Aerospace Publishing Ltd & Anor v Thames Water Utilities Ltd

The prima facie measure for destruction of a chattel is its market or resale value. Cost of replacement or reinstatement may instead be recovered where the owner genuinely intends to reinstate, market value is inadequate for that purpose, and both reinstatement and its cost are reasonable mitigation.

For an unusual business archive, the absence of a fixed future publishing plan does not defeat reinstatement. The decision need only be commercially reasonable, not certain to produce profit. Staff time spent responding to a wrong is recoverable where its diversion and substantial disruption to the business are established. Interest on damages ordinarily runs from the date when the loss occurred, even if restoration is undertaken later.

A burst water main flooded premises occupied by Aerospace Publishing Ltd and Midsummer Books Ltd, damaging their publishing archives. Liability was undisputed because Thames Water was liable under section 209 of the Water Industry Act 1991. The dispute concerned quantum.

Holland J awarded damages principally on a reinstatement basis, having found that the claimants genuinely intended, and could reasonably seek, to restore the archive. He also awarded staff costs and limited interest. Thames Water appealed, principally contending that damages should be confined to diminution in sale value. The claimants cross-appealed on staff costs and interest.

The appeal was heard as a full rehearing on the evidence because the judge's reasons had been challenged as insufficient. The central issue was whether a commercially valuable but unusual archive should be valued by diminution in sale value or reasonable reinstatement cost.

1. Thames Water's appeal was dismissed, save for £6,047 claimed for freelance former employees; the cross-appeal was substantially allowed. The Court upheld the award of damages on a reinstatement basis.

2. Applying the principles stated in The Maersk Colombo [2001] EWCA Civ 717, market value was the prima facie measure, but replacement cost was available where it was reasonable mitigation. It would be very rare to award reinstatement cost to an owner who did not intend actually to reinstate. Here the archive's sale value was particularly difficult to assess and inadequate to reflect its commercial utility as a coherent collection.

3. Longmore LJ held that the evidence supported the finding that Aerospace remained an ongoing aviation business and genuinely intended to restore the archive for future publications. A business owner need not identify a fixed future publication, or prove that every future plan will be profitable, before reinstatement can be reasonable. The proper question was whether restoration was manifestly commercially unwise. It was not. Continued publication after the flood, achieved only with difficulty and extra cost, did not show that the archive was unnecessary.

4. Wilson LJ held that staff costs were recoverable for the seven employees. A claimant must prove diversion of staff time and significant disruption to its business. Once those matters are established, the court may ordinarily infer that the staff would otherwise have generated revenue at least equal to their employment cost, unless the defendant proves the contrary. The freelance work, however, appeared to concern preparation of the claim and was a costs issue rather than recoverable damage.

5. The judge erred in refusing interest on most restoration damages. The loss occurred when the archive was damaged, not when remedial expenditure would later be incurred. Interest should therefore run from the date of the flood on the restoration and artwork-loss figure. The Court also accepted the parties' compromise increasing the delay-of-profit award from £129,035 to £193,553, but rejected the remaining challenges to the interest methodology and rate.

• Court of Appeal (Civil Division): Thames Water's appeal was dismissed save for the freelance staff-cost item; the claimants' cross-appeal was substantially allowed: [2007] EWCA Civ 3.
• High Court of Justice, Queen's Bench Division: Holland J awarded damages on a reinstatement basis, together with consequential losses, staff costs and interest: [2005] EWHC 2987 (QB).