Wasted Expenditure

Another alternative to an award of damages based on the expectation measure is one based on expenditure which C has incurred but which is wasted as a result of D’s breach.

Mason v Burningham [1949] 2 KB 545

The buyer of a second-hand typewriter had paid to have the machine overhauled but then had to deliver up the machine to the true owner as the seller had had no title to pass on. The court held that the buyer could recover from the seller the cost of having the machine overhauled, as well as the price.

Similarly, in McRae v Commonwealth Disposals Commission (1950) 84 CLR 377 (HCA) it was held that C could recover the £285 it had paid for the salvage rights to the vessel together with the wasted cost, of £3,000, of mounting the salvage operation.

Mason and McRae can be contrasted with C & P Haulage v Middleton.

 

C & P Haulage v Middleton [1983] 1 WLR 1461

In that case, C rented a garage from D on a six-month tenancy. C had incurred expenditure installing equipment in the garage. Under the terms of the tenancy, the equipment was deemed to form part of D’s property on the expiry of the term. With 10 weeks of the tenancy remaining, D repudiated the agreement. C claimed as damages the cost of the equipment. The court rejected C’s claim.

‘It is not the function of the courts where there is a breach of contract knowingly, as this would be the case, to put a plaintiff in a better financial position than if the contract had been properly performed.’ (Ackner LJ)

The awards in Mason and McRae appear to take no account of the position in which C would have been had the contract been performed. Instead, the damages seem to place C back into its pre-contractual position. But this will not always be the outcome of an award of damages for wasted expenditure.

Anglia Television v Reed [1972] 1 QB 60

C engaged D to star in a film but D repudiated the contract shortly before filming was due to commence. C abandoned the film as it was unable to find a replacement for D. C could not show what profit it would have made from the film had it been made. The Court of Appeal held that C could recover its wasted expenditure.

The basis of the awards in these cases was considered in some depth by Teare J in his judgment in Omak v Mamola.

Omak Maritime Ltd v Mamola Challenger Shipping Co [2010] EWHC 2026 (Comm)

C agreed to charter its vessel to D for five years at daily hire of $13,700 but D repudiated the charter within a matter of weeks. Having accepted the repudiation as bringing the charterparty to an end, C secured alternative employment for the vessel at rates substantially higher rates, such that it earned or stood to earn an extra $7,500 per day for the balance of the original five-year term. In its action against D, C claimed as damages a sum in excess of $675,000 being the expenditure incurred in undertaking certain modifications to the vessel prior to delivery, expenditure it claimed was wasted as result of D’s repudiation. The arbitral tribunal held that, notwithstanding that C had not suffered any net loss, it was entitled to damages for its wasted expenditure, which it assessed at $85,000.

Teare J allowed D’s appeal. Any award of damages had to take account of the additional hire earned by C. To award as damages C’s wasted expenditure without taking account of the additional hire received after termination would place it in a better position than if the contract had been performed.

Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] EWHC 111 (QB)

D granted to C exclusive rights to sell certain Manchester United-branded fragrances in certain, mostly duty-free, markets around the world. A little over a year later, C terminated the agreement in response to what it said was D’s repudiation of the contract. Leggatt J held that D was in breach of two implied terms, namely (i) that D would not knowingly provide C with false information on which C was likely to rely, and (ii) that D would not approve a retail price for a product lower than the duty-free price agreed with C. Leggatt J further held that C could recover in damages its net expenditure incurred in performing the agreement.

You cannot copy content of this page