Gordon J

21.

there is no principled basis for confining the notion of expenditure incurred

"in reliance on the defendant's contractual promise" to expenditure required by the
contract or required to enable the plaintiff to perform their contractual obligations.
The notion that one would incur expenses only if it were reasonable to suppose
that they would at least be recouped applies equally to moneys expended in
reliance on the promised performance as to those expended in performing or
preparing to perform the contract.

54 The references in The Commonwealth v Amann Aviation Pty Ltd to

expenditure in preparation for or in performance of a contract do not confine the
award.88 While such a description sufficed to capture the relevant expenditure in
Amann Aviation, it would not capture the kind of expenditure held to be
recoverable, for example, in McRae v Commonwealth Disposals Commission.89
That expenditure was not required by the contract or incurred in performance of,
or in preparing to perform, any contractual obligation. The plaintiffs' only
contractual obligation was to pay the purchase price; they were not obliged to
salvage the tanker.90 The expenditure was incurred so that the plaintiffs could
acquire and exploit the property they acquired under the contract –
the (non-existent) tanker – or, put differently, so that they could derive benefit from
the contract.

55 However, not all wasted expenses are recoverable. There are necessarily
some limits. As earlier noted, the expenditure must be reasonable.
Reasonableness applies to the nature and extent of the expenditure, not to the
reasonableness of the reliance on the promised performance.91
Reasonable expenditure extends to expenditure that might naturally be incurred in
preparing for, performing, or exploiting the benefit of the contract, or that is or
ought to have been contemplated by the defendant. In other words, it is assessed
by considering whether the expenditure was in the contemplation of the parties.
It is not a form of insurance.92

56 The wrongdoer, however, can seek to establish that the plaintiff should not
recover the wasted expenditure by reference to type and amount of expenditure
(it not being reasonable on one or both of the bases just identified) as well as
adducing evidence of what would have happened, recognising that the latter may
be difficult if not, in some cases, impossible. That is, "[i]t will still be open to a

88 See, eg, (1991) 174 CLR 64 at 126, 135.

89 (1951) 84 CLR 377.

90 McRae (1951) 84 CLR 377 at 381-382, 414-415.

91 McRae (1951) 84 CLR 377 at 413.

92 L Albert (1949) 178 F 2d 182 at 189.