The mere fact that the defendant’s breach of his contract with the plaintiff has enabled him to enter into a more profitable contract with someone else should also not be sufficient to justify departing from the normal rules for calculation of damages.
A advanced pounds 15,000 to B, to be used in B’s business for a period of five years, receiving in return, besides interest, three-eighths of the profits. It was agreed that B’s books should be audited annually by a particular firm of accountants, whose certificates as to the amount of profits were to be binding on both parties. Notice of this agreement and of its terms was given by A to one of the partners of the firm of auditors, but they were not communicated by him to the partner who actually conducted the audit. While aware that A had an interest in the profits, the latter did not know the terms of the agreement, and in particular did not know that his audit was intended to bind the parties.
In an action for a judicial accounting at A’s instance, the Court of Session ( aff. the judgment of Lord Low- diss. Lord Adam) held, as the result of a proof, that it would have made no substantial difference in the result of the audit had the auditor been aware of the agreement, and refused the accounting. Judgment reversed in the House of Lords on the ground (1) that there had been mutual error as regards the auditor’s knowledge of the agreement, and that in the absence of such knowledge the audit could not he regarded as binding; and (2) that it was not substantiated by the evidence that the want of this knowledge did not affect the audit.
A advanced to B pounds 15,000, to be used in B’s business of timber merchant for a period of five years, receiving in return 5 per cent. interest and three-eighths of the annual profits. The agreement did not provide that A should become a partner of the business, but it was agreed that B should always keep a like sum of pounds 15,000 of his own in the business. In breach of the latter engagement B withdrew from time to time from the business part of this sum of pounds 15,000, and used it in a distillery business where large profits were earned.
In an action of damages for breach of contract, at A’s instance, he maintained that the damages ought to be assessed at the amount made by the diverted capital in the distillery, on the ground that the defender must be treated as a trustee for or a partner of the pursuer.
Held that this method of assessment was inapplicable, and that the appropriate method was to assess the damages by ascertaining the extra profit which might have been made in the timber business with the aid of the diverted capital.
Judgment affirmed in the House of Lords.
Lord Watson (in the Chair) and Lords Shand and Davey
[1899] AC 451, [1899] UKHL 1, (1899) 7 SLT 153, (1899) 1 F (HL) 39, [1899] UKHL 949, 36 SLR 949
Bailii, Bailii
Scotland
Citing:
Appeal From – Teacher v Calder SCS 25-Feb-1898
An agreement was entered into between T and C, whereby, as interest for an advance made by T for the purpose of carrying on and extending the business of C’s firm, he was to receive a certain percentage of the profits of the business. It was . .
Lists of cited by and citing cases may be incomplete.
Damages, Contract
Updated: 10 January 2022; Ref: scu.631841