Contractual Damages and the Supreme Court -- Altimarloch and the Shifting Sands of "Reasonableness"

Abstract

In Marlborough District Council v Altimarloch Joint Venture Ltd [2012] NZSC 11, [2012] 2 NZLR 726 the Supreme Court split 3-2 on whether the damages in a claim for a misrepresentation under s 6 of the Contractual Remedies Act 1979 should be analysed according to the cost of cure or diminution in value measure. This article analyses that decision and argues that the majority decision to award the cost of cure was the correct one. The majority rightly considered the plaintiff’s loss in light of the purpose for which it had entered the contract. The diminution in value alternative preferred by the minority would have under-compensated the plaintiff. Of further concern, the minority’s test of “reasonableness” for contractual damages was inherently uncertain, unprincipled and unsupported by authority.