also be retained to calculate the true market value of the company's shares had the company not misrepresented its financial position (i.e., the accountant cannot calculate the loss suffered by an investor who bought the company's shares). In that case, the latter opinion, although relating to and following on from the calculations based on accounting expertise, falls substantially outside the accountant's field of expertise.
vi Novel science and methods
Experts engaged to quantify damages in securities actions use a method of quantitative linear regression involving event studies. Event studies aim to quantify effects on share price caused by information (or rather misinformation) released to the market. This method of quantification arose out of US securities fraud litigation. Event studies assume a semi-strong efficient capital market hypothesis and require experts to select a relevant market or industry share index and obtain data for the movement in that index over a relevant period and compare it to the share price of the subject company to establish statistically significant linear trend by way of regression analysis.41 Then by comparing the actual share price immediately after the disclosure of information and a predicted price using the aforementioned trend, an expert concludes that the difference in those prices is the dollar value attributable to the disclosure of the information.
IV RECENT CASE LAW
i Re HIH Insurance Ltd (in liq)  NSWSC 482 (HIH Insurance ) and Re HIH Insurance Ltd (in liq)  NSWSC 380 (HIH Insurance )
HIH Insurance  and HIH Insurance  related to multiple claims by investors who acquired shares in HIH Insurance Limited (HIH) at an artificially inflated market price. HIH was a public company listed on the ASX. It was placed into liquidation in 2001 and admitted that its FY1999 financial statements, FY2000 interim financial statements and FY2000 final statements contained representations that were misleading and deceptive.42 The statutory causes of action required investors to show that they had suffered loss 'by' the contravening conduct, in this case the misleading and deceptive financial statements.43
Justice Brereton interpreted the word 'by' to express 'the notion of causation without defining or elucidating it'.44 Justice Brereton followed Mason CJ's leading judgment in March v. Stramare,45 which stated that for a sufficient causal link to be established, it must be shown that the contravening conduct 'caused or materially contributed to' the loss.
Thus, Brereton J found that it was not necessary to prove each investor's individual reliance on the misleading or deceptive financial statement and that a causal link could instead be established by showing that HIH made misleading or deceptive representations in relation to its financial statements, the market was deceived into a misapprehension that HIH was trading more profitably than it really was and had greater net assets than it really had, HIH shares traded at an inflated market price and investors paid that inflated market price to acquire shares, thereby suffering loss.46 This causal link is referred to as indirect market-based causation.
The principle recognised by Brereton J is similar but not identical to the well-established 'fraud-on-the market' doctrine recognised by the United States Supreme Court in Basic v. Levinson.47 The key difference between the two doctrines is that, under the approach recognised in HIH Insurance , there is no need to establish reliance, whereas the American doctrine provides plaintiffs with a presumption of reliance on the integrity of the market price of securities effected by the misrepresentation, which it is open to the defendant to rebut with sufficient evidence.
Following on from the HIH Insurance  decision, in HIH Insurance  Brereton J provided further guidance when calculating the quantum of loss in circumstances where a shareholder purchased shares while market price was inflated by misrepresentations, but then subsequently sold some of those shares within the inflated period. The approaches suggested for his Honour's consideration included a 'last-in-first-out' (LIFO) approach, a 'first-in-first-out' (FIFO) approach and a proportionate approach. A proportionate approach requires treating the shares sold during the inflationary period as being proportionately drawn from the shares owned prior to the inflationary period and the shares acquired during the inflationary period. Brereton J held the LIFO method to be the favoured approach because it requires the shareholder to account for any inflationary benefit received on a share sale.
ii Stone v. Chappel  SASCFC 72
In Bellgrove v. Eldridge, the High Court of Australia famously held that following the provision of defective building work, the innocent party is entitled to recover the cost of rectification provided such work is necessary to produce conformity with the contract and a reasonable course of action to adopt in the relevant circumstances.48 This principle was reaffirmed by the High Court more recently in Tabcorp Holdings Ltd v. Bowen Investments Pty Ltd,49 but a persistent question remains regarding precisely what determines whether rectification work is 'reasonable', it having been observed that 'the Court's reasons in Tabcorp provide little guidance in relation to the application of… [this] qualification' and that as yet 'there has been no express identification in the Australian case law of any principle or policy underpinning the notion of unreasonableness'.50
Following Tabcorp, it might reasonably have been thought that the recovery of such awards is easier in Australia than in England given the House of Lords' decision in Ruxley Electronics and Construction Ltd v. Forsyth to deny a homeowner's claim for the cost of reconstructing a swimming pool not built to the requisite depth on the ground that the expenditure necessary to rectify the defect was 'out of all proportion' to the benefit to be obtained from the work.51 However, the High Court in Tabcorp did stress that the facts in Ruxley were 'exceptional'52 and the South Australian Supreme Court's recent decision in Stone v. Chappel arguably supports the view that the Australian and English positions are not all that far apart.53
In Stone, the plaintiff homeowners engaged a builder to construct an apartment according to a previously prepared plan, which required that the ceilings would be 2.7m high. However, the ceilings were built on average approximately 40mm lower than the specified height and the apartment owners sought to recover damages assessed by reference to the cost of rectification.
After a first instance decision in favour of the builder, the homeowners' appeal was unanimously denied, though there was a noteworthy split in the Court's reasoning. For Doyle and Hinton JJ, the 'reasonableness' test was primarily about determining whether the contractual objective (also referred to as the homeowners' 'performance interest') had been sufficiently delivered. According to their Honours, it had been here because the unit was structurally sound and any additional 'aesthetic interest' in precise performance was also 'substantially achieved'.54
Kourakis CJ, by contrast, identified various distinct considerations relevant to determining whether rectification costs are 'reasonable' in the relevant sense, including 'the adverse effect of the departure on the functional utility, amenity and aesthetic appearance of the building… the reasons, objectively ascertained and commonly known, for which the innocent party made the stipulation which was breached… the absolute cost of the rectification work and the disproportion between that cost and the value of the building and contract price… the diminution in commercial value of the building… the nature of the wrongdoer's fault for the defect; and the public interest in reducing economic waste'. Applying these considerations to the present case, his Honour concluded that despite there being a strong prima facie case for the award of rectification costs, ultimately such an award should not be made because rectification would cause a significant fire hazard and likely promote 'unconstructive litigation' from other tenants in the block so that, despite the Stones' (probable) honestly held intention to rectify, it was unlikely that rectification would actually occur.55
1 Simon Morris is a partner, David Winterton is a special counsel and Amir Chowdhury is a law clerk at
2 See Harris v. Digital Pulse Pty Ltd (2003) 56 NSWLR 298 (Heydon JA).
3 See Bunnings Group Ltd v. CHEP Australia Ltd  NSWCA 342; (2011) 82 NSWLR 420 at
-, -, considering damages assessment for conversion or detinue.
4 For trespass to land, see Houghton v. Immer (No. 155) Pty Ltd (1997) 44 NSWLR 46 and Inverugie Investments v. Hackett  1 WLR 713 (PC).
5 See J Edelman, Gain-Based Damages: Contract, Tort, Equity and Intellectual Property (Hart 2002).
6 See Hospitality Group Pty Ltd v. Australian Rugby Union Ltd 110 FCR 157. Compare Attorney General v. Blake  1 AC 268.
7 See Paciocco v. Australia and New Zealand Banking Group Ltd (2016) 258 CLR 525;  HCA 28,  (French CJ and Kiefel J).
8 ibid,  (Gageler J).
9 Livingstone v. Rawyards Coal Co (1880) 5 App Cas 25, 39 (Lord Blackburn).
10 Luna Park (NSW) Ltd v. Tramways Advertising Pty Ltd (1938) 61 CLR 286.
11 Johnson v. Perez (1988) 166 CLR 351, 356.
12 O'Brien v. McKean (1968) 118 CLR 540.
13 Simply Irresistible Pty Ltd v. Couper  VSC 601.
14 Hasell v. Bagot, Shakes & Lewis Ltd (1911) 13 CLR 374, 388.
15 Fox v. Wood (1981) 148.
16 See the discussions in YP Barley Producers Ltd. v. Robertson (EC) Pty Ltd  VLR 194 and, more recently, Flame SA v. Glory Wealth Shipping Pte Ltd (The Glory Wealth)  EWHC 3153 (Comm).
17 Sellars v. Adelaide Petroleum NL (1994) CLR 332.
18 Pennant Hills Restaurants Pty Ltd v. Barrell Insurances Pty Ltd; sub nom Barrell Insurances Pty Ltd v. Pennant Hills Restaurants Pty Ltd (1981) 145 CLR 625.
19 Personal Injuries (Liabilities and Damages) Act 2003 (NT) Section 22; Civil Liability Act 2002 (NSW) Section 14; Civil Proceedings Act 2011 (Qld) Section 61; Civil Liability Act 1936 (SA) Sections 3 and 5; Civil Liability Act 2001 (Tas) Section 28A; Wrongs Act 1958 (Vic) Section 28I.
20 Law Reform (Miscellaneous Provisions) Act 1941 (WA) Section 5.
21 Brown Boveri (Aust) Pty Ltd v. Baltic Shipping Co (1989) 15 NSWLR 448, 464.
22 But not in Tasmania.
23 Judiciary Act 1903 (Cth) Section 77MA(2)(a); Federal Court of Australia Act 1976 (Cth) Section 51A(2)(a); Federal Circuit Court of Australia Act 1999 (Cth) Section 76(4)(a); Court Procedures Rules 2006 (ACT) r1616(6)(a); Supreme Court Act 1979 (NT) Section 74(2)(a); Civil Procedure Act 2005 (NSW) Section 100; Civil Proceedings Act 2011 (Qld) Section 58; Supreme Court Act 1936 (SA) Section 30C(4)(a); District Court Act 1991 (SA) s39(4)(a); Magistrates Court Act 1991 (SA) Section 34(4)(a); Supreme Court Act 1986 (Vic) Section 60(2)(a); Supreme Court Act 1935 (WA) Section 32(2)(a).
24 Grincelis v. House (2000) 201 CLR 321.
25 Judiciary Act 1903 (Cth) Section 77MA(2)(c); Federal Court of Australia Act 1976 (Cth) Section 51A(2)(c); Federal Circuit Court of Australia Act 1999 (Cth) Section 76(4)(c); Court Procedures Rules 2006 (ACT) r1616(6)(c); Supreme Court Act 1979 (NT) Section 74(2)(c); Civil Procedure Act 2005 (NSW) Section 100(3)(d); Civil Proceedings Act 2011 (Qld) Section 58(4)(b); Supreme Court Act 1935 (WA) Section 32(2)(c).
26 Milne v. A-G (Tas) (1956) 95 CLR 460, 477.
27 Alltrans Express Ltd v. CVA Holdings Ltd 1 All ER 685;
28 Singleton v. Macquarie Broadcasting Holdings Ltd (1991) 24 NSWLR 2013, 108, Uniform Civil Procedure Rules 2005 (NSW) Rules 42.15-42.15A.
29 Atlas Tiles v. Briers (1978) 144 CLR 202, 223.
30 Joseph Crosfield and Sons Ltd v. Techno-Chemical Laboratories Ltd (1913) 29 TLR 378, 379.
31 R v. Smith (1915) 11 Cr App R 229, 238.
32 Evidence Act 1995 (Cth), Section 80; each jurisdiction in Australia has its own Evidence Act, but they have been made uniform throughout almost all Australian jurisdictions.
33 R v. GK (2001) 53 NSWLR 317 (per Mason P).
34 Evidence Act 1995 (Cth).
35 Evidence Act 1995 (Cth) Section 76.
36 Evidence Act 1995 (Cth) Section 79.
37 Makita (Australia) Pty Ltd v. Sprowles (2001) 52 NSWLR 705.
38 (1997) 41 NSWLR 49, 79.
39 Expert witness code of conduct Sch 7 UCPR; Federal Court of Australia Expert Evidence Practice Note (GPN-EXPT), Annexure A.
40 Australian Cement Holdings Pty Ltd v. Adelaide Brighton Ltd  NSCW 645, .
41 Justice Beach, 'Structural and Forensice Developments in Securities Litigation', International Commercial Law Conference, Inner Temple, Inns of Court, London, 29 June 2016.
42 HIH Insurance  NSWSC 482, .
43 Trade Practices Act 1974 (Cth) Section 82(1); Corporations Act 1989 (Cth) Section 1005.
44 HIH Insurance  NSWSC 482.
45 (1991) 171 CLR 506, 514.
46 HIH Insurance  NSWSC 482, .
47 485 U.S. 224 (1988). The continued correctness of the doctrine was also approved in Halliburton Co v. Erica P John Fund Inc. 134 S Ct 2398 (2014).
48 (1954) 90 CLR 613, 617.
49  HCA 8; (2009) 236 CLR 272.
50 Stone v. Chappel  SASCFC 72, - (Doyle J).
51  AC 344.
52 Tabcorp Holdings Ltd v. Bowen Investments Pty Ltd  HCA 8; (2009) 236 CLR 272, .
53  SASCFC 72.
54 ibid  (Doyle J) and - (Hinton J). Compare Ruxley, where the pool was built somewhere between 9 and 18 inches too shallow.
55 ibid -.