Loss of Opportunity Claims (Aldgate Construction and Unibar Plumbing)

Dated 17 August 2011 have actually pursued, merely the number it would have been Author Rebecca Parry (Senior Consultant for Blake Newport) expected that they would have pursued based on their build rate and the availability of local opportunities. Unibar argued that once The courts are clear in their approach that any direct loss and/or the initial effects of the fire were compensated there was no further expense claim requires an assessment process on a parity to that recoverable loss. of damages awarded for breach of contract (Wraight Ltd v P H & T (Holdings) Ltd [1968] and FG Minter Ltd v Welsh Health Technical Mr Justice Akenhead considered that the issues for consideration in the case were firstly, what would have happened in terms of Services Organisation [1980]). Aldgates trading activities of purchasing, developing and selling Under a direct loss and/or expense claim, sums are often claimed properties if there had been no fire. Secondly, was Aldgate entitled for loss of profit. There has been some debate over what to the alleged profit it had lost as a result of the fire relating to constitutes a loss of profit and how it is demonstrated. The recent properties which it was unable to develop? Finally, was Aldgate case in the Technology and Construction Court of Aldgate entitled to the additional profit which would have been associated Construction Company Ltd v Unibar Plumbing & Heating Ltd [2010] with the economies of scale achieved by working on two properties EWHC 1063 has confirmed that a claim for loss of profit can on one site at a time? include loss of opportunity as well as loss actually incurred. The case raised interesting issues of causation and in particular on the applicability of the but for test of causation. The judgment sets out the various steps which have to be taken in analysing the extent to which different types of loss, and the losses said to have been actually suffered, are recoverable. The case concerned damages flowing from a fire on 9 March 2005 which was caused by the defendants (Unibar) admitted breach of contract. The claimant (Aldgate) had an established practice of acquiring and developing dual property sites due to the economical advantages of constructing two properties on one site rather than single properties on separate sites. Aldgate were self funded with the profit from the sale of each development used to fund the subsequent. Unibar were aware that Aldgate was a self funded business, and of the fact that it was Aldgates established practice and policy to develop dual property sites. There has been great debate with regards to how to establish which type of loss and expense has been suffered and how that might be recoverable. Mr Justice Akenhead reviewed the law in place and broke it down into steps for consideration, which can be summarised as follows: Firstly, one must determine whether the type of loss claimed falls within the two limbs of Hadley v Baxendale (1854) 9 Ex 341, that is, was the loss claimed of a type or kind that would either: - naturally arise from the breach; or - have been in the contemplation of the parties at the time they made the contract as the probable result of the breach? If the loss meets one of the above criteria, on the balance of probabilities what element of that loss was actually caused by the breach? On this point the so-called but for test may be of relevance. Finally, where there any concurrent or later events that may have contributed to the loss (this may include the new intervening act or force or in some cases contributory negligence)?

Aldgate claimed that as a result of the fire they had been prevented from developing a further three dual property sites until the sale of the fire damaged property, and receipt of the associated funds. Aldgate also claimed that they had suffered a loss of profit on the development upon which the fire occurred as they could not carry out the works on the two properties simultaneously. The claim was therefore not a claim for a loss actually incurred as a matter of fact, In reference to the but for test, Mr Justice Akenhead concluded that where it was relevant it is (almost) axiomatic that all but a loss of opportunity. recoverable losses proved to have been caused by the breach of This as a concept was challenging. Aldgate were unable to provide duty would not have been incurred but for the breach of duty. It conclusive evidence of exactly which developments they would does not follow from this logic that all losses incurred which would
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Loss of Opportunity Claims (Aldgate Construction and Unibar Plumbing) Cont.

not have been incurred but for the breach of duty are necessarily was satisfied that the Unibars breach had resulted in a loss of recoverable or will necessarily have been caused by the breach of opportunity for Aldgate to engage in other developments, and duty. awarded damages comprising of the loss of profit on three properties and 50% of the marginal loss of opportunity to carry out Mr Justice Akenhead explained this as if a claimant suffers a dual property development. This was because the judge business disruption as a reasonably foreseeable consequence of concluded that based on the facts there was no more than a 50% the breach of contract in question, it will not be able to recover all chance that the Aldgate would have procured a dual development business disruption which follows which merely might not have plot if it had had the funds. been suffered if the breach had not occurred. here can be no presumption of fact that all losses within a recoverable category The Court also rejected a claim submitted by Unibar that Aldgate which are incurred after the breach by the claimant are caused by had not done all that was reasonably required to mitigate its losses, the breach. It is necessary factually to analyse the facts and the and made the point that the losses had actually been exacerbated history to see if on a balance of probabilities the losses at different by the fact that it was Unibar who had denied liability and refused stages were caused by the initial breach. Mr Justice Akenhead to compensate Aldgate for any of the losses it had claimed. also concluded that the onus of proof remains with the claimant whom seeks to establish any losses. In conclusion, Aldgate v Unibar has held that in a claim for loss of business opportunity, the court does not necessarily require the Mr Justice Akenhead then considered relevant loss of a chance claimant to prove exactly what they would have done but rather cases in consideration of the fact that Aldgate were claiming they that the opportunities were available and sufficient likelihood that lost the opportunity to develop further dual property developments. the claimant would and could have gone ahead. The most relevant of cases to Aldgate v Unibar was that of Allied Maples v Simmonds & Simmonds [1995] 1 WLR 1602. This case was in relation to the negligence of a solicitor and a consideration in the context of damages dependant on what the claimant may or may not have done had there been no negligence. The solicitors (Simmonds and Simmonds) were acting for the claimant (Allied Maples) in a takeover of a group of companies. The solicitors failed to warn the Allied Maples of potential liability that may arise under the transaction. The transaction was completed and risk of liability materialised leaving Allied Maples liable to pay substantial sums. Allied Maples sought to recover some of this from the solicitors arguing that if they had been advised correctly, there was a chance that they would have been able to negotiate out of the liability. In reaching the decision in Allied Maples v Simmonds and Simmonds the judge considered other loss of opportunity cases such as Chaplin v Hicks [1911] 2 KB 786 and later on Davies v Taylor [1995] AC 207: in my judgement, the plaintiff must prove as a matter of causation that he has a real or substantial chance as opposed to a speculative one. If he succeeds in doing so, the evaluation of the chance is part of the assessment of the quantum of damage, the range lying somewhere between something that just qualifies as real or substantial on the one hand and near certainty on the other. I do not think that it is helpful to seek to lay down in percentage terms what the lower and upper ends of the bracket should be, It was held that Allied Maples were entitled to recover a sum to reflect their loss of a chance of negotiating out of liability. In conclusion, the case holds that where a result depends on what a third party would have done in a hypothetical situation, the claimant only has to demonstrate that there was a more than speculative chance, rather than on the balance of probabilities. After analysing the facts the judge in the case of Aldgate v Unibar
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