Ruxley Electronics and Construction Ltd v Forsyth
| Jurisdiction | UK Non-devolved |
| Judge | Lord Keith of Kinkel,Lord Bridge of Harwich,Lord Jauncey of Tullichettle,Lord Mustill,Lord Lloyd of Berwick |
| Judgment Date | 29 June 1995 |
| Judgment citation (vLex) | [1995] UKHL J0629-2 |
| Date | 29 June 1995 |
| Court | House of Lords |
[1995] UKHL J0629-2
Lord Keith of Kinkel
Lord Bridge of Harwich
Lord Jauncey of Tullichettle
Lord Mustill
Lord Lloyd of Berwick
House of Lords
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE
My Lords,
I have had the advantage of reading in draft the speeches to be delivered by my noble and learned friends Lord Jauncey of Tullichettle, Lord Mustill and Lord Lloyd of Berwick. I agree with them and for the reasons they give would allow this appeal.
My Lords,
Damages for breach of contract must reflect, as accurately as the circumstances allow, the loss which the claimant has sustained because he did not get what he bargained for. There is no question of punishing the contract breaker. Given this basic principle, the court, in assessing the measure of the claimant's loss has ultimately to determine a question of fact, although the law has of course developed detailed criteria which are to be applied in ascertaining the appropriate measure of loss in a wide variety of commonly occurring situations. Since the law relating to damages for breach of contract has developed almost exclusively in a commercial context, these criteria normally proceed on the assumption that each contracting party's interest in the bargain was purely commercial and that the loss resulting from a breach of contract is measurable in purely economic terms. But this assumption may not always be appropriate.
The circumstances giving rise to the present appeal exemplify a situation which one might suppose to be of not infrequent occurrence. A landowner contracts for building works to be executed on his land. When the work is complete it serves the practical purpose for which it was required perfectly satisfactorily. But in some minor respect the finished work falls short of the contract specification. The difference in commercial value between the work as built and the work as specified is nil. But the owner can honestly say: "This work does not please me as well as would that for which I expressly stipulated. It does not satisfy my personal preference. In terms of amenity, convenience or aesthetic satisfaction I have lost something." Nevertheless the contractual defect could only be remedied by demolishing the work and starting again from scratch. The cost of doing this would be so great in proportion to any benefit it would confer on the owner that no reasonable owner would think of incurring it. What is the measure of the loss which the owner has sustained in these circumstances? If there is no clear English authority which answers this question, I suspect this may be because parties to this kind of dispute normally have the good sense to settle rather than to litigate.
The cogent argument of Mr. Jacob, for the respondent, reduced to its bare essentials, can, I think, be summarised in three propositions.
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1. The judges' award of £2.500 damages to the respondent for "loss of amenity" demonstrates that the respondent suffered a real loss for which he is entitled to be compensated.
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2. In a building contract case there is no admissible head of damages capable of assessment by reference to such concepts as loss of amenity, inconvenience or loss of aesthetic satisfaction. These are imponderables which the court can only evaluate by plucking figures out of the air. If a possible head of damage of this nature were to be admitted in building contract cases, this would introduce chaotic uncertainty into the law and undermine clear and well settled principles.
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3. By these well settled principles damages in a building contract case can only be assessed by reference to diminution in value or cost of reinstatement. There being here no diminution in value, the only available measure of damages to compensate the respondent for his real loss is the cost of reinstatement.
Attractive as was Mr. Jacob's development of this argument, it seems to me to suffer from an inherent logical flaw in that it leads from the premise that a loss has been suffered which is incapable of economic measurement to the conclusion that it must be compensated by reference to a measure of economic loss, sc, the cost of reinstatement, which has not been and will not be incurred.
It is no doubt correct that, in the absence of any cross-appeal against the judge's award, the propriety of that award is strictly not in issue. But since the attack on the principle of the award was central to Mr. Jacob's argument. I think the issue is one which we may properly address and I agree with my noble and learned friend Lord Mustill in the reasons he gives for concluding that there is no reason in principle why the court should not have power to award damages of the kind in question and indeed that in some circumstances such power may be essential to enable the court to do justice.
But, quite independently of these conclusions, to hold in a case such as this that the measure of the building owner's loss is the cost of reinstatement, however unreasonable it would be to incur that cost seems to me to fly in the face of common sense.
My Lords, since the populist image of the geriatric judge, out of touch with the real world, is now reflected in the statutory presumption of judicial incompetence at the age of 75, this is the last time I shall speak judicially in your Lordships' House. I am happy that the occasion is one when I can agree with your Lordships still in the prime of judicial life who demonstrate so convincingly that common sense and the common law here go hand in hand. For the reasons given in the speeches of my noble and learned friends Lord Lloyd of Berwick, Lord Jauncey of Tullichettle and Lord Mustill. I too would allow the appeal and restore the judgment of Judge Diamond Q.C.
My Lords,
The respondent entered into a contract with the appellants for the construction by them of a swimming pool at his house in Kent. The contract provided for the pool having a maximum depth of 7' 6? but, as built, its maximum depth was only 6ft. The respondents sought to recover as damages for breach of contract the cost of demolition of the existing pool and construction of a new one of the required depth. The trial judge made the following findings which are relevant to this appeal:
(1) the pool as constructed was perfectly safe to dive into: (2) there was no evidence that the shortfall in depth had decreased the value of the pool: (3) the only practicable method of achieving a pool of the required depth would be to demolish the existing pool and reconstruct a new one at a cost of £21,560; (4) he was not satisfied that the respondent intended to build a new pool at such a cost; (5) in addition such cost would be wholly disproportionate to the disadvantage of having a pool of a depth of only 6ft as opposed to 7' 6? and it would therefore be unreasonable to carry out the works: and (6) that the respondent was entitled to damages for loss of amenity in the sum of £2,500.
The Court of Appeal by a majority (Staughton and Mann L.J.. Dillon L.J. dissenting) allowed the appeal holding that the only way in which the respondent could achieve his contractual objective was by reconstructing the pool at a cost of £21,560 which was accordingly a reasonable venture.
The general principles applicable to the measure of damages for breach of contract are not in doubt. In a very well known passage Parke B. in Robinson v. Harman 1 Exch. (1848) 850, 855 said:
"The next question is: what damages is the plaintiff entitled to recover? The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation with respect to damages, as if the contract had been performed."
In British Westinghouse Electric and Manufacturing Co. Ltd. v. Underground Electric Railways Co. of London Ltd. [1912] A.C. 673, Viscount Haldane L.C. said, at pp. 688-689:
"The quantum of damage is a question of fact, and the only guidance the law can give is to lay down general principles which afford at times but scanty assistance in dealing with particular cases
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Subject to these observations I think that there are certain broad principles which are quite well settled. The first is that, as far as possible, he who has proved a breach of a bargain to supply what he contracted to get is to be placed, as far as money can do it, in as good a situation as if the contract had been performed.
The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach."
More recently in what is generally accepted as the leading authority on the measure of damages for defective building work, Lord Cohen in East Ham Corporation v. Bernard Sunley and Sons Ltd. [1966] A.C. 406 said, at pp. 434D-435A:
"… the learned editors of Hudson's Building and Engineering Contracts, 8th ed. (1959) say at p. 319 that there are in fact three possible bases of assessing damages, namely, (a) the cost of reinstatement; (b) the difference in cost to the builder of the actual work done and work specified: or (c) the diminution in value of the work due to the breach of contract. They go on:
'There is no doubt that wherever it is reasonable for the employer to insist upon reinstatement the courts will treat the cost of reinstatement as the measure of damage.'
In the present case it could not be disputed that it was reasonable for the appellants to insist upon reinstatement and in these circumstances it necessarily follows that on the question of damage the trial judge arrived at the right conclusion."
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