Y5. Loss and remoteness

Compensatory principle

"[83] Two fundamental principles of the law of damages are the compensatory principle and the principle of mitigation of damage.
[84] The compensatory principle aims to put the injured party in the same position as if the breach of duty had not occurred. In relation to contractual damages this means that the injured party is "so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed": Robinson v Harman (1848) 1 Exch 850 at 855, (1848) 154 ER 363 at 365 (Parke B); Bunge v Nidera at para 14." (Sharp Corp Ltd) v. Viterra BV [2024] UKSC 14)

Compensatory principle

Evidence required that earlier settlement would have been reached and produced lower liability for C

"[395] This alternative claim was not heavily pressed in argument. The loss flowing from any breach of duty committed in November 2005 or December 2009 can only have been limited to the difference, if any, between such settlement as might have been reached with HMRC on or shortly after those dates, and the settlement that was ultimately achieved. There was no evidence led on the basis of which I could conclude that the claimants would have sought to reach an earlier settlement with HMRC, which I find to have been an inherently unlikely proposition given that (as I explain in more detail in considering section 14A LA 1980 below) HMRC were not actively progressing an investigation into the Schemes at these times." (McClean v. Thornhill [2022] EWHC 457 (Ch), Zacaroli J)

Evidence required that earlier settlement would have been reached and produced lower liability for C

Mitigation principle

"[85] The principle of mitigation requires the injured party to take all reasonable steps to avoid the consequences of a wrong. This means that (i) there is no recovery for loss which should reasonably have been avoided; (ii) there is recovery for loss incurred in taking reasonable mitigating steps, even if that increases the loss and (iii) if the loss is successfully reduced by the taking of reasonable mitigating steps then the party in breach is entitled to the benefit of that - there is no recovery for avoided loss - see, for example, the judgment of Robert Goff J in Koch Marine Inc v d'Amica Societa di Navigazione arl (The Elena d'Amico) [1980] 1 Lloyd's Rep 75 at p 88. In McGregor on Damages 21st ed (2021), paras 9.002-9.007 these are described as the "three rules" of mitigation. Andrew Dyson and Adam Kramer suggest that there is one underlying rule: "damages are assessed as if the claimant acted reasonably, if in fact it did not act reasonably" - see A Dyson and A Kramer, "There is No 'Breach Date Rule'" (2014) 130 LQR 259, 263." (Sharp Corp Ltd) v. Viterra BV [2024] UKSC 14)

Mitigation principle