AMT Vehicle Rental Limited v Volkswagen Group United Kingdom Limited

A contractual engagement to provide services may impose obligations governing how the parties deal with one another, even where the contract guarantees no minimum volume of orders. Here, the obligation required the customer to communicate its replacement-vehicle needs and give the supplier an opportunity to offer vehicles, although it retained discretion whether to accept any particular offer.

Loss of profits from preventing performance of that obligation was direct loss within the first rule in Hadley v Baxendale. An exclusion for indirect or consequential loss therefore did not apply. Alternatively, a contractual exception for deliberate acts applied because termination was intentional, whether or not the defendant appreciated that it was acting in breach.

Damages were assessed on the probable level of business, with deductions for avoided costs and a further inquiry into vehicle-cost savings.

The claimant supplied replacement hire vehicles to the defendant under a written agreement. The defendant served notice terminating the agreement with effect from 7 March 2020, but from 10 October 2019 stopped giving the claimant access to the Booking Master Sheet and ceased communicating its requirements.

The claimant claimed lost profits for the period of premature exclusion. The principal issues were whether the agreement imposed duties to communicate demand and allow the claimant to offer vehicles, whether the loss was excluded, and how the loss should be quantified. During closing submissions, the defendant also argued that only vehicles and rates listed in Schedule 2 fell within the agreement.

1. Contractual duties. The claim succeeded in principle. On the proper construction of clause 2.1, the defendant’s engagement of the claimant imposed operational obligations. The defendant had to communicate its need for replacement vehicles, give the claimant an opportunity to offer vehicles, and consider offers made. The absence of any guaranteed minimum number of hires did not prevent those obligations. The contractual relationship required the defendant to provide information enabling the claimant to perform.
2. Breach. Stopping access to the Booking Master Sheet without providing an alternative means of communicating demand breached the agreement from 10 October 2019 until termination. There was no separate breach based on failure to consider offers, because no offers had been made or could realistically have been made in the absence of the other breaches.
3. Exclusion of liability. The claimed loss of profits was direct loss within the first rule in Hadley v Baxendale, since inability to hire out vehicles made such loss plain and obvious. Clause 17.1.1 therefore did not exclude it. Alternatively, clause 17.1.3 applied: terminating the agreement was a deliberate act, and the word “deliberate” did not require proof that the defendant knew termination would breach the contract.
4. Loss. Compensation was assessed by estimating the business the claimant would probably have obtained, rather than assuming that the defendant would have made no hires or committed another breach. The claimant’s previous dealings supplied the best evidence of probable turnover. Fuel and driver savings were deducted. The court also required a further hearing, or agreement, on vehicle-cost savings attributable to the premature termination. The claimant was awarded £1,262,550.01, subject to that further deduction.
5. The defendant’s late and unpleaded argument concerning Schedule 2 was rejected. It was prejudicial, inconsistent with the defendant’s pleaded position, and unsupported by proper case management.