County Council of Surrey v Bredero Homes Ltd [1993] EWCA Civ 7 (07 April 1993)

Surrey County Council and Mole Valley District Council sold land to Bredero Homes subject to covenants requiring development in accordance with planning permission for 72 houses. Bredero obtained new permission and built 77 houses, making additional profit. The councils sought damages for breach of covenant but, having suffered no financial loss, were awarded only nominal damages.

Facts

In 1980, Surrey County Council and Mole Valley District Council sold approximately 12.33 acres of land to Bredero Homes Ltd for £1.5 million. The transfers contained covenants requiring the defendant to develop the land in accordance with planning permission MO/80/1214, which permitted 72 detached houses and bungalows. The defendant later obtained a new planning permission (MO/83/0368) from Mole Valley District Council and built 77 houses instead of 72, making additional profit from the five extra properties.

The Plaintiffs’ Position

The councils admitted they suffered no damage to any adjoining property. Their sole purpose in imposing the covenants was to require the defendant to apply and pay for any relaxation if it wished to build more than originally permitted. The plaintiffs sought damages representing either the profit made by the defendant from the breach or a reasonable premium the defendant should have paid for contractual permission to build the additional houses.

Issues

The central issue was the correct measure of damages for breach of contract where: (a) the breach was deliberate; (b) the party in breach made a profit; and (c) the innocent party suffered no financial loss.

Judgment

Lord Justice Dillon

Lord Justice Dillon held that damages at common law for breach of contract are intended to compensate the victim for loss, not to transfer the benefit gained by the wrongdoer to a plaintiff who has suffered no loss. He cited established authority:

Damages for a breach of contract committed by the defendant are a compensation to the plaintiff for the damage, loss or injury he has suffered through that breach.

He distinguished the tort cases involving trespass and use of property, noting that the defendant had made no use of any property belonging to the plaintiffs. Regarding Wrotham Park Estate Co Ltd v Parkside Homes Ltd, he observed that case concerned damages under Lord Cairns’ Act in lieu of an injunction, whereas the present case involved purely common law damages.

Lord Justice Steyn

Lord Justice Steyn analysed the case from first principles, identifying three interests protected by damages for breach of contract: expectation interest, reliance interest, and restitutionary interest. He considered that Wrotham Park was defensible only on the restitutionary principle and involved invasion of property rights. However, he rejected extending restitutionary remedies as proposed:

The introduction of restitutionary remedies to deprive cynical contract breakers of the fruits of their breaches of contract will lead to greater uncertainty in the assessment of damages in commercial and consumer disputes.

He emphasised that the present case involved no breach of fiduciary obligations and no invasion of property interests.

Lord Justice Rose

Lord Justice Rose distinguished Wrotham Park on the basis of the plaintiffs’ conduct. In Wrotham Park, the plaintiffs objected immediately and issued proceedings within a month. In the present case, the plaintiffs never wished to object to what the defendants did and waited over five years before issuing their writ.

Implications

This case confirms that the compensatory principle remains fundamental to contractual damages in English law. A plaintiff who has suffered no actual loss from a breach of contract is entitled only to nominal damages, regardless of the profit made by the defendant. The Court declined to extend restitutionary remedies to deprive contract breakers of profits where no property rights were invaded. The decision has significant implications for commercial contracts, confirming that the motive for breach and the profit obtained are generally irrelevant to the assessment of damages where the innocent party has suffered no compensable loss.

Verdict: Appeal dismissed. The plaintiffs were entitled to nominal damages only for the defendant's breach of covenant, as they had suffered no actual financial loss.

Source: County Council of Surrey v Bredero Homes Ltd [1993] EWCA Civ 7 (07 April 1993)