11 March 2022 by Paul Croft
Damages are a legal relief referring to the sums, assessed in monetary terms, paid to a successful party arising from the wrongful conduct of another party. Damages are generally compensatory in character, as opposed to punitive or vindicatory in nature.
The plaintiff is responsible for proving the losses for which damages are claimed were caused by the defendant on the balance of probabilities[i]. This requires the plaintiff to establish that:
- The defendant’s actions were directly connected with, or substantially caused, by every loss for which the plaintiff seeks damages[ii] (causation);
- The plaintiff took reasonable steps to fulfil its duty to ensure continuing losses were not exacerbated by extraneous factors (mitigation), such as the plaintiff’s own carelessness[iii]; and
- There is a likelihood that the losses resulted from the breach (remoteness). While the required degree of probability or certainty of the losses occurring may vary between remedies for damages, there appears to be general consensus that the minimum benchmark requires that the loss or damage was “not unlikely to result” from the wrongful conduct[iv].
In certain situations, the Court may reduce or apportion the award of damages where the defendant:
- Satisfies its burden of proof in demonstrating that the plaintiff failed to mitigate its losses through reasonable action or inaction. In these circumstances, the Court will reduce the award of damages payable by the defendant to the plaintiff; and/or
- Successfully pleads in its defence that there was contributory negligence or concurrent wrongdoing on the part of the plaintiff or alternatively a third party in causing the loss, resulting in the Court apportioning the damages. Such an outcome recognises that the defendant’s actions, while not the sole cause of the plaintiff’s loss, “materially contributed” to the loss[v].
While there are a number of recognised heads of damage, this FAQ concerns only damages awarded for economic losses suffered by a plaintiff.
Examples of wrongful conduct giving rise to claims for damages
A plaintiff may seek an award for damages when it has suffered economic losses arising from the complained of conduct, in circumstances such as the following:
- Breach of contract;
- Breaches of fiduciary duties and obligations (see also FAQ “What is an account of profits?”);
- Breaches of statutory and legislative obligations, including:
- Directors’ and trustees’ duties set out in the Corporations Act (2001);
- Misleading and deceptive conduct under the section 18 of the Australian Consumer Law (Sch 2 Competition and Consumer Act 2010 (Cth)); and
- Unconscionable conduct in connection with goods or services under the section 21 of the Australian Consumer Law (Sch 2 Competition and Consumer Act 2010 (Cth)).
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