Manton Hire and Sales Ltd v Ash Manor Cheese Company Ltd

Mitigation does not require an innocent party to accept any proposal from the contract-breaker. The claimant may need to negotiate, or even initiate negotiations, where that is reasonable. The standard is not exacting and depends on all the circumstances. A proposal should contain enough reliable information to permit an informed decision, particularly where safety, legality, ownership, warranties and implementation are in issue. An inadequate initial proposal does not prevent the contract-breaker from making a better one. Nor does rejecting the first proposal necessarily shut the door to further discussion. A claimant may reasonably reject an unparticularised and unconvincing proposal without inviting a proper replacement offer.

Ash entered a five-year hire agreement for a reach forklift supplied following Manton’s recommendation. The forklift was unsuitable for the racking at Ash’s premises. The owner, Albury Asset Rentals Ltd, terminated the hire agreement and recovered accelerated rentals from Ash.

Ash brought a Part 20 claim against Manton for an indemnity. At trial, Mr Recorder Bould held that Ash had not failed reasonably to mitigate its loss by rejecting Manton’s proposed modification of the forklift. Manton appealed, arguing that Ash should have invited or permitted a more detailed proposal and that [2009] EWCA Civ 580 restricted a contract-breaker to one opportunity to make an offer in mitigation. The central issue was whether Ash’s conduct was unreasonable.

1. Appeal dismissed. Tomlinson LJ delivered the judgment of the court, with Lloyd and Floyd LJJ agreeing. Manton was liable to indemnify Ash for the sum paid to Albury.
2. The mitigation principle, stated in [1912] AC 673 at 689, does not impose a freestanding duty requiring a claimant to act for the defendant’s benefit. A claimant is free to act in its own interests, but cannot recover loss properly attributable to its failure to take reasonable steps to avoid it. The claimant is ordinarily required to act only in the ordinary course of business.
3. There may be cases in which reasonableness requires the innocent party to negotiate with the contract-breaker, or to initiate negotiations. The standard is not high. The court must consider the terms and bona fides of the proposal, the commercial context, the parties’ conduct, and all the circumstances. The claimant’s response is not to be assessed with excessive strictness by the party whose breach caused the difficulty. These principles were illustrated by [1932] AC 452, [1919] 2 KB 581 and [2008] EWCA Civ 819.
4. No reasonable offer was before Ash on 18 or 21 October 2010. The proposed modification was unclear as to its dimensions, method, responsible specialist, legality, safety, effect on warranties and insurance, owner’s consent, duration, temporary replacement and funding. Albury’s consent was required, although its absence was not alone conclusive. Manton had not supplied drawings, specifications or reliable confirmation that the proposed work would satisfy the manufacturer and regulatory requirements.
5. Ash was therefore entitled to reject the proposals without inviting a proper offer. Its communications did not prevent Manton from making a detailed and documented proposal, which Ash might then have rejected at its peril. [2009] EWCA Civ 580 concerned the urgent replacement of a motor vehicle and did not establish a general one-opportunity rule. The sophisticated shipping-market decision in [1983] 1 Lloyd’s LR 605 did not require a cheese company faced with a vague and unconvincing modification proposal to invite a better one.

• Court of Appeal (Civil Division) — On 16 May 2013, dismissed Manton’s appeal and upheld the indemnity liability.
• Wrexham County Court — Mr Recorder Bould held that Ash had not acted unreasonably in rejecting Manton’s proposed modification and that Manton was liable to indemnify Ash.