Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528

Facts

• Victoria Laundry (Windsor) Ltd (VLL), a laundry business, contracted with Newman Industries Ltd (NIL) for the purchase of a large boiler needed for immediate use in VLL’s operations, including a dyeing service.
• VLL informed NIL that the boiler was for immediate business use.
• NIL delayed delivery of the boiler by approximately five months, breaching the agreement.
• As a result, VLL claimed damages for lost profits due to the delay, specifically:
  • Ordinary profits lost from the delay to their general laundry business.
  • Exceptional profits lost from a lucrative government contract, which NIL did not know about.
• VLL initiated proceedings seeking to recover both ordinary and exceptional losses.

Issues

1. Whether VLL could recover losses for ordinary business profits caused by NIL's delayed delivery.
2. Whether VLL could recover exceptional losses arising from a missed government contract that NIL was not aware of.
3. What degree of foreseeability is necessary for a loss to be recoverable as damages for breach of contract.
4. How remoteness of damage should be assessed when concurrent contract and tort claims arise.

Decision

• The Court of Appeal held that VLL could recover damages for the ordinary profits lost due to the delayed delivery, as these losses were foreseeable and within NIL’s knowledge from the contract.
• VLL could not recover damages for the exceptional profits lost from the missed government contract, as these were not within the contemplation of NIL and were not foreseeable based on the information NIL had at the time of contract formation.
• The court clarified that losses are only recoverable if, at the time of contracting, they were either naturally arising from the breach (“ordinary losses”) or if special circumstances had been communicated to the contract breaker.
• The degree of likelihood required was stated to be a “serious possibility” or a “real danger,” not absolute certainty.

Legal Principles

• Only losses reasonably foreseeable by the parties at the time of contract formation are recoverable for breach of contract.
• There is a distinction between ordinary losses (naturally arising from the breach and imputed to the parties) and exceptional losses (arising from special circumstances requiring actual communication to the contract breaker).
• The test of remoteness is objective: a reasonable person in the contract breaker’s position must have foreseen the type of loss as a serious possibility.
• Actual contemplation of the specific loss is not necessary; imputed or communicated knowledge suffices.
• In concurrent contract and tort claims, the contractual remoteness test governs, and is stricter than the remoteness test in tort.

Conclusion

Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 established that recoverable damages for breach of contract are limited to losses that are reasonably foreseeable at the time of contracting, either arising naturally from the breach or from special circumstances known to both parties. The case clarifies that losses must be a serious possibility in the reasonable contemplation of the parties, and contractual remoteness prevails over tort remoteness in concurrent claims.