In this blog Ted Cunningham of 12KBW examines the recent decision in ARB v IVF Hammersmith v R  EWCA Civ 2803 in which the Court of Appeal confirmed that a parent cannot recover the pecuniary cost of bringing up a healthy child, regardless of whether that alleged loss arose in tort or out of a breach of contract.
The appellant and R, who were in a relationship at the time, attended the respondent’s clinic to undergo fertility treatment in 2008. They entered into a contract with IVF Hammersmith for the provision of fertility services, and R subsequently gave birth to a boy. As part of the contracted fertility services, a number of embryos made with ARB and R’s gametes were frozen in case they decided to undergo further treatment in the future. ARB and R consented to the storage of the embryos via a document called ‘Agreement for Cryopresevation of Embryos’. This Agreement contained the following key terms:
1) Both parties had to give written consent before the embryos could be thawed and replaced;
2) If the parties separate, the IVF unit will only thaw and replace the embryos if both ARB and R give written consent at the time of the embryo replacement.
By approximately July 2010, ARB and R separated. However, in or around October 2010 R attended the IVF clinic with a Consent to Thaw form which had been allegedly signed by ARB. R was subsequently implanted with the previously frozen embryos, and proceed to have another child with ARB’s gametes. However, it was discovered that R had forged ARB’s signature, and that ARB had no intention of having a second child with R.
ARB brought a claim for the pecuniary losses of brining the second child up, incurred as a result of the clinic’s breach of contract. At first instance, ARB successfully established that there had indeed been a breach, however Jay J held that he could not recover damages for the cost of the child’s upbringing. The judge considered that the legal policy described by the House of Lords in the cases of McFarlane v Tayside Health Board  2 AC 59 and Rees v Darlington Memorial Hospital NHS Trust  1 AC 309, both of which were tortious claims, applied equally to contractual claims.
In McFarlane, a couple sought to recover the cost of raising a healthy child who was born following negligent advice in respect of a vasectomy performed on the husband. In that case, it was agreed that the mother’s pregnancy was the direct and foreseeable consequence of the negligent advice. In Rees, the Claimant, who suffered from a severe visual handicap, underwent sterilisation as she felt unable to care for a child. However, the procedure was negligently performed and the Claimant became pregnant with a healthy baby. As before, damages were sought for the cost of the child’s upbringing. In both cases, this head of loss was found to be irrecoverable as a matter of legal policy: it is impossible to value the benefits and value of having a child, accordingly it is impossible to offset such a value against the cost of a child’s upbringing. Moreover, the judgments in both cases described the positioning of a child as a financial liability to be morally unacceptable.
Returning to the index case; ARB appealed the decision of Jay J primarily on the ground that it wrong to bar his contractual claim on the basis of legal policy. ARB’s argument was threefold:
1) The legal policy described above does not apply to contractual disputes; in assessing a contractual loss, the court should ignore any benefit and consider only the financial loss resulting from the breach of contract as per Hadley v Baxendale (1854) 9 Exch 341;
2) The court should consider the nature of the contract and the breach; this could only occur if the female wishes to have a child and the male does not. The breach and damage in this case therefore satisfied both limbs of Hadley;
3) Given that the type of loss suffered fell within either limb of Hadley, and that ARB regarded the birth as a loss and not as something that brought any benefit, he should be entitled to claim for that loss. It was accepted by ARB’s counsel that this would require a subjective rather than objective assessment of his loss.
The Respondent submitted that Jay J correctly identified the legal policy described in McFarlane and Rees and applied it appropriately to a contractual claim. The measure of damages remained the same and there was no material difference between contractual claims founded on reasonable care obligations and strict obligations for the purpose of the legal policy identified.
Lady Justice Nicola Davies DBE, in her judgment to which Lord Justice David Richards and Lady Justice King DBE both agreed, approved Jay J’s analysis of the claim, and quoted it in full within her judgment:
“317. The crux of the matter remains whether the legal policy enunciated by the House of Lords in Rees, and undoubtedly applicable to contractual claims founded on reasonable care obligations in the light of the principle of relevant equivalence or congruence which I have identified, should – for reasons of principle, logic and policy – apply equally to contractual claims founded on strict obligations in circumstances where the parties have not sought to quantify or liquidate the damages payable in the event of breach. This last aspect is crucial because the current focus is on the secondary obligation to pay damages arising under the common law.
318. In my judgment, the same legal policy applies to thwart ARB’s claim. The measure of damages is the same; the test for remoteness does not turn on any distinction pertaining to the nature of the underlying obligation; and, most particularly, there is no material difference for the purposes of this legal policy between contractual duties of these two types…”
Accordingly, the appellate court held that the legal policy which prevented the recovery of the cost of the upbringing of a healthy child in the tortious claims in Rees and McFarlane applied to ARB’s claim for breach of contract and the appeal failed.
This decision by the Court of Appeal has ensured a consistent judicial approach to a controversial, if still theoretical, head of loss: a child’s upbringing. Had their Lordships found in ARB’s favour, there would be an unsatisfactory discrepancy in the value of claims and the rights of those wronged between cases based on a contractual breach and those arising from negligence.