What Australian disputing parties should know about the facilitation principle and proof of loss

Courts and tribunals may take a more flexible approach to proof of loss in limited circumstances, though this does not displace the need to produce robust project records and contemporaneous documents.

The facilitation principle may assist claimants facing genuine difficulties in quantifying loss caused by a respondent's breach. Crucially, however, the principle is only available where the difficulty in proving or measuring loss results from the respondent's conduct. It will not assist a claimant that has simply failed to produce evidence that was available to it. In other words, it provides claimants with a ‘fair wind’ but not a ‘free ride’.

The 2024 High Court of Australia case of Cessnock City Council v 123 259 932 Pty Ltd (91 pages/ 561 KB PDF) illustrates both the opportunities and limits of the principle and provides important lessons for parties preparing and defending claims. Since the Cessnock case, more claimants in complex construction disputes have sought to evoke the facilitation principle.

The principle is particularly significant because it may prevent a respondent from avoiding liability for proven loss simply because its own breach has made the claimant's loss difficult to measure. Where evidential uncertainty is a consequence of the respondent's conduct, courts and arbitral tribunals may be prepared to draw inferences in favour of a claimant.

A more flexible approach to proving loss

Proving the quantum of loss arising from a breach of contract is often one of the most challenging aspects of construction disputes. This is particularly true in claims involving disruption, inefficiency and lost productivity, where assessing damages requires a court or tribunal to determine what would have happened had the contract been properly performed.

Rather than allowing a party to benefit from uncertainty that its own conduct has created, the facilitation principle permits courts and tribunals, in appropriate circumstances, to adopt a more robust approach to assessing damages and drawing inferences about loss.

Importantly, the principle does not alter the claiming party’s burden of proof. It remains necessary to establish breach, causation and loss. However, where conduct has materially contributed to the difficulties in proving or quantifying loss, courts and tribunals may be more willing to resolve uncertainty through inference and evaluation.

The principle in practice

The dispute in the Cessnock case arose from an agreement under which Cessnock City Council was obliged to take steps to secure registration of a subdivision plan for land at Cessnock Airport. In reliance on that agreement, the developer invested almost A$3.7 million (approximately US$2.7 million) constructing a hangar at the airport.

The developer subsequently faced substantial difficulty in establishing the position it would have been in, had the council performed its obligations. Future development of the airport and surrounding land was uncertain, making precise proof of consequential loss challenging.

The High Court – Australia’s highest court – found that the council's breach had contributed to the evidential uncertainty facing the developer. In those circumstances, it was appropriate to draw inferences that facilitated proof of loss. The court accepted that expenditure reasonably incurred, but rendered wasted by the breach, could be treated as expenditure likely to have been recouped had the contract been performed.

In doing so, the court confirmed an important principle: a defendant should not necessarily be able to avoid liability merely because its own conduct has created uncertainty about the extent of the claiming party’s loss.

Practical lessons for businesses

The facilitation principle may be particularly relevant in major construction and infrastructure projects, where disruption and loss of productivity claims often span multiple work fronts; involve numerous contractors, subcontractors and suppliers; and develop over extended periods. Workforce turnover and the passage of time can further complicate the task of reconstructing events and tracing the effects of a particular breach through interconnected project milestones. Even where substantial project records exist, establishing causation and quantifying loss with precision may be difficult. Where those difficulties are materially attributable to the respondent's conduct, courts and tribunals may be prepared to draw appropriate inferences when assessing loss.

For respondents, the principle highlights a broader litigation risk. Even where projects are affected by poor record-keeping, contract administration issues or complex causation questions, courts and tribunals may be prepared to draw inferences in favour of a claimant if the respondent's conduct has materially contributed to the difficulty of proving loss. Equally, parties defending claims should seek to demonstrate that any gaps in the evidentiary record stem from the claimant's own failures rather than the alleged breach. The facilitation principle does not excuse a failure to prove what could have been proved.

Comprehensive record-keeping therefore remains fundamental. Even where disruption itself affects a party's ability to maintain complete records, courts and tribunals will still expect contemporaneous cost records, labour and resource tracking, and evidence linking alleged inefficiencies to identifiable causes. The facilitation principle may assist where conduct has created genuine evidential uncertainty, but it cannot cure deficiencies in evidence that should have been available in the first place.

Co-written by Aamina Sultanbawa and Kylie Tan of Pinsent Masons.