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Written by Michael Harper, barrister at Crown Office Chambers.
The assessment of damages can in many cases
take account of events subsequent to breach and what is known by the date of trial.
This is despite what has been traditionally referred to as a general rule that
damages are assessed as at the date of breach.
Hindsight, proverbially said to be 20/20,
will therefore be much required in 2020. The quantification of some claims may
be radically affected by the effects of COVID-19.
The (supposed) general rule
It remains necessary to start with the
traditional recitation that “as a general rule in English law damages for
tort or for breach of contract are assessed as at the date of the breach”: Miliangos
v George Frank (Textiles) Ltd  AC 443 at 468D. This has been
repeatedly affirmed as a starting point, including most notably in The
Golden Victory  UKHL 12 at
 and .
Nonetheless, if one starts with this
general rule, there are a remarkably high number of potential exceptions.
Moreover, these exceptions are not always readily explicable nor demarcated in
a way that preserves the rule itself. The effect is that it becomes more difficult
to predict or justify when a Court should take into account subsequent events.
A focus on the correct counterfactual
The better (and arguably now prevailing) approach
is that the real question as to the date of assessment is one of identifying
the correct counterfactual and in particular regarding mitigation: what ought the
claimant to have done in response to the breach and when?
This approach now has the direct support of
Pluczenik Diamond Co NV v W Nagel  EWCA Civ
2640, at , which reframes the two leading Supreme Court cases as
favouring this view:
has often been said that damages should be assessed ‘as at’ the date of breach,
following the decisions of [The Golden Victory] and [Bunge SA v
Nidera BV], it is now clear that this is not a rule of law but merely a
rule of thumb which reflects the usual result in practice of applying the
mitigation principle where there is an available market. Where there is an
available market, it is presumed that the claimant acting reasonably will enter
the market at once and obtain a replacement performance. Hence applying the
mitigation principle has the result of crystallising the claimant's loss at or
at least shortly after the time of breach. But where the mitigation principle
does not yield this result – for example because there is no readily available
market – subsequent losses (and gains) have to be brought into the calculation.”
This approach is also consistent with a sizeable
body of academic commentary, which has further noted that the supposed general
rule has often seemed more honoured in the breach than the observance in recent
Some basic applications of a focus on
As identified in Pluczenik,
if there was an available market to remedy the breach it will ordinarily be reasonable
for the claimant to have resorted to this shortly after the date of breach. Hence,
under trite principles of mitigation, damages will be assessed on the basis of
a counterfactual that the claimant did so, which must entail that damages should
be assessed at that time. This is what is meant by the loss ‘crystallising’:
the Court will calculate damages against a counterfactual in which the breach was
remedied at a given time, so what happens thereafter is irrelevant. This
accounts for the many scenarios that do look to the date of breach, such as a failure
to supply goods or services or negligent surveying.
Conversely, if acting reasonably the claimant
has not remedied the breach, the loss never crystallised and subsequent events
may continue to inform the assessment of loss (subject to general principles, such
as remoteness). If a defendant failed to perform a contract or negligently
damaged property but it was reasonable for the claimant not to pay for substitute
performance or repairs, then subsequent events remain material. If it would now
be reasonable for the claimant to remedy the breach, damages should reflect
whether the cost of doing so has increased or decreased.
There are a multitude of reasons why it
might have been reasonable not to remedy the breach, so that subsequent events
will factor into the assessment of damages. These include if the claimant was
unaware of the breach at all or if they were locked into the consequences of
One must of course take care in considering
what the claimant ought to have done in response to the breach and the overall position
in that counterfactual. However, there is at least a coherent framework to
explain why this enquiry matters and how it yields a date of assessment.
Hindsight in 2020
On any view COVID-19 and the global
response to it have had profound effects. Where appropriate, the assessment of
damages for breaches prior to this period may be radically affected by those subsequent
events, just as with breaches occurring now.
Many counterfactuals will be less
profitable than would have been previously forecast. A claimant who, due to the
defendant’s breach in contract or tort, was prevented from (say) providing client-facing
services and where this loss never crystallised has likely suffered a much
smaller loss of profit than might have been assumed. The same will likely be
true of most contracts that depend on the high-street, public events or general
In other cases, subsequent events may show
that a claimant’s loss is greater than would have been forecast assuming
ordinary circumstances. Perhaps it is reasonable for the claimant to now undertake
emergency property repair works but the necessary cost is increased due to appropriate
safety measures for those undertaking the works. Or perhaps the claimant was
prevented from sharing in the growth in certain sectors, such as a spike in
demand for certain goods or remote services.
In these cases, all parties will want to assess
whether COVID-19 has increased or decreased the loss and how to evidence this. A
starting point may be to look at the appropriate industry trend or specific comparators,
but with adjustments if the claimant would have been particularly well or
ill-placed to deal with the new market conditions.
In relevant cases, parties would be well
advised to revisit assumptions as to the date of assessment and the quantification
of settlement offers.
This article, in a longer format, was
originally published on the Crown Office Chambers website here.
Nothing in this article constitutes legal
advice and no liability is accepted.
Free trials are only available to individuals based in the UK
* denotes a required field
Michael is a barrister practising at Crown Office Chambers, principally on professional negligence, insurance, property damage and commercial matters. Recent notable instructions include one of the Lawyer’s Top 20 cases of 2019.
0330 161 1234