Consequential Loss: NSW Court Of Appeal Agrees With Peerless

The NSW Court of Appeal's decision in Allianz v Waterbrook [2009] NSWCA 224 has confirmed the Victorian Court of Appeal's decision in Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd [2008] VSCA 26 (Peerless) as to the interpretation of "consequential loss" provisions in contracts. The decision confirms that "consequential loss" should be given its "ordinary and natural" meaning. Prior to this decision, there had been considerable debate in legal circles as to whether New South Wales courts would follow the Victorian courts lead on this issue.

Consequential loss before Peerless

The term "consequential loss" has no precise meaning. Before Peerless, it was generally considered to cover the type of loss encompassed in the second limb of Hadley v Baxendale; 1854 9Exch 341 that is, loss which the parties, at the time they made the contract, contemplated as being the indirect result of a breach of contract.