In the recent decision of Forest Holdings Ltd v Mangatu Blocks Incorporation [2017] NZHC 448, the High Court considered the controversial decision of the House of Lords in Golden Strait Corporation v Nippon Yusen Kubishika Kaisa (The Golden Victory) [2007] UKHL 12, [2007] 2 AC 353, which held that events subsequent to breach of a contract may be taken into account for the purposes of assessing damages.

Forest Holdings Ltd concerned an appeal from an arbitral award.  In the contract in dispute Mangatu Blocks Incorporation (MBI) granted Forest Holdings Limited (FHL) a forestry right.  MBI terminated that contract ten years into its fifty year term on the basis of FHL's failure to comply with various resource management conditions imposed by Gisborne District Council.  At arbitration, FHL claimed that the termination was wrongful, and sought $10.7m in damages. 

The arbitrator found that MBI should have allowed FHL 120 days to remedy the problems prior to terminating the contract.  However, the arbitrator concluded that FHL could not have remedied the issues within 120 days, and that any damages awarded would therefore be nominal. 

The High Court reversed the decision of the arbitrator, and held that damages must be re-assessed.  On ordinary principles, Heath J considered the value of the forestry right at the time of MBI's repudiation of the contract should have been taken into account.  Had MBI given proper notice, FHL might have, for example, assigned the contract to a third party.  FHL deserved the opportunity to adduce evidence on that point.

Heath J then went on to hold that applying Golden Victory produced the same result.  It is difficult to see how Golden Victory is relevant to Forest Holdings Ltd.  In Golden Victory, the Court reduced the innocent party's damages by reference to actual events occurring subsequent to the breach of the contract.  That differs from the orthodox position of assessing damages as at the date of breach.  However, in Forest Holdings, there are no actual subsequent events which the arbitrator could take notice relevant to the issue of damages.  This is because MBI had not given the 120 days' notice as required.  Accordingly, applied in this case, the analysis in Forest Holdings will be hypothetical whether damages are assessed as at the date of breach, or at some later point in time.  In those circumstances, Golden Victory is unlikely to be applicable. 

See the Court's decision here.