Hussey v Eels

JurisdictionEngland & Wales
JudgeLORD JUSTICE MUSTILL,LORD JUSTICE FARQUHARSON,SIR MICHAEL KERR
Judgment Date30 November 1989
Judgment citation (vLex)[1989] EWCA Civ J1130-1
Docket Number89/1141
CourtCourt of Appeal (Civil Division)
Date30 November 1989

[1989] EWCA Civ J1130-1

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE BRIGHTON COUNTY COURT

(His Honour Judge MacManus)

Royal Courts of Justice

Before:

Lord Justice Mustill

Lord Justice Farquharson

and

Sir Michael Kerr

89/1141

Between
Christopher Sydney Hussey Veronica Anne Hussey
Appellants (Plaintiffs)
and
Wilfred Owen Eels Rachel Eels
Respondents (Defendants)

MR. D. FISHER (instructed by Messrs Stoneham Langton & Passmore) appeared on behalf of the Appellants/Plaintiffs.

MR. M. BURTON, Q.C. and MR. T. HIGGINSON (instructed by Messrs Griffith Smith Dodd & Riley, Brighton) appeared on behalf of the Respondents/Defendants.

LORD JUSTICE MUSTILL
1

This appeal stems from a claim by Mr. & Mrs. Christopher Hussey against Mr. & Mrs. Wilfred Eels to recover damages in respect of a negligent misrepresentation. When the matter was before His Honour Judge MacManus in the Brighton County Court he was called on to decide several contested issues of fact and an interesting question of law concerning the effect of the Unfair Contract Terms Act on Condition 7 of the Law Society's General Conditions of Sale. None of these matters arise on the present appeal. Liability is no longer in issue, and we are concerned only with the conclusion of the judge that the action must be dismissed because the plaintiffs have suffered no recoverable damage. I may therefore state the facts very briefly.

2

For many years until the beginning of 1984 the defendants had lived in a bungalow in Farnham, Surrey. The nature of the underlying ground was such that the building suffered from subsidence. At the end of 1983 the defendants commenced negotiations for the sale of the bungalow to the plaintiffs, whose solicitors served the customary enquiries before contract. Additional Enquiry No. 2 read as follows: "Please confirm to the Vendor's knowledge that the property has not been subject to the following matters:…(c) subsidence." The response was: "Confirmed". In due course the transaction went ahead, and on 7th February 1984 the purchase and sale was completed at a price of £53,250.00.

3

The learned judge has found that the untrue statement given on the defendants' behalf in the response to Enquiry No. 2 was made negligently, and that the plaintiffs relied on this statement when deciding to purchase the bungalow.

4

Resuming the story, it was not long before the plaintiffs discovered that there was something badly wrong with the house. They had wanted to carry out a roof conversion but their builder advised them of the subsidence, and they formed the view that they could not live there without measures to stabilize the foundations. This would have required them to vacate the house for two or three months, and to pay a sum estimated at £17,000 as the cost of necessary work. They did not have sufficient money to permit this to be done, so they decided to build another residence in the existing garden. Accordingly, within a few months of the purchase they made a planning application to erect another building. This was refused on 9th August 1984, essentially on the ground that this would lead to overcrowding. A second application was refused six months later. The plaintiffs then reformulated their application, so as to permit the erection of one new bungalow and one new chalet bungalow, after the demolition of the existing bungalow. This time the application was successful, permission being granted on 18th August 1986. The plaintiffs then set about finding buyers for the land with planning permission, and by October 1986 they had sold it to developers for a price of £76,094.47. The purchasers were going to pull down the bungalow and build on the land, so the question of repair was no longer relevant.

5

Meanwhile in January 1986 the plaintiffs had commenced their action in the High Court: it was subsequently transferred to the County Court. In its original and amended form the statement of claim contained no particulars of damage. These were, however, requested and in response the plaintiffs pleaded as follows:

"The value of the freehold land and bungalow known as Oakwood had it not suffered from subsidence is £80,000. The plaintiffs in an attempt to mitigate their loss have managed to sell the bungalow and land for a gross sale price of £78,500.

The cost of the sale is £1,908.53. The cost of removal from the premises is £500. The net price obtainable for the bungalow and land by the plaintiffs is therefore £76,094.47. The net loss in value on the land to the plaintiffs is therefore £3,905.53."

6

The plaintiffs have adopted this course of action in preference to having remedial work carried out on the premises to remedy the damage caused by the said subsidence which would have cost in excess of £17,000.

7

Seventeen months later, on 12th July 1988, the plaintiffs amended the particulars to increase the sound value of the land and bungalow to £90,000 and hence the "net loss in value" to £13,905.73. All this happened before the grant of planning permission and the sale to the developers.

8

The trial began on 7th November 1988. On the first day the plaintiffs' counsel (who had not pleaded either the first or the amended set of particulars) applied to re-amend so as to add the following paragraph:

"Alternatively the Plaintiffs' claim is for the difference between the price paid of £53,250.00 and the actual market value of the property at the date of completion namely £36,250, the difference representing the cost of carrying out repairs to the property to remedy the subsidence."

9

In addition, the amendment deleted the second of the paragraphs from which I have quoted. There is an unfortunate difference of recollection about whether the amendment also involved the deletion of the first paragraph. The appeal bundle prepared on behalf of the appellant plaintiffs contains a document purporting to be the re-amended particulars, which the learned judge gave leave to serve on the second day of the trial: these do not show any deletion of the first paragraph, but counsel maintained that this is a later copying error. On the other hand, counsel for the defendants recalls that the re-amended pleading never showed this paragraph as deleted. We cannot resolve this dispute. Three things are however clear. (1) For the eighteen months leading up to the trial the plaintiffs had been advancing a case based on the proposition that they had sold to developers in mitigation of damage. (2) By the end of the trial (as the judge's notes disclose) the plaintiffs were contending that the proper measure of damage was "17,000, being the difference between the sound value of the property, less the price paid". (3) Counsel were agreed that this would indeed have been the proper measure of damage on the hypothesis that the plaintiffs had remained in occupation. The sole question on damages was whether the effect of the re-sale at a price much greater than had been paid was to nullify this prima facie right of recovery. The judge answered this question in the affirmative. After concluding in favour of the plaintiffs on damages he continued (according to counsel's agreed note):

"However the matter does not end there due to a vitally important mitigation point. I am persuaded by Mr. Higginson that this is a classic Westinghouse case. Mr. Higginson also referred me to the case of Bellingham v. Dhillon. Damages accrue on the date of completion: the tortious measure applies. I do not think, having considered Lord Denning's judgment in Perry v. Sydney Phillips that these principles are affected or excluded. I am bound to hold that the windfall accruing to the plaintiffs wipes out by far the loss that follows. Thus, despite what I have found about the subsidence, the defendants succeed."

10

In the course of his argument in support of the notion thus briefly conveyed by the learned judge Mr. Burton Q.C. advanced two distinct propositions:

1. The plaintiffs owed a duty towards the defendants to mitigate the loss resulting from their purchase of the house in reliance on the misrepresentation; the sale to the developers was a performance of this duty; the result of this mitigation was to be taken into account in computing the loss.

2. Whether the re-sale was a mitigation or not, the fact is that when the plaintiffs' dealings are regarded as a whole it can be seen that they have suffered no loss.

11

Very often it happens that no distinction need be drawn between these two ways of approaching the problem: they raise the same issues of fact and lead to the same conclusion, and are often treated together under the same heading of "mitigation". Nevertheless, I believe that Mr. Burton was right to recognise the distinction when advancing his clients' case.

12

The first argument depends upon proof that the plaintiffs were under a duty to re-sell the house in mitigation. For the plaintiffs, Mr. Roddick, Q.C. takes the initial point that there can never be a question of mitigating a loss which has already crystallised, and that the loss has crystallised here in terms of the conventional measure of damage for an unsatisfactory purchase made in reliance on an actionable misrepresentation by the vendor. I feel some reservations about this proposition. It is true that the question of a duty to mitigate tends most often to arise in the context of a continuing loss. Thus, for example where a plaintiff is suffering a loss of business profits, which will go on until he does something to stop it, then if there is something which he could reasonably do, and yet he fails to do it, the damages are computed as if the loss had come to an end; conversely if he does take action to prevent further loss, all the consequences...

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