Brown's Bay Resort v Pozzoni
| Jurisdiction | UK Non-devolved |
| Judge | Lord Hodge |
| Judgment Date | 26 April 2016 |
| Date | 26 April 2016 |
| Court | Privy Council |
| Docket Number | Privy Council Appeal no. 0058 of 2015 |
Privy Council
Lord Nueberger; Lord Clarke; Lord Sumption; Lord Carnwath; Lord Hodge
Privy Council Appeal no. 0058 of 2015
David Dorsett, PhD for the appellant.
Owen Roach for the appellant.
Lenworth Johnson for the respondent.
Contract - Breach of Contract — Lease agreement — Liquidated damages — Penalty — Whether there was sufficient evidence to entitle the court to assess respondent's loss of earnings — Interpretation of clause 19 of the contract.
The appellants (“BBR”) are the owners of a tourist resort at Brown's Bay, St Philips, Antigua. On 13 November 2006 BBR granted a two-year lease of part of the resort to the respondent (“Mr. Pozzoni”) from which he was to operate a restaurant and bar known as the Tamarind Bar and Restaurant. The lease was prepared within BBR and not by a lawyer.
The lease allowed Mr. Pozzoni and his customers to use the resort's facilities, which included a swimming pool, tennis courts, a beach and beach facilities, and gave him the use of a proportion of space in both the boutique and office within the resort. The contract ran from 1 November 2006 to 1 November 2008. The annual rent was in equal installments of US$2,000 to be paid in advance over ten months from 1 November in each year and the months of September and October were to be used by BBR and Mr. Pozzoni to carry out maintenance, restoration and repairs. The lease also provided for the equal division of expenses of maintenance, including gardeners, a maid and electricity costs, and the maintenance of the swimming pool. Clause 17 of the lease obliged Mr. Pozzoni to “run the business directly without interruption at an acceptable standard”. The lease thus provided for the parties' shared interest in the smooth and uninterrupted operation of leased premises and also the resort during its ten-month season.
BBR committed a repudiatory breach of contract in September 2007, which Mr. Pozzoni accepted. As a result Mr. Pozzoni did not re-open the restaurant at the start of the 2007–2008 season in November 2007 but instead commenced legal action to recover damages for the breach of contract.
In the course of the trial before Michel J counsel for BBR founded on clause 19 of the lease, which provided:
“Interruption of Contract — Failure to respect every aspect of this contract could result in an interruption of the contract by either the owner or the tenant. If an interruption occurs then the party responsible will pay to the other party a penalty fee of US$4,000.00. Any pending expenses of either the owner or the tenant are to be paid before the contract is terminated.”
Counsel for BBR submitted that this clause operated as a liquidated damages clause and restricted the damages which Mr. Pozzoni could recover to US$4,000.
Michel J, in a judgment dated 7 June 2010 and corrected on 28 June 2010, did not interpret the clause as a pre-estimate of damages following a repudiation but as an agreed penalty to be paid for any interruption of the contract. He therefore held that Mr. Pozzoni was entitled to claim damages unrestricted by clause 19. The Court of Appeal, in a judgment dated 16 September 2014 in which Webster JA (Ag) wrote the leading judgment, agreed that clause 19 did not restrict Mr. Pozzoni's right to claim damages for breach of contract. The Court of Appeal interpreted clause 19 as covering any interruption of the operation of the lease which was followed by its resumption and not the termination of the contract by one party's acceptance of the other's repudiatory breach. The Court of Appeal altered Michel J's award of damages for reasons which are not challenged in this appeal, and awarded damages of EC$92,587.02(or US$34,291.49) comprising (i) EC$52,940.00 for lost earnings from the restaurant business, (ii)EC$38,297.02 for the expense which Mr. Pozzoni...
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