YJB Port Ltd v M&A Pharmachem Ltd & Anor

For contractual damages, the breach must be an effective or dominant cause of the loss, rather than merely creating the occasion for it. Concurrent causes may suffice where they are independently operative and of approximately equal efficacy. A threatened or anticipatory breach is not actionable by itself and cannot be used to augment the causative effect of an actual breach. Where proven breaches cause no recoverable loss, only nominal damages are available. The court must apply common sense while maintaining analytical precision, and the “fair wind” principle cannot provide a claimant with a free ride.

The claim arose from an exclusive manufacturing and distribution agreement for a medical thickening product. In the liability phase, the court found three breaches of an anti-competition covenant, but also identified separate threatened future breaches. The first trial judge held that some loss had been suffered and directed assessment by reference to diminution in the capital value of the business.

At this second phase, the court considered whether the three proven preparatory breaches caused any such diminution, whether threatened future competition could be included in the causation analysis, and whether final injunctive relief was required to protect confidential contact information.

1. The claim for damages succeeded only to the extent of nominal damages. The court awarded £3, representing £1 for each of the three proven breaches.

2. The applicable contractual causation test was whether each breach was an effective or dominant cause of the claimed loss, rather than merely creating the occasion or opportunity for it. The inquiry required the application of common sense, but the claimant retained the burden of proving causation on the balance of probabilities.

3. Each proven breach consisted of an internal preparatory act. The production of modest quantities of the proposed competing product, the agreement to produce them, and the ordering of raw material did not interfere with the claimant’s business and were not effective causes of any diminution in value. Combining the breaches did not increase their causative potency.

4. A threatened future breach was not actionable per se. Although threatened conduct could support acceptance of a repudiation and a distinct claim for loss of bargain following termination, it could not enhance or augment the causative effect of an actual breach. The commercial concern that affected the prospective purchaser was the prospect of future competition and misuse of confidential information, not the proven preparatory breaches.

5. The “fair wind” principle did not apply. This was not a case of evidential uncertainty requiring latitude in favour of the innocent party. Compensatory damages could not be awarded for a risk of injury, the manner of the breach, or future competition which had not occurred.

6. The claim for final injunctive relief was not determined. An undertaking given on behalf of the defendants adequately protected the claimant’s interests and removed the need for a final order.

This was the quantum phase of a split trial. The earlier liability judgment was delivered by Miss Elizabeth Jones QC, sitting as a Deputy Judge of the High Court, in [2019] EWHC 2117 (Ch). Permission to appeal was refused by Males LJ. The present judgment determined the remaining damages and remedial issues.