Surrey County Council v Bredero Homes Ltd

The Court of Appeal held that common law damages for breach of contract are compensatory and ordinarily cannot be used to deprive a deliberate breacher of his profit.

The decision in [1974] 1 WLR 798 (Wrotham Park) operates as an equitable remedy under the jurisdiction conferred by Lord Cairns' Act and cannot be read across to create a general restitutionary remedy at common law for contract breaches.

The appellants were two local authorities which had granted land to the respondent subject to covenants to develop in accordance with a specified planning permission.

The respondent developed part of the land pursuant to a later planning permission allowing more houses and thus breached the covenants.

The appellants sued for damages representing the respondent's gain from the breach rather than for loss suffered.

The central issue was whether, at common law, a contract claimant who has suffered no compensatory loss may recover damages reflecting the defendant's profit or loss of bargaining power.

1. Outcome: The appeal was dismissed and the award of only nominal common law damages was upheld.
2. The court affirmed the basic compensatory principle of common law damages for breach of contract. The object is to compensate the victim for loss or to recoup reliance expenditure. Cases such as [1854] 9 Ex 341 (Hadley v Baxendale) and [1912] A.C. 673 (British Westinghouse) show that common law damages aim at compensation.
3. The Court distinguished the decision in [1974] 1 WLR 798 (Wrotham Park). That case was decided in the exercise of jurisdiction under Lord Cairns' Act to award damages in lieu of an injunction. Its reasoning rests on equitable and restitutionary considerations and is not authority for creating a general common law restitutionary remedy for contract breaches.
4. Although one member of the court considered [1974] 1 WLR 798 a defensible development based on restitutionary principle, the majority declined to extend that principle to ordinary common law contractual claims where the claimant has suffered no loss.
5. The court rejected the submission that deliberate breach producing a defendant's profit automatically justifies awarding the claimant the defendant's gain at common law. The availability of restitutionary relief was limited by principle and policy concerns including predictability and commercial consequences.
6. The conduct of the claimant may be relevant. A claimant who does not seek or pursue equitable relief promptly may be disentitled to substantial equitable damages in lieu of injunction.
7. Order: Appeal dismissed with costs. Costs included those arising from the respondent's notice.

• Court of Appeal (Civil Division): Appeal from Chancery Division (Ferris J). Appeal dismissed; costs awarded to respondent including costs of Respondent's Notice.
• High Court (Chancery Division): First instance judgment by Mr Justice Ferris awarded nominal damages only; appealed to the Court of Appeal.