Thai Airways International Public Company Ltd v KI Holdings Co Ltd & Anor

Contract damages are assessed by reference to causation and on the assumption that the claimant responded reasonably to the breach. Where the claimant takes a reasonable mitigating step, the calculation includes both its costs and the resulting benefits, subject to any benefit being causally attributable to the breach rather than an independent commercial decision.

Credit must be given for any monetary benefit received or reasonably capable of realisation as a result of reasonable mitigation, even if the benefit was unavoidable. The defendant bears the burden of proving both the existence and value of the benefit relied upon.

An airline claimed damages after an aircraft-seat manufacturer delivered some seats late and failed to deliver others under three English-law contracts. Regulatory intervention following falsification of safety data also required testing and replacement of certain seats. Liability was admitted shortly before trial.

The principal claim concerned the cost of leasing three substitute aircraft. Other claims included the additional cost of replacement seats, storage and preservation expenses, technician expenses and regulatory-compliance costs. The manufacturer contended that profits, fuel savings and credits obtained from an aircraft supplier had to be brought into account. The central issues were which costs and benefits were legally attributable to reasonable mitigation and who bore the burden of proving betterment.

1. Judgment for the claimant on its principal damages claim. The claimant was entitled to recover approximately US$107 million representing the first two years of the substitute-aircraft leases. The third year was attributable to the claimant’s independent commercial objectives rather than reasonable mitigation of the breaches: paras [51]–[62], [138]–[139].

2. The mitigation rules are aspects of causation. Damages are assessed by reference to the position resulting from a reasonable response to the wrong. Where the claimant acts reasonably, both costs and benefits caused by that response enter the damages calculation. Where it acts unreasonably, damages are assessed as if it had acted reasonably: paras [31]–[38].

3. A benefit from reasonable mitigation must still be causally connected with the breach. A consequence of an independent commercial decision remains for the claimant’s own account. Applying that distinction, the first two years of the leases were attributable to the breach, but the third was not: paras [46]–[62].

4. Credit must be given for a monetary benefit received, or reasonably capable of being realised in money, as a result of reasonable mitigation. This applies whether or not the benefit was chosen or avoidable. Non-pecuniary improvements may stand differently where they confer no proven realisable financial advantage: paras [66]–[82].

5. The defendant bears the burden of proving both the fact and amount of any benefit said to reduce recoverable mitigation expenditure. The manufacturer failed to prove that profits from the leased aircraft offset the claimant’s loss or lease costs: paras [83]–[92], [127]–[139].

6. The claimant had to credit US$1,893,418 in proven fuel savings from lighter replacement seats, but no deduction was made for alleged savings from other seats because their value was too speculative. The recoverable storage costs were US$2,465,980. Technician expenses were reduced by 80%. The legal-cost claim and future seat-replacement claim failed: paras [141]–[170].

7. The claimant had to credit a US$9.44 million price reduction causally connected with delayed aircraft delivery. Later credits conditional on purchasing other aircraft resulted from an independent transaction and were not attributable to the breaches. A separate disruption-cost sum was irrecoverable because liability for it was unproved. The parties were invited to agree the resulting net awards in each currency: paras [171]–[192].

not stated in the judgment.