“1.1 Reference is made to the Service Agreement dated28 February 2007 (hereinafter referred to as “The Service Agreement”) and its clause 6.1. The parties agree as follows regarding “Fees and expenses”; 1.2 In consideration of SPYKER entering and performing the aforementioned Service Agreement the Company or the Driver will pay SPYKER per race season: US$3million (US Dollar three million) (plus VAT if applicable) upon signing. SPYKER will not be liable for any costs, fees or expenses incurred by the Company and the Driver. Notwithstanding the aforementioned, SPYKER will be responsible (i) to provide solely for and on behalf of the Driver the reasonable travel expenses to places at which he participates in Tests (including transfers in relation to the respective Grand Prix location) (ii) to provide solely for and behalf of the Driver one double room with respect to the respective days on which the Driver is present at days on which he participates in Tests (iii) to pay the Company a management fee of a total of US$60,000 – payable by the end of each month in monthly instalments of US$5,000 – subject to SPYKER’s receipt of a respective invoice and SPYKER’s receipt of the amount set out in clause 1.2. SPYKER will provide the Driver with up to three paddock (for himself with pit access and two of his guests) and pit access passes subject to availability at times when the Driver is providing driving services hereunder. Additional two paddock passes will be provided for Mr Marcel Boekhoorn subject to notification by the Driver and/or Company to SPYKER in writing not less than three weeks prior to the start of the respective Grand Prix weekend. In addition SPYKER will provide the Driver during the Term with a lease/rental car in the Netherlands. SPYKER will bear the lease/rental fee. All other costs and expenses shall be borne by the Driver. Any payment owed to SPYKER under the Service Agreement or this agreement shall be effected without any deduction, right to set-off or retention. The Company and the Driver are jointly and severally responsible for any payment under the Service Agreement or this agreement. Payments once effected shall not be refundable.”
“It’s all over” they did not mean that the contract between Super Aguri and him was terminated and were instead to claim that that contract was still in full force and effect, there was a procedure which had to be gone through if Super Aguri had registered their contract with Mr Van der Garde with the FIA Contract Recognition Board. Dr Kolles told Mr Boekhoorn that any contract with Spyker would need to be registered with the Contract Recognition Board and they might find themselves in a difficult position if the Super Aguri contract had already been registered and if Super Aguri did not agree to it being terminated. According to Mr Muller it was made very clear to Mr Boekhoorn that it was not a done deal to get a Super Licence for Mr Van der Garde. That led to a discussion about using best efforts. Mr Boekhoorn asked if Spyker could get Mr Van der Garde a Super Licence in response to which Dr Kolles was very explicit saying: “No I cannot guarantee you that I can get that done.”
“We are surprised to note from your media statements issued within the last 24 hours that an agreement is purported to exist between you and the above named driver (Mr Van der Garde) or between you and a third party in respect of the services of the driver for the 2007 season.”
“Subject to the provisions in the draft Giedo will drive during the Friday morning sessions. It is not possible to predict times but as you know Giedo will run a minimum of 6,000 km. On another note I understand that Super Aguri involved lawyers now and a discussion was held between Colin [Kolles] and Bernie Ecclestone. As you know the driver’s agreements will be lodged with the Contract Recognition Board. It is not in the parties’ interest to have a dispute involving the Contract Recognition Board and therefore we ask you to add the following provision at the end of clause two: ‘The driver and the company jointly and severally warrant and represent to Spyker that by entering into this agreement they will not be in breach of any existing or former terms of agreement, whether express or implied, or of any other obligation binding on the Driver and/or the Company. The Driver and the Company shall severally and jointly indemnify Spyker from any loss, costs (including but not limited to professional and lawyer’s fees and/or fees in relation to the Contract Recognition Board), liabilities or claims suffered or incurred as a result of the Driver and the Company entering into this agreement, including Spyker’s costs suffered or incurred as a result of Spyker lodging this agreement with the Contract Recognition Board.’ For your convenience I inserted this clause in the attached draft.”
“If it is indeed the case that you were unaware of any contractual relationship between the Driver [Mr Van der Garde] and our client, you are now aware that such relationship exists, and it is not, as we understand has been claimed, that this agreement has been terminated. Rather it remains in force, and the Driver is considered to be in breach of his obligations under its terms. Super Aguri F1 Limited has registered its agreement for the services of the Driver with the Formula One Contract Recognition Board and any attempt by you to do likewise will give rise to the convening of a resolution hearing by the Board. Please now confirm that any arrangement between yourself and the Driver will now be regarded as ineffective and incapable of performance on the basis that the Driver’s services were and remain exclusively contracted to Super Aguri F1 Limited. My client has no wish to be required to commence any form of restraining action if this matter can be dealt with by way of your undertaking in this respect. We look forward to hearing from you.”
“Giedo drove 1261 kilometres so far and I will take care that he will drive a lot of mileage to complete 6,000 kilometres (we reserve our right to deduct 1500 kilometres he would have driven if we would have had his full co-operation). However, I am not sure whether he is still committed to the team ...”
“to be judged by the FIA to have consistently demonstrated outstanding ability in single-seater formula cars, but with no opportunity to qualify under any of (d) to (g) above. In this case the F1 team concerned must show that the applicant has driven at least 300 kilometres in a current Formula One car consistently at racing speeds over a maximum period of two days, completed not more than 90 days prior to the application and certified by the ASN of the country in which the test took place.”
“In order to put it to the vote of the F1 Bureau we also await confirmation of the agreement to drive for Spyker.”
“The final sentence refers to the fact that they are waiting for confirmation from the CRB that he has a valid agreement to drive for Spyker.”
“Spyker F1 would solve the problems with Super Aguri. These problems have not yet been solved in a proper way. Same for the Super Licence.”
“Given the trust and good faith that I showed by wiring a very substantial amount to Spyker F1 even before Giedo’s contract was signed, based on oral agreements, I was expecting a less defensive and more co-operative attitude from Spyker’s side. I totally disagree with your statements and suggestion that it is because of Giedo’s attitude that he drove a very limited number of kilometres so far. Giedo is as dedicated as can be to get on the track.”
“1.1 Reference is made to the Service Agreement dated28 February 2007 and the agreement dated of the same day [hereinafter collectively referred to as “the Agreements”]. 1.2 The Driver and the Company hereby consent that FORCE INDIA assigns its rights and its obligations under the Agreements [hereinafter referred to as “Transfer of Agreement”] to Centurium Capital Limited (BVI company number 1436225) of 48 East Street, Bella Visia, Sucre Building P.O Box 6277, Panama 5, Panama. This Transfer of Agreement shall become effective on30 December 2007 . The parties agree that this Transfer of Agreement shall not inhibit FORCE INDIA to permit the Driver to drive the car in tests beyond the aforementioned date, especially in the context of an amicable settlement of any dispute, however FORCE INDIA shall have no liability anymore towards the Driver and/or the Company and Centurium Capital Limited shall be solely responsible and liable for any loss, costs, liabilities, damages or claims of the Driver and/or the Company. This shall not apply if death or personal injury is caused to the Driver by FORCE INDIA’s negligence or wilful misconduct. 1.3 This agreement is entered by the Driver and the Company with due consideration of GBP1 payable by FORCE INDIA and the Driver and the Company hereby confirm the receipt of GBP1. 1.4 The interpretation, validity and performance of this agreement are governed by the laws of England and Wales. Any dispute relating hereto will be decided exclusively by the English courts.”
“These are the waivers can you sign them please?”
“To shift liabilities, but to be honest with you I still do not understand, you know, how you shift the liabilities and the whole claim of Super Aguri because I – to be honest I did not read the claim of Super Aguri so it was not for me to decide what is in the text of this Novation Agreement.”
“In addition to the above mentioned points, I kindly remind you that we are indemnified from all the costs related to the Giedo/Super Aguri matter. As you know we have incurred costs. We are looking to find an amicable solution and to promote Giedo’s career. I hope you agree!”
“In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.”
“… When one is speaking of aim, or object, or commercial purpose, one is speaking objectively of what reasonable persons would have in mind in the situation of the parties.”
“In my opinion, then, evidence of negotiations, or of the parties’ intentions, and a fortiori of [the claimant’s] intentions, ought not to be received and evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of the “genesis” and objectively the “aim” of the transaction.”
“I do not consider Mr. Mance’s submission to be sound in law. The drafting of the slip formed no part of the relevant matrix of this case. That matrix was the background to the commercial adventure that formed the subject matter of the contract, not the mechanism by which the parties set about negotiating and reaching agreement. The reason that Mr. Mance wished me to look at the slip was not so that I could inform myself of relevant background, but because he hoped that, by considering somewhat different words used by the parties in an earlier version of the contract, I would deduce the agreement reached as being that for which he contended and construe the policy so as to reproduce that agreement. This approach to construction is one which has its attractions and which in some cases might result in the court construing an unclear written agreement so as to give effect to the intentions of the parties where it might not otherwise do so. But if prior written agreements or drafts were admitted in evidence as an aid to construction the result would be that the Courts would often be called upon to consider a profusion of documents in cases where there was an issue as to the true construction of the final version of the contract. The English Court has firmly set its face against such a practice. It has done so by adopting the so-called parol evidence rule…”
“This document is the entire agreement between the parties and supersedes all other agreement or arrangements, whether written or oral, express or implied, between the parties or any of them.”
“subject to the terms and conditions of this Agreement and the FIA provision and regulations and the Driver and Company complying with their obligations here under” there could be no doubt that the Service Agreement “is to be construed in the way advocated by the Defendant, namely as including the Friday morning test sessions in the 6,000 kilometres to be driven. One of the obligations of [Mr Van der Garde] was to be the defendant’s first reserve race driver – see paragraph 2 - which obviously should only occur if an FIA super licence was held.”
“subject to the terms and conditions of this agreement and the FIA provisions and regulations…”
“Subject to the Driver holding a valid FIA Super Licence the Driver will drive at all of the Grands Prix Friday morning test sessions.”
“Rest assured that it is up to Giedo himself to co-operate with us in receiving a good preparation to become an F1 race driver. We did and will do our part. This is also true with regards to the Super Licence which was not granted due to lack of performance by Giedo. I even recently suggested to Giedo to get involved in GP2 to eventually win a race and consequently obtain the Super Licence.”
“The claimants claim restitution and/or damages for breach of contract, alternatively claim to recover in equity, the sum of US$2,100,000 (£1,072,796.93 ). This is calculated as follows: US$3 million (£1,532,567.05 ) for 6,000 km = US$500 (£255.43 )for 1 km; 4,200 km not made available X US$500 (£255.43 ) = US$2,100,000 . (£1,072,796.93 )”
“alternatively the claimants claim for breach of contract: i) The claimants’ costs incurred as a result of the breach (including but not limited to McLaren consultancy fees, fee in 2007 and 2008 for participation in world series by Renault and fee for GP2 in 2009); and ii) Claimants’ lost income from salary, winnings, sponsorship and merchandising suffered as a result of the breach or lost opportunities thereof”
“Further or alternatively, the claimants claim for breach of contract: (a) the claimants’ costs incurred as a result of the breach of contract, including but not limited to fees incurred for participation in the World Series by Renault competition in 2008 and fees incurred for participation in the GP2 competition in 2009; and (b) the claimants’ lost income from salary, winnings, sponsorship and merchandising suffered as a result of the breach, or lost opportunities therefor; or (c) the fees paid by the claimants for driving in the Car in Tests and for participating in the World Series by Renault competition in 2007 as wasted expenditure.”
“The test is not whether the promisee has received a special benefit, but rather whether the promisor has performed any part of the contractual duties in respect of which the payment is due”
“(1)The grant of sponsor spaces on the trade area of the car and the race suit. These spaces were available to third party sponsors and thus could be sold by the Claimants to third parties to help defray the costs of the Fee Agreement – see clause 7 of the Service Agreement. (2) Entering into the Service Agreement (and performing it) – see clause 1.2 of the Fees Agreement. (3) Travel expenses for Mr Van der Garde for getting to tests – see clause 1.3 of the Fee Agreement. (4) Accomodation when Mr Van der Garde was driving in tests – see clause 1.3 of the Fee Agreement. (5) A management fee of$60,000 per annum to Mr Van der Garde – see clause 1.3 of the Fees Agreement. (6) Up to 5 paddock and pit access passes when Mr Van der Garde was providing services and two additional paddock passes for Mr Boekhoorn on request prior to a Grand Prix weekend – see clause 1.3 of the Fee Agreement. (25.7) A rental car in the Netherlands – see clause 1.3 of the Fees Agreement.”
“Spyker hereby nominates and permits the Driver to drive the car in tests. Tests means the testing and/or practising and/or racing with the car of (i) of a minimum of 6,000 km and (ii) subject to the Driver holding a valid FIA Super Licence, during the Grands Prix for Friday morning test sessions”
“The general rule of law is that where a contract has been in part performed no part of the money paid under such contract can be recovered back.” (page 81). However to this general rule he held that there are exceptions. “There may be some cases of partial performace which form exceptions to this rule, as for instance, if there were a contract to deliver ten sacks of wheat and six only were delivered, the price of the remaining four might be recovered back. But there the consideration is clearly severable…The contract having been in part performed it would seem that the general rule must apply unless the consideration be in its nature apportionable. I am at a loss to see on what principle such apportionment could be made. It could not properly be made with reference to the proportion which the period during which the apprentice was instructed bears to the whole term. In the early part of the term the teaching would be most onerous and the services of the apprentice of little value; as time went on his services would probably be worth more and he would require less teaching. There appears to be no instance of a similar nature to the present in which an action for the return of a part of the premium has been brought.” (Page 81). Montague Smith J referred to a “rule of law that an action for money had and received can only be brought when there is a total failure of consideration with the exception of a few cases which on being analysed hardly proved to be exceptions…Moreover it appears to me clear that the action for money received cannot lie where the contract has been partly performed on both sides. To ascertain the amount which in equity in such a case requires to be returned it would be necessary to go into a great variety of considerations, the relevant weight of which it would be almost impossible correctly to estimate: e.g. the value of the service lost to the master, and the degree to which the apprentice had profited by the instruction. It would be impossible to take merely the proportion of the time which had elapsed to the whole term as the standard of measurement.” (page 85-86). While restating the general rule the court in Whincup v Hughes expressly contemplated the existence of exceptions where the consideration is “in its nature apportionable” or “severable”
“Whilst the traditional view is that a party to a contract (whether the innocent party or the contract-breaker) can only recover payments made under it where there has been a total failure of consideration, the dictum of Lord Goff in Goss v Chilcott referred to at [42], above, suggests that this may no longer be so, and recent authority suggests that there may be circumstances in which recovery for partial failure may be allowed: See DO Ferguson v Sohl[1992] 62 BLR 95 in which as the editorial note indicates, Hirst LJ “robustly” described as a total failure of consideration what might more conventionally have been seen as a partial failure. See also White Arrow Express Limited v Lamey’s Distribution Limited [1995] NLJR 1504 and Baltic Shipping Co. v Dillonthe Michael Lermontov[1993] 176 CLR 344 .” (845 B-E). Referring to those dicta and in particular their reliance on Lord Goff’s dictum in Goss v Chilcott the editors of Goff and Jones point out that it was made in the hypothetical context of facts where the borrowers had repaid part of the capital sum and expressed the view that “what is more doubtful is whether a restitutionary claim will lie if there has been a partial failure and the counter-performance is not the payment of money but the rendering of services.”
“The question whether there has been a total failure of consideration is not answered by considering whether there was any consideration sufficient to support a contract or purported contract. The test is whether or not the party claiming total failure of consideration has in fact received any part of the benefit bargained for under the contract or purported contract”. (923 G). Central to Kerr LJ’s decision was his conclusion that in order to defeat a claim of total failure of consideration is it not sufficient to show that the promisee has received any benefit or even any benefit due under the contract. What must be proved is receipt of “any part of the benefit bargained for under the contract or purported contract”
“So, in the context of failure of consideration, the failure is judged from the perspective of the payer.” [Reference was then made to Kerr LJ’s test in Rover International]. In the immediately preceding passage of their judgment the majority arguably went further than the Court of Appeal in Rover in holding that the question of failure is judged not just from the perspective of the payer but by reference to the subjective understanding of the payer as to what it thought it was receiving as consideration. “The respondent, taking a different view of the contractual arrangements, asserts that all its pre-contractual statements concerning payment of withholding tax simply took the form of a contractual offer, which the appellants were at liberty to accept or to reject. Viewed from the angle of contract formation between equal and experienced parties, this is undoubtedly true. But we are not concerned in this case with what a hypothetical, experienced commercial person believed he/she was contracting for; in order to decide whether the appellants in this case have received consideration for payment of the additional moneys, we mustask what these particular appellants, in all the circumstances, thought they were receiving as consideration. In this context, consideration means the matter considered in forming the decision to do the act, “the state of affairs contemplated as the basis or reason for the payment.”
“In truth the test is not whether the promise has received a specific benefit, but rather whether the promisor has performed any part of the contractual duties in respect of which the payment is due.”
“When, however, an innocent party seeks to recover money paid in advance under a contract in expectation of the entire performance by the contract-breaker of its obligation under the contract and the contract-breaker renders an incomplete performance, in general, the innocent party cannot recover unless there has been a total failure of consideration. If the incomplete performance results in the innocent party receiving and retaining any substantial part of the benefit expected under the contract, there will not be a total failure of consideration. In the context of the recovery of money paid on the footing that there has been a total failure of consideration, it is the performance of the defendant’s promise, not the promise itself, which is the relevant consideration. In that context, the receipt and retention by the plaintiff of any part of the bargained-for benefit will preclude recovery, unless the contract otherwise provides or the circumstances give rise to a fresh contract. So in Whincup v Hughes, the plaintiff apprenticed his son to a watchmaker for six years for a premium which was paid. The watchmaker died after one year. No part of the premium could be recovered. That was because there was not a total failure of consideration. A qualification to this general rule, more apparent than real, has been introduced in the case of contracts where a seller is bound to vest title to chattels or goods in a buyer and the buyer seeks to recover the price paid when it turns out that the title has not been passed. Even if the buyer has had the use and enjoyment of chattels or goods purportedly supplied under the contract for a limited time, the use and enjoyment of the chattels or goods has been held not to amount to the receipt of part of the contractual consideration. Where the buyer is entitled under the contract to good title and lawful possession but receives only unlawful possession, he or she does not receive any part of what he or she bargained for. And thus, it is held, there is a total failure of consideration. As this Court stated in David Securities Pty v Commonwealth Bank of Australia: “the notion of total failure of consideration now looks to the benefit bargained for by the plaintiff rather than any benefit which might have been received in fact.””
“Let it however be supposed that in the present case the defendants had been so discharged from liability at a time when they had paid nothing, by way of principal or interest, to the company. In such circumstances their Lordships can see no reason in principle why the company should not be able to recover the amount of the advance made by them to the defendants on the ground that the money had been paid for a consideration which had failed, the failure of the defendants to perform their contractual obligation to repay the loan, there being no suggestion of any illegality or other ground of policy which precluded recovery in restitution in such circumstances. In the present case however, although no part of the principal sum had been repaid by the defendants, two instalments of interest had been paid; and the question arises whether these two payments of interest precluded recovery on the basis that in such circumstances the failure of consideration for the advanced was not total. Their Lordships do not think so. The function of the interest payments was to pay for the use of the capital sum over the period for which the loan was outstanding, which was separate and distinct from the obligation to repay the capital sum itself. In these circumstances it is, in their Lordships’ opinion, both legitimate and appropriate for present purposes to consider the two separately. In the present case, since it is unknown when the mortgage instrument was altered, it cannot be known whether, in particular, the second interest instalment was due before the defendants were discharged from their obligations under the instrument. Let it be supposed however that both interest payments had fallen due before the event occurred. In such circumstances, there would have been no failure of consideration in respect of the interest payments rendering them recoverable by the defendants; but that would not affect the conclusion that there had been a total failure of consideration in respect of the capital sum, so that the latter would be recoverable by the company in full on that ground. Then let it be supposed instead that the second interest payment did not fall due until after the avoidance of the instrument. In such circumstances the consideration for that interest payment would have failed (at least if it was payable in advance), and it would prima facie be recoverable by the defendants on the ground of failure of consideration; but that would not affect the conclusion that the capital sum would be recoverable by the company also on that ground. In such a case, therefore, the capital sum would be recoverable by the lender, and the interest payment would be recoverable by the borrower; and doubtless judgment would, in the event, be given for the balance with interest at the appropriate rate: see Westdeutsche Landesbank Girozentrale v Islington London Borough Council[1994] 1 W.L.R 938 . In either event, therefore, the amount of the loan would be recoverable on the ground of failure of consideration. In the present case, since no part of the capital sum had been repaid, the failure of consideration for the capital sum would plainly have been total. But even if part of the capital sum had been repaid, the law would not hesitate to hold that the balance of the loan outstanding would be recoverable on the ground of failure of consideration; for at least in those cases in which apportionment can be carried out with difficulty, the law will allow partial recovery on this ground: see David Securities Pty. Ltd. v Commonwealth Bank of Australia [1992] 175 C.L.R 353,383.”
“Finally, there are a number of passages on which Mr Armstrong relies from the leading textbook on restitution (that is the textbook of Lord Goff of Chieveley and Professor Gareth Jones on Restitution in the third and current edition), stating the well-known principle (which is strongly criticised by the editors as worthy of reform) that where there is only a partial failure of consideration then, as the law at present stands, an injured party cannot claim restitution, but is only entitled to claim for general damages for breach of contract. But here again Mr Armstrong, in my judgment, derives no assistance because, ex hypothesi, the learned judge’s finding is in that for the£4,673 there was indeed a total failure of consideration because£4,673 was paid by the defendant for work that was never done at all. The plaintiffs rightly recovered their£22,000 odd for work which they had done, including their profit, and there is no question of rolling back the carpet so far as that payment is concerned. But for the sum actually claimed in restitution there was, in my judgment, no consideration at all, and its matters not, though Mr Armstrong sought to argue the contrary, that at some stage or other that sum of money formed part of a larger instalment. In those circumstances the learned judge was, in my judgment, correct in upholding two separate causes of action, and awarding restitution in the amount that he did on the first, and only moninal damages on the second.”
“As a result of the judge’s findings, the position became a very simple one. The plaintiff had done work to a value of£22,065.75 . The defendant had made payments to him under the contract amounting to£26,738.75 , an overpayment of$4,673 . The plaintiff then repudiated the contract, the repudiation being accepted by the defendant. That meant that the plaintiff could recover nothing more from the defendant. On his side the defendant became prima facie entitled to recover, by way of damages, the cost of completing the works in a reasonable manner, less the amount of the contract price remaining unpaid. As it happened, and this is the unusual feature of the case which may have been responsible for it having been brought as far as this court, the defendant was able to complete the works for less than the amount of the contract price remaining unpaid. That meant that he could only recover nominal damages for£1 for breach of contract. But why should it also mean that he is unable to recover the overpayment of£4,673 ? That is a question which the well-sustained argument of Mr Armstrong, for the plaintiff, has been unable to answer. I do not think that any unseful purpose is served by making too elaborate an analysis of the legal principles which may here be in play. The plaintiff had been found to be entitled to£22,065.75 for the work done and, by virtue of his repudiataion of the contract, to nothing more. Pursuant to the contract he had been paid£26,738.75 . If the basis of his right to retain the£22,065.75 is that he has done the work to that value, by what possible right can be claim to retain£4,673 for work which, in breach of contracat, he has not done? I think that it would be a sorry state of affairs if the defendant was unable to recover that amount. I am quite satisfied that he can. If it is necessary, out of respect for well-established principles in the law of contract and restitution, to base our decision on the proposition that there was a total failure of consideration in regard to the£4,673 , so be it. For myself, I would have held that simple common sense was every bit as sure a foundation. In a quite admirable judgment Judge Hicks came to an entirely correct decision. I too would affirm it accordingly.”
“Ex hypothesi the learned judge’s finding is that for the£4,673 there was indeed a total failure of consideration because£4,673 was paid by the defendant for work that was never done at all. The plaintiffs rightly recovered their£22,000 odd for work which they had done, including their profit, and there is no question of rolling back the carpet so far as that payment is concerned”
“The parties agree as follows regarding “Fee and expenses”
“In consideration of Spyker entering and performing the aforementioned Service Agreement the Company or Driver will pay Spyker per race season: US$ 3million (plus VAT if applicable) upon signing.”
“In other words the benefits due to the claimants under the Service Agreement constituted the consideration for the$3 million payment. The benefits due to the Claimants under the Fee Agreement were not expressed to be any part of that consideration”
“However the agreement appears to me to be first and foremost a driver agreement with the principal benefit being to test the Spyker car, and the benefits as listed above would typically be inclusive of such a deal. At the centre of this agreement is the fee and the testing mileage, and the additional benefits are required merely to oil the machinery of this deal to make it happen. To put it simply had [Mr Van der Garde] been asked to put a value on these benefits and disregard the driving aspect, the value - from a driver’s perspective – would be zero.”
“I did not receive any other paddock passes as I was not invited to any other Grand Prix. This meant that the real benefits of the paddock passes mainly being seen in the paddock as a driver (i.e in a race suit and also preferably in a car) was lost to me. I could not use the paddock passes if I was not at a race. They were part of the deal as a driver, not as spectator.”
“If you’ve made it already it is a great bonus to do Friday driving at Grands Prix. But I had not made it as a Formula One drvier at that time. I was not at all experienced in a Formula One car. For me, I needed to make it to that stage, where I have proved the potential as a F1 driver. For me that meant 6,000 kilometres of testing. Other people might pay that much for driving on a Friday, but the agreement was between me and the defendant. I wanted test driving miles and so driving on Fridays was not what I felt I was paying for. The most important thing is to have time in the car, on the track, in the pit lane and in the garages with an engineer who is dealing only with me. That is how you get better at driving. On Fridays, the team tests the car and all attention is devoted to the race drivers, which is understandable. At other testing they test the driver. As a driver you obviously get much more out of driving at other tests than you do on Fridays because the car is set up for the individual driver and changes are made according to that driver’s specification. Additionally testing provides the benefit of spending time with the team and building proper relations with them. This is important for your career. The feedback a driver receives is also of a better standard. Also, when a team see you testing at your best, with the car set up for your specifications, they are more likely to be impressed with your driving. In turn, this would mean that if a place as a paid test driver or a race driver became available I would have been more likely to be given it.....”
“In contract the normal loss can generally be stated as the market value of the property, money or service that the claimant should have received under the contract, less either the market value of what he does receive or the market value of what he would have transferred but for the breach. Consequential losses are anything beyond this normal measure, such as profits lost or expenses incurred through the breach, and are recoverable if not too remote. …The distinction is brought out by ss50 and 51 of theSale of Goods Act 1893 dealing with damages for non-acceptance and non-delivery of goods sold respectively. The second subsection of each section states the general measure of damages as the loss directly and naturally resulting in the ordinary course of events from the particular breach: this includes both normal and consequential losses. The third subsection of each section states the prima facie measure of damages to be the difference between contract price and market price: this is the normal loss.”
“Where there is an available market for the goods in question the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered or (if no time was fixed) at the time of the refusal to deliver.”
“In all actions for goods sold and delivered with a warranty, or for work and labour, as well as in actions for goods agreed to be supplied according to a contract, it is competent for the defendant to show how much less the subject matter of the action was worth by reason of the breach of contract: and to the extent that he obtains, or is capable of obtaining, an abatement of price on that account, he must be considered as having received satisfaction for the breach of contract.”
“It is… obvious that in the ordinary way a party who contracts and pays for a superior service or superior goods and receives a substantially inferior service or inferior goods has suffered loss. If A hires and pays in advance for a 4-door saloon at£200 per day and receives delivery of a 2-door saloon available for£100 per day, he has suffered loss. If B orders and pays in advance for a 5-course meal costing£50 and is served a 3-course meal costing£30 , he has suffered loss. If C agrees and pays in advance to be taught the volin by a world famous celebrity at£500 per hour, and is in the event taught by a musical nonentity whose charging rate is£25 per hour, he has suffered loss. It is irrelevant whether A,B or C might have been entitled to reject the goods or services tendered if they in fact accept them. It would defy common sense to suggest that A,B and C have suffered no loss, and are not financially disadvantaged by the breach. The measure of damage in each of these cases is the difference between the price paid (or, if it is lower, the market value of what was contracted for) and the market value of what was obtained.”
“The third question is as to the ascertainment of the value the machinery would have had if fully re-conditioned at the time of sale. As to this, the only evidence of value is the contract price, and that can be accepted subject to one [irrelevant for present purpose] qualification.”
“It is not the law that an innocent party who contracts for a deluxe service and receives a sub-standard service is in principle denied a claim to more than nominal damages. If such were the law it would be defective. But it is the law that an innocent party in such a position must quantify, or at least provide evidence from which the court can draw an inference as to, the difference between the value (usually the market value) of what was contracted and the value (again usually the market value) of what was provided. (13 D-F).”
“ The second ground upon which the recovery of damages is resisted is that Investments in fact reimbursed Corporation for the money they spent on the repairs. But here again in my view who actually pays for the repairs is no concern of the defendant who broke the contract. The court will of course wish to be satisfied that the repairs have been or are likely to be carried out but if they are carried out the cost of doing them must fall upon the defendant who broke his contract” (97G–H).”
“The exception contained in Lord Griffiths’s speech. The rationale of Lord Griffiths’s wider principle is essentially that, if a party engages a builder to perform specified work and the builder fails to render the contractual service, the employer suffers a loss. He suffers a loss of bargain or of expectation interest. And that loss can be recovered on the basis of what it would cost to put right the defects. While other members of the House of Lords expressed sympathy with this view they did not decide the point. The point has now been argued in some depth before us. We have also had the benefit of some academic comment on the point: John Cartwright, ‘Remedies in Respect of Defective Buildings and Linden Gardens’ (1993) 9 Constr.L.J. 281 and I.N. Duncan Wallace, ‘Assignment of Rights to Sue: Half a Loaf’ (1994) 110 LQR. 42. Subject to one qualification, it will be clear from what I said earlier that I am in respectful agreement with the wider principle. It seems to me that Lord Griffiths based his principle on classic contractual theory. The qualification is, however, important. Lord Griffiths observed, at p.97: “The court will of course wish to be satisfied that the repairs have been or are likely to be carried out but if they are carried out the cost of doing them must fall upon the defendant who broke his contract.”
“The court will of course wish to be satisfied that the repairs have been or are likely to be carried out but if they are carried out the cost of doing them must fall upon the defendant who broke his contract.”
“In the McAlpine case Lord Griffiths suggested a wider principle which received a measure of support obiter from Lord Keith of Kinkel and Lord Bridge of Harwich. Mr Furst urged us to decide this case on Lord Griffiths’s wider principle. But I do not find it necessary to consider Lord Griffiths’s principle, and I prefer not to, since it has been suggested that Lord Griffiths’ formulation is, at least in one respect, still too narrow. It seems that Lord Griffiths’ formulation was not the subject of argument during the hearing of the McAlpine appeal. It includes the statement, at p.97: “who actually pays for the repairs is no concern of the defendant who broke the contract. The court will of course wish to be satisfied that the repairs have been or are likely to be carried out but if they are carried out the cost of doing them must fall upon the defendant who broke his contract.”
“However there is a further matter to be considered in this case, namely the DCDE [the deed] in favour of UIPL [the owner]. This, in my view is equally relevant to the broader as to the narrow ground. The former as does the latter seeks to find a rational way of avoiding the “black hole”
“I turn accordingly to what was referred to in the argument as the broader ground. But the label requires more careful consideration. The approach under The Albazero exception has been one of recognising an entitlement to sue by the innocent party to a contract which has been breached, where the innocent party is treated as suing on behalf of or for the benefit of some other person or persons, not parties to the contract, who have sustained loss as a result of the breach. In such a case the innocent party to the contract is bound to account to the person suffering the loss for the damages which the former has recovered for the benefit of the latter. But the so-called broader grounds involves a significantly different approach. What it proposes is that the innocent party to the contract should recover damages for himself as a compensation for what is seen to be his own loss. In this context no question of accounting to anyone else arises. This approach however seems to me to have been developed into two formulations. The first formulation, and the seeds of the second, are found in the speech of Lord Griffiths in the St Martins case[1994] 1 AC 85 , 96. At the outset his Lordship expressed the opinion that Corporation, faced with a breach by McAlpine of their contractual duty to perform the contract with sound materials and with all reasonable skill and care, would be entitled to recover from McAlpine the cost of remedying the defect in the work as the normal measure of damages. He then dealt with two possible objections. First, it should not matter that the work was not being done on property owned by Corporation. Where a husband instructs repairs to the roof of the matrimonial home it cannot be said that he has not suffered damage because he did not own the property. He suffers the damage measured by the cost of a proper completion of the repair: “In cases such as the present the person who places the contract has suffered financial loss because he has to spend money to give him the benefit of the bargain which the defendant had promised but failed to deliver.” (see p.97.) The second objection, that Corporation had in fact been reimbursed for the cost of the repairs was answered by the consideration that the person who actually pays for the repairs is of no concern to the party who broke the contract. But Lord Griffiths added, at p.97: “The court will of course wish to be satisfied that the repairs have been or are likely to be carried out but if they are carried out the cost of doing them must fall upon the defendant who broke his contract.”
“Such a result would in my view be absurd and the answer is that the husband has suffered loss because he did not receive the bargain for which he had contracted with the first builder and the measure of damages is the cost of securing the performance of that bargain by completing the roof repairs properly by the second builder.”
“He suffers a loss of bargain or of expectation interest.”
“In the light of this preamble I wish to state that I find persuasive the reasoning and conclusion expressed by Lord Griffiths in his opinion in the St Martins case[1994] 1 AC 85 that the employer under a building contract may in principle recover substantial damages from the building contractor, because he has not received the performance which he was entitled to receive from the contractor under the contract, notwithstanding that the property in the building site was vested in a third party. The example given by Lord Griffiths of a husband contracting for repairs to the matrimonial home which is owned by his wife is most telling. It is not difficult to imagine other examples, not only within the family, but also, for example, where work is done for charitable purposes – as where a wealthy man who lives in a village decides to carry out at his own expense major repairs to, or renovation or even reconstruction of, the village hall, and himself enters into a contract with a local builder to carry out the work to the existing building which belongs to another, for example to trustees, or to the parish council. Nobody in such circumstances would imagine that there could be any legal obstacle in the way of the charitable donor enforcing the contract against the builder by recovering damages from him if he failed to perform his obligations under the building contract, for example because his work failed to comply with the contract specification. At this stage I find it necessary to return to the opinion of Lord Griffiths in the St Martins case. In the passage from his opinion[1994] 1 AC 85 , 96-97 which I have already quoted, he gave the example of a husband placing a contract with a builder for the replacement of the roof of the matrimonial home which belonged to his wife. The work proved to be defective. Lord Griffiths expressed the opinion that, in such a case, it would be absurd to say that the husband has suffered no damage because he does not own the property. I wish now to draw attention to the fact that, in his statement of the facts of his example, Lord Griffiths included the fact that the husband had to call in and pay another builder to complete the work. It might perhaps be thought that Lord Griffiths regarded that fact as critical to the husband’s cause of action against the builder, on the basis that the husband only has such a cause of action in respect of defective work on another person’s property if he himself has actually sustained financial loss, in this example by having paid the second builder. In my opinion, however, such a conclusion is not justified on a fair reading of Lord Griffiths’s opinion. This is because he stated the answer to be that “the husband has suffered loss because he did not receive the bargain for which he had contracted with the first builder and the measure of damages is the cost of securing the performance of that bargain by completing the roof repairs properly by the second builder.”
“I turn next to the authoritative judgment of Oliver J in Radford v De Froberville[1977] 1 WLR 1262 , for which I wish to express my respectful admiration. The case was concerned with a contract for the sale of a plot of land adjoining a house belonging to the plaintiff (the vendor) but occupied by his tenants, under which the defendant (the purchaser) undertook to build a house on the plot and also to erect a wall to a certain specification on the plot so as to separate it from the plaintiff’s land. The plaintiff obtained judgment against the defendant for damages for breach of contract by reason of her failure to erect the dividing wall, but an issue arose as to the measure of the damages. The defendant having failed to build the dividing wall on the land purchased from the plaintiff, the plaintiff proposed to build a dividing wall on his own land, and claimed the cost of doing so from the defendant; whereas the defendant maintained that the appropriate measure of damages was the consequent diminution in the value of the plaintiff’s property, which was nil. Oliver J rejected the defendant’s contention. He held that the plaintiff had a genuine and serious intention of building the wall on his own land, and that this was a reasonable course of action for him to take. With regard to an argument by the defendant that, since the plaintiff did not himself occupy the property, he could not be said to have himself suffered damage by reason of the defendant’s failure to build the wall, because he was not there to enjoy it, and that his only loss, therefore, was the diminution of the value of his reversion, Oliver J gave the following answer[1977] 1 WLR 1262 , 1285: “Whilst I see the force of this, I do not think that it really meets the point that, whatever his status, the plaintiff had a contractual right to have the work done and does in fact want to do it … As it seems to me, the fact that his motive may be to confer what he conceives to be a benefit on persons who have no contractual rights to demand it cannot alter the genuineness of his intentions.”
“First, am I satisfied on the evidence that the plaintiff has a genuine and serious intention of doing the work? Secondly, is the carrying out of the work on his own land a reasonable think for the plaintiff to do? Thirdly, does it make any difference that the plaintiff is not personally in occupation of the land but desires to do the work for the benefit of his tenants?”
“If [the plaintiff] contracts for the supply of that which he thinks serves his interests—be they commercial, aesthetic or merely eccentric—then if that which he contracts for is not supplied by the other contracting party I do not see why, in principle, he should not be compensated by being provided with the cost of supplying it through someone else or in a different way, subject to the proviso, of course, that he is seeking compensation for a genuine loss and not merely using a technical breach to secure an uncovenanted profit.”
“My Lords, Lord Griffiths was not proposing to depart from the general rule that a plaintiff can only recover compensatory damages for breach of contract in respect of a loss which he has himself sustained. He was insisting that, in certain kinds of contract at least, the right to performance has a value which is capable of being measured by the cost of obtaining it from a third party. In theDarlington Borough Council case [1995] I WLR 68 Steyn LJ expressed himself as being in agreement with Lord Griffiths’s broad principle, which he considered to be based on classic contractual theory. Indeed, he adopted it as part of his reasoning. But he held that the case was also covered by the rule in Dunlop v Lambert, and I have a difficulty with this I do not think that it can be both. The rule in Dunlop v Lambert is an (incidental) exception to the general rule that a plaintiff can only recover damages for his own loss. Lord Griffiths’s broader principle treats the plaintiff as recovering for his own loss, and is thus an application of the general rule and not an exception to it. For the same reason I cannot accept the Court of Appeal’s attempt in the present case to unify the narrow and broad grounds by treating the broad ground as “the underlying principle” of the narrow. If the House had felt itself free to adopt the broad ground in the St Martinscase, then logic would have required it to adopt it in place of and not in addition to the narrow ground.” (587B-E)… “Whether the law should take account of the performance interest when considering the measure of damages for breach of contract arose clearly in the seminal case of Radford v De Froberville [1977] I WLR 1262. The landlord of premises let to tenants had obtained a covenant from the owner of neighbouring land to build a garden wall on the neighbour’s side of the boundary. The wall was not built. The landlord sued on the covenant for damages, claiming the cost of building a similar wall on his own side of the boundary. Oliver J found that the absence of the wall caused no reduction in value to the landlord’s reversionary interest, and that the landlord (as opposed to his tenants) would derive no amenity or other advantage from having the wall built. The defendant contended that, since the landlord had suffered no loss, he was entitled to nominal damages only. The judge found that the landlord intended to apply the damages in building the wall in order to provide his tenants with the amenity which the promised wall would have done, and that this was a reasonable course for him to take. On these findings Oliver J awarded the landlord the cost of building the wall. He said, at p 1270: “Now, it may be that, viewed objectively, it is not to the plaintiff’s financial advantage to be supplied with the article or service which he has stipulated. It may be that another person might say that what the plaintiff has stipulated for will not serve his commercial interests so well as some other scheme or course of action. And that may be quite right. But that, surely, must be for the plaintiff to judge. Pacta sunt servanda. If he contracts for the supply of that which he thinks serves his interests – be they commercial, aesthetic or merely eccentric – then if that which is contracted for is not supplied by the other contracting party I do not see why, in principle, he should not be compensated by being provided with the cost of supplying it through someone else or in a different way, subject to the proviso, of course, that he is seeking compensation for a genuine loss and not merely using a technical breach to secure an uncovenanted profit.”
“Whilst I see the force of this, I do not think that it really meets the point that, whatever his status, the plaintiff had a contractual right to have the work done and does in fact want to do it. I refrain from expressing any view about what the position would be if his motives were merely capricious, for there is no suggestion of anything of that sort. As it seems to me, the fact that his motive may be to confer what he conceives to be a benefit on persons who have no contractual rights to demand it cannot alter the genuineness of his intentions. The recent case of Jackson v Horizon Holidays Ltd [1075] I WLR 1468 demonstrates that the plaintiff may obtain damages for breach of a contract entered into for the benefit of himself and other persons not parties to the contract.”
“I do not find it entirely easy to reconcile Lord Griffiths’s last observation with his reference to the promisee, St Martins, having suffered financial loss because they had to spend money. It is true that they did initially pay for the remedial work but they were reimbursed in full and cannot therefore be said to have suffered financial loss in the end of the day. Can it matter that they were reimbursed afterwards rather than being put in funds before they made payment? Lord Griffiths vouched his remarks about the second defence by reference to Jones v Stroud District Council[1986] 1 WLR 1141 , in which the plaintiffs were unable to prove that they had paid for repair (sic) carried out to their building and rendered necessary by the defendant’s negligence. In the Jones case Neill LJ, at pp 1150-1151, after referring to the general principle that a plaintiff who seeks to recover damages must prove that he has suffered loss continued: “but if property belonging to him has been damaged to an extent which is proved and the court is satisfied that the property has been or will be repaired I do not consider that the court is further concerned with the question whether the owner has had to pay for repairs out of his own pocket or whether the funds have come from some other source.”
“There is much force in the analysis that the party who contracted for the works to be done has suffered loss because he did not receive the performance he had bargained for and in order to remedy that has been required to pay for the defects to be put right by another builder.”
“As it seems to me, the fact that his motive may be to confer what he conceives to be a benefit on persons who have no contractual rights to demand it cannot alter the genuineness of his intentions.”
“But if property belonging to him has been damaged to an extent which is proved and the court is satisfied that the property has been or will be repaired, I do not consider that the court is further concerned with the question whether the owner has had to pay for repairs out of his own pocket or whether the funds have come from some other source.”
“In such a context” – where the instinctive reaction is that, whether or not the claimant would have been better off if the wrong had not been committed, the wrongdoer should make some reasonable recompense – “it is natural to pay regard to any profit made by the wrongdoer ….The law can in such cases act either by ordering payment over of a percentage of any profit or, in some cases, by taking the cost which the wrongdoer would have had to incur to obtain (if feasible) equivalent benefit from another source.”
“[Brightman J] paid attention to the profits earned by the defendants, as it seems to me, not in order to strip the defendants of their unjust gains, but because of the obvious relationship between the profits earned by the defendants and the sum which the defendants would reasonably have been willing to pay to secure release from the covenant. I am reassured to find that this is the view taken of the Wrotham Park case by Sir Robert McGarry VC in Tito v Waddle (No. 2)[1977] CH 106 , 335 when he said: Brightman J resolved the difficult question of the appropriate quantum of damages by holding that the plaintiffs should recover 5 percent of the defendant’s expected profit from their venture. In Bracewell v Appleby, Graham J applied the same principle where the right in question was not a consent under a restrictive covenant, but an easement of way. I find great difficulty in seeing how these cases help Mr Macdonald. If the plaintiff has the right to prevent some act being done without his consent, and the defendant does the act without seeking that consent, the plaintiff has suffered a loss in that the defendant has taken without paying for it something for which the plaintiff could have required payment, namely, the right to do the act. The court therefore makes the defendant pay what he ought to have paid the plaintiff, for that is what the plaintiff has lost. The basis of computation is not, it will be observed, in any way directly related to wasted expenditure or other loss that the defendant is escaping by reason of an injunction being refused: it is the loss that the plaintiff has suffered by the defendant not having observed the obligation to obtain the plaintiff’s consent. Where the obligation is contractual, that loss is the loss caused to the plaintiff by the breach of contract.”