Barkin Construction Ltd v Re-Source America International Ltd

Where damaged or destroyed property must be replaced, the claimant’s recoverable loss is the reasonable replacement cost less any expense saved because the destroyed property no longer requires refurbishment or preparation for use. That deduction is distinct from an impermissible “new for old” deduction where the claimant receives an unwanted and unavoidable benefit.

A claim for consequential loss must be proved by reference to what actually occurred during the period in which the loss was allegedly suffered. Later market conditions and closure may therefore be relevant. The claimant must also account for saved operating costs, and an appellate court may refuse a remittal where the proposed case was not advanced at trial and a further hearing would be disproportionate.

Re-Source America International Ltd operated a business refurbishing used cable spools owned by Corning Inc. A fire caused by Barkin Construction Ltd’s negligence destroyed about 130,000 spools awaiting refurbishment. The Technology and Construction Court awarded the cost of purchasing new replacement spools, making no deduction for saved refurbishment costs.

Barkin appealed the quantum judgment, arguing that Corning’s saved refurbishment expenditure had to be deducted. Re-Source responded that it would have earned the refurbishment charges, so no deduction was required, or alternatively that its own loss should be assessed and the issue remitted. The central questions were the proper measure of Corning’s loss, whether Re-Source had proved an equivalent loss of its own, and whether a new case should be permitted on remission.

1. Appeal allowed. The award had to be reduced by the amount saved because Corning no longer had to pay Re-Source to refurbish the destroyed spools. Corning’s loss was the cost of replacing the spools with new spools, less the saved cost of making them usable. Re-Source accepted that this deduction was required, and the judge’s contrary reasoning was wrong.
2. The saved-refurbishment deduction was not a “new for old” deduction. Barkin accepted that no deduction was available for an unwanted and unavoidable benefit where new property replaced old property, applying the reasoning referred to in Harbutt’s Plastircine v Wayne Tank & Pump Co. [1970] 1 QB 447. The deduction here concerned expenditure directly avoided by the destruction.
3. Any financial loss suffered by Re-Source through being unable to refurbish the spools was recoverable if attributable to the fire, but Re-Source had not proved a loss equal to the full refurbishment revenue. It had not shown that it was short of work after the fire, could not have processed anything like 100,000 additional spools before the plant closed, and was not trading profitably. Any award would also have required credit for saved operating costs.
4. The claim had to be assessed by examining what actually happened after the fire during the period when the loss was said to have been suffered. It was untenable to assess it solely at the date of the fire or replacement purchase while disregarding the subsequent fall in the fibre-optics market and closure of the plant.
5. The court declined to remit the issue. Re-Source sought to advance a new and complicated case that it would have remained open and profitably refurbished all the destroyed spools. That case had not been made at trial, was of doubtful merit, and a further hearing would be disproportionate. The agreed reduced amount was to be substituted for the judge’s award, with the costs of the appeal subject to detailed assessment if not agreed.

• Court of Appeal (Civil Division): [2005] EWCA Civ 97. Appeal from part of a quantum judgment of His Honour Judge Thornton Q.C. in the Technology and Construction Court. Appeal allowed and the award reduced by the saved refurbishment cost.
• Technology and Construction Court: judgment awarded the cost of purchasing new replacement spools and made no deduction for saved refurbishment costs.