Property — Defects — Measure of damages — Building contract — Claimant seeking to recover retention fee — Defendant counterclaiming for damages — Whether defendant entitled to damages for breach of contract — Nominal damages awarded
The claimant built a residential training college for the defendant. Issues arose as to defects in the property, and were compromised by an agreement under which: (i) the claimant agreed to make good any defects; and (ii) the defendant agreed to pay £470,000 to the claimant within 14 days after notification by the architect that all the defects had been made good. The claimant carried out significant remedial works, but was later instructed to stop.
In subsequent proceedings, the claimant sought to recover the unpaid retention fee under the agreement. The defendant served a defence and counterclaim for the costs that it had incurred in remedying certain defects and for the estimated costs of remedying defects that it had not yet put right. The sums claimed exceeded the retention fee. In 2000, the defendant decided to sell the college.
An issue arose, inter alia, as to the appropriate measure of damages for the defendant for breach of contract. A settlement was reached prior to delivery of the judgment.
Held: Nominal damages were awarded.
The normal measure of damages for defective works was the cost of reinstatement (namely the cost of the remedial works), but this had to be applied reasonably. Thus, where that measure was out of proportion with the claimant’s real loss, some other measure should be used. This would be the case where there had been a modest effect upon the utility of the works and where it would be reasonable to assess the loss on the basis of diminution in value. A pragmatic approach might have to be applied, although a claimant was not to be too readily deprived of the ordinary measure of compensation: Ruxley Electronics & Construction Ltd v Forsyth [1995] EGCS 117; [1996] AC 344 applied.
If an owner disposed of a property with defects that were attributable to a breach of duty by a contractor for which the cost of reinstatement was the appropriate measure, but without any reduction or loss on account of its condition, the supposed loss would be avoided and no damages would be recoverable. In some cases, it might be reasonable (or even proportionate) to award an amount so that the contractor did not receive payment for works that had not been undertaken. If the work had not been done at all, then either an appropriate contractual reduction in the price or a comparable award of damages should be made.
If certain items truly affected the general appearance, comfort and amenity of the building, any reasonable owner with resources (such as the defendant) would have rectified them either during the main works or soon thereafter under a planned scheme. The defendant had not done so. On that basis alone, a claim for general damages, based upon the totality of the unremedied defects, had to fail. To award to the defendant the cost of remedying the defects would be unreasonable and out of proportion to the defendant’s loss, which appeared to be minimal in financial or economic terms. There was no evidence that the defendant’s business had suffered or that students’ work had been affected. The defendant was entitled to nominal damages of £2: Dodd Properties (Kent) Ltd v Canterbury City Council [1980] 1 EGLR 15 considered.
Rosemary Jackson (instructed by Osborne Clarke, of Bristol) appeared for the claimant; Nerys Jefford (instructed by Speechley Bircham) appeared for the defendant.
Eileen O’Grady, barrister
