Damages–Building destroyed by fire owing to negligence of adjoining owners–Measure of damages–Whether cost of reinstatement or diminution of market value–Underlying basic principles–Damages to be such as will, so far as money can do it, put plaintiff in same position as if wrong had not occurred, but damages must be reasonable as between the parties–No intention to use destroyed billiards hall as such–Retained as investment for development potential–Damages limited to necessary remedial and safety work, damage to trade fixtures and fittings, and cost of removal of debris
These were
proceedings brought by four plaintiffs (1) C R Taylor (Wholesale) Ltd, (2)
Amatco Supermarket Ltd, (3) executors of the estate of Alice Birch, and (4)
Coleman & Son (Nuneaton) Ltd, owners and occupiers of adjoining premises in
the centre of Nuneaton, against the defendants for damages in respect of loss
and damage caused by a fire started by the defendants’ servants or agents in an
alleyway at the rear of the defendants’ premises. Liability was admitted and
the amounts payable to the second, third and fourth plaintiffs were agreed. The
total amount payable by way of damages to the first plaintiffs was, however, in
dispute and was the only issue in these proceedings.
P Otton QC and
Nigel Wilkinson (instructed by Herbert Smith & Co) appeared on behalf of
the plaintiffs; Dermod O’Brien (instructed by Maples, Teesdale & Co)
represented the defendants.
Giving
judgment, MAY J said: At all material times in this case the defendants were
the owners and occupiers of premises at 11 Market Place, Nuneaton. Market Place
is in the centre of Nuneaton; joining it from the south is a street known as
Coventry Street. No 9 Market Place is on the corner of Coventry Street and
Market Place. No 11 is two doors away to the west. The adjoining premises, 12
Market Place, were owned by the third plaintiffs and occupied under a lease
from them by the second plaintiffs. The fourth plaintiffs were the occupiers of
the two adjoining premises, 15 Market Place and 2 Queens Road. Somewhat
confusingly Market Place ends and Queens Road begins at no clear point. To the
south of all of the premises which I have already mentioned there are further
premises described on the plan as "works" which were at all such
times both owned and occupied, save in one small respect to which I shall refer
hereafter, by the first plaintiffs.
Prior to
October 26 1970 these last premises comprised, first, three lock-up shops
fronting on to Coventry Street. Of these 17 and 21-23 Coventry Street, the latter
comprising what had originally been two single shops, were unlet and empty. No
19 Coventry Street was occupied by a Mrs Neil as a wool shop. She was holding
over as tenant after the expiry of a lease which had been granted for a term of
three years from Christmas 1959 at a rent of £175 a year. As the first
plaintiffs’ solicitors wrote in the fourth paragraph of their letter of
September 20 1976 to the defendants’ solicitors:
No formal
documents extending the lease appear to have been executed, however, and we
understand from Peter Bromwich, Horne & Co (the first plaintiffs’ estate
agents and surveyors) that the arrangement that existed between Mrs Neil and
the first plaintiffs was that she should continue in occupation until such time
as the property was required for development.
Secondly,
behind these three lock-up shops was an old billiard hall. This was vacant on
October 26 1970 and I shall have to relate more of its history a little later
in this judgment.
The length of
the frontage to Coventry Street of the premises was 65 ft. To the north-east of
those premises there was a small alleyway which had a frontage of 4 ft to
Coventry Street. This alley way was open from the road back to about the level
of the boundary between 11 and 12 Market Place and was then either covered or
built on for the remainder of its length, exceptlperhaps for another small open
portion at the rear. Precisely how the alleyway was covered or built over was
not clear on the evidence, but it seems that part may have been occupied by the
second plaintiffs under some arrangement with the first plaintiffs, who were
also the freeholders of the alleyway throughout its length. The complete
premises, therefore, of which the first plaintiffs were at material times the
owners in fee had a frontage to Coventry Street of 69 ft.
On the evening
of October 26 1970 some servant or agent of the defendants burnt some rubbish
in the open part of the alleyway to which I have just referred at the rear of
their own premises, 11 Market Place. This fire got out of control and did
substantial damage to the various premises of the various plaintiffs which I
have described. Until shortly before the trial in this action began the
defendants continued to dispute their liability for such damage. By their solicitors’
letter of October 8 1976, however, liability was admitted and, save in respect
of the first plaintiffs, agreement has been reached on the quantum of the
damages payable by the defendants to the various plaintiffs. It is agreed that
the second plaintiffs are entitled to judgment for the sum of £16,809; that the
third plaintiffs are entitled to judgment for the sum of £4,885; and that the
fourth plaintiffs are entitled to judgment for the sum of £385.
In so far as
the first plaintiffs are concerned, the defendants accept their liability to
pay the two sums of £74 and £650 respectively pleaded under the particulars of
damage of the first plaintiffs in paragraph 9 of the reamended statement of
claim, and also now concede that the latter are entitled to a further
£2,643.63, as I shall indicate hereafter. No further agreement, however, has
been possible in respect of the first plaintiffs’ claim in this action, and in
the end this has been the only issue which I have had to try. For the remainder
of this judgment, therefore, I propose to describe the first plaintiffs as just
"the plaintiffs" save where the context necessarily requires me to do
otherwise.
As the result
of the fire the billiard hall, which comprised
destroyed. It was never rebuilt, but in so far as it may be relevant it is
agreed as a figure between the plaintiffs and the defendants that the cost of
reinstating the billiard hall after the fire, giving credit for any betterment
that such reinstatement would have produced, would have been the sum of
£28,956.95. Fortunately the fire caused no damage to the three shops on the
Coventry Street frontage of the plaintiffs’ site, and Mrs Neil continued to
occupy 19 Coventry Street until she gave up possession in 1973 in circumstances
which I shall have to relate hereafter. After the fire certain repairs on the
boundaries or "fringes" of the plaintiffs’ site had to be carried out
at a cost of £2,487.24. In addition it was necessary to demolish parts of the
billiard hall itself and to board it up and padlock it against trespassers;
this minor work cost £156.39. The defendants now agree that these two items of
work had to be carried out on the premises as a result of the fire; they agree
the cost of each of them; and they consequently also agree that whatever may be
my decision upon the principal issue in this case, the defendants are in any
event liable to the first plaintiffs for the aggregate of these two sums,
namely £2,643.63.
That principal
issue is what is the correct measure of damages in law to which the plaintiffs
are entitled in all the circumstances of the case in respect of the very
substantial damage that the fire caused to the actual billiard hall. Although I
have not seen the relevant policy, it is not disputed that the plaintiffs were
themselves insured in respect of their whole premises at the time of the fire.
The chartered loss adjuster acting on behalf of the plaintiffs’ insurers, Mr
Lewis, gave evidence before me and it was he who prepared the report of
September 1971. In respect of the billiard hall, as appears from the report,
and as Mr Lewis deposed to in evidence which I accept, his insured, that is to
say the plaintiffs, elected to accept for their loss what was described as
"an indemnity settlement."
Apparently, under the terms of their policy the plaintiffs were entitled
either to require their insurers to reinstate the damaged premises in fact, or
alternatively to be paid by those insurers what it would have cost to have
reinstated them, making all due allowance for betterment and any other relevant
considerations. To this end, quantity surveyors were instructed to prepare
bills of quantities for the theoretical reinstatement of the billiard hall and,
after adjustment, agreement was reached between the plaintiffs and their
insurers that the theoretical cost of reinstatement was £32,896.61. Due
allowance for betterment was then made and agreed and ultimately the
plaintiffs’ insurers paid to the plaintiffs the total sum of £28,956.95, in
addition to the aggregate sum of £2,643.63 to which I have already referred, in
respect of the fire damage to their premises. This is therefore a subrogated
action and in truth a dispute between the plaintiffs’ insurers on the one hand
and the defendants’ insurers on the other, although this has no relevance in so
far as my ultimate decision on the facts and law is concerned. I must and do
treat this case as a claim by the plaintiffs personally against the defendants
personally and I must assess, upon the facts as I find them to be and upon the
law as I think it is, the sum of money which the plaintiffs are entitled to
recover from the defendants, putting out of my mind any question of the
respective insurances.
In brief, the
dispute between the parties can be put in this way. The plaintiffs first
contend that the proper measure of damages for the loss which they sustained as
the result of the destruction of the billiard hall by the fire was its
theoretical cost of reinstatement. They therefore contend that in addition to
the various smaller agreed items to which I have referred they are entitled to
recover from the defendants the sum of £28,956.95 as the cost of reinstatement,
and consequently to a total sum of £32,324.58 as originally pleaded in the
particulars of damage of these plaintiffs in paragraph 9 of the reamended
statement of claim. For their part, the defendants submit that upon the
evidence to which I shall shortly refer the plaintiffs never had any intention
of reinstating the billiard hall on their site. This site, so the defendants
contend, was one which in planning jargon was "ripe for development,"
and that consequently the proper measure of damage is not the estimated
theoretical cost of reinstating the premises after the fire, but the diminution
in the market value of those premises caused by the fire. The defendants’
argument continues that as this was at all material times a development site,
its market value was its value as such, and that this in truth was in no way affected
by the fire or by the damage due to it, save only in a sense favourable to the
plaintiffs in that instead of having to clear the site prior to development the
fire in effect did this for them. In these circumstances the defendants submit
that their only liability to the plaintiffs in this case is the aggregate of
the various agreed smaller items to which I have already referred.
In the course
of the trial Mr Otton on behalf of the plaintiffs sought and obtained leave to
reamend the statement of claim to allege in the alternative that if he were
wrong in his first submission that the proper measure of damages in law was the
reinstatement cost, and that the defendants were correct in contending that the
proper measure of damages was the difference between the pre- and post-fire
market values of the premises, then the value of his clients’ site before the
fire was £58,125 and that its value after the fire was a mere £22,588. The
diminution in value was then £35,537. However, in order properly to assess damages
on this basis, credit must be given for what it would have cost to clear the
site, an operation which the fire effected free for the plaintiffs. This cost
on the evidence he submitted would have amounted to about £3,000, but per
contra there should be added back the sum of £2,643.63 for the necessary
immediate repairs and security measures which had to be made and taken. In the
result, Mr Otton submitted that if Mr O’Brien’s submissions on the defendants’
behalf were correct in law, nevertheless on the evidence the plaintiffs were
entitled to £35,904.63, a sum rather greater than the damages to which they
contended they were entitled in the first instance.
I now turn to
the evidence which was adduced before me and to the findings of fact which I am
able to make upon it. The first witness called on behalf of the plaintiffs was
Mr Eric Dudley. He is a Fellow of the Royal Institution of Chartered Surveyors
and had practised in the Nuneaton and Coventry districts for the last 40 years.
He had practised for the last 22 years on his own account at premises at 1
Coton Road in Nuneaton. Mr Dudley, therefore, had substantial experience not
only as a chartered surveyor but also of the actual area of Nuneaton in which
the plaintiffs’ premises were. Indeed, as I have already indicated, he had been
in business as such on his own account at premises only some 70 yds or so from
the billiard hall and the adjoining shops for the last 22 years. Whatever view
one may take of other parts of Mr Dudley’s evidence, I have no doubt that his
history of the relevant area is to be accepted and indeed it was not seriously
disputed by the defendants or their witnesses.
The
plaintiffs’ billiard hall and shops were built in 1919. The billiard hall
remained in use as such until the outbreak of the last war in 1939. It was then
occupied by a hosiery firm, but they ceased to use it at the end of the war. It
then became a warehouse which was for some time assimilated with the occupation
of 12 Market Place, which it will be remembered was owned by the third
plaintiffs and let and occupied by the second plaintiffs at the time of the
fire as a supermarket. The use of the billiard hall as a warehouse with 12
Market Place ceased, however, some years before the fire. From time to time
thereafter it was used casually
which he wished to store for a period, but even this desultory use stopped and
the billiard hall remained vacant for about three years before the fire on October
26 1970. Originally the shops on the Coventry Street frontage were let and
occupied. Mr Dudley remembered 17 occupied as a camera shop and confirmed that
19 was occupied as a wool shop. However, 17 became vacant two years or
thereabouts before the fire; thereafter it remained empty except for short
temporary periods, for instance during elections. The other two shops, 21 and
23, had been a double unit for many years, but they, too, had been unoccupied
for some five or six years before the fire occurred. So much for the undisputed
part of Mr Dudley’s evidence.
The part of
his evidence which was disputed, however, was that despite the history which I
have outlined and despite the position of the plaintiffs’ site in or near to
the business and commercial centre of Nuneaton nevertheless the plaintiffs’
site was not one ripe for development. Mr Dudley preferred to value it both
before and after the fire on what I may call an investment basis. That is to
say, he postulated that at or about the time of the fire the billiard hall
could have been let as a warehouse and the three shops could have been let as
shops, each at rents which he calculated upon the basis of their respective
floor areas, and likely to produce, he told me in evidence, an aggregate rental
of £4,650 pa. In his opinion the plaintiffs’ premises were what he described as
somewhat "off pitch"–that is to say that they were not right in the
centre of Nuneaton and thus would not command the highest rents. In these
circumstances he took the view that an investor would be looking for an 8 per
cent yield and consequently, if one capitalised the postulated rents by taking
a 12 1/2 years’ purchase, he valued the plaintiffs’ premises immediately before
the fire at the sum of £58,125.
That in normal
circumstances such an approach to valuing premises is a usual one was not I
think disputed by any of the other expert witnesses who were called. On behalf
of the defendants, however, it was pointed out that although Mr Dudley was
prepared to value the premises in their pre-fire condition in this way, his
other evidence, which I have already outlined, made it quite clear that not
only had these premises not been so let at such rents over a substantial period
before the fire, but indeed there were other circumstances which demonstrated
that in the particular context of the instant case such an approach proceeded
upon a totally false basis. In cross-examination Mr Dudley told me that the
plaintiffs had bought the whole site in November 1963 for £30,000. There had
been no new letting of any of the shops while the premises had been in the
possession of the plaintiffs from then until they subsequently disposed of
them. Although he expressed the view that there would have been little
difficulty in letting or selling the premises on an investment basis if they
had been put on the open market, so far as he knew in fact the plaintiffs had
never taken this step. His attention was also drawn to the passage referring to
Mrs Neil’s continuance in occupation of her shop until development of the
premises took place, to which I have already referred, but Mr Dudley
nevertheless reiterated his view that this was not a site which was in reality
suitable for development: it possessed, he said, an investment value of the
amount I have mentioned–a value which was very seriously reduced as the result
of the damage caused by the fire. The arithmetic of his valuation of the site
after the fire I did not find entirely clear, but in the result I think that he
assessed its post-fire value at between £20,000 and £25,000.
Although I am
quite satisfied that Mr Dudley was doing all he could to assist the court, I
did not find his evidence particularly convincing or entirely consistent. He
told me that at any one time there is only one value for a property, depending
on all the circumstances obtaining at the material time. This I accept as a
hypothesis because I take "value" for present purposes to mean the
price that would be paid at that time by the reasonable willing purchaser to
the reasonable willing vendor, with each of them equally aware of all relevant
circumstances and their relative importance. If each is both reasonable and
willing, and each knows all that there is to know about the property, then hypothetically
they will agree upon its value as so defined. In real life and practice such
harmony may not be so easy to achieve. Be that as it may, however, and in any
event, one of the very important things to know about a property when one is
valuing it is its development potential, and indeed Mr Dudley agreed that there
were effectively two methods of or approaches to the valuation of a particular
property at any given time: first, as an investment on its letting potential;
secondly, as a redevelopment prospect. One can readily appreciate that these
two approaches to the problem at any one time might lead one to very different
answers. Now whatever one might have felt about the possibility of development
on the plaintiffs’ site in October 1970, I cannot accept that one should have
disregarded it entirely. Nor do I accept Mr Dudley’s evidence that at that time
there would have been no difficulty in letting the various parts of the site at
the figures he put forward, having regard to his own evidence of the previous
history of the premises and its constituent parts. On all the evidence I think
that it is quite clear that in valuing this site in October 1970 at least an
important consideration–if not the only consideration–was its development
potential. Pressed in cross-examination to express a view about the value of
the plaintiffs’ premises for development purposes at the time of the fire, Mr
Dudley somewhat tentatively gave a figure of £25,000. He was, however, not
minded to agree at the outset that the value of the site, viewed in this light,
was to all intents and purposes unaltered as a result of the fire; but I think
that as this was tested in cross-examination it became clear that Mr Dudley was
effectively reverting to his investment letting approach to these particular
valuations. In the end, however, whatever Mr Dudley may have said at other
stages in his evidence, I think that he was ultimately forced to agree what
seems to me to be commonsense, that if one were looking at the plaintiffs’ site
purely from the development point of view then it had much the same value
before and after the fire, and that such value was of the order of £25,000.
The next
witness who gave evidence was Mr Lewis, the chartered loss adjuster to whom I
have already referred. When he was cross-examined Mr Lewis told me that his
opinion was that in practical terms it would have been unwise to rebuild the
billiard hall after the fire, and indeed that it was obvious to him that it was
never going to be rebuilt. I think that when he was adjusting the plaintiffs’
loss under their policy it was quite clear to Mr Lewis that in due course the
plaintiffs’ premises were going to be redeveloped either by themselves or as
part of a larger redevelopment scheme.
The defendants
then called K Clews [FSVA]. He was and is the senior partner of a firm of
valuers and estate agents carrying on business at 47-49 Newdegate Street in the
centre of Nuneaton. He was directly concerned with the history of the
plaintiffs’ premises some years after the fire, and to his and other evidence
on this aspect of the case I shall return shortly. However, on the question of
the value of these premises immediately before and after the fire, I found Mr
Clews’ evidence also somewhat surprising. Immediately prior to the fire he said
that he thought that their value would have been much as had been spoken to by
Mr Dudley. He (Mr Clews) would have adopted the same method of calculation as
Mr Dudley, that is to say, to take 12 1/2 years’ purchase of its aggregate
rental potential. He might
would have reached a figure of the order of £58,000. On the day after the fire,
however, the value of the premises, with the billiard hall gutted, lay in their
development value and he would have advised a developer to have bid £40,000 for
them on that basis. As with Mr Dudley, however, Mr Clews gave no reason why
immediately before the fire he would have adopted what may be the normal
rule-of-thumb aggregate rental capitalisation approach after he had heard the
history of the premises from 1945 until the fire occurred in October 1970. I
think he would have been much more realistic to have adopted the same approach
both before and after the fire, namely to treat the premises as suitable only
for development.
The second
expert witness on the value of the plaintiffs’ premises at the time of the fire
called on behalf of the defendants was D W Stevens. He was and is a Fellow of
the Royal Institution of Chartered Surveyors and a partner since April 1964
with the firm of estate agents and surveyors in Nuneaton whom he joined as an
assistant in April 1963. He agreed that it was an accepted method of valuation
to make arithmetical calculations on the basis of so much per foot frontage or
so much per sq yd of superficial area in valuing premises as had Mr Dudley, but
only in appropriate cases. He pointed out, as I have already said, that in so
doing one is theoretically postulating a willing vendor and a willing
purchaser, and in his opinion when one was considering a particular site at a
particular time in particular circumstances which included potential
development, it might well be difficult to find a willing vendor or a willing
purchaser at any figure, or alternatively that although the vendor might be
willing to sell or the purchaser to buy at a particular figure the other might
be unwilling.
Mr Stevens
took the view that in 1970, prior to the fire, the only use to which the
billiard hall could have been put would have been general storage purposes and
that even for that it would have been difficult to find a tenant. He thought
that although the site was one which would ultimately have been developed, he
doubted whether this would have occurred for perhaps three to five years. When
that time came he would have put a value on the site of about £62,000, and this
he discounted at a rate of 8 per cent for about five years to produce a 1970
figure of just over £40,000. Mr Stevens’ opinion was that in 1970 before the
fire a vendor would probably have asked for something of the order of £50,000
to sell the relevant premises. Having regard to the very limited potential use
apart from development, he thought that a purchaser at that time would not have
been prepared to have gone much above £40,000. Nevertheless he felt that there
might have been room for negotiation between such vendor and purchaser between
these two figures. On the other hand it could well have been, he said, that if
one had simultaneously to postulate a willing vendor and a willing purchaser in
order to arrive at a value of this site in 1970 immediately before the fire,
there might not have been a sale at all, and the plaintiffs as potential
vendors would have had to have waited until the development price rose. Nevertheless,
Mr Stevens also said that he would have expected it to have been easier to have
disposed of the relevant premises in 1970 had there been no fire at all. I can
well imagine that although a potential developer is looking at a site with a
view to redevelopment, one with a burnt-out building upon it may not look quite
so attractive as one with standing buildings, even though the latter may in
themselves have little or no use. All in all, but subject to the caveats which
I have mentioned, I think that Mr Stevens’ view in the end was that if one was
seeking to evaluate any diminution in value of the plaintiffs’ premises as the
result of the fire, he would have assessed this at about £10,000, namely a
reduction from a value of £50,000 immediately before the fire to one of £40,000
immediately after the fire. I found Mr Stevens’ evidence in general more
realistic and acceptable on this part of the case than that of either Mr Dudley
or Mr Clews, although as will appear, I do not accept it in its entirety.
So much for
expert opinion on the value of the relevant premises in 1970 both before and
after the fire. In addition, however, there was other important evidence at the
trial both about what was happening in respect of these premises before and
also what did happen to them after the fire had occurred. Part of this evidence
was given by Mr Clews, to whom I have already referred. In addition I had put
before me an agreed selection of letters taken from the files of Peter
Bromwich, Horne & Co, to whom I have referred, who were at all material
times the plaintiffs’ agents. Suffice it to say that I think that it is quite
clear from the latter that prior to the fire on October 26 1970 neither the
plaintiffs nor their agents were contemplating any letting of their premises on
anything more than temporary bases but were looking to sell them, and indeed
were receiving tentative offers to purchase them for the purposes of
redevelopment. It is unnecessary for me to go through all the letters in
detail: it is enough for me to say that it is apparent from them that the sale
price the plaintiffs and their agents had in mind before the fire was of the
order of £40,000 to £42,000. A number of potential redevelopers were interested
in the plaintiffs’ site then and subsequently, and at one stage there were
plans on foot for the comprehensive redevelopment of the whole of the much
larger site which is outlined by a broken red line on the plan. As will be
seen, this larger site would have included not only the plaintiffs’ premises
but also the Congregational Church, and Mr Clews told me that while the various
negotiations were on foot offers for the congregational church on a
redevelopment basis of between £150,000 and £195,000 were being made. The whole
scheme ultimately came to nought, however, in I think late 1973 or early 1974
as the result of measures taken by the then Chancellor of the Exchequer.
Be that as it
may, in about 1972 the local agents for Lloyds Bank Ltd approached Mr Clews
with a view to buying the lease of his firm’s premises at 47-49 Newdegate
Street. At that time Lloyds Bank occupied the premises at 39 Newdegate Street,
on the east side of that street. At the same time Mr Clews was receiving
inquiries in respect of his premises from Debenhams, a branch of the well-known
stores group, who occupied 59 Newdegate Street. Mr Clews knew that the
plaintiffs’ premises were then still empty, and on the figures that were being
discussed between himself, Lloyds Bank Ltd and Debenhams he believed that if
his firm did sell their premises at 47-49 Newdegate Street they would have
sufficient capital to redevelop the plaintiffs’ premises as new offices and
also as offices for a particular building society for which they were agents.
To this end Mr Clews opened negotiations with the plaintiffs’ agents towards
the end of 1972. During the remainder of 1972 and through a large part of 1973
he also became involved in the scheme for the possible redevelopment of the
much larger site including the congregational church to which I have already referred.
Ultimately, however, Mr Clews and his partners formed a limited company known
as Lattern Developments Ltd and that company bought the plaintiffs’ premises
from them on November 26 1973 for the sum of £35,000. Mr Clews told me that he
would have been prepared to have gone to £40,000 or indeed £42,000, depending
upon how much free capital the disposal of the lease of his existing premises
generated. I think that it is clear that Mr Clews and his company obtained the
plaintiffs’ premises cheaply, largely because the principal shareholder in the
plaintiff company had died only a short while before; he had very many business
interests of which these premises in Nuneaton were by no means the largest, and
his executors were minded to dispose of the premises as soon as they could. I
have no
of their premises, whether Lattern Developments Ltd or any other, at this time
in 1973. Shortly after Lattern Developments Ltd had bought the plaintiffs’
premises, however, the negotiations between Mr Clews and Lloyds Bank Ltd for
the acquisition of the former’s then premises broke down. Mr Clews did not
obtain the free capital that he was expecting; he remained where he had been at
47-49 Newdegate Street and ultimately in his turn sold what had been the
plaintiffs’ premises to Lloyds Bank Ltd for their redevelopment in November
1975 for the sum of £72,500.
On all the
evidence, therefore, the conclusions to which I have come are as follows.
Immediately prior to the fire on October 26 1970 I do not think that anyone
could realistically or did indeed regard the plaintiffs’ premises as otherwise
than a potential redevelopment site. I am quite satisfied that the chance of
letting the premises in whole or in part, as distinct from redevelopment, was
minimal, save for isolated instances for short periods. I am satisfied that the
plaintiffs made no attempt to let any part of their premises for some years
before the fire. As I have said, I think that these premises and indeed the
plaintiff company itself, were in reality only a small part of the overall
business interests of their actual proprietors. For this reason, and also
because those concerned saw the development potential in the premises, I do not
think that any substantial effort was made even to sell them before the fire. I
think that the plaintiffs and their agents were content to await any offers
that came in, and if any seemed to be sufficiently attractive then to consider
and perhaps accept them. In my view Mr Stevens was being unnecessarily generous
to the plaintiffs in putting a value of £50,000 on their premises immediately
before the fire occurred. He did this on the basis that they had some
investment value for letting which, as I have already indicated, I do not think
was the fact. I am prepared to accept that the premises were rather more
valuable before the fire than they were after the fire, and I think that the
realistic and correct view to take is that the value of the plaintiffs’ premises
before the fire was £42,500 and that their value after the fire was £40,000.
For any proposing redeveloper who had bought the premises before the fire for
£42,500 I think that it would have cost £3,000 to clear the site to the
condition to which it had been cleared by the fire when the latter occurred.
Nevertheless, once the fire had occurred the sum of £2,643.63 had to be spent
to make the premises safe and to do necessary immediate works to what I have
called the "fringe" buildings. In the result, whereas the theoretical
cost of reinstating the plaintiffs’ premises after the fire is shown and agreed
to have been £28,956.95, I think that in so far as their then value to the
plaintiffs was concerned the fire on October 26 1970 only reduced this by £2,500.
What
principles of law, therefore, have to be applied to these findings of
fact? This is a case in which the issue
between the parties is the proper measure of damages to be paid by one to the
other for the damage caused to the latter’s premises by the legal fault of the
former. I have been referred to a number of cases concerned with the measure of
damages for torts affecting land, principally trespass. In some of them damages
have been assessed upon what has been said to be the prima facie measure
of damages, that is to say the amount of the diminution of the value of the
land. Examples of this type of case are Jones v Gooday (1841) 8 M
& W 146, Moss v Christchurch Rural District Council [1925] 2
KB 750, and Hole & Son (Sayers Common) Ltd v Harrisons
of Thurnscoe Ltd [1973] 1 Lloyd’s Rep 345.
The other, and
perhaps more recent, line of authority to which I have also been referred is
that in which the measure of damages has been held to be the actual cost of
reinstating the land and the buildings on it, whether or not any credit is
given for what is described as betterment. Examples of this type of case are Hollebone
v Midhurst and Fernhurst Builders Ltd [1968] 1 Lloyd’s Rep 38, and Harbutt’s
"Plasticine" Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB
447. It is true to say that the latter case was strictly one in contract, but
the nature of the damage and the circumstances in which it occurred were such
that in my opinion no real distinction can be drawn between it and those cases
in which the cause of action lies properly in tort.
In Salmond
on the Law of Torts, 16th ed, p 574, it was said that "when a trespass
has caused physical damage to the land, the measure of damages is the loss
thereby caused to the plaintiff, which in all ordinary cases is measured by the
resulting diminution in the value of the property. The measure of damages is
not the cost of reinstatement . . . a cost that greatly exceeds the actual
diminution in the value of the land. Thus if an old building is pulled down the
plaintiff cannot recover the cost of putting up a new one, but merely the value
of the old unless his house is unique."
Finally, in McGregor on Damages, 13th ed, in paragraphs 1059 to
1061 there are these passages:
It was for
long said that the normal measure of damages was the amount of the diminution
of the value of the land, a proposition based on what was generally considered
to be the leading, but somewhat ancient, case of Jones v Gooday,
where the alternative measure of cost of replacement or repair, ie the sum
which it would take to restore the land to its original state, was rejected.
However, as
was pointed out in the 12th edition of this work, not only is Jones v Gooday
the sole case where a plaintiff in possession and with full ownership was
refused the cost to him of replacement or repair of the damage done, but
Alderson B’s remark there suggests that the cost of replacement or repair may
be an inappropriate measure only because it is out of all proportion to the
injury to the plaintiff. That this is the true reason of the result in Jones
v Gooday is now supported by Hollebone v Midhurst and
Fernhurst Builders, a decision which has been adopted by the Court of
Appeal, in the context of a claim for breach of contract, in Harbutt’s
Plasticine v Wayne Tank and Pump Co. . . . The difficulty in
deciding between diminution in value and cost of reinstatement arises from the
fact that the plaintiff may want his property in the same state as before the
commission of the tort but the amount required to effect this may be substantially
greater than the amount by which the value of the property has been diminished.
The test which appears to be the appropriate one is the reasonableness of the
plaintiff’s desire to reinstate the property; this will be judged in part by
the advantages to him of reinstatement in relation to the extra cost to the
defendant in having to pay damages for reinstatement rather than damages
calculated by the diminution in the value of the land.
I think that
these passages which I have just read from McGregor on Damages correctly
reflect the state of the law. The various decided cases on each side of the
line to which my attention has been drawn, and to some of which I have referred
in this judgment, reflect in my opinion merely the application in them of two basic
principles of law to the facts of those various cases. These two basic
principles are, first, that whenever damages are to be awarded against a
tortfeasor or against a man who has broken a contract, then those damages shall
be such as will, so far as money can, put the plaintiff in the same position as
he would have been had the tort or breach of contract not occurred. But
secondly, the damages to be awarded are to be reasonable, reasonable that is as
between the plaintiff on the one hand and the defendant on the other. That
these are the underlying principles is I think quite clear, for instance, from
the judgments in Jones v Gooday, and in particular in the
judgment of Alderson B. In Moss v Christchurch Rural District Council
the plaintiff was the reversioner and could reasonably be and was put into the
same position in so far as money was concerned as he would have been had the
relevant tort not occurred by the award to him of the diminution in value of
his property caused by the fire which was the subject matter of that case. That
all these cases do really only reflect the
special facts can, if I may say so, be demonstrated by adopting the judgment of
O’Connor LJ in the Irish case of Hepenstall v County Council of
Wicklow [1921] 2 IR 165 from the bottom of p 174 onwards. Again in Hole
& Son (Sayers Common) Ltd v Harrisons of Thurnscoe Ltd
the facts were that before the relevant accident the plaintiffs had intended to
demolish the cottages which were extensively damaged by the lorry which ran
into them. At no time had they intended to repair them, but so soon as the
statutory tenancy in one of the cottages had been determined it had been their
intention to redevelop the site by building new and different premises upon it
in place of the cottages. On the facts of that case clearly the damage suffered
by the plaintiffs was only the cost of temporary repairs and any proved loss of
rent. To have awarded them the cost of reinstating the premises would have put
them in a better position than they would have been from a monetary point of
view had the collision by the lorry never occurred, and would in any event
clearly have been unreasonable as between the plaintiffs and the defendants.
On the other
hand, in Hollebone’s case the plaintiff was the freehold owner of the
damaged premises actually in occupation of them as his dwelling-house, and that
house was itself unique. The learned judge found as a fact that the diminution
in value due to the relevant fire was just under £15,000. Nevertheless in order
to repair the premises and so allow the plaintiff and his family to continue to
occupy their own home would have cost nearly £19,000. On these facts the
learned judge came to the conclusion that the proper application of the
relevant principles to which I have referred required him to award the larger
of the two sums. On the facts of that case such a sum was required to put that
particular plaintiff in the same position, so far as money could, as he would
have been had the tort not occurred and the award of that amount was not
unreasonable in all the circumstances as between the two parties. The learned
judge referred to the words of Viscount Dunedin in The Susquehanna
[1926] AC 655, namely that no rigid rule or rules that apply in all cases can
be laid down, but that one must consider all the relevant circumstances. He
referred also to the proposition of Lord Sumner in The Chekiang [1926]
AC 637 at p 643–"the measure of damages ought never to be governed by mere
rules of practice, nor can such rules override the principles of law on this
subject." Finally, the learned
judge quoted the observations of Denning LJ (as he then was) in Philips
v Ward [1956] 1 WLR 471 at p 473:
It all
depends on the circumstances of the case . . . the general rule is that the
injured person is to be fairly compensated for the damage he has sustained,
neither more nor less.
Lord Denning
then concluded his judgment in this way:
For the
reasons which I have endeavoured to set out, in my judgment the cost of repair
is the correct measure in the circumstances of this case as providing fair and
proper restitution for the damage sustained.
Similarly, in Harbutt’s
case merely to have awarded the plaintiffs the diminution in value of their
factory premises caused by the fire would not have been reasonable in so far as
they were concerned. Theirs were factory premises, they were in production and
it was only reasonable that they should get back into production and into full
production as soon as they could. It was found as a fact that they acted
reasonably in rebuilding the premises as they did; they sought to obtain
nothing effectively better or more valuable than they had had before the fire.
In these circumstances the court held that in order to put the plaintiffs into
the same position as they would have been had the fire not occurred it was in
truth necessary to award them the cost of rebuilding the damaged part of their
factory, although this was rebuilt differently from what had been there before,
and that such an award of damages was on the facts of that case reasonable as
between plaintiff and defendant.
Whereas the
statement in Halsbury’s Laws of England, 4th ed, vol 12, para 1168 that:
The prima
facie measure of damages for all torts affecting land is the diminution in
value to the plaintiff or, in the case of a plaintiff in possession with full
ownership, the cost of reasonable reinstatement
may well be
correct, this is not in my opinion really the statement of any legal principle,
it is merely the factual result in the majority of cases of the application of
the two basic rules to which I have referred to cases of torts affecting land.
Given appropriate facts, there may well be exceptions.
What then is
the result of applying the basic principles to the facts of the present case as
I have found them, bearing in mind of course the assistance that I can and do
obtain from the earlier cases, but remembering that they were decisions on
their own particular facts?
First, it is
irrelevant for my decision that the plaintiffs have been paid over £28,000 by
their own insurers as the theoretical cost of reinstating their premises after
the fire on October 26 1970. They were no doubt entitled to this pursuant to
the contract which they had made with their insurers. That they had made that
contract and that it had that result is of no relevance in so far as the
present claim is concerned. There is no doubt that in the present case at the
time of the fire the plaintiffs were the freeholders in possession of their
premises, with the minor exception of shop 19 which cannot affect the overall
position. I have found as a fact that the plaintiffs’ premises immediately
before the fire occurred were not worth something of the order of £58,000 as deposed
to by Mr Dudley. As I have indicated, I think that the value of the plaintiffs’
premises at that time was £42,500. After the fire I think that the value of the
premises was £40,000, and that accordingly the diminution in value caused by
the fire was £2,500. Are the plaintiffs entitled only to this figure or are
they entitled to the notional cost of restoring the billiard hall to its
pre-fire condition? I think that they
are entitled merely to the former. To award the plaintiffs the cost of
reinstatement, theoretical or not, if it is intended thereby to put them in the
same position as they would have been had the fire not occurred, in so far as
money can, and also be reasonable as between themselves and the defendants, one
must at least be able to contemplate the possibility, if not probability, that
the plaintiffs were indeed minded to rebuild their billiard hall and shops. For
the reasons which I have indicated, had the defendants gone to the plaintiffs
the day after the fire and offered to reinstate the premises themselves at
their own cost for the plaintiffs, the latter would, I think, have immediately
told them to do no such thing. They would have said that it would only be a
waste of money, because not only had the premises not been occupied for some
years before but also they had no intention of occupying themselves or letting
them for occupation to others: they were merely holding on to the premises in
only one particular sense as an investment, that is to say an investment which
might over the years show capital appreciation by way of increase in
development value. That development value lay in the site itself, not in the
buildings, whole or destroyed, which had previously been erected upon it. In
these circumstances, it would in my opinion not only be totally unrealistic but
also unreasonable as between the plaintiffs and the defendants to award the
former the notional cost of reinstating the premises. To do so would be to put
them in a far better position, from the point of view of money, than they were
immediately before the fire occurred. Whereas in another case in the same field
of law it might be irrelevant to consider any special purpose to which an owner
of premises had intended to put them immediately prior to a fire which gutted
them, nevertheless
it is both relevant and reasonable to consider of what nature were the premises
alleged to have been damaged. The premises in the present case comprised a site
the building on which it was intended in the fullness of time would be razed to
the ground by developers’ bulldozers for the purposes of redevelopment without
any investment letting, in Mr Dudley’s meaning of that phrase in the meantime.
Prima facie, therefore, the plaintiffs would have been entitled to the sum of
£2,500 as the diminution in value of their property as damages for the injury
to those premises by the fire. However, as I have already indicated, the
evidence clearly is that it would have cost the plaintiffs at least this amount
to clear the site for development purposes to the extent that it was cleared by
the fire. In respect of this head of damage, therefore, I do not think that the
plaintiffs are entitled to recover anything from the defendants. They are,
however, entitled to recover the cost of the immediately necessary remedial and
safety work namely £2,643.63. In addition they are entitled to the agreed
figure of £74 for damage to trade fixtures and fittings, and to the further
agreed sum of £650 in respect of the cost of the removal of debris.
I therefore
think that the first plaintiffs in this case are entitled to judgment against
the defendants for the total sum of £3,367.63. As I have already indicated, the
second plaintiffs are by agreement entitled to judgment against the defendants
for £16,809; the third plaintiffs to judgment against the defendants for
£4,885; and the fourth plaintiffs to judgment against the defendants for the
sum of £385.
Finally, when
this case was first opened to me, I was told that there might be an issue
between the parties about the recovery of interest by the various plaintiffs
and how this should be apportioned between themselves and their respective
insurers. During the trial, however, no doubt after consideration of the Court
of Appeal in the case of H Cousins & Co Ltd v D & C Carriers
Ltd [1971] 2 QB 230, I was told that any potential disagreement between the
parties on this issue had been resolved and I shall no doubt now be asked to
make orders for the payment of interest by the defendants to the various
plaintiffs upon a basis which has been agreed.
Judgment was given accordingly for the amounts
mentioned above, together with interest at 9 per cent per annum for four years.
The second, third and fourth plaintiffs were awarded their costs of the action;
the first plaintiffs were awarded four-fifths of their costs.
