PROVING THINGS 51: NO EVIDENCE OF LOSS – NO DAMAGES: A LESSON TO SHARE

Mediatelegal

For the second time today we are looking at the judgment of Mrs Justice Proudman in Abbott -v- RCI Europe [2016] EWHC 2602 (Ch).  This time in relation to the failure of the claimants to quantify or prove they had suffered any damages.

“…no attempt has been made to put a figure on the loss it is said that the Claimants suffered”

KEY POINTS

  • The claimants had not pleaded any specific figures for loss or adduced any expert evidence as to their losses.
  • The claimants could not rely upon general principles and rely on the defendant’s breach to prove a loss.
  • The claimants’ action failed.

THE CASE

The claimants, by way of a test case, brought an action complaining that the defendant was acting in an unfair way in the renting out of timeshares.  The judge held that there was “little doubt” that the defendants had acted in breach of contract.  However the action failed. It was, in part, statute barred. More fundamentally the claimants failed to prove they had suffered any loss as a result of the defendants conduct.

THE JUDGMENT ON DAMAGES

    1. As to quantum, further information was sought in RCIE’s letter of 27 April 2015 (on the basis that the Claimants’ replies to the Requests for Further Information dated 12 February 2015 were insufficient) and the Claimants replied that damages for breach of contract are claimed on the basis that timeshares were removed from the exchange pool by RCIE for its own commercial benefit causing the Claimants to be unable to get the exchanges they wanted, causing the following pecuniary losses:
“a. The loss of value to the exchange scheme as promised.
b. The loss of use of their own timeshare.
c. The costs incurred each year in finding and arranging alternative holidays or otherwise seeking to mitigate the losses incurred as a result of RCI’s breach of contract.”
    1. It is said that the loss of the value of access (under a.) is the difference between the exchange actually received in any given year and the exchange which would have been received had the exchange system functioned as promised and that ([5]),
“These differences in value will be either a matter for agreement or a matter for expert evidence.”
However, the Claimants have not sought either to agree the differences in value or adduce expert evidence of them. The Claimants said on 4 June 2015 without agreement from RCIE (see the Further Information of the Test Claimants Regarding Quantum) at [15],
“In cases where timeshares deposited in the exchange pool have been used without the claimant’s [sic] consent it would be appropriate to award a sum which would have been agreed between the parties in the course of hypothetical negotiations over what would have been agreed to be paid for such use. This would require expert evidence and should be dealt with after the trial on liability.”
    1. Mr Deacon and Mr Wolman rely on Lord Lloyd’s speech in Ruxley Electronics v. Forsyth [1996] 1 AC 344 but that does not permit damages not to be pleaded.
    2. As for non-pecuniary losses, there are claims in respect of lack of amenity and disappointment and again Ruxley is relied upon. Again, however, the claim is unclear. In [8], the Claimants say,
“The quantum of the claim for lack of amenity and disappointment will depend on what, if any, holiday was taken in any given year in place of the holiday of choice and the level of frustration and disappointment attendant on being unable, in any given year, to book the holiday of choice.”
    1. Again, however, no attempt has been made to put a figure on the loss it is said that the Claimants suffered. In [9] it is said,
“In the event that no loss has been suffered by a particular claimant the following damages are awardable where breach of contract is established.”
And the Particulars go on to cite authority for “damages for breach of contract where there has been benefit to RCI but no loss to the claimant”, “Remedies for breach of trust/fiduciary duty” etc., but again, neither causation nor quantum is pleaded.
    1. Mr Deacon and Mr Wolman rely on damages under Attorney General v. Blake [2001] 1 AC 268 for an account of profits for breach of contract. However, the fact that the Claimants have failed to quantify their claim does not mean that it is unquantifiable. The Claimants cannot say, on the one hand, that they have not adduced any expert evidence and on the other, that this is such an exceptional case that damages would be inadequate. In A-G v. Blake, Lord Nicholls said (at p.285),
“Normally the remedies of damages, specific performance and injunction, coupled with the characterisation of some contractual obligations as fiduciary, will provide an adequate response to a breach of contract. It will be only in exceptional cases, where those remedies are inadequate, that any question of accounting for profits will arise. No fixed rules can be prescribed. The court will have regard to all the circumstances, including the subject matter of the contract, the purpose of the contractual provision which has been breached, the circumstances in which the breach occurred, the consequences of the breach and the circumstances in which relief is being sought. A useful guide, although not exhaustive, is whether the plaintiff had a legitimate interest in preventing the defendant’s profit-making activity and, hence, in depriving him of his profit.”
    1. There is no legitimate interest in preventing RCIE’s profit-making activity as the Claimants knew that RCI was a commercial entity. In any event one cannot simply point to profits made by RCIE in relation to rentals of inventory deposited by the Claimants since the Weeks pool operates on a global basis through RCI.
    2. The Claimants also rely on damages under Wrotham Park Estate Co Limited v. Parkside Limited and others [1974] 1 WLR 79, namely the sum which might reasonably have been negotiated between a claimant and a defendant. In Abor and another v. Saudi Economic and Development Co (SEDCO) Real Estate Limited and others [2013] EWHC 1414 (Ch), David Richards J said (at [225]),
“Negotiating damages have not, however, replaced the usual compensatory damages as the primary remedy in damages for breach of contract. It is a basis of assessment available where a breach of contract has been established but the claimant cannot establish any financial loss, assessed on the usual basis, flowing from the breach.”
    1. The Claimants’ solicitors’ letter of 4 June 2015 says that
“…the information which would allow us to assess the profits RCI has made or “the fruits of their wrongdoing is exclusively in the hands of RCI. We await a satisfactory conclusion to the disclosure process.”
    1. However, this is in response to a letter of RCIE’s solicitors in which they said,
“…The reference to the “value of the lost timeshare and damages for distress/disappointment” is simply not sufficient.
…it cannot be correct that it is not possible for your clients to provide particulars of the value of their own timeshare(s) until the Defendant has provided further information with respect to the operation of the exchange system…”
  1. Further, by [3] of an order dated 16 March 2016 of HHJ Keyser QC, sitting as a judge of the High Court, the Claimants were permitted to “file and serve a Reply, limited to matters raised by the amendments to the Defence”. However, the Reply deals with other matters such as an allegation that RCI was not “transparent, open and fair” with its members: see [4] of the Replies. Thus this has become a case that RCIE was not transparent with its members but I do not see how that relates to the causes of action. Although I see Mr Deacon’s point, I agree with Mr Graham QC that RCIE was thereby deprived of the opportunity to disclose documents or submit evidence dealing with the extent to which members were informed about rental of premium inventory.

The proving things series