Two Wrongs Don't Make a Right

When a contract is breached and one party suffers a loss as a result, they are normally entitled to be compensated for their loss by the party that has breached the contract.

Whilst there are a number of ways the breach can be dealt with by the courts, the usual way is for a claim for compensation by way of a payment ('damages') to the party that suffered the loss.

In a recent case, a company took action against another company for trading with its clients at reduced rates and without informing it that this was occurring, thus causing it a loss. The company introduced wealthy Greek citizens to a financial services company and claimed a commission on the income that it generated for the financial services company. The financial services company began to deal directly with the clients introduced at lower rates and cut out the introducer from the process.

The High Court agreed that the contract had been breached. However, it accepted that the claimant company had in reality suffered a loss because it had breached its own fiduciary duty to the clients, because it had introduced them to the financial services company without 'informing the clients of the charges levied by the first-tier provider and the amount of commission and rebate being charged'.

Accordingly, it was the architect of its own downfall and, after a trial lasting two weeks, the Court concluded that only nominal damages for the breach of contract would be appropriate.