1 GAGELER CJ.

This appeal concerns the recoverability in damages for breach of

contract of expenditure incurred by an innocent party (a plaintiff), in reliance on
an expectation of performance of a contract, rendered futile as a result of non-
performance of the contract by a defaulting party (a defendant).

2 The principle governing recovery of such "wasted expenditure" was stated

in the decision of the Court of Appeal of the Supreme Court of New South Wales
under appeal as follows:1

"To sum up: a plaintiff who is unable or does not undertake to

demonstrate whether or to what extent the performance of a contract would
have resulted in a profit may claim its wasted expenditure. In such a case,
expenditure incurred by a plaintiff in reliance on a contractual promise
made by the defendant and 'wasted' because of non-performance by the
defendant is recoverable, except to the extent that the defendant shows that
the plaintiff would not have recouped its expenditure had the contract been
performed."

The Court of Appeal emphasised that recovery is limited by the principle of

remoteness of damage associated with Hadley v Baxendale,2 in respect of which
the Court of Appeal added:3

"[T]he proper application of Hadley v Baxendale as a control on remoteness

of damage in a claim for wasted expenditure is whether, when the contract
was made, it was within the reasonable contemplation of the parties that the
relevant expenditure would be incurred and, if the contract were breached
in the relevant manner, wasted."

3 In my opinion, the Court of Appeal was correct. The principle governing

the recovery of damages for wasted expenditure can be generalised as follows. A
plaintiff establishes a prima facie entitlement to recover damages for breach of
contract if and to the extent that the plaintiff establishes that expenditure it has
incurred in reliance on an expectation of performance of the contract has in fact
been wasted upon breach of the contract by the defendant. The prima facie
entitlement of the plaintiff prevails unless and except to the extent that the
defendant establishes the counterfactual that the expenditure would still have been
wasted even if the contract had been performed. Beyond the limitations imposed

1 123 259 932 Pty Ltd v Cessnock City Council (2023) 110 NSWLR 464 at 487-488
[73].

2 (1854) 9 Exch 341 [156 ER 145].

3 123 259 932 Pty Ltd v Cessnock City Council (2023) 110 NSWLR 464 at 513 [146].