BARROWFEN PROPERTIES LIMITED v GIRISH DAHYABHAI PATEL & Ors

Where a claimant’s successful mitigation forms part of a continuous transaction caused by the defendant’s breach, a resulting profit is generally brought into account. The claimant cannot characterise the profit as collateral merely because additional capital was raised to achieve it.

Future financing costs are excluded where the claimant could sell the completed asset and any decision to retain it reflects its own commercial judgment. In a loss-of-chance assessment, countervailing benefits are deducted before applying the percentage chance, so that the whole financial outcome is assessed. Separate contingent opportunities may be valued cumulatively where the later opportunity depends on failure of the earlier one and the court has assessed a single ultimate outcome.

The claimant had previously succeeded in claims against the first and second defendants for breaches of duty arising from the management and development of property. In the earlier judgment, Barrowfen Properties Ltd v Patel [2021] EWHC 2055 (Ch), damages or equitable compensation were provisionally assessed.

This judgment determined reserved issues concerning the credit for increased developer’s profit, future finance costs, loss-of-chance calculations, cumulative counterfactual outcomes, additional intra-group fees, liability for a specific cost, interest, and correction of the provisional award.

1. Financial costs. The claimant had to give credit for the full £2,508,182 increase in developer’s profit. The additional capital raised to implement the revised scheme and the profit earned from it formed part of one continuous transaction of which the defendants’ breaches were the inception. The profit was therefore not collateral or res inter alios acta. The fact that the revised scheme was less profitable per pound did not alter that conclusion.
2. Future debt-finance and equity opportunity costs were excluded. Although such costs could be relevant to a claimant-specific investment valuation, the property could be sold immediately after completion. The causative effect of the breaches ended on completion, and any decision to retain the property was a matter of the claimant’s commercial judgment. Finance costs to completion were already included in the development appraisal.
3. The retrospective fees for the standby letter of credit and the related-party guarantee were not deducted. No binding liability had been assumed before the later agreements, and the fees did not form part of the continuous transaction caused by the breaches.
4. Loss of chance. The capital-appreciation credit had to be deducted before applying the loss-of-chance percentage. The relevant comparison concerned the whole financial picture, including lost income and the capital appreciation obtained. The court applied the reasoning in Hartle v Laceys and Ministry of Defence v Wheeler.
5. The Company Claims and Administration Claim were cumulative rather than alternative. The Administration Claim depended on failure of the Company Claims outcome. The claimant therefore recovered 80% of the remaining 40% chance, namely 32%, in respect of the Administration Claim.
6. The court corrected the omission of the £28,000 award against the first defendant for the Bedford Rectification Claim. It declined to reopen the loss-of-chance basis against that defendant because the case had been pleaded and argued on the same basis against both defendants.
7. Interest could be recovered as damages on the pleaded and proved lost opportunity to reinvest rental income. It was awarded on the relevant loss-of-chance-adjusted gross sums at 2% above base rate.

Final awards were £1,388,768.05 against both defendants for the Company Claims, £316,792.03 against both for the Administration Claim, and £28,000 against the first defendant alone.

This was a further first-instance judgment following the reserved issues arising from the court’s earlier liability and quantum judgment, [2021] EWHC 2055 (Ch). The court corrected and finalised the provisional awards.