England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
LEEDS DISTRICT REGISTRY
(HIS HONOUR JUDGE COCKCROFT)

		Royal Courts of Justice Strand, London, WC2A 2LL
		15th October 2009

Lord Justice Dyson:

1. The first defendant ("Westbury") has at all material times been a property developer. By agreements made in 2001 Westbury agreed to sell the freehold properties at numbers 1, 5 and 7 Cooper Close, Brampton Brierlow, Rotherham, to the first and second, third and fourth and fifth and sixth claimants respectively. I shall refer to the properties as "number 1", "number 5" and "number 7". It was a term of each contract that Westbury had or (as the case may be) would as soon as practicable complete the erection of the plot "in a thorough and workmanlike manner". It was common ground in these proceedings that Westbury was in breach of its contract in that it supplied brickwork which was chipped and damaged and the workmanship of the brickwork was poor. In these proceedings the claimants claim damages for (1) the cost of remedial work necessary to remedy the defective brickwork, (2) the residual diminution in the value of the properties following the proper completion of the remedial work and (3) inconvenience and distress.
2. At the trial before HHJ Cockcroft a schedule of the necessary remedial works was agreed but the cost of the remedial work was in issue. The judge awarded each pair of claimants £5,000 in respect of the residual diminution in value and £2,000 for general damages for inconvenience and distress. In respect of the remedial works he awarded the first and second claimants £27,250, the third and fourth claimants £28,250, and the fifth and sixth claimants £27,250. He also awarded small sums for interest on the general damages. Westbury appeals against the awards in respect of the remedial works and diminution in value.

The facts

3. Some remedial works were carried out by the brickwork manufacturers in 2003, but it was accepted by Westbury that these were ineffective to rectify the problem. In 2005 a firm of consulting engineers drew up a schedule of remedial works. Westbury engaged Pennine Pointing Contractors Limited ("Pennine") to carry out the work. The judge described Pennine as "cowboys properly so-called", and said that they probably made matters worse. Westbury have always accepted that Pennine's intervention did not solve the problem. The parties continued to seek a solution. In 2006 Westbury was acquired by Persimmon Homes Limited ("Persimmon"). Persimmon too tried to find a solution.
4. The claimants issued these proceedings in January 2008. Eventually on 19 December 2008 an agreement was reached between the parties as to the remedial work that was required. It was agreed that this scheme would restore the brickwork to a reasonable standard and that, if it were properly carried out, Westbury's obligations under the contract would be discharged. The claimants obtained quotations dated 28 February 2009 for the remedial work from Milton Construction Limited ("Milton") in the sums of £27,250 for number 1, £28,250 for number 5 and £27,250 for number 7. These figures are inclusive of VAT.
5. It will be seen that these were the sums accepted by the judge. Milton's quotations were lump sum quotations which gave no more than a brief description of the work but no breakdown of how the quoted figures were calculated. Westbury obtained a quotation dated 16 February 2009 from a firm called Gunpoint. Gunpoint is a brickwork specialist. Mr Haseltine, the expert who gave evidence on behalf of Westbury, said that he knew Gunpoint and that it was a competent contractor. Its quotation merely gave rates. Thus the rate for repointing was £35 per square metre, the rate for brickwork replacement was £4.50 per brick, for mild mortar cleaning £3.00 per square metre, for chimneys £250 and for day works £30 per man hour for "variations client delays and additional work". On the basis of these figures and quotations for other necessary work which included the hire of scaffolding, Mr Followes, managing director of Persimmon, produced detailed estimates in the sums of £13,710 for number 1, £14,922 for number 5 and £13,838 for number seven inclusive of VAT.
6. At paragraph 15 of his judgment the judge put it this way:

"Mr Followes … the only lay witness relied on by the defendants, has transposed the figures in that somewhat unorthodox quotation using the break down of the defective brickwork as specified in tabular form by Doctor White at page 465 in his report of 21st August 2008."

Mr Followes has no technical expertise. The judge said that he went to considerable trouble to attempt to elucidate what Gunpoint should have made clear in its quotation. Mr Followes said that he had checked his figures with Mr Girling of Gunpoint. One of the unsatisfactory features of this case is that no evidence was given by Milton or Gunpoint. The only person who spoke to the quotations was the unqualified Mr Followes who spoke to the quotation of Gunpoint. I regret to say that this case was badly prepared on both sides. This presented the judge with a very difficult task.

The remedial costs issue

7. The judge referred to other quotations that had been obtained. In particular there was a quotation dated April 2008 from Master Craftsmen's Building Services in the sums of £35,800-odd for number 1 and £38,000 for number 5. There was no figure for number 7. There was also an earlier estimate by consulting building engineer Mr Reece-Taylor in the sums of £21,000-odd for numbers 1 and 7 and what the judge described as an "anomalous estimate" for number 5 of £5,000. At paragraph 23 the judge described Gunpoint's quotations as being "way out of line". I understand him to have been referring both to these earlier quotations and to the Milton quotations. At paragraph 21 the judge said that without any evidence from Gunpoint, it was not clear to him whether its repointing system would comply with the agreed specification. He accepted the submission on behalf of the claimants that the Gunpoint quotation was in an unusual form and a number of items were excluded from it.
8. The quotation stated that Gunpoint would require access to all areas free from hindrance of any other trades, and a hoist for the full duration of the works, access to clean water, pressure and waste removal skips. There was no reference to project management. Further, Gunpoint was expecting the client to provide scaffolding, power, waste removal, mortar, sand and replacement bricks. The judge said at paragraph 23 that there was no evidence in support of Westbury's case that its costings were reasonable and all inclusive except for that from Mr Followes. He said that the suspicion that Gunpoint were helping Persimmon in the hope of future business remained. He also said that if Gunpoint were to be instructed to carry out the works, there could be demarcation disputes as to who was to supply what. Finally at paragraph 25 he said:

"In short, the claimants clearly have much more confidence in Milton, whose quote appears to be comprehensive, albeit undetailed. I conclude that Milton's pricing of the works more closely resembles the reasonable all-encompassing costs of the agreed necessary works."

9. On behalf of Westbury Mr Singer submits that the judge should have found that the proper cost of the remedial works was that given by Mr Followes. He says that the judge was wrong to prefer the unparticularised quotation of Milton to the particularised quotation relied on by Westbury. The burden of proof was on the claimants to show that the figures for which they contended were reasonable and not on Westbury to prove that they were not. The judge did not take the burden of proof into account. By taking into account the fact that the claimants had confidence in Milton, the judge took into account an irrelevant consideration. The question was whether the Milton quotation was reasonable, not whether it had the confidence of the persons on whose behalf it had been obtained. The judge was also wrong to hold that there was a suspicion that Gunpoint was helping out Persimmon when there was no evidence to support such a suspicion. Further, he was wrong to say that there would be demarcation disputes if Gunpoint were appointed to do the work. This was pure speculation, perhaps based on the concerns of the judge about the remedial work which had been previously carried out by Pennine.
10. In my judgment the judge was entitled to find that the Milton quotations represented the reasonable costs of remedial works. It is a striking feature of this case that Mr Followes' figures were so much lower than the Milton quotations and indeed the other figures to which I have referred. The judge was entitled to take that into account, although I accept Mr Singer's submission that the other earlier quotations were of less significance because they did not relate to the agreed specification of remedial works. In my view the most significant feature of this case is the fact that Milton was offering to do all the work that was necessary to remedy the defects whereas Gunpoint was not. Westbury did not offer to carry out the works using Gunpoint as a sub-contractor. It was Westbury's case before the judge that the claimants would not have been acting reasonably if they did not engage Gunpoint and then apparently make the other arrangements that were necessary for the supply of the items excluded from the Gunpoint quotation as well as for the employment of a project manager to coordinate the scheme. That is what the claimants would have had to do if Gunpoint were to be involved. It seems to me that the reasons given by the judge for rejecting Mr Followes' figures included that it was not unreasonable for the claimants to refuse to adopt such a course.
11. That is what the judge had in mind when he referred at paragraph 23 to "demarcation disputes as to who supplies what". It is also what he was referring to in paragraph 25 when he summarised his conclusion on this point in the passage that I have already quoted. The reference to Milton's quotation being "comprehensive" and "all encompassing" is shorthand for saying that the claimants were acting reasonably in preferring a single contractor who had overall responsibility for the works rather than a piecemeal arrangement of the kind being put forward by Westbury. As I read his judgment, this is the single most important reason given by the judge for his conclusion. I do not accept Mr Singer's submission that the fact that the claimants had more confidence in Milton was irrelevant. It was highly relevant. If Westbury had offered to act as main contractor, the claimants would have been entitled to reject the offer in view of their past distressing experiences in relation to the brickwork. But, as I have said, no such offer was made. As for Mr Singer's point that the judge was wrong to hold that there was a suspicion that Gunpoint was helping out Westbury, this was not an important plank in the judge's reasoning. But in any event there was no evidence that Gunpoint was prepared to offer its rates to the claimants. For all these reasons I would hold that the judge was entitled to award damages for the remedial work on the basis of the Milton quotations.

The diminution in value issue

12. The judge found that the claimants intended to have the agreed remedial works carried out. It was their case that even if the works were properly carried out there would remain a residual diminution in value. The judge heard expert valuation evidence from Mr Brierley on behalf of Westbury and Mrs Hines on behalf of the claimants. The experts agreed that the value of the properties on the assumption that they suffered from no defects was: £221,000 (number 1); £227,000 (number 5); and £220,000 (number 7). Mr Brierley said that if the works were properly carried out there would be a residual diminution of value of 10%. He relied on the fact that potential purchasers would be aware of the history of the defects and the future risk of spalling which could not be ruled out. Mrs Hines said that there would be no residual diminution in value. She said that there would be no duty to disclose to potential purchasers the history of the defects or the litigation. The possibility of future spalling was minimal and would not affect the minds of potential purchasers. The judge dealt with this issue in the following way:

"36. I conclude that fear of further litigation would drive vendors into sufficient disclosure for the past history of defects and litigation to become known and that that, together with the very small risk of further problems, is just sufficient in the current climate to drive down the price for these properties, but only by a very modest amount. If the years go by and the claimants do not choose to sell and the market picks up and there are no further brickwork defects becoming apparent, this residual diminution in value could prove to be a windfall to the claimants. I do not think the commercial analogy helps here, by that I mean a percentage approach to the diminution in value, in a domestic setting. I am conscious that I am departing from both experts so that it can be said that my conclusion is unsupported by evidence, but this is a difficult area in which no scientific approach is possible. I was careful to ask counsel whether or not a point someway in-between the various extremes that they contended for would be unjustified and they conceded that it would not.

37. I have come to the conclusion that a reasonable figure for residual diminution of loss in all the circumstances of this case would be £5,000 per property. Now, that is two-and-a-half times the general damages per household that would be awarded for discomfort and inconvenience, as I shall shortly indicate. It also, as it happens, represents about two-and-a-half per cent of the market value of the properties, but I emphasise that in arriving at the lump figures I have I have not followed a percentage approach. It represents, on the limited evidence available, a judicial guesstimate of how, in the current climate, negotiations may go, in the hypothetical event of one of these properties coming onto the market, a judicial guesstimate of the discount which it would be reasonable to agree in the light of the past history which we must assume is entirely resolved by satisfactory repair of the agreed rectification works and of a purely cosmetic defect and a further risk which is deemed to be remote and barely significant. If the parties are equally disgruntled by such approach, it may be that I have got it about right.

38. So far as the claimants are concerned, whilst I have every sympathy and understanding, I do think that the protracted course that this litigation has taken may have led them to become quite obsessed with details that the average incoming house purchaser will not share. These are attractive and saleable new build properties and, well, I believe that the figure that I have specified best allows for the principle that there should be some diminution in value recovered but that that figure should be an extremely modest one."

13. Mr Singer submits that the judge should not have awarded any damages under this head. He says that the judge wrongly failed to take into account the facts that the parties' structural experts agreed that structural and integrity issues had no material impact and that the brickwork quality did not of itself require remedial work. The figure awarded by the judge was so low as to be de minimis. There had to be some evidential basis for choosing a figure between the parties' respective contentions and Mr Singer submits there was none. The judge made no findings of fact on the basis of which he could reasonably have concluded that there was a diminution of value of £5,000 per property. He gave no reasons for rejecting the evidence of Mrs Hines. It was inappropriate to award damages on the basis of a judicial guesstimate. Finally he submits that it was wrong to find any residual diminution in value because there was no evidence that the claimants intended to sell their properties in the near future or at all. It was impossible to say whether, if and when they came to sell, there would be a residual diminution in value at that time.
14. I cannot accept that the judge did not give reasons for his conclusions. He said that the fear of further litigation would drive vendors into sufficient disclosure for the past history of defects and litigation to become known, and that that, together with the very small risk of further problems, was just sufficient to drive down the price for these properties, but only by a very modest amount. It seems to me that those were the reasons that the judge gave. I accept the submission of Mr French that in so holding the judge was preferring the evidence of Mr Brierley to that of Mrs Hines. As the judge said, both counsel conceded that it could not be said that a figure between the positions adopted by the valuers was unjustified. The judge was entitled to conclude that the figures contended for by Mr Brierley were too high in all the circumstances; but equally the factors that he had identified were not wholly immaterial. He was entitled to adopt a modest figure, particularly in the light of the concession made by counsel to which I have referred. The assessment of this head of damages did not admit of detailed or precise analysis. The use by the judge of the word "guesstimate" is perhaps unfortunate but it seems to me that that was merely a rather robust way of referring to what most judges would have described as an assessment.
15. We have been referred to the decision of HHJ Hicks QC in George Fischer Holding Limited v Multi Design Consultants Limited [1994] ORB 775, and in particular paragraphs 198 and 199 of his judgment. In paragraph 198 the judge said that a residual diminution in value of the property following the completion of remedial works is a recognised head of loss which can be the subject of an award of damages if the facts justify making such an award. At paragraph 199 he referred to the evidential dispute that there was in that case between the two experts. One expert was saying that there would be a residual diminution in value of £200,000, which amounted to nearly 3% of the value free of defects. The other expert said that there would be no residual diminution in value. The judge concluded: "I assess the diminution in value at £100,000".
16. Mr Singer accepts that in principle it is possible for a court to award damages for a residual diminution in value of property following the satisfactory completion of remedial works if it is satisfied that such a residual diminution in value has been proved on the evidence. In my judgment he is right to make that concession. I find it difficult to see on what basis it can properly be said as a matter of principle that such an award of damages cannot be made. It must always depend on the facts of the case. Mr Singer appeared to submit that this principle had little or no application in the case of residential property. He seeks to distinguish the Fischer case from the present case on the grounds that the Fischer case concerned a very substantial commercial property. I cannot accept that this is a proper or principled basis for distinguishing the two cases. If the evidence supports the conclusion that the proper carrying out of remedial works to a residential property will nevertheless result in there being a residual diminution in the value of the property, then I cannot see in principle why the claimant should not be awarded damages to reflect that diminution in value. Nor can I accept Mr Singer's submission that it was not open to the judge to award damages under that head because the claimants apparently had no present or fixed future intention to sell their properties. The fact that the claimants did not intend immediately to sell their properties did not mean that the assessment of the diminution in value involved a hypothetical exercise and guesswork as to what the market conditions would be at the time when, if that time did occur, the claimants came to sell their properties.
17. The time for carrying out the assessment was either the date of trial or the date when the remedial works were completed. For practical purposes, there is no difference between these two dates in the present case. It seems to me that the judge was entitled to award the damages that he did under this head, especially in the light of the concession made by counsel. I wish to emphasise that is only right to award damages under that head if there is cogent evidence of a residual diminution in value. In cases where what is being contended for is some modest residual diminution in value, a court may well conclude that it is not satisfied that it is appropriate to award damages under this head. As I have said, each case turns on its own facts.
18. For all the reasons that I have given I would uphold the judge's decision on the diminution of value issue and I would dismiss this appeal.

Lord Justice Wall:

19. I agree and do not wish to add anything.

Sir Anthony May:

20. I agree that this appeal should be dismissed for the reasons which Dyson LJ has given. He has referred to the unsatisfactory nature of the evidence of the reasonable cost of remedial works in this case required to the brickwork. This I think points to the truism that disputes as to the reasonable cost of remedial work will very often be avoided if the remedial works are actually carried out. The trouble in this case was that they have not been, and that certainly one and possibly both of the quotations before the court were in the nature of forensic exercises. The figures advanced by Westbury were, so it seems, hurriedly put together shortly before the hearing. The difficulties with them include that the Gunpoint scheme was not apparently an offered package put forward as capable in real life of being accepted by the claimants to effect the remedial works to which they have for so long been entitled. It was a forensic exercise intended to persuade the court that the reasonable cost of remedial works was much less than the claimants contended. Mr Singer confirmed that there was no offer from Persimmon to have the agreed works carried out as a full package by Gunpoint with Persimmon organising and paying for these and necessary ancillary works. If that had been an offer, I rather think that the history of the previous abortive attempts to remedy the defects might have made it reasonable for the claimants to decline to go down that path. Without such an offer, the claimants were apparently to be left to themselves to organise difficult remedial works with more than one organisation carrying them out. The Milton quotation was a complete package capable of being accepted as it stood.
21. These considerations, with all the other considerations to which Dyson LJ has referred and with which I agree, in my judgment support the judge's conclusion that the Westbury Gunpoint figures did not represent in all the circumstances the reasonable cost of remedial works. As to the diminution in value issue, I agree with what Dyson LJ has said and have nothing that I wish to add.
22. The appeal is accordingly dismissed.

Order: Appeal dismissed