No damages for loss defender had an option to avoid

The pursuer had three-year contracts for school routes for Angus Council which were cancelled by the local authority during the second year. The grounds of cancellation were complaints about the service, the merits of which remain the subject of litigation. After debate, however, Sheriff Martin-Brown rejected part of the claims.

At the expiry of the three years, the contract provided that the council had an option to extend them for up to two more years. The pursuer averred that but for the (allegedly wrongful) termination of the contracts, they would all have been extended for those further two years, pointing to the fact that the council had exercised its option to extend by two years all other operators’ school-bus contracts in the county. The larger part of the damages claim was for the lost income from those two extra years.

In Sheriff Martin-Brown’s judgment, she applied the rule stated by the Court of Appeal in Lavarack v Woods of Colchester Ltd [1967] 1 QB 278 that if a contract-breaker had a choice of alternative methods of performance, then damages will be assessed on the basis of its minimum legal obligation, ie on the alternative which would have been least onerous, or most beneficial to it. Damages are not assessed on the assumption that the defender would have done something that it was not obliged to do, such as, here, extend the terms of the contracts. Lavarack had been followed in Scotland in Morran v Glasgow Council of Tenants Associations 1997 SC 279.

The pursuer argued that Lavarack was distinguishable as a claim for discretionary employment bonuses which had not been paid, either to the plaintiff or to others, because the bonus scheme had been terminated. To determine loss, the court looks to see what the position would be if the contract had not been breached. That meant looking at what would in fact have happened if the contracts had not been terminated. That was a matter for proof.

The Sheriff disagreed; following Lavarack and Morran, the pursuer’s averments that all other such contracts had in fact been extended were irrelevant and would not be admitted to proof, and the claim for the income of the two additional years was dismissed. The claim for the fixed-term period would go to proof.

Garry Sutherland, solicitor advocate, appeared for the pursuer; Michael Upton, advocate, appeared for the defender.