Aldgate Construction Company Ltd v Unibar Plumbing & Heating Ltd

In a contractual damages claim, recoverability, factual causation and subsequent intervening events are separate questions. The court must first identify whether the claimed kind of loss is recoverable under Hadley v Baxendale. It must then determine, on the balance of probabilities, what loss of that kind was caused by the breach. The but for test is necessary but not sufficient: losses occurring after the breach are not presumed to have been caused by it. In a loss-of-chance case involving the hypothetical conduct of a third party, the claimant must establish a real or substantial chance; the value of that chance is then assessed in quantifying damages. Reasonable mitigation does not break the chain of causation.

Aldgate Construction Company Ltd claimed damages from Unibar Plumbing & Heating Ltd for the admitted contractual breach which caused a fire at a house being developed by Aldgate. The fire delayed reconstruction and prevented Aldgate from pursuing its usual strategy of developing dual-property sites. Aldgate claimed lost profits and the loss of an opportunity to acquire and develop further properties.

The central issues were whether the claimed future development losses were legally recoverable, whether they were factually caused by the fire, whether Aldgate had established the relevant lost chance, and whether its later decision to undertake a single-property development broke the chain of causation or amounted to inadequate mitigation.

1. Judgment for the claimant. Aldgate was awarded £401,253, with interest and costs to be addressed later.
2. The court identified three distinct stages in analysing contractual loss: first, whether the type or head of loss was recoverable under Hadley v Baxendale; secondly, whether loss of that type was actually caused by the breach, as a question of fact; and thirdly, whether a subsequent event prevented recovery or reduced the loss. The accepted foreseeability principles did not dispense with proof of factual causation.
3. The but for test was not conclusive. Although every loss proved to have been caused by the breach would ordinarily not have occurred but for it, it did not follow that every loss which would have been avoided but for the breach was recoverable. The claimant retained the burden of proving the causal connection on the balance of probabilities.
4. Applying Allied Maples Group Ltd v Simmonds & Simmonds, where loss depended on the hypothetical action of an independent third party, Aldgate had to prove a real or substantial chance rather than a speculative chance. The percentage assessment of that chance was a matter of quantification.
5. On the evidence, Aldgate would probably have carried out one development broadly in parallel with Plot 3, Ermine Street, followed by a dual development. There was a 50 per cent chance that it would have acquired Plot 1 at Ermine Street. The court allowed the agreed profit figures, the assessed loss of opportunity and a credit for the Ramsey Heights development, producing total damages of £401,253.
6. Aldgate had acted reasonably in declining commercially unacceptable borrowing terms and in undertaking a single-property development when its available funds were insufficient for a dual development. The chain of causation was not broken. The fire caused the reconstruction delay, which prevented the subsequent developments, and Unibar had not accepted liability or offered compensation during the relevant period.