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GAZETTE
JULY/AUGUST
1983
Recent
Irish
Cases
CONTRACT
Breach of Contract — Damages — Loss of
Profits — Mitigation of Loss — Remote-
ness of Damage.
The Plaintiff lived with his wife in a
large guesthouse which was owned and
run by his father assisted by his step-
mother (the Defendant). The Plaintiff
helped to run the guesthouse until his
father's death in 1976. Relations between
himself and the Defendant became very
strained and in October 1976 he left to
reside elsewhere with his wife and found
work as a painter. In July, 1978 the
Defendant agreed, as executrix of her
husband's estate, to sell the guesthouse to
the Plaintiff for £35,000. Shortly after the
contract was signed and after the
purchase price had been paid over she
repudiated her agreement. The sale was
closed, following an order for specific
performance, in January, 1981. The
Plaintiff claimed compensation of
£73,830.46 for the loss sustained as a
result of the Defendant's breach of
contract, made up of:—
(i) lossrof trading profits between the
contractual completion date
(August, 1978) and the date of actual
completion,
(ii) additional interest payable to the
Plaintiffs Bank arising from the
Defendant's breach of contract. The
Plaintiff drew down a loan shortly
before August, 1978 and his solicitor
thereupon sent a cheque to the
Defendant's solicitor. Notwith-
standing the Defendant's repudia-
tion of the contract, the purchase
price was not returned to the
Plaintiffs solicitors until November,
1979. The Plaintiffs solicitor refused
to accept its return and it was agreed,
on a without-prejudice basis, that
the monies would be placed on
deposit receipt in the joint names of
the parties' solicitors. As a result of
being deprived of the profits which
would have been made from the
guesthouse business no repayments
were made to the bank and much
greater interest became payable. In
addition, a bridging term loan was
opened and interst on this sum was
also due, and
(iii) miscellaneous items of damage —
the Defendant auctioned the guest-
house contents for £1500. The
Plaintiff claimed the sale was of the
guesthouse as a going concern and
its contents were his. £662.29 was
claimed arising from damage to the
central heating plant. £1280 was
claimed for the storage of furniture
which the Plaintiff had purchased
for the guesthouse and which he was
required to leave with the vendor of
the furniture.
. The Court held:
(i) Loss of Trading Profits — On the
evidence only a rough calculation could
be made of the trading profits which the
Plaintiff would have made had the sale
gone through. This task could be
approached best by (1) taking into
account the market value of the guest-
house at the date of sale, that is £35,000
and (2) taking into account the fact that
an experienced bank manager had
concluded that the guesthouse was
capable of generating an income of at
least £393 per month. It would have been
reasonable to assume that the Plaintiff
would have obtained an after tax trading
profit of about £800 per month.
However, the Plaintiff would have had to
repay the bank approximately £400 per
month and so his actual net loss would
have been in the region of £400 per
month — £11,600 over the 29 month
period. But there must be deducted from
the lost profits the Plaintiffs after tax
earnings during that period, namely
£11,979.25, which meant he suffered no
loss of profits.
(ii) Interest — The claim for interest
on the bridging loan could not be
sustained as it arose primarily because of
extra borrowing for the renovation of the
guesthouse. The claim if sustainable
would have been limited to the difference
between the interest payable had all
repayments been made and the interest
which actually accrued because no repay-
ments were made.
There were two objections to the claim
The first of these was that when the
Vendor's solicitors returned the purchase
price in November, 1979 the Plaintiff
could have repaid the loan in full and thus
could have stopped interest running on
it — the loss could therefore have been
mitigated by the Plaintiff.
The second arose from the rule relating
to remoteness of damage as stated in
Hadley
-v-
Baxendale
(1854) 9 EX. 341
which states that a plaintiff is entitled to
such damages for breach of contract—
"as may fairly and reasonably be
considered either arising naturally,
i.e., according to the usual course of
things, from such breach of contract
itself, or such as may reasonably be
supposed to have been in the contem-
plation of both parties, at the time
they made the contract, as the
probable result of the breach of it.
Now, if the special circumstances
under which the contract was actually
made were communicated by the
Plaintiffs to the Defendants and thus
known to both parties, the damages
resulting from the breach of such
contract, which they would reason-
ably contemplate, would be the
amount of injury which would
ordinarily follow from a breach of
contract under these special circum-
stances so known and communi-
cated."
The claim for additional bank interest
could not be regarded as a loss which
arose naturally from the Defendant's
breach of contract. The Defendant could
not know, and was not told, the amount
the Plaintiff was required to borrow and
there was no evidence to show that she
could have been aware that the Plaintiff
was not in a position to pay interest if she
failed to complete the sale. The Plaintiffs
special circumstances were not known by
or communicated to the Defendant; thus
the damages claimed were not reasonably
in the contemplation of the parties when
the breach occurred,
(iii) Miscellaneous Items of Damage—
(a) As the contract made no reference to
the guesthouse contents the claim
for £1500 failed.
(b) The Defendant, as Vendor, had a
duty to take reasonable care of the
property pending completion of the
sale; she was in breach of that duty
and should pay damages which
arose out of it. The claim for £662.29
was allowed.
(c) The claim for £1280 was not sustain-
able as (1) the Plaintiff was not under
a contractual obligation, either
expressed or implied, to pay storage
charges. On the evidence the vendor
did not require the Plaintiff to agree
to pay him for the storage, and (2)
the claim did not fall within either of
the limbs of the rule in
Hadley
-v-
Baxendale.
The loss did not arise
naturally from the Defendant's
breach of contract and the Defen-
dant did not know of the special
circumstances which gave rise to it.
Seamus Malone
-v-
Mary Malone. High
Court (per Costello J.). Unreported. 9
June. 1982.
WilHam Johnston
PLANNING
Declaration sought that Permission be
deemed to have been obtained by default —
exercise of Court's discretion to refuse.
Section 4 (5) of the Housing Act, 1969
("the 1969 Act") provides that a decision
by a Housing Authority to grant Permis-
sion under the Act is to be regarded as
having been given in circumstances where
it has not issued notice to the applicant of
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