SC Confectia SA v Miss Mania Wholesale Ltd

Contractual damages are normally assessed at the date of breach, but the rule is flexible where another date would more accurately reflect the compensatory principle. The duty to mitigate arises then and requires reasonable steps, not speculative retention of recovered goods in the hope of a later price rise. A later valuation requires evidence that it would produce a more accurate measure of loss. The remoteness principles in The Achilleas did not alter that result: the inability to recover defective goods from an insolvent sub-buyer was too remote, leaving only a deduction for the quantifiable value of the goods. The standard Hadley v Baxendale rule may be displaced by contractual risk allocation shown by the contract and commercial background, but no such basis was established.

Confectia, a Romanian clothing manufacturer, appealed from an order of HHJ Freeland QC in proceedings concerning defective garments supplied to Miss Mania, a wholesaler. The first-instance judgment awarded Confectia £5,899.67 overall but ordered it to pay 80 per cent of Miss Mania’s costs.

Permission to appeal was limited to the effect of a sub-buyer’s insolvency and dissolution on the damages recoverable for garments which Miss Mania could not recover. The judge treated that inability as unforeseeable and too remote, or as breaking the chain of causation, and valued the unrecovered garments at £6 each. The central issue was whether damages should instead be assessed by reference to a later date and whether mitigation required Miss Mania to retain the garments until their value allegedly increased.

Lord Justice Beatson gave the judgment of the court. Lord Justice Fulford agreed.

1. Applicable principles. The parties proceeded on the basis that Romanian law and the law of England and Wales did not materially differ on the issues before the court, apart from a possible distinction between foreseeability and reasonable contemplation. The judge had correctly approached remoteness under the first limb of Hadley v Baxendale (1854) 9 Exch 341 and had accepted that the inability to recover the garments from the sub-buyer was unforeseeable.
2. Date of assessment. Damages are normally assessed at the date of breach, but that is a flexible principle. Assessment at another date may be appropriate where it more accurately reflects the overriding compensatory rule. The court referred to Dodd Properties (Kent) Ltd v Canterbury City Council [1980] AC 174, County Personnel v Pulver [1987] 1 WLR 916 at 926, Johnson v Agnew [1980] AC 367 and The Golden Victory [2007] UKHL 12, [2007] 2 AC 353.
3. Mitigation and evidence. The duty to mitigate arises at the date of breach and requires reasonable steps. It did not require Miss Mania to keep recovered garments for nine or eleven months in the hope of a seasonal price increase, while incurring storage and related expenses. There was also no evidence that the garments’ value would have risen by the proposed later date. A later assessment therefore could not be said to measure the loss more accurately.
4. Remoteness and risk allocation. The Achilleas [2008] UKHL 48, [2009] 1 AC 61 did not assist Confectia. The case concerned the recoverability of loss which the contracting party had not accepted responsibility for, whereas the present issue was the date for valuing goods whose recovery was already too remote or causally broken. The standard rule remains applicable, although it may be displaced by contractual allocation of risk where the contract and commercial background show that the loss falls within or outside the contractual duties. The conditions for such displacement were not established. The court applied the approach in Supershield Ltd v Siemens Building Technologies FE Ltd [2010] EWCA Civ 7.
5. Disposition. The judge’s valuation and deduction of £3,486 from the credit given to the sub-buyer were correct. The appeal was dismissed.

• Court of Appeal (Civil Division) On 29 October 2014, the court dismissed Confectia’s appeal on the limited issue for which permission had been granted.
• Central London Civil Justice Centre On 18 March 2013, HHJ Freeland QC gave judgment for Confectia in the overall sum of £5,899.67 and ordered Confectia to pay 80 per cent of Miss Mania’s costs.