C & P Haulage v Middleton [1983] EWCA Civ 5 (27 June 1983)

Mr Middleton, an automobile engineer, was granted a licence to use premises for his business. He spent money on improvements. The licensors wrongfully terminated the licence ten weeks early. The Court of Appeal held he was entitled only to nominal damages as he suffered no actual loss, having returned rent-free to his own premises.

Facts

Mr Middleton, an automobile engineer, was prevented by local authority from operating his business from his home garage. He entered into a licence agreement with C & P Haulage to use their yard and workshop premises. The licence was reviewable every six months with at least one month’s notice required for termination. Mr Middleton spent approximately £1,767.51 on improvements including building a wall, installing electricity, and fitting locks. The agreement contained a clause stating that any fixtures installed would remain on the premises.

On 5th October 1979, following a dispute, C & P Haulage wrongfully terminated the licence by changing the locks, despite the licence being valid until at least 15th December 1979. Mr Middleton returned to his own garage premises, where the local authority permitted him to continue operating rent-free for a year.

Issues

The key issue was whether Mr Middleton could recover as damages the expenditure he had incurred on improvements to the premises, following the wrongful termination of the licence.

Judgment

The Court of Appeal dismissed the appeal, holding that Mr Middleton was entitled only to nominal damages of £10. Lord Justice Ackner delivered the leading judgment.

The Correct Measure of Damages

The court held that damages for breach of contract should put the plaintiff in the position he would have been in had the contract been performed, not in the position he would have been in had the contract never been made.

Lord Justice Ackner, approving the reasoning of Mr Justice Berger in the British Columbia case, stated:

The law of contract compensates a plaintiff for damages resulting from the defendant’s breach; it does not compensate a plaintiff for damages resulting from his making a bad bargain. Where it can be seen that the plaintiff would have incurred a loss on the contract as a whole, the expenses he has incurred are losses flowing from entering into the contract, not losses flowing from the defendant’s breach.

Lord Justice Ackner further stated:

It is not the function of the courts where there is a breach of contract knowingly, as this would be the case, to put the plaintiff in a better financial position than if the contract had been properly performed.

Application to the Facts

Had the contract been lawfully terminated on 15th December 1979, Mr Middleton would still have lost his improvements under clause 5 of the agreement. Since he returned to his own premises rent-free, he actually saved money during the ten-week period. Awarding the claimed expenditure would place him in a better position than if the contract had been properly performed.

Lord Justice Fox agreed, noting:

A high risk of waste was from the very first inherent in the nature of the contract itself, breach or no breach. The reality of the matter is that the waste resulted from what was, on the appellant’s side, a very unsatisfactory and dangerous bargain.

Implications

This case establishes an important limitation on the recovery of wasted expenditure in contract damages. Where a plaintiff has made a bad bargain, they cannot use a claim for wasted expenditure to circumvent the normal expectation measure of damages. The court will not compensate plaintiffs for losses flowing from entering into a disadvantageous contract rather than from the breach itself. This prevents defendants from becoming insurers of unprofitable ventures and maintains the distinction between compensating for breach and compensating for poor commercial decisions.

Verdict: Appeal dismissed save that judgment be entered for the appellant for nominal damages of £10. Costs in this court. No order for costs below.

Source: C & P Haulage v Middleton [1983] EWCA Civ 5 (27 June 1983)