Toppan Holdings Limited & Anor v Augusta 2008 LLP

Contractual damages for construction defects are assessed by comparing the actual position with the position that would have existed but for the breaches. Loss arising from a failed sale may be recoverable where the defendant knew, or reasonably contemplated, that the property was constructed for onward disposal. The contractual remoteness test applies where concurrent contractual and tortious duties exist. Losses remain unrecoverable where they are speculative, too remote, or outside the defendant’s assumed responsibility. Evidence should be assessed holistically. Contemporary documents are important, but the court should avoid a dogmatic preference for documents over recollection.

The claimants were the freeholder and operator of a care home designed and constructed by the defendant. The defendant admitted defects concerning fire resistance, fire protection, fire stopping and fire doors, together with breaches of the building contract and collateral warranty.

The remaining claims concerned lost trading profits, abortive sale costs, overdraft charges, loss arising from the failure of a proposed sale to BlackRock, associated financing and investment losses, and increased interest charges. The court also considered whether the defendant breached its contractual obligation to notify insurers of the claims.

1. Evidence. The court rejected a rigid preference for contemporary documents over oral evidence. Credibility was assessed by considering consistency with other evidence, internal consistency and demeanour. The claimants’ witnesses were accepted as credible, subject to one finding concerning rent compensation.
2. Loss of trading profits. Abbey was entitled to damages based on the difference between actual profits and the profits which would have been earned absent the breaches. The loss period began in September 2018, when occupancy was suppressed, and ended in September 2021. A conservative monthly occupancy increase of two residents and a steady-state occupancy of 59 residents were adopted. Damages were assessed at £4,260,000.
3. Abortive sale costs. The legal costs and disbursements incurred for the aborted BlackRock sale were caused by the breaches and could not be reused. Abbey and Toppan each recovered £12,000.
4. Remoteness and the failed sale. Applying the contractual remoteness test, the loss associated with the proposed sale was not too remote. The defendant operated in the same specialist sector and knew, or reasonably contemplated, that care homes might be sold to discharge development finance or generate further capital. The defects, rather than planning, VAT or financial-record issues, caused the sale to fail. Nevertheless, Toppan suffered no recoverable loss because the compensation it would have paid Abbey for the increased rent extinguished the valuation loss.
5. Other financial losses. Abbey’s overdraft charges and Toppan’s claimed continuing loan interest and investment profits were too remote and, in the latter case, speculative. Toppan did recover £38,878.25 for increased interest caused by failure to achieve the contractual reduced-interest condition.
6. Insurance notification. The defendant breached clause 6.13A by failing to notify its insurers immediately after receiving the claims. The court was not asked to determine the loss flowing from that breach.
7. Disposition. Abbey recovered £4,272,000 and Toppan recovered £50,878.25, subject to 4% simple interest from the dates of loss, with the interest calculation to be agreed.