The Court was asked in what circumstances can damages for breach of contract be assessed by reference to the sum that the claimant could hypothetically have received in return for releasing the defendant from the obligation which he failed to perform?
Held: The appeal was allowed. In such situations, an imagined negotiation to assess the loss was allowed. The loss to be compensated equated to the economic value of the right breached, if treated as an asset. The negotiation imagined to assess such ‘negotiating damages’ was a way of getting to the value and was not incompatible with the compensatory purpose of awarding contractual damages. The underlying question was as to the circumstances where that value did measure the claimant’s loss.
The court concluded that: ‘(1) Damages assessed by reference to the value of the use wrongfully made of property (sometimes termed ‘user damages’) are readily awarded at common law for the invasion of rights to tangible moveable or immoveable property (by detinue, conversion or trespass). The rationale of such awards is that the person who makes wrongful use of property, where its use is commercially valuable, prevents the owner from exercising a valuable right to control its use, and should therefore compensate him for the loss of the value of the exercise of that right. He takes something for nothing, for which the owner was entitled to require payment.
(2) Damages are also available on a similar basis for patent infringement and breaches of other intellectual property rights.
(3) Damages can be awarded under Lord Cairns’ Act in substitution for specific performance or an injunction, where the court had jurisdiction to entertain an application for such relief at the time when the proceedings were commenced. Such damages are a monetary substitute for what is lost by the withholding of such relief.
(4) One possible method of quantifying damages under this head is on the basis of the economic value of the right which the court has declined to enforce, and which it has consequently rendered worthless. Such a valuation can be arrived at by reference to the amount which the claimant might reasonably have demanded as a quid pro quo for the relaxation of the obligation in question. The rationale is that, since the withholding of specific relief has the same practical effect as requiring the claimant to permit the infringement of his rights, his loss can be measured by reference to the economic value of such permission.
(5) That is not, however, the only approach to assessing damages under Lord Cairns’ Act. It is for the court to judge what method of quantification, in the circumstances of the case before it, will give a fair equivalent for what is lost by the refusal of the injunction.
(6) Common law damages for breach of contract are intended to compensate the claimant for loss or damage resulting from the non-performance of the obligation in question. They are therefore normally based on the difference between the effect of performance and non-performance upon the claimant’s situation.
(7) Where damages are sought at common law for breach of contract, it is for the claimant to establish that a loss has been incurred, in the sense that he is in a less favourable situation, either economically or in some other respect, than he would have been in if the contract had been performed.
(8) Where the breach of a contractual obligation has caused the claimant to suffer economic loss, that loss should be measured or estimated as accurately and reliably as the nature of the case permits. The law is tolerant of imprecision where the loss is incapable of precise measurement, and there are also a variety of legal principles which can assist the claimant in cases where there is a paucity of evidence.
(9) Where the claimant’s interest in the performance of a contract is purely economic, and he cannot establish that any economic loss has resulted from its breach, the normal inference is that he has not suffered any loss. In that event, he cannot be awarded more than nominal damages.
(10) Negotiating damages can be awarded for breach of contract where the loss suffered by the claimant is appropriately measured by reference to the economic value of the right which has been breached, considered as an asset. That may be the position where the breach of contract results in the loss of a valuable asset created or protected by the right which was infringed. The rationale is that the claimant has in substance been deprived of a valuable asset, and his loss can therefore be measured by determining the economic value of the right in question, considered as an asset. The defendant has taken something for nothing, for which the claimant was entitled to require payment.
(11) Common law damages for breach of contract cannot be awarded merely for the purpose of depriving the defendant of profits made as a result of the breach, other than in exceptional circumstances, following Attorney General v Blake.
(12) Common law damages for breach of contract are not a matter of discretion. They are claimed as of right, and they are awarded or refused on the basis of legal principle’
Lady Hale, President, Lord Wilson, Lord Sumption, Lord Reed, Lord Carnwath
[2018] UKSC 20, [2018] IRLR 661, [2018] 2 All ER (Comm) 769, [2018] 3 All ER 659, [2018] 1 Lloyds Rep 495, [2018] 2 WLR 135, UKSC 2016/0086, [2018] WLR(D) 260
Bailii, Bailii Summary, SC, SC Summary, SC Video Summary, SC 2017 Oct 11 amVideo, SC 2017 Oct 11 pm Video, SC 2017 Ot 12 am Video, WLRD, WLRD
Chancery Amendment Act 1858 2, Senior Courts Act 1981 50
England and Wales
Citing:
At QBD – One Step (Support) Ltd v Morris-Garner and Another QBD 7-Jul-2014
The defendant had sold her interest in the claimant company, undertaking not to compete. The claimant now sought damages alleging a breach.
Held: The defendants had acted in breach of contract by breaching the non-compete covenants (although . .
Appeal from (CA) – Morris-Garner and Another v One Step (Support) Ltd CA 22-Mar-2016
Alleged breach of non-solicitation covenants in the sale of a business providing ‘supported living’ services for children leaving care and vulnerable adults.
Held: The defendant’s appeal was dismissed.
The test was whether an award of . .
Cited – Wrotham Park Estate Ltd v Parkside Homes Ltd ChD 1974
55 houses had been built by the defendant, knowingly in breach of a restrictive covenant, imposed for the benefit of an estate, and in the face of objections by the claimant.
Held: The restrictive covenant not to develop other than in . .
Cited – HM Attorney General v Blake (Jonathan Cape Ltd third Party intervening) HL 3-Aug-2000
Restitutionary Claim against Pofits from Breach
The author had written his book in breach of his duty of confidence. Having signed the Official Secrets Act, he accepted a contractual private law duty. After conviction as a spy, the publication of the book was in breach of the undertaking by not . .
Cited – Liverpool and Lancashire Properties Limited and Another v Lunn Poly Ltd and Another CA 15-Mar-2006
Where a tenant successfully obtained relief from forfeiture, and compensatory damages were payable under the 1858 Act in lieu of an injunction, and had assigned the lease for a profit the court could exceptionally use its equitable jurisdiction to . .
Cited – Pell Frischmann Engineering Ltd v Bow Valley Iran Ltd and Others PC 26-Nov-2009
(From the Court of Appeal of Jersey) Lord Walker reviewed the principles in awarding damages under Lord Cairns Act, setting out five general principles established by the authorities. They included: ‘1. Damages (often termed ‘user damage’) are . .
Cited – Livingstone v Rawyards Coal Co HL 13-Feb-1880
Damages or removal of coal under land
User damages were awarded for the unauthorised removal of coal from beneath the appellant’s land, even though the site was too small for the appellant to have mined the coal himself. The appellant was also awarded damages for the damage done to the . .
Cited – Experience Hendrix LLC v PPX Enterprises Inc and Another CA 20-Mar-2003
The claimant had obtained an interim injunction against the defendant for copyright infringement, though it could show no losses. It now sought additionally damages. The defendant argued that it could not have both.
Held: The case arose form . .
Cited – Strand Electric and Engineering Co Ltd v Berisford Entertainments Ltd 1952
The court assessed the amount of damages for the wrongful refusal to deliver up portable switchboards which the owner would not have used anyway (detinue). The measure was a sum equivalent to the price or hire that a reasonable person would pay for . .
Cited – Whitwham v Westminster Brymbo Coal and Coke Co CA 24-Jun-1896
Common law damages for the misuse of property involved an award of a sum equivalent to the price or hire that a reasonable person would pay for such use, even if the owner would not himself actually have been using the property. This case involved . .
Cited – Watson Laidlaw and Co v Pott Cassels and Williamson HL 26-Jun-1911
A patent was obtained for ‘improvements in centrifugal machines.’ It dealt with a means of supporting while preventing the oscillation of the spindle to which the basket rotated is attached, and the means employed was, in typical form, a hollow . .
Cited – The Owners of the Steamship Mediana v The Owners, Master and Crew of the Lightship Comet HL 1900
A lightship was damaged by negligence. The plaintiff harbour board kept a ship ready for emergencies, and consequently the damaged ship was replaced with the spare while she was being repaired. The question was whether the claimant could recover . .
Cited – Meters Limited v Metropolitan Gas Meters Limited ChD 1910
The plaintiffs had claimed and proved infringement of patents relating to improvements in gas meters. The Master had assessed damages in the inquiry in relation to the plaintiffs’ loss of profits in relation to entire meters. The defendants now . .
Cited – Stoke-on-Trent City Council v W and J Wass Ltd CA 1988
The council had operated open markets on its land under statutory authority. In breach of the statute, the defendant operated a market on a different day, but within the excluded area. This was a nuisance actionable on proof of damage. The council . .
Cited – Meters Limited v Metropolitan Gas Meters Limited CA 1911
The defendant having been found to have infringed the defendants patents, now appealed against the method of calculation of damages.
Held: The appeal failed. Fletcher Moulton LJ emphasised the discretion given to a judge, and said: ‘But I am . .
Cited – Robinson v Harman 18-Jan-1848
Damages for breach of contract should compensate the victim of the breach for the loss of his contractual bargain. Baron Parke said: ‘The next question is: What damages is the plaintiff entitled to recover? The rule of the common law is, that where . .
Cited – British Westinghouse Electric and Manufacturing Co v Underground Electric Railways Co (London) Limited HL 1912
The plaintiffs purchased eight steam turbines from the defendants. They later proved defective, and the plaintiffs sought damages. In the meantime they purchased replacements, more effective than the original specifications. In the result the . .
Cited – Golden Strait Corporation v Nippon Yusen Kubishka Kaisha (‘The Golden Victory’) HL 28-Mar-2007
The claimant sought damages for repudiation of a charterparty. The charterpary had been intended to continue until 2005. The charterer repudiated the contract and that repudiation was accepted, but before the arbitrator could set his award, the Iraq . .
Cited – Bunge Sa v Nidera Bv SC 1-Jul-2015
The court considered the effect of the default clause in a standard form of contract which is widely used in the grain trade. On 10 June 2010 the respondents, Nidera BV, whom I shall call ‘the buyers’, entered into a contract with the appellants, . .
Cited – Photo Production Ltd v Securicor Transport Ltd HL 14-Feb-1980
Interpretation of Exclusion Clauses
The plaintiffs had contracted with the defendants for the provision of a night patrol service for their factory. The perils the parties had in mind were fire and theft. A patrol man deliberately lit a fire which burned down the factory. It was an . .
Cited – Ruxley Electronics and Construction Ltd v Forsyth HL 29-Jun-1995
Damages on Construction not as Agreed
The appellant had contracted to build a swimming pool for the respondent, but, after agreeing to alter the specification to construct it to a certain depth, in fact built it to the original lesser depth, Damages had been awarded to the house owner . .
Cited – Parabola Investments Ltd and Others v Browallia Cal Ltd and Others CA 5-May-2010
The second defendant appealed against the level of damages awarded against him after he was found guilty of a fraud on the claimant, saying that the loss of profits element was unproven.
Held: The appeal failed. Where a claimant’s investment . .
Cited – Jaggard v Sawyer and Another CA 18-Jul-1994
Recovery of damages after Refusal of Injunction
The plaintiff appealed against the award of damages instead of an injunction aftter the County court had found the defendant to have trespassed on his land by a new building making use of a private right of way.
Held: The appeal failed.
Cited – Surrey County Council and Mole District Council v Bredero Homes Ltd ChD 1992
Land was agreed to be sold for development in accordance with an existing planning permission. Instead a later permission was obtained, and more houses were built. The plaintiff had not sought to restrain or prevent the breach, but now sought . .
Cited – Leeds Industrial Co-operative Society Ltd v Slack HL 1924
The plaintiff complained of a threatened interference with ancient lights.
Held: Damages may be awarded in lieu of an injunction even where the injunction sought is a quia timet injunction, but that power imports a further power to give an . .
Cited – Battishill v Reed and Another 28-May-1856
Action for disturbance of certain alleged rights of the plaintiff.. . .
Cited – Marathon Asset Management Llp and Another v Seddon and Others ComC 22-Feb-2017
. .
Cited – WWF (World Wide Fund for Nature) and Another v World Wrestling Federation Entertainment Inc CA 2-Apr-2007
The parties had disputed use of the initals WWF, with a compromise reached in 1994 allowing primary use by the Fund with restricted use by the Federation. The Federation now appealed an award of damages made after a finding of a breach of the . .
Cited – CF Partners (UK) Llp v Barclays Bank Plc and Another ChD 24-Sep-2014
CFP sought compensation for the alleged breach of an exclusivity agreement, and the misuse of confidential information, in the context of the pursuit and acquisition by the first defendant, Barclays Bank PLC of the second defendant, a body . .
Cited – Milner and Another v Carnival Plc (T/A Cunard) CA 20-Apr-2010
Damages for Disastrous Cruise
The claimants had gone on a cruise organised by the defendants. It was described by them as ‘the trip of a lifetime.’ It did not meet their expectations. There had been several complaints, including that the cabin was noisy as the floor flexed with . .
Cited – Vercoe and Others v Rutland Fund Management Ltd and Others ChD 5-Mar-2010
Claim in respect of a management buy-in transaction in relation to a company which carried on business as a pawnbroker. . .
Cited – Devenish Nutrition Ltd v Sanofi-Aventis Sa (France) and others CA 14-Oct-2008
The defendant had been involved in price fixing arrangements, and the claimant sought damages for breach of its proprietary rights. The claimant appealed refusal of an award an account of profits for what was akin to a breach of statutory duty.
Cited by:
Cited – Prudential Assurance Company Ltd v Revenue and Customs SC 25-Jul-2018
PAC sought to recover excess advance corporation tax paid under a UK system contrary to EU law. It was now agreed that some was repayable but now the quantum. Five issues separated the parties.
Issue I: does EU law require the tax credit to be . .
Lists of cited by and citing cases may be incomplete.
Updated: 10 August 2021; Ref: scu.608734
