John Grimes Partnership Ltd v Gubbins
| Jurisdiction | England & Wales |
| Judge | Sir David Keene,Lord Justice Tomlinson,Lord Justice Laws |
| Judgment Date | 05 February 2013 |
| Neutral Citation | [2013] EWCA Civ 37 |
| Docket Number | Case No: A1/2012/0837 |
| Court | Court of Appeal (Civil Division) |
| Date | 05 February 2013 |
[2013] EWCA Civ 37
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EXETER COUNTY COURT
TECHNOLOGY & CONSTRUCTION COURT
HHJ Cotter QC
8PL03589
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Laws
Lord Justice Tomlinson
and
Sir David Keene
Case No: A1/2012/0837
Simon Lofthouse QC and Peter Land (instructed by Caytons Law) for the Appellant
Adrian Palmer QC and Hugh Sims (instructed by Brains) for the Respondent
Hearing dates: 6th December 2012
Introduction
This appeal raises an issue of some importance about the law on the remoteness of damage in cases of breach of contract. Can a developer of land, whose development scheme is delayed in its implementation by the failure of a consulting engineer to perform tasks which he has contracted to perform by an agreed date, recover damages for the loss he suffers thereby from a diminution in the market value of the development which occurs during the period for which its completion is delayed?
This appeal is brought from a decision of His Honour Judge Cotter, Q.C., sitting at Exeter County Court. The proceedings involved a claim by the present appellant for unpaid fees, a claim which the Judge allowed. But there was also a counterclaim by the defendant which was successful, that counterclaim including within its scope a claim for damages for the fall in market value of the property in question. It is that judgment on the counterclaim which gives rise to the present appeal. Permission to appeal was granted by Aikens L.J. on one ground concerning the appellant's liability for that particular head of loss.
The Facts
The appellant is a company providing consulting engineering and geological services. It is based in Devon. The respondent is a farmer who in August 2006 obtained planning permission for the development of a field which he owned adjacent to an A class road in East Taphouse, Cornwall. The development permitted was for residential purposes so as to provide a mix of open-market dwellings and what are known as "affordable" dwellings.
The development permitted included a road to be built within the site so as to serve the dwellings. As is usual in such circumstances, it was the respondent's intention that the road upon its completion should be adopted by the highway authority, in this case Cornwall County Council, under section 38 of the Highways Act 1980, so that it would thereafter be maintained by that authority at public expense. That required the County Council's agreement, which in turn depended upon that Council approving the design of the estate road.
To that end, Mr. Gubbins engaged the appellant to design the road and drainage for the site and to obtain section 38 approval. There was initially an oral agreement made on 15 September 2006 between Mr. Gubbins and Mr. Swainson, a director of the appellant, with a fee payable (as originally agreed) of £15,000. Subsequently there was a formal letter of engagement. The Judge found that it was an express oral term of the contract that the appellant would complete the agreed work by March 2007, and indeed the Judge also found that that was a reasonable time for the work to be done. It is clear that the appellant was well aware that the work which it was to undertake formed an essential part of the permitted residential development, as indeed its counsel accepted in the course of the hearing in this court.
That work was not completed by March 2007. Indeed, an initial section 38 approval was not obtained until 17 February 2008, and even then some parts had not been finalised. Mr. Gubbins was dissatisfied with the appellant's performance and in April 2008 he engaged another consulting engineer, Mr. Powell of the Joint Technical Partnership Limited. The Judge found that Mr. Powell had in reality taken over from the appellant by 8 May 2008. Mr. Powell redesigned the road and drainage layout and submitted it to the Council on 16 June 2008. It was approved 2 days later.
The appellant had by this time received just under £20,000 by way of fees, but it invoiced the respondent for a further £2,893. Mr. Gubbins refused to pay and the appellant commenced these proceedings. Mr. Gubbins counterclaimed for the sums previously paid on the basis that the appellant's work had been defective and had had to be redone, but in addition he sought damages for the appellant's failure to complete the agreed work by March 200This, it was said, had resulted in a reduction in market value of the private residential units, a reduction in the offer from a Housing Association for the affordable units and an increase in building costs.
The Trial and Judgment
A number of issues arose at trial, most of which we are not concerned with on this appeal. The Judge noted a number of failings on the part of the appellant's Mr. Swainson, with there having been long periods of no or very limited progress with the contracted work. It was found that even as at May 2008 the appellant had failed to produce adequate drawings as required under the contract and that it was only when Mr. Powell's drawings were approved by the Council on 18 June 2008 that Mr.Gubbins was in the position that the express term of the contract would have placed him in at March 2007: paragraph 76. The Judge found in terms at paragraph 96 that the development of the site was delayed by those 15 months as a result of the appellant's breach of contract. He also found that, but for that breach, the respondent would have achieved completion of the development by June 2008.
The agreed evidence of the valuers for each side gave a figure for the gross sales value of the development as at that date of £3,827,500, had it been completed by then. There was also evidence that by July 2009, that figure had fallen by £398,000 to £3,429,500, prices having fallen by about 14% during that period of just over one year. But the Judge took the view that any loss associated with the decline in market values, if recoverable at all, would need to be assessed. He therefore dealt with the position at law as a matter of principle.
He found that the delay in the development had been caused by the appellant's breach of contract and that that had resulted in loss to Mr.Gubbins because of the reduced value of the development. So causation as such was established. But the remaining issue, and the one which gives rise to this appeal, is whether that loss was too remote. The Judge set out extensively passages from the judgment of Lord Hoffmann in Transfield Shipping Inc-v-Mercator Shipping Inc, more conveniently referred to as The Achilleas 2008 UKHL 48; (2009) 1 AC 61, and he referred to the classic decision on remoteness of damage in contract cases, Hadley-v-Baxendale (1854) 9 Exch. 341; 156 Eng. R. 145. He concluded at paragraph 185 of his judgment that:
"It is clear that Mr. Swainson well knew at the time of entering into the contract that delay brought with it the risk that the property market might move considerably including to the significant disadvantage of Mr.Gubbins. In this regard he had actual knowledge and it was not in any sense loss of a type that he did not reasonably foresee, should significant delay occur. He knew exactly what Mr. Gubbins intended to do and when he intended to start. He knew that a delay could mean as "with all these things up and down". In short it would clearly have been within his contemplation, had he chosen to consider the issue, as an obvious potential effect of delay or a "real danger" if delay occurred. There was no idiosyncratic or unusual element to this relatively modest development, its funding or sale in this regard."
He then went on to consider the nature of the contract and whether the appellant could reasonably be considered to have assumed responsibility for such a type of loss, given the commercial background to the contract. I say at this point that there does not appear to have been any evidence put before him of any general understanding or expectation in the land development market as to assumption of responsibility for this type of loss, similar to that referred to in The Achilleas and other cases in certain types of market. The judge here observed that, while property markets do rise and fall, they tend not to do so overnight but over a prolonged period, and that it was the egregious delay of the appellant which had produced the extent of the loss in the present case. He noted that Mr. Swainson was a professional in a field closely allied to the property market. At paragraph 193 of his judgment he said that he did not regard the decision in The Achilleas as effecting a major change to the approach to be adopted to the recoverability of damages for breach of contract. In so saying, he was echoing views expressed in a number of High Court decisions, as we shall see.
Finally he added:
"It seems to me that, as a first principle, the Hadley-v-Baxendale approach remains the one to be taken. In my judgment Lord Hoffmann was setting out in The Achilleas that only if on consideration of the commercial background to the contract, the standard approach would not reflect the expectation or intention reasonably to be imputed to the parties would losses not be recoverable. In the present case I have considered the commercial background to this particular contract and see no reason to limit liability as Mr Land submits I should.
In my judgment in this specific contract the Claimant is responsible for loss flowing from the property market decline."
That loss was to be assessed.
The Submissions
The...
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