[COURT OF APPEAL]

ANGLIA TELEVISION LTD. v. REED [1968 A. No. 5132]

1971 July 29

Lord Denning M.R., Phillimore and Megaw L.JJ.

Damages – Contract – Breach – Actor repudiated television contract – Plaintiff’s election to claim damages for wasted expenditure and not loss of profits – Whether pre-contract expenditure recoverable

The defendant, a well known actor, contracted with the plaintiffs to play the leading man’s part in a television play which they were producing. A few days afterwards the defendant repudiated the contract. The plaintiffs could not get a substitute for the defendant and accepted his repudiation. They abandoned the production.

The plaintiffs sued the defendant for damages. They claimed their total wasted expenditure of £2,750. The defendant contended that they could only recover their expenditure after the contract was concluded of £854. Master Elton gave judgment for the plaintiffs for £2,750.

On the defendant’s appeal:-

Held, dismissing the appeal, that the plaintiffs, having elected to claim their wasted expenditure instead of their loss of profits, were not limited to the expenditure incurred after the contract but could claim the expenditure incurred before the contract provided it was reasonably in the contemplation of the parties as likely to be wasted if the contract were broken. Accordingly in the circumstances the plaintiffs were entitled to recover the £2,750.[1972] 1 Q.B. 60 Page 61

Dicta of Tindal C.J. in Hodges v. Earl of Litchfield (1835) 1 Bing. N.C. 492, 498 and Thesiger J. in Perestrello & Companhia Limitada v. United Paint Co. Ltd., The Times, April 16, 1969, not followed.

Lloyd v. Stanbury [1971] 1 W.L.R. 535 approved.

The following cases are referred to in the judgment:

Cullinane v. British “Rema” Manufacturing Co. Ltd. [1954] 1 Q.B. 292, [1953] 3 W.L.R. 923; [1953] 2 All E.R. 1257, C.A.

Hodges v. Earl of Litchfield (1835) 1 Bing.N.C. 492.

Lloyd v. Stanbury [1971] 1 W.L.R. 535; [1971] 2 All E.R. 267.

Perestrello & Companhia Limitada v. United Paint Co. Ltd., The Times, April 16, 1969; (1969) 113 S.J. 324.

The following additional cases were cited in argument:

McRae v. Commonwealth Disposals Commission (1951) 84 C.L.R. 377.

Wallington v. Townsend [1939] Ch. 588; [1939] 2 All E.R. 225.

APPEAL from Master Elton.

By specially indorsed writ of December 20, 1968, the plaintiffs, Anglia Television Ltd., claimed against the defendant, Robert Reed, that by reason of the defendant’s breach and repudiation of an agreement made in a telephone conversation on August 30, 1968, between Jenia Reissar on behalf of the plaintiffs and Terence Owen of Hugh Francis Ltd. on behalf of the defendant whereby it was agreed, subject to a grant of a permit, that the defendant should perform the role of “Hardy” in a play to be produced and recorded in England for television the plaintiffs were forced to cancel their arrangements for the production and had suffered damage. Particulars of damage included: network fees for supporting artists; director’s fees; designer’s fees; stage manager’s fees; assistant stage manager’s fees; and pre-filming and rehearsal fees for supporting artists. The damages claimed before amendment totalled £2,676.

On March 2, 1971, Master Elton on an assessment of damages pursuant to R.S.C., Ord. 37, r.1 (the plaintiffs having obtained interlocutory judgment for damages to be assessed on May 16, 1970) adjudged that the defendant should pay the plaintiffs £2,750 and costs.

The defendant appealed. The grounds of appeal were that (1) the master was wrong in law in holding that the defendant was liable to the plaintiffs for expenses incurred by them prior to the date of the agreement between the parties; (2) there was no evidence on which the master could hold that the defendant’s conduct made it impossible for the plaintiffs to show that they would have made a profit on their production; (3) the defendant was liable in law only for the expenses incurred by the plaintiffs subsequent to the date of the agreement, namely, expenses of £854.

The facts are stated in the judgment of Lord Denning M.R.

Gerald Butler for the defendant. The appeal is against the assessment of damages. In English law pre-contract expenditure cannot be recovered as damages for loss of expenditure: see Perestrello & Companhia Limitada v. United Paint Co. Ltd., The Times. April 16, 1969. There is a clear[1972] 1 Q.B. 60 Page 62

line to be drawn between pre- and post-contract expenditure. All engagements which the plaintiffs entered into before the date of their contract with the defendant are irrelevant. The obligations would be honoured in any events. Thesiger J.’s decision in Perestrello & Companhia Limitada v. United Paint Co. Ltd. is a direct decision in the defendant’s favour.

One has to ask: what were the benefits lost to the plaintiffs by the pre-contractual obligations? What should the defendant have contemplated that the loss of benefit to the plaintiffs would have been if he did not go on with the contract? The law limits the damages for expenditure to post-contractual expenditure. The hypothetical reasonable defendant would say at the time of the contract that he would be liable in the event of his breach of contract for post-contractual but not for pre-contractual obligations. If a housewife goes to a shop to buy apples and buys apples which prove to be worthless, she cannot recover her expenditure in going to the shop: see per Tindal C.J. in Hodges v. Earl of Litchfield (1835) 1 Bing.N.C. 492, 498. Jenkins L.J. stated the general principle in Cullinane v. British “Rema” Manufacturing Co. Ltd. [1954] 1 Q.B. 292, 308: see his reference to “letting the capital expenditure lie where it falls.”

Lloyd v. Stanbury [1971] 1 W.L.R. 535 is against the defendant but what Brightman J. said at p. 546 was obiter and the Perestrello case, The Times, April 16, 1969, was not cited in argument. In the case of anticipatory breach the party who is not in breach must exercise his election reasonably.

If a plaintiff chooses to incur expenditure before a contract is made, he cannot recover that expenditure as damages for breach of that contract: McRae v. Commonwealth Disposals Commission (1951) 84 C.L.R. 377, 412, 415, an Australian case. Wallington v. Townsend [1939] Ch. 588 was cited for the defendant in Lloyd v. Stanbury [1971] 1 W.L.R. 535, 545. No authority has been found where, in a contract for the sale of land which has gone off, pre-contract expenditure has been held to be recoverable.

As to recovery for expenses rendered futile by the breach, see Mayne & McGregor on Damages, 12th ed. (1961), pp. 23-27, paras. 21-25. The argument in para. 25 is adopted. Treitel’s Law of Contract, 3rd. ed (1970), p. 796, points out that although expenses incurred in reliance upon the contract may be recovered this excludes expenses incurred before the contract (see note 60). Accepting that a plaintiff may elect whether to claim expenses rendered futile by the breach or loss of profits, he is limited to post-contract expenses unless the contrary is envisaged in the contract.

Andrew Bateson Q.C. and Desmond Browne for the plaintiffs were not called upon to argue.

LORD DENNING M.R. Anglia Television Ltd., the plaintiffs, were minded in 1968 to make a film of a play for television entitled “The Man in the Wood.” It portrayed an American man married to an English woman. The American has an adventure in an English wood. The film was to last for 90 minutes. Anglia Television made many arrangements in advance. They arranged for a place where the play was to be filmed. They employed a director, a designer and a stage manager, and so forth.[1972] 1 Q.B. 60 Page 63

They involved themselves in much expense. All this was done before they got the leading man. They required a strong actor capable of holding the play together. He was to be on the scene the whole time. Anglia Television eventually found the man. He was Mr. Robert Reed, the defendant, an American who has a very high reputation as an actor. He was very suitable for this part By telephone conversation on August 30, 1968, it was agreed by Mr. Reed through his agent that he would come to England and be available between September 9 and October 11, 1968, to rehearse and play in this film. He was to get a performance fee of £1,050, living expenses of £100 a week, his first class fares to and from the United States, and so forth. It was all subject to the permit of the Ministry of Labour for him to come here. That was duly given on September 2, 1968. So the contract was concluded. But unfortunately there was some muddle with the bookings. It appears that Mr. Reed’s agents had already booked him in America for some other play. So on September 3, 1968, the agent said that Mr. Reed would not come to England to perform in this play. He repudiated his contract. Anglia Television tried hard to find a substitute but could not do so. So on September 11 they accepted his repudiation They abandoned the proposed film. They gave notice to the people whom they had engaged and so forth.

Anglia Television then sued Mr. Reed for damages. He did not dispute his liability, but a question arose as to the damages. Anglia Television do not claim their profit. They cannot say what their profit would have been on this contract if Mr. Reed had come here and performed it. So. instead of claim for loss of profits, they claim for the wasted expenditure. They had incurred the director’s fees. the designer’s fees, the stage manager’s and assistant manager’s fees, and so on. It comes in all to £2,750. Anglia Television say that all that money was wasted because Mr. Reed did not perform his contract.

Mr. Reed’s advisers take a point of law. They submit that Anglia Television cannot recover for expenditure incurred before the contract was concluded with Mr. Reed. They can only recover the expenditure after the contract was concluded. They say that the expenditure after the contract was only £854.65, and that is all that Anglia Television can recover.

The master rejected that contention: he held that Anglia Television could recover the whole £2,750; and now Mr. Reed appeals to this court.

Mr. Butler, for Mr. Reed, has referred us to the recent case of Perestrello & Companhia Limitada v. United Paint Co. Ltd., The Times, April 16, 1969, in which Thesiger J. quoted the words of Tindal C.J. in Hodges v. Earl of Litchfield (1835) 1 Bing. N.C. 492, 498:

“The expenses preliminary to the contract ought not to be allowed. The party enters into them for his own benefit at a time when it is uncertain whether there will be any contract or not.”

Thesiger J. applied those words, saying: “In my judgment pre-contract expenditure, though thrown away, is not recoverable.”

I cannot accept the proposition as stated. It seems to me that a plaintiff in such a case as this has an election: he can either claim for loss of[1972] 1 Q.B. 60 Page 64

profits; or for his wasted expenditure. But he must elect between them. He cannot claim both. If he has not suffered any loss of profits – or if he cannot prove what his profits would have been – he can claim in the alternative the expenditure which has been thrown away, that is, wasted, by reason of the breach. That is shown by Cullinane v. British “Rema” Manufacturing Co. Ltd. [1954] 1 Q.B. 292, 303, 308.

If the plaintiff claims the wasted expenditure, he is not limited to the expenditure incurred afterthe contract was concluded. He can claim also the expenditure incurred before the contract, provided that it was such as would reasonably be in the contemplation of the parties as likely to be wasted if the contract was broken. Applying that principle here, it is plain that, when Mr. Reed entered into this contract, he must have known perfectly well that much expenditure had already been incurred on director’s fees and the like. He must have contemplated – or, at any rate, it is reasonably to be imputed to him – that if he broke his contract, all that expenditure would be wasted, whether or not it was incurred before or after the contract. He must pay damages for all the expenditure so wasted and thrown away. This view is supported by the recent decision of Brightman J. in Lloyd v. Stanbury [1971] 1 W.L.R. 535. There was a contract for the sale of land. In anticipation of the contract – and before it was concluded – the purchaser went to much expense in moving a caravan to the site and in getting his furniture there. The seller afterwards entered into a contract to sell the land to the purchaser, but afterwards broke his contract. The land had not increased in value, so the purchaser could not claim for any loss of profit. But Brightman J. held, at p. 547, that he could recover the cost of moving the caravan and furniture, because it was “within the contemplation of the parties when the contract was signed.” That decision is in accord with the correct principle, namely, that wasted expenditure can be recovered when it is wasted by reason of the defendant’s breach of contract. It is true that, if the defendant had never entered into the contract, he would not be liable, and the expenditure would have been incurred by the plaintiff without redress; but, the defendant having made his contract and broken it, it does not lie in his mouth to say he is not liable, when it was because of his breach that the expenditure has been wasted.

I think the master was quite right and this appeal should be dismissed.

PHILLIMORE L.J. I agree.

MEGAW L.J. I also agree.Appeal dismissed with costs.

Solicitors: Richards, Butler & Co.; Crawley & de Reya.

A. H. B.