In the decision of Redrouge Nominees Pty Ltd v Canberra Institute of Technology [2024] ACTSC 263, the Supreme Court of the ACT considered whether a party was entitled to claim damages for ‘loss of bargain’ at common law where it had relied on a contractual right to terminate an agreement.

The Canberra Institute of Technology (CIT) engaged Redrouge Nominees (Redrouge) to provide management consultancy services (Agreement) for the sum of $4,999,990 (Contract Price). The Contract Price was payable in instalments with the first instalment paid upon execution of the Agreement. Shortly thereafter, CIT purported to ‘pause’ the Agreement, initially for a short period, and later indefinitely. Redrouge, treating CIT’s conduct as a material breach of contract, terminated the Agreement. In its notice of termination, Redrouge made clear that it intended to terminate the Agreement pursuant to its contractual termination rights. Redrouge subsequently commenced proceedings seeking damages for the balance of the Contract Price and in the alternative, damages at common law.

In determining whether Redrouge was entitled to damages, the Court considered:

• whether, under the terms of the Agreement, the whole of the unpaid Contract Price became payable upon termination; and
• if the whole of the Contract Price was not payable upon contractual termination, whether Redrouge was entitled to loss of bargain damages at common law for the breach.

Mossop J rejected Redrouge’s submission that the correct interpretation of the Agreement meant that upon termination for breach CIT became liable to pay the entire Contract Price. In reaching his decision, his Honour considered the precise language of the Agreement, reasoning that termination was permitted by either party and this would mean that CIT became liable for the Contract Price even where there was termination for breach by Redrouge.

Rejecting a contractual entitlement to the Contract Price, Mossop J considered the question of loss of bargain damages at common law. His Honour held that where a party terminated pursuant to a contractual entitlement, recovery of damages for loss of bargain will depend on two matters:

• whether there were grounds for termination on the basis of repudiation; and
• whether the consequences of termination upon the contractual basis are so different from the consequences of termination by reason of repudiation that the decision to terminate under the contract should be treated as an election not to invoke alternative rights at common law.

His Honour found that in this matter, Redrouge terminated the Agreement for conduct that fell within the scope of the termination clause and at the same time amounted to repudiation. Further, whilst its notice of termination was confined to the exercise of its contractual rights, Redrouge’s communication was also an unequivocal act inconsistent with the Agreement remaining on foot. In those circumstances, his Honour reasoned that absent any constraints in the terms of the Agreement, Redrouge was entitled to claim loss of bargain damages on the basis that by its notice of termination, Redrouge had accepted CIT’s repudiation.

His Honour went on to find that the contractual provisions in the Agreement were not sufficiently clear to exclude common law entitlements and awarded Redrouge damages for loss of bargain.

The decision confirms that, subject to the terms of the agreement, a party may rely upon a contractual right of termination and at the same time be entitled to terminate for repudiation and enforce its common law right to damages. Further, that clear language is required to rebut the presumption that a contracting party does not intend to abandon any remedies for breach of contract arising from the operation of the law.

The full decision can be found here.