Damages, remoteness, The Heron II

Published: 2020/09/10 Number of words: 1387

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Damages, remoteness, The Heron II

The stance of this Brief is that the rejection of the trial judge of the claim for damages for breach of contract on the basis that the damages claimed were too remote as they were not of a type in the reasonable contemplation of Northern Executive Cars at the time the contract was made.

Based on the above, the ground of appeal is based on the premise that the damages claimed were not too remote and that the judge wrongly applied the test in Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48; [2009] 1 AC 61

On the facts provided, the taxi firm, Northern Executive Cars, frequently carried partners to client meetings some distance away from their office and the firm promoted it as providing a ‘reliable, high quality service’ for ‘discerning business people’. The firm was targeting niche market i.e. high-level clients who would like to be driven using a limousine to meetings. To add to this, as an old service contractor with the law firm, they were clearly told at the time of booking that the job was very important. The firm had been providing taxi services to Growloves for the previous 10 years.

The following points are important thus, in relation to the facts and the ground of appeal stated above:

(1) The Tacit Assumption Test as proposed by Achilleas, Lord Hoffman, which focuses upon looking at what was the original implied but unspoken understanding. In The Achilleas, Lord Hoffman stressed upon the ‘tacit assumption’ formulation and stated ‘It seems to me logical to found liability for damages upon the intention of the parties (objectively ascertained) because all contractual liability is voluntarily undertaken [1]”. Having worked together for 10 years and being told specifically of the importance of the matter, the Taxi Firm should have been more careful in inspecting the condition of the vehicle being provided. It was clear that failure to reach the destination altogether (rather than delay itself as featured in Achilleas) would pave the way for loss of the law firm. On this basis it can be said that the judge has not correctly applied the idea of ‘tacit assumption’. The very basic rule of foreseeability or remoteness which is found in Hadley v Baxendale[2] was seen in the Heron II[3] where it was noted that the Hadley v Baxendale standard was framed in terms of the ‘requisite degree of probability of loss’.

2) In the Heron II, Lord Reid explained foreseeability as knowledge of consequences ‘not unlikely’ to arise from the breach. The phrase, ‘not unlikely’ has a lot of weight for this case. The contracting Taxi Firm was in a financial mess and clearly cutting corners in costs without having any regard to how this may affect crucial client meetings. This was not a one time taxi hiring agreement but something much more solid, i.e. a business arrangement which went back a decade. A tacit understanding in such a case could not be overruled, on the basis of several years of previous dealings, where as the Taxi Firm would be well aware of what kind of loss their clients were actually dealing with, due to their default of service. The quotation of Lord Reid is very much instrumental in this regard, “So the question for decision is whether a plaintiff can recover as damages for breach of contract a loss of a kind which the defendant, when he made the contract, ought to have realized was not unlikely to result from a breach of contract causing delay in delivery. I use the words “not unlikely” as denoting a degree of probability considerably less than an even chance but nevertheless not very unusual and easily foreseeable.[4]

(3) The next point to argue is that “who controlled the probability of Harm”? It seems what has been ignored by the trial judge is that cases like The Achilleas (and the Heron II for that matter) belong to the shipping industry, where the probability of harm is beyond the control of parties and very much dependent upon the weather condition of the sea. In this case the failure of the Law Firm to have a fair chance as securing the contract was not based upon bad traffic, delayed service or even bad weather (or any other frustrating event). The damage arose from a factor, which was 100% in the control of the Taxi Firm, i.e. workable condition of the Taxi car, and the subsequent failure to have a replacement car on the standby.

4) Hence, a more fair argument would be, that the case at hand is not, in any way, a case of shipping and the volatile nature of the sea. Hence, the harm possible to Growloves LLP was very much in the hands of the Taxi Firm, i.e. Northern Executive Cars, because a breakdown of the contracted Taxi/ car with no replacement available simply shows incompetence and a failure to maintain reasonable service. Had the taxi been maintained the partners would have not lost the opportunity to reach their destination in time. The Achilleas relied on a general understanding in the “Shipping industry” preventing profits being recovered via damages for a lost cause. This aspect cannot be fairly applied to the situation at hand where the entire root cause of the Law firm’s loss is the unquestionably poor and risky service provided by a Taxi firm, which makes all its profits on the basis that it will provide a service which will be sound, niche, and reliable while catering to a certain business class which seeks to rely on them to reach their business destinations on time.

Relevant cases

Czarnikow (C) Ltd v Koufos (The Heron II) [1969] 1 AC 350 (HL)

Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48, [2009] 1 AC 61.

Transfield Shipping Inc of Panama v Mercator Shipping Inc of Monrovia ComC (Bailii, [2006] EWHC 3030 (Comm), [2007] 1 Lloyd’s Rep 19, [2007] 1 All ER (Comm) 379, [2006] 2 CLC 1069)

Hadley v Baxendale Exc (Bailii, [1854] EWHC Exch J70, [1854] EngR 296, Commonlii, (1854) 9 Exch 341, (1854) 156 ER 145)

Relevant (useful) References

Robert Gay, ‘The Achilleas in the House of Lords: Damages for Late Delivery of Time Chartered Vessel’ (2008) 14 J Int Maritime Law 295;

Adam Kramer, ‘The New Test of Remoteness in Contract’ (2009) 125 LQR 408;

Greg Gordon, ‘Hadley v Baxendale Revisited: Transfield Shipping Inc v Mercator Shipping’ (2009) 13

Edin LR 125; KV Krishnaprasad, ‘From the Mill Shaft to the Coal Cruiser: Contractual Damages after The Achilleas’ (2011) ICCLR 218.

Lord Hoffmann, ‘The Achilleas: Custom and Practice or Foreseeability?’ (2010) 14 Edin LR 47.
Victor P Goldberg The Achilleas: Forsaking Foreseeability *Current Legal Problems, Vol. 66 (2013), pp. 107–130

[1] Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48, [2009] 1 AC 72.
[2] Hadley v Baxendale Exc (Bailii, [1854] EWHC Exch J70, [1854] EngR 296, Commonlii, (1854) 9 Exch 341, (1854) 156 ER 145) see also, Transfield Shipping Inc of Panama v Mercator Shipping Inc of Monrovia ComC (Bailii, [2006] EWHC 3030 (Comm), [2007] 1 Lloyd’s Rep 19, [2007] 1 All ER (Comm) 379, [2006] 2 CLC 1069)

[3] Czarnikow (C) Ltd v Koufos (The Heron II) [1969] 1 AC 350 (HL).
[4] Ibid

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