UYB Ltd v British Railways Board

Compensatory damages must place the claimant in the position it would have occupied absent the wrong. The appropriate method depends on the circumstances and must avoid both under-compensation and double recovery. Where a proposed profit-making business has effectively been destroyed, the court may award profits earned before the destruction together with the business’s capital value at that date, rather than projected profits for the whole intended period. The claimant must mitigate continuing loss by seeking alternative premises, a substitute venture, or another reasonable use of its resources. Interest is discretionary. An appellate court should interfere only where the discretion was misdirected or exercised outside the generous ambit of reasonable disagreement. Without-prejudice material remains subject to strong protection, absent unambiguous impropriety.

UYB Ltd leased railway arches from the British Railways Board for a proposed leisure business. Water penetration caused by works to the roadway above the arches made the premises unusable, and the venture was abandoned. The Bristol Mercantile Court awarded damages calculated by reference to profits up to November 1993 and the capital value of the hypothetical business at that date, reduced for saved expenditure and interest. It also excluded from the interest calculation the period during which the claimant had not disclosed the eventual scale of its claim.

UYB appealed, arguing that it should receive additional profits for the period in which alternative premises could have been found and that the interest discretion had been wrongly exercised. The central issues were the proper measure of loss, the effect of mitigation, and the relevance of a without-prejudice draft expert report.

1. Appeal dismissed. The trial judge was entitled to assess damages by awarding profits from the date when the business would have opened until 11 November 1993, together with the value which the business would have had when it became clear that the original venture could not proceed, subject to appropriate deductions.
2. The overriding principle is that damages should provide fair compensation for the loss caused by the wrong. The assessment is fact-sensitive. The judge was entitled to treat 11 November 1993 as the date when the claimant’s expectations were destroyed and to value the lost business at that date.
3. The claimant was under a duty to mitigate continuing loss. On the facts, mitigation required seeking alternative premises or an alternative venture in which its human and financial resources could be employed. The directors instead pursued other profitable businesses. Awarding further projected profits on top of the value of the lost business risked compensating the claimant twice.
4. The exclusion of interest for the period from service of the writ to disclosure of the expert report was a discretionary case-management and compensation decision. Applying the approach in G v G [1985] 1 WLR 647, there was no misdirection and the decision fell within the generous ambit of reasonable disagreement.
5. The court was not persuaded that the without-prejudice draft report should have been considered. The rule protects candid settlement discussions, subject to recognised exceptions. The threshold identified in Forster v Friedland [1992] CA Transcript 1052 was unambiguous impropriety. In any event, the draft did not reveal the eventual magnitude of the claim and would not have altered the exercise of discretion.
6. Appeal dismissed with costs.

• Court of Appeal (Civil Division): appeal from two judgments of His Honour Judge Jack QC in the Bristol Mercantile Court. Appeal dismissed with costs.