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Esso Petroleum v. Niad 22/11/2001 Morritt V-C
On my website (www.law.cam.ac.uk/restitution) and elsewhere.

Solus agreement on petrol filling station, by which Niad ran the station under Esso's banners. Introduction of new "Pricewatch" scheme, under which retailers such as Niad would inform Esso of prices charged by local competitors, and Esso would order price reductions by retailers as appropriate, to keep their prices competitive. Breach, inasmuch as Niad did not make price reductions when ordered by Esso.

Esso were pursuing alternative measures of damage because of the difficulty of proving loss. The V-C held that they were entitled to: "(a) .. damages, or (b) an account of profits for breach of contract, or (c) to restore the amount by which the pump prices it charged its customers exceeded the recommended prices...". The latter two measures were treated as distinct. The passages relating to them are as follows:

"63. In my judgment the remedy of an account of profits should be available for breaches of contract such as these. First, damages is an inadequate remedy. It is almost impossible to attribute lost sales to a breach by one out of several hundred dealers who operated Pricewatch. Second, the obligation to implement and maintain the recommended pump prices was fundamental to Pricewatch. Failure to observe it gives the lie to the advertising campaign by which it was publicised and therefore undermines the effectiveness of Pricewatch in achieving the benefits intended for both Esso and all its dealers within Pricewatch. Third, complaint was made of Niad on four occasions. On all of them Niad appeared to comply without demur. It now appears that the breaches of its obligation were much more extensive than Esso at first thought. Fourth, Esso undoubtedly has a legitimate interest in preventing Niad from profiting from its breach of obligation.

"64. I turn then to the restitutionary remedy. It is undoubted that Niad obtained a benefit, in the form of the price support, to which it was only entitled if it complied with its obligation to implement and maintain the recommended pump prices to be supported. In these circumstances it can hardly be denied that Niad was enriched to the extent that it charged pump prices in excess of the recommended prices. The enrichment was unjust because it was obtained in breach of contract. It was obtained at the expense of Esso because Esso was providing price support for a lower price than that charged by Niad. I can see no reason why this remedy should be unavailable to Esso if it wishes to pursue it. Indeed it appears to me to be the most appropriate remedy in that it matches most closely the reality of the case, namely that Niad took an extra benefit to which it was not entitled. It is just that it should be made to restore it to its effective source. "

Various comments occur to me.

1/ The V-C was deeply unimpressed with counsel for Niad, who had wasted the court's time with utterly hopeless arguments on liability.

2/ As para 63 shows, a rather lax view of the Blake requirements is being taken. As in Blake itself, we see random bits of doctrine (eg 'damages is an inadequate remedy') combined with denigration of the defendant, with no firm rule being even hinted at.

3/ The third measure proposed, discussed in para 64, seems rather generous to Esso: the amount by which customers who actually bought petrol from Niad were "overcharged" in the relevant period. But surely if the "Pricewatch" scheme had any effect at all, Niad's conduct lost them customers. As a measure of Niad's profit, this is surely an overestimate: if they had implemented the price reductions, they would have made less profit per customer but presumably they would have had more customers.

4/ Combining points 2/ and 3/, I think we have yet another example of how the Blake remedy in practice fades into the award of exemplary damages. Calculation of profit is a tricky business if done properly; in practice the courts are not inclined to be so careful. The defendants in these cases are not worth the effort. In practice, therefore, the line that "we will remove profits but no more" cannot be held; the choice is between compensatory damages only, or compensatory damages plus exemplary damages.

Steve Hedley

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FACULTY OF LAW, UNIVERSITY OF CAMBRIDGE

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