AN INCONVENIENT RULING
October 4, 2017
The Victorian Court of Appeal in Archibald v Powlett  VSCA 259 recently considered whether damages for inconvenience are recoverable for breach of contract.
The respondent rented out a cottage on her property as holiday accommodation. In 2011, the respondent purchased two relocatable houses (the First House and the Second House) from the applicant, which the applicant agreed to deliver to her property. The respondent intended to use the houses to expand her accommodation business.
Despite contracting to sell the First House to the respondent, the applicant did not in fact own this house and was unable to purchase it from its owner. In April 2012, the First House was sold by its owner to a third party. In December 2011, the applicant delivered the Second House to another property in Daylesford, but did not notify the respondent of this. The respondent later discovered the location of this house and, at her own expense, relocated it to her property in February 2015.
The trial judge found that the applicant did not perform the contract in relation to the First House and only partially performed the contract in relation to the Second House.
Under Part VBA of the Wrongs Act 1958 (Vic) (the Act), a claimant is not entitled to recover damages for non-economic loss ‘in respect of an injury to a person caused by the fault of another person’ unless the claimant has suffered ‘significant injury’.
The trial judge awarded the respondent damages on a number of grounds, including $30,000 for ‘distress, anxiety and depression’. This was awarded notwithstanding that the respondent had not established that she had suffered from a ‘significant injury’ as defined in the Act.
The trial judge found that the respondent had been subject to ‘increasing pressure, both financially and emotionally’ as a result of the breach and that:
contractual arrangements relating to the pursuit of accommodation and business plans, which are bound up with an individual’s personal hopes for their future life, are likely to result in the sort of distress and anxiety which [the applicant’s] actions have caused for [the respondent]
The applicant appealed on a number of grounds, including that the trial judge erred in awarding damages for distress, anxiety and depression because such damages are not recoverable for breach of contract.
The Victorian Court of Appeal held a claim for damages that involves any component of ‘mental distress, anxiety or stress’ is a claim for ‘non-economic loss’ within Part VBA of the Act. Accordingly, as the respondent had not demonstrated that she had suffered from a ‘significant injury’, she could not recover for her alleged non-economic loss.
However, the Court of Appeal went on to say that, where the claim is for inconvenience alone and that inconvenience is of some significance, the claim falls outside part VBA of the Act because it is not ‘in respect of an injury’. The respondent sought to rely on this exception on appeal.
The respondent pointed to cases where damages for anxiety, distress and disappointment had been awarded following breach of a building contract. However, the Court of Appeal distinguished these cases on the basis that they involved a physical imposition on the plaintiff by having to live with ‘offensive odours, a leaking roof, or in unsanitary or dirty conditions, or being obliged to vacate the defective premises’ or because they required that the plaintiff had suffered from a ‘physical inconvenience’ as a result of the breach of contract.
The Court of Appeal stated that:
The ‘inconveniences which have been caused by the breach of contract’ for these purposes are not the time and trouble inevitably spent as a result of dealing with the consequences of any breach of contract. They are the actual disruption and physical imposition resulting from the building and construction works not having been performed as agreed.
The Court of Appeal held that there was no evidence or finding that the applicant’s breaches of contract were of the kind required and upheld the applicant’s appeal on this ground.
This ruling confirms that an exception to the general principle that damages for injured feelings are not available in contract exists where the damages proceed from physical inconvenience caused by the breach.
However, the exception will not be invoked merely because a claimant has been inconvenienced as a result of dealing with the breach of contract. The claimant must experience a physical imposition as a result of the breach.
Authored by Stephanie Young, Senior Associate, Melbourne
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