Owner of nursing home engaging architect to design extension – Architect making mistakes in design – Extension made shorter and narrower – Discovery of defects – Architect claiming fees – Owner counterclaiming for loss of profit – Judge finding remedial work possible to make good defects – Judge awarding damages for loss of profit — Court of Appeal dismissing appeals
The defendant owned a property which was used as a nursing home. In 1990 she engaged the plaintiff and a contractor to build an extension. The plaintiff made mistakes in the design of the extension and as a result it had to be shortened and made narrower. However a registration certificate for 30 residents was granted. Subsequently it was discovered that there were defects with the stairs in breach of building regulations. The plaintiff sued for unpaid fees and the defendant counterclaim for damages for breach of contract. The defendant claimed that the staircase could be remedied without the demolition of the extension and although that required a successful application for the relaxation of building regulations, the appropriate permission would be forthcoming.
The judge found that the deficiencies could be made good by remedial work rather than by demolition and awarded £500,000 by way of damages for loss of profits. The loss of profits were calculated on the basis of a report by the defendant’s expert witness who, in essence, had calculated the profit, which would have been earned if the work had been properly done, by assuming a 95% occupancy of 30 beds less notional costs and expenses and then subtracting the profits actually made which, due to the defendant’s inadequate records, were calculated as 95% of the number of the established occupants less costs and expenses. A 10-year multiplier was applied to the notional lost income to calculate future losses.
After the judgment the defendant emptied the home. The existing registration was surrendered and as a result of new and higher standards, a fresh registration would have been limited to 19-bed spaces. The defendant applied a year after judgment for approval of the plans in relation to the staircase, but the application was rejected by the building control authorities. The plaintiff appealed against the award of damages on the basis that the calculation of lost revenue on which the award had been based was in practice invalidated by a number of imponderables and assumptions based on inadequate evidence. The defendant cross-appealed and sought to have damages reassessed on the basis of the complete demolition of the extension.
Held The plaintiff’s appeal and the defendant’s cross-appeal were dismissed.
1. The application for leave to adduce further evidence of events after judgment was refused and therefore the defendant’s cross-appeal could not succeed. The passage of time, the closing of the home and the defendant’s delay in making an application to the building control authorities had resulted in a situation which was unconnected with the liability established by the defendant against the plaintiff.
2. The judge had been at liberty to base the award of damages upon the report and evidence of the defendant’s expert witness. The judge had adequately considered and made such adjustments as were necessary in the light of the factual evidence which invalidated, or called for substantial adjustment in, the assumptions made by the expert witness.
William Crowther QC and Gavin Hamilton (instructed by Alastair Thomson & Partners) appeared for the plaintiff; Hilary Heilron QC and Louis Browne (instructed by J Keith Park & Co, of St Helens) appeared for the first defendant, Mrs Beryl Wylie; Benet Hytner QC and Andrew Loveridge (instructed by Christopher Thomas & Co, of Birkenhead) appeared for the second defendant, DJ Cartwright & Sons.
