University of Wales v London College of Business Ltd

Loss of profits following breach of contract must be assessed by making the best reasonable evaluation of what would probably have happened, taking all significant factors into account. The court need not prove a hypothetical sum on the balance of probabilities. However, the claimant must establish an actionable head of loss and bears the burden of proving the loss claimed. Uncertainty caused by the breach does not, by itself, justify a generous evidential presumption or a “fair wind” approach. Such an approach is inappropriate where the evidential position is level and the claim concerns ordinary lost profits rather than suppressed evidence, lost property or loss of a litigation chance.

The judgment assessed damages payable by the University of Wales to London College of Business Ltd for breach of a validation agreement. In an earlier judgment, [2015] EWHC 1280 (QB), the court held that the University had wrongfully suspended enrolments during 2012 and that the College was entitled to damages, subject to a contractual limitation excluding general business losses.

The assessment concerned profits allegedly lost from the April and September 2012 intakes. The parties agreed that the court should determine three issues: the number of students who would have enrolled, the fees they would have paid, and the additional teaching costs that would have been incurred.

1. The court held that the recoverable loss was limited to profits lost because the University’s breaches prevented enrolment on University-validated courses. General harm to the College’s business was excluded by clause 17.3.3 of the Validation Agreement.

2. Following the approach explained by Toulson LJ in Parabola Investments Ltd v Browallia Cal Ltd, [2010] EWCA Civ 486; [2011] QB 477, the College first had to establish an actionable head of loss. Since quantification involved hypothetical events, the court had to estimate the loss by evaluating the significant chances and uncertainties, rather than proving the precise figure on the balance of probabilities.

3. The College’s reliance on a “fair wind” or evidential presumption was rejected. The indemnity principle and the burden of proving loss remained fundamental. The fact that the breach made quantification uncertain did not justify resolving uncertainty in the claimant’s favour. The cases concerning withheld physical property, loss of a litigation chance or suppressed evidence did not establish a general rule for ordinary contractual lost-profit claims.

4. In assessing the hypothetical student intake, the court considered four matters: the College’s past performance; its contemporaneous assessment of prospects; its recruitment performance in 2012 compared with earlier periods; and the suspension and timing of restoration of its Tier 4 licence. The College’s optimistic litigation projections were rejected in favour of evidence-based estimates.

5. The court assessed the likely April and September intakes after allowing for the adverse direct and reputational effects of the licence suspension. It also allowed for discounts, course attrition and incremental teaching costs. The parties were directed to finalise the damages calculation from those findings.

This was a first-instance assessment of damages following the earlier judgment in [2015] EWHC 1280 (QB).