Globe Motors Inc & Ors v TRW Lucas Varity Electric Steering Ltd& Anor

In assessing damages for breach of contract where the loss depends on a hypothetical bargain, the court may adopt the least unsatisfactory methodology supported by the evidence. The exercise is necessarily broad and approximate where historical evidence is incomplete, inconsistent or uncertain. The court may apply an overall discount to reflect evidential imprecision and contingencies, provided the discount represents a reasoned assessment rather than a loss-of-chance calculation. Contractual interpretation determines the starting price, but the damages assessment must also prevent double recovery or an unintended windfall.

The judgment concerned the limited damages exercise left open by the court’s earlier judgment. The claimants sought damages for the defendants’ breach of contract concerning the supply of electric steering motors. The court had identified the Pinto B methodology as the least unsatisfactory basis for measuring loss, subject to further submissions on adjustments and discount.

The defendants challenged the late presentation and evidential reliability of that methodology. The parties also disputed the treatment of amortisation, later magnet-price increases and the extent of any discount for uncertainty.

1. Fairness. The court rejected the defendants’ objection that the claimants had advanced the Pinto B methodology too late. The defendants had been given an opportunity to address the case in writing or by other procedural means, and no application for further evidence or witness recall had been made. The late presentation nevertheless justified caution in assessing the evidence [4]-[11].
2. Methodology. The court adhered to its earlier conclusion that Pinto B was the least unsatisfactory route for measuring the loss. Both competing approaches had defects, but Pinto B was the best available guide. The exercise involved inevitable imprecision and there was no single correct answer [18]-[33].
3. Amortisation. On construction of article 4.3, the amortisation element formed part of the contractual price. However, the damages assessment had to avoid allowing the claimants to recover amortisation twice. The damages were therefore adjusted to reflect relevant shortfall payments received from the defendants [34]-[40].
4. Magnet-price increases. The contract did not require the defendants to agree an increase for the later rise in rare-earth magnet prices. In the hypothetical commercial circumstances, however, the court assessed that hard bargaining would probably have resulted in the defendants accommodating half of those additional costs. The damages were adjusted accordingly [41]-[45].
5. Discount. The proposed discount was not a mandatory loss-of-chance discount. It was an overall allowance for uncertainty, contingencies, incomplete scrutiny of the late methodology and the burden on the claimants to prove their loss. Applying the broad-sweep approach, the court reduced the adjusted Pinto B figures by 22.5 per cent [46]-[49]. The parties were invited to agree the resulting figures and submit a draft order.