When does a claimant need to give credit for the benefits which have resulted from a breach of contract? Aside from commercial contract claims this is an issue which also seems to crop up with increasing regularity in claims against the accountancy profession, particularly audit claims.
Take an audit negligence claim, for example, in which the claimant is seeking to recover trading losses. The claimant may say that, absent a negligent audit report, it would not have traded at all and so seek to recover all the costs of its ongoing existence from the auditors. But what about benefits earned in the same period? What about, say, further share capital which would never have been raised had the claimant stopped trading? What about tax benefits? What if market conditions moved favourably over the relevant period?
The recent Court of Appeal judgment in Fulton Shipping Inc of Panama v Globalia Business Travel SAU of Spain was about rather different facts (it relates to mitigation of loss on a charterparty) but it offers some useful guidance on the principles the Courts are likely to apply.
In short, the judgment indicates that the Courts will take a broader view as to the benefits which should be taken into account. This seems to us the right approach in principle.
Much as there will always be policy cases in which benefits can be disregarded (the well-known exception of insurance cover for example), damages are about compensating the innocent party: to put it in the position that it would have been in had the breach not occurred. If a claimant has earned a benefit in the ordinary course of its business (fortuitous or not), it should expect to give credit for it, without the need for the same rigorous causation analysis involved in the assessment of loss.
This is certainly a more encouraging judgment than last year’s controversial Court of Appeal decision in Swynson Ltd v Lowick Rose LLP  EWCA Civ 629 which dealt with some similar principles. We understand that permission is being sought on that case from the Supreme Court; we will report back.
For further commentary on the decision, read Fulton Shipping Inc of Panama v Globalia Business Travel SAU of Spain