Recent cases on difficult issues in the law of damages

The law of damages might at times seem the "poor cousin" of commercial litigation, with both litigants and courts focusing much more time and attention on the principles relating to liability. However, two recent judgments show that the assessment of damages can give rise to issues that are every bit as interesting, and problematic, as the question of liability.

In Giedo van der Garde BV v Force India Formula One Team Ltd [2010] EWHC 2373, the High Court awarded damages of US$1,865,000 for the defendant's breach of contract in permitting the claimant to test drive its Formula One cars for only some 2,000 km out of the 6,000 km contracted for (at a price of US$3 million). There were obvious difficulties in establishing loss on the conventional basis, in that it was not clear what financial benefits the claimant would have obtained had the contract been properly performed. In a 200-page judgment, the court considered in great detail the law relating to various alternative remedies, concluding:

• The court could not order restitution of sums paid on grounds of a total failure of consideration. In some circumstances it would be possible to apportion the services provided on a dollar per km basis, so that the claimant could claim restitution of sums paid in respect of the 4,000 km withheld. In this case, however, the fact that the contract involved provision of other rights made it impossible to apportion the contract price in this way.
• However, the court accepted the claimant's alternative claim for damages representing the value of the defendant's services that were wrongfully withheld. This approach was supported by analogy with the law on damages for non-delivery of goods, as well as various authorities in the employment context where an employer was awarded damages representing the value of work wrongfully withheld by an employee without proving that it would have made additional profits if the work had been carried out.
• In the alternative, the court would have awarded the same sum as "Wrotham Park" damages, representing a reasonable payment for the release of its obligation to provide the relevant services. Such an award was not, in the court's view, precluded by the fact that this case did not involve various features which are normally associated with Wrotham Park damages, namely a claim for an injunction, breach of a restrictive covenant, or the invasion of property rights.
• As a further alternative, the court would have awarded damages based on the claimant's lost chance of obtaining a paid Formula One race seat if the further kilometres had been provided. Applying a "broad brush" approach and exercising caution in light of the large number of "imponderables", the court would have awarded US$100,000 to compensate for this lost chance.

This judgment is significant in that it appears to extend the scope for alternative remedies in a claim for breach of contract where the claimant is unable to establish loss on a traditional basis. The claimant's application for permission to appeal to the Court of Appeal is expected to be heard in December. This will be an interesting case to watch.

Another recent judgment, this time of the Court of Appeal, has arguably brought the law of damages a step back toward the orthodox position, in suggesting that the courts should not be too ready to apply the "loss of a chance" approach to assessing damages in a commercial case. The decision in Law Debenture Trust Corporation PLC v Elektrim SA [2010] EWCA Civ 1142 establishes that, where a claimant's loss depends on the valuation of a concrete asset, the court will do its best to estimate that value rather than deciding it is a matter of chance (see post). The overall result is likely to be to rein in large claims based on a small chance of achieving an extreme result.