| CONVERSION — Damages — Duty to mitigate loss — Contract for sale of Uzbek cotton to English trader — Arrangements with bank to finance purchase of goods — Failure to perform contract in accordance with terms — Arbitration award in favour of seller — English trader subsequently going into insolvent liquidation — Seller claiming against bank damages for conversion of cotton — Whether seller under duty to mitigate loss
Uzinterimpex JSC v Standard Bank plc [2008] EWCA Civ 819; [2008] WLR (D) 240
CA: Sir Anthony Clarke MR, Laws and Moore-Bick LJJ: 15 July 2008
The general principle that damages in tort were to provide just compensation for the loss suffered in the particular circumstances of the case applied to the tort of conversion, giving rise to a duty to mitigate loss flowing from the wrongful act.
The Court of Appeal so held, dismissing the appeal of the claimant seller, Uzinterimpex JSC against the order of David Steel J on 15 May 2007, giving judgment for the seller against the defendant, Standard Bank plc, and awarding damages for conversion up to the date when the seller failed to mitigate its loss.
MOORE-BICK LJ said that as a general rule the victim of an unlawful act had a duty to take reasonable steps to ensure that any damage he suffered as a result was kept to a minimum. Whether any duty to mitigate arose was a question of law but if it did, whether the victim acted reasonably to avoid loss depended on the circumstances of the case and was a matter of fact. The judge concluded that the seller’s objections to co-operation with the bank were not strong enough to justify its refusal to accede to the bank’s suggestion for the disposal of the goods. His Lordship was not persuaded that on the evidence before him the judge’s decision to award damages up to the date the seller should have agreed to the bank’s proposal was wrong. The seller’s primary argument was that it was under no duty to mitigate its loss in this case because of the nature of the wrongful act on which the claim was based. If that were right it could only be because there was a special rule applicable to the tort of conversion or because the nature of the loss was not capable of being reduced by any subsequent actions of the victim. Mitigation could be understood in terms of causation but it did not add greatly to the understanding of the principles. S 11 of the Torts (Interference with Goods) Act 1977 provided that contributory negligence was no defence to proceedings founded on conversion. The primary purpose of s 11 was to settle any doubt as to whether a claimant’s failure to take care of his own property provided a partial defence to a claim in conversion against a person who appropriated it without any right to do so. S 11 could have no bearing on a duty to mitigate. Analysed in terms of causation, a failure to mitigate had to be viewed as a new intervening cause which broke the link between the wrongful act and the continuing loss, thereby releasing the wrongdoer from liability for subsequent loss. The concept of contributory negligence, on the other hand, rested on the assumption that the fault of the original wrongdoer and the fault of the victim both contributed to the loss and were both causally related to it. Contributory negligence and the failure to mitigate were therefore mutually inconsistent concepts as regards the same loss. It had long been recognised that if the claimant in conversion recovered his property or any part of it, he had to give credit for the value of what he had recovered. That being so why should a person deprived of his property not be expected to take reasonable steps to recover it, thereby reducing the loss he would otherwise suffer. The position in relation to consequential loss was even clearer: in principle the claimant should take all reasonable steps to ensure that the losses he suffered as a result of being deprived of his property, whether permanently or temporarily, were kept to a minimum. The changes brought about by the 1977 Act added weight to the view expressed in earlier authorities that damages for proprietary torts should reflect the loss suffered by the claimant as a result of the wrong and not be subject to artificial rules based on the value of the goods at any particular date: see Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 & 5) [2002] 2 AC 883, para 67. Once it was accepted that the correct measure of damages for conversion was just compensation for loss suffered by the claimant in the particular circumstances, it was impossible to ignore the claimant’s own conduct since, if he had failed to take advantage of an opportunity reasonably afforded to him to avoid that loss in whole or in part, it would be difficult to justify requiring the defendant to pay compensation for a loss not fairly attributable to his wrongful act.
Laws LJ and Sir Anthony Clarke MR agreed.
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