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Wednesday, 10 February 2016

Damages for non-delivery where there is no available market: Hughes v Porsche Centre Bolton

In Hughes v Pendragon Sabre Ltd (t/a Porsche Centre Bolton) [2016] EWCA Civ 18 (20 January 2016) Mr Hughes appealed against the judgment of District Judge Knifton in Preston County Court on 22 November 2013. The judge had held that there was no contract between Mr Hughes, who had paid a £10,000 deposit to secure one of a very few Porsche 911 GT3 RS4 motor cars that would be available in the UK: there was nothing more than an agreement to agree. The dealer's salesman had assured him that he would be first in the queue for one if Bolton received an allocation, but when one did arrive it was delivered to another customer - apparently because Mr Hughes dealt in classic cars and it was feared that he would resell it.

His appeal against that judgment was upheld by the Court of Appeal, Mr Justice Cranston saying that it was "as plain as a pikestaff" that there was a binding contract between Mr Hughes and the dealership, subject only to a condition that a vehicle be allocated to the dealer. Paying the deposit was a lot more than just an "expression of interest".

Although Mr Hughes had signed (although he had also forgotten) a standard-form contract which reserved to the dealer the right to allocate cars in a different order to that in which orders were received, and also said that the terms could only be varied in writing by a director of the company, that did not help the dealer. The salesman told Mr Hughes in an email "you will get the first one from Porsche Centre Bolton if we get one, which I am very confident that we will", but weeks after paying his deposit the salesman emailed him again with the bad news that Porsche had not allocated any of the cars to Bolton. In fact this was untrue: the dealer had been allocated a 911 GT3 RS4 model, but it had been supplied to another customer.

Having won the race to pay his deposit, Mr Hughes was assured that he would be first in line and the dealership was in breach of contract, Mr Justice Cranston ruled. If there was an agreement for the sale of a vehicle to the claimant, and if there had been a collateral contract that the claimant would be first in the queue if Porsche supplied one to the defendant, the defendant had been in breach of contract when it had sold the one vehicle it had been allocated to someone else. 

The next problem for the Court of Appeal was how to measure the damages Mr Hughes should receive for breach of the contract. Section 51(3) of the Sale of Goods Act 1979 says that the measure of damages is to be ascertained by the difference between the contract price and the market or current price at the time the goods ought to have been delivered or, as in this case, if no time was fixed for delivery, at the time of the refusal to deliver. But the breach date rules in section 51(3) apply only when there is an available market in the goods - the price being settled by the laws of supply and demand. Market forces could not work in the case of the 911 GT3 RS4: fewer than 30 had been supplied to the UK, and the parties' expert witnesses had been unable to find one for sale when they prepared their reports. The fact that Mr Hughes had particular requirements (he wanted the car in black, rather than the standard white) appear to have complicated the matter.

In that situation, section 51(2) of the Sale of Goods Act 1979 tells us that what lawyers know and love as the rule in Hadley v. Baxendale (1854) 9 Ex 341 applies. The first leg of that rule says that the measure of damages is the loss directly and naturally resulting, in the ordinary course of events, from the seller's breach of contract, based on the value of the contract goods at the time and place of the breach. That can be assessed by any relevant evidence: it does not require any evidence about an actual resale, but can turn on other evidence such as the cost of the nearest equivalent vehicle. Although there was no active market in the precise model, there were equivalent cars being bought and sold, and the evidence was that the going rate was about £170,000. The parties agreed that Mr Hughes would have paid about £135,000 had the car been delivered to him. The difference was his entitlement in damages.

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