Ward & Anor v NFU Mutual Finance Ltd

In assessing damages for goods which were not of merchantable quality, the recoverable loss may include the reasonable cost of remedial measures required to perform functions which the defective goods should have performed. Those measures may include hiring alternative equipment and purchasing replacement equipment, provided they flow directly from the breach and constitute reasonable mitigation. A part-exchange of an existing asset does not necessarily mean that the new asset replaced that existing asset rather than the defective goods. The Court of Appeal will not interfere with factual findings or findings as to reasonable mitigation where no proper basis for doing so is shown. A late point on VAT may be permitted where there is no prejudice and the award would otherwise contain an error of law.

Mr and Mrs Ward, farmers, claimed damages from NFU Mutual Finance Ltd after purchasing a TM200 crawler tractor which was found to be unfit for its intended purposes and not of merchantable quality. The Oxford County Court awarded damages including the cost of a Massey Ferguson tractor, hired alternative machinery, repairs and other replacement equipment.

Liability was not challenged. The appeal concerned quantum, principally whether the Massey Ferguson was a replacement for the defective TM200 or for an existing John Deere tractor, whether the hire cost was recoverable, and whether VAT should form part of the award.

1. Appeal on ordinary quantum issues dismissed. The judge was entitled to find that the Massey Ferguson 3655 had been purchased to perform functions which the defective TM200 should have performed. The part-exchange of the John Deere was a means of financing the purchase and did not establish that the Massey Ferguson replaced the John Deere.
2. The distinction between the machinery was material. The Massey Ferguson was acquired for harrowing and drilling, the hired New Holland tractor for ploughing, and the Caterpillar tractor for other functions which the TM200 should have performed. The award of the hire cost was therefore not duplicative.
3. The steps taken by the claimants were reasonable measures in mitigation and flowed directly from the breach. Applying Bank of Portugal v Waterloo, the judge was entitled to award the resulting losses. The Court of Appeal could identify no basis for interfering with either the factual findings or the finding that the mitigation steps were reasonable.
4. Leave was granted to raise the VAT issue late. There was no prejudice to the respondents and, if the point succeeded, the award would contain an error of law. The respondents conceded that VAT should not be included because they were registered for VAT.
5. The appeal was dismissed on all issues except VAT. The VAT element of the award was allowed to be removed, and the appellants were ordered to pay the respondents’ costs, summarily assessed at £5,375.10.

• Oxford County Court: His Honour Judge King entered judgment for the claimants in damages and interest on 2 March 2001.
• Court of Appeal (Civil Division): The appeal was dismissed on the disputed quantum issues. The appeal was allowed on the VAT issue.