Damages — Breach of contract — Loss — Delay in completion of refurbishment — Whether claimant entitled to damages for holding costs incurred following delay — Whether credit to be given for increase in property values — Claim allowed
The claimant, a company incorporated for the specific purpose of developing a row of Georgian houses, engaged the defendant as its architect and the Part 20 defendant as its contractor. The project was funded by a construction credit agreement (CCA). The completion of the works was delayed owing to alleged negligence on the part of the defendant, and the claimant sought damages for breach of contract and duty.
The defendant joined with the contractor as a Part 20 defendant on the basis that, if the claimant were to win the case, the facts relied upon would amount to breaches by the contractor of its contractual and common law duties to the claimant. The defendant claimed an indemnity for, or a contribution towards, its liability to the claimant, since the contractor’s liability would be the same as that of the defendant.
The court was asked to determine whether: (i) the claimant could recover damages for costs incurred as a result of funds being held in the project under the CCA during the period of delay; and (ii) whether the claimant was obliged to give credit for the increased price for which it was able to sell the houses following the delay.
Held: The claim was allowed.
Any direct and foreseeable loss caused by the delayed completion was recoverable. The mere fact that the development had been delayed was not sufficient, because it was possible, if unlikely, that the developer had not incurred any loss even though the houses had been completed behind schedule: John Harris Partnership (a firm) v Groveworld Ltd (1999) CILL 1485, Heskell v Continental Express Ltd [1950] 1 All ER 1033, Liesbosch v Edison [1933] AC 449 and British Columbia and Vancouver’s Island Spar Lumber and Saw Mill Co Ltd v Nettleship (1868) LR 3 CP 499 applied. Alfred McAlpine Construction Ltd v Panatown Ltd (1998) 58 ConLR 46 and Ministry of Defence v Blue Circle Industries plc [1999] Ch 289 considered.
Any increase in the sale prices of the houses need not be taken into account in assessing the claimant’s recoverable damages, nor need the increase be reflected in a reduced award of damages. On the assumed facts, the sale of the houses and the consequences of that sale were not directly connected to the alleged negligent design and supervision, nor did they arise out of any breach of contract or duty. Any downturn in the market would be too remote and hence irrecoverable, and would fall outside the scope of the defendant’s duty of care. Thus, there was no potential for asymmetry whereby such a loss would have been irrecoverable from the defendant if the market had fallen, although a corresponding profit for the claimant would have had to have been taken into account if the market had risen: Jamal v Moolla Dawood, Sons & Co [1916] 1 AC 175 applied; Hussey v Eels [1990] 2 QB 227 and Hodgson v Trapp [1989] 1 AC 807 considered; Ministry of Defence v Blue Circle Industries plc [1999] Ch 289 distinguished.
Vivian Ramsey QC and Alexander Nissen (instructed by Simmons & Simmons) appeared for the claimant; Roger Stewart QC and Graeme McPherson (instructed by Kennedys) appeared for the defendant; John Marrin QC (instructed by Masons) appeared for the Part 20 defendant.
Eileen O’Grady, barrister
