BURGESS JA:
INTRODUCTION
FACTUAL BACKGROUND
[3] The deceased was a joint owner of a property called “Desert Rose” (Desert Rose) situate at 78 Cherry Lane, Sunset Crest, St. James. The other joint owner was his wife at the date of the trial of this matter, Ms. Elaine Newitt (Ms. Newitt). Desert Rose is a short term rental property which is rented during the period of December to April each year.
[4] The appellant is a writer/publisher and a broker of electronic goods. He resides in San Clemente, California, in the United States of America. He is married to Ms. Soozie Brooks (Ms. Brooks) who is a business woman.
[5] The deceased advertised Desert Rose via the internet describing it therein as a “luxury 5 bedroom villa with pool 3 mins from Beach”. Ms. Brooks saw the advertisement and, via electronic mail, expressed her interest to the deceased in renting Desert Rose for a family vacation in December 2005.
[6] By a series of electronic mail exchanges between the deceased and Ms. Brooks, and subsequently, between the deceased and the appellant, the parties entered into a contract for the rental of Desert Rose during the period 13 to 28 December 2005. Of particular note is the electronic mail dated 21 June 2005 in which the deceased wrote to Ms. Brooks in relation to the rental of Desert Rose as follows:
“Hi Soozi,
Thank you for the interest shown in Desert Rose, it is certainly an ideal spot for your vacation.
The total cost for the 16 Day period requested would be $11,750 U.S Dollars inclusive of V.A.T.
To secure your booking a 25% non-refundable deposit is required with balance due 8 weeks prior to your arrival. Payment to be made by bank transfer to a bank account provided.
Kind Regards,
Harry”
[7] On or about 24 June 2005, the appellant paid the sum of US $2,937.00 as a deposit for the rental of Desert Rose pursuant to the deceased’s email of 21 June 2005. The balance of the rental fee in the sum of US $8,813.00 was paid by the appellant to the deceased, on or about 15 October 2005.
[8] On 13 December 2005, the appellant arrived at Desert Rose with his family.
[9] According to the appellant, upon his arrival at Desert Rose with his family, the property was in a state of uncleanliness and in a state unfit for habitation. Consequently, the appellant averred, he and his family were forced to find alternative accommodation at El Hambra, Sandy Lane, St. James and The Coral Reef Hotel, St. James respectively at a cost of approximately Bds $36,226.76.
[10] Prior to the appellant’s departure from the island, the deceased gave the appellant a cheque in the sum of Bds $5,000.00 and attached a note indicating that he, the deceased, had been able to rent the house for a period of four days. The deceased stated that the cheque was a gesture of goodwill. Nevertheless, the deceased put a stop payment on the cheque shortly thereafter.
THE ACTION BEFORE THE HIGH COURT
The Claim and Amended Statement of Claim
[11] On 10 July 2006, the appellant filed a writ of summons together with a statement of claim.
[12] On 23 November 2007, with the leave of the court, the appellant filed a writ of summons and amended statement of claim alleging that there were breaches of the implied terms of the contract by the deceased, which caused him, the appellant, to suffer loss and damage.
[13] The appellant claimed that it was an implied term of the rental agreement that the premises would be in a fit state for occupation at the commencement of the term of the rental and that this term was breached by the premises being in a state of uncleanliness and in a state unfit for habitation. The appellant alleged that when the unfitness of the premises was brought to the attention of the deceased, the deceased refused to rectify the situation or make an offer of amends. Instead, the appellant claimed, the deceased became offended and refused to allow the appellant and his family to stay at the premises. As a result of this, the appellant claimed that he was forced to find alternative accommodation at a cost of Bds $36,226.76.
[14] In sum, the appellant claimed (i) that he was entitled to recover the monies paid to the deceased in the sum of Bds $23,500.00; (ii) damages for breach of contract for the stress and emotional distress which the deceased caused to him; (iii) interest; and (iv) costs.
The Defence
[15] On 3 August 2006, the deceased filed a defence to the appellant’s claim. In that defence, the deceased denied that the premises were in a state unfit for habitation and occupation by the appellant and his family and that the appellant ever pointed out to him the alleged defects of the premises. The deceased stated that the appellant’s refusal to rent the premises was due to Ms. Brooks’ contention that the premises were too far from the beach. He therefore pleaded that it was the appellant who was in breach of the contract and that he, the deceased, was entitled to retain the monies paid to him by the appellant.
[16] The deceased also denied that the appellant suffered loss or damage or stress or emotional distress as claimed.
Reifer J’s Orders
[17] The matter came on for hearing before Reifer J on 21, 22, 23 and 27 November 2007 and 19 June 2009. After assessing the evidence of the appellant in support of his claim and the evidence of the deceased in support of the deceased’s defence, Reifer J held that it was the appellant and not the deceased who was in breach of contract and that the deceased was entitled to the deposit plus the remainder of the rental fee as damages for the appellant’s breach of contract. Reifer J also made the following orders at para [44] of her judgment:
“1. That the Defendant shall pay the Plaintiff the sum of $5,000 together with interest thereon at the rate of 6% from the date of this judgment until payment.
THE APPEAL
The Amended Notice of Appeal
[18] On 26 October 2009, Mr. Brooks filed a notice of appeal entitled Civil Appeal No. 17 of 2009 appealing the decision of Reifer J. He subsequently filed an amended notice of appeal on 17 May 2016. We find it advantageous to set out verbatim the amended notice of appeal. In it, Mr. Brooks sought the following orders:
“a. The Respondent do pay the Appellant the sum of US $8,813.00 or its Barbados Dollar equivalent;
[19] The details of finding of law appealed against were as follows:
“The Learned Trial Judge held as a matter of law that the Appellant was entitled to a refund only of monies collected by the Respondent in mitigation of his damage in circumstances where the Claimant had paid to the Respondent the entire rental fee for accommodation in advance and then not used the accommodation at all, having paid as a part of the said rental fee a 25% non-refundable deposit.”
[20] The grounds of appeal as stated in it were as follows:
“a. The Trial Judge’s conclusion that the Respondent (Mr. Newitt) had not breached the implied term of the rental agreement is not sustainable because the Learned Trial Judge:
(b) His further admission in evidence that after he had agreed to a refund of the sum of $5,000.00 to the Appellant and had actually issued a cheque to the Appellant in that amount, proceeded to put a stop payment thereon, as this is evidence of a dishonest and dishonorable (sic) act on his part, that is to say, that he knowingly kept what in effect was a double payment for the rental of his property for at least a portion of the time which was covered by the payment which had been made by the Appellant, his evidence should therefore not have been accepted by the Trial Judge on any of the issues in dispute;
The Cross-Appeal
[21] On 17 November 2009, the deceased filed a notice of cross-appeal seeking an order setting aside the part of Reifer J’s order in which she ordered the deceased to pay the sum of $5,000.00 to the appellant. This cross-appeal was not pursued before us and nothing more needs to be said of it.
COURT’S ANALYSIS AND CONCLUSIONS
The Issues in this Appeal
[22] Based on the pleadings and the written and oral submissions before this Court, three dispositive issues are raised in this appeal. The first is whether there is any basis for this Court to disturb the findings of Reifer J that, on the evidence before her, it was the appellant, and not the respondent, who was in breach of the rental contract. The second is whether Reifer J applied the correct legal principles in determining the measure of damages. The third relates to Reifer J’s costs award.
[23] We deal hereafter with these issues seriatim.
Whether there is a basis for this Court to disturb Reifer J’s findings that, on the evidence, the appellant, not the respondent, breached the rental agreement
[24] The pith and purport of the appellant’s contention on this question concerns Reifer J’s conclusions on the credibility of the witnesses before her in arriving at her findings of facts. In consequence, as a preliminary matter, this Court must advert to the principles which govern the appellate court’s function on an appeal against a trial judge’s findings of fact.
[25] Those principles were explored by this Court in E. Pihl and Sons A/S (Denmark) v Brondum A/S (Denmark) Civil Appeal No. 24 of 2012 at para [21]. There, those well traversed principles were recounted as follows:
“[21] Where the appeal is on questions of fact, the settled law in our jurisdiction is that a distinction is to be drawn between the perception of facts and the evaluation of facts, or stated differently, between primary facts and inferences from primary facts. The process of finding primary facts involves assessing the credibility of witnesses. Inferences are concerned with the evaluation of primary facts. An appellate court will only interfere with the former where there was no evidence at all or only a scintilla of evidence to support the finding: Eudese Ramsay v. St. James Hotels Services Ltd (Magisterial Appeal No. 4 of 1999); Layson v. Marshall (Civil Appeal No. 45 of 1990); Edwards v. Buxton (1982) 30 WIR 82; Powell v. Streatham Manor Nursing Home [1983] AC 243 at p. 251 per Viscount Sankey LC; Bookers Stores Limited v. Mustapha Ally (1972) 19 WIR 230; Peters v. Peters (1969) 14 WIR 457. In respect of the latter, namely, the evaluation of facts, it is clear from the judgment of Byron CJ, as he then was, in the Grenadian case of Grenada Electricity Services Ltd v. Isaac Peters, Grenada Civil Appeal No. 10 of 2002 that an appellate court will generally regard itself as being in as good a position to draw inferences from or to evaluate facts as the trial judge. That principle was applied by this Court’s recent decision in Walsh v. Ward (Civil Appeal No. 20 of 2005).”
[26] The settled law applicable to this appeal, then, is that this Court can only interfere with Reifer J’s findings of fact if there was no evidence at all or only a scintilla of evidence to support those findings. So what were those findings?
[27] In approaching this question, we find it useful to recall that the action commenced in the High Court by the appellant alleged that the deceased breached his rental contract with the appellant. The alleged breach of contract was that the deceased failed to deliver Desert Rose in a condition of fitness for occupation in accordance with an implied term of the rental contract, and that the deceased refused to rectify the situation or to allow the appellant and his family to occupy Desert Rose after its condition was brought to the deceased’s attention.
[28] As regards the condition of Desert Rose, the judge stated at para [7] of her judgment that the appellant’s complaints were best summarised in the following extract from his evidence:
“Mr. Newitt brought us into the house and it appeared as though it was still occupied. There were medicines and a toothbrush and other personal belongings of someone in the bathroom, the kitchen was dirty, there was trash about and there was broken furniture and some mold or algae.”
[29] In relation to this complaint, the judge found at para [20] of her decision that:
“My view is that on arrival in the island she [the appellant’s wife] was not satisfied with the arrangements made by him [the appellant] and sought to get out of these arrangements because she felt that she could do better. The plaintiff realized that his wife was not satisfied and he tried to make peace.”
[30] The judge further found at para [24] that “… The Plaintiff’s wife’s allegation was that there was no sea-view, that the property was not within walking distance of the sea and that there was a breach of the implied term as to fitness were excuses to avoid the contract.”
[31] Ultimately, the judge accepted the deceased’s evidence as to the care with which he attended the preparation of Desert Rose. She thereby rejected the appellant’s claim that there was a breach by the deceased of the implied term as to the fitness of the premises for habitation. So the question now becomes whether there was any evidence or a scintilla of evidence to support
Reifer J’s findings that Desert Rose was fit for habitation.
[32] The deceased gave evidence that the property was kept in excellent condition and that two full-time staff were employed whether it was rented or not. When asked on cross-examination whether a cleaning schedule was attached to the property, the deceased responded as follows:
“Yes there is. We have a system where if guests leave, all the linen is stripped from the beds. There is a cleaning schedule daily where one maid strips and fixes beds and it is then inspected by me.”
[33] When pressed further on cross-examination by Mr. Weekes, the deceased stated,
“We have two full-time cleaners. They have been employed for a long time; one of them for 20 years. We have a second service for the pool by an outside pool maintenance company. He has been employed since the pool was built. It is my evidence that it is nearly impossible that medicine was left out. I did not see anything. I inspected every room. It was not a cursory inspection… I inspected every single room. We provide all bathrooms with soap. A new cake of soap is placed in dish.”
[34] Mr. Weekes then asked “Could you have missed a tooth brush in the bathroom?” To this, the deceased responded, “It is not impossible, but under my inspection there were no toothbrushes.”
[35] Ms. Newitt gave detailed evidence in her examination-in-chief as follows:
“Desert Rose is always kept in very good condition. We have two maids and they regularly change linens and towels. They attend every day from 10:00 to 4:00 p.m. They do a very good job. Before guests arrive we strip all the beds, take all the towels away, take covers off all sofa and we have replacements of more than one set. My husband checks the premises before guests arrive, checks that every lamp is working and that everything is tidy… I had even erected a Christmas tree with lights and decorations and it looked lovely… I have experience in this area. My second husband was a hotelier who ran Royal Pavilion and Glitter Bay so I am aware of the standards of a 5 Star Hotel. I keep my standards the same way at Desert Rose.”
[36] It is clear from the foregoing that there was an abundance of evidence to support the judge’s finding that the deceased attended the preparation of Desert Rose with care and so was not in breach of the implied term that that accommodation would be fit for occupation.
[37] There was also ample evidence to support Reifer J’s finding that the deceased did not refuse to allow the appellant’s family to occupy Desert Rose as alleged by the appellant. There was, rather, evidence that the appellant’s wife had refused to accept occupation of those premises because she was dissatisfied with the accommodation which she described as “filthy” because it was not what she had in mind.
[38] First, there was the evidence of the appellant. He testified that he personally found Desert Rose to be habitable. During cross-examination, he admitted that:
“I may have apologised to Mr. Newitt for my wife’s behavior. I had said if it was me and the boys we would work something out.”
[39] Then there was the evidence of the deceased that Ms. Brooks got angry and that she refused to consider staying at Desert Rose which the judge accepted because she found the deceased credible. In his testimony, the deceased stated that:
“Mrs. Brooks said to me I cannot see the ocean… She became very angry and informed her family to stay in the bus…We went straight from the van to the villa. Mrs. Brooks was very angry and basically, had a cursory look around the lounge and minutes later left the villa… It was a tirade. Mrs. Brooks stated that from her house in Santa Barbara she could see the ocean…
I was in shock.”
[40] Viewed as a whole, then, the appellant’s case of breach of contract, was based on testimonial evidence. Consequently, in making her findings of fact, the judge was forced to match the appellant’s credibility against that of the deceased and his wife. She found the appellant’s credibility “lacking” and the deceased and his wife credible.
[41] Counsel for the appellant disputed the judge’s assessment of the credibility of the appellant and the deceased. He argued that the judge described the appellant as “a pleasant and decent man” and yet found his credibility to be “lacking”. On the other hand, he argued that, in his words, the “dishonourable” conduct of the deceased in recalling the cheque after he had given it to the appellant was not taken into account by the judge in assessing the deceased’s credibility.
[42] In our view, assessing the credibility of a witness is a far more nuanced exercise than counsel’s argument suggests. In this regard, it is our judgment that the statement of Lord Pearce in the English House of Lords decision of Onassis v Vergottis [1968] 2 Lloyds Rep 403 at p. 431 on assessing the credibility of an oral witness provides the answer to counsel’s arguments on Reifer J’s assessment of the credibility of the witnesses in this case. Lord Pearce stated there as follows:
“Credibility’ involves wider problems than mere ‘demeanour’ which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person telling something less than the truth on this issue, or though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so has his memory correctly retained them? Also, has his recollection been subsequently altered by unconscious bias or wishful thinking or by overmuch discussion of it with others?”
[43] In addition to Lord Pearce’s dictum, counsel’s arguments run into the immovable brick wall that is the principle that an appellate court will not interfere with the findings of a trial judge where the evidence before the trial judge is restricted to the credibility of the parties. As Byron CJ, as he then was, said in Grenada Electricity Services Ltd v Isaac Peters, Grenada Civil Appeal No. 10 of 2002:
“[A]n appellate court will usually be reluctant to differ from the finding of a trial judge where his finding turned solely on the credibility of one or more witnesses.”
[44] In sum, we are of the opinion that there is evidence, and for sure more than a scintilla thereof, to support Reifer J’s finding that the appellant was the party in breach of the contract and was therefore not entitled to damages. Furthermore, the findings of Reifer J which are challenged by the appellant relate to evidence restricted to the credibility of the witnesses in the case. Even if we were minded to, which we are not, we are forbidden by high and well established authority from so doing. There is therefore no basis for interfering with the judge’s findings of fact.
Whether Reifer J applied the correct legal tests in determining the measure of damages.
[45] Before us, Mr. Weekes argued that, assuming the appellant was in breach of the rental agreement, as found by Reifer J, the “maximum amount which (the deceased) was entitled to retain was the 25% deposit” but not the entire rental fee paid to him. According to his written submissions, this is because “when parties to a contract agree to a deposit being paid which is not liable to be set aside as a penalty they have agreed to two things, first, there is no need to further quantify the damage caused by the breach and secondly, they have effectively put a limit on the extent of the contract breaker’s liability to damages”. Mr. Weekes alleged that this proposition of law was derived from the Privy Council decision in the Jamaican case of Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573 as applied by the Caribbean Court of Justice in Errol Pratt, Doing Business as Toucan Helicopter Ltd and Toucan Helicopter Ltd v Karl R. Renz III et al [2014] CCJ 7 (AJ) (Errol Pratt v Karl Renz III).
[46] Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd is undoubtedly the leading authority on the law on deposits. In that case, a contract for the sale of land provided for a deposit of 25 percent with payment of the balance within 14 days and that the deposit would be forfeited to the vendor if the purchaser failed to comply with its contractual obligations. A question arose as to whether the purchaser could claim relief from forfeiture of the deposit. Zacca CJ in the Jamaican High Court refused to grant relief. The Jamaican Court of Appeal allowed the purchaser’s appeal in part and granted relief from forfeiture to the extent of 15 per cent of the purchase price.
[47] The vendor appealed and the purchaser cross-appealed to the Privy Council which dismissed the appeal and allowed the cross-appeal. The Privy Council held that in a contract for the sale of land a provision for the payment by the purchaser of a reasonable amount as deposit, to be forfeited if the purchaser failed to complete in accordance with the terms of the contract, was not an unlawful penalty provided that, viewed objectively, it operated as earnest for the performance of the contract. Since 10 per cent had been the customary deposit in the United Kingdom and formerly in Jamaica, a vendor seeking to obtain a greater sum as a forfeitable deposit had to establish special circumstances justifying it. The vendor had failed to show that the deposit of 25 per cent was to encourage performance of the contract or that a deposit exceeding 10 per cent was reasonable. Consequently, the deposit provision was a penalty. The court therefore had jurisdiction to grant relief and would order the repayment of the whole deposit, together with interest, less the amount of any damage suffered by the vendor as a result of the purchaser’s breach of contract.
[48] The law which underpins the decision of the Privy Council was unequivocally explained by Lord Browne-Wilkinson, who delivered the judgment of their Lordships, as follows at pp 578-579:
“In general, a contractual provision which requires one party in the event of his breach of the contract to pay or forfeit a sum of money to the other party is unlawful as being a penalty, unless such provision can be justified as being a payment of liquidated damages being a genuine pre-estimate of the loss which the innocent party will incur by reason of the breach. One exception to this general rule is the provision for the payment of a deposit by the purchaser on a contract for the sale of land. Ancient law has established that the forfeiture of such a deposit (customarily 10 per cent of the contract price) does not fall within the general rule and can be validly forfeited even though the amount of the deposit bears no reference to the anticipated loss of the vendor flowing from the breach of contract.
This exception is anomalous and at least one textbook writer has been surprised that the courts of equity ever countenanced it: see Farrand, Contract and Conveyance, 4th ed. (1983), p. 204. The special treatment afforded to such a deposit derives from the ancient custom of providing an earnest for the performance of a contract in the form of giving either some physical token of earnest (such as a ring) or earnest money. The history of the law of deposits can be traced to the Roman law of arra, and possibly further back still: see Howe v Smith (1884) 27 Ch D 89, 101-102, per Fry LJ. Ever since the decision in Howe v Smith, the nature of such a deposit has been settled in English law. Even in the absence of express contractual provision, it is an earnest for the performance of the contract: in the event of completion of the contract the deposit is applicable towards payment of the purchase price; in the event of the purchaser’s failure to complete in accordance with the terms of the contract, the deposit is forfeit, equity having no power to relieve against such forfeiture.”
[49] Lord Browne-Wilkinson went on to consider passages in two authorities, Stockloser v Johnson [1954] 1 QB 476 at 491 per Denning LJ and Linggi Plantations Ltd v Jagatheesan [1972] 1 MLJ 89 at 94 per Lord Hailsham, which indicate that the special treatment afforded to deposits cannot be abused by parties to a contract attaching the label “deposit” to what is in effect a penalty. Lord Browne-Wilkinson then stated at p. 579:
“In the view of their Lordships these passages accurately reflect the law. It is not possible for the parties to attach the incidents of a deposit to a payment of a sum of money unless such sum is reasonable as earnest money. The question therefore is whether or not the deposit of 25 per cent in this case was reasonable as being in line with the traditional concept of earnest money or was in truth a penalty intended to act in terrorem.”
[50] It is clear from the foregoing that the law which emerges from Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd does not support Mr. Weekes’ argument. That law is that deposits enjoy “special treatment” in the law of contract. As Fry LJ first explained in Howe v Smith (1884) 27 Ch D 89 at 101-102 (Howe v Smith), a deposit is earnest money given by the purchaser to guarantee performance of the contract, and if the contract is not duly performed by the purchaser, the purchaser is not entitled to relief from forfeiture of the deposit. This is different from the law relating to a contractual provision for payment of an agreed-beforehand sum by a party in breach of contract. Such a provision is subject to equitable jurisdiction as being a penalty, unless such provision can be justified as being a payment of liquidated damages, or in other words, being a genuine pre-estimate of the loss which the innocent party will incur by reason of the breach. Thus, equitable relief applies only to penalties and liquidated damages, not deposits. All that said, if on investigation a deposit is held not to be a true deposit, the courts will not uphold it. The test of whether a deposit is a true deposit depends on the reasonableness of the sum and not upon whether the deposit was a genuine pre-estimate of the likely loss to the innocent party in the event of breach of contract.
[51] Mr. Weekes further contended that the Caribbean Court of Justice’s (CCJ) decision in the Belizean appeal of Errol Pratt v Karl Renz III supports his argument. In that case, an issue arose as to the forfeiture of a $100,000 deposit in respect of a contract for the purchase of a helicopter for $240,000. Hayton J, delivering the unanimous decision of the CCJ, held at para [31] of the judgment as follows:
“The lower courts appear to have overlooked the impact upon Belize law of Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd where the Privy Council held that if the amount of a deposit is not a genuine pre-estimate of the loss which at the time of the contract it appeared likely that the innocent party would suffer by reason of a breach, the whole deposit is treated as an in terrorem penalty liable to be returned. It appears to us that forfeiture of the $100,000 deposit in respect of a $240,000 purchase, being over 41% of the purchase price, was not in April 2005 a genuine pre-estimate of likely loss and so amounts to a penalty. It follows that the whole deposit of $100,000 is due to be returned to the Lessee except to the extent that it is more than offset by unpaid rent and the damages flowing from the Lessee’s breach of the Agreement.”
[52] Mr. Weekes has argued before us that we are bound by the decision of the CCJ and must apply the test as stated by the CCJ in Errol Pratt v Karl L Renz III, namely, whether the deposit is a genuine pre-estimate of the loss which at the time of the contract it appeared likely that the innocent party would suffer by reason of a breach. To this we say that there is absolutely no question that we are bound by the decisions of the CCJ. However, we do not agree with the suggestion of Mr. Weekes that the CCJ in Errol Pratt v Karl L Renz III intended to, or indeed did, lay down any legal principle on deposits different from that stated in Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd. Of course, it was open to the CCJ to state the law on deposits differently from Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd. If it intended to do so, we believe that the CCJ would have done so expressly and after mature consideration.
[53] In Errol Pratt v Karl L Renz III, Hayton J categorically asserted that the test laid down by the Privy Council in Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd was the test which he was applying in the case before the CCJ. The learned authors of Cheshire, Fifoot and Furmston, Law of Contract 15th ed. at p 794 have summarised the decision in Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd: “The Privy Council held that, although the deposit was not in general subject to the penalty rule, this was only the case where the amount of the deposit was reasonable”. Similarly, Chitty on Contracts Vol 1 General Principles 30th ed. at 26-126 have said of this case: “The Privy Council … treated the forfeiture of money held by the innocent party (for the breaching party) as subject to rules akin to (but not identical to) those on penalties…”
[54] Therefore, as we have already stated above, the test of whether a deposit may be forfeited is not whether the amount of a deposit is a genuine pre-estimate of the loss which at the time of the contract it appeared likely that the innocent party would suffer by reason of a breach. Rather the test is whether the deposit is earnest money and whether the amount of the deposit was reasonable. In our view, it is this test which the CCJ had in mind in Errol Pratt v Karl L Renz III.
[55] So was the deposit in this case earnest money and was the amount of the deposit reasonable?
[56] There can be little doubt that the deposit in this case was intended to be an earnest to secure the performance of the accommodation contract. This is plain from the email of 21 June 2005 from the deceased to Ms. Brooks setting out the terms of the accommodation agreement. It is therein expressly provided that “To secure your booking a 25% non-refundable deposit is required…” The 25% deposit is therefore unmistakably an earnest. The only question is whether the 25% deposit was reasonable.
[57] Reifer J noted at para [42] of her judgment that no evidence was led in respect of the reasonableness of the deposit and held that she could not make any finding on this on the interpretation of the contract. In our view, some insight into the reasonableness of the deposit provision may be derived from an interpretation of that provision in light of Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd. As seen above, in that case the Privy Council held that long usage had established that 10 per cent was reasonable in a contract for the sale of land and that any deposit in excess of 10 per cent appeared to be a penalty unless special circumstances could be shown which justified taking a deposit at a higher level. In that case also, because no special circumstances were shown, a deposit of 25 per cent of the purchase price of land was held to be not reasonable.
[58] In this case, as in Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd, the deposit was 25 per cent of the total rental fee. However, we feel bound to take judicial notice of the volatile nature of the market for winter tourism rental accommodation in Barbados. Taken in its market context, it does not appear to us that a deposit which does not exceed 25 per cent of the total rental fee is unreasonable earnest money. The respondent is therefore entitled to validly forfeit the deposit even though the amount of the deposit is not shown to bear any reference to the anticipated loss to the deceased flowing from the appellant’s breach of the rental contract.
[59] The deceased’s right to forfeit the deposit must however be considered in the context of the overall calculation of his entitlement to be compensated for loss occasioned by the appellant’s breach of contract. In this regard, it is useful to be reminded of the basic aim of the legal principle governing the recovery of compensation for breach of contract. This was firmly laid down by Parke B in the venerated case of Robinson v Harman (1848) 1 Exch 850 at 858 as follows:
“Where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it to be placed in the same situation with respect to damages as if the contract had been performed.”
[60] In our judgment, the major thrust of the operation of the compensatory objective of contract damages as explained by Professor Furmston’s Law of Contract Fourth Edition Lexis Nexis 2010 (Law of Contract) at para 8.8 is particularly illuminating in this case. He writes there:
“In pursuit of its compensatory aim, damages for breach of contract are awarded on a ‘net loss’ basis. Or put another way an award of damages should not put the claimant in a better position than he would have been in if the contract had been performed and so secure ‘a massive and wholly unwarranted windfall’. This means that the compensation which the claimant receives will prima facie be adjusted to take account of any ‘betterment’ or ‘saving’ he enjoys following the breach of contract.”
[61] The learned authors of Chitty on Contracts Volume 1 Sweet & Maxwell 1999 at para 27-001 write to the same effect as Professor Furmston as follows:
“Damages for breach of contract committed by a defendant are compensation to the claimant for the damage, loss or injury he has suffered through that breach. He is, as far as money can do it, to be placed in the same position as if the contract had been performed. This implies a “net loss” approach in which the gains made by the claimant as the result of the breach… must be set off against his losses arising from the breach (after he has taken reasonable steps to minimise those losses).”
[62] Further, consistent with the compensatory objective of contract damages that an innocent party be compensated only for actual loss suffered is the duty of the party not in breach to mitigate his post-breach losses. Of this, we again find the exposition in the Law of Contract at para 8.12 extremely helpful in this case. Professor Furmston states there:
“The victim of a breach of contract is said to be subject to a ‘duty’ to mitigate his loss. The duty to mitigate in fact comprises two related principles: first the claimant must take all reasonable steps to reduce or contain his loss; second he must not act unreasonably so as to increase his loss. When a claimant acts to reduce or minimise his loss and thereby benefits himself, the act falls to be considered as a compensating advantage. To the extent that he was discharging his duty to mitigate when he became entitled to the benefit there is an overlap between mitigation and compensating benefits. In other words all successful mitigation will be regarded as a compensating advantage but all compensating advantages do not derive from acts of mitigation.”
[63] Two sets of principles applicable to this case emanate from the foregoing. The first relates to the quantum of damages to which the deceased is entitled as a result of the appellant’s breach of contract. The second relates to the treatment of the Bds $5,000.00 obtained by the deceased in mitigating his loss resulting from the appellant’s breach.
[64] In relation to the first, as we have determined above, the non-refundable deposit was not liquidated damages and so damages could not be treated as agreed nor fixed by the parties as argued by Mr. Weekes. In consequence, the quantum of damages to which the deceased was entitled was the sum of money which he would have been paid under the contract for the performance of his side of the contract. That sum, inclusive of the deposit, was US $11,750.00. That sum, inclusive of the deposit, was paid by the appellant prior to his arrival at the Desert Rose. Thus, Reifer J was correct in holding that the deceased was to be treated as having already recovered the quantum of damages to which he was entitled, namely, the contract price consisting of the deposit plus the remainder of the rental fee.
[65] As regards the treatment of the $5,000.00 earned by the deceased by re-letting Desert Rose, everything turned on the principles governing the deceased’s duty to mitigate his losses occasioned by the appellant’s breach. Here, the judge found as a fact that the deceased discharged his duty to mitigate. Thus, at para [39] of her judgment, Reifer J stated that “The Defendant did not sit back but instead sought to relet the premises for the period booked by the Defendant. This satisfied his legal obligation to mitigate.”
[66] Reifer J further found at para [40] that “the Defendant on his own admission received a double payment for an approximate five day period that he was able to rent the unit.” Reifer J meant by this that, in addition to receiving the entire rental fee, the deceased received Bds $5,000.00 for renting out the premises during the period within which the appellant was contracted to stay at Desert Rose. So that the deceased, in discharging his duty to mitigate, derived a compensating advantage in the form of the $5,000.00.
[67] In our judgment, the judge correctly ordered the deceased to pay the sum of $5,000.00 to the appellant as this sum represented a compensating advantage to the deceased which was not part of his loss and consequently which was to be paid to the appellant. Accordingly, we find no basis for disturbing the order made by Reifer J in respect of the $5,000.00 to be paid by the deceased to the appellant.
[68] All in all, it is our judgment that on the question of the measure of damages, Reifer J correctly identified the legal principles applicable to this case and having done so, she correctly applied those principles to the case before her. The appeal must therefore fail on this ground.
Entitlement to Costs
[69] At para [44] of her judgment, Reifer J ordered that: “The Plaintiff shall pay one-half of the Defendant’s costs to be agreed or taxed”. Mr. Weekes has taken issue with this order. He argued before us that Reifer J “erred in the exercise of her discretion in awarding the defendant/respondent half of his legal costs where the plaintiff/appellant was forced to bring legal proceedings to recover his money and where the judge in fact ordered the appellant to pay to the deceased the sum of $5,000.00”.
[70] We are not persuaded by Mr. Weekes’ submissions on this point for reasons that follow hereafter.
[71] Section 85 (1) of the Supreme Court of Judicature Act Cap. 117A provides, in so far as is relevant in this matter, that, “subject to rules of court”, costs are in the discretion of the court and that each court has to determine by whom and to what extent the costs are to be paid. In turn, the rules of court governing the determination of a party’s entitlement to costs are provided for in CPR 64.6.
[72] CPR 64.6 (1) to (4) are particularly relevant to Mr. Weekes’ argument that no costs should have been awarded against the appellant because “he was forced to bring legal proceedings to recover his money”. CPR 64.6 (1) to (4) read as follows:
“(1) In exercising its discretion under section 85 of the Act, the general rule is that the court will order the unsuccessful party to pay the costs of the successful party.
(2) The court may, however, while acting judicially, make no order as to costs or, in an exceptional case, order a successful party to pay all or part of the costs of an unsuccessful party.
(3) Without limiting the court’s discretion or the range of orders open to it, the court may order a person to pay
(a) only a specified proportion of another person’s costs;
(b) costs from or up to a certain date only;
(c) costs relating only to a certain distinct part of proceedings;
(4) In deciding who, or if any person should be liable to pay costs, the court must have regard to all the circumstances.”
[73] In the present case, the unsuccessful party was the appellant. His claim in the High Court sought inter alia the sum of $23,500.00 and damages for breach of contract. The judge found that the appellant had suffered no breach of contract, but rather that the appellant was in breach of the contract with the deceased. This meant that the appellant was unsuccessful in his claim for damages. Accordingly, Reifer J was palpably entitled to invoke the general rule in CPR 64.6 (1) that the unsuccessful party, the appellant, was liable to pay the costs of the successful party, the deceased. She was similarly entitled to invoke CPR 64.6 (3) and order that only a specified portion, namely, one-half of the deceased’s costs be paid by the appellant.
[74] And so we turn to Mr. Weekes’ further argument that, because the judge also ordered that the deceased pay to the appellant the sum of $5,000.00 together with interest, she should not have awarded costs against the appellant. Here, we note that the sum of $5,000.00 in that order represented the amount by which the deceased mitigated his loss and as such the sum by which the quantum of damages which the appellant was liable to pay to the deceased was reduced. We also note that this issue of mitigation was never advanced as an issue by the appellant before Reifer J and therefore the appellant could not be said to have succeeded on this particular issue. In consequence, CPR 64.6 (5) (b) which enjoins the court to have regard to “whether a party has succeeded on particular issues, even if not successful in the case” was not triggered and was correctly disregarded as a relevant factor by Reifer J in her costs award.
[75] All in all, we agree with Reifer J’s costs order. In our judgment, in exercising her discretion to award costs, the judge took into account only relevant considerations and omitted irrelevant considerations ultimately arriving at a correct conclusion in her order in respect of costs.
Disposal
[74] For all of the foregoing reasons the appeal is dismissed and the respondent shall have his costs in this appeal to be assessed if not agreed.
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