McAlpine Grant Ilco Ltd v AFR Refrigeration Ltd

For a breach of the statutory warranty of satisfactory quality, recoverable damages are governed by section 53(2) of the Sale of Goods Act 1979. The question is whether the loss was estimated loss directly and naturally resulting, in the ordinary course of events, from the breach. The contractual contemplation of the parties is relevant to the second limb of Hadley v Baxendale, but does not replace the statutory test in section 53(2). Where a defective refrigeration unit fails, the resulting loss of goods requiring refrigeration may arise naturally from the breach. The value of the goods does not itself make their refrigeration a special use. An optional alarm facility does not break causation or prevent recovery unless evidence establishes that an installed alarm would have averted the loss.

The Claimant bought a refrigeration unit from the Defendant and supplied it to AMS, which used it to store pharmaceutical products. The unit failed over a bank-holiday weekend, causing the products to perish. The Claimant settled AMS’s resulting claim and sought recovery of that sum and associated costs from the Defendant.

The Defendant admitted breach of the satisfactory-quality warranty and quantum was agreed. The Oxford County Court dismissed the claim on remoteness grounds, relying substantially on the availability of an optional alarm facility which AMS had not installed. The central issues on appeal were the correct statutory test for recoverable damages, the significance of the unused alarm facility, and whether the loss constituted a special use.

1. Appeal allowed. The County Court had applied the wrong question. The governing provision was section 53(2) of the Sale of Goods Act 1979, part of a comprehensive statutory code. The relevant inquiry was whether the claimed loss was directly and naturally resulting, in the ordinary course of events, from the breach of warranty. The question of what the parties contemplated belonged to limb two of Hadley v Baxendale, not to the primary statutory inquiry.
2. The judge’s finding that, when a refrigeration unit fails because it is unfit for purpose, the natural consequence is that the goods requiring refrigeration perish was correct. Awareness that the goods were of high value was irrelevant to whether the loss arose naturally.
3. The optional alarm facility did not constitute a supervening event or break the chain of causation. The cause of the damage was the defective refrigeration unit. Nor did the failure to install the optional alarm make the use of the unit a special use. Refrigerating goods was the ordinary use for which the unit was designed.
4. The judge was not entitled to assume that an alarm would have prevented the loss. The evidence did not establish how the alarm would have operated, whether personnel would have responded during the bank holiday, or whether the goods would already have been damaged before any response. Without evidence that an alarm would have made a difference, its presence or absence could not displace the conclusion that the goods’ perishing was the natural consequence of the breach.
5. The claim was therefore recoverable. The order dismissing the claim and the order for costs were set aside. The parties were invited to agree consequential orders, including costs below and on appeal.

• High Court (Queen’s Bench Division): Appeal from the Oxford County Court allowed. The order dismissing the claim and the costs order were set aside.
• Oxford County Court: Recorder Riza QC dismissed the claim for damages and ordered the Claimant to pay the costs on 9 October 2019.