Legal principles
5The leading principle with respect to the assessment of damages for breach of contract at common law is that stated by Parke B in Robinson v Harman (1848) 1 Exch 850 at 855; (1848) 154 ER 363 at 365:
"The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed."
6In Ruxley Electronics and Construction Ltd v Forsyth [1994] 1 WLR 650 at 655; [1994] 3 All ER 801 at 806, Staughton LJ pointed out that there are potentially two methods of measuring the loss in a breach of contract case: the difference in value and the cost of restoration.
7In relation to the former, his Lordship indicated that it was appropriate where a breach of contract related to a chattel commonly available when a hypothetical purchase and sale of the defective and a replacement chattel could be obtained:
"The difference in value method is available, and will often be appropriate, when the building or chattel which has been damaged, or which does not answer to the contract, is of a kind that is commonly available. In such a case the cheapest way to make good the loss will often be to sell the building or chattel in question and buy another which, as the case may be, is not damaged or does answer the specification in the contract. The difference in value method seeks to reflect the financial consequences of such a notional transaction. Hence the rules as to damages when there is a contract for the sale of a marketable commodity. I say that the transaction is notional because the loser is not obliged to sell his building or chattel and purchase another; I have never heard it suggested that he is. He merely recovers damages measured on the loss that he would have suffered if he had done so."
8In Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2008-2009) 236 CLR 272 at [13]; 286, the court said that in the case of the supply of defective goods, the prima facie measure of damages is the difference in value between the contract goods and the goods supplied. The court approved Staughton LJ's statement in Ruxley that such a measure of damages seeks only to reflect the financial consequences of a notional transaction whereby the buyer sells the defective goods on the market and purchases the contract goods.
9In this case Fertility First purchased sperm from a supplier in the United States of America, Xytex Corporation, and claims that the cost is the best evidence of the value of sperm complying with the warranties in the deed and the best evidence of cost on a hypothetical purchase. It is claimed that this cost represents the damages because a hypothetical sale of the defective sperm would have realised nothing.
10Under the Sale of Goods Act 1923, the same result would be achieved because s 54(3) provides that in the case of a breach of warranty of quality the loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.
11St George Fertility and Dr Macourt accept that the basic principle is that stated in Robinson . They draw attention, however, to a corollary stated by Mason CJ and Dawson J The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at [28]; 82:
"The corollary of the principle in Robinson v Harman is that a plaintiff is not entitled, by the award of damages upon breach, to be placed in a superior position to that which he or she would have been in had the contract been performed."
12There is, however, a difference between the parties as to when the assessment of damages should take place. Dr Clark says that the general rule that damages are assessed at the date of breach should apply, while St George Fertility and Dr Macourt say damages should be assessed at the date of trial or, alternatively, when Fertility First completed a stock take of the sperm acquired from St George Fertility.
13In a breach of contract case involving goods, the general rule of common law is that damages are assessed at the time of breach of contract or when the cause of action arises ( Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351, Golden Strait Corp v Nippon Yusen Kubishika Kaisha [2007] 2 WLR 691; [2007] 3 All ER 1).
14The rule finds expression in the Sale of Goods Act , s 54(3). But the rule is not inflexible. In Johnson at 355-356 Mason CJ said:
"There is a general rule that damages for torts or breach of contract are assessed as at the date of breach or when the cause of action arises. But this rule is not universal; it must give way in particular cases to solutions best adapted to giving an injured plaintiff that amount in damages which will most fairly compensate him for the wrong he has suffered."
15His Honour went on, however, to say that the general rule that damages are assessed at the time of breach or when the cause of action arises has been applied more uniformly in contract than in tort and for good reason. But even in contract cases his Honour pointed out that courts depart from the general rule whenever it is necessary to do so in the interests of justice.
16In Golden Strait , Lord Brown referred to the breach date rule by reference to the Sale of Goods Act 1893 (UK) and said at 722; [79]:
"But the rule is by no means confined to the sale of goods context and, as Lord Bingham explains, has been applied by analogy to a variety of other situations. Essentially it applies whenever there is an available market for whatever has been lost and its explanation is that the injured party should ordinarily go out into that market to make a substitute contract to mitigate (and generally thereby crystallise) his loss."
17In Gagner Pty Ltd (t/as Indochine Cafe) v Canturi Corporation Pty Ltd [2009] NSWCA 413; (2009) 262 ALR 691 at [54]; 703 Campbell JA, having referred to the above authority and to Dodd Properties Ltd v Canterbury City Council [1980] 1 All ER 928 and Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281 said this:
"It follows that, even though a cause of action for breach of contract has accrued at the time the breach occurs, it cannot now be said that there is an accrued right at that time to receive any particular sum of damages. That is because it must await the trial to decide what is the most appropriate way, in light of the events than known, to give effect to the compensatory principle of damages."
18In this case I see no reason to depart from the principle that in breach of contract cases involving goods available in a market, damages should be assessed as at the date of breach.
19This is not a case of estimating damages into the future. It is simplified by the fact that an identifiable number of straws of sperm did not comply with warranties in the deed and a market existed in which replacement sperm could be purchased.
20In support of their contention that damages should be assessed at the date of trial, St George Fertility and Dr Macourt put the argument that because Fertility First recovered the cost to it of the acquisition and storage of sperm purchased from Xytex by charging those costs to patients, Fertility First recovered its costs and Dr Clark had suffered no loss.
21The simple answer to that proposition is that Dr Clark paid twice for the use of sperm and recovery of the cost of acquisition and storage of the sperm purchased from Xytex still left her out of pocket for the amount paid under the deed.
22In support of their contention that damages should be assessed after the stock take had been completed, St George Fertility and Dr Macourt argued that it revealed a lesser amount of non-compliant sperm than the amount claimed by Dr Clark. Later in these reasons I reject that submission.