Anglia Television Ltd v Reed 29 Jul 1971 [1972] 1 QB 60, CA

Facts

The plaintiffs, Anglia Television Ltd., planned to produce a television film and incurred significant expenses in preparation before securing a lead actor. These pre-production costs, totalling over £2,750, included fees for a director, a designer, a stage manager, and other critical staff. In August 1968, they contracted with the defendant, Robert Reed, a well-known American actor, to play the leading role. The contract was finalised on 30 August 1968. However, on 11 September 1968, the defendant’s agent repudiated the contract, informing the plaintiffs that Mr. Reed was already committed to another engagement in the United States and would not be available. Anglia Television accepted this repudiation. Unable to find a suitable substitute for Mr. Reed, they were forced to abandon the film project entirely. They subsequently sued the defendant for damages for breach of contract.

Issues

The primary legal issue before the Court of Appeal was the correct measure of damages. The plaintiffs did not claim for loss of profits, as it was impossible to ascertain what, if any, profit the film would have generated. Instead, they claimed for their total wasted expenditure, which included costs incurred *before* the contract with the defendant was concluded. The key question was whether a party could recover for pre-contractual wasted expenditure as damages for a breach of contract.

Judgment

The Court of Appeal, with Lord Denning M.R. delivering the leading judgment, unanimously held that the plaintiffs were entitled to recover the full amount of their wasted expenditure, including the costs incurred before the contract was made with the defendant.

The Plaintiff’s Election

Lord Denning M.R. affirmed the principle that a plaintiff in a breach of contract case has an election between two methods of claiming damages. They can claim for expectation loss (loss of profits) or reliance loss (wasted expenditure).

It seems to me that a plaintiff in such a case as this has an election: he can either claim for loss of profits; or for his wasted expenditure. But he must elect between them. He cannot claim both. If he has not suffered any loss of profits – or if he cannot prove what his profits would have been – he can claim in the alternative the expenditure which has been thrown away, that is, wasted, by reason of the breach.

Recovery of Pre-Contractual Expenditure

The central point of the judgment was the extension of reliance damages to cover pre-contractual costs. The court reasoned that such expenses were recoverable provided they were reasonably within the contemplation of the parties as likely to be wasted if the contract were broken. The defendant, upon entering the contract, must be assumed to have known that such preparatory expenses had been incurred and that his breach would render them futile.

If the plaintiff claims the wasted expenditure, he is not limited to the expenditure incurred after the contract was concluded. He can claim also the expenditure incurred before the contract, provided that it was such as would reasonably be in the contemplation of the parties as likely to be wasted if the contract was broken.

The court reasoned that it was ‘just and reasonable’ that the defendant, who had caused the loss by his breach, should bear the cost of the wasted expenditure. The defendant’s breach made the prior expenditure, which had been undertaken in anticipation of the film’s production, entirely worthless.

Implications

The decision in Anglia Television Ltd v Reed is a landmark authority on the assessment of damages in contract law. It significantly clarified and expanded the scope of ‘reliance loss’. Its primary importance lies in establishing that damages can include pre-contractual wasted expenditure. This provides vital protection for claimants, particularly in industries like entertainment or construction where substantial investment is necessary before all contracts are finalised. The case sets a precedent that when a party’s breach renders a project abortive, they can be held liable for all expenses foreseeably wasted by their failure to perform, not just those incurred after they formally joined the venture. This decision serves as an important alternative route to damages where proving lost profits is speculative or impossible, ensuring that the innocent party is compensated for the expenditure thrown away due to the breach.

Verdict: Appeal dismissed. The court upheld the judgment for the plaintiffs to recover damages of £2,750, representing their total wasted expenditure.