Debenhams Ottaway successfully defend Fairgate in £1.5m Technology and Construction Court trial

In Redbourn Group Limited v Fairgate Developments Ltd [2018] EWHC 658 (TCC), Mr Andrew Bartlett QC has held that a claim for loss of a chance, amounting to up to £1.5m, failed in its entirety. Debenhams Ottaway acted for the successful Defendant, the judgement was handed down earlier today.

Key points

Although the outcome of “loss of a chance” cases are, by their nature, fact-specific, this decision serves as a reminder that the Court must ask itself first whether there was, in fact, any chance of a benefit accruing to the claimant in the future under the contract.

Defendants in such cases should provide comprehensive evidence to overturn the burden set out in Armory v Delamirie [1722] EWHC 94, namely that there is a “fair wind” that blows in favour of a claimant where information about the chance that has been lost is lacking as a result of a defendant’s actions.

Claimants seeking to pursue a claim for repudiation of a contract should be alive to when to draw a line under their claim, rather than pursuing a loss of a chance case directed towards payments that go above and beyond the sums immediately due to them under the repudiated contract.

Contracting parties should be aware of the termination provisions in their contracts, so as to identify the extent of their contractual obligations and any points at which they, or any other party, is entitled to walk away from the relationship.

Background

The claim originated from a development agreement between Redbourn Group Ltd (the developer) (“Redbourn”) and Fairgate Developments Ltd (the site owner) (“Fairgate”), relating to a site intended for residential development in Wembley. The relationship between the parties soured, leading to Fairgate terminating the contract. In August 2017, Coulson J gave judgment for the Claimant relating to various sums of money due to them for work performed under the development agreement where the contractual trigger event had, in his view, already been met. However, a number of issues relating to causation of loss and quantum were left undecided. In particular the Claimant’s claim for loss of a chance to earn lucrative professional fees in respect of the planning and construction phases of the project (where build costs was estimated to be anything from £50m to £85m).

Redbourn contended that, if the development agreement had not been terminated, grant of planning consent at the site would have been inevitable, and this would have triggered payment of further specified sums under the contract. In particular, they claimed entitlement to two tranched payments of £200,000 and a payment of 2% of the build costs. The total claim was up to £1.5m dependant on build costs. Fairgate’s position was that, first, the claimant had no contractual right to further fees and, second, the site is in any case no longer a viable development. In particular, this stemmed from difficulties relating to the ownership of the land, together with the financial viability of the kind of designs likely to obtain planning approval from Brent Council.

The legal principles

i. Is there a presumption in favour of the Claimant?
The Claimants sought to rely on Armory v Delamirie (1721) 1 Strange 504, in which there was a presumption against a defendant who had in his possession disputed property (in that case a jewel) but failed to produce it. In that case, the property was assumed to have the greatest value compatible with property of this type. Armory has been described as creating a principle requiring the court to resolve uncertainties by making assumptions generous to the claimant, where it is the defendant’s wrongdoing which has created those uncertainties (as referenced in Double G Communications Limited v News Group International Limited [2011] EWHC 961 (QB).

Fairgate provided detailed and extensive evidence, both by way of disclosure and witness statements, explaining the progress of the development after the termination of the agreement. The Judge held that this evidence made the general picture “sufficiently clear” that it was not altered by the fair wind that blows in favour of the claimant under the authority of Armory and subsequent cases.

ii. The contractual right to further fees
On the question of whether any further fees were in fact due, the Judge considered the principle that a defendant in an action for breach of contract is not liable for doing that which he is not bound to do, citing Abrahams v Herbert Reiach Ltd [1922] 1 KB 477, Lavarack v Woods of Colchester [1967] 1 QB 278, Horkulak v Cantor Fitzgerald International [2004] EWCA Civ 1287.

This issue was also considered in Durham Tees Valley Airport Ltd v BMI Baby Ltd [2010] EWCA Civ 731, which provided a taxonomy of four different types of cases. In these proceedings there was disagreement on the “type” of case, however, the Judge found that, in essence, it is for the court to determine how the contract would have been performed, had it not been repudiated. A parallel could be drawn with a case for wrongful dismissal of an employee, in which damages are usually limited to the benefits that the employee would have gained during the period during which his employment would have continued if he had been dismissed by lawful notice.

The Judge held that, on analysis of the contractual terms, Fairgate had no obligation to continue working with Redbourn for the duration of the project. In particular, they were under no obligation to approve any planning application suggested by Redbourn. This reflected the commercial reality, that the financial viability of the project, together with the land ownership issues, meant that Fairgate was not in a position to take forward the development. Redbourn was therefore not entitled to further remuneration.

iii. Loss of a Chance
Redbourn faced the same issues in its alternative case for a loss of a chance. This did not succeed either under the facts (because the project was no longer realistic), or on the law (because awarding damages for loss of a chance, by analogy to the principle and authority in wrongful dismissal cases, would be akin to awarding an employee damages based on the chance that their employer might choose to extend employment longer than it was contractually obliged to do). This alternative case therefore also failed.

A copy of the Judgment may be found here.