MALLINO DEVELOPMENT LIMITED v ESSEX DEMOLITION CONTRACTORS LIMITED

Where a contract imposes a single mandatory obligation but leaves the contract-breaker discretion over how to perform it, damages are assessed by asking how the obligation would probably have been performed in the relevant circumstances. The minimum-obligation principle for alternative contractual modes of performance does not apply mechanically.

A claimant seeking damages for loss of a chance must prove a real or substantial chance of obtaining the lost benefit. Once that threshold is met, the value of the lost benefit is assessed by reference to the probability of its occurring.

The claimant developer appointed the defendant under a building contract divided into three sections. A related variation contract required the claimant to invite the defendant to tender for the remaining Section 3 works. The claimant appointed another contractor without carrying out the required re-tendering exercise.

Following two adjudications, the claimant accepted breach but disputed the defendant’s entitlement to lost profit and overhead contribution. The issues were whether damages were limited by the minimum contractual obligation principle, whether the defendant would have secured the Section 3 works, and the proper quantum of any loss-of-chance claim.

1. Measure of loss. The minimum-obligation principle applies where a contract permits alternative modes of performance or confers a discretion as to contractual benefits. It did not apply here. Clause 2 imposed a mandatory obligation to re-tender the Section 3 works and include EDC in that process. The claimant retained discretion over other tenderers, the selection method and the terms of any new contract, but not whether to re-tender or include EDC (paras [29]–[34]).
2. Damages therefore required a factual assessment of how the contractual obligation would probably have been performed. Even if the minimum-obligation principle applied, the least financially burdensome course would not necessarily have been termination. The court had to consider the claimant’s wider commercial interests and could not assume conduct that would cause greater loss merely to reduce contractual liability (para [45]).
3. Causation and chance. EDC had to prove, on the balance of probabilities, that it would have re-tendered using its existing tender and price, and that it had a real or substantial chance of its tender being accepted. The court found both matters established. EDC had a 66 per cent chance of being awarded the Section 3 works, rather than a certainty of success (paras [38]–[44], [54]–[56]).
4. Quantum. The recoverable benefit if EDC had obtained the work was assessed at £321,391.71. Applying the 66 per cent chance produced damages of £212,118.53. Questions of interest and costs were reserved (paras [46]–[58]).

The judgment does not state an appellate history. It records proceedings following two adjudications; the claimant’s Part 8 claim was subsequently managed and tried under the Part 7 procedure.