Hampshire County Council v Supportways Community Services Ltd.

An inquiry as to damages should proceed where a claim is speculative but has a realistic prospect of producing a positive result. The court must identify the contractual and factual hurdles affecting liability and quantum; speculation alone does not justify refusing an inquiry. Where the alleged loss depends on what the contracting parties would have done, the claim is assessed by asking what would probably have happened, rather than as loss of a chance. A fresh review carried out after a breach does not automatically defeat a damages claim where its validity is honestly and realistically challenged. The inquiry may be made conditional on payment of costs.

The Company claimed relief following the Council’s 2004 review under clause 11.3. Mitting J found that the Council had breached the clause and held that the Company was entitled to specific enforcement. The Council then carried out a second review, which resulted in a decision not to enter into a new contract. The Company challenged that review and resisted the Council’s strike-out application.

After judgment in the appeal, the Court of Appeal considered whether to direct an inquiry as to damages, the consequences of the second review and the Company’s election of specific performance, the appropriate costs order, and permission to appeal. The central issue was whether there was a realistic prospect that an inquiry could produce a positive damages award.

Decision

1. Permission to appeal. Permission to appeal to the House of Lords was refused. The issues, even if important, did not justify permission being granted by the Court of Appeal.
2. Inquiry as to damages. The Company’s claim was highly speculative. The inquiry would need to determine the proper basis of the review, its likely result, whether it would probably have led to a new contract, whether that contract would have been profitable, and how any profitability would translate into damages. Those hurdles did not mean that there was no realistic prospect of a positive result. The application for an inquiry therefore could not properly be rejected.
3. Loss of a chance. Because the issue concerned what the Council and the Company themselves would probably have done, the claim was not properly characterised as loss of a chance. The court applied the approach illustrated by Allied Maples Limited v Simmons and Simmons [1995] 1 WLR 1602.
4. Election and the second review. The Company’s election between specific performance and damages, and the effect of specific performance, had to be considered in accordance with Johnson v Agnew [1980] AC 37. The Company had obtained what appeared to be specific performance through the second review. However, it alleged in good faith, and with some prospect of success, that the second review did not comply with clause 11.3. The court therefore could not treat the review as conclusively defeating the damages claim. If the Company failed to establish non-compliance, the damages claim would fail. If it succeeded, the second review might assist the Council but would be unlikely by itself to determine the damages issue.
5. Costs and conditions. The Council was awarded 50% of its costs below and 90% of its appeal costs. The balance was reserved to the court deciding the damages issue. The inquiry was stayed until an appropriate sum on account of those costs was paid into court or an agreed bank account. If the sum was not paid by the date fixed, the order for an inquiry would be rescinded.

1. Court of Appeal (Civil Division): Following judgment in the appeal, refused permission to appeal to the House of Lords, directed an inquiry as to damages subject to conditions, and made a costs order.
2. High Court of Justice, Queen’s Bench Division (Administrative Court): Mitting J found a breach of clause 11.3 and held that the Company was entitled to specific enforcement. No citation for that judgment is stated in the judgment.