Ms Powlett owned a property in Daylesford, Victoria, where she rented a timber cottage as holiday accommodation.
She decided to expand her business by contracting with Mr Weis and Mr Archibald to purchase, transport and install 2 relocatable houses.
The houses never arrived, and Ms Powlett sued to recover a total amount of $130,950 she had paid to Weis and Archibald.
Ms Powlett also sought damages for breach of contract for distress, anxiety and depression.
The decision of the trial judge
The trial judge awarded Ms Powlett $30,000 in damages for distress, anxiety and depression.
The judge found that:
- Ms Powlett had been subject to ‘increasing pressure, both financially and emotionally’ as a result of [Mr Archibald’s] failure to perform his contractual responsibilities’
- in appropriate circumstances the Court could award modest compensation where a person suffers distress and anxiety as a consequence of a party’s breach of their contractual obligations.
The judge observed 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 [Mr Archibald’s] actions have caused for [Ms Powlett].”
Mr Archibald appealed these (and other) findings of the trial judge to the Victorian Court of Appeal.
The result in the Court of Appeal
The Court of Appeal unanimously observed and held as follows:
1. the general rule is that damages for anxiety, disappointment and distress are not available for breach of contract
2. however there are exceptions to that rule, the main ones being where the purpose of the contract is to provide:
- enjoyment, relaxation, peace of mind or freedom from molestation; or
- where the damages proceed from physical inconvenience caused by the breach.
3. So, for example:
- damages have been awarded to plaintiffs for disappointment and distress caused by the breach of a contract to provide a holiday, entertainment or enjoyment, because the purpose of the contract is to provide pleasure or relaxation
- a plaintiff recovered damages from a solicitor who negligently failed to obtain an injunction to protect the plaintiff from being molested, where the plaintiff was subsequently molested and suffered mental distress
- damages have been awarded to building owners who have suffered physical inconvenience and mental distress as a result of the breach of a building contract, but damages for mental distress are only available where the mental distress is directly related to the physical inconvenience caused by the breach of contract.
4. The type of inconvenience for which damages are recoverable is not the time and trouble inevitably spent as a result of dealing with the consequences of any breach of contract.
5. The type of inconvenience for which damages are recoverable is actual disruption and physical imposition resulting from the building and construction works not having been performed as agreed.
6. In the present case, there was no evidence of actual disruption or physical imposition on Ms Powlett, caused by the breaches of contract.
7. Accordingly the Court of Appeal disallowed the damages awarded to Ms Powlett for distress, anxiety and depression.
When considering a claim for breach of a building contract (or any commercial contract), consideration should be given to whether the breach has caused:
- physical inconvenience, in the sense of actual disruption or physical imposition, particularly where such inconvenience can be quantified. For example, the need to rent alternative premises pending completion of construction
- mental distress directly related to such physical inconvenience. For example, mental distress caused to a person who cannot afford to rent indefinitely, by the additional financial burden involved with renting alternative premises for an uncertain period of time.
If so, damages might be available for such inconvenience and mental distress.
Note that careful consideration must also be given to civil liability legislation, and any claim must be framed accordingly.
If you would like assistance with this kind of claim please contact me.
The case is Archibald v Powlett  VSCA 259 (21 September 2017).