Victoria Laundry (Windsor) Ltd v. Newman Industries Ltd

Facts

• Victoria Laundry (plaintiffs) purchased a large boiler from Newman Industries (defendants) for use in their laundry and dyeing business
• The defendants knew the boiler was required for immediate use by the plaintiffs and that the plaintiffs were launderers/dyers
• Delivery was delayed by 5 months due to damage during dismantling
• During the delay, Victoria Laundry lost: (a) ordinary business profits; (b) profits from particularly lucrative dyeing contracts with the Ministry of Supply that they could have accepted with the boiler
• Victoria Laundry claimed both categories of loss

Issue

1. Which categories of lost profit were within the reasonable contemplation of the parties and therefore recoverable under the Hadley v Baxendale principles?

Held

• Ordinary loss of profits: RECOVERABLE; the defendants knew a laundry urgently needed the boiler for business; it was reasonably foreseeable that delay would cause loss of ordinary business
• Exceptional profits from the Ministry contract: NOT RECOVERABLE; the defendants did not know about this unusually lucrative contract; this was a special circumstance requiring actual notice
• Asquith LJ reformulated the Hadley test: what matters is whether the loss was reasonably foreseeable as "not unlikely" to result; it need not be the "most probable" result, just a "serious possibility" or "real danger"
• Imputed knowledge: the defendant is taken to know what a reasonable person in their position would know (here: that a laundry needs a boiler for business = general profits are at stake)

Ratio Decidendi

The remoteness test from Hadley v Baxendale is applied through the lens of foreseeability at the time of contracting. The defendant is liable for losses that were reasonably foreseeable as a "serious possibility" given (a) imputed knowledge (what anyone in the defendant's position would know) and (b) actual knowledge of special circumstances communicated before contracting. Loss need not be "probable," only "not unlikely." Where the defendant lacks notice of specially lucrative sub-contracts, those exceptional losses remain too remote.