Cases - Pell Frischmann Engineering Ltd v Bow Valley Iran Ltd

Record details

Name
Pell Frischmann Engineering Ltd v Bow Valley Iran Ltd
Date
[2009]
Citation
UKPC 45
Legislation

Chancery Amendment Act 1858

Keywords
Easements - rights of light
Summary

The appellant entered into a confidentiality agreement with the respondent as intended partners in an oilfield development. The appellant lost the oilfield contract and it was awarded to the respondent. The respondent breached the confidentiality agreement.

In proceedings brought by the appellant they were awarded damages in lieu based upon a sum that might have been reached in a hypothetical negotiation for the release of the contractual obligations. The sum awarded at trial did not take into account sums offered in actual negotiations that had taken place between the parties because, after that, the appellant had lost its exclusive rights in relation to the project and had nothing valuable to assign. If the court had regard to the earlier negotiations the award of damages would have been significantly higher.

The Court of Appeal upheld the trial judge on that issue. The appeal to the Privy Council succeeded. Lord Justice Neuberger’s approach in Lunn Poly was correct in that each case will turn upon its facts. Where parties entered into actual negotiations the negotiated buy-out figure was relevant because it gave an indication of the parties’ intentions when the contract was entered into. The outcome of the actual negotiations was not conclusive but it was contemporaneous evidence of what the parties considered to be the likely profitability of the contract and what they expected to achieve by entering into it. Their lordships also stated that damages in lieu of an injunction may be awarded whether or not the claimant seeks an injunction.

The approach taken by the Court of Appeal in Lunn Poly has been approved by the Privy Council. The law as to the assessment of damages in lieu has been clarified.

The matters to be taken into account in assessing negotiating damages are a question of fact. Parties who enter into actual negotiations should be aware that, if the negotiations fail and the defendant breaches a covenant or interferes with an easement, those negotiations can be taken into account in the assessment of damages.

Accordingly, even if a developer misjudges the value of a development, negotiations based upon expected profit could be taken into account in assessing damages.