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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Bella Casa Ltd v Vinestone Ltd & Ors [2005] EWHC 2807 (TCC) (09 December 2005) URL: https://www.bailii.org/ew/cases/EWHC/TCC/2005/2807.html Cite as: [2005] EWHC 2807 (TCC), [2006] BLR 72, 108 Con LR 148, [2006] CILL 2344, [2006] TCLR 2 |
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QUEENS BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
![]() ![]() ![]() ![]() ![]() | Claimant |
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(1) ![]() ![]() ![]() (2) ![]() ![]() (3) ![]() ![]() | Defendants |
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DUFFY CONSTRUCTION ![]() | Part 20 Claimant |
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FABERDEX INSTALLATIONS ![]() | Part 20 Defendant |
____________________
Crown Copyright ©VERSION
OF JUDGMENT
His Honour Judge Peter Coulson QC:
A) INTRODUCTION
"BCL's consequential costs:
(A) Loss of use. As a result of the defects set out above, in particular the defective gas installation, the water ingress, inadequate heating, electrical faults and inadequate safety provision, BCL was unable to use the Property for human occupation until the completion of the remedial works. BCL has therefore been deprived of the use of the Property and claims:
(i) Interest on the balance of the purchase price and other costs paid on or about completion (£1,232,387.26 set out in Appendix 12) from 16 July 1999 until 18 December 2002 when the Property became fit for human habitation apart from the defects to the common parts, £341,962.14.
Particulars:
(a) Balance of purchase price £1,034,000 from 16 July 1999 to 18 December 2002 at 8%.
(£82,720 per annum) £283,291.18
(b) Other costs paid following completion, £198,387.20 as set out in Appendix 12 hereto at 8%.
(£15,870.98 per annum) £58,670.96
Total: £341,962.14.
(ii) Service charge for the property from 1st August 1999 to 18th December 2002:
Particulars:
1/8/99 – 31/7/00 | £2,382.98 |
1/8/00 – 31/7/01 | £5,882.38 |
1/8/01 – 31/702 | £7,943.60 |
1/8/02 – 18/12/02 | £2,238.81 |
TOTAL: 18,447.77 |
"Of: Paragraph 42.2 sub-paragraph(1)
Request
8. Please explain how the figure of 8% for interest has been arrived at and set all facts and matters relied upon in support of such figure as the loss consequent upon the alleged breaches.
Reply
8. The interest rate of 8% was based on the Judgment Rate of interest for the relevant period."
"In my judgement, the right approach to preliminary issues should be as follows:
(a) Only issues which are decisive or potentially decisive should be identified.
(b) The questions should usually be questions of law.
(c) They should be decided on the basis of a schedule of agreed or assumed facts.
(d) They should be triable without significant delay, making full allowance for the implications of a possible appeal.
(e) Any order should be made by the court following a case management conference."
B) THE PRELIMINARY ISSUE AND THE ASSUMED FACTS
"Assuming the facts pleaded in the Claimant's Particulars of Claim are correct, are the points in Paragraph 101 of the Second Defendant's Defence correct and do they provide a complete defence to the claims made in Paragraphs 40.2, 40.6, 42.2, 42.5, 44.2 and 44.5 of the Particulars of Claim?"
"Further and without prejudice to the forgoing, it is specifically denied that BCL is entitled to recover the sums claimed in sub-paragraphs 42.2 and 42.5 or any similar sums contained elsewhere. BCL alleges that the said sums represent 'loss of use' by which PLA understand BCL to refer to loss of use of the Property. PLA deny that such sums are a consequence of any loss of the Property. The claim is for loss of the use of the money necessary to complete the purchase of the property and to continue to own the Property. It is denied that such costs represent a recoverable loss because:
(i) The costs do not represent consequential loss. These costs would have been incurred in any event.
(ii) It is denied that such costs are recoverable for breach of Section 1 of the Defective Premises Act 1972."
a) The design, specification and detailing of the work were inadequate;
b) The works were not carried out in a good and workmanlike manner, using good and proper materials suitable for their purpose;
c) The works were not properly inspected, tested or commissioned;
d) As a result of the above, the works when completed did not provide a property that was fit for human habitation;
e) The property was unfit for habitation from the 16th of July 1999 to the 18th of December 2002, this being the period for which BCL pursue their loss of use claims;
f) The purchase price for the property (about £1.2 million) would have been incurred in any event, whether the works were defective or not.
a) That BCL bought the property for any particular purpose (either residential occupation or investment);
b) That BCL would have occupied the property for all or even part of the period between the 16th of July 1999 and the 18th of December 2002;
c) For the cost of alternative accommodation for any part of the period between 16th of July 1999 and the 18th of December 2002;
d) That the property would have been rented out for all or any part of this period; thus there is no claim for lost rent during the period when, on BCL's case, the property was unfit for human habitation;
e) For any actual interest charges incurred by BCL.
C) THE NATURE OF BCL'S CLAIMS FOR LOSS OF USE
"Counsel for PLA has misunderstood the damages claimed under this head. BCL does not claim the cost of purchase and ownership of the apartment, which it is accepted would have been incurred in any event. BCL claims the interest on the capital costs for the period during which the apartment was uninhabitable and the service charge payable for the period during which the apartment was uninhabitable. Such costs are claimed as compensation for the fact that BCL was unable to use the asset that had been purchased."
"PLA notes that the interest figure is not alleged to be a sum that BCL in fact incurred. The interest claim is not, therefore, a claim for 'special damages' in the pleading sense (i.e. a claim for actual pecuniary loss) but a claim for general damages for loss of use of the apartment."
In the following paragraph, Mr Walker, on behalf of PLA, contrasts the interest claim with the two smaller claims in respect of service charges and the sums paid to utilities and the like which, he says, appear to be sums that have been incurred and which therefore form claims for special damages. Again, I agree with that distinction.
D) LOSS OF USE CLAIMS IN BUILDING CASES
"The Judge allowed a figure of £1,500 per year for four years making a total of £6,000. In myview
that item of damages is clearly allowable under the provisions of the Defective Premises Act, and I do not myself think that it has been shown that his assessment, either in terms of the annual
value
or the period of time, was excessive."
This case is therefore authority for the proposition that general damages for loss of use are recoverable under section 1 of the Defective Premises Act 1972.
"The running costs or outgoings in respect of the defendant's flat are not, in my judgment, recoverable. It is true that while the defendant was not living in the flat because of the plaintiffs' breach of contract she was not getting anything for the rates which were payable under the lease. But she had not terminated the lease and had to pay outgoings on some property, and I would regard the costs of the property which she rented as alternative accommodation for herself and her husband in the Isle of Man as prima facie the loss suffered by being kept out of her flat for the period of the plaintiffs' continuing breach of covenant, subject to the renting of that alternative accommodation being reasonable.
"The second objection is that to submit that what the defendant has lost by the plaintiffs' breach of covenant is the consequent diminution in thevalue
of the flat as a marketable asset is to ask the court to take a wholly unreal
view
of the facts. The reality of the defendant's loss is the temporary loss of the home where she would have lived with her husband permanently if the plaintiffs had performed their covenant. She cannot increase her loss by deciding not to return after the covenant has been performed and she does not seek to do so. But she can claim, as it seems to me, to be put in as good a position as she would have been if the plaintiffs had performed their covenant, at least as early as they had notice that the main structure was out of repair instead of years later. If she had bought the lease as a speculation intending to assign it, to the knowledge of the plaintiffs, the alleged diminution in rental (or capital)
value
might be the true measure of her damage. But she did not; she bought it for a home, not a saleable asset, and it would be deplorable if the court were bound to leave the real world for the complicated underworld of expert evidence on comparable properties and
values,
on the fictitious assumption that what the flat would have fetched had anything to do with its
value
to her or her husband."
"Recoverable consequential losses should include such items as loss of use of the building during the repairs and also loss of profits in appropriate circumstances."
However, it does not seem to be that this passage is of any particular assistance in the present case. Contrary to Ms O'Farrell QC's submissions, I consider that there is no dispute in the present case that damages for loss of use might be recoverable as a head of general damage or, as the case may be, a head of special damage: the point made by the Defendants here is that the particular claim for general damages made by BCL in the Particulars of Claim, by reference to interest at 8% on the purchase price, is not sustainable in law, or on the assumed facts.
"Mr Field-Fisher for Mr Moss argues that that measure is wrong, because Mr Archer and Mr Applegate were in occupation of the houses from 1957 until 1966. They should not recover both interest on the £1,900 and also the benefit of occupation; for that would be having it both ways. I think that criticism is to some extent justified. But the right method gives about the same total. It is this: if the defects had not been so serious, and the house could have been repaired at reasonable cost, the damages would be the cost of repair at the date when in 1965 the breach was discovered… But in 1965 it was not an economical proposition to repair the house. It would have cost too much to underpin it. The only thing was to pull it down. In these circumstances it seems to me that we should apply the general principle that the party injured by the breach should put into as good a position, as far as money can do it, as he would have been if there had been no breach. If this house had been properly built it would have been worth £2,900 in 1965 when the breach was discovered. That is the proper figure of damage. As to interest on it, Mr Applegate and Mr Archer did not go out until January 1966. In these circumstances, interest should be at 7¼% on £2,900 from January 1966. The total is some £200 more than the total awarded by the judge."
a) There are no building or property cases in which claims for general damages of the kind now maintained by BCL have been advanced or held to be successful;
b) There is at least one case (Calabar) in which a claim similar to (although not precisely the same as) that now maintained by BCL was expressly rejected by the Court of Appeal;
c) The BCL claim for general damages is not in accordance with the usual situation where a natural claimant is awarded a modest amount to reflect loss of use, such as the £1,500 per year awarded to the claimant in Bayoumi.
LOSS OF USE CLAIMS RELATING TO OTHER ASSETS
"If he is building houses of blocks of flats for letting, then on analogy with shipping cases he is probably liable for loss of rent. It may be that in cases where works, such as those for public buildings, would not produce rent or profits, the contractor would be liable for loss of interest on capital lying idle."
The two cases in the footnote relied on in support of this proposition are The Hebridean Coast [1961] AC545 and Birmingham Corporation v
Sowsbery [1969] 113 SJ 877. The only reported citation/approval of the passage in Keating which I could find was that of His Honour Judge Thornton QC in Earl's Terrace Properties
v
Nilsson Design (2004) 94 Con L R 118.
(a) Shipping Cases
"It is a sufficiently familiar head of damages between individuals that, if one person injured the property of another, damages may be recovered, not only for the amount which it may be necessary to spend in repairs, but also for the loss of the use of the article injured during the period that the repairing may occupy… Why are not the appellants entitled to recover damages for the loss thus sustained? The answer given is that, although their dredging operations were delayed, the appellants sustained no tangible pecuniary loss. I'm not quite sure I understand what is meant by the use of the word 'tangible'. If by that is meant in order to entitle a plaintiff to recover, you must be able to show that during the period of repair to hisvessel,
or his cart, or his horse, some specific money has been lost by the period of time during which the article has not been susceptible of being used. The principle so affirmed would, as it appears to me, go
very
far beyond the particular case now before your Lordships. But to my mind it is a principle for which there is no authority whatever. This public body has to pay money like other people for the conduct of its operations, and if it is deprived of the use of part of its machinery, which deprivation delays or impairs the progress of their work, I know no reason why they are not entitled to the ordinary rights, which other people possess, of obtaining damages by the loss occasioned by the negligence of the wrongdoer."
"If the appellants had hired a dredger instead of purchasing one, and had during the months they were deprived of its use been bound to pay for its hire, it cannot be doubted that the sums so paid could have been recovered. How can they the less be entitled to damages because, instead of hiring a dredger, they invested their money in its purchase? The money so invested was out of their pockets and they were deprived of the use of the dredger, to obtain which they had sacrificed the interest on the money spent on its purchase. As some equivalent to this, at least, they must surely be entitled to."
"Supposing a person took away a chair out of my room and kept it for twelve months, could anybody say you had a right to diminish the damages by showing that I did not usually sit in that chair, or that there were plenty of other chairs in the room ?"
However, in my view,
this passage needs to be read in context. In The Mediana quantum was agreed. Moreover, Lord Halsbury was not only dealing with what he called a "broad principle", but he expressly went on to find that "in many cases a jury would say there really has been no damage at all" and would therefore award "a trifling amount".
"I do not proceed on any supposed distinction in principle between a profit-earning ship and a non-profit-earning ship. The task of assessing damages is easier with a profit-earning ship and depends on the probability that she would have earned so much money if her owner could have used her. With a non-profit-earning ship there is no direct financial loss and one must ask what harm was done to the owner by him being deprived of the use of his ship. Then comes what may be avery
difficult task, to put a
value
in money on the harm which the owner has suffered. But you must first prove the harm. If no harm is proved beyond the mere fact that owner is deprived of the services of that ship during the period of repairs, the opinion Lord Herschell in The Greta Holme appears to have given rise to the practice of awarding damages based on interest on the
value
of the ship."
"Interest is, in any case, a thing that has little to do with non-commercial transaction and, apart from cases of contract, is always a highly fictitious factor in calculations. Further, a calculation based on the cost of the construction of a ship, written down to the date of the collision is, of course, much more appropriate to the case of a total loss than to demurrage during repair and although, by manipulating the percentage of depreciation, and the percentage assumed for annualvalue,
a flexibility is obtained, which theoretically is almost infinite, the calculation must be a
very
uncertain test of the true daily
value
of the user lost."
"…was not really a statement of anything that the Mersey Docks and Harbour Board had actually sacrificed but was rather directed to he position of a private firm, trading for profit with its own capital. I think, however, that when one gets away from personal trading this assumption may quickly become unsound… there is no presumption that ships of war are worth to the state what was spent on building them or that their daily user is worth the cost of running them, for outlay on the Navy is not a matter of commercial investment of money but of state policy… much depends on the kind of ship: more on the existence of profound peace or the imminence of the outbreak of war. In the last event thevalue
of the time, when collision makes a man-of-war unavailable, may truly be at once
vast
and inestimable; in some of the others the
value
of the user may really be no more than that of floating accommodation for officers and crew, who have among other things to be kept under discipline and busy. To all these matters in the appropriate case the registrar would have to direct his mind. No formula can fit them all and no formula could fail to
vary
in regard to its factors from time to time."
(b) Other Commercial Cases
"On the evidence [the appellant] did not use the Rolls Royce for his ordinary day-to-day travel. He apparently had two other cars. There was no claim for hiring an alternativevehicle,
nor was it suggested that he had suffered the inconvenience of having to travel on foot or by other means. Thus, the basis of his claim was for a nominal award based on the observation of Lord Halsbury in The Mediana [1900] AC113… the principle has been applied in claims for damage to a dredger or light ship causing the plaintiff owner to be deprived of its use. It has also been applied to a corporation bus in Birmingham Corporation
v
Sowsbery [1970] RTR84. In these instances damages have sometimes been calculated upon the maintenance costs of the interest on the capital
value
of the property damaged. In cases of private motor cars the approach has generally been different. Notwithstanding that no substitute
vehicle
had been hired, judges have awarded compensation for loss of use of a
vehicle
while it is being repaired where it has been shown that inconvenience has been caused or, for example, that the owner has had to use public transport or walk or that a family have been deprived of the advantage of a family car where otherwise they would have used the car which had been damaged…
In the present case there was no basis to found an award for inconvenience or for the cost of maintenance of the plaintiff's car; such use as he made of it was slight and the fact that he failed to collect it in September 1985 when it was ready but waited some weeks before doing so, does not suggest that he suffered any real deprivation from loss of use."
c) Conclusions on non-buiding cases
a) It may sometimes be appropriate to assess a claim for loss of use of a non-profit-making asset by reference to interest on the capitalvalue
of the asset itself (The Greta Holme);
b) Such a claim does not arise automatically and has not always been regarded with enthusiasm by the courts (The Hebridean Coast, The Chekiang);
c) Such a claim will always depend on its facts (Lord Halsbury in The Mediana) and will usually require particular evidence of the type referred to by Beldam LJ in Alexander;
d) Such a claim has only ever been recovered in respect of wasting or depreciating assets (such as the dredger in The Greta Holme, and the bus in Birmingham Corporation), because such awards are intended to compensate the owner for the period when the asset in question is not generating income or saving other expenditure.
F) CONCLUSIONS