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Damages in lieu, user and negotiating damages
Damages in lieu, user and negotiating damages · Remedies module 7
The idea
This module prices rights the court declines to enforce directly. One branch substitutes money for an injunction or specific performance under statute. The other charges a fee for a use already taken, whether or not the owner lost anything. Most of the marks sit in choosing the correct basis and defending the measure. This is because the same arithmetic can rest on different legal footings, and the footing decides what each side can argue. The statutory branch descends from Lord Cairns' Act, the nineteenth century English statute that first let a court award money in place of an injunction. In Victoria the power lives in s 38 of the Supreme Court Act 1986 (Vic).
Some rules carry a small icon marking the structure the rule takes. The icon is a reading aid and nothing more. The facts of the cases and the words of the rules do the work.
Attack plan
- First ask whether a court could grant an injunction or specific performance. The statutory power under s 38 of the Supreme Court Act 1986 (Vic) exists only where the court has jurisdiction to entertain such an application. The Victorian provision is wide and reaches purely equitable claims and future wrongs.
- Ask whether money should be substituted for the order. The discretion is not confined by mechanical rules. It weighs proportionality, the parties' conduct and the public interest.
- Measure the substituted award as the price of release. The measure is the sum the defendant would reasonably have paid for release of the right, assessed as a hypothetical bargain at the date of breach. Anchor the figure in something the facts supply, such as the defendant's anticipated profit.
- Check for a use already taken. A trespasser or converter pays a reasonable fee for the use taken of another's property, and the fee is payable whether or not the owner suffered any loss or would ever have bargained. Profit earning chattels are included.
- Ask whether negotiating damages are available for breach of contract. They require a right that functioned as an economically valuable asset akin to property, so that the lost opportunity to bargain is itself the loss. An ordinary contract breach stays with conventional damages.
- Consider distress damages under the statutory jurisdiction. They are available for the equitable breach of confidence and only for that wrong.
- Conclude with the money result. State the fee, the fact that drove it, and the outcome even if the contested discretion goes the other way.
Cases at a glance
| Case | In a line |
|---|---|
Fen Tigers  |
A speedway created a noise nuisance and damages answered it. The flexible approach to substitution was endorsed against the Shelfer working rule |
| Shelfer | The source of the old working rule for substituting damages. Fen Tigers displaced it with the flexible approach |
Wrotham Park  |
Houses were completed in breach of a restrictive covenant. Five per cent of the anticipated profit was awarded as the release fee rather than demolition |
| Morris Garner | An ordinary non compete breach was confined to conventional damages. Negotiating damages need a right that functions as an economically valuable asset akin to property |
| LJP |
Scaffolding intruded into the plaintiff's airspace. The trespasser paid a licence fee for the use taken |
| Strand Electric |
Theatre equipment was detained. The full hire rate was payable for the use of the goods |
| Bunnings |
User damages extend to profit earning chattels |
Lewis  |
Gordon J and Edelman J rationalised user damages as compensation for infringement of the right to exclusive use rather than restitution of gain |
Giller  |
Intimate videos were distributed in breach of confidence. Distress damages were awarded under Lord Cairns' Act, and the jurisdiction reaches that wrong only |
The rules
R54 · When does the court have power to award damages in lieu of an injunction or specific performance? If the court has jurisdiction to entertain an application for an injunction or specific performance it may award damages in addition to or in substitution for that relief. The Victorian width turns on jurisdiction to entertain an application, reaching purely equitable claims and future wrongs. s 38 Supreme Court Act 1986 (Vic). Trap. The timing tactic. Delay converts injunction cases into fee cases. Argue acquiescence against the delaying plaintiff, the fee for them.
R55 · How is the discretion to substitute damages for an injunction exercised? The discretion to award damages in substitution for an injunction is not confined by mechanical rules and weighs proportionality the parties' conduct and the public interest. Fen Tigers. Argue each factor on the facts rather than reciting a checklist. The plaintiff's conduct in arriving at the interference usually opens the analysis.
R56 · How are damages in substitution for an injunction measured? Damages in substitution may be measured by the sum the defendant would reasonably have paid for release of the right assessed as a hypothetical bargain at the date of breach. Wrotham Park. The bargain needs a commercial anchor. The defendant's anticipated profit or the premium it captured gives the fee its figure.
R57 · When are negotiating damages available for breach of contract? Negotiating damages for breach of contract are available only where the right breached was an economically valuable asset akin to property so that the lost opportunity to bargain is itself the loss. Morris Garner. Trap. Blake via Morris Garner. In England Blake survives as true exceptional disgorgement, stripped of the negotiating damages reading. Australia: Hospitality refused both. Keep the threads separate.
R58 · What must a trespasser or converter pay for the use taken of another's property? A trespasser or converter must pay a reasonable fee for the use taken of another's property whether or not the owner suffered factual loss or would have bargained, including profit earning chattels. LJP; Strand Electric; Bunnings; SLHD. Trap. User versus negotiating damages. User is a backward fee for use taken (tort). Negotiating is the lost bargaining opportunity for an asset-like right (contract or covenant). Same arithmetic, different bases, and Lord Reed calls both compensatory. Critics answer that where no bargain would ever have been struck the loss is fiction and the award strips gain by stealth (SLHD leaves it open).
R59 · What is the doctrinal basis of user damages in Australia? In Australia user damages are best rationalised as compensation for infringement of the right to exclusive use rather than restitution of gain. Lewis (Gordon J and Edelman J). This answers the defendant who says the owner lost nothing. The award compensates the infringed right, so proof of factual loss is not the point.
R60 · When can distress damages be awarded under Lord Cairns' Act? Damages including for distress may be awarded under Lord Cairns' Act for the equitable breach of confidence and only for that wrong. Giller. Trap. Giller over-extension. Equitable breach of confidence only. Wider use is reform argument. A statutory power conjured into a general distress jurisdiction strains the text. The criticism is fusion by stealth.
The flowchart
The damages in lieu flowchart runs the attack plan as a single page of decisions, from the statutory power through the discretion to the two measures. It ships with the Remedies flowcharts page at /remedies/flowcharts. Until that page is live the chart sits in Remedies Flowcharts (the companion document to the schematic).
A worked example, dissected
The Barrabool Gun Club has run Saturday clay target shooting for forty years and hosts the region's only accredited range, which Victoria Police rely on for qualification shoots. Odile bought the adjoining farmhouse at a $180,000 discount after the agent played her a recording of a shoot, then spent $450,000 converting it into a wedding venue. She sues in nuisance and seeks an injunction silencing all Saturday shooting. The Club concedes the interference and has offered $95,000 of soundproofing together with an afternoon schedule, a package the uncontested evidence says would halve the noise.
| The move | What the strong answer does |
|---|---|
| Open on the power | Names s 38 and frames the contest as remedy rather than liability, since the nuisance is conceded and jurisdiction to entertain the application makes the power live |
| Meet the plaintiff's instinct | States her argument that a proved nuisance is stopped rather than priced, then answers it with Fen Tigers, which freed the discretion from mechanical rules |
| Run the three factors | Takes conduct first, then the Club's offered abatement and the public interest in the only accredited range. Proportionality gathers the threads |
| Measure the fee | Values what remains after abatement as a hypothetical bargain, anchored by the two cancelled bookings and restrained by the $180,000 purchase discount |
| Conclude with the result | Substitution on terms that the works are completed, plus the minimum the Club secures even on the losing view, an injunction shaped by its own offer |
The full problem, with its Pass answer, H1 answer and examiner's comments, is Problem 1 of the damages in lieu drill bank on the practice page.
Practise this module
Ten drills in the damages in lieu bank cover every rule above, and the exam tier runs the module inside integrated scenarios. Start with the quick drills on choosing between the substituted fee and the user fee, then attempt the bank blind.