Barrowfen Properties Limited v Girish Dahyabhai Patel & Ors

Where a breach delays an income-producing development, benefits obtained through a reasonable mitigating development must be brought into account if they were caused by the breach or the mitigation. The benefit need not be of the same kind as the loss.

Enhanced rental and capital values may therefore be credited, but financing and opportunity costs arising from the claimant’s independent decision to retain the completed property are not part of the causal transaction. Where the benefit represents the difference between the value that would have been obtained and the value actually obtained, the credit is deducted before applying the relevant loss-of-chance percentage. Interest awards must also avoid double recovery.

Barrowfen claimed equitable compensation and damages from Girish Dahyabhai Patel for breach of fiduciary duty and from Stevens & Bolton LLP for negligence. The claims concerned delay in obtaining control of Barrowfen and delay in developing its Tooting property.

Leech J found liability and awarded damages in three judgments, including the Main Judgment ([2021] EWHC 2055 (Ch)) and Reserved Matters Judgment ([2022] EWHC 1601 (Ch)). He required credit for the increased developer’s profit produced by a revised development scheme, deducted that credit before applying loss-of-chance percentages, and awarded interest as damages. Barrowfen appealed those rulings. Stevens & Bolton cross-appealed on the sequencing of the credit and on interest.

The court dismissed Barrowfen’s appeals and dismissed Stevens & Bolton’s cross-appeal on the timing of the credit. It allowed the cross-appeal on interest to a limited extent. Lord Justice Snowden gave the judgment, with Lord Justice Lewis and Lord Justice Newey agreeing.

1. Mitigation and causation. The purpose of compensation is to restore loss caused by the breach. A claimant must take reasonable steps to mitigate. Further losses and benefits resulting from a reasonable mitigating course must be brought into account. The controlling question is causation, not whether the benefit resembles the loss. The principles in British Westinghouse v Underground Electric [1912] AC 673 and Fulton Shipping v Globalia Business Travel [2017] 1 WLR 2581 applied equally to fiduciary breach and professional negligence.
2. Revised development. The revised scheme was a continuous dealing with the situation created by the breaches. Its enhanced rental and capital values were benefits caused by mitigation. The resulting increased developer’s profit, after completion costs, had to be credited. Once the development was complete, however, the causative effect of the breaches ended. Barrowfen’s later choice to retain rather than sell the property, and its future financing and opportunity costs, were independent commercial decisions.
3. Loss of chance. The increased developer’s profit represented the difference between the profit under the original scheme and that under the revised scheme. The credit therefore had to be deducted before applying the relevant chance percentages. This ensured that credit was given only for the benefit caused by the breaches. The approach in Hartle v Laceys [1999] Lloyd’s Rep PN 315 supported that conclusion.
4. Betterment. The exceptional rules concerning damaged or destroyed property did not apply. The case was distinguishable from Harbutt’s Plasticine v Wayne Tank and Pump [1970] 1 QB 447. The measurable benefit from a chosen, enlarged development had to be credited. The alternative distinction between monetary and non-monetary benefits advanced in Thai Airways International v KI Holdings [2016] 1 All ER (Comm) 675 was doubted.
5. Interest. Interest as damages and statutory interest addressed the same underlying loss of use of money. Awarding both on overlapping sums would produce double recovery. The order for £520,014 was set aside and £352,684 was substituted, comprising £337,229 interest as damages and £15,455 statutory interest.

• Court of Appeal (Civil Division): Barrowfen’s appeals were dismissed. Stevens & Bolton LLP’s cross-appeal was dismissed on the credit and loss-of-chance issue but allowed in part on interest. The order for £520,014 was replaced by an order for £352,684.
• High Court of Justice, Chancery Division: Leech J determined liability, causation and quantum in the Main Judgment ([2021] EWHC 2055 (Ch)), reserved matters in the Reserved Matters Judgment ([2022] EWHC 1601 (Ch)), and interest at a consequentials hearing on 24 May 2023.