White Arrow Express Ltd and Others v Lamey's Distribution Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE ROSE,LORD JUSTICE MORRITT |
| Judgment Date | 15 June 1995 |
| Judgment citation (vLex) | [1995] EWCA Civ J0615-8 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | QBENF 94/0384/C |
| Date | 15 June 1995 |
[1995] EWCA Civ J0615-8
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Before: The Master of the Rolls Lord Justice Rose Lord Justice Morritt
QBENF 94/0384/C
MR. G. TATTERSALL QC, MR. S. STEWART AND MISS S. KEWLEY (15th June 1995) appeared on behalf of the Appellants. (Instructed by Messrs. Jacobsens, The Strand, London.)
MR. N. INGLIS-JONES QC AND MR. D. WESTCOTT appeared on behalf of the Respondents. (Instructed by Messrs. Toller Beattie, Barnstaple.)
15th June 1995
This appeal raises a short but elusive issue on the recovery of damages for breach of contract. It arises from the determination of His Honour Judge Kershaw QC, sitting as the mercantile judge in Manchester, of a preliminary issue of law.
The issue of law was:
"On the assumption that
(a) paragraphs 1,2,3 and 4 of the Re-re-amended Statement of Claim (including all the sub-paragraphs thereof) are true; and
(b) the Defendants acted in breach of the agreement in that they failed to operate the agreed criteria for deliveries and collections as particularised in the report appended to the Re-re-amended Statement of Claim are the Plaintiffs entitled to recover damages other than nominal damages from the Defendants under paragraph 5.2 thereof ?"
The answer given by the judge was:
"The Plaintiffs are not entitled to recover damages other than nominal damages from the Defendant under paragraph 5.2 of the Re-re-amended Statement of Claim."
Against that ruling the plaintiffs appeal.
The second and third plaintiffs (who alone are relevant) carry on a mail order business: that is, they issue catalogues offering goods for sale and solicit written orders directly from members of the public and through agents. When ordered, goods have to be collected from the supplier and delivered to the customer or agent. When, from time to time, goods are for any reason rejected by the customer or agent they have to be collected from the customer or agent and returned to the supplier.
The defendants are road transport contractors who have for some years delivered and collected goods sold by the plaintiffs. In the spring of 1989 the plaintiffs and the defendants made a new agreement. It was to run from 6 March 1989. Rates were agreed (to remain in force for a year) for all deliveries, abortive deliveries, collections and abortive collections. Detailed terms were agreed concerning the giving of notice to customers before delivery; the making of certain deliveries to rooms chosen by the customer; the attempts to be made to deliver before aborting the delivery; the inspection of goods by customers; the removal of packaging from customers' premises; the dress of delivery crews; the giving of notice to customers before collection; the recording of collection; the responsibility for and handling of claims; the collection of goods from suppliers; and the duty of the defendants to take care of goods and not to deliver apparently defective goods.
These, in summary and so far as relevant to the preliminary issue, are the facts pleaded in paragraphs 1 to 4 inclusive of the re-re-amended statement of claim and assumed to be true. The preliminary issue further assumes (as alleged in paragraph 5.2 of the pleading) that the defendants acted in breach of the 1989 agreement by failing to operate the agreed criteria for deliveries and collections as particularised in a report dated 19 September 1991 commissioned by the plaintiffs and entitled "Evidence Relating to Our Claim Against Lameys Distribution Ltd".
The breaches complained of related to pre-advice of deliveries and the timing of deliveries and collections. As a result of these breaches the plaintiffs claimed that they had suffered loss and damage "as set out in subparagraph 7.4 of the Report".
Sub-paragraph 7.4 of the report set out three alternative bases of claim by each of the second and third plaintiffs. These figures were reproduced in the pleading as the particulars of the plaintiffs' claim for damages, which is alone the subject of the preliminary issue. The plaintiffs had paid the contract price in full. They were claiming damages because the service contracted for had not, in part, been provided.
In the report it was expressly accepted that the defendants had provided "a basic level of service":
"What is claimed is that the additional requirements constituting the enhanced service were not met. The carriage rates paid included a price increase to reflect the extra costs of the enhancements, therefore, to the extent that Lameys failed to provide the additional service elements, we have a claim against them that they are not entitled to some of the costs invoiced."
The plaintiffs' complaint was not, therefore, that the defendants had not performed the basic terms of the contract but that they had failed to comply with certain "enhanced" terms which they had, for additional (although unspecified) consideration, undertaken to observe.
The basis of the plaintiffs' claim is made clear in the report:
"A two stage approach has been taken to deriving a total claim value. First the overall failure rate is established in the form of a single percentage. Second, the total amount of additional carriage cost due as a result of the enhancements to the service is calculated in £. Finally, the failure rate is applied to the cost of enhancements to derive the total value of the carriage service paid for but not received from Lameys."
Thus the plaintiffs' claim is not based on any damage to or loss of goods; nor on any complaints or claims by customers, agents or suppliers; nor on any damage to or loss of goodwill; nor on any quasi-contractual or restitutionary principle. The plaintiffs' claim simply is that they agreed and paid for an enhanced level of service; that to an extent quantified in the report they did not receive that level of service; that to that extent they paid for a service they did not get and so to that extent paid money for nothing; and that they have accordingly suffered damage to the extent of such overpayment. So the question arises whether, on this basis, the plaintiffs are in principle entitled to recover only nominal damages (as the judge held) or (as the plaintiffs argue) more than nominal damages.
Both sides based their argument on a ground of pure contractual principle. The plaintiffs argued that if a party contracted and paid for a benefit which, because of the other party's breach, it did not receive, then it had suffered a loss for which a claim in damages would lie. The quantum of that claim might be the subject of dispute, but more than nominal damages would in principle be recoverable. Reliance was placed on McGregor on Damages, 15th edition, paragraph 26:
"Instead, another scheme of analysis is adopted. In tort, where non-pecuniary losses tend to predominate, the pattern generally used is simply to consider separately the various heads of damage. But in contract, where pecuniary losses are nearly ubiquitous, and in torts concerning property which in this respect are similar to contract, another distinction is taken and built upon. This is the useful and important division between normal and consequential losses. The normal loss is that loss which every plaintiff in a like situation will suffer, the consequential loss is that loss which is special to the circumstances of the particular plaintiff. In contract the normal loss can generally be stated as the market value of the property, money or services that the plaintiff should have received under the contract less either the market value of what he does receive or the market value of what he would have transferred but for the breach. Consequential losses are anything beyond this normal measure, such as profits lost or expenses incurred through the breach, and are recoverable if not too remote. The distinction is not the same as that between the first and the second rules in Hadley v. Baxendale: a consequential loss may well be within the first rule….."
Reliance was also placed on Chitty on Contracts, 27th edition, volume 1, paragraph 26-010:
"…usually, however, damages are assessed as the difference between the market value of the defendant's performance in its defective or incomplete state, and the market value of the performance if it had been properly completed….."
The plaintiffs' central point was essentially that made by Lord Templeman in Miles v Wakefield Metropolitan District Council [1987] AC 539 at 560 E:
"A man who pays something for nothing truly incurs a loss. The value of the lost services cannot be less than the value attributable to the lost hours of work."
The defendants relied on the familiar principle that a party seeking to recover damages for breach of contract must allege and prove that he has suffered damage as a result of the breach complained of. As stated in McGregor on Damages at paragraph 39, under the heading "Defective performance",
"…In the case of an ordinary service contract, however, there is no clear basic loss: perhaps most loss will be consequential….."
The defendants referred to Sunley & Co Ltd v Cunard White Star Limited [1940] 1 KB 740. In that case shipowners, in breach of contract, delayed delivery of a bulldozer for one week. The plaintiff contractors claimed damages of £577, but failed to prove any facts on which their damages could be estimated. The judge's unparticularised award of £250 was set aside, and judgment was entered for £14, the...
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