John Grimes Partnership Ltd v Gubbins

In contractual remoteness, the ordinary rule remains that loss is recoverable where, at the time of contracting, a reasonable person would have regarded that type of loss as not unlikely to result from breach. The law normally implies responsibility for such loss. The Achilleas qualification is exceptional. It applies where the contract, commercial background or other special circumstances show that responsibility for the particular loss was not undertaken. A fall in property values during delay is not inherently too remote. Market movement, lack of control over the market, and a disparity between the contractual fee and the loss do not, without more, displace the ordinary rule.

The respondent engaged the appellant consulting engineer to design estate roads and drainage and obtain the necessary highway approval for a residential development. The engineer failed to complete the work by the agreed date. A replacement engineer completed the work, causing a delay of about 15 months.

The trial judge allowed the respondent’s counterclaim in principle, finding that the delay caused loss including a reduction in the market value of the development and that the loss was not too remote. The appeal concerned liability for that reduction in value. The central issue was whether the conventional contractual remoteness test was displaced by the assumption-of-responsibility analysis in The Achilleas.

1. Appeal dismissed. The Court of Appeal unanimously held that the trial judge had correctly approached the issue of remoteness and was entitled to find the market-value loss recoverable.
2. The ordinary contractual test derives from Hadley v Baxendale (1854) 9 Exch. 341 and was developed in The Heron II (Koufos v C. Czarnikow Ltd) (1969) 1 AC 350. A type of loss is not too remote where, at the time of contracting, the defendant ought reasonably to have realised that it was not unlikely to result from breach. The defendant’s actual knowledge is relevant to that assessment.
3. The Achilleas (Transfield Shipping Inc v Mercator Shipping Inc) 2008 UKHL 48; (2009) 1 AC 61 did not replace that ordinary test. It recognised an exceptional qualification based on the contract as a whole, its commercial background, and any evidence showing that responsibility for the particular type of loss was not undertaken. The Court adopted the summary in Supershield (Siemens Building Technologies Ltd v Supershield Ltd) 2010 EWCA Civ 7; (2010) 2 All ER (Comm) 1185.
4. This was not an exceptional case. There was no evidence of a general property-market understanding that a consulting engineer would not assume responsibility for loss caused by delay and falling values. The fact that the engineer did not control the market was not decisive. A property-value fall of about 14 per cent over just over a year, following an egregious 15-month delay, was not comparable to a rapid and extreme movement in a highly volatile market. SAAMCO (Banque Bruxelles v Eagle Star Insurance Co Ltd) (1997) AC 191 concerned negligent valuation rather than delay and provided little guidance.
5. The modest contractual fee compared with the potential loss was only a possible indication against assumed responsibility. It could not, by itself, exclude liability. Lord Justice Tomlinson separately observed that the effect of extreme market volatility remained open and doubted any simplistic rule that losses arising from such volatility are automatically irrecoverable.

1. Court of Appeal (Civil Division) — In [2013] EWCA Civ 37, the appeal against the finding that the market-value loss was recoverable was dismissed unanimously.
2. Exeter County Court (Technology and Construction Court) — HHJ Cotter QC found that the engineer’s breach delayed the development by about 15 months, caused the relevant loss, and did not make that loss too remote.