Hungerfords v Walker

Hungerfords v Walker - [1989] HCA 8 - HCA 1974 case summary — Zoe

[102]

When an action is brought for damages for breach of contract or for tort, the amount of damages is never increased (apart from some statutory provision, e.g. Lord Tenterden's Act) because there has been delay caused by negotiation and litigation or by other circumstances. The loss of the use of the money ultimately awarded as damages is not part of the loss occasioned by the tort or breach of contract itself. It is a loss due entirely to delay in the payment of money ultimately held to be due, and is not recoverable as part of the damages. And in Norwest Refrigeration Services Pty. Ltd. v. Bain Dawes (W.A.) Pty. Ltd. [56] Gibbs C.J., Mason, Wilson and Dawson JJ. in a joint judgment drew the same distinction in a case in which the plaintiff sought to recover, in addition to damages for negligence on the part of the defendant in failing to effect insurance cover over its fishing vessel, an amount representing the loss which it suffered by being deprived of the insurance moneys. The majority observed [57] : It [the plaintiff] argues that if the Sonoma had been covered effectively under the fleet policy then it would either have received the sum insured from the insurer in 1975 or if it became necessary to sue the insurer it would probably have received the sum insured plus interest on that sum pursuant to s. 33 of the Supreme Court Act 1935 WA. On this basis, Norwest claims that the interest is an integral part of the damages themselves. It is not merely a case of seeking interest on a sum assessed as the damages flowing from a tort. In our opinion, however it be put, the argument cannot succeed. At common law, no court could award interest in a case such as this, whether by way of interest on damages or as damages: London, Chatham & Dover Railway Co. v. South Eastern Railway Co. [58] ; Riches v. Westminster Bank, Ltd. [59] ; and cf. Halsbury's Laws of England, 4th ed., vol. 12, par. 1179. 1. (1945) 70 C.L.R. 518, at p.525. 2. (1984) 157 C.L.R. 149. 3. (1984) 157 C.L.R., at p.162. 4. [1893] A.C. 429. 5. [1947] A.C. 390, at pp. 400-402.

[123]

There were, however, still gaps in the legislation and one such gap was disclosed in President of India v. La Pintada Compania Navigacion S.A. [64] . In that case it was held that the then current United Kingdom legislation, the Supreme Court Act 1981 UK, s. 35A, afforded no claim for interest upon a sum paid late but before the commencement of proceedings. Nor, so it was held, did the common law afford any such claim in the circumstances of that case. But the House of Lords took the opportunity to review the decision in London, Chatham & Dover Railway Co. v. South Eastern Railway Co. and, whilst declining to depart from it, explained and limited it in the light of two intervening decisions of the Court of Appeal, Trans Trust S.P.R.L. v. Danubian Trading Co. Ltd. [65] and Wadsworth v. Lydall [66] . The limitation placed upon London, Chatham & Dover Railway Co. v. South Eastern Railway Co. was to treat the claim for interest in that case as having been made under the first limb of the rule in Hadley v. Baxendale [67] and as being too remote under that part of the rule. That is to say, it was held that London, Chatham & Dover Railway Co. v. South Eastern Railway Co. decided no more than that damages for the detention of a debt are, in the absence of special circumstances, beyond the reasonable contemplation of the parties. That, of course, does not preclude the recovery of damages by way of interest if those damages are claimed and proved to arise from special circumstances which are known or ought to be known by the party against whom they are claimed, that is to say, if they fall within the second limb of the rule in Hadley v. Baxendale. The interest claimed in President of India v. La Pintada Compania Navigacion S.A. was not claimed to arise from any special circumstances and was held to be irrecoverable at common law. Whilst recognizing that this result did less than complete justice, the House of Lords took the view that the intervention of the legislature by the modification of the rule laid down in London, Chatham & Dover Railway Co. v. South Eastern Railway Co. precluded any abrogation of that decision by judicial determination.

[131]

The distinction between foreseeable future losses and loss due to delay in the payment of damages is fundamental. As I have said, to draw the distinction is not to deny the justice of compensation for delay in the payment of damages. The legislature has recognized this in South Australia by making provision for compensation in s. 30c of the Supreme Court Act. Even in the absence of this section precedent would have constituted a considerable obstacle in the way of this Court making its own provision. I have described the sort of difficulties which would be encountered in Trident General Insurance Co. Ltd. v. McNiece Bros. Pty. Ltd. [72] . The difficulties are, however, insuperable having regard to the presence of s. 30c. That section makes detailed provision for compensation by way of interest in a way which must necessarily prevail over any solution at common law. Under the section the right to interest is liable to be defeated by good cause shown and no compound interest is to be awarded. The interest claimed by the respondents in this case is compound interest and it is claimed as an absolute right. I am unable to see how the Court, even if it were otherwise able to do so, can grant such a claim in the face of the statute. True it is that the statute says in sub-s.(4)(e), that s. 30c does not "limit the operation of any other enactment or rule of law providing for the award of interest" but the plain matter of fact is that there was no enactment or rule of law providing for the award of interest of the kind claimed by the respondents at the time s. 30c came into force. It is surely one thing to interpret sub-s.(4)(e) as preserving existing remedies. It is quite another thing to construe it as authorizing, in effect, the amendment of the section by the provision of remedies patently inconsistent with the legislative intent. It might at once be observed that similar provision was to be found in s. 28 of Lord Tenterden's Act which, it would seem, was directed to preserving the right, at that time, to recover interest in accordance with trade usage, a right referred to in Page v. Newman. That provision was not thought sufficient to justify the award of interest in London, Chatham & Dover Railway Co. v. South Eastern Railway Co., notwithstanding the House of Lords' preference for that result. Similarly, I do not think that s. 30c(4)(e) can justify departure from established principle in a manner inconsistent with the remainder of the section. There is nothing to indicate that the paragraph was intended to be anything more than a saving provision.

[132]

This case may serve as an illustration of the distinction between foreseeable future losses and loss due to delay in the payment of damages. The loss by reason of the overpayment of income tax could, and could only, be measured at the time of overpayment by reference to the amount overpaid. It contained no element of future loss. On the other hand, the loss arising from the payment of additional provisional tax could not be measured solely by reference to the additional amount paid. The payment of provisional tax constitutes a payment on account of an income tax liability yet to be assessed. Even if an extra amount is paid in error, that amount will be brought into account when income tax is assessed in the following year. Yet that amount is lost to the taxpayer during the intervening time and he is entitled to be compensated for the loss if it is the result of another's negligent conduct. It is a future loss in the sense that it runs from the time of payment of the additional provisional tax until that payment is offset against liability to tax in the following year. The respondents are therefore entitled to damages in respect of the amount of provisional tax paid in error in each of the years 1975, 1976 and 1977. The proper measure of compensation upon the findings of fact in the courts below is appropriately interest upon each of the amounts involved between the time of payment and the time that income tax assessed in the following year became due and payable. No question of compound interest arises since the period involved in each instance is not significantly more or less than a year. The appropriate rate of interest is the commercial rate expressed upon an annual basis. The commercial rate of interest may be taken to be that paid by the partnership to Mutual Acceptance (Finance) Ltd. from time to time upon loans made by that company to the partnership during the relevant period. It was not suggested before us that if interest were to be paid for the loss of use of money, that was an inappropriate rate.

At a glance

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Decision date

Before

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Judgment (135 paragraphs)

Parties