Factual and Procedural Background
This claim arises from professional negligence alleged by an insurance company ("Plaintiff") against loss adjusters ("Defendant") concerning the reinstatement of an old farmhouse in Leicestershire following subsidence damage. The Plaintiff accepted liability under a householder's policy and initially retained a firm ("Defendant") to manage reinstatement works in 1999 and 2000. The works did not proceed satisfactorily, leading to the Plaintiff terminating the Defendant's retainer in April 2000 and appointing another firm to complete remedial works between August 2000 and August 2001.
The original insured sum was just over £200,000, with initial expectations that reinstatement would cost less than £100,000. However, the ultimate cost exceeded £1.5 million. The Plaintiff attributes the bulk of this excess cost to the Defendant's alleged negligence, which the Defendant denies. The dispute focuses largely on quantum and causation, with the Plaintiff adopting a "top-down" approach assessing total losses and deducting non-causative elements, and the Defendant adopting a "bottom-up" approach pricing only admitted defects.
The case involved a 14-working-day hearing with 10 witnesses, including four experts. The householders ("Insured") did not give evidence, and the court limited findings concerning their conduct accordingly.
Legal Issues Presented
- What were the material terms of the contractual retainer between the Plaintiff and the Defendant?
- To what extent did the Defendant breach its contract between February 1999 and April 2001?
- What recoverable losses did the Plaintiff suffer as a consequence of any established breaches?
Arguments of the Parties
The opinion does not contain a detailed account of the parties' legal arguments.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Hadley v Baxendale (1854) 9 Ex 341 |
Principles of remoteness of damages and foreseeability in contract law |
Applied to confirm damages must arise naturally or be within parties' contemplation; no challenge to first limb damages in this case |
| Ruxley Electronics Ltd v Forsyth [1996] 1 AC 344 |
Importance of reasonableness in assessing damages |
Reasonableness considered central in selecting appropriate measure of damages |
| British Westinghouse Co v Underground Railway [1912] AC 673 |
Duty to mitigate loss |
Affirmed claimant's duty to take reasonable steps to mitigate loss but not to adopt cheapest method |
| Darbishire v Warran [1963] 1 WLR 1067 |
Clarification of duty to mitigate and reasonable expenditure |
Confirmed claimant entitled to reasonable expenditure but not to charge defendant for unnecessary extravagance |
| East Ham Corpn v Bernard Sunley & Sons [1966] AC 406 |
Measure of damages in defective works cases |
Reinstatement costs often appropriate measure of damages for defective performance |
| Banco De Portugal v Waterlow & Sons Ltd [1932] AC 452 |
Reasonableness of remedial measures taken by claimant |
Claimant not to be criticized for reasonable remedial measures taken in emergency caused by breach |
| Galoo Ltd v Bright Grahame Murray [1994] 1 WLR 1360 |
Effective cause in causation analysis |
Applied common sense test to determine if breach was effective cause of loss |
| Board of Governors of the Hospitals for Sick Children v McLaughlin and Harvey [1987] 19 Con LR 25 |
Reliance on expert advice in remedial works |
Claimant entitled to damages for remedial scheme adopted on reasonable expert advice |
| McGlinn v Waltham Contractors Co Ltd [2007] 111 Com LR 1 |
Limits of recovery based on expert advice |
Confirmed reliance on expert advice is significant but not alone sufficient to prove reasonableness |
| Biggin and Co Ltd v Permanite Ltd [1951] 2 KB 314 |
Reasonableness of settlements with third parties |
Settlement sum recoverable if reasonable and causally linked to defendant's breach |
| John F Hunt Demolition Ltd v ASME Engineering Ltd [2007] EWHC 1507 |
Analysis of reasonable settlements and causation |
Detailed guidance on when settlement sums are recoverable and when not; reasonableness and causation essential |
| Watts v Morrow [1991] 1 WLR 1421 |
General damages for distress and inconvenience |
Modest damages awarded for physical discomfort and aggravation over prolonged periods |
| Ezekiel v McDade [1994] 43 Con LR 45 |
General damages for inconvenience and mental suffering |
Damages awarded for prolonged aggravation and discomfort |
| Hoadley v Edwards [2001] PNLR 41 |
General damages in construction defect cases |
Damages awarded for inconvenience during remedial works, reduced for improvements made |
| Peak v McKinney [1970] 1 BLR 111 |
Effect of employer's prevention on liquidated damages |
Delay caused by employer may render liquidated damages unenforceable |
| P & O Developments Ltd v Guys and Thomas' National Health Service Trust [1999] BLR 3 |
Effect of unreasonable settlements on recovery |
Unreasonable settlements may break chain of causation and become irrelevant |
Court's Reasoning and Analysis
The court undertook a detailed factual and legal analysis of the contractual retainer, breaches, causation, quantum, and reasonableness of losses claimed. It found that a contractual retainer existed from 3 February 1999, under which the Defendant was engaged to take over and manage the execution of remedial works following subsidence damage, based on an existing schedule of works prepared by a previous firm.
The Defendant's retainer was limited in scope and did not include undertaking new structural investigations or redesigns. The court found a number of breaches of contract and negligence by the Defendant, including failure to conduct a proper condition survey, negligent use of concrete lintels for crack repairs, use of unsuitable plaster, defective re-pointing with inappropriate mortar, inadequate supervision, poor record-keeping, failure to procure a proper programme, and overpayment to contractors.
However, the court found that many defects and additional works were caused by the Insured's own extensive refurbishment and interference, which were not the Defendant's responsibility. The court rejected the Plaintiff's "top-down" approach to quantum, preferring a "bottom-up" approach assessing damages only for losses causally linked to established breaches.
On causation, the court emphasized the need for an effective causal link between breaches and losses, applying a common-sense approach. It found that the substantial delays and cost overruns were largely attributable to the Insured's interference and demands rather than the Defendant's breaches.
The court accepted that the Plaintiff was entitled to recover reasonable costs for remedial works necessary to put right defects caused by the Defendant's breaches, including associated professional fees, accommodation costs, and general damages for inconvenience and distress. It rejected claims for costs relating to works not caused by the Defendant or for betterment beyond reinstatement.
The court also analyzed the reasonableness of a settlement made between the Plaintiff and the Insured, concluding that the settlement was unreasonably high and that only a modest proportion could be attributed to the Defendant's breaches.
In assessing quantum, the court made allowances and discounts to exclude costs unrelated to the Defendant's breaches or attributable to the Insured's works, and applied accepted principles on mitigation and reasonableness.
Holding and Implications
The court's final decision was to award damages to the Plaintiff against the Defendant in the sum of £282,902.67, representing the reasonable losses causally linked to the Defendant's breaches of contract and negligence.
The damages include costs for remedial building works, alternative accommodation, professional fees, and general damages for inconvenience and distress. The court rejected claims for broader costs arising from the Insured's own extensive refurbishments and betterment, as well as a large part of the settlement sum paid to the Insured, finding no sufficient causal link to the Defendant's breaches.
No new legal precedent was established; the decision applies established principles of contract and tort law, including causation, remoteness, reasonableness, and mitigation, to the facts of a complex subsidence claim with extensive remedial works and disputed responsibility for delays and costs.