JAMES KEMBALL LIMITED v "K" LINE (EUROPE) LIMITED

This is the trial of a claim by the claimant against the defendant for damages for alleged breach of a service agreement (“SA”) by which the claimant agreed to provide road haulage services for a fixed period and up to a defined maximum volume and by which the defendant agreed to provide an agreed minimum volume. The claimant alleges that it was entitled to terminate the SA in accordance with its terms upon the defendant informing the claimant that it would not be able to comply with the minimum volume requirement for the or most of the final period covered by the SA, referred to in the SA as “Period 3”. The defendant disputes both liability and quantum. It maintains that in the events that have happened it is not liable for anything other than a sum to be calculated in accordance with some contractual machinery that it was agreed would apply where the minimum volume requirement was not met, but in any event, if it is liable to the claimant and damages are at large, it is liable for only a fraction of the sums claimed. Most of the trial was taken up with expert evidence relevant to quantum on the assumption that damages are at large.

The trial took place between 18-20 July 2022 inclusive. I heard oral evidence from Mr Iain Liddell, the Group Managing Director, founder and owner of the Uniserve Group, which includes the claimant. The group operates in the warehouse and inland transport industry. I heard expert evidence relevant to Quantum from Mr Richard Cameron-Williams, a chartered accountant and partner in BDO whose evidence was adduced on behalf of the claimant and Mr David Scrivener, a chartered accountant, insolvency practitioner and partner in the firm of Ensors Accountants LLP, whose evidence was adduced on behalf of the defendant.

The sum claimed by the claimant has varied substantially over the life of the claim, but by the time of the trial was valued by the claimant at a fraction of its originally pleaded value. Originally this claim was alleged to entitle the claimant to £6.8m in damages, based on an assertion as to the likely revenue that it would probably have earned over Period 3. By the time the case came to be opened, that sum had reduced to £857,000 odd and was based on the profit that it was alleged was probably lost over the same period. On the defendant’s case the claim is worth either £150,984, if the contractual machinery applies, or between £148,200 and £195,140 odd if damages are at large.

By the time the trial closed, Mr Jacobs KC, who appears with Ms Hosking on behalf of the claimant, accepted in principle the quantum reasoning advanced by Mr Scrivener (thereby in effect abandoning the evidence of Mr Cameron-Williams), but challenged three elements in the make-up of the damages that Mr Scrivener had calculated. The effect of this part of the claimant’s closing submissions is that if the claimant succeeds on the liability issues, is right in its submission that damages are at large, and right in its submissions concerning the three disputed elements, then damages are to be assessed at £560,000 odd, whereas the defendant continues to contend that Mr Scrivener’s evidence should be accepted in its entirety and therefore (assuming damages are at large, which it continues to dispute) they are to be assessed at either £148,200 or £195,140 odd. Had the claimant’s claim been pleaded at what it now accepts it should have been valued at from the outset, it is highly likely that this case would either not have been started in, or would have been transferred out of, the Commercial Court.

The claimant is a company whose business consists of or includes the transport by road of shipping containers from and to ports in the UK, using its own fleet of vehicles and by sub-contracting its work to haulage sub-contractors. The defendant is a wholly owned indirect subsidiary of Kawasaki Kisen Kaisha Limited (“KKK”). KKK’s business included the operation of a cargo ship liner service for the transport of containerised cargos to and from ports round the world, including the UK. It is based in Japan. Until the events to which I refer below, the defendant managed the import to and export from the UK of containers carried or to be carried on KKK’s ships. At all material times prior to 22 April 2016, the claimant was a wholly owned subsidiary of the defendant. Prior to that date, the claimant carried containers to and from UK ports on the instructions of the defendant as agent for KKK.

By a sale and Purchase Agreement dated 22 April 2016, Uniserve Holdings Limited acquired the claimant from the defendant. At the same time, the claimant and defendant entered into the SA, which as I have said was expressed to apply for a minimum period of three years. It will be necessary for me to set out its terms in detail shortly. At this stage it is necessary to note only that under the SA, the defendant agreed to supply a minimum amount of business (referred to in the agreement as “Jobs”) over a three-year period between 1 April 2016 and 31 March 2019. This period was divided up into three periods designated in the SA as Period 1, Period 2 and Period 3. Period 3 was between 1 April 2018 and 31 March 2019. This claim is concerned with what the claimant alleges to be an anticipatory repudiatory breach of the SA in relation to Period 3 from May 2018 to its end on 31 March 2019.

On 31 October 2016, the claimant was first informed that three shipping companies, all based in Japan, including KKK, were to merge and their respective container shipping businesses integrated and operated by a new joint venture company. The joint venture company was ultimately named Ocean Network Express and was abbreviated by its promoters to ONE. ONE was planned to commence operations on and from 1 April 2018. In consequence, the defendant would no longer be responsible for KKK’s container business in the UK and therefore would be unable to perform its obligations under the SA for Period 3, because KKK’s container business was to be conducted exclusively by ONE. There were discussions between the claimant and ONE concerning the provision of container work by ONE to the claimant, but those discussions foundered because the claimant was seeking guaranteed minimum volumes of work (as was the position under the SA), but ONE was not prepared to enter into such an agreement. The defendant maintains that this was a failure by the claimant to mitigate.

Against that background it is now necessary to turn to the SA in detail. It defines the claimant as “JKL” and the defendant as “K-Line”. Various definitions are set out in clause 1 of the SA. Those included the definition of a “Job” as being “ … a road haulage job, either in/out, of the nature described in Schedule 1 and by reference to which K-Line has calculated the targets set out in clause 2.2 and Annex 1 Part A …” In so far as is material the SA provided as follows:

I return to the chronology of relevant events. By an email from the defendant to the claimant dated 23 February 2018, the defendant informed the claimant that:

On 1 March 2018, in a letter marked “Without Prejudice save as To Costs” but which it is accepted by all parties was either not privileged, or in respect of which all parties accept privilege has been waived, the claimant sought to induce a response by writing to the defendant in these terms:

Following further email communication which took matters no further, by an email dated 16 April 2018, the claimant purported to invoke the termination procedure set out in clause 11.3(a) of the SA. It is common ground that this is the Notice that matters for present purposes. In so far as is material, that email was in these terms:

The 16 April letter was acknowledged by the defendant by an email of 19 April 2018, in which it was stated that:

I have not referred to any of the internal correspondence within the defendant because it is obviously not material either to the construction of the SA, or to whether the defendant should be treated as having anticipatorily repudiated the SA or the claimant was entitled to terminate the SA as it claimed to have done - something that depends on the true construction of the relevant provisions of the SA, the communications between the parties and the actions of the defendant.

It is common ground that the liability issues that arise primarily turn upon the true construction of the SA. The principles that apply to the construction of a contract are well known. In summary:

I am satisfied (indeed it is not disputed) that the SA is a professionally drawn document entered into at a time when both parties were legally represented and therefore should be interpreted principally by textual analysis save where a provision lacks clarity or is apparently illogical or incoherent, applying the principles summarised in sub paragraphs (vii) of the applicable construction principles set out above.

Neither party sought to rely on any contextual evidence in aid of the construction of the SA other than what is set out within the four corners of the SA itself.

For these reasons, I conclude that the construction of the SA should be approached by reference to the natural and ordinary meaning of the provisions being construed, considered in the context of any other relevant provisions of the SA, and bearing in mind the overall purpose of the provision being construed and the contract in which it is contained. Commercial common sense was relied on by Mr Jacobs in the course of his submissions. However, that concept is relevant only in the limited sense identified in (vi) above. It is not a mechanism by which the natural meaning of a provision should be rejected because, with hindsight and by reference to events that have happened since the SA was concluded between the parties, a provision within it appears imprudent from the perspective of the claimant, nor is it a basis for avoiding how the parties chose to allocate risk at the date when they entered into the SA. The relevant risks so far as the parties were concerned were (a) the risk that the defendant would not supply the minimum number of Jobs agreed and (b) the risk that the claimant would refuse to carry out the maximum number of Jobs it had contracted to carry out. Both those risks were addressed by agreement between the parties.

As I have explained, the claimant sought to invoke the express termination machinery within the SA. It did not seek to terminate the agreement relying on any common law rights that it might have had outside the four corners of the SA. Thus, no issue arises as to whether it might have been able to take advantage of such a principle and I express no conclusions, provisional or otherwise, about it. Mr Jacobs submitted that the effect of the SA is that clause 11 sets out an exhaustive code for the termination of the SA. He relies on this point as justifying a construction of clause 11.3(a) as extending to an anticipatory breach of contract. I return to this point later.

Clause 11.3 permits termination by notice for one or more of the grounds identified in that clause. The notice relied on by the claimant – being its email to the defendant of 16 April 2018 - relies exclusively on clause 11.3(a), which provides that a party could terminate the SA by giving written notice “ … if the other Party commits a wilful, persistent or material breach of any provision of this Agreement.” I suggested in the course of the argument that the claimant might also or alternatively have relied on clause 11.3(d), which entitles a party to terminate where the other party “ … threatens to cease to carry on business …”. However, no attempt was made by the claimant to rely on that provision in either of its notices, nor has it attempted to rely on it in its pleadings. That point does not arise therefore and I say no more about it.

I should make clear however that I reject Mr Jacobs’ submission that it would have been difficult or impractical to serve a notice that both purported to accept a repudiation at common law as well as purporting to rely on a contractual termination mechanism. The serving of such notices without prejudice to the effect of the other is a well-recognised and used technique. Similarly, there would have been no difficulty in serving a notice under clause 11.3 that invoked different sub-paragraphs within clause 11.3 in the alternative.

In circumstances where the claimant has not sought to rely on wrongful repudiation at common law or on any provision within clause 11.3 other than sub-paragraph (a), it follows that the claimant must bring itself within clause 11(3)(a) or fail in its claim. In this context it is common ground that the defendant offered the minimum number of Jobs required by the SA to the claimant during April 2018.

Applying the principles set out above, I am satisfied that it is necessary for a party relying on clause 11.3(a) to be able to show that the other party was in “ … wilful, persistent or material breach …” of a provision of the SA at the date when that party gives notice if it is to succeed. In this case that means that the claimant must show that is so on 16 April 2018, when it purported to give notice under clause 11.3. I reach that conclusion because clause 11.3(a) is not expressed to apply to events that are prospective. This is the effect of the word “commits” as defining the trigger for the giving of a notice. This is the approach that has been adopted in relation to sub paragraphs (b), (c) and (e). This formulation is to be compared and contrasted with the reference in sub paragraph (d) to “… threatens to cease …”. This contrast in drafting techniques shows that where the parties wanted to confer a power to terminate for prospective as opposed to present or past conduct they adopted language that made that clear. Had the parties wished to replicate the common law in relation to anticipatory breaches of contract as being a ground of termination under clause 11.3 they could with ease have drafted the clause so as to have that effect, either by broadening the scope of sub-paragraph (a) or by including a separate sub-paragraph. They did neither of these things.

I have considered whether Mr Jacobs is right to submit that I should take a different view because clause 11 on its proper construction excludes reliance on the common law of repudiation. I am not convinced that is the effect of this provision, not least because where the parties considered a provision should provide a sole and exclusive remedy they so expressed themselves. However, I am prepared to proceed for present purposes on the assumption that Mr Jacobs is correct without finally deciding the point. In my judgment this submission does not assist. The language used by the parties is clear and unambiguous. As I have explained, where the parties wished to extend the right to terminate to prospective events they did so expressly. The availability or otherwise of the common law of repudiation is not a reason for coming to a different conclusion than I have concerning the effect of the plain language used by the parties.

Mr Jacobs placed some reliance on authorities that establish that an anticipatory breach of contract is to be treated as a breach of contract – see by way of example Moschi v. Lep Air Services Limited [1973] AC 331. However, that case was not concerned with a contractual termination mechanism but with the common law of wrongful repudiation. What comes within the scope of an express power to terminate a contract depends on its true construction applying the principles set out earlier. It does not follow that because anticipatory repudiation is treated as a repudiatory breach for the purposes of the common law doctrine of wrongful repudiation, the parties are to be treated as having adopted a similar approach when adopting a contractual mechanism that is clearly confined to actual breach, particularly where the parties have shown themselves ready and willing to incorporate prospective events where they have considered it appropriate to do so. No authority was drawn to my attention which has this effect. The analysis also breaks down for the reasons considered at T3/51/19-52/14.

Mr Jacobs places some reliance on Afovos Shipping Co SA v Romano Pagan and Pietro Pagnan [1983] 1 WLR 195. In my judgment that authority does not assist the claimant in the circumstances of this case. That case was concerned with the effect of a provision within a time charter that gave the owner the right to give 48 hours’ notice of withdrawal of the vessel if hire that was due but unpaid when notice was given was not paid within the 48 hour period of notice. Notice was given before the time for payment had expired. Even though it was accepted that the sum could not be paid by the time when notice could have been given because it would have expired when the relevant banks were closed for business, the notice was nonetheless held to be of no effect. It was held by both the Court of Appeal and House of Lords that the particular clause took effect in accordance with its terms and anticipatory breach was of no relevance. In so far as it is material, this authority supports the defendant’s not the claimant’s case.

Mr Jacobs relies on business common sense as leading to a different conclusion from that I have identified above. I have addressed the limits that apply to a submission of this sort when summarising the law above and do not need to repeat it. The underlying basis for this submission is that if it is correct then the claimant would have to wait for more than one breach to occur, then give 30 days’ notice, in order to satisfy the requirement the breach relied on was persistent. This last point is wrong in the sense that the requirement for any breach to be persistent is disjunctive from the requirement that it be either wilful or material. Thus, a breach which is either material or wilful does not also have to be persistent.

More generally, the suggestion that the construction to which I have referred is uncommercial is mistaken in my judgment. First, if the effect of the clear words used by the parties is that the power to terminate is not available unless and until the other party has committed a breach which is either wilful or persistent or material, then there is no basis for not giving effect to the bargain of the parties. As I have said in the summary of applicable construction principles set out earlier, “… commercial parties are free to make their own bargains …” and effect must be given to the language used. That principle is illustrated by Afovos Shipping Co SA v Romano Pagan and Pietro Pagnan (ibid.) and, in this case as in that, is the effect of the unambiguous language the parties have chosen to use.

Secondly, commercial common sense is relevant only to the extent of how matters would have been perceived by reasonable people in the position of the parties, as at the date that the contract was made. It no doubt appears to the claimant, in the events that have happened, to be contrary to commercial common sense for it to have to conduct itself in the manner Mr Jacobs submits is uncommercial, but that is very different from how reasonable people in the position of both parties would have seen the situation at the date when the contract was entered into. It is by no means obvious why it would lack common sense for commercial parties to decide that one of them could not terminate the SA unless a relevant breach had occurred. Indeed, it may have made real commercial sense for such a provision to be included so as to prevent a termination unless a breach had actually occurred, as opposed to a party concluding that one might or would be committed in the future as a means of bringing a contract to an end in that party’s own interests. Finally, for the reasons that I set out below, I do not accept that what has occurred is a breach that comes within the scope of clause 11.3(a) in any event.

I now turn to a point that I drew attention to when setting out the relevant correspondence between the parties leading to the notices of 16 April then 22 May 2018.

The only provision which it is alleged the defendant would breach by reason of the transfer of business to ONE is clause 2.2. Clause 2 contains the subheading “Service Commitment”. The only obligation imposed on the defendant by clause 2.2 is that set out in clause 2.2(a) – that is to offer no fewer that the Daily Minimum number of jobs referred to in clause 2.1, which for Period 3 was 72 per day. If that provision was viewed in isolation, then if it was breached either wilfully or persistently or materially, that might have entitled the claimant to serve notice under clause 11.3(a) as and when such a breach had occurred. However, that provision cannot be read in isolation. It must be read together with clause 3.3, as compared and contrasted with the very different provisions set out in clause 4.4. So read, in my judgment it is plain that the parties did not intend that a breach of clause 2.2(a) would entitle the claimant to invoke clause 11.3(a). My reasons for reaching that conclusion are as follows.

First, clause 3.3 provides that the claimant’s “… sole and exclusive remedy …” for breach of the clause 2.2 obligation “… shall be to levy a surcharge in respect of that month …” to be calculated in accordance with the formula set out in that clause. In my judgment a provision to the effect that the sole and exclusive remedy for a failure to provide the Jobs guaranteed under the SA is the payment of a surcharge is entirely inconsistent with it being contemplated by the parties at the time the SA was entered into that the claimant would be entitled to terminate for such a breach. Clause 3.4, which provides for the claimant to invoice the defendant for payment of the surcharge is consistent with this analysis.

Secondly, there is a plain and very clear contrast between on the one hand clauses 2.2(a) and 3.3 (which govern the defendant’s minimum service obligation to the claimant and the claimant’s remedy for non-compliance) on the one hand and clause 4 (which governs the defendant’s remedies in respect of Jobs that are deemed accepted by the claimant but not performed). The default remedy is a financial charge imposed by clause 4.3. By clause 4.4 however, it was agreed that where there were two or more Shortfall Months in any 12-month period, then:

The parties were fully entitled to approach each risk differently and having agreed to that approach should be held to their bargain. It may well be that the sole and exclusive remedy provided by clause 3.3 is perceived to be inadequate so far as the claimant is concerned. The terms of the letter of 1 March 2018 suggests that is how it perceives it to be, as does the apparent extravagance of this claim as it was pleaded originally. However, that is nothing to the point. Commercial absurdity (if that is what is alleged to be the effect of holding the claimant to its bargain) is not to be judged at any date after the date when the contract concerned was entered into, nor is it to be judged from the point of view of one party but not the other, and in any event, is relevant only to the extent that the language used by the parties in their agreement is unclear or capable of bearing two meanings. That is not this case. It is not the function of a court when construing a contract to relieve a party from what it perceives to a bad bargain or to have become one in the events that have happened by hunting for ambiguities that in reality do not exist. In this agreement the parties have chosen to manage the risk that the defendant would not provide the guaranteed minimum number of Jobs by a contractual compensation mechanism and have done so in clear and unambiguous terms. They might have formulated clause 3.3 in similar terms to those adopted in clause 4.4 but they chose not to do so. There is no basis for the phrase “… sole and exclusive remedy …” to be ignored or for concluding that it should not take effect in accordance with its terms.

Mr Jacobs argued that the effect of the opening words of clause 2.2 (“… for so long as this Agreement continues …”), implied that the parties recognised that the claimant might terminate the SA by reference to clause 11.3(a) for non-compliance with clause 2.2. I do not agree. All that this phrase is designed to achieve is to make clear that the obligations of the parties under clause 2.2 do not survive the termination of the SA. It says nothing at all about whether it was open to either party to terminate for the other’s non-compliance with the obligations imposed in particular by clauses 2.2(a) and (b). As I have explained already, breach of clause 2.2(a) is addressed expressly and in clear and unambiguous terms by clause 3.3.

In summary therefore I conclude that the claim fails because:

In those circumstances it is not necessary that I address the quantum issues that arise at all since they are academic in the circumstances. However, I address them shortly in the next section of this judgment because the issue was argued in full.

This part of the judgment proceeds on the counter factual basis the claimant was entitled to terminate the SA under clause 11.3(a). Nothing I say hereafter is intended to derogate from my dismissal of this claim for the reasons set out above.

Had it been necessary to do so, I would have considered that damages would be at large. Mr Collins KC argues that the effect of clause 3.3 is to restrict the damages that would otherwise be recoverable for breach of the clause 2.2 obligation. In my judgment that submission is mistaken given the terms and effect of clause 12.2 of the SA, which provides that:

Turning to what might be recovered as damages in this counter factual world, it is necessary to start from first principles. As Mr Collins submits, those principles are accurately summarised in Chitty on Contracts, Volume 1 at paragraph 29-001:

The debate between the experts, which generated numerous and extensive reports, was designed to give effect to these basic principles. Had the debate not narrowed this would have resulted in a very lengthy judgment, analysing a large number of assumptions and calculations. However, as I indicated at the start of this judgment, by the end of the trial, the issues between the parties, on the assumption that the claimant was entitled to recover damages and that damages were at large, were very narrow.

Mr Jacobs indicated that with three exceptions, the claimant accepted Mr Scrivener’s assessment as set out in the table at paragraph 10.3 of his report (“Table”). I reproduce the Table below since all the closing submissions made on behalf of the claimant were advanced by reference to it and the underlying reasoning leading to the figures set out in it:

The three figures challenged were (a) vehicle costs, which it was submitted should be reduced by £332,239, (b) sub-contractor costs, which it was submitted should be reduced by approximately £20,000 with a consequential reduction of revenue from sub-contractor diesel sales to £52,039 and (c) other revenue, which it was submitted should be reduced by £19,582. The combined effect of these adjustments if permitted is to increase the sum recoverable by way of damages from £195,140 to about £562,000 odd.

Before turning to those issues it is necessary to determine one point that surfaced in the course of Mr Collins’ oral closing submissions. He submitted at T3/79/16, correctly, that it was “ … common ground that the defendant offered the minimum number of jobs in April …”. I agree. I also agree that it is not open to the claimant to contend otherwise for the reasons identified by Mr Collins at T3/79/17-20. I agree that in consequence it is not open to the claimant to recover anything for the month of April, whether under clause 3.3 or otherwise.

The next point that arises concerns whether reloads and re-positions are to be treated as separate jobs or as part and parcel of a single originating Job. The defendant’s case on this issue was always that on a proper construction, both reloads and repositions are Jobs and should count towards the minimum number of Jobs in the calculation of the Claimant’s loss. As Mr Collins submitted in his closing oral submissions, the effect of Mr Jacobs’ closing submissions was that the claimant had abandoned its pleaded case that reloads and repositions were not separate jobs and that the defendant’s case on this issue was correct. The Table proceeds on this assumption. This led Mr Collins to submit that “… what is sauce for the goose is also sauce for the gander …”, that the claimant had made a tactical retreat from its case and therefore there was no reason why the defendant should not be permitted to. The reason for this unprincipled submission is that if it is adopted then the end point on the defendant’s damages calculation is not £195,140 that appears in the Table but the lower figure of £148,214. I have no hesitation in rejecting this submission. Had the defendant wanted to adopt the claimant’s arguments on this issue on any principled basis it could and should have done so weeks or months ago. Its own arguments lead to the conclusion that Mr Jacobs has implicitly if not explicitly accepted. I am unimpressed by the defendant’s attempted volte face and I reject it.

It is now necessary to consider each of the challenged elements in more detail. Turning first to vehicle costs, Mr Scrivener’s detailed workings leading to the total he sets out in the Table was summarised in yet another table at Appendix 17 to his report. This contains a column for Period 2 and Period 3. This included an element for “Maintenance & Tyres”:

Turning now to sub-contractor costs, reduced to its bare essentials, Mr Jacobs criticised Mr Scrivener because he used an extrapolated cost per mile to arrive at his figures rather the lower actual figure for Period 3 as extracted from the management accounts of the claimant for that period. He submits also on the evidence the average length of each Job in miles was longer in Period 3 than it was in Period 2, which means the cost per mile was lower. The effect of this if carried into the Table is to reduce the Sub Contractor costs to £647,918 from £667,343. A consequence of this that the revenue from sub-contractor diesel sales drop from £53,575 to £52,039.

Mr Collins submits that it is not open to the claimant to accept Mr Scrivener’s figures but not his methodology and that his figures as set out in the Table should be not merely be the starting but the end point for this debate.

Turning first to the sub-contractor costs, Mr Collins submits that Mr Jacobs is wrong to submit that the figure in the Table should be adjusted, essentially on the basis that to adopt the claimant’s contention would be to cease comparing like with like. Mr Collins submits that the cost per mile will be lower for longer distance Jobs. This means that it is wrong in principle to derive the cost per mile from Period 3 – where the Jobs were shorter than those actually undertaken in Period 2 – and then apply that figure to the work profile derived from Period 2. There is an issue too about the impact of the treatment of repositions and reloads.

In my judgment there is a real difficulty in attempting to apply a different methodology to some elements that make-up the deduced loss of profit but not others. It is also wrong in principle to attempt to apply a cost per mile figure derived from one period of performance parameters to the work done in another period. I am not satisfied therefore that Mr Jacobs is correct in the point he makes in relation to this issue. In relation to vehicle costs element, Mr Collins submits this point should be rejected as well for a variety of different reasons. Of these points, the one that it seems to me is most material is the absence of any investigation or evidence that addresses the question of whether the cost base for Period 3 increased for any real-world reasons when the financial information that is available suggests that in real terms the costs incurred in Period 3 were higher than in Period 2. Whilst Mr Scrivener was prepared to accept the mathematical point put to him in cross examination, that does not in any way address this point.

In any event, in relation to each of these elements there is an air of unreality about the way in which these submissions have been formulated. Various items have been selected from the Table and then a different methodology has been applied to the calculation of the sums concerned from that adopted by Mr Scrivener, without applying the same revised approach to various other relevant heads. In the course of their closing submissions, counsel for the defendant provided a schedule that applied the claimant’s revised methodology to fixed costs lines – Road Tax, Vehicle Insurance, Maintenance and Tyres, Trailer and Vehicle hire and other direct costs. I have reproduced this schedule as the Appendix to this judgment. Applying that methodology resulted in variations to the sums concerned that exceeded the adjustments that Mr Jacobs submitted ought to be made. This illustrates the real difficulty of such an approach. It is not appropriate or fair for any conclusions to be reached by reference to the two heads identified by Mr Jacobs – vehicle maintenance and sub-contractor costs – on the overall loss of profit that has been suffered.

Finally, I turn to the Other revenue figure, which appears in the Table at £154,690. This was income realised by the claimant from leasing out trucks from its fleet. The issue here is that Mr Scrivener has included leasing revenue for April. It was submitted by Mr Jacobs that this was wrong in principle since the contract was still being performed in April and so there is no reason to suppose that this income could not have been earned as well as performing the SA. Further, since termination did not occur until 22 May, the income derived from leasing out trucks should not be taken into account because there is no duty to mitigate prior to the breach or acceptance of a repudiatory breach. The defendant did not breach clause 2.2 in April. In the result, Mr Jacobs submits that this element should be reduced by £19,582 to strip out the April lease income.

In principle Mr Jacobs is correct. Since no loss occurred before 22 May, it follows that the loss of profit for which damages is recoverable is for the period starting on that date not the earlier date of 1 April, when Period 3 started to run. Mr Collins accepts that if this methodology had been adopted then the hire income for April would drop out of the equation. However, the point he makes is that both experts have approached quantification on the basis that loss is to be assessed by reference to the whole of Period 3. Mr Collins submits that if this is the methodology or convention that has been adopted, then it would be wrong in principle to ignore the rental income for April whilst calculating loss by reference to that month. I agree. Had the sums involved been larger and had the issue been one of importance I would have held that damages could not be calculated by reference to any period other than a period starting on 22 May. It strikes me that the impact on this might have been taken account of by a process of apportionment. However, both sides wish to stick with the approach that the experts have adopted. On that basis, the point made by Mr Jacobs is wrong, as he implicitly acknowledged in his closing submissions – see T3/115/11-15.

In the result, had it been necessary for me to have assessed damages on the basis that damages were at large, I would have assessed them at £195,140.

For the reasons set out at paragraphs 14-36 above, I dismiss the claim. Had I concluded that the defendant was liable to the claimant for breach of contract, I would have rejected the defendant’s submission that damages should be assessed by reference to the clause 3.3 formula for the reasons set out in paragraph 38 above, and would have assessed damages in the sum of £195,140, for the reasons set out in paragraphs 39 to 51 above.