John Grimes Partnership Ltd v Gubbins
Court of Appeal
Citations:  EWCA Civ 37;  PNLR 17;  CLY 567.
Gubbins was a Cornish farmer seeking to develop his land for housing. To do this, he needed to build a road to be adopted by the local authority. This was conditional on the local authority approving the road design. Gubbins hired JGP to design the road by March 2007.
JGP did not complete on time, which considerably delayed construction. In April 2008 Gubbins hired a third-party to make the design. The local authority approved this design a few months later, and construction began. However, in the meantime housing prices had fallen. As a result, Gubbins did not profit as much from the development as he had been expecting.
JGP sued Gubbins for their fees. Gubbins counter-sued for damages reflecting the lost profits. JGP argued that a loss due to the fall in the housing market was too remote to be recoverable and was not a loss which they had accepted liability for.
- Was JGP liable for the loss of profit due to the fall in house prices?
The Court of Appeal held that JGP was liable for Gubbins’ loss of profit. It was reasonably foreseeable that Gubbins would lose profit due to delay if the housing market fell. On this basis, the court assumed that JGP had accepted responsibility for that possibility. The fact that JGP’s liability would be disproportionate to its fee, and that it had no control over the property market, was not relevant.
This Case is Authority For…
Where a loss is a reasonably foreseeable result of the breach, the court will normally infer that the breaching party assumed responsibility for that loss. The onus is on the breaching party to show particular circumstances which might persuade the court to conclude that this inference should not be drawn.
Sir Keene explained the reason why the courts will infer that a party assumed responsibility for the reasonably foreseeable consequences of their breach:
‘If there is no express term dealing with what types of losses a party is accepting potential liability for if he breaks the contract, then the law in effect implies a term to determine the answer. Normally, there is an implied term accepting responsibility for the types of losses which can reasonably be foreseen at the time of contract to be not unlikely to result if the contract is broken.’