Since the decisions of Peerless Holdings and Regional
Power, a lot of attention has been given to what 'consequential
loss' means. Suppliers have been urged to precisely define
'consequential loss' and not rely on a general
A recent Queensland Supreme Court decision, Vision
Eye, is a timely reminder with a much simpler message: the
first step is to ensure that commercial contracts exclude
Vision Eye also reinforces that without a contract
exclusion, a party may claim lost profits from new technologies
that may come to be used during a contract. This is even if the
parties could not, at the time of entering the contract, precisely
predict the new form of technology that would be developed.
VISION EYE INSTITUTE
In 2006 Dr Kitchen was engaged as an ophthalmologist in eye
clinics ultimately owned by Vision. In 2009, Dr Kitchen wrongfully
terminated the contract. As a result, Vision Eye could no longer
effectively operate two of its clinics and closed them.
The service agreement did not include a consequential loss
In Vision Eye Institute Ltd v Kitchen QSC
66, the Queensland Supreme Court found that Dr Kitchen was
lost profits from the closure of the two clinics; and
additional lost earnings that would have resulted from taking
advantage of a development in medical treatment in 2010.
The court ordered Dr Kitchen to pay over $10 million in damages.
The damages would have been a lot less if Dr Kitchen had ensured
his service agreement excluded liability for certain types of
losses, such as loss of profits, loss of revenue and loss of
INDUSTRY DEVELOPMENTS AS CLAIMABLE LOSS
Vision Eye is very relevant for industries where revenue is
liable to change as a result of innovation and new
With no exclusion clause, the Court found that lost earnings
resulting from industry developments can be factored into a claim
for damages. (So long as it is reasonable for the parties to
contemplate that a breach of the contract would preclude a party
from additional income from new technologies).
You don't have to know the "precise details" of
how an industry will develop at the time you enter a contract in
order to claim damages based on developments that eventuate.
ENSURE YOU ARE PROTECTED
There's no time like the present to ensure that
consequential loss is excluded from your contracts. Given the
Peerless and Regional Power cases, suppliers should define exactly
what losses are excluded, rather than using terms such as
"consequential loss", "indirect loss" or
If your business is susceptible to new developments and
technologies which affect future revenue, pay particular attention
to the types of losses that could arise from a breach of contract
and ensure this risk is addressed.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Do not depart from the contract terms, or encourage the other party to do so, unless you plan to alter the contract.
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