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Defective premises: how will a court assess damages?

Ramsey J has provided a helpful summary of the principles that apply in deciding the type and level of damages to be awarded in cases involving defective premises.

He did so in a case involving claims by freeholders of homes built at a development at Eden Park in Hartlepool during 2002 to 2004 (Harrison and others v Shepherd Homes Ltd and others [2011] EWHC 1811 (TCC)).

A number of the properties had suffered serious cracking due to settlement of un-compacted landfill in the land on which the affected houses were built.

The trial involved ten lead properties. The hope was that the judge’s findings for those ten would enable the parties to resolve similar claims on many other properties.

The TCC’s findings

Ramsey J found that the defects were caused by the foundation work not being carried out in a workmanlike or professional manner. He found Shepherd Homes to be:

Damages

Turning to the question of damages, Ramsey J decided that there was no distinction to be drawn in this case between the approach to damages for liability under the sales contracts, the NHBC Buildmark or under the DPA 1972.

Having reviewed the case law in some detail, he went on to summarise the general principles that he considered could be drawn. In summary these were as follows:

  • The court will generally make an award of the cost of reinstatement, provided that reinstatement is reasonable. Reinstatement will be unreasonable if the cost would be out of all proportion to the benefit to be obtained. The question of reasonableness can only be answered in relation to the particular contract.
  • In order to recover the cost of reinstatement, it is not necessary for the claimant to show that it will actually reinstate the property. However, the claimant’s intention to reinstate may be relevant to reasonableness.
  • If reinstatement is found to be unreasonable, the measure of damages will generally be diminution in value.
  • Where reinstatement is found to be unreasonable and there is no diminution in value, the court may still award damages for loss of amenity.

Loss of amenity

Helpfully, Ramsey J went on to summarise the general principles that he considered applied in relation to damages for loss of amenity. In brief:

  • As a general rule, a claimant cannot recover damages for injured feelings for breach of contract.
  • However, where the object of the contract is to award pleasure, relaxation, peace of mind or freedom from molestations, such damages are recoverable.
  • In cases not falling within the exception, damages may be recovered for physical inconvenience and discomfort caused by the breach and mental suffering directly related to physical inconvenience and discomfort.
  • The cause of that inconvenience or discomfort must be a sensory (sight, touch, hearing, smell) experience.
  • Any damages awarded for loss of amenity will be modest.

Appropriate measure was diminution in value

Ramsey J went on to award damages to each of the claimants in the ten lead cases by applying these principles to the particular facts and circumstances of each claim.

On the basis of the expert evidence, he found that the claimants in the lead cases were not entitled to damages based on reinstatement, but were entitled to damages for diminution of value. He assessed the diminution in value for each property based upon valuation evidence.

He also awarded damages for distress, inconvenience and loss of amenity in sums varying from £250 – £2,500, for the period up to the date of trial (and similar sums in relation to the future).

A welcome clarification

Shepherd Homes’ request for leave to appeal against the judgment was turned down. So, unless the Court of Appeal is asked and agrees to reconsider the decision, this judgment is likely to provide a welcome clarification of the way in which the complex law in relation to damages for defective buildings should be applied.

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