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

A licensee was wrongfully ejected from premises, but his claim for wasted expenditure on fixtures failed. The court held that damages cannot be used to escape a bad bargain or put a claimant in a better position than if the contract had been performed.

Facts

The claimant, Mr Middleton, was granted a contractual licence by the plaintiff, C & P Haulage, to occupy premises for use in his car repair business. The licence was for a renewable six-month period. A term of the agreement stipulated that any fixtures put into the premises by the licensee were to be left on the premises at the termination of the licence. Mr Middleton spent money on improving the property, including installing electrical wiring and other fixtures, knowing they could not be removed. Ten weeks before the end of a six-month term, C & P Haulage unlawfully ejected him from the premises. Mr Middleton was able to continue his business from his own garage at his home, and later found alternative business premises provided by the local council, so he did not suffer any loss of profit or incur additional rental costs. He brought a counterclaim for damages for breach of contract, seeking to recover the £1,767 he had spent on the improvements as wasted expenditure (reliance loss).

Issues

The central legal issue before the Court of Appeal was whether a claimant, following a breach of contract, can recover damages for wasted expenditure (reliance loss) when that expenditure would have been lost even if the contract had been properly performed. The core question was whether damages can place the innocent party in a better position than they would have been in had the contract been fulfilled.

Judgment

The Court of Appeal dismissed the appeal, upholding the trial judge’s decision to award only nominal damages. The court reasoned that the purpose of damages is to compensate for loss caused by the breach, not to reverse the consequences of a disadvantageous bargain.

Lord Justice Ackner

Lord Justice Ackner, delivering the leading judgment, affirmed the fundamental principle of contract damages established in Robinson v Harman (1848) 1 Ex 850, that the aim is to place the innocent party, so far as money can do, in the same position as if the contract had been performed. Mr Middleton was not claiming for loss of profits (expectation loss), but for his capital expenditure (reliance loss). While reliance loss can be claimed, it is subject to a critical qualification: the claimant cannot be put in a better position than if the contract had been lawfully completed.

In this case, the contract explicitly stated that the fixtures were to be left on the premises after the licence terminated. Therefore, even if C & P Haulage had not breached the contract and Mr Middleton had remained for the full six months, he would not have been able to recover the cost of his improvements. The breach did not cause this loss; the terms of the contract itself did. Awarding him the cost of the fixtures would put him in a better position than if the contract had been performed. Ackner LJ 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.

He distinguished cases like Anglia Television v. Reed [1972] 1 QB 60 where reliance loss was awarded, on the basis that in those cases it could not be shown that the claimant had made a bad bargain. Here, the defendant had successfully shown that the claimant’s expenditure would not have been recouped even if the contract was performed.

Lord Justice Fox

Lord Justice Fox concurred, adding that Mr Middleton’s loss did not flow from the breach of contract. He explained:

The fact is that the defendant has not lost anything by reason of the breach. He has lost the value of the expenditure which he has made in this garage. But he would have lost that anyway. He would have lost it because the terms of the contract were that he was not, at the end of the six months, to be permitted to take the fixtures away. Therefore the breach of contract has not resulted in that loss to him.

Fox LJ concluded that since the breach had not caused the claimant any loss (he was trading from his own home and suffered no loss of profits), the trial judge was correct to award only nominal damages.

Implications

C & P Haulage v Middleton is a leading authority on the assessment of damages for breach of contract, particularly concerning the relationship between expectation loss and reliance loss. It firmly establishes the ‘bad bargain’ principle: a claimant cannot use a claim for reliance loss to escape the consequences of a contract that would have been unprofitable or resulted in a loss anyway. The decision clarifies that the burden is on the defendant to prove that the claimant’s expenditure would not have been recouped had the contract been performed. If the defendant discharges this burden, the claimant cannot recover their wasted expenditure, as the loss was not caused by the breach but by the claimant’s own decision to enter into an unfavourable agreement.

Verdict: Appeal dismissed.

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