| Date | 13 May 1998 |
|
|
| Judgment | George Fischer Ltd -v- Multi Design Consultants and Davis Langdon & Everest, ORB 10 February 1998 |
|
|
| The Issue | The measure of damages in connection with defective works. |
|
|
| Implication |
The damages to be assessed following defective works may be the cost of remedial works and in addition a sum in respect of diminution in value of the property, notwithstanding the correction of the defect. |
printMany readers will remember the 1995 House of Lords decision in the case of Ruxley -v- Forsyth which concerned the construction of a swimming pool six inches too shallow. The Court of Appeal had awarded the full cost of replacing the swimming pool on the undertaking of the owner to rebuild the pool. The House of Lords overturned this decision on the basis that the owner's undertaking to spend monies on re-building was irrelevant and amounted to creating a loss which did not exist. In cases such as this the cost of reinstatement was held not to be an appropriate measure of damages. Lord Mustill referred to damages in a sum intermediate between on one hand the full cost of reinstatement, which had not and would not be suffered by the owner, and on the other hand the diminished market value of the property, which similarly had not been established. Accordingly the owner was only entitled to be paid a nominal sum for loss of amenity. In assessing damages following a breach of contract, lawyers will examine the nature or type of damages recoverable, often referred to as the "remoteness of loss", and will also consider the amount, or the measure of damages. The most important case dealing with the remoteness of damages is now almost 150 years old. The 1854 case of Hadley -v- Baxendale remains one of the most important judgments connected with the law of contract, providing the basic rules for the consideration of damages, whether in connection with the assessment of loss and/or expense, or damages for defective works. The type of damages which may be recovered were set out in Hadley and Baxendale in a well repeated passage: "where two parties have made a contract which one of them has broken, the damages which the other party ought to receive the respect of such breach of contract, should be such as may fairly and reasonably be considered either (1) arising naturally, ie according to the usual course of things from such breach of contract itself, or (2) such as may reasonably be supposed to have been in the contemplation of both parties at the time they made the contract, as the probably result of the breach of it." As regards the measure of damages, 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 regard to damages as if the contract had been performed. Questions relating to these matters were raised in the recent case of George Fischer Ltd -v- Multi Design Consultants and Davis Langdon and Everest. In Contract Journal on 22 April 1998 I reported another aspect of this case concerning the issue of certificates of practical completion. The dispute concerned defective roofs and Fischer's claim had included the cost of remedial works as well as a sum representing loss of value of the property on the basis that even after completion of the remedial work, the property, it argued, would not be worth as much as it would have been had there not been defective works. The employer's representative, Davis Langdon and Everest, resisted the claim on the ground that the cost of remedial works and diminution in value were in law alternative measures of damage and could not both be recovered. The design and construct contractors, Multi Design Consultants, resisted the claim on the factual ground that the evidence of its valuation expert was that there would be no such diminution in value if the remedial work was properly carried out. His Honour Judge Hicks QC had no doubt that the objection in law must be rejected. He considered that in point of principle a Plaintiff who carries out the best and most economical repair which can be devised to defective property, but is left at the end with an asset for which purchasers in the market are not prepared to pay as much as for one which never had the defects, had plainly lost both the money expended on the repair work and the residual difference in value. The closest authority for this principle was established in Thomas and Others -v- T A Philips (Builders) Ltd in 1985. In this case the builders had constructed foundations defectively, requiring underpinning to eight houses. The court held that the elimination of the danger to the property by the expedient of underpinning still left the injured party with a depreciated house. This was valued at the sum of £3,000 per property. Referring to this case Judge Hicks took into account and gave effect to evidence of the reduction in value of the property, attributable to the blight or stigma which expert valuers considered to be present in previously defective property.
CJ-9817
|
|||
|
© Brewer Consulting |
|||
 |
|||