Saleslease Ltd v Davis

For conversion or wrongful detention of goods, consequential loss exceeding the goods’ market value is recoverable only if the loss was reasonably foreseeable or could reasonably have been anticipated by the defendant. A loss arising from an exceptional opportunity peculiar to the claimant may be too remote unless the defendant knew the circumstances that made delay likely to destroy that opportunity.

Notice of a proposed transaction and its approximate value does not necessarily suffice. The defendant must have enough information reasonably to anticipate that delay, rather than merely postponing the transaction, will cause the exceptional opportunity to be lost.

The plaintiffs owned MOT testing equipment situated on premises belonging to the defendant. After the equipment’s original lessee repudiated its lease, the plaintiffs obtained an exceptional opportunity to lease it to Mr Gyles for £13,194. The defendant subsequently refused to release the equipment unless storage, reinstatement and other charges were paid. The opportunity with Mr Gyles was lost, and the equipment was eventually returned and sold for £5,000.

A District Judge found that the proposed transaction would have proceeded and awarded the plaintiffs substantially the whole contractual amount. The defendant appealed. The central issue was whether that exceptional loss was too remote because he had not been told that Mr Gyles represented the plaintiffs’ only opportunity to lease the second-hand equipment at the higher value.

1. By a majority, the appeal was allowed. Waller LJ delivered the leading judgment, with which Butler-Sloss LJ agreed. The damages award was set aside and judgment was entered for the defendant. Schiemann LJ dissented.

2. Per Waller LJ, the applicable rule for conversion and wrongful detention was that consequential loss exceeding the goods’ market value was recoverable only where it could reasonably have been anticipated by the defendant. The majority judgments in The Arpad [1934] P 189 were binding. Their approach was consistent with the reasonable-foreseeability principle recognised in The Wagon Mound [1961] AC 388.

3. The defendant knew that the plaintiffs proposed to assign or novate the former lease and expected to receive about £12,500. He did not know that Mr Gyles was the only possible assignee, that leasing second-hand equipment was exceptionally rare, or that delay would destroy rather than postpone the opportunity. He therefore could not reasonably have anticipated the special loss claimed.

4. The plaintiffs had not established any recoverable loss from the delay. Apart from the exceptional proposed lease, the equipment was worth £5,000, which was both the amount previously offered by the defendant and the amount ultimately obtained on sale. The resulting damages were therefore nominal, and judgment was entered for the defendant.

5. Waller LJ considered, without deciding, that an award based on the full proposed lease receipts would also have required a realistic assessment of the chance that Mr Gyles would pay throughout the two-year term. Butler-Sloss LJ agreed that no compensable loss had been proved.

6. Schiemann LJ dissented. In his view, a tortfeasor who is accurately warned of the financial consequences of persisting in an unlawful detention should compensate the resulting loss. The warning that a proposed assignment worth about £12,500 would fail was sufficiently accurate, even though the plaintiffs did not explain the limited prospects of later mitigation.

1. Court of Appeal: By a majority, allowed the defendant’s appeal, set aside the damages order and entered judgment for the defendant. Leave to appeal to the House of Lords was refused.

2. High Court, Queen’s Bench Division, Sheffield District Registry: The plaintiffs obtained judgment under Order 14 for damages to be assessed. The District Judge subsequently found that the proposed transaction with Mr Gyles would have proceeded and awarded the contractual receipts, less £500 for accelerated payment.