Case note – Renown Corporation Pty Ltd v SEMF Pty Ltd  NSWCA 233
If a product supplied or installed falls short of what was contractually promised, the aggrieved party is generally entitled to claim damages. The recent New South Wales Court of Appeal decision in Renown Corporation Pty Ltd v SEMF Pty Ltd  NSWCA 233 (Renown v SEMF) provides practical guidance on the timing for assessment of damages and allowance for “betterment”.
In 2014, SEMF contracted with Renown to supply and install a software system. The system installed by Renown was defective. SEMF claimed losses to replace the system with an upgraded version.
Timing for assessment of damages
Renown argued damages should be the cost of rectification as at the date of the breach and not on a later date.
The Court noted damages to be assessed at the date of the breach is only a starting point. It is applicable only if the plaintiff does not show assessment made on a later date would provide adequate compensation or if there was an excessive delay in seeking relief.
The Court found the measure of damages is the reasonable costs of rectification at the time:
- when the costs were incurred (if incurred by the date of trial); or
- of trial (if not already incurred).
Allowance for betterment
In general, an allowance for betterment (to reduce the amount of damages) may be made if a plaintiff chooses to acquire a more valuable product. Credit may have to be given reflecting greater value of the improved product. Renown asserted the damages should be reduced to account for benefits received with the upgraded version of the system.
The Court did not allow any deductions for betterment because:
- there was no other practical means of SEMF obtaining the contracted-for system;
- SEMF would have been entitled to the upgraded version under the contract, subject to payment of maintenance fees; and
- Renown failed to quantify the betterment.
This case is a timely reminder of steps to be taken by contractors and principals in bringing and defending construction claims.
- Do not ‘wait and see’ in bringing a claim
Plaintiffs must not delay in bringing a claim. As seen in Renown v SEMF, the Court allowed damages to be assessed on a later date after the breach (which may result in a larger amount of damages) on the basis that SEMF did not delay to rectify the problem or to commence proceedings.
- Work out the amount of any betterment
If the defendant asserts the damages award should be discounted for betterment, it is essential that the defendant work out and justify the amount of that betterment . In general, a calculation of betterment calls for an evaluation of how (in monetary terms) the plaintiff has benefited from the improved product received over the product it contracted to receive.
If you would like to discuss this article with us further, please contact Brett Vincent, Managing Partner, or Marcus Wong, Associate on (02) 9261 5900.