Leche Pascual SA v Collin & Hobson Plc

Prospective loss of profits following a failure to supply a product may require an informed commercial estimate where there are no comparable sales of the identical product. The court may consider historical sales, market evidence, product advantages, contemporaneous commercial projections and expert evidence, while recognising the limits of each. It need not adopt sales at the date of breach as its mandatory starting point. Uncertainty may be addressed by an overall discount based on judgment rather than exact calculation. An appellate court should not interfere where the judge considered the relevant evidence, explained the reasoning and made no error of principle.

The claimant supplier appealed against the High Court’s assessment of damages after admitting breach of an agreement to supply single-pot yoghurt. The trial judge awarded damages for lost profits over the minimum 12-month supply period, based on projected sales of branded and own-brand products, subject to a 25 per cent discount for uncertainty and risk. The appeal challenged the evidential approach to projected sales, the treatment of particular customer and own-brand evidence, the weight given to the successful launch of multi-pack yoghurt, and the level of the discount. The central issue was whether the assessment disclosed an error of principle or was otherwise one with which the appellate court should interfere.

Lord Justice Carnwath delivered the leading judgment. Lord Justice Potter and Mr Justice Bodey agreed.

1. Appeal dismissed. The trial judge was entitled to assess damages by reference to anticipated profits during the full 12-month minimum period of supply. The assessment was necessarily speculative because the breach concerned non-supply of a specific product for which there were no directly comparable previous sales.
2. The appropriate approach was one of informed commercial estimation. The judge was entitled to consider the whole evidential picture, including historic Campina sales, the condition of the existing customer base, evidence of the market, the advantages of the Leche Pascual product, the successful launch of the multi-pack product, contemporaneous estimates for own-brand sales and the expert evidence. Historic sales figures were properly treated as one aspect of the evidence, rather than as a mandatory starting point.
3. The judge had adequately addressed the relevant risks. The contemporaneous estimate of own-brand sales was capable of supporting the assessment because it was made for the purpose of entering into the contract, accepted by both parties as feasible, and supported by the commercial circumstances. The judge was also entitled to reject the assumption that each own-brand sale would displace an equal branded sale.
4. A discount for uncertainty in a prospective loss assessment is inevitably an arbitrary exercise based on overall judgment. The 25 per cent discount was open to the judge on the evidence, and there was no basis for substituting a different percentage.
5. The judge was not shown to have overlooked a material issue. In particular, an appellate criticism based on an apparent inconsistency in customer projections could not succeed where the point had not been drawn to her attention as a material issue at trial. Overall, the assessment was careful, fully reasoned and free from error of principle. The formal order was: appeal dismissed.

• Court of Appeal (Civil Division) — On 15 June 2004, the court dismissed the appeal in [2004] EWCA Civ 700, upholding the assessment of damages.
• High Court of Justice, Queen’s Bench Division, Mercantile Court — On 20 August 2003, HH Judge Alton assessed damages for lost profits over the minimum supply period, using projected sales volumes reduced by 25 per cent for uncertainty and risk.