PROVING THINGS 58 : FAILURE TO PROVE CAUSATION LEADS TO AWARD OF NOMINAL DAMAGES

March 24, 2017 · by · in Civil evidence, Damages

For the third time in recent weeks I write about a case where a claimant has spent much time, energy (and no doubt money) in bringing an action but only recovered nominal damages. In Plantation Holdings (FZ) LLC -v- Dubai Islamic Bank PSJC [2017] EWHC 520 (Comm) the trial took 31 days of court time.  In the end, however,  Mr Justice Picken held that only nominal damages were to be awarded.

“The simple fact is that, in assessing the level of damages which are payable to any claimant, it is necessary to consider what level of damages will fairly compensate the claimant. The claimant should not be short-changed. Equally, however, the claimant ought not to be allowed to recover a windfall.”

“… it would have been open to me to take the view that no damages should be awarded at all. I am, however, persuaded that it would be appropriate, in the circumstances, to make an award of damages, albeit only in a nominal amount.”

 

THE CASE

The claimant claimed damages of £2 billion following the defendant’s taking possession of land which had been intended for development in Dubai. The claimant contended that the defendant had no right to take possession at that time and had suffered £2 billion for the losses it sustained.

THE DEFENDANT’S ARGUMENT

The defendant denied breach. Further it denied causation, arguing that the claimant’s financial position was so precarious the development would have failed.

“DIB denies liability to Plantation. DIB’s case is that it was entitled to act as it did and when it did, and that accordingly it was not in breach of the RSA in doing what it did. Even if that is not the case, however, it is DIB’s position that there is, in any event, no basis upon which Plantation can claim to be entitled to substantial damages since Plantation’s case entirely ignores both the highly precarious nature of Plantation’s financial position, specifically a funding model which required it to achieve sales at an unachievable (and unachieved) rate (all the more so having regard to the wider economic realities in the second half of 2008). DIB contends that, in the circumstances, even had DIB not taken the action which it did, Plantation would, in any event, have failed and DIB would, as a result, have been entitled to take possession following an Event of Default”

THE JUDGMENT ON CAUSATION

The judge stated that the question of causation was the most significant issue.

Causation

    1. I come on now to deal with what, in view of my conclusions so far, is a subject of significant importance, namely the issue of causation.
    2. At the start of the trial there appeared to be a fundamental dispute between Mr Anderson QC and Mr Cakebread concerning the proper causation approach to be adopted in relation to contractual claims. Mr Anderson QC pointed out in his written opening submissions that Plantation’s case appeared to boil down to an assertion that, if DIB was not entitled to act as it did, then, Plantation must receive damages assessed by reference to the market value of Plantation, with damages being assessed as at the date of breach with no reference to subsequent events or what would have occurred absent the breach. Mr Anderson QC’s submission was that this was an entirely wrong approach since ‘stopping the clock’ in this way would involve affording Plantation compensation on a basis which ignored reality, specifically the fact that as at 1 October 2008, when the next instalment of the Rescheduling Amount became due, a Plantation Enforcement Event would have occurred in any event. As a result, Mr Anderson QC submitted, Plantation cannot show that it has suffered any recoverable loss.”

The judge considered the case law and the claimant’s assertion that the damages should be based on conversion. He rejected that argument.

 

    1. These are all reasons why Mr Cakebread’s reliance on conversion-based authorities does not assist him. It follows that I agree with Mr Anderson QC that the correct approach is to apply contractual principles to the assessment of Plantation’s damages and, in particular, that The ‘Golden Victory’ is applicable in this case. The simple fact is that, in assessing the level of damages which are payable to any claimant, it is necessary to consider what level of damages will fairly compensate the claimant. The claimant should not be short-changed. Equally, however, the claimant ought not to be allowed to recover a windfall.
    2. The consequence in the present case is clear: Plantation cannot make anything like the level of recovery which has been suggested on its behalf since it is perfectly plain and obvious (Mr Anderson QC described it during the course of his oral closing submissions as an “inconvenient truth”) that, even if DIB had not done what it did in mid-July 2008 when it sought to perfect the assignment of the Lease notwithstanding that, as I have decided, there had not been a Plantation Enforcement Event, there would, in any event, have been the occurrence of a Plantation Enforcement Event on 1 October 2008, when just under US$60 million fell to be repaid in accordance with Schedule 2 to the RSA to bring the cumulative amount of the Rescheduling Amount up to the US$120 million which it was agreed would be repaid within 365 days of the RSA’s Effective Date.
    3. I agree with Mr Anderson QC that it is, indeed, as he submitted, plain beyond doubt that Plantation would not have been in any position to meet its obligations under clause 6 of the RSA, and that there would, therefore, have been a very large default on 1 October 2008 since, again as he submitted in his written closing submissions: “no more was going to come in, and no more came in, from the various receivables; no more came in from any other source; and there was no prospect of Plantation/Mr Fitzwilliam raising further monies”. I have previously analysed Plantation’s financial position as at June/July 2008 in considerable detail, concluding that it was precarious to say the least since its sources of income were insufficient to meet its expenditure commitments. I have rejected the evidence given by Mr Bacon and Mr Fitzwilliam concerning the alleged Chescor deal. I have decided that there was no Chescor deal, and that the evidence given by Mr Bacon and Mr Fitzwilliam was essentially made up in order to support a case that, notwithstanding the apparent precariousness of Plantation’s financial position, Plantation would have had access to a substantial source of funding were it not for Mr Fitzwilliam’s arrest. I have also considered the evidence given by Mr Bacon concerning other third party interest in Plantation, specifically his evidence concerning Arbah Capital and Noor Capital. I have concluded that there is nothing in the suggestion that during the course of 2008 there was substantial interest by potential investors in Plantation, still less that there would have been any deal in place in time to enable Plantation to meet the obligation which arose on 1 October 2008. It is fanciful to suppose, in the circumstances, that proviso (i) to sub-paragraph would have come to Plantation’s rescue since application of that proviso would still have required 90%, and so a very substantial sum of money, to have been repaid. Plantation was, quite simply, in no position to pay anything like the amount of money which it would have had to pay on 1 October 2008.
    4. It follows that the occurrence of a Plantation Enforcement Event was inevitable. That DIB would, accordingly, have been entitled to perfect the assignment of the Lease in October 2008 is obvious. In these circumstances, Mr Anderson QC must be right when he submitted that Plantation has no entitlement to damages which take no account of what would, in any event, have happened even if DIB had not taken the action which it did in July 2008. The most that it is open to Plantation to seek by way of damages is a sum representing the loss suffered by reason of DIB having given itself what Mr Anderson QC described as a ‘paper title’ between mid-July and 1 October 2008, yet Plantation has put forward no such case as I shall explain when dealing with the damages issue.

THE JUDGE’S CONCLUSION ON DAMAGES

Damages
    1. This brings me, lastly, to the topic of damages. In view of my conclusion in relation to causation, this is not a subject which I propose to spend too much time addressing. The position is straightforward.
    2. As I have already explained, since DIB would, in any event, have been entitled to perfect the assignment of the Lease, and so enforce the Plantation Security, after 1 October 2008, any damages ought only to be to compensate Plantation for loss suffered between mid-July 2008 and 1 October 2008. Since, as I have explained, the Project was loss-making in this period, it is very difficult indeed (if not impossible) to see how Plantation can really have suffered any loss which would merit an award of anything more than nominal damages. Plantation has, however, made no attempt at quantifying its loss by reference to that period, even in the alternative. Given this, it would have been open to me to take the view that no damages should be awarded at all. I am, however, persuaded that it would be appropriate, in the circumstances, to make an award of damages, albeit only in a nominal amount.”

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