Aitchison v Gordon Durham & Company Ltd

Damages for breach of a joint-venture development agreement are assessed by identifying the profit the claimant would probably have received had the venture proceeded as intended. The date of breach does not require the court to ignore later events. Subsequent events may be considered where they provide the best evidence of what would probably have happened and of the resulting profit. Actual costs may be preferred to industry estimates where they more accurately establish development expenditure. Interest is discretionary and may run from the point when the profit became ascertainable and distribution could fairly have been required.

This was an appeal by Mr William Aitchison against the assessment of damages after Gordon Durham & Company Ltd was found to have breached a joint-venture agreement for developing the Plummer Tower site. Following an inquiry, His Honour Judge Maddocks QC treated the later Tabgain contract as the best evidence of the development in which Mr Aitchison would have shared. He calculated half the resulting developer’s profit, allowed building-related costs and awarded interest. The appeal challenged the valuation method, overheads, legal fees and interest.

Disposition. Aldous LJ delivered the leading judgment. Schiemann LJ and Butler-Sloss LJ agreed. The appeal was dismissed with costs, and the application to appeal to the House of Lords was refused.

1. Measure of damages. The agreement was a joint venture for developing land, not a contract for goods with an ascertainable market price. Applying the compensatory principle in Livingstone v The Rawyards Coal Co 5 AC 25, the task was to determine the development profit that would probably have been made and to award the claimant his agreed share.
2. Use of subsequent events. Assessment by reference to the breach date did not require the court to disregard later events. The court could consider what actually happened where it provided the best evidence of the loss that would probably have been suffered. This approach was supported by Bwllfa and Merthyr Dawr Steam Collieries 1891 Ltd v Pontypridd Water Works Co [1903] AC 426 and In re Bradbury [1942] Ch 35. The evidence showed that the later Tabgain transaction was the likely route for the joint venture, with Centreland as developer and Durham as builder. The later contract was therefore the best evidence of the subject matter and profit in which the claimant would have participated.
3. Costs. The judge was entitled to use actual project costs rather than trade estimates. The overheads incurred after Durham had assumed the builder’s role were properly attributable to building costs. Legal fees were deductible, including the payment relating to the replacement debenture, which was a legitimate business expense in the context of the overall transaction. In re North Settled Estates; Public Trustee v Graham [1946] 1 Ch 13 was distinguishable because it concerned valuation under a trust deed, while Williams Brothers v Ed T Agius Ltd [1914] AC 510 concerned a market-price measure for non-delivery of goods.
4. Interest. The rate of interest was a matter for the trial judge’s discretion and there was no basis for appellate intervention. The profit could not fairly be distributed until it was ascertainable. Interest was therefore properly calculated from the time when the relevant final payment was received, with later retained sums attracting interest only when received.

• Court of Appeal (Civil Division): On appeal against the order of His Honour Judge Maddocks QC dated 8 December 1993. The appeal was dismissed with costs. Application to appeal to the House of Lords was refused.
• High Court: The trial judge had previously found that a joint-venture agreement existed and had been breached. On the subsequent damages inquiry, judgment was entered for the claimant.