Did you know – The issue of “betterment” is often raised in tort and contract claims for replacement or repair costs.
The theory behind betterment applies in situations where the plaintiff replaces or repairs property destroyed or damaged by the defendant’s tort or breach of contract, and where the replaced or repaired property is improved or is better in some way than the original. The question is then whether the plaintiff’s damages should be reduced to reflect this “betterment”.
The key factor in determining damages in a tortious act against real property is the reasonableness of rebuilding the property. If it was reasonable, then the plaintiffs would be entitled to the full amount of the costs of replacing the real property, without deduction for either pre-loss depreciation or post re-instatement betterment.
Recently, betterment was a focal point in the New South Wales Court of Appeal’s ruling in Walker Group Constructions v Tzaneros Investments [2017] NSWCA 27. In this case, the plaintiff sought damages for defective concrete paving. Despite initial repairs, further rectification was required, leading to the replacement of old slabs with reinforced ones, with the cost claimed from the defendant.
The Court focused on the two circumstances in which an allowance for betterment would be made (as enunciated in Tyco Australia Ltd Pty v Optus Networks Pty Ltd [2004] NSWCA 333), namely:
- When a plaintiff chooses a more valuable asset than necessary, a discount for betterment may be warranted if a cheaper alternative would have sufficed. In the Walker Group Construction-case, the defendant failed to propose a cost-effective alternative for repairing the pavement that met contractual requirements.
- When the plaintiff may have to give credit (concede a benefit was received) if there is a benefit which is not remote in time or speculative and can be quantified. The Court held in the Walker Group Construction-case that as the new pavement had a minimum use time of 20 years, a pavement properly designed to the specification would not be expected to be unusable immediately on the expiration of such a period. The future benefit to be obtained by the proposed pavement was therefore speculative and there was no betterment.
The Court stressed that even if the defendant can prove a real benefit, applying a discount for betterment should be done carefully. Otherwise, it could unfairly force the plaintiff to pay for improvements they didn’t want or can’t afford that ultimately resulted from the defendant’s wrongdoing.
This decision will hopefully provide more certainty around when discounts for betterment apply.
The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.
