ABSTRACT
The machinery of the Act worked satisfactorily in BP Exploration (Libya) Ltd v Hunt because the valuable benefit, even when reduced in the light of the frustrating event, exceeded the just sum. But the position would have been different if the expropriation had occurred immediately before oil had begun to flow and if no compensation for expropriation had been paid. On the reasoning of the judgment, there would then have been no valuable benefit (beyond the ‘farm-in’ oil); for that reasoning has regard to ‘the circumstances giving rise to the frustration’ within s 1(3)(b) in valuing the benefit rather than in assessing the just sum. The same reasoning is adopted in an example which closely resembles Appleby v Myers: ‘Suppose that a contract for work on a building is frustrated by a fire which destroys the building and which therefore destroys a substantial amount of the work already done by the plaintiff. Although it might be thought just to award the plaintiff a sum assessed on a quantum meruit basis, the effect of s 1(3)(b) will be to reduce the award to nil ...’ If this is right, Appleby v Myers would not be affected by the Act; but in view of the evident reluctance with which the learned judge reached this conclusion it is submitted that an alternative interpretation of s 1(3) is to be preferred. This would make the destruction of the benefit relevant, not to the identification of the benefit, but to the assessment of the just sum. Two points seem to support such an interpretation. First, s 1(3) applies where a valuable benefit has been obtained before the time of discharge: thus, to identify the benefit in a case like Appleby v Myers the court must look at the facts as they were before, and not after, the fire. The partly completed installation would at least prima facie be a benefit, in that completion of the installation would be likely to cost less after part of the work had been done. Secondly, there is the structure of the sub-section. This begins by setting out the circumstances in which the court has power to make an award (that is, when a valuable benefit has been obtained) and then provides guidelines for the exercise of that power. The guideline contained in s 1(3)(b) is introduced by the words ‘such sum as the court thinks just having regard to ... (b) ...’; and these words seem to link the guideline to the exercise rather than to the existence of the court’s discretion. This interpretation cannot cause any injustice, for if the court thinks that very little or nothing should be awarded it can exercise its discretion to that effect; and for this purpose the court can certainly take the destruction of the benefit into account so as to split the loss in such proportions as the court thinks just. But if such destruction necessarily led to the conclusion that no valuable benefit had been obtained before frustration, the court would have no discretion to award anything at all. It would be a pity
if this useful discretion were restricted in a way that is neither clearly required by the words of the sub-section nor necessary to promote justice.
