BetterLawNotes-5 (2)

CONTRACT LAW

In assessing C’s loss, the court must take account of benefits accruing to C as a result of D’s breach. Consider the facts of Platt v London Underground:

Platt v London Underground Ltd [2001] 2 EGLR 121 (Ch D)

By separate tenancies granted by D, C occupied two retail kiosks at an underground station owned by D. In breach of the terms of the tenancy of the first kiosk, D had kept closed for substantial periods each day one of the entrances/exits to the station thereby reducing the number of prospective customers passing that kiosk. The evidence also indicated that closure of that particular entrance/exit had led to a greater number of prospective customers passing C’s second kiosk than otherwise would have been the case. Neuberger J held that C’s damages for lost profits at the first kiosk had to take account of the additional profits made at its second kiosk.

In Platt the benefit to the claimant accrued as a result of the defendant’s actions. In other cases, the benefit may accrue because of what the claimant herself does. Here the doctrine of mitigation, which we will turn to shortly, may also come into play.

Lavarack v Woods of Colchester Ltd [1967] 1 QB 278 (CA)

Following his dismissal by D, C took a job with another employer, T1, and acquired a 50% shareholding in T1. C also invested £14,000 in another company, T2. C had to give credit for salary earned at T1 as well as for the capital increase in the value of his shareholding in T1. But C did not have to give credit for the increase in the value of his investment in T2.

Fulton Shipping Inc v Globalia Business Travel SAU (the New Flamenco) [2017] UKSC 43

A charterer, in breach of contract, re-delivered the vessel two years before the end of the agreed term. The owner treated the breach as bringing the charterparty to an end. Unable to find a substitute charter, the owner sold the vessel for $23.7m. The owner then claimed damages from the charterer for loss of hire. The arbitrator held that the owner had to give credit for the difference between the sale proceeds and the notional market value the vessel would have had at the end of the charterparty. Popplewell J allowed the owner’s appeal, finding that the sale of the vessel was independent of the charterer’s breach and that account of it need not be taken in assessing damages. The Court of Appeal in turn allowed the charterer’s appeal and restored the decision of the arbitrator. The Supreme Court allowed the owner’s appeal and restored the decision of Popplewell J. The early termination of the charter by the charterers had, at most, provided the occasion for the sale of the vessel and had not been the legal cause of it.

Swynson Ltd v Lowick Rose LLP [2017] UKSC 32

C made three loans to a company, T, relying on a due diligence report prepared for it by D, a firm of accountants. When T failed to repay the loans, C brought a claim against D alleging negligence in the preparation of the report. Before the matter came to trial, T repaid the first two loans, having received money to do so from H, who indirectly owned C. D admitted negligence and causation but argued that it was only liable for loss arising from the making of the third loan. Rose J held that the re-payment of the first two loans was a collateral matter which did not go to reduce the damages for which D was liable. By a majority, the Court of Appeal upheld Rose J’s decision. However, the Supreme Court unanimously allowed D’s appeal: the loss suffered by C from the first two loans had been made good when C received payment from T. The fact that the money used to make re-payments was borrowed from H was no more relevant than if T had borrowed the money from a bank.

Finally, the question of whether the claimant must give credit for a benefit received may arise where the benefit is the very award of damages which the defendant has to pay. Consider the facts of Haysman v Mrs Roger Films.

Haysman v Mrs Roger Films Ltd [2008] EWHC 2494 (QB)

C had agreed to let D use C’s property to shoot various scenes for a film. When accessing the property, D’s vehicles damaged certain parts of C’s driveway. The court rejected D’s argument that C’s damages, based on the cost of re-surfacing the entire driveway, should be reduced to reflect the fact that C would be left with a driveway in better condition than that existing immediately prior to the breach.

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