Hajigeorgiu v Vasiliou

Loss of profits from a commercial lease is recoverable where, viewed at the time of contracting, the landlord would reasonably have contemplated that breach of the landlord’s obligations would prevent the tenant from operating the intended business. The amount is not limited by the rent or by the landlord’s benefit under the lease. Where the breach causes loss of an opportunity to earn projected profits, assessment may require valuing the chance of achieving them and discounting the projections for commercial risks. A new mitigation argument cannot ordinarily be raised for the first time on appeal when the trial judge had no opportunity to assess it. Challenges to a court-appointed joint expert’s appointment or competence should be taken when the appointment is made.

The claimant leased commercial premises from the defendant intending to operate a restaurant. The defendant’s conduct rendered the restaurant unusable, and the claimant accepted the defendant’s repudiation of the lease. In earlier proceedings, damages for lost profits were assessed for an initial period. In the subsequent proceedings, the county court assessed further lost profits at £422,186 and the assignment value of the unexpired lease term at £300,000.

The defendant sought permission to appeal on 11 grounds, challenging the recoverability and quantification of lost profits, mitigation, the expert evidence, and the lease valuation. The renewed application followed refusal of permission on the papers.

1. Permission and disposition. The renewed application was refused on grounds 1–5 and 7–11. Permission was granted on ground 6, subject to the applicant recasting it to identify more clearly the arguable issue concerning the proper assessment of lost-profit damages.
2. Recoverability and scope of responsibility. The intended purpose of the lease was to enable the tenant to operate a restaurant. It was therefore foreseeable at the time of the grant that breaches of the landlord’s obligations preventing that operation would cause loss of profit. Such loss was within the scope of the landlord’s assumed responsibility. Transfield Shipping Inc v Mercator Shipping Inc [2009] AC 61 concerned a materially different commercial situation and did not undermine that conclusion.
3. Quantification. Once causation and the ability to trade successfully were established, the loss could not necessarily be measured solely on the balance of probability. The arguable issue was whether the court should assess the chance of achieving the projected profits and discount them to reflect the commercial risks that the tenant might not achieve those projections. The principles summarised in Parabola Investments Limited v Browallia Cal Limited [2010] EWCA Civ 486, paragraph [23], were relied on in identifying that issue.
4. New points and expert evidence. A mitigation argument not advanced at trial could not be raised for the first time on appeal, because the trial judge had not been able to assess it. Challenges to the appointment or fitness of a joint expert were too late where the appointment had been made after a contested hearing and had not been appealed. An expert may revise an earlier view if the change is explained and the judge considers the revised opinion reliable.
5. An expert’s duty to the court requires the expert to express a revised view formed in the course of the case. The suggested disproportion between the damages and the rent, the factual challenge to the tenant’s ability and intention to trade, and the challenge to the expert’s assumptions disclosed no arguable basis for permission.

• Court of Appeal (Civil Division): renewed application for permission to appeal. Lloyd LJ had refused permission on the papers on 29 March 2010. Rimer LJ granted permission only on Ground 6 and refused it on the remaining grounds.
• Central London County Court: His Honour Judge Dight assessed damages by order dated 11 January 2010, awarding £422,186 for lost profits and valuing the lease assignment at £300,000.