In January 2016, we reported on the Court of Appeal judgment in Fulton Shipping Inc of Panama v Globalia Business Travel SAU of Spain  EWCA Civ 1299 which offered some useful guidance on the principles the Courts are likely to apply when considering whether a claimant needs to give credit for benefits which have resulted from the breach of contract which is the subject of the claim (to read that commentary please click here)
This January, we find ourselves reporting on another decision of the Court of Appeal which addresses accounting for benefits – Alison Quilter v Hodson Developments Ltd  EWCA Civ 1125.
Ms Quilter purchased an apartment from Hodson in January 2012 for the sum of £240,000, which she sold for £275,000 two years later. Subsequently, Ms Quilter brought a claim against Hodson seeking damages flowing from alleged misrepresentations made prior to contract. The alleged misrepresentations concerned, amongst other things, a failure by Hodson to disclose the existence of disputes relating to the communal heating system used by the property.
Ms Quilter succeeded with her claim at first instance. The High Court found that some of the alleged misrepresentations were made out, and awarded damages in the sum of £15,000. In arriving at this figure, the judge applied the “normal measure” of damages; that is, the difference between the actual value of what was acquired and the price which was paid. He held that Ms Quilter was entitled to take advantage of the market increase in the property (from £240,000 to £275,000) and noted that the profit would have been £15,000 greater if she had paid the appropriate price initially.
Hodson appealed the High Court decision on several grounds, including, that the judge had erred in deciding that Ms Quilter had suffered a capital loss on the purchase of the property by wrongly assessing the loss at the date of the transaction when he ought to have taken the subsequent sale into account.
The Court of Appeal rejected all of Hodson’s grounds of appeal, including the ground concerning the measure of damages. Central to the Court’s decision on this issue was the fact that benefit which had accrued had not arisen directly as a consequence of Hodson’s breach of duty. The Court found that Ms Quilter’s decision to sell the property was not due to the defects in the heating system (which was in the process of being repaired under the NHBC guarantee scheme) but a decision in the ordinary course of her domestic life as she was buying another property. This can be contrasted with a case such as Fulton Shipping Inc (although the facts in that case were very different) where the decision to sell is a direct result of the breach of contract.
The decision serves as a reminder that there are circumstances in which a claimant may be allowed to benefit from a rise in market value, and makes clear that the Courts will focus on the causative connection between the breach and benefit when assessing loss in such claims.