Breach of contract – Damages – Remoteness – Respondent obtaining planning permission for residential development – Respondent engaging appellant as engineering consultant – Appellant failing to meet deadline for carrying out work – Respondent engaging new consultant – Appellant suing for balance of fees – Respondent counterclaiming for loss caused by fall in value of development due to delay – Whether judge erring in law in finding losses due to fall in housing market not too remote to give rise to liability for damages – Appeal dismissed
The appellant was a company providing consulting engineering and geological services. The respondent was a farmer who obtained planning permission for the development of a field which he owned adjacent to an A class road. The permission was for a residential development to provide a mix of open-market dwellings, “affordable” dwellings and a road to serve those dwellings. The road was to be adopted upon its completion by the highway authority under section 38 of the Highways Act 1980 and maintained at public expense which required the county council’s agreement.
The respondent engaged the appellant to design the road and drainage for the site and to obtain section 38 approval. There was initially an oral agreement between the respondent and a director of the appellant, with a fee payable of £15,000 followed by a formal letter of engagement. It was an express oral term of the contract that the appellant would complete the agreed work by March 2007. The appellant knew that the work formed an essential part of the development. The work was not completed by the deadline. The respondent became dissatisfied with the appellant’s performance and engaged another consulting engineer who redesigned the road and drainage layout. The council approved the new plans.
The appellant had received just under £20,000 by way of fees, but invoiced the respondent for a further £2,893. When the respondent refused to pay, the appellant commenced proceedings. The respondent counterclaimed seeking, inter alia, damages for the appellant’s failure to complete the agreed work by March 2007 which, it was said, had resulted in a reduction in market value of the development.
The judge allowed both the claim and the counterclaim. He found that the delay in the development of the site had been caused by the appellant’s breach of contract and the respondent’s loss was not too remote since the appellant should have known that the risk of the property market going up or down was an obvious potential effect of delay. The appellant appealed against the decision on the counterclaim, contending that the judge had adopted the wrong approach to the issue of remoteness.
Held: The appeal was dismissed.
Where one was dealing with the law of contract, the situation was governed by what had been agreed between the parties. If there was no express term dealing with what types of losses a party was accepting potential liability for if he broke the contract, the law in effect implied a term to determine the answer. Normally, there was an implied term accepting responsibility for the types of losses which could reasonably be foreseen at the time of contract to be not unlikely to result if the contract was broken. But if there was evidence in a particular case that the nature of the contract and the commercial background, or other relevant special circumstances, rendered that implied assumption of responsibility inappropriate for a type of loss, then the contract-breaker escaped liability: Siemens Building Technologies FE Ltd v Supershield Ltd [2010] EWCA Civ 7; [2010] PLSCS 23 applied.
If the type or kind of loss was, at the time of contract, reasonably foreseeable by the defendant was not unlikely to result from his breach, had he contemplated a breach, then such a type or kind of loss was not too remote. What was known to the defendant at the time of contract would clearly be relevant to what was reasonably foreseeable: Hadley v Baxendale (1854) 9 Exch 341, The Heron II [1969] 1 AC 350, The Achilleas [2009] 1 AC 61 and Pindell Ltd v Air Asia Berhad [2011] 2 All ER (Comm) 396 considered.
In the present case, the judge had sought to apply the relevant principles and had been right to find that there was nothing to take this case out of the conventional approach to remoteness of damage in contract cases. He had considered whether losses arising from movement in the property market were reasonably foreseeable at the time of contract as a consequence of the appellant’s delay and he concluded that they were. He went on to consider whether this was one of those unusual cases which fell outside the more common Hadley v Baxendale approach and expressly applied his mind to the commercial background of the contract and to whether the standard approach would not reflect the expectation or intention reasonably to be imputed to the parties. The judge’s approach to and summary of the legal principles could not be faulted.
Simon Lofthouse QC and Peter Land (instructed by Caytons Law) appeared for the appellant; Adrian Palmer QC and Hugh Sims (instructed by Brains Solicitors, of St Austell) appeared for the respondent.
Eileen O’Grady, barrister
