The Problem with Amann: Would an Agreement-Centred Approach to Remoteness Benefit Australian Jurisprudence?

• Author: Hugh Davis
• Position: BE W.Aust; ProfCertArb; PRIArb3,Adj; commercial arbitrator, adjudicator and consultant
• Pages: 1-28

THE PROBLEMS WITH AMANN: WOULD AN

AGREEMENT-CENTRED APPROACH TO REMOTENESS

BENEFIT AUSTRALIAN JURISPRUDENCE?

HUGH DAVIS*

The agreement-centred approach to assessing damages for breach of contract

formulated by Lord Hoffmann in The Achilleas dovetails neatly with the modern

approach to contractual interpretation. In this paper, I will seek to analyse and expose

what I respectfully submit are shortcomings in the joint judgment of Mason and

Dawson JJ in Amann and how it contrasts with Lord Hoffmann’s reasons in The

Achilleas. Further, I will attempt to conflate the agreement-centred approach applied

in The Achilleas with the broader task of contractual interpretation and, given the

shortcomings in Amann, demonstrate how Australian jurisprudence would benefit from

a consolidated, consistent approach to contractual claims, whether it be a claim for

damages for breach of contract, the existence of an unexpressed term or the broader

task of contractual interpretation.

CONTENTS

I Introduction ...................................................................................................... 2

IIDamages for Breach of Contract: The Orthodox Rules ................................... 4

IIIThe Difficulties with the Orthodox Rule of Remoteness................................. 5

IV What Are Expectation and Reliance Damages?............................................... 7

V Amann: The Facts and a Summary of the Leading Judgment.......................... 8

VIThe Problems with Amann .............................................................................. 9

VIIThe Achilleasto the Rescue........................................................................... 11

VIIIDoes Amann Lend Itself to the Agreement-Centred Approach? ............... 14

IXContractual Interpretation and Unexpressed Terms in Australia and the

United Kingdom ..................................................................................................... 16

X Contractual Interpretation .............................................................................. 17

XIUnexpressed Terms........................................................................................ 18

XIIOpposition to the Belize Test for Unexpressed Terms ................................... 21

XIIIConflating an Agreement-Centred Approach to Remoteness with the

Broader Task of Contractual Interpretation ............................................................ 24

XIVWould Australian Jurisprudence Benefit from an Agreement-Centred

Approach? ............................................................................................................... 25

XVConclusion ................................................................................................. 27

University of Western Australia Law ReviewVol 42(2):1

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IINTRODUCTION

In recent times, particularly in the United Kingdom, rather than observing a

rigid application of the orthodox rules for claims relating to breach of contract and

unexpressed terms,1common law courts have been anxious to uphold the bargain

struck between parties. This approach is in lock step with the modern contextual

approach to contractual interpretation which necessarily involves careful

consideration of both the text contained in the express terms of the contract and the

context or surrounding circumstances in which the parties contracted. In other

words, with respect to such claims, the court ‘is concerned only to discover what

the instrument means’.2 Australian jurisprudence appears to be moving in the

direction of the UK approach, but the rules that have traditionally governed three

important areasof the law of contract still represent orthodoxy in Australia. For

the reasons that follow, I respectfully submit that the modern UK approach should

apply for any claim relating to contracts, whether it be a claim for, inter alia,

damages for breach of contract, the existence of an unexpressed term or the task of

interpreting contracts generally. As Lord Hoffmann observed in Transfield

Shipping Inc v Mercator Shipping Inc (The Achilleas):3

the question of whether a given type of loss is one for which a party assumed

contractual responsibility involves the interpretation of the contract as a whole

against its commercial background, and this, like all questions of interpretation, is a

questionof law(my emphasis).

In Australia, Commonwealth of Australia v Amann Aviation Pty Ltd4is

considered the leading authority for damages awards, assessed on a reliance basis,

for breach of contract. The judgments pay very little attention to the terms of the

contract between the parties. Further, the leading judgment in Amannappears to

suffer from two distinct issues with respect to, first, its application of the ‘ruling

principle’5for measuring damages for breach of contract set out in Robinson v

* BE W.Aust; ProfCertArb; PRIArb3,Adj; commercial arbitrator, adjudicator and consultant. An earlier

draft of this article was submitted for assessment for the subject Remedies in the Construction Context

which forms part of the Master of Construction Law program at the University of Melbourne. Thank you

to Wayne Jocic for his thoughtful guidance.

1In this essay, I refer to ‘unexpressed terms’ to address the point made by McHugh and Gummow JJ in

Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 447that ‘the expression ‘implied term’ suggests

imposition in the way in which statutes ... imply conditions or warranties in contracts of a particular

description, which may not be excluded or modified. The sense of the matter would have been better

served by general adoption of the expression - apparently coined by Sir John Salmond and used by Dixon

J – ‘tacit term’ to identify the latent unexpressed intention of the parties’.

2Attorney General of Belize v Belize Telecom Ltd [2009] 1 WLR 1988 at [16].

3[2009] 1 AC 61 at [25].

4(1991) 174 CLR 64.

5So described by the High Court in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd(2009) 236 CLR

272 at [13].