Introduction

The case study that we will be discussing here is the case that majorly deals with the
contractual obligations and how a breach of the contractual obligations leads to compensation
of damages to the other party. It deals with the amplitude of damages that needs to be
assessed and how will they be assessed by keeping in mind the various factors relevant in a
case. It is the judgment of Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009],
wherein the contract was breached and aspects of contractual obligations were applied, the
question arose as to whether the landlord can get the value of rectification of the loss caused
to the building, or the diminuition caused to the building. Various case laws were referred to
in order to answer this question, majorly the applicability of the Bellgrove case and the
Ruxley cases were discussed at par.

The case of Tabcorp v Bowen is discussed in detail along with the various issues involved in
it along with a critical analysis of the judgement below.

Facts of the case

The case relates to a foyer of a building in Melbourne, the building was owned by Mary
Bergamin, director of Bowen Investments. Tabcorp, had been on lease of the bilding for 10
years, which could be extended for further 5 years. They had a meeting, on that particular day
to discuss about the alteration of the foyer. As Mary Bergamin had come earlier than the
scheduled time for the meeting, she was shocked to see, that the floor panelling, stones,
partition, everything was removed and the remains were jack hammered. Tabcorp had not
bothered to wait for the discussions and had assumed that the meeting would be in their
favour, and had already demolished the foyer, without any prior written or oral permission of
Bowen Investments. This was an act, which was against their agreement clause 2.13, which
stated that no alterations could take place by the tenants in the building without any written
permission (which the landlord would not withhold unnecessarily)of the landlord.

This resulted in the various litigations filed by the parties in the trial court and the full court
as well as the high court of Australia wherein the matter was discussed at length. The trial
court’s judgment was dismissed by the full court and the high court upheld the judgement of
full court which was in favour of the landlord, i.e. Bowen Investments Pvt Ltd.
Literature review

It is clear from the facts of the case that there has been a breach of contract as Tabcorp has
breached clause 2.13 of the agreement with Bowen Investment. To understand breach of
contract we will deal with certain examples as to what constitutes breach of a contract. So a
breach occurs when a party does not perform its obligations under a contract. In the case of
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007], it was held that
the essentiality of the contract lies in the intention of the contract and the promise so made, if
the promise was such so that to obey the terms of the contract then it would amount to a
proper contract else it would not. Hence, if any of the condition is not obeyed it would lead to
breach of contract and could amount to termination also.

The aim of the damages or compensation provided is to put the person in the same situation
as if the contract had been performed as stated in Robinson v Harman [1848]. The same
situation does not always mean the same financial situation; it means the same contractual
situation, i.e. whatever happens after the occurrence of the contract (Bell, 2009). For
example, if the market rate was to drop for a particular good after it has been sold to a person
from a dealer to the purchaser, then he would incur a loss. Therefore, if there was a breach
there cannot always be a profit in the form of damages being provided to the claimant.

The case of Tabcorp v Bowen has been considered as a matter of contumelious disregard,
wherein a tenant has maliciously done a deed which he was not supposed to. The court had
applied the principles of calculating the contractual damages by applying the case of
Bellgrove v Eldrige [1954]. There are two types of damages that can be awarded by the court,
one is value of loss damages and other is cost of cure (Tawil, 2013), their functions are
different, so as to their purposes. Value of loss is for compensating the party for the loss
caused to them and cost of cure is for reinstating the party to its previous condition in which
it had been if the contract had been fulfilled. In the case of Radford v de Froberville [1977],
the defendant was to build a wall which he did not, which was to separate the land of
claimant and the defendant (Patterson, 2016). The wall had not value as such and would not
cause any loss. But they had a contract; the court therefore awarded damages for cure and not
for loss to the claimant. Hence, the value of cost of cure is more than damages for loss.
Legal issues

The various legal issues involved in the matter were:

1. Whether there was a breach of contract from the side of Tabcorp when it did not take
prior permission of Bowen Investment?
Yes, Tabcorp had breached the contract, specifically clause 2.13 of the agreement by
not taking prior written permission, as he had the contractual obligation under it to do
so. Also, Tabcorp did not even wait for the meeting with Bowen and had already
gone with dismantling the floor of the foyer thereby conducting the doctrine of
efficient breach.
2. Whether quantification of damages for the breach of contract could be done in this
case or not, and if so, then how?
There were two principles discussed in the case by way of Bellgrove v Eldrige [1954]
and Ruxley Electronics v Forsyth[1966]. Thus it was explained that quantification can
be done by way of two principles which were; firstly, that the work must be necessary
to achieve conformity and secondly it must be reasonable to adopt the course of it.
That is to say that, the damages awarded must be only to the value of the necessary
standards of the work that needs to be met and there must be a reasonable way to meet
the standards.

Analysis of the applicable laws

The case deals basically with the quantification of damages when there is a breach of
contractual obligation. As explained in the case of Radford v de Froberville [1977], the
defendant was to build a wall, the wall had not value as such and would not cause any loss.
But they had a contract; the court therefore awarded damages for cure and not for loss to the
claimant. In such a case, there is a possibility of misuse by the claimant, of the monetary sum
so received, he can-not put that money to use for the purpose for which it was granted. But in
the judgment it was specifically mentioned by the judge that the claimant had shown interest
in fulfilling the contract through another contractor and had taken steps in doing so, and
therefore he must be awarded the damages for cure. Therefore it is to be seen that the award
is not unreasonable and also that it does not cause any hardship to the defendant. The
unreasonableness would be seen from the pretext that, for example there is a contractor A
who builds a house for B and uses a particular variety of pipes during the construction,
however the contract was for the uses of the pipes of another company, but A has used the
pipes of the same quality. Now after the construction it is of no use of rebuilding and putting
new pipes, as it would be unreasonable. Hence, it was held in the case of Ruxley Electronics
v Forsyth [1966], wherein, the contractor had made the deeper side of the swimming pool
few inches shallower than what was contracted for, however it was safe for diving; that only
the cost for loss of amenity would be given and not for any diminuition in value or cure for
loss would be given as it was nil.

Critical review of the decision

Trial Court

The trial court awarded reinstatement costs to Bowen investments following the case of
Joyner v Weeks, further the judge added that the reinstatement costs cannot be heightened
unless there are any other changes that is the renovations that the tenants have made to the
foyer. The trial judge made a distinction between the old foyer and the new foyer and granted
the difference in the amount of the two (Stern and Wong, 2009). The judge also took in
consideration the time of lease and stated that till 2015 or 2017, the foyer would have
suffered wear and tear and would require restoration anyways.

Full Court

The full court struck down the judgement of the trial court and stated that the reinstatement
costs were the costs that would be required to make the foyer to its original condition, which
it was earlier. Therefore, the full court awarded damages for the breach of contract under
clause 2.13 for the reinstatement of the foyer to its original condition as well as the loss of
rent while the restoration takes place.

High Court

On appeal to the high court, the court upheld the decision of the full court and dismissed the
plea of Tabcorp and awarded damages worth $1,380,000 to Bowen Investments on the
following grounds:

The court had discussed in detail the two landmark cases of Bellgrove v Eldridge [1954] and
Ruxley Electronics Ltd v Forsyth [1966]. In Bellgrove v Eldridge [1954], the builder has
constructed the building with substantial departure from the original contract which leads to
grave instability in the building. It was under the contract that the building must be erected on
her land as per the contract and now the failure in the specifications requires that it be
demolished and be redone. The loss here is prima facie, the one that can be measured by the
ascertainment of the amount of rectification needed in constructing a new building. Here two
principals were laid down by the court in ascertaining the damages: necessity and
reasonableness; now the necessity is as to the compliance of the standards to be followed,
otherwise the building would be of no use. So in the present case of Tabcorp, it is the
necessary that the work be apt to conform to the contractual bargain, as discussed by the high
court. Reasonableness requires that the conformity must be such that there is a reasonable
way to follow or achieve that conformity. As held by the high court in Tabcorp, it was
feasible to demolish the foyer again and achieve the conformity in the present case. Therefore
both the principles of Bellgrove can be applied in the case of Tabcorp and hence damages can
be assessed accordingly. In Ruxley Electronics v Forsyth [1966], the facts were such that the
contractor had not made the swimming pool as per the specifications of the contract, however
there was no grave departure from the contract, therefore the damages awarded were not in
conformity or for the diminuition in value as there was none. Hence, in the case of Tabcorp
the principles of Bellgrove were aptly applied and damages were assessed.

Conclusion

Tabcorp is a continuing example of the Bellgrove case, which gives a chance to the
application of principles of necessity and reasonableness to the construction and building
cases. Tabcorp clearly explains how a breach of a contractual obligation can take place and
the ways and manners in which the application of the principles of awards for damages can
be applied to a construction case. The dispute that arose here was a clear case of
contumelious disregard of the landlord which should not be encouraged in any way. Hence
must be awarded in the form of damages too. The damages that were awarded in this case
were not only for the purpose of the loss caused to the foyer and the reconstruction of it but
also for the time wasted in the reconstruction and the potential loss so incurred because of it.

Bibliography

1. Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA, p.8.
2. Koompahtoo Local Aboriginal Land Council v Sanpine Pty Limited [2007] HCA,
p.61.
3. Robinson v Harman [1848] EngR, p.135.
4. Bellgrove v Eldridge [1954] clr, p.613.
5. Radford v de Froberville [1977] WLR, p.1262.
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