Contract Damages, Ruxley, and the Performance Interest

Cambridge Law Journal

Volumn 56, Issue 3, 1997, Pages 537-570

  Coote, Brain ^a  

^a UNIVERSITY OF AUCKLAND   (New Zealand)

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EID: 85010180194     PISSN: 00081973     EISSN: 14692139     Source Type: Journal    
DOI: 10.1017/S0008197300098573     Document Type: Article

References (280)

1. E.g. Harbutt's Plasticine v. Wayne Tank and Pump Ltd. [1970] 1 Q.B. 447.
2. The difference between performance damages and consequential loss was adverted to by Lord Griffiths in Linden Gardens Trust Ltd V. Lenesta Sludge Disposals Ltd [1994] 1 A.C. 85, 97.
3. Claims against professionals for failure to exercise skill and care will normally be in respect of consequential loss so that difference in value can be an appropriate measure (Treitel, The Law of Contract, 9th ed., (1995), p. 852)
4. Though not necessarily so (Auburn Municipal Council v. Arc Engineering [1973] 1 N.S.W.L.R. 513
5. Bevan Investments Ltd. v. Blackhall & Struthers [1978] 2 N.Z.L.R. 97).
6. (1854) 9 Exch. 341.
7. 156 E.R. 145
8. The two categories have not always been distinguished, e.g. Surrey County Council v. Bredero Homes Ltd. [1993] 1 W.L.R. 1361, 1365.
9. [1969] 1 A.C. 350.
10. [1994] 1 W.L.R. 650 (C.A.)
11. [1996] 1 A.C. 344 (H.L.). Noted: (C.A.)
12. Beale (1995) 111 L.Q.R. 54
13. Price (1995) 69 A.L.J. 32
14. Halson [1995] Lloyd's M.C.L.Q. 27
15. Dawson, “Reflections on Certain Aspects of the Law of Damages for Breach of Contract”. (1995) 9 J.C.L. 125, 146 et seq. (H.L.)
16. Poole (1996) 59 M.L.R. 272
17. O'Sullivan [1995] C.L.J. 496
18. McMeel [1995] Lloyd's M.C.L.Q. 456
19. Bruce (1995) 145 N.L. 1086
20. Loke, “Cost of Cure or Difference in Market Value? Towards a Sound Choice in the Basis for Quantifying Expectation Damages” (1996) 10 J.C.L. 189
21. Phang, “Subjectivity, Objectivity and Policy-Contractual Damages in the House of Lords” [1996] J.B.L. 362.
22. While subjective factors are relevant to general damages (cf. Scholtz v. Thompson 1996 (2) SA 409, 417) the issue here was one of market worth.
23. Cf. Harris, Ogus and Phillips, “Contract Remedies and the Consumer Surplus” (1979) 95 L.Q.R. 581, 582, for whom the “consumer surplus” (value to a consumer beyond market value) is subjective.
24. [1996] 1 A.C. 344, at 354, 357, 358, 362, 372–373.
25. 11th ed., (1995) by Duncan Wallace, p. 1058.
26. See also Price, (1995) 69 A.L.J. 32.
27. (1848) 1 Exch. 850, 855
28. 154 E.R. 363, 365.
29. (1854) 9 Exch. 341
30. 16 E.R. 145.
31. Pell v. Shearman (1855) 10 Ex. 766, 769, 770
32. 156 E.R. 650, 651, 652.
33. (1880) 43 L.T. 218 (Exch. D.)
34. (1882) 8 Q.B.D. 357.
35. A recent example is Surrey County Council v. Bredero Homes Ltd [1993] 1 W.L.R. 1361.
36. “The Essence of Contract” (1988) 1 J.C.L 91 (Part I), 183 (Part II), especially at 190 et seq
37. Cf., e.g., Kleinwort Benson Ltd. v. Glasgow City Council [1996] Q.B. 678.
38. Cf. The Heron II [1966] 2 Q.B. 695, 722–730, per Diplock L.J.
39. In the course of an interesting discussion, Dawson, (1995) 9 J.C.L. 125 at pp. 125–126, elaborates the same point from a slightly different angle.
40. Cf. Ruxley at pp. 358, 370–371 (though contrast 361)
41. cf. James v, Hutton and Cook Ltd [1950] 1 K.B. 9, 17.
42. Cf. Ruxtey, at p. 360
43. The Rozel [1994] 2 Lloyd's Rep. 161, 166–167. The purpose of a negative covenant like a restraint of trade might well be confined to protecting an economic asset.
44. Friedmann, “The Performance Interest in Damages” (1995) 111 L.Q.R. 628.
45. Fuller and Perdue, “The Reliance Interest in Damages” (1936) 46 Yale L.J. 52, 373.
46. The Common Law, (1881), pp. 300 et seq.
47. “The Path of the Law” (1896) 10 Harv. L.R. 457.
48. Benjamin's Sale of Goods, 4th ed. (1992), pp. 833–834. A more complete protection of the performance interest would also take account of transaction costs. The law can be similarly blind to the costs of litigation.
49. See Semelhago v. Paramadeven (1996) 136 D.L.R (4th) 1.
50. Torts cases to similar effect were Mummelly v. Calcon Ltd [1978] LR. 387
51. Panlalone v. Alouie (1989) 18 N.S.W.L.R. 119.
52. Contrast Parramatta C.C. v. Lutz (1988) 12 N.S.W.L.R. 293.
53. At pp. 355–356, 360, 366–369. See also East Ham Corporation v. Bernard Simley & Sons Ltd [1966] A.C. 406, 434–435, 445
54. Linden Gardens Trust Ltd. v. Lenesta Sludge Disposals Ltd [1994] 1 A.C. 85, 96
55. Darlington B.C. v. Wiltshier Northern Ltd. [1995] 1 W.L.R. 68, 79.
56. Ruxley, at pp. 358, 360, 366, 371. see pp. 557–558 below, at pp. 126–127.
57. [1891]2 Q.B. 31.
58. [1994] 3 N.Z.L.R. 410.
59. Bunge Corporation v. Tradex [1981] 1 W.L.R. 711.
60. H. Dakin & Co. Ltd. v. Lee [1916] 1 K.B. 566.
61. Johnson v. Agnew [1980] A.C. 367
62. Radford v. De Froberville [1977] 1 W.L.R. 1262
63. East Ham Corporation v. Bernard Sunley & Sons Ltd. [1966] A.C. 406.
64. Friedman, (1995) 111 L.Q.R. 628, 631–632.
65. R. (in Right of the Province of Ontario) v. Jennings (1966) 57 D.L.R. (2d) 644.
66. N.Z. Wholesale Groceries v. Hewin [1982] 2 N.Z.L.R. 176
67. Horsburgh v. N.Z. Meat Processors Union[1988] 1 N.Z.L.R. 698.
68. British Transport Commission v. Gourley [1956] A.C. 185.
69. Cf. White Arrow Express Ltd. v. Lamey's Distributors Ltd, 21 July 1995, (C.A.)
70. noted by Beale, (1996) 112 L.Q.R. 205.
71. [1972] A.C. 441.
72. [1980] A.C. 827.
73. Lord Lloyd did, though suggest that the award had been too large: Ruxley, at p. 374.
74. (1880) 5 App. Cas. 25, 39
75. [1912] A.C. 673, 689.
76. E.g., Cunningham v. Insinger [1924] 2 D.L.R. 433, 439
77. McGarry v. Richards, Ackroyd & Gall Ltd. [1954] 2 D.L.R. 367, 389
78. James v. Hutton and Cooke [1950] 1 K.B. 9
79. Chitty on Contracts, 27th ed., (1994), Vol. 1, p. 1204
80. McGregor on Damages, 15th ed., (1988), p. 26.
81. Phang, [1996] J.B.L. 362, 370–371, characterises cost of cure as “exceptional”.
82. Cf. Burrows, Remedies for Torts and Breach of Contract, 2nd ed. (1994), p. 16.
83. This seems to be a basic premise of most theories of contract. See e.g. Fried, Contract as Promise: A Theory of Contractual Obligation, (1981)
84. Benson, “The Idea of a Public Basis of Justification for Contract” (1995) 33 O.H.L.J. 273.
85. See also Burrows, O.H.L.J., p. 20
86. Evans, “The Concept of Legal Power” (1984)11 N.Z.U.L.R. 149, 163(the parties define the acts in respect of which the law imposes a duty to perform)
87. South Australia Asset Management Corporation v. York Montague Ltd. [1977] A.C. 191, 211, per Lord Hoffmann (though contrast, p. 212).
88. The point is discussed inCoote, “The Essence of Contract” (1988) 1 J.C.L. 183, 194–195, 196.
89. E.g., Gava and Kincaid, “Contract and Conventionalis” (1966) 10 J.C.L. 141, 142, 143, 145
90. Burrows, J.C.L.
91. Enonchong, “Contract Damages for Injury to Reputation” (1966) 59 M.L.R., 592, 599.
92. (1986), at pp. 280, 282–283.
93. See also his An Introduction to the Law of Contract, 5th ed. (1985), p. 41.
94. [1964] A.C. 465.
95. A.C., 529, per Lord Devlin.
96. In Hollebone v. Midhurst and Fernhurst Builders Ltd. [1968] 1 Lloyd's Rep. 38,40, the then contemporary editions of Salmond on Torts, Mayne and McGregor on Damages and Street on Damages are cited to this effect.
97. See also Woollongong C.C. v. Fregnan [1982] 1 N.S.W.L.R. 244
98. Carosella v. Ginos (1981) 46 L.G.R.A. 51. Because the result is not guaranteed, awards against professionals for want of care, even in contract, will normally be based on difference in value
99. Perry v. Sidney Phillips & Son [1982] 1 W.L.R. 1297.
100. E.g. Hollebone v. Midhurst and Fernhurst Builders Ltd [1968] 1 Lloyd's Rep. 38
101. Evans v. Balog [1976] 1 N.S.W.L.R. 36
102. Dodd Property (Kent) Ltd v. Canterbury C.C. [1980] 1 W.L.R. 433
103. Paramatta C.C. v. Lutz (1988) 12 N.S.W.L.R. 293.
104. Cf. Ruxley, at p. 353, per Lord Bridge.
105. [1968] A.C. 58, 81, 83, 102.
106. See also Woodar Investment Development Ltd. v. Wimpey Construction UK Ltd. [1980] 1 W.L.R. 277.
107. The position is different in respect of loss suffered by the promisee other than the loss of performance as such: Coulls v. Bagots Executor and Trustee Co. Ltd. (1967) 119 C.L.R. 460, 501–502.
108. [1980] Ch. 297.
109. [1995] 2 A.C. 207.
110. (1997) 71 A.L.J.R. 487.
111. In New Zealand, the equivalent case is Gartside v. Sheffield, Young & Ellis [1983] NZ.L.R. 37 (C.A.).
112. The one exception seems to have been Nicholls V.-C. in the Court of Appeal in White v. Jones, at pp. 223–224.
113. [1993] 1 W.L.R, 1361.
114. [1996] 1 Qd. R. 156.
115. Beach v. Reed Corrugated Cases Ltd. [1956] 1 W.L.R. 807
116. Re Houghton Main Colliery Ltd. [1956] 1 W.L.R. 1219
117. Parsons v. B.N.M. Laboratories Ltd [1964] 1 Q.B. 95.
118. Carter and Harland, Contract Law in Australia, 3rd ed., (1996), p. 813.
119. Fairholme v. Firth & Brown Ltd. (1933) 149 L.T. 332, 332–335;
120. Blackwood v. Andre. 1947 S.C. 333, 333–334.
121. Waddams, The Law of Damages, 2nd ed., (1995), pp. 1–2.
122. The Law of Damages.
123. H. Dakin & Co. Ltd. v. Lee [1916] 1 K.B. In New Zealand, completion by the building owner could be classed as “cancellation” and enable relief under the Contractual Remedies Act 1979, s. 9.
124. This was accepted in British Transport Commission v. Gourley [1956] A.C. 185.
125. Dewesv. National Coal Board [1978] A.C. 1, 12–13.
126. E.g., Harbutt's Plasticine Ltd. v. Wayne Tank and Pump Co. Ltd. [1970] 1 Q.B. 447
127. though contrast Cooke v. Rowe [1950] N.Z.L.R. 410
128. Ryons v. Thomas [1986] I.R. 666.
129. Jamal v. Moola Dawood Sons & Co. [1916] 1 A.C. 175.
130. E.g., Ribeiro v. Canadian Imperial Bank of Commerce (1989) 67 O.R. (2d) 385
131. Tak & Co. Inc. v. A.E.L. Corporation Ltd. (1995) N.Z.B.L.C. 103/887.
132. “The General Principles of the Law of Damages,” in Law of Remedies: Principles and Proofs (1995) Law Soc. of Upper Canada, 15, 17.
133. See e.g. Burrows, Remedies, 2nd ed., pp. 124–128
134. Tilbury, Civil Remedies, (1993) Vol. 2, para. 13051–13054
135. Cf. Gourley, [1956] A.C. 185, 199, per Earl Jowitt L.C.
136. A.C., para. 553.
137. See also Beale, (1995) 111 L.Q.R. 54.
138. [1977] Ch. 106.
139. (1993) 1 W.L.R. 1361.
140. See Goodhart, “Restitutionary Damages for Breach of Contract” [1995] R.L.R. 3 for a contrary argument. Third party beneficiaries have been given a statutory right of enforcement in New Zealand (Contracts (Privity) Act 1982), Western Australia (Property Law Act 1969, s. 11 (2) and Queensland (Property Law Act 1974, s. 55).
141. The English Law Commission has recommended a reform very similar to the New Zealand statute (Privity of Contract: Contracts for the Benefit of Third Parties, Law Comm. 242 (1996)).
142. [1991] 1 Q.B. 1.
143. [1962] A.C. 446.
144. Compare how in discussion of Appleby v. Meyers (1867) L.R. 2 C.P. 651, “benefit” is ascribed to enjoyment of the use of the machinery rather than to the legal rights which passed when it was affixed to the premises: Cheshire. Fifoot and Furmston's Law of Contract, 12th ed. (1991), p. 589.
145. Cf B.P. v. Hunt (No 2) [1979] 1 W.L.R. 783, 801, per Robert Gough J.
146. [1980] 1 W.L.R. 277, 300–301.
147. Compare Coulls v. Bagots Executor and Trustee Co. Ltd (1967) 119 C.L.R. 460, 501–502.
148. [1994] 1 A.C. 85. More strictly, he was addressing himself to St. Martin's Property Corporation v. Sir Robert McAlpine Ltd., heard and decided at the same time, but the case seems likely to be remembered by the name in the text.
149. (1880) 5 App. Cas. 25, 39.
150. [1995] 1 W.L.R. 68, 80.
151. See also Ruxley, at p. 360 (“value of the promise to the promisee”).
152. “Privity of Contract: Judicial and Legislative Reform” (1995) 9 J.C.L. 103, 107.
153. Darlington B.C. v. Wiltshier Northern Ltd. [1995] 1 W.L.R. 68.
154. (1839) 6 Cl. & F. 600, 7 E.R. 824
155. The Albazero [1977] A.C. 744, 847
156. Linden Gardens Trust Ltd v. Lenestra Sludge Disposals Ltd. [1994] 1 A.C. 85
157. Darlington B.C. v. Wiltshire Northern Ltd. [1995] 1 W.L.R. 68.
158. Henderson v. Merrett Syndicates Ltd. [1995] 2 A.C. 145, 195.
159. But see Burrows, “Legislative Reform of Remedies for Breach of Contract: The English Perspective” (1997) 1 E.L.R. 155, 173.
160. Dunlop v. Lambert (1839) 6 Cl. & F. 600
161. 7 E.R. 824
162. The Albazero [1977] A.C. 744.
163. It was the justification for the promisee's claim in The Albazero (“transferred loss”) which Lord Goff held did not apply to the situation in White v. Jones [1995] 2 A.C. 207, 266–267.
164. Hunt V. Severs [1994] 2 A.C. 350, 363.
165. Cf. White v. Jones [1995] 2 A.C. 207, 233–234, per Nicholls V.-C.
166. [1891] 2Q.B. 31.
167. See also Inderwick v. Leech (1885) 1 T.L.R. 484.
168. [1895] 2 Ch. 377.
169. [1841) 9 C. & P. 734, 739
170. 173 E.R. 1030, mi, per Coleridge J.
171. [1896] A.C. 490.
172. A.C. at p. 494.
173. A.C., at pp. 494–495.
174. Megarry and Wade, Law of Real Properly, 5th ed., (1984), p. 720.
175. Conveyancing Act 1919, s. 133A (N.S.W.)
176. Property Law Act 1974, s. 112 (Queensland).
177. Aspects of Damages: The Rules in Bain v. Fothergill and Joyner v. Weeks. Report No. 19 (1991).
178. Property Law Act 1974. pp. 18, 28.
179. [1994] 3 N.Z.L.R. 410.
180. (1832) 1 Moo. & R. 218
181. 174 E.R. 74.
182. [1916] 1 K.B. 566.
183. See also Miller v. Advanced Farming (1969) 5 D.L.R. (3d) 369.
184. [1933] 1 W.W.R. 179.
185. (1954) 90 C.L.R. 613.
186. See also Hudson's Building and Engineering Contracts, 11th ed., pp. 1036–1037;
187. Thornton v. Place (1832) 1 Moo. & R. 218
188. 174 E.R. 74.
189. [1976] 1 N.S.W.R. 36.
190. See also Mertens v. Home Freeholds Co. [1921] 2 K.B. 526
191. Paramatta C.C. v. Lutz (1988) 12 N.S.W.L.R. 293.
192. [1970] 1 Q.B. 447.
193. see Hollebone v. Midhurst and Fernhurst Builders Ltd [1968] 1 Lloyd's Rep. 38.
194. E.g., East Ham Corporation v. Bernard Sunley & Sons Ltd. [1996] A.C. 406
195. Radford v. De Froberville, [1977] 1 W.L.R. 1262
196. Evans v. Balog, [1976] 1 N.S.W.R.
197. McGarry v. Richards [1954] 2 D.L.R. 367
198. Nu West Homes Ltd. v. Thunderbird Petroleums Ltd (1975) 59 D.L.R. (3d) 292
199. Strata v. Winkler (1987) 45 D.L.R. (4th) 741.
200. Newton Abbot Development Ltd v. Stockman Bros. (1931) 47 T.L.R. 616
201. Perry v. Sidney Phillips & Son [1982] 1 W.L.R. 1287.
202. Applegate v. Moss [1971] 1 Q.B. 406.
203. The cost of reinstatement was refused by May J. as unreasonable in C.R. Taylor (Wholesale) Ltd v. Hepworth [1997] 1 W.L.R. 659, but that was a torts case.
204. (1980) 7 Construction L.J. 125.
205. [1994] 1 W.L.R. 650, 662.
206. [1955] 1 W.L.R. 1168.
207. Phang [1996] J.B.L. 362 suggests that though the test is objective, it ought to be subjective.
208. Ruxley, at pp. 358–359.
209. Ruxley, at pp. 358, 360, 361, 370–371.
210. Nu West Homes Ltd. v. Thunderbird Petroleums Ltd (1975) 59 D.L.R. (3d) 292.
211. (1921) 129 N.E. 889, 891.
212. At pp. 367, 369. And see Darlington B.C. v. Wiltshier Northern Ltd [1995] 1 W.L.R. 68, 79 per Steyn L.J.
213. At p. 361. And see Tito v. Waddell (No. 2) [1997] Ch. 106, 328.
214. See, e.g., Ruxley, at pp. 357, 358
215. James v. Hutton and Cook Ltd [1950] 1 K.B. 9, 15
216. C.R. Taylor (Wholesale) Ltd v. Hepworths Ltd. [1972] 1 W.L.R. 659, 670
217. Radford v. De Froberville [1977] 1 W.L.R. 1262, 1270
218. Henderson v. Thorn [1893] 2 Q.B. 164, 167
219. Strata Corp. v. Winkler (1987) 45 D.L.R. (4th) 741, 750
220. Tito v. Waddell (No. 2) [1977] Ch. 106, 332
221. Maori Trustee v. Bolton [1971] N.Z.L.R. 226
222. Harris, Ogus and Phillips, (1979) 95 L.Q.R. 581, 586, 593–594.
223. see N.Z. Law Commission, Report No. 19 (1991), p. 27.
224. [1977] Ch. 106. Other examples are Wigsell v. School for Indigent Blind (1882) 8 Q.B.D. 357
225. Smiley v. Townshend [1950] 2 K.B. 311, 322–323;
226. McGarry v. Richards. Akroyd & Gall [1954] 2 D.L.R. 367.
227. Cf. Carosella v. Ginas (1981) 46 L.G.R.A. 51.
228. (1882) 8 Q.B.D. 357.
229. [1977] Ch. 106.
230. [1977] 1 W.L.R. 1262.
231. See also Jones v. Stroud District Council [1986] 1 W.L.R. 1141, 1150. For other examples, see n. 143 above
232. Imodco Ltd. v. Wimpey Major Projects Ltd (1987) 40 B.L.R. 1,19
233. Linden Gardens Trust Ltd v. Lenesta Sludge Disposals Ltd. [1994] A.C. 85.
234. Shearson v. Lehmann [1980] 1 Lloyd's Rep. 441, 443.
235. [1891]2 Q.B. 31.
236. [1950] 1 K.B. 9, 15.
237. (1954) 90 C.L.R. 613.
238. Followed in De Cesare v. Deluxe Motors Pty. Ltd. (1996) 67 S.A.S.R. 28 (F.C.S.A.).
239. Darlington B.C. v. Wiltshier Northern Ltd. [1995] 1 W.L.R. 68, 80. And see pp. 75–76, per Dillon L.J.
240. See also The Alecos M. [1990] 1 Lloyd's Rep. 82, 85 per Steyn J. (rev'd on other grounds [1991] 1 Lloyd's Rep. 120).
241. Dean v. Ainley [1987] 1 W.L.R. 1729, 1737–1738.
242. [1994] 1 W.L.R. 650, 657.
243. There is an analogy, too, with claims in restitution for the recovery of over-paid tax: e.g. Commissioner of State Revenue (Victoria) v. Royal Insurance Australia Ltd. (1994) 182 C.L.R. 51, 78–79.
244. Ruxley, at p. 359.
245. Cf. Darlington B.C. v. Wiltshier Northern Ltd. [1995] 1 W.L.R. 68, 80–81, per Steyn L.J.
246. E.g., Unfair Contract Terras Act 1977.
247. (1995) 9 J.C.L. 125, 152.
248. Cf. South Australia Asset Management Corporation v. York Montague Ltd. [1997] A.C. 191,211 (“… a duty in respect of the kind of loss which he has suffered”).
249. [1975] 1 N.Z.L.R. 655.
250. Contrast, though, Horieybun v. Harris [1995] 1 N.Z.L.R. 64, 74 75
251. Tito v. Waddell (No. 2) [1977] Ch. 106, 332.
252. E g., Greig and Davis, The Law of Contract (1987) pp., 1362–1363;
253. Davis, “Damages” in Finn (ed.), Essays in Contract (1987), 200, 203 et seq.
254. [1993] 1 W.L.R. 1361.
255. Attorney-General of Hong Kong v. Reid[1994] 1 N.Z.L.R. 1
256. [1994] 1 A.C. 324.
257. (1979) 95 L.Q.R. 58, 586.
258. [1962] A.C. 413
259. (1954) 90 C.L.R. 613, 618–619.
260. [1973] Q.B. 233.
261. Ruxley, at p. 374
262. Baltic Shipping Co. v. Dillon (1993) 176 C.L.R. 344. It is assumed the word “amenity” in Ruxley carries its dictionary connotations of pleasantness.
263. (1979) 95 L.Q.R. 581, 593–594.
264. [1977] Ch. 106.
265. And see Farnsworth, “Legal Remedies for Breach of Contract” (1970)70 Col. L.R. 1145, 1160–1175.
266. Cf. Ruxley, at pp. 353, 360–361.
267. E.g., Jarvis v. Swans Tours Ltd. [1973] Q.B. 233
268. Jackson v. Horizon Holidays Ltd. [1975] 1 W.L.R. 1468.
269. Ruxley, at p. 354, per Lord Bridge.
270. (1980) 7 Construction L.J. 215.
271. (1882) 8 Q.B.D. 357.
272. [1976] 1 Lloyd's Rep. 250.
273. [1991] 1 Lloyd's Rep. 120.
274. [1993] 1 W.L.R. 1361.
275. (1848) 1 Exch. 850
276. 154 E.R. 145.
277. (1854) 9 Ex. 341
278. 156 E.R. 145.
279. [1972] 1 Q.B. 60.
280. [1994] 1 A.C. 85.