Vendor and purchaser — Action by purchaser for breach of condition in contract of sale — Appeal from decision of Mann J holding that the plaintiff purchaser (present appellant) had not proved that he had suffered more than nominal damages and awarding the sum of £5 — Defendant (present
The following
cases are referred to in this report.
James v Hutton and Cook [1950] KB 9; [1949] 2 All ER 243, CA
Radford v De Froberville [1977] 1 WLR 1262; [1978] 1 All ER 33;
(1977) 35 P&CR 316
Wigsell v School for Indigent Blind (1882) QBD 357
This was an
appeal by the plaintiff, Alan Dean, from a judgment of Mann J awarding the
plaintiff nominal damages of £5 only, with no order for costs, in the
plaintiff’s action against the defendant, Mrs Mary Ainley, for damages for
breach of a condition in the contract for sale to the plaintiff of a house know
as The Hoploft, at Eardiston, Tenbury Wells, Worcestershire.
Patrick
McCahill (instructed by Gateley Wareing & Co, of Birmingham) appeared on
behalf of the appellant; Frederick Philpott (instructed by Dean Jordan &
Co, of Worksop) represented the respondent.
Giving the
first judgment at the invitation of Kerr LJ, GLIDEWELL LJ said: This is an
appeal against a judgment of Mann J, given on January 28 1987 at Birmingham. In
the plaintiff’s action for damages for breach of condition contained in a
contract for the sale by the defendant to the plaintiff of a house, the learned
judge held that the defendant was in breach of the condition but that the
plaintiff had not proved that he had suffered more than nominal damage as a
result of the breach. Accordingly the judge gave judgment for the plaintiff for
the sum of £5 and made no order as to the costs. The plaintiff now appeals
against that decision. There is no cross-appeal by the defendant against the
judge’s findings that she was in breach of contract.
The house in
question is The Hoploft, Eardiston, Tenbury Wells, Worcestershire. It is the
central part of a large building, originally constructed in the 18th century,
which has been converted into three dwelling-houses. It stands on the side of a
hill. The front of the house faces south. Behind, ie to the north of the house,
at the same level as the ground floor, is a windowless vault, referred to
throughout the proceedings as ‘the cellar’. It lies east-west across the whole
rear elevation of the house, built of brick with a barrel vaulted roof, some 74
ft long by 10 ft wide and about 8 ft in height at the crown of the arch. The
southerly wall of the cellar is separated from the northerly wall of the house
by a short distance. There is a door in the east end of the cellar which gives
access from the house.
At some time
in the past the area to the north of the ground floor of the house was filled
with material, which thus wholly encloses the cellar. On top of this fill there
is a terrace or patio at the same level as the first floor of the house. This
extends outwards for some 25 ft or so, and at its northern edge the ground
rises again. The main entrance door to the house leads from the patio.
Approximately the southerly half of the patio lies above the cellar. The patio
is divided into two parts by a low wall. The smaller, easterly part was at all
material times covered with quarry tiles over which a layer of asphalt had been
laid. The western part of the patio was constructed of rectangular flagstones.
There are two drain gullies to take surface water run-off from the patio, and
the judge found that the falls to the gullies were properly laid. It is
obvious, however, that water could seep through the joints between the
flagstones.
In 1982 the
defendant, Mrs Ainley, owned The Hoploft and lived there with her late husband,
who had until his retirement been a director of a major civil engineering
company. The plaintiff, Mr Dean, became interested in buying the property. On
visits to the property he saw several indications of defects, including buckets
in the cellar placed to catch water percolating through the brickwork. He
instructed a consulting engineer, who advised him that the water was
penetrating the brickwork both vertically (ie from the terrace above) and laterally
(ie from the fill material to the north of the cellar). According to Mr Dean,
Mr Ainley said that he would have the problem of water penetrating the cellar
remedied. Later, in the early part of 1983, Mr Ainley told Mr Dean that over
the western part of the patio the flagstones had been lifted, a plastic
membrane and an asphalt layer laid on a concrete base and the flagstones
relaid.
Nevertheless,
the plaintiff required a specific term in the contract of sale of the house
obliging the defendant to rectify three defects, of which the water penetrating
the cellar was the third. Special condition G provided, so far as is material:
The vendor
will at her own expense prior to completion hereunder complete to the
reasonable satisfaction of the Purchaser or his surveyor the following works:
. . .
(c) Prevention of leaking of water from the patio
into the premises beneath.
Before the
contract was exchanged, Mrs Ainley’s solicitor wrote to Mr Dean’s solicitors on
February 1 1983 a letter in which he said:
As to the
works to the property listed in Special Condition G of the enclosed draft, my
client informs me that all these works have now been carried out but I have
included them in the draft contract so as to reflect the terms agreed between
our respective clients.
This confirmed
what Mr Ainley had told Mr Dean. Parts of the contract were exchanged on March
17 1983.
In reliance on
those assurances, Mr Dean completed the puchase of The Hoploft, which was
conveyed to him by Mrs Ainley on April 23 1983.
In the autumn
of 1983 it became apparent that water was again penetrating into the cellar
through the brickwork. On investigation it became clear that, though there was
asphalting and a plastic membrane covering some of the western part of the
patio, over much of that part no work to prevent water leaking from the patio
into the cellar had been carried out. Why Mr Ainley told Mr Dean the work had
been done will remain unknown because, sadly, Mr Ainley died before the matter
was investigated. Clearly, as the judge found, Mrs Ainley was in breach of
condition G of the contract of sale. Specific performance of the condition was
not possible, because by the time the breach was discovered the property had
been conveyed to Mr Dean, who had been in occupation for some months.
The questions
therefore arose, what damage did Mr Dean suffer as a result of the breach of
contract and to what sum was he entitled by way of damages?
The writ in
this action was issued on July 1 1985. The statement of claim originally served
pleaded condition G, alleged breach and claimed as damages the ‘estimated cost
of works necessary to prevent leaking of water from patio to cellar’ at not
less than £10,000. However, the chartered surveyor engaged by Mr Dean, Mr David
Gould, advised that if works of the nature of those described
water would no longer be able to enter the cellar vertically, water would still
be able to penetrate horizontally through the surrounding ground. Accordingly
Mr Gould suggested that the best solution would be to construct a waterproof
envelope around the cellar, either outside or inside the brickwork, which would
keep out all water. In the end his preferred solution was internal ‘tanking’, a
view with which Mr Andrew Shepherd RIBA, who gave evidence for Mrs Ainley,
concurred.
On May 1 1986
the statement of claim was amended. After amendment, the particulars of special
damage read:
The only
remedial measure which can be carried out has to be designed on the principle
that the whole of the cellar is to be enclosed in a waterproof envelope, either
externally or internally or a combination of both. Estimated cost (as at
October 1984) £11,152.70p inclusive of VAT.
At the trial,
at which both Mr Gould and Mr Shepherd gave evidence, they agreed that it would
not be sensible to seal or waterproof the patio, and that the proper solution
to the problem of water penetration into the cellar was internal tanking.
The witnesses
differed, however, as to the respective proportions of horizontal and vertical
water penetration. Mr Gould’s opinion was that 60%-70% of the water penetrated
vertically (and thus would be prevented by sealing the patio). Mr Shepherd’s
view was that only 30% was vertical penetration and 70% lateral penetration by
ground water. The judge was not satisfied that Mr Gould’s opinion in this
respect was correct. He found ‘the percentage contribution of ground water
moving laterally’ to be higher than 30% of the total.
On the
question, ‘What damage has the plaintiff proved he has suffered?’ the judge
said:
The onus of
proving that he has sustained more than nominal damage in consequence of the
breach of contract rests upon the plaintiff.
I ask what
damage has the plaintiff shown that he has suffered by reason of the
defendant’s failure to prevent penetration from the patio? I am not satisfied that on the balance of
probabilities he has shown any damage. Not one word has been heard as to the
extent to which the tunnel would have been usable for any purpose had the patio
been sealed.
All I do know
is that all the experts agree that sealing would not have been an answer to the
problem of the tunnel. To say 30 per cent only of intrusion is due to ground
water movement tells me nothing, in that intrusion was not quantified. It could
still be unusable for any purpose desired by the plaintiff.
The finding
that the proportion was greater than 30% then followed.
The learned
judge did not in his judgment refer to any authorities, but counsel referred us
to three. The first was the decision of this court in James v Hutton
and J Cook & Sons Ltd [1950] 1 KB 9.
In that case
the lessee of a shop had been permitted by the lessor to erect a new shop front
but covenanted to restore the shop to its previous state at the termination of
his lease. He failed to remove the new shop front and restore the building to
its original condition. In an action for damages for breach of the covenant,
the trial judge found that the lessor would not restore the shop to its former
condition and there was no likelihood that it ever would be so restored. There
was no evidence that the old shop front was preferable, nor that its
restoration would enhance the value of the building. As Lord Goddard CJ, giving
the judgment of the court, said at p 15 ‘. . . if the plaintiff obtains this
sum as damages she will be enabled to put it into her pocket’.
At p 16 his
lordship said:
In our
opinion, the general rule as to damages for breach of contract ought to be
applied, namely, to ascertain what is the amount of the damage actually
suffered. A covenant is only a special form of contract and the same rules
apply to a breach of covenant as apply to a breach of a simple contract so far
as damages are concerned.
To apply the
rule as to the measure of damage for a breach of contract to deliver up a house
in repair to this case is, in our opinion, wrong for there is no true analogy
between the two cases. If a tenant fails to deliver up a house in repair, the
landlord must suffer some damage, at least so long as the house remains in
existence.
Instead of
getting a house in a perfect state of repair he gets one which is dilapidated.
It is true that he may be able to let the dilapidated house for the same or
even a higher rent than he was hither to getting, but that may be due to market
conditions and more especially to the demand for a certain class of premises. A
dilapidated house must be worth less than a house in a proper state of repair.
Presumably, if the house is sold, if in good repair, it would fetch more than a
house which is out of repair. If a house can be let in good repair, it would
ordinarily fetch a higher rent than one that is out of repair. Damage is
therefore suffered. The measure of damage to be applied was laid down in Joyner
v Weeks. In that case the Divisional Court had applied the same rule as
is applicable to a case where the lessee has failed to keep the house in repair
during the term and ordered the damages to be assessed according to the injury
done to the reversion. The Court of Appeal held that in these cases there was a
well-defined rule which had become a rule of law that, on a failure to deliver
up a house in good repair, the damage was the cost of the work necessary to put
it into repair. Lord Esher MR, in giving the judgment referred to the large
number of cases in which this rule had been adopted, and said that such an
inveterate practice amounted to a rule of law. He said it was a highly
convenient rule, avoiding all the subtle refinements with which the court had
been indulged and the extensive and costly inquiries which they would involve.
It was a simple and business-like rule, and he was very much inclined to think
it was an absolute rule.
But, as we
have already said, that case must be regarded as proceeding on the footing that
the plaintiff must have suffered damage by the tenant yielding up the house out
of repair. We see no ground here for assuming that the plaintiff in this case
has suffered any damage at all.
The court
therefore decided that the plaintiff was entitled only to nominal damages.
To the same
effect was the earlier decision of the Divisional Court in Wigsell v School
for Indigent Blind (1882) 8 QBD 357. In that case the defendants had
purchased a plot of land on which they intended to build a school for the
blind, and covenanted to erect a wall between the plot and the adjoining land
retained by the vendor. They built neither school nor wall. The vendor sued for
damages for breach of the covenant, rather than for specific performance. He
claimed as damages the costs of erecting the wall himself, but was held
entitled only to a sum equal to the diminution in value of his land as the
result of the breach, which was less than the cost of the wall.
The facts of
the third case, Radford v De Froberville [1977] 1 WLR 1262, a decision
of Oliver J as he then was, were similar, but the result was different. The
plaintiff sold part of the garden of his house with planning permission for the
erection of another house. The purchaser covenanted to erect a wall to separate
the two plots. Neither the new house nor the wall was built. In an action for
damages, the question was whether the proper measure was the diminution in the
value of the plaintiff’s house as a result of the failure to build the wall or
the cost of erecting the wall. Having considered earlier authorities, in
particular Wigsell v School for Indigent Blind, Oliver J held
that Mr Radford genuinely intended to build a wall on his own land to divide
the two plots. For this reason, he decided, the proper measure of damages was
the cost of the work.
On the
difference between the decisions in Wigsell and Radford, the
learned author of McGregor on Damages (14th ed) at para 753 comments:
That contrary
results were reached in these two cases is not to be attributed in any way to the
separation of a century but stems from two points of difference between them
which are themselves related. In the earlier case, the plaintiffs could have
claimed, but chose not to claim, specific performance, and it seems to have
been accepted on all sides that they had no intention themselves of building
the wall, it being no longer really required as the asylum project had been
abandoned. In the later case, a claim for specific performance would have been
futile as the property sold had been resold to a third party against whom the
covenant, being of a positive nature, was unenforceable, and the court was
convinced that the plaintiff had every intention of building the wall, and
expending any damages awarded in doing so. Of these two differences it is clearly
the second which is the key one — there can be no justification in awarding
damages to do something which is not going to be done — but the existence of
the first difference, which is capable of objective proof, gives some
assistance in establishing whether the second difference, of a more subjective
nature, is also present. For the failure to claim specific performance where it
is not likely to be barred, whether by the intervention of a third party or for
some other reason, may indicate a certain disinterest in the performance of the
covenant.
James v Hutton and Cook is not directly in point in the present
case, though the passage I have quoted from the judgment of Lord Goddard can be
applied by analogy. The other two decisions are not binding upon us, but in my
view the approach adopted by Oliver J in Radford v De Froberville
was correct. I thus conclude that if the plaintiff in the present case can
show:
(i) that he has suffered some damage as a result
of the defendant’s breach of covenant; and
(ii) that, if he is awarded substantial damages,
he intends to use the money to pay for the work which was required by the
covenant, then the proper measure of damages is the cost of that work.
The judge held
that he was not satisfied that Mr Dean had suffered any damage. In reaching
this conclusion, I believe that he adopted an argument which Mr Philpott
advanced before us, namely, that what
prevention of water leaking from the patio would not make the cellar completely
dry, and thus the plaintiff had suffered no damage. In my view this argument is
fallacious, and with respect to the judge he fell into error in adopting it,
perhaps misled by the amendment of the statement of claim and the rejection by
the expert witnesses of ‘waterproofing’ the patio as a suitable solution.
The covenant
required the vendor to carry out work to prevent water leaking from the patio
into the cellar. The evidence established, and the judge accepted, that if this
work had been done, a substantial proportion — something less then 70% — of the
total penetration of water would have been prevented. In my judgment the
plaintiff has suffered damage as a result of the defendant failing to carry out
this work.
Has Mr Dean
proved that he genuinely intends to carry out the work required by the
covenant? During the course of giving
evidence, he gave a firm undertaking that if damages were awarded to him, he
would carry out the work of tanking the cellar internally. It is clear that
tanking the cellar would be works which would prevent water leaking from the
patio into the cellar, in accordance with the covenant. Thus in my view the
plaintiff did satisfy the conditions which entitled him to claim as damages the
cost of carrying out work in compliance with the covenant.
There remains,
however, a question as to the amount of damages. While, as I have said, tanking
the cellar internally would prevent water leaking from the patio into the
cellar, the work of waterproofing the patio itself would also achieve that
objective. The evidence suggests that the latter would be less expensive than
the former. Thus on general principle the plaintiff is entitled only to damages
equal to the cost of the less expensive solution.
The judge expressly
accepted the evidence called for the plaintiff as to the cost of internal
tanking, namely £10,580. Unfortunately, he made no finding as to the cost of
work to the patio itself. For this work, Mr Gould gave in evidence estimates
(not based on a contractor’s quotation) which varied between £7,525 (in total)
and £8,750. The evidence for the defendant on this came from Mr Heywood, a
structural engineer, who had inspected The Hoploft only a short time before he
gave evidence. His figure was £3,960 plus VAT, which totals £4,554.
Neither party
wishes us to send this issue back for decision by the judge or a master. Doing
the best I can on the material before us, I would assess the cost of the works
necessary to waterproof the patio at £7,500.
For the reasons
I have given, I would therefore allow the appeal and substitute an award of
£7,500 damages.
Concurring,
KERR LJ said: I agree that this appeal should be allowed and with the order
proposed by Glidewell LJ, but in some respects for slightly different reasons.
The judge
clearly took the view that the plaintiff was not entitled to substantial
damages because the performance of the defendant’s contractual obligation would
have reduced the total percolation of water into the cellar only by about 30%.
There had been evidence that the plaintiff had intended to use the cellar as a
miniature rifle range or as a games room, and the judge appears to have
concluded that this measure of relief from dampness, puddles or worse would
still not have enabled the cellar to be suitable for any such purposes. But
that does not entail the conclusion that the plaintiff is entitled only to
nominal damages on the ground that he has effectively suffered no damage at
all. Performance of the contractual obligation to render the patio watertight
by sealing it off from the cellar would have made the cellar substantially less
wet or damp, and to that extent a better and more usable space than if water
continued to percolate from the patio vertically as well as from the
surrounding earth laterally. The position might well have been different if the
defendant had shown that performance of the contractual obligation would have
served no purpose at all, because the cellar would have been unusable for any
purpose at any time in any event. But this was not suggested and would have
been unarguable, since the evidence showed that the cellar had in fact been
used by the defendant for some purposes, despite water percolation from the
patio as well as the sides.
These are my
reasons for concluding that the appeal must be allowed. But I should like to
add some brief comments on two other aspects which were raised in the course of
the argument.
The first
concerns the measure of the damages recoverable by the plaintiff. The evidence
showed that (a) sealing the patio would have cost less than internal ‘tanking’,
but (b) the sensible course, in all the circumstances, was nevertheless to
adopt the latter alternative, because this would have solved the problem
entirely, whereas the former alternative would (on the judge’s findings) only
have effected an improvement of the order of 30%. But in my view these
considerations are irrelevant to the measure of damages to which the plaintiff
is entitled. The defendant did not undertake to make the cellar waterproof but
merely to seal it off from the patio. The fact that the latter operation would
have achieved much less than the former is on any view irrelevant to this
extent: in no event could the plaintiff recover more than the cost of sealing
the patio, since this is all that the defendant had undertaken to do. That is
my view of the construction of special condition G(c) in the circumstances of
this case. I therefore do not think that in this case it is necessary to resort
to the principle that the damages must reflect the solution which is most
favourable to the defendant.
The position
would, in my view, only have been different if the cost of sealing the patio
had been greater than that of ‘tanking’ the cellar. Since the latter would have
been a much more effective way of improving the cellar, which was the sole
object of the defendant’s contractual obligation in question, then the
plaintiff’s entitlement to damages would have been limited to the lower cost of
‘tanking’. The reason is that he would then have been bound to mitigate his
loss by adopting this cheaper and more effective alternative in order to
achieve the objective which the broken contractual obligation had been designed
to achieve. In that event he could not have insisted, unreasonably and indeed
capriciously, on the more expensive and less effective alternative of sealing
the patio.
The second
aspect concerns the authorities and the undertaking given by the plaintiff in
this case to which Glidewell LJ has referred. In my view the test which
distinguishes cases such as Wigsell v School for Indigent Blind
(1882) 8 QBD 357 and James v Hutton and Cook [1950] 1 KB 9 on the
one hand from Radford v De Froberville [1977] 1 WLR 1262 on the
other is merely the question whether or not the plaintiff can show some economic
loss as the result of the defendant’s breach, ie a real loss which is properly
to be assessed in terms of money and which therefore justifies an award of
substantial, as opposed to merely nominal, damages. This was not the position
in the earlier of these two cases, but it was the reality in the latter.
The present
case falls clearly into the latter category, because the defendant’s failure to
improve the relative dryness of the cellar by his failure to seal the patio
involved a real economic loss to the plaintiff. The cellar was at all times a
usable part of the plaintiff’s property, and the degree of its usefulness
depended on what was done and expended to improve its dryness. In my view, that
is all that the plaintiff needed to establish — as he has — to entitle him to
substantial damages, albeit limited to the extent discussed above. I do not
accept that he has to go further by anything in the nature of an undertaking
that he will in fact use any damages which he may recover in order to improve the
cellar. Thus, my recollection is that we expressly released the plaintiff from
an undertaking to this effect which he had given voluntarily at the trial, and
that on appeal we merely said that we would take into account, so far as
relevant, the plaintiff’s proffered expression of his sincere intention to use
in this way any damages which he might recover. In my view, however, even that
was unnecessary. It would have made no difference if he had said that he
intended to sell the property or that it was uncertain whether he would do so
or not. Nor would it make any difference if, having recovered £7,500 upon this
appeal, he were now to change his mind and decide — for whatever reason — not
to spend anything on the improvement of the cellar. In my view, all these
matters are irrelevant in the case such as the present, because the plaintiff
has established a real economic loss by reason of the fact that the cellar of
his property is substantially wetter, and therefore less usable or useful, than
it would have been if the defendant had performed the contract. To that extent
the plaintiff’s property is clearly less valuable so as to entitle him to
damages (in this case properly assessable at £7,500 on the best that we can do
with the evidence) whether he intends to use the cellar as it is, or to sell
the property with the cellar as it is, or to spend the damages on improving it.
Also agreeing
that the appeal should be allowed. SIR GEORGE WALLER said: The evidence set out
in the judgment of Glidewell LJ shows that if entry of water from the patio had
been prevented the cellar would have been less damp to the extent of at least
30% than in fact it was. The fact that it would still have been damp does not
mean
more damp than it would have been if the contract had been carried out. I agree
with my lords that the learned judge was in error in finding that the damage
was only nominal.
I agree with
Glidewell LJ that the plaintiff is entitled only to the less expensive solution
and that this is represented by the figure of £7,500.
The appeal
was allowed with costs in Court of Appeal and below; leave to appeal to House
of Lords was refused.
