Getting back to where you were before or a great leap forward? High Court determines claim for mitigation damages

Tradebe Solvent Recycling Ltd v Coussens of Bexhill Ltd [2013] EWHC 3786 (QB) is a recent example of the factual and hypothetical issues which can bedevil damages claims in the construction industry. John Denis-Smith sets out the position.

Background and Facts

The Claimant (“SRM”) is one of Europe's largest solvent handling companies, specialising in the waste processing of chemicals used in the pharmaceutical and other industries. During a lifting operation being carried out by the Defendant at the Claimant’s premises in March 2010, the crane driver failed to extend the hydraulic feet from the mobile crane, causing the crane to topple over and to fall onto storage tanks and other equipment below.

Liability was admitted three months after the collapse. The Claimant sought damages for the cost of remedial works. Quantum remained in dispute.

Trial

At trial, recoverability turned on the issue of the Claimant’s intentions, applying classic legal principles:

  1. If the costs were costs that the Claimant was always going to incur, then the Claimant could not recover them as a matter of causation. Thus the Claimant gave credit for the costs it was going to spend on the works in relation to which the lifting operation was being carried out – the removal and replacement of two storage tanks
  2. The Defendant contended that there was a pre-existing proposal of 2007 to remove and replace all storage tanks in the area and that this was demonstrated by the fact that, since March 2010, several tanks had been removed. However, this claim failed because, contrary to the 2007 plan, tanks in the area had continued to be used, demonstrating that the proposal had not been implemented
  3. Considerable argument turned on the fact that, under the remedial works carried out, the Claimant had not simply replaced the damaged tanks with identical tanks in the same location. Instead, the tanks which were going to be used to replace them were placed in another location to enable production to be maintained. The Defendant contended that this proved that the Claimant had in fact already decided to replace tanks in the alternative location. Alternatively, the Defendant contended that, whether or not the Claimant had reached such a decision, the accident provided a business opportunity which the Claimant chose to exploit by carrying out a general upgrade so as to put it in a better position than it had been in prior to the accident. This brought into play two legal principles. First, a party is not entitled to claim the cost of improving its property beyond costs reasonably necessary to restore it to the position it was in before the damage was caused: this is the principle of “betterment” (Harbutt's Plasticine v Wayne Tank and Pump Co [1970] 1 Q.B. 447 CA). Second, however, a party is entitled to recover costs of steps reasonably carried out to avoid or reduce the effect of damage suffered, even if those costs in the event mean that the Claimant suffers greater loss than if they had not been carried out: this is the principle of “mitigation”. The Court held that, on the facts, the steps taken by the Claimant fell in the latter category; the relocation of the replacement tanks was a reasonable and proportionate step taken in mitigation of the potentially huge economic loss that would otherwise have flowed from the physical damage to the site in consequence of the Claimant’s inability to service its clients.

Practical implications

  1. The Court’s decision demonstrates the importance of documentation and other evidence explaining why given steps were taken. The cogency of the evidence, documentary and witness, will be important: in this case it led to the Claimant recovering more than its own Part 36 Offer and recovering indemnity costs accordingly
  2. Where a party’s property is damaged, it is important to make and keep records identifying the consideration given to potential remedial steps and the ground for the decision to proceed with a given remedial scheme. Such evidence will be important to demonstrate that the steps were carried out in mitigation
  3. Records showing the use (or in the case of a facility, operation) of the Claimant’s property may be important evidence in showing what the Claimant’s plans were before the damage and will explain decisions taken afterwards
  4. Where pre-existing proposals for future development have been drafted, it will be important to show the method by which proposals would be approved or rejected and the extent to which the specific proposals in issue were adopted.
  5. Evidence showing how the remedial scheme will be implemented may be important in showing that the scheme was reasonable. While it is not necessary that a scheme carried out in mitigation is successful for its costs to be reasonable, evidence of the result obtained will cast some light on the reasonableness of the steps taken.

Court details

Court: Queens Bench Division

Judge: Mrs Justice Andrews DBE

Date of judgment: 2 December 2013

John Denis-Smith is a barrister at 39 Essex Street specialising in commercial and construction work.

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