• The case of John Grimes Partnership Limited v Gubbins [2013] EWCA Civ 37 concerned the remoteness of damage in the context of a breach of contract. The classic test for remoteness from Hadley v Baxendale [1854]  was upheld after confusion following The Achilleas case [2008]. However some cases may need to be considered further to give the commercial context to the contract involved.

Facts of John Grimes Partnership Limited v Gubbins [2013] EWCA Civ 37

  • The appellant company JGP provided consulting engineering and geological services
  • The D respondent, Gubbins, was a farmer who obtained planning permission to develop a field for residential purposes adjacent to a road
  • He was required by the local authority to build a road
  • As is usual in these circumstances, Gubbins intended for the local authority to maintain the being constructed to support the residential buildings, at public expense
  • JGP was contracted by the D to design he road but was unable to deliver the design in time resulting in the D not being able to obtain council permission for the construction
  • This made D suffer a large loss due to market price fall when the construction was finally completed and sold
  • C claimed the contractual price and D counterclaimed for breach of contract by the C
  • The court found in favour of the D, the C appealed

Issues in John Grimes Partnership Limited v Gubbins [2013] EWCA Civ 37

  • Would the C be found liable for the loss suffered by the D due to the fall in market price?

Held by the Court of Appeal

  • Appeal dismissed – the C was found liable for the loss suffered due to the fall in market price. The judges agreed with the previous decision that the loss was reasonably foreseeable, and there was no evidence found in the favour of the C excluding his assumption of responsibility.

Sir David Keene

Sir David Keene noted that the previous case of The Achilleas was not to depart wholly from the well-established test of remoteness from Baxendale. It was to stress “that what was reasonably foreseeable might sometime not prevail as the test if there were particular circumstances demonstrating that the parties could not have contracted on the basis that the defendant was to bear the liability of a particular kind of loss, even though reasonably foreseeable as a “not unlikely” consequence of breach” [20]

  • Furthermore, “if there is evidence in a particular case that the nature of the contract and the commercial background, or indeed other relevant special circumstances, render that implied assumption of responsibility inappropriate for a type of loss, then the contract-breaker escapes liability.” [24]

In the present case, it was held by the Court of Appeal that the previous judge’s approach to legal principles, and summaries, could not be faulted [25]:

  • The loss from the market price fall was reasonably foreseeable, JGP “knew that the property market could go up or down and knew what Mr. Gubbins intended to do by way of development”
  • Nor did the case fall outside the case of Baxendale

Whilst one cannot control the market price, damages for loss due to changes int eh market price have previously been awarded for example The Heron II; this case is no different. It may differ in a case of an “unusually volatile” market, which this one was not. [27]

The “egregious delay … in the present case gave rise to a quantifiable loss” [29]

This quantifiable loss being disproportionate to the fee payable by the D to the C under contract did not matter here [30]:

  • “the breach of a contract of modest size gives rise to a substantial claim in damages”
  • “any such contrast is merely one possible pointer towards a contracting party not having undertaken a potential liability which is reasonably foreseeable and by itself would not normally suffice to establish such an absence of responsibility. It does not do so here.”