Equitable Damages Notes

Prior to the Judicature Acts, damages were a remedy of the common law.
Monetary compensation was awarded for purely equitable wrongs in the exclusive jurisdiction and for breaches of common law or statutory wrongs in the auxiliary jurisdiction.

The modern jurisdiction to award ‘damages’ in respect of common law and other wrongs is based largely upon statutory provisions under the Chancery Amendment Act 1858, followed by the Judicature Acts.
In NSW, the modern enactment is s 68 of the Supreme Court Act 1970 (NSW).
Where the Court has power:
- to grant an injunction against the breach of any covenant, contract or agreement, or against the commission or continuance of any wrongful act; or
- to order the specific performance of any covenant, contract or agreement,
  the Court may award damages to the party injured either in addition to or in substitution for the injunction or specific performance.

The award of equitable damages is discretionary.
Equitable damages may be reduced or denied because of equitable defenses, such as ‘unclean hands’, laches, or hardship to the defendant.
Under s 68 of the Supreme Court Act 1970 (NSW) and its statutory equivalents, one of three outcomes is possible:
- Neither damages nor specific relief may be awarded;
- Damages may be awarded in addition to specific relief;
- Damages may be awarded in substitution for specific relief.

As noted in s 68(a) of the Supreme Court Act 1970 (NSW), one occasion where the court can award equitable damages is where the court has power to grant an injunction against the commission or continuance of any wrongful act.
The term ‘wrongful act’ encompasses torts.

The High Court has held that s 68(a) of the Supreme Court Act 1970 (NSW) does not authorize the award of damages for breach of a statutory provision.
This is because the section is ‘exclusively preoccupied with private rights’: see Wentworth v Woollahra Municipal Council (1982) 149 CLR 672 at 683.

Debate exists about whether the phrase ‘commission or continuance of any wrongful act’ in s 68(a) and similar legislation was intended only to apply to common law wrongs, such as torts.
The authors of Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (5th ed) argue in support of this proposition.
However, the High Court in Wentworth v Woollahra Municipal Council (1982) 149 CLR 672 at 676 have held that the legislative provisions are not limited to common law wrongs and can apply to the extent that the court can now refuse equitable relief and award common law damages even for purely equitable causes of action.

As equity is required to follow the law, the rule governing the assessment of equitable damages in the auxiliary jurisdiction is that equity follows the common law principles of assessment.
This is the exact opposite of equitable compensation in the exclusive jurisdiction.
Two consequences follow this:
- The common law standards of causation and remoteness of damage are applied in the auxiliary jurisdiction of equity: see Dillon v Nash [1950] VLR 293 at 301.
- There is no difference between the common law and equity as to the date for assessment of damages, as both remedies are governed by the compensation principle: see Johnson v Agnew [1980] AC 367 at 400–1.
However, it is considered general practice to assess common law damages by reference to the date on which the cause of action accrued, and to assess equitable damages as at the date of judgment, in order to be a true substitute for specific relief: see Mills v Ruthol Pty Ltd (2004) 61 NSWLR 1 at 14.
There is one qualification to the general rule that equitable damages follow the common law rules of assessment. The exception being that the requirement does not apply to actions where damages are not available at common law.
Consequently, should a court decide to award statutory damages for a purely equitable cause of action, the rules for assessing damages at common law will not apply.