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You are here: BAILII >> Databases >> United Kingdom House of Lords Decisions >> Farley v. Skinner [2001] UKHL 49 (11 October 2001)
URL: http://www.bailii.org/uk/cases/UKHL/2001/49.html
Cite as: [2001] 48 EG 131, [2001] NPC 146, [2002] 2 AC 732, [2001] 49 EG 120, [2001] 42 EGCS 139, [2001] 3 EGLR 57, [2002] TCLR 6, [2002] BLR 1, [2002] HLR 5, [2001] 3 WLR 899, [2001] 4 All ER 801, [2002] PNLR 2, 79 Con LR 1, [2001] UKHL 49

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Farley v. Skinner [2001] UKHL 49 (11th October, 2001)

HOUSE OF LORDS

Lord Steyn Lord Browne-Wilkinson Lord Clyde Lord Hutton Lord Scott of Foscote

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

FARLEY

(APPELLANT)

v.

SKINNER

(RESPONDENT)

ON 11 OCTOBER 2001

[2001] UKHL 49

LORD STEYN

My Lords,

1. The central question is whether a buyer, who employed a surveyor to investigate whether a property in the countryside was seriously affected by aircraft noise, may in principle recover non-pecuniary damages against the surveyor for the latter's negligent failure to discover that the property was so affected. The trial judge answered this question in the affirmative. A two-member Court of Appeal disagreed on it. The point was then re-argued before a three-member Court of Appeal. By a majority the Court of Appeal reversed the decision of the trial judge and ruled that there was no right to recover non-pecuniary damages in such cases. The second Court of Appeal was deluged with authorities. So was the House on the present appeal. The hearings of what was a comparatively simple case took up an exorbitant amount of time. This circumstance underlines the importance, in the quest for coherent and just solutions in such cases, of simple and practical rules.

I. Riverside House, aircraft noise and the surveyor

2. In 1990 the plaintiff, a successful businessman, contemplated retirement. He owned a flat in London, a house in Brighton and a property overseas. He wanted to buy a gracious country residence. He became interested in a beautiful property known as Riverside House in the village of Blackboys in Sussex which was situated some 15 miles from Gatwick International Airport. The property is in the heart of the countryside. There is a stream running through the middle of it. The property has a croquet lawn, tennis court, orchard, paddock and swimming pool. Although the attractive house required modernisation and refurbishment, it appeared to be ideal for the plaintiff. There was, however, one question mark over the transaction. For the plaintiff a property offering peace and tranquillity was the raison d'être of the proposed purchase. He wanted to be reasonably sure that the property was not seriously affected by aircraft noise.

3. The plaintiff engaged as his surveyor the defendant, who had been in practice as a sole practitioner for some years. The surveyor had to investigate the usual matters expected of a surveyor who inspects a property. In addition the plaintiff also specifically asked the surveyor to investigate, amongst other things, whether the property would be affected by aircraft noise. The plaintiff told the surveyor that he did not want a property on a flight path. The surveyor accepted these instructions.

4. On 17 December 1990 the surveyor sent his report to the plaintiff. From the plaintiff's point of view it was a satisfactory report. About aircraft noise the surveyor reported:

Comforted by this reassuring report the plaintiff decided to buy the property. The purchase price was £420,000 (which included £45,000 for chattels). The purchase was completed on 28 February 1991.

5. In the next few months the plaintiff caused the house to be modernised and refurbished at a total cost of about £125,000. During this period he was unaware that there was a significant problem associated with aircraft noise. On 13 June 1991 the plaintiff and his partner (who had a 32.74% beneficial interest) moved in. Since 1991 they had lived there three to four days a week for seven to nine months of the year.

6. After he moved in the plaintiff quickly discovered that the property was indeed affected by aircraft noise. In fact, the property was not far away from a navigation beacon (the Mayfield Stack) and at certain busy times, especially in the morning, the early evening, and at weekends, aircraft waiting to land at Gatwick would be stacked up maintaining a spiral course around the beacon until there was a landing slot at the airport. Aircraft frequently passed directly over, or nearly over, the position of the house. The impact of aircraft noise on the tranquillity of the property was marked. The property was undoubtedly affected by aircraft noise.

7. It is common ground that the plaintiff's enjoyment of the property was diminished by aircraft noise at those times when he was enjoying the amenities of the property outdoors and aircraft were stacked up, maintaining their spiral course around the beacon, waiting for a landing slot at the airport. Nevertheless, after initial vacillation, the plaintiff decided not to sell the property and he does not presently intend to do so.

II. The proceedings in the High Court

8. In due course the plaintiff claimed damages against the surveyor. The action came for trial before Judge Peter Baker QC sitting as a judge of the Queen's Bench Division in May 1999. The action was resolutely defended by the surveyor on all aspects of the claim. The judge accepted the plaintiff's account of his instructions to the defendant. I have already set out the instructions. The judge had to consider whether the defendant had been negligent. It was clear that the surveyor could have discovered the true position by checking with Gatwick. He did not do so. The judge found that the surveyor had been negligent and that, if the surveyor had carried out his instructions properly, the plaintiff would not have bought the property. The judge's conclusions on this aspect are not challenged on the appeal before the House.

9. The principal claim was one for a diminution of value of the property by reason of the negative effect of aircraft noise. The judge found that the purchase price coincided with the open market value of the property after taking into account aircraft noise. He accordingly dismissed the principal claim. There is also no challenge to this part of the judgment at first instance.

10. The judge then had to consider the plaintiff's claim for non-pecuniary damage. He accepted the evidence of Mr Attwood, a sound expert. The report of this expert summarised the general effect of the aircraft noise on Riverside House as follows:

The judge approached the claim in accordance with the law as stated in Watts v Morrow [1991] 1 WLR 1421. He upheld the plaintiff's claim.

For what he described as the discomfort that had been sustained by the plaintiff the judge awarded £10,000.

11. Immediately after this judgment was given counsel for the defendant invited the judge to deal specifically with one of his arguments, viz that the plaintiff's claim must be rejected because he had decided not to move house. The judge dealt with this point as follows:

Watts v Morrow

[1991] 1 WLR 1421

The judge's decision on the claim for non-pecuniary damages therefore stood.

III. The proceedings in the Court of Appeal

12. The surveyor appealed to the Court of Appeal. In November 1999 the matter came before Judge and Hale LJJ. The issue was whether as a matter of law the judge was entitled to make the award of non-pecuniary damages. The members of the court disagreed. Judge LJ thought that the judge's decision was correct and he would have dismissed the appeal. Hale LJ took the opposite view and would have allowed the appeal. For her the insuperable obstacle was that the surveyor had not guaranteed a result but had only undertaken a duty to exercise reasonable care. In the result the matter had to be re-argued.

13. In March 2000 the matter came before a three-member Court of Appeal [2000] Lloyd's Rep PN 516. In separate judgments the majority (Stuart-Smith and Mummery LJJ) held that the award of non-pecuniary damages was contrary to principle and allowed the appeal. In a detailed and powerful judgment Clarke LJ dissented. Stuart-Smith LJ concluded that the judge made the award on the ground that the breach of contract caused physical inconvenience and discomfort to the plaintiff. He found that the evidence did not justify this conclusion. He further held that the case fell beyond the reach of the exceptional category where the very object of the contract is to provide pleasure, relaxation, or peace of mind. He did so essentially for two separate reasons. First, in his view the particular obligation to investigate aircraft noise was "simply one relatively minor aspect of the overall instructions" (p 521). Secondly, there was not "an obligation to achieve a result" (p 523) but a mere obligation to exercise reasonable care. Mummery LJ agreed with Stuart-Smith LJ and reinforced his reasoning by reference to policy considerations of incommensurability, subjectivity and difficulties of proof involved in claims for mental distress flowing from breach of contract.

IV. The law

14. The judgments in the Court of Appeal and the arguments before the House took as their starting point the propositions enunciated by Bingham LJ in Watts v Morrow [1991] 1 WLR 1421. In that case the Court of Appeal had to consider a claim for damages for distress and inconvenience by a buyer of a house against his surveyor who had negligently failed to report defects in the house. Bingham LJ observed, at p 1445:

As Stuart-Smith LJ pointed out in the present case [2000] Lloyd's Rep PN 516, 519-522, the propositions of Bingham LJ have often been cited and applied.

15. But useful as the observations of Bingham LJ undoubtedly are, they were never intended to state more than broad principles. In Broome v Cassell & Co Ltd [1972] AC 1027 Lord Reid commented, at p 1085:

Rookes v Barnard

[1964] AC 1129

Bingham LJ would have had this truth about judicial decision making well in mind. So interpreted the passage cited is a helpful point of departure for the examination of the issues in this case. Specifically, it is important to bear in mind that Watts v Morrow [1991] 1 WLR 1421 was a case where a surveyor negligently failed to discover defects in a property. The claim was not for breach of a specific undertaking to investigate a matter important for the buyer's peace of mind. It was a claim for damages for inconvenience and discomfort resulting from breach. In Watts v Morrow [1991] 1 WLR 1421 therefore there was no reason to consider the case where a surveyor is in breach of a distinct and important contractual obligation which was intended to afford the buyer information confirming the presence or absence of an intrusive element before he committed himself to the purchase.

V. Recovery of non-pecuniary damages

16. The examination of the issues can now proceed from a secure foothold. In the law of obligations the rules governing the recovery of compensation necessarily distinguish between different kinds of harm. In tort the requirement of reasonable foreseeability is a sufficient touchstone of liability for causing death or physical injury: it is an inadequate tool for the disposal of claims in respect of psychiatric injury. Tort law approaches compensation for physical damage and pure economic loss differently. In contract law distinctions are made about the kind of harm which resulted from the breach of contract. The general principle is that compensation is only awarded for financial loss resulting from the breach of contract: Livingstone v Rawyards Coal Co (1880) 5 AppCas 25, 39, per Lord Blackburn. In the words of Bingham LJ in Watts as a matter of legal policy "a contract breaker is not in general liable for any distress, frustration, anxiety, displeasure, vexation, tension or aggravation which his breach of contract may cause to the innocent party" (my emphasis). There are, however, limited exceptions to this rule. One such exception is damages for pain, suffering and loss of amenities caused to an individual by a breach of contract: see McGregor on Damages, 16th ed, para 96, pp 56-57. It is not material in the present case. But the two exceptions mentioned by Bingham LJ, namely where the very object of the contract is to provide pleasure (proposition (2)) and recovery for physical inconvenience caused by the breach (proposition (3)), are pertinent. The scope of these exceptions is in issue in the present case. It is, however, correct, as counsel for the surveyor submitted, that the entitlement to damages for mental distress caused by a breach of contract is not established by mere foreseeability: the right to recovery is dependent on the case falling fairly within the principles governing the special exceptions. So far there is no real disagreement between the parties.

VI. The very object of the contract: The framework

17. I reverse the order in which the Court of Appeal considered the two issues. I do so because the issue whether the present case falls within the exceptional category governing cases where the very object of the contact is to give pleasure, and so forth, focuses directly on the terms actually agreed between the parties. It is concerned with the reasonable expectations of the parties under the specific terms of the contract. Logically, it must be considered first.

18. It is necessary to examine the case on a correct characterisation of the plaintiff's claim. Stuart-Smith LJ [2000] Lloyd's Rep PN 516, 521 thought that the obligation undertaken by the surveyor was "one relatively minor aspect of the overall instructions." What Stuart-Smith and Mummery LJJ would have decided if they had approached it on the basis that the obligation was a major or important part of the contract between the plaintiff and the surveyor is not clear. But the Court of Appeal's characterisation of the case was not correct. The plaintiff made it crystal clear to the surveyor that the impact of aircraft noise was a matter of importance to him. Unless he obtained reassuring information from the surveyor he would not have bought the property. That is the tenor of the evidence. It is also what the judge found. The case must be approached on the basis that the surveyor's obligation to investigate aircraft noise was a major or important part of the contract between him and the plaintiff. It is also important to note that, unlike in Addis v Gramophone Co Ltd [1909] AC 488, the plaintiff's claim is not for injured feelings caused by the breach of contract. Rather it is a claim for damages flowing from the surveyor's failure to investigate and report, thereby depriving the buyer of the chance of making an informed choice whether or not to buy resulting in mental distress and disappointment.

19. The broader legal context of Watts v Morrow [1991] 1 WLR 1421 must be borne in mind. The exceptional category of cases where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation is not the product of Victorian contract theory but the result of evolutionary developments in case law from the 1970s. Several decided cases informed the description given by Bingham LJ of this category. The first was the decision of the sheriff court in Diesen v Samson 1971 SLT (Sh Ct) 49. A photographer failed to turn up at a wedding, thereby leaving the couple without a photographic record of an important and happy day. The bride was awarded damages for her distress and disappointment. In the celebrated case of Jarvis v Swans Tours Ltd [1973] QB 233, the plaintiff recovered damages for mental distress flowing from a disastrous holiday resulting from a travel agent's negligent representations: compare also Jackson v Horizon Holidays Ltd [1975] 1 WLR 1468. In Heywood v Wellers [1976] QB 446, the plaintiff instructed solicitors to bring proceedings to restrain a man from molesting her. The solicitors negligently failed to take appropriate action with the result that the molestation continued. The Court of Appeal allowed the plaintiff damages for mental distress and upset. While apparently not cited in Watts v Morrow [1991] 1 WLR 1421, Jackson v Chrysler Acceptances Ltd [1978] RTR 474 was decided before Watts v Morrow. In Jackson's case the claim was for damages in respect of a motor car which did not meet the implied condition of merchantability in section 14 of the Sale of Goods Act 1893. The buyer communicated to the seller that one of his reasons for buying the car was a forthcoming touring holiday in France. Problems with the car spoilt the holiday. The disappointment of a spoilt holiday was a substantial element in the award sanctioned by the Court of Appeal.

20. At their Lordships' request counsel for the plaintiff produced a memorandum based on various publications which showed the impact of the developments already described on litigation in the county courts. Taking into account the submissions of counsel for the surveyor and making due allowance for a tendency of the court sometimes not to distinguish between the cases presently under consideration and cases of physical inconvenience and discomfort, I am satisfied that in the real life of our lower courts non-pecuniary damages are regularly awarded on the basis that the defendant's breach of contract deprived the plaintiff of the very object of the contract, viz pleasure, relaxation, and peace of mind. The cases arise in diverse contractual contexts, eg the supply of a wedding dress or double glazing, hire purchase transactions, landlord and tenant, building contracts, and engagements of estate agents and solicitors. The awards in such cases seem modest. For my part what happens on the ground casts no doubt on the utility of the developments since the 1970s in regard to the award of non-pecuniary damages in the exceptional categories. But the problem persists of the precise scope of the exceptional category of case involving awards of non-pecuniary damages for breach of contract where the very object of the contract was to ensure a party's pleasure, relaxation or peace of mind.

21. An important development for this branch of the law was Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344. The plaintiff had specified that a swimming pool should at the deep end have a depth of 7 feet 6 inches. The contractor failed to comply with his contractual obligation: the actual depth at the deep end was the standard 6 feet. The House found the usual "cost of cure" measure of damages to be wholly disproportionate to the loss suffered and economically wasteful. On the other hand, the House awarded the moderate sum of £2,500 for the plaintiff's disappointment in not receiving the swimming pool he desired. It is true that for strategic reasons neither side contended for such an award. The House was, however, not inhibited by the stance of the parties. Lord Mustill and Lord Lloyd of Berwick justified the award in carefully reasoned judgments which carried the approval of four of the Law Lords. It is sufficient for present purposes to mention that for Lord Mustill, at p 360, the principle of pacta sunt servanda would be eroded if the law did not take account of the fact that the consumer often demands specifications which, although not of economic value, have value to him. This is sometimes called the "consumer surplus": see Harris, Ogus and Philips, "Contract Remedies and the Consumer Surplus" (1979) 95 LQR 581. Lord Mustill rejected the idea that "the promisor can please himself whether or not to comply with the wishes of the promisee which, as embodied in the contract, formed part of the consideration for the price". Lords Keith of Kinkel and Bridge of Harwich agreed with Lord Mustill's judgment and with Lord Lloyd of Berwick's similar reasoning. Labels sometimes obscure rather than illuminate. I do not therefore set much store by the description "consumer surplus". But the controlling principles stated by Lord Mustill and Lord Lloyd are important. It is difficult to reconcile this decision of the House with the decision of the Court of Appeal [2000] Lloyd's Rep PN 516 in the present case. I will in due course return to the way in which the majority attempted to distinguish Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344. At this stage, however, I draw attention to the fact that the majority in the Court of Appeal, at p 521, regarded the relevant observations of Lord Mustill and Lord Lloyd as obiter dicta. I am satisfied that the principles enunciated in Ruxley's case in support of the award of £2,500 for a breach of respect of the provision of a pleasurable amenity have been authoritatively established.

VII. The very object of the contract: The arguments against the plaintiff's claim

22. Counsel for the surveyor advanced three separate arguments each of which he said was sufficient to defeat the plaintiff's claim. First, he submitted that even if a major or important part of the contract was to give pleasure, relaxation and peace of mind, that was not enough. It is an indispensable requirement that the object of the entire contract must be of this type. Secondly, he submitted that the exceptional category does not extend to a breach of a contractual duty of care, even if imposed to secure pleasure, relaxation and peace of mind. It only covers cases where the promiser guarantees achievement of such an object. Thirdly, he submitted that by not moving out of Riverside House the plaintiff forfeited any right to recover non-pecuniary damages.

23. The first argument fastened onto a narrow reading of the words "the very object of [the] contract" as employed by Bingham LJ in Watts v Morrow [1991] 1WLR 1421, 1445. Cases where a major or important part of the contract was to secure pleasure, relaxation and peace of mind were not under consideration in Watts v Morrow. It is difficult to see what the principled justification for such a limitation might be. After all, in 1978 the Court of Appeal allowed such a claim in Jackson v Chrysler Acceptances Ltd [1978] RTR 474 in circumstances where a spoiled holiday was only one object of the contract. Counsel was, however, assisted by the decision of the Court of Appeal in Knott v Bolton (1995) 11 Const LJ 375 which in the present case the Court of Appeal treated as binding on it. In Knott v Bolton an architect was asked to design a wide staircase for a gallery and impressive entrance hall. He failed to do so. The plaintiff spent money in improving the staircase to some extent and he recovered the cost of the changes. The plaintiff also claimed damages for disappointment and distress in the lack of an impressive staircase. In agreement with the trial judge the Court of Appeal disallowed this part of his claim. Reliance was placed on the dicta of Bingham LJ in Watts v Morrow [1991] 1 WLR 1421, 1445.

24. Interpreting the dicta of Bingham LJ in Watts v Morrow narrowly the Court of Appeal in Knott v Bolton ruled that the central object of the contract was to design a house, not to provide pleasure to the occupiers of the house. It is important, however, to note that Knott v Bolton was decided a few months before the decision of the House in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344. In any event, the technicality of the reasoning in Knott v Bolton, and therefore in the Court of Appeal judgments in the present case, is apparent. It is obvious, and conceded, that if an architect is employed only to design a staircase, or a surveyor is employed only to investigate aircraft noise, the breach of such a distinct obligation may result in an award of non-pecuniary damages. Logically the same must be the case if the architect or surveyor, apart from entering into a general retainer, concludes a separate contract, separately remunerated, in respect of the design of a staircase or the investigation of aircraft noise. If this is so the distinction drawn in Knott v Bolton and in the present case is a matter of form and not substance. David Capper, "Damages for Distress and Disappointment - The Limits of Watts v Morrow" (2000) 116 LQR 553, 556) has persuasively argued:

There is no reason in principle or policy why the scope of recovery in the exceptional category should depend on the object of the contract as ascertained from all its constituent parts. It is sufficient if a major or important object of the contract is to give pleasure, relaxation or peace of mind. In my view Knott v Bolton 11 Const LJ 375 was wrongly decided and should be overruled. To the extent that the majority in the Court of Appeal relied on Knott v Bolton their decision was wrong.

25. That brings me to the second issue, namely whether the plaintiff's claim is barred by reason of the fact that the surveyor undertook an obligation to exercise reasonable care and did not guarantee the achievement of a result. This was the basis upon which Hale LJ after the first hearing in the Court of Appeal thought that the claim should be disallowed. This reasoning was adopted by the second Court of Appeal and formed an essential part of the reasoning of the majority. This was the basis on which they distinguished Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344. Against the broad sweep of differently framed contractual undertakings, and the central purpose of contract law in promoting the observance of contractual promises, I am satisfied that this distinction ought not to prevail. It is certainly not rooted in precedent. I would not accept the suggestion that it has the pedigree of an observation of Ralph Gibson LJ in Watts v Morrow [1991] 1 WLR 1421, 1442B-D: his emphasis appears to have been on the fact that the contract did not serve to provide peace of mind, and so forth. As far as I am aware the distinction was first articulated in the present case. In any event, I would reject it. I fully accept, of course, that contractual guarantees of performance and promises to exercise reasonable care are fundamentally different. The former may sometimes give greater protection than the latter. Proving breach of an obligation of reasonable care may be more difficult than proving breach of a guarantee. On the other hand, a party may in practice be willing to settle for the relative reassurance offered by the obligation of reasonable care undertaken by a professional man. But why should this difference between an absolute and relative contractual promise require a distinction in respect of the recovery of non-pecuniary damages? Take the example of a travel agent who is consulted by a couple who are looking for a golfing holiday in France. Why should it make a difference in respect of the recoverability of non-pecuniary damages for a spoiled holiday whether the travel agent gives a guarantee that there is a golf course very near the hotel, represents that to be the case, or negligently advises that all hotels of the particular chain of hotels are situated next to golf courses? If the nearest golf course is in fact 50 miles away a breach may be established. It may spoil the holiday of the couple. It is difficult to see why in principle only those plaintiffs who negotiate guarantees may recover non-pecuniary damages for a breach of contract. It is a singlarly unattractive result that a professional man, who undertakes a specific obligation to exercise reasonable care to investigate a matter judged and communicated to be important by his customer can in Lord Mustill's words in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344, 360 "please himself whether or not to comply with the wishes of the promisee which, as embodied in the contract, formed part of the consideration for the price". If that were the law it would be seriously deficient. I am satisfied that it is not the law. In my view the distinction drawn by Hale LJ and by the majority in the Court of Appeal between contractual guarantees and obligations of reasonable care is unsound.

26. The final argument was that by failing to move out the plaintiff forfeited a right to claim non-pecuniary damages. This argument was not advanced in the Court of Appeal. It will be recalled that the judge found as a fact that the plaintiff had acted reasonably in making "the best of a bad job". The plaintiff's decision also avoided a larger claim against the surveyor. It was never explained on what legal principle the plaintiff's decision not to move out divested him of a claim for non-pecuniary damages. Reference was made to a passage in the judgment of Bingham LJ in Watts v Morrow [1991] 1 WLR 1421, 1445C. Examination showed, however, that the observation, speculative as it was, did not relate to the claim for non-pecuniary damages: see the criticism of Professor M P Furmston, "Damages - Diminution in Value or Cost of Repair? - Damages for Distress" (1993) 6 JCL 64, 65. The third argument must also be rejected.

27. While the dicta of Bingham LJ are of continuing usefulness as a starting point, it will be necessary to read them subject to the three points on which I have rejected the submissions made on behalf of the surveyor.

VIII. Quantum

28. In the surveyor's written case it was submitted that the award of £10,000 was excessive. It was certainly high. Given that the plaintiff is stuck indefinitely with a position which he sought to avoid by the terms of his contract with the surveyor I am not prepared to interfere with the judge's evaluation on the special facts of the case. On the other hand, I have to say that the size of the award appears to be at the very top end of what could possibly be regarded as appropriate damages. Like Bingham LJ in Watts v Morrow [1991] 1 WLR 1421, 1445H I consider that awards in this area should be restrained and modest. It is important that logical and beneficial developments in this corner of the law should not contribute to the creation of a society bent on litigation.

IX. Conclusion

29. In agreement with the reasoning of Clarke LJ I would therefore hold that the decision of the majority in the Court of Appeal was wrong. I would also reject the subsidiary written argument of counsel for the surveyor that the plaintiff was not entitled to his costs at trial.

X. Inconvenience and discomfort

30. It is strictly unnecessary to discuss the question whether the judge's decision can be justified on the ground that the breach of contract resulted in inconvenience and discomfort. It is, however, appropriate that I indicate my view. The judge had a great deal of evidence on aircraft noise at Riverside House. It is conceded that noise can produce a physical reaction and can, depending on its intensity and the circumstances, constitute a nuisance. Noise from aircraft is exempted from the statutory nuisance system and in general no action lies in common law nuisance by reason only of the flight of aircraft over a property: see section 6(1) of the Civil Aviation Act 1982 and McCracken, Jones, Pereira and Payne, Statutory Nuisance, 2001, 10.33. The existence of the legislation shows that aircraft noise could arguably constitute a nuisance. In any event, aircraft noise is capable of causing inconvenience and discomfort within the meaning of Bingham LJ's relevant proposition. It is a matter of degree whether the case passes the threshold. It is sufficient to say that I have not been persuaded that the judge's decision on this point was not open to him on the evidence which he accepted. For this further reason, in general agreement with Clarke LJ, I would rule that the decision of the Court of Appeal was wrong.

XI. Disposal

31. I would allow the appeal and restore the judge's decision.

LORD BROWNE-WILKINSON

My Lords,

32. I have had the advantage of reading in draft the speeches of my noble and learned friends, Lord Steyn and Lord Scott of Foscote. For the reasons they have given I too would allow the appeal.

LORD CLYDE

My Lords,

33. In December 1990 the appellant plaintiff, Graham Farley, was interested in buying a house at Blackboys, East Sussex. The trial judge described it as a beautiful house in a beautiful setting. It had a terrace, a croquet lawn, a tennis court, an orchard, a paddock and a swimming pool. The property is not very far from Gatwick Airport. He engaged the respondent defendant, a surveyor, to inspect and report on the property. He also asked him to report on certain specific matters, including whether the property would be affected by aircraft noise. The defendant did so, but it is now accepted that his report was negligent in relation to the aircraft noise. The plaintiff relied on the report and bought the property. Considerable work required to be done to the house and some time passed before the plaintiff was able to move in. He then discovered the extent of the aircraft noise. Had the defendant made an adequate investigation of the aircraft noise he would have ascertained the true position and the plaintiff would not have bought the property. His enjoyment of the amenity of the property outside the house has been diminished by aircraft noise. He has not sought to sell the property and does not intend to do so He claims damages for the impairment to his use and enjoyment of the property caused by aircraft noise.

34. Much weight in the argument was placed upon the observations of Bingham LJ in Watts v Morrow [1991] 1 WLR 1421, 1445. Having expressed the general rule that a contract-breaker is not in general liable for the distress and suchlike which may follow upon the breach, his Lordship continued:

In the ordinary case accordingly damages may be awarded for inconvenience, but not for mere distress; but where the contract is aimed at procuring peace or pleasure, then, if as a result of the breach of contract that expected pleasure is not realised, the party suffering that loss may be entitled to an award of damages for the distress.

35. It would detract from the importance of this summary in Watts v Morrow if the words used were to be treated as written in stone and subjected to the kind of analysis which might be more appropriate to a conveyancing document. The expression "physical inconvenience" may be traced at least to the judgment of Hobbs v London and South Western Railway Co (1875) LR 10 QB 111, 122, where in that case damages were awarded for the inconvenience suffered by the plaintiffs for having to walk between four and five miles home as a result of the train on which they had taken tickets to Wimbledon travelling instead to Esher. They had tried to obtain a conveyance but found that there was none to be had. A further claim was made for the consequences of an illness which the wife contracted as a result of the walk but that was refused by the Court of Appeal as too remote. The railway company paid into court £2 as being ample to cover the cost of a conveyance. They resisted a larger award for inconvenience, relying on the observations of Pollock CJ in Hamlin v Great Northern Railway Co (1856) 1 H & N 408, 411 to the effect a plaintiff could recover whatever damages naturally resulted from the breach of contract, "but not damages for the disappointment of mind occasioned by the breach of contract". Cockburn CJ referred, at p 115, to the claim which was allowed as one for "personal inconvenience". Blackburn J referred to it, at p 120, as an "inconvenience". Mellor J, at p 122, contrasted matters of "real physical inconvenience" with matters "purely sentimental". Archibald J observed, at p 124: "The case is not one of mere vexation, but it is one of physical inconvenience, which can in a sense be measured by money value…." It does not seem to me that there is any particular magic in the word "physical". It served in Hobbs's case to emphasise the exclusion of matters purely sentimental, but it should not require detailed analysis or definition. As matter of terminology I should have thought that "inconvenience" by itself sufficiently covered the kinds of difficulty and discomfort which are more than mere matters of sentimentality, and that "disappointment" would serve as a sufficient label for those mental reactions which in general the policy of the law will exclude.

36. In Hobbs's case the defendants were prepared to compensate the plaintiffs for the cost of a conveyance, even although they had not been able to find any. In the present case the defendant would be prepared to pay for the costs of sale and removal if the plaintiff had decided to sell because of the noise. It is said by the respondent that since he has decided to keep the house he is not entitled to any damages at all. But in Hobbs the plaintiffs were entitled to damages in respect of the inconvenience. It is hard to understand why a corresponding result should not follow here. That an award may be made in such circumstances is to my mind in line with the thinking of this House in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344. In that case there was a breach in the performance of a contract to provide a pleasurable amenity, a swimming pool. The cost of rebuilding it to conform to the required specification was an unreasonable and inappropriate measure of the damages. The House restored the judge's original award of general damages for loss of amenity. So also here, where the plaintiff has decided to remain in the property despite its disadvantage, he should not be altogether deprived by the law of any compensation for the breach of contract. It may be noticed in passing that in Hobbs's case the damages awarded for the inconvenience were substantially more than the cost of the conveyance. In the present case it seems that the cost of removal, for which at an earlier stage the plaintiff was claiming, far exceeded the sum awarded for inconvenience. But those differences do not affect the principle.

37. The judge found that the plaintiff was not a man of excessive susceptibility and he refers to the inconvenience he was suffering as "real discomfort". I do not consider it appropriate to explore the detail of the inconvenience as being "physical", either because it impacts upon his eardrums, or because it has some geographical element, such as the relative locations of the aircraft and the property, or the obviously greater audibility of their movements when the plaintiff is seeking to enjoy the amenity of the terrace and the gardens than when he is inside the house. In my view the real discomfort which the judge found to exist constituted an inconvenience to the plaintiff which is not a mere matter of disappointment or sentiment. It is unnecessary that the noise should be so great as to make it impossible for the plaintiff to sit at all on his terrace. Plainly it significantly interferes with his enjoyment of the property and in my view that inconvenience is something for which damages can and should be awarded.

38. As I have already noted the plaintiff's claim has been not for disappointment at the absence of the expected pleasure but for inconvenience. The claim related to the use and enjoyment of the property, but I do not understand this as intended to include injury to his personal feelings. The judge quoted from the headnote to Watts v Morrow [1991] 1 WLR 1421, 1422, where the summary is given in these terms: "(2) That in the case of the ordinary surveyor's contract general damages were recoverable only for distress and inconvenience caused by physical consequences of the breach of contract…" That formulation is no doubt prompted by such passages in the judgment of Ralph Gibson LJ, at p 1442C ("distress caused by physical consequences") and 1443D ("the physical consequence of such a breach"). But elsewhere he uses the expression "physical discomfort or inconvenience resulting from the breach…" (eg at p 1440B-C) and the language of Bingham LJ, at p 1445, which I have already quoted is in like terms. But it seems plain that the judge was proceeding upon the basis that this was an ordinary surveyor's contract and the award which he sought to make was intended to be within the guidance which Watts v Morrow gave him on that approach. That is to say that it was not an award falling within the exceptional category noted in Watts v Morrow. He recorded that the plaintiff found the noise to be a "confounded nuisance", but the award which he made was intended to meet the "real discomfort" which he found the plaintiff to be suffering. It seems to me that he decided the case as an ordinary example of inconvenience following on a breach of contract. In my view he was entitled to make an award on that basis. While the judge thought that the award would be regarded by the plaintiff as almost derisory I would regard it as almost erring on the side of generosity. But I would not interfere with it. In my view the appeal can be allowed on the foregoing basis.

39. But it is possible to approach the case as one of the exceptional kind in which the claim would be for damages for disappointment. If that approach was adopted so as to seek damages for disappointment, I consider that it should also succeed.

40. It should be observed at the outset that damages should not be awarded, unless perhaps nominally, for the fact of a breach of contract as distinct from the consequences of the breach. That was a point which I sought to stress in Panatown Ltd v Alfred McAlpine Construction Ltd [2000] 4 All ER 97. For an award to be made a loss or injury has to be identified which is a consequence of the breach but not too remote from it, and which somehow or other can be expressed and quantified in terms of a sum of money. So disappointment merely at the fact that the contract has been breached is not a proper ground for an award. The mere fact of the loss of a bargain should not be the subject of compensation. But that is not the kind of claim which the plaintiff is making here. What he is seeking is damages for the inconvenience of the noise, the invasion of the peace and quiet which he expected the property to possess and the diminution in his use and enjoyment of the property on account of the aircraft noise.

41. The critical factor on this approach, as it seems to me, is that the plaintiff made the specific request of the defendant to discover whether the property might be affected by aircraft noise. It is suggested that because this point was wrapped up together with a number of other matters in the instructions given by the plaintiff it cannot be regarded as constituting the "very object" of the contract. But that approach seems to me simply to be playing with words. What is referred to as a breach of contract is often a breach of a particular provision in a contract. The effect of that breach may affect the continued existence of the other terms of the contract, so as to bring the whole to an end. But the point which is the focus of concern is a particular provision in the whole agreement. I can see no reason for distinguishing the present case from a situation where the plaintiff had instructed the defendant simply to advise on the matter of aircraft noise, having already obtained a survey report covering all the other matters. The defendant's argument gained some support from Knott v Bolton (1995) 11 Const LJ 375 where the Court of Appeal regarded the failure to provide the wide staircase and gallery which the clients had particularly requested as the main object of the contract with the architects was held to be the designing of the house, not the giving of pleasure in respect of the staircase and the gallery. In so far as the court proceeded on the basis that the contract could only be regarded as a whole I consider that it was mistaken. The approach involves a very literal reading of the passage in Watts v Morrow [1991] 1 WLR 1421, to which I have already referred.

42. What was said in Watts v Morrow must be seen in the context of the case. It is instructive to refer to a passage in the judgment of Ralph Gibson LJ with which Bingham LJ was expressly in complete agreement. He said, at p 1442, of the proposition that the contract in that case was a contract whose subject matter was to provide peace of mind or freedom from distress:

The present case is not an "ordinary surveyor's contract". The request for the report on aircraft noise was additional to the usual matters expected of a surveyor in the survey of a property and could properly have attracted a extra fee if he had spent extra time researching that issue. It is the specific provision relating to the peacefulness of the property in respect of aircraft noise which makes the present case out of the ordinary. The criterion is not some general characteristic of the contract, as, for example, that it is or is not a "commercial" contract. The critical factor is the object of the particular agreement.

43. The defendant, following something of the thinking in the second hearing before the Court of Appeal in the present case, sought to take from the passage in the judgment of Ralph Gibson LJ in Watts v Morrow, at p 1442, support for an argument that while damages for distress might be granted in the case of a breach of a warranty for the provision of peace and quiet, an award should not be permitted where the case is one of a failure to exercise reasonable skill and care in the performance of a contractual obligation to provide information. I am not persuaded that that can fairly be taken from the passage in question nor that the alleged consequence follows from the distinction. There would be no sufficient logic in allowing damages for inconvenience where the travel agent warrants that the client will have peace and quiet on the beach at Brighton and refusing damages where he negligently advises his client that that beach would be a place to find peace and quiet. Nor does it seem to me that the distinction is one supported by precedent. On the contrary Heywood v Wellers [1976] QB 446 was a case of negligent advice by a solicitor where an award for the consequent distress was made.

44. The object of the request to consider the risk of aircraft noise was very plainly to enable the plaintiff to determine the extent of the peace and quiet which he could enjoy at the property. It would be within the contemplation of the defendant that if the noise was such as to interfere with the occupier's peaceful enjoyment of the property the plaintiff would either not buy it at all or live there deprived of his expectation of peace and quiet. Each of these consequences seems to me to flow directly from the breach of contract so as to enable an award of damages to be made on one or other basis. The present case can in my view qualify as one of the exceptional cases where a contract for peace or pleasure has been made and breached, thereby entitling the injured party to claim damages for the disappointment occasioned by the breach.

45. For the foregoing reasons I would allow the appeal and restore the judge's award.

LORD HUTTON

My Lords,

46. I have had the advantage of reading in draft the speech of my noble and learned friend Lord Steyn and I gratefully adopt his account of the facts of the case and of the issues to which they give rise and I can therefore proceed to state my opinion on those issues. I consider first the question whether the plaintiff is entitled to recover damages to compensate him for the annoyance and nuisance from aircraft noise to which the defendant's breach of contract exposed him, the judge having found that the plaintiff would not have bought the house if the defendant, as he should have done under the contract, had advised him of the true position in relation to aircraft noise. I propose to consider this issue on the assumption (contrary to the opinion which I express later) that the annoyance and nuisance from aircraft noise did not constitute physical inconvenience and discomfort.

The principle, and the exception to it, stated in Watts v Morrow

47. It is clearly established as a general rule that where there has been a breach of contract damages cannot be awarded for the vexation or anxiety or aggravation or similar states of mind resulting from the breach. The principle was stated by Bingham LJ in Watts v Morrow [1991] 1 WLR 1421, 1445:

This general principle has recently been approved by this House in Johnson v Gore Wood & Co [2001] 2 WLR 72 . The principle has particular application to commercial cases and in Johnson v Gore Wood & Co Lord Cooke of Thorndon observed, at p 108, that :

But the principle is not applicable in every case and in Watts v Morrow [1991] 1 WLR 1421 Bingham LJ went on to state, at p 1445, that there was an exceptional category of cases which he described as follows:

Bingham LJ. then stated:

Cases such as Jarvis v Swans Tours Ltd [1973] QB 233 where a travel company in breach of contract fails to provide the holiday for which the plaintiff has paid and damages are awarded for mental distress, inconvenience, upset, disappointment and frustration are examples of this exception to the general principle.

48. In addition, the speeches of Lord Mustill and Lord Lloyd of Berwick (with which Lord Keith of Kinkel and Lord Bridge of Harwich agreed) in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 established that in some cases the plaintiff, notwithstanding that he suffers no financial loss, should be compensated where the defendant is in breach of a contractual obligation. In that case a contractor contracted to build a swimming pool for a householder in his garden. The contract specified that the pool should have a maximum depth of 7 feet 6 inches but, as built, the maximum depth was only 6 feet. The trial judge found that the pool as constructed was perfectly safe to dive into and that the shortfall in depth had not decreased the value of the pool. The judge held that the householder was entitled to damages of £2,500 for loss of amenity and rejected his claim for the cost of reinstatement which would have involved demolition of the existing pool and the reconstruction of a new one, on the ground that the cost of reinstatement was an unreasonable claim in the circumstances. The Court of Appeal held that the householder was entitled to recover the cost of reinstatement amounting to £21,560. This House held that reinstatement would be unreasonable and the expense of the work involved would be out of all proportion to the benefit to be obtained. But the speeches of Lord Mustill and Lord Lloyd of Berwick are important in relation to the present case because they considered the entitlement of a party to a building contract to recover damages for breach of contract where he was not entitled to the cost of reinstatement and where the breach had not caused diminution in the market value of the property. Their conclusion was that in such a case justice required that reasonable damages should be awarded. Lord Mustill stated, at p 360:

Radford v. De Froberville

And he stated, at pp 360-361, that in some cases:

49. In his speech Lord Lloyd referred, at p 374, to the general rule that in claims for breach of contract the plaintiff cannot recover damages for his injured feelings and referred to the exception to this rule, as exemplified in the holiday cases, that a plaintiff may recover damages for his disappointment where the object of a contract is to afford pleasure. He stated that this was the principle which the trial judge had applied and he held that the judge had been entitled to award £2,500 to the householder on the ground that the contract was one "for the provision of a pleasurable amenity", and in the event the householder's pleasure was not as great as it would have been if the pool had been 7 feet 6 inches deep. He then stated:

G W Atkins Ltd v Scott

50. Whilst Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 was concerned with the proper measure of damages for breach of a construction contract, I consider that the principle stated in it can be of more general application and that, as Lord Mustill stated, at p 360, there are some occasions "where the value of the promise to the promisee exceeds the financial enhancement of his position which full performance will secure" and for which the law must provide a remedy. In my opinion the present case falls within the ambit of this principle as the defendant in breach of contract failed to alert the plaintiff to the presence of aircraft noise with the result that the plaintiff bought a house which he would not have bought if he had been made aware of the true position.

51. Counsel for the defendant submitted that even if it were right to extend the exception as exemplified by the holiday cases to other cases, nevertheless the exception must be confined to cases where, in the words of Bingham LJ in Watts v Morrow [1991] 1 WLR 1421, 1445, "the very object of a contract" is to provide the benefit which the promisee regards as being of particular importance to him. This argument was accepted by Hale LJ in the first hearing before the Court of Appeal and by Stuart Smith and Mummery LLJ in the second hearing. I am unable to accept this submission because I can see no reason in principle why, if a plaintiff who has suffered no financial loss can recover damages in some cases if there has been a breach of the principal obligation of the contract, he should be denied damages for breach of an obligation which, whilst not the principal obligation of the contract, is nevertheless one which he has made clear to the other party is of importance to him. It is clear from the speech of Lord Mustill in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344, 360 that he considered that a householder may obtain damages for comparatively minor deviations from specification or sound workmanship which do not cause any diminution in the value of the house. And it is clear that in that case the obligation to build a pool 7 feet 6 inches deep as opposed to 6 feet deep could not be regarded as the principal obligation or the very object of the contract.

52. In Knott v Bolton (1995) 11 Const LJ 375 the defendant architect was given instructions to include in his design of a house a wide staircase with a gallery area and an imposing and impressive entrance hall and he failed to carry out these instructions. The plaintiff sought to recover general damages for the disappointment and distress they suffered by reason of this failure, but their claim was rejected by the trial judge and the Court of Appeal. In a judgment delivered some months before the decision of the House in Ruxley Electronics and Construction Ltd v Forsyth, Russell LJ laid emphasis, at p 376, on the words "the very object of [the] contract" in Bingham LJ's judgment in Watts v Morrow [1991] 1 WLR 1421, 1445 and stated:

I consider, with respect, that in that case the Court of Appeal was led into error by concentrating too much on the concept of the provision of pleasure - the correct approach would have been to have taken the view later expressed by Lord Mustill in his speech in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344, 360B and to have held that the plaintiffs were entitled to recover some reasonable damages because they were entitled to say that they chose to obtain from the architect a promise to produce a particular design in order to make the house conform to their own particular tastes and wishes. Accordingly I consider that the decision of the Court of Appeal in Knott v Bolton 11 Const LJ 375 should not be followed.

53. I further consider that there is no valid distinction between a case where a party promises to achieve a result and a case where a party is under a contractual obligation to take reasonable care to achieve a result. Suppose a case where a householder's enjoyment of his garden is spoilt by an unpleasant smell from a septic tank at the bottom of the garden and he employs a company to clean out the tank. If the contract constituted a promise by the company to clean out the tank and it failed to do so, with the result that the smell continued, I think that in accordance with the principle stated by Lord Mustill in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344, 360-361 the householder would be entitled to recover a modest sum of damages for the annoyance caused by the continuation of the smell. But if the contract provided that the company would exercise reasonable care and skill to clean out the tank and due to its negligence the tank was not cleaned out, I consider that the householder would also be entitled to damages.

54. Whilst I do not accept the submission advanced on behalf of the defendant that, where there is no pecuniary loss, damages can only be recovered where the claim is for breach of an obligation which is the very object of the contract, I think that (other than in building contract cases where the principle stated by Lord Mustill in Ruxley Electronics and Construction Ltd v Forsyth, at p 360, gives direct guidance) there is a need for a test which the courts can apply in practice in order to preserve the fundamental principle that general damages are not recoverable for anxiety and aggravation and similar states of mind caused by a breach of contract and to prevent the exception expanding to swallow up, or to diminish unjustifiably, the principle itself. It will be for the courts, in the differing circumstances of individual cases, to apply the principles stated in your Lordships' speeches in this case, and the matter is not one where any precise test or verbal formula can be applied but, adopting the helpful submissions of counsel for the plaintiff, I consider that as a general approach it would be appropriate to treat as cases falling within the exception and calling for an award of damages those where:

1. the matter in respect of which the individual claimant seeks damages is of importance to him, and

2. the individual claimant has made clear to the other party that the matter is of importance to him, and

3. the action to be taken in relation to the matter is made a specific term of the contract.

If these three conditions are satisfied, as they are in the present case, then I consider that the claim for damages should not be rejected on the ground that the fulfilment of that obligation is not the principal object of the contract or on the ground that the other party does not receive special and specific remuneration in respect of the performance of that obligation.

55. Counsel for the defendant submitted that the award of damages of £10,000 was manifestly excessive as it constituted compensation for the inconvenience and annoyance from the aircraft noise which the plaintiff would continue to suffer for an indefinite period in the future. In support of this submission counsel relied on the observation of Bingham LJ in Watts v Morrow [1991] 1 WLR 1421, 1445:

Therefore counsel submitted that the damages should have been restricted to compensation for inconvenience and annoyance suffered for one year, that being a reasonable time during which the plaintiff could have moved house; after the period of a year, the inconvenience and annoyance suffered by the plaintiff could not be regarded as caused by default of the defendant.

56. I am unable to accept that submission. I consider that in the circumstance of this case where the plaintiff had expended a considerable sum of money in improving the house before he was aware of the defendant's failure to inform him of aircraft noise, and where he would have had to incur very considerable expense in selling and buying a new house and moving to it, it was reasonable for him to decide to stay in the house, even though that involved putting up with the noise, and I think that the trial judge was right to reject the defendant's argument on this point.

Physical inconvenience and discomfort

57. The second principal issue which arises on this appeal is whether, as a separate ground, the plaintiff is entitled to recover damages because the aircraft noise constituted physical inconvenience and discomfort which he suffered as a consequence of the defendant's breach of contract. The authorities cited and analysed by Clarke LJ in his judgment make it clear, as he observes [2000] Lloyd's Rep 516, 527, that damages are recoverable for physical inconvenience and that it is not necessary to establish any kind of physical injury or loss. Thus in Hobbs v London and South Western Railway Co (1875) LR 10 QB 111, Cockburn CJ stated, at p 117:

Mellor J stated, at pp 122-123:

And Archibald J stated, at p 124:

58. I also consider that Barry J. in Bailey v Bullock [1950] 2 All ER 1167, 1170-1171 and Beldam LJ in Wapshott v Davis Donovan & Co [1996] PNLR 361, 378 were right to emphasise that there is a distinction between mere annoyance or disappointment at the failure of the other party to carry out his contractual obligation and actual physical inconvenience and discomfort caused by the breach. Therefore the judge was entitled to award damages to the plaintiff for the annoyance caused to him by the aircraft noise if the noise constituted physical inconvenience and discomfort.

59. In his careful judgment the judge expressly referred to one head of damages discussed in Watts v Morrow [1991] 1 WLR 1421 and cited part of the headnote which states:

Therefore the judge clearly had in mind that damages could only be awarded for physical inconvenience and discomfort. He subsequently stated at page 17 of his judgment that the plaintiff had sustained "real discomfort". The fact that the judge also stated that the plaintiff found the noise "a confounded nuisance" does not, in my opinion, mean that the noise could not be regarded as a physical inconvenience and discomfort. No doubt as Mr Hobbs walked home after midnight with his wife and children the four or five miles from Esher station through the drizzling rain he thought that the walk was a confounded nuisance, but that did not disentitle him from recovering damages for physical inconvenience and discomfort.

60. The aircraft noise was something which affected the plaintiff through his hearing and can be regarded as having a physical effect upon him, and on the evidence which was before him I consider that it was open to the judge to find that the plaintiff suffered physical inconvenience and discomfort.

61. I agree with Judge and Clarke LLJ that on first impression the award of £10,000 damages appears to be a very high one, but I also agree with them that this is a very unusual case where the inconvenience and discomfort caused to the plaintiff will continue, and on further consideration I do not consider that it would be right for an appellate court to set aside the award as being excessive. Therefore I would allow the appeal and restore the order of the judge.

LORD SCOTT OF FOSCOTE

My Lords,

62. This is a case with simple facts, a short question and, in my respectful opinion, a simple answer.

63. The plaintiff, Mr Farley, wanted to purchase a house in the country. Riverside House at Blackboys, Sussex was on the market. It seemed to fit the bill. It was, however, 15 miles or so from Gatwick Airport. Mr Farley was anxious that his rural retreat should not be affected by aircraft noise. He instructed Mr Skinner, the defendant, who is a chartered surveyor, to inspect the property and report on its general and structural condition. He asked Mr Skinner, also, to report on whether, in view of the proximity of the property to Gatwick Airport, the property would be affected by aircraft noise. Mr Skinner accepted these instructions. On 17 December 1990 Mr Skinner provided Mr Farley with a detailed 38-page report. The report contained, on p 35, a paragraph about aircraft noise. The paragraph indicted Mr Skinner's opinion that it was "unlikely that the property will suffer greatly from such noise . . ."

64. Unfortunately, Mr Skinner had made inadequate inquiries about aircraft noise and, in particular, had not discovered that within a few miles from the property was the Mayfield Stack, an area where aircraft waiting to land at Gatwick were directed to circle until the airport was ready to receive them and from where their route to the airport frequently passed over or near to Blackboys.

65. It was found by the trial judge, and is accepted before your Lordships, that Mr Skinner's failure to find out about the Mayfield Stack and to draw its implications to Mr Farley's attention was an inadequate contractual response to his instructions about aircraft noise.

66. In short, Mr Skinner was in breach of contract. His client, Mr Farley, is entitled in principle to be compensated in damages for the breach.

67. Mr Farley gave evidence that if he had received from Mr Skinner the information about aircraft noise to which he, Mr Farley, was contractually entitled, he would not have purchased Riverside House. This evidence was accepted by the judge. But, in the event, in reliance on the contractually inadequate information about aircraft noise that he had received from Mr Skinner, Mr Farley purchased the property.

68. Having purchased the property, Mr Farley put in hand fairly extensive works of modernisation and renovation. It was only after these had been carried out that he moved in and took up residence. It was then that he discovered that the property was affected by aircraft noise. The degree of discomfort caused by noise is always to some extent subjective. There was evidence that many, perhaps most, of the residents in the area were not troubled by the noise. But Mr Farley was.

69. He gave evidence that it interfered with his enjoyment of a quiet, reflective breakfast, a morning stroll in his garden or pre-dinner drinks. The trial judge having heard the evidence, concluded that "real discomfort . . . has been sustained by Mr Farley in this case".

70. It is accepted by Mr Simpson, counsel for Mr Skinner, that if Mr Farley, on becoming aware of the extent of the aircraft noise, had decided to re-sell, Mr Skinner would have been liable to compensate him at least for the costs of re-selling. But, having had the house modernised and renovated to his taste, and no doubt having become attached to the house, Mr Farley decided not to sell. But nonetheless, feeling that he ought to be compensated for Mr Skinner's breach of contract, he commenced an action for damages.

71. He claimed damages on the footing that the true value of the property, affected by the aircraft noise, was substantially less than the price he had paid. On this issue, however, the judge concluded that the aircraft noise that upset Mr Farley did not result in any diminution in the value of the property.

72. Mr Farley claimed damages on the footing, also, that:

The judge held that Mr Farley was entitled to damages for impairment of use and enjoyment and awarded him £10,000.

73. Mr Skinner appealed. The issue on appeal was whether, in law, Mr Farley was entitled to contractual damages for impairment of his enjoyment of Riverside House. My noble and learned friend, Lord Steyn, has described the course of proceedings in the Court of Appeal and it suffices for me to say that two Lords Justices held that he was, three held that he was not, and it is now for your Lordships to resolve the issue.

74. The reason why such an apparently straightforward issue has caused such division of opinion is because it has been represented as raising the question whether and when contractual damages for mental distress are available. It is highly desirable that your Lordships should resolve the present angst on this subject and avoid the need in the future for relatively simple claims, such as Mr Farley's, to have to travel to the appellate courts for a ruling.

75. In my opinion, the issue can and should be resolved by applying the well known principles laid down in Hadley v Baxendale (1854) 9 Exch 341 (as restated in Victoria Laundry Ltd v Newman Industries Ltd [1949] 2 KB 528) in the light of the recent guidance provided by Bingham LJ in Watts v Morrow [1991] 1 WLR 1421 and by this House in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344.

76. The basic principle of damages for breach of contract is that the injured party is entitled, so far as money can do it, to be put in the position he would have been in if the contractual obligation had been properly performed. He is entitled, that is to say, to the benefit of his bargain: see Robinson v Harman (1848) 1 Exch 850, 855.

77. In Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 builders had agreed to construct a swimming pool with a diving area 7 feet 6 inches deep. The pool when constructed had a depth of only 6 feet. The cost of rebuilding the pool to the contractual depth would have been £21,560. But the trial judge, having heard the evidence, concluded that the pool owner did not have the intention of using the damages to reconstruct the pool. He found also that the residential property of which the pool formed part had suffered no diminution in value by reason of the lack of one foot of depth in the pool's diving area. Nonetheless the pool owner claimed the £21,500 as damages. The builders, on the other hand, contended that, on the facts as found, the pool owner had suffered no loss and the damages should be nil. The trial judge accepted neither contention but instead awarded the £2,500 expressed as compensation for "a loss of amenity brought about by the shortfall in depth" (see at p 363). The Court of Appeal [1994] 1 WLR 650 set aside the £2,500 award and substituted an award of the cost of rebuilding, ie the £21,560. This House restored the trial judge's order.

78. Lord Mustill [1996] AC 344, 360 referred to situations where, in the carrying out of building works on residential property, there had been minor deviations from the contractual specifications but where the deviations had not reduced the value of the property below the value it would have had if the work had been properly carried out. He went on:

Radford v De Froberville

Lord Lloyd of Berwick, to the same effect, said, at p 374:

79. Ruxley's case establishes, in my opinion, that if a party's contractual performance has failed to provide to the other contracting party something to which that other was, under the contract, entitled, and which, if provided, would have been of value to that party, then, if there is no other way of compensating the injured party, the injured party should be compensated in damages to the extent of that value. Quantification of that value will, in many cases be difficult and may often seem arbitrary. In Ruxley's case the value placed on the amenity value of which the pool owner had been deprived was £2,500. By that award, the pool owner was placed, so far as money could do it, in the position he would have been in if the diving area of the pool had been constructed to the specified depth.

80. In Ruxley's case the breach of contract by the builders had not caused any consequential loss to the pool owner. He had simply been deprived of the benefit of a pool built to the depth specified in the contract. It was not a case where the recovery of damages for consequential loss consisting of vexation, anxiety or other species of mental distress had to be considered.

81. In Watts v Morrow [1991] 1 WLR 1921, however, that matter did have to be considered. As in the present case, the litigation in Watts v Morrow resulted from a surveyor's report. The report had negligently failed to disclose a number of defects in the property. The clients, who had purchased the property in reliance on the report, remedied the defects and sued for damages. The judge awarded them the costs of the repairs and also general damages of £4,000 each for "distress and inconvenience" (p 1424). As to the cost of repairs, the Court of Appeal substituted an award of damages based on the difference between the value of the property as the surveyor's report had represented it to be and the value as it actually was. Nothing, for present purposes, turns on that. As to the damages for "distress and inconvenience" the Court of Appeal upheld the award in principle but held that the damages should be limited to a modest sum for the physical discomfort endured and reduced the award to £750 for each plaintiff. Bingham LJ, at p 1445, in an important passage, set out the principles to be applied where contractual damages for distress and inconvenience are claimed:

82. In the passage I have cited, Bingham LJ was dealing with claims for consequential damage consisting of the intangible mental states and sensory experiences to which he refers. Save for the matters referred in the first paragraph, all of which reflect or are brought about by the injured party's disappointment at the contract breaker's failure to carry out his contractual obligations, and recovery for which, if there is nothing more, is ruled out on policy grounds, Bingham LJ's approach is, in my view, wholly consistent with established principles for the recovery of contractual damages.

83. There are, however, two qualifications that I would respectfully make to the proposition in the final paragraph of the cited passage that damages "for physical inconvenience and discomfort caused by the breach" are recoverable.

84. First, there will, in many cases, be an additional remoteness hurdle for the injured party to clear. Consequential damage, including damage consisting of inconvenience or discomfort, must, in order to be recoverable, be such as, at the time of the contract, was reasonably foreseeable as liable to result from the breach: see McGregor on Damages, 16th ed (1997), para 250, pp 159-160.

85. Second, the adjective "physical", in the phrase "physical inconvenience and discomfort", requires, I think, some explanation or definition. The distinction between the "physical" and the "non-physical" is not always clear and may depend on the context. Is being awoken at night by aircraft noise "physical"? If it is, is being unable to sleep because of worry and anxiety "physical"? What about a reduction in light caused by the erection of a building under a planning permission that an errant surveyor ought to have warned his purchaser-client about but failed to do so? In my opinion, the critical distinction to be drawn is not a distinction between the different types of inconvenience or discomfort of which complaint may be made but a distinction based on the cause of the inconvenience or discomfort. If the cause is no more than disappointment that the contractual obligation has been broken, damages are not recoverable even if the disappointment has led to a complete mental breakdown. But, if the cause of the inconvenience or discomfort is a sensory (sight, touch, hearing, smell etc) experience, damages can, subject to the remoteness rules, be recovered.

86. In summary, the principle expressed in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 should be used to provide damages for deprivation of a contractual benefit where it is apparent that the injured party has been deprived of something of value but the ordinary means of measuring the recoverable damages are inapplicable. The principle expressed in Watts v Morrow [1991] 1 WLR 1421 should be used to determine whether and when contractual damages for inconvenience or discomfort can be recovered.

87. These principles, in my opinion, provide the answer, not only to the issue raised in the present case, but also to the issues raised in the authorities which were cited to your Lordships.

88. In Hobbs v London and South Western Railway Co (1875) LR 10 QB 111 the claim was for consequential damage caused by the railway company's breach of contract. Instead of taking the plaintiff, his wife and two children to Hampton Court, their train dumped them at Esher and they had to walk five miles or so home in the rain. The plaintiff's wife caught a cold as a result of the experience. The plaintiff was awarded damages for the inconvenience and discomfort of his and his family's walk home but his wife's cold was held to be too remote a consequence. The plaintiff's recovery of damages attributable, in part, to the discomfort suffered by his wife and children was in accordance with principle. The contractual benefit to which he was entitled was the carriage of himself and his family to Hampton Court. It was reasonable in my opinion, to value that benefit, of which he had been deprived by the breach of contract, by reference to the discomfort to the family of the walk home. This was, in my view, a Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 case.

89. Jarvis v Swans Tours Ltd [1973] QB 233 was a case in which the plaintiff had contracted for a holiday with certain enjoyable qualities. He had been given a holiday which lacked those qualities. His holiday had caused him discomfort and distress. The trial judge awarded him £31.72, one half of the price of the holiday. This must, I think have been the value attributed by the judge to the contractual benefit of which the plaintiff had been deprived. But on the plaintiff's appeal against so low an award, the Court of Appeal allowed him £125.

90. Somewhat different reasons were given by the three members of the court. Lord Denning MR said, at pp 237-238:

The reference in this passage to the "contract for a holiday, or any other contract to provide entertainment and enjoyment" is consistent with an intention to compensate the plaintiff for the contractual benefit of which he had been deprived. The reference, however, to "the disappointment, the distress …" etc reads like a reference to consequential damage.

91. Edmund Davies LJ based his decision on the defendant's failure to provide a holiday of the contractual quality". He held that the amount of damages was not limited by the price for the holiday. He said, at p 239:

He regarded the plaintiff's vexation and disappointment as relevant matters to take into account in "determining what would be proper compensation for the defendants' marked failure to fulfil their undertaking". This was a Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 approach. Stephenson LJ, at p 240, based his decision on the "reasonable contemplation of the parties … as a likely result of [the holiday contract] being so broken". He said, at pp 240-241, that where there are contracts "in which the parties contemplate inconvenience on breach which may be described as mental: frustration, annoyance, disappointment ….." damages for breach should take that inconvenience into account. This was a Watts v Morrow [1991] 1 WLR 1421 approach.

92. Jackson v Horizon Holidays Ltd [1975] 1 WLR 1468 was a case brought by another disappointed holiday-maker. He had booked a holiday for himself, his wife and children. Its quality turned out to be substantially below contractually justified expectations. The plaintiff recovered £1,100 damages as compensation not only for his own discomfort but also for the discomfort experienced by his wife and children. In my opinion, the justification for such an award is that the plaintiff was entitled to be compensated for the value of the contracted benefit of which he had been deprived. This case, like Jarvis v Swans Tours Ltd, [1973] QB 233, 239 per Edmund Davies LJ, and like Hobbs v London and South Western Railway Co LR 10 QB 111 is a Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 type of case.

93. Knott v Bolton 11 Const LJ 375 is, in my opinion, inconsistent with Ruxley's case and should now be regarded as having been wrongly decided. The plaintiffs had been deprived of the wide staircase and gallery and baronial entrance hall to which they were contractually entitled and had to put up with lesser facilities. A value should, in my opinion, have been placed on the benefit of which they had been deprived.

94. In Heywood v Wellers [1976] QB 446 a firm of solicitors was sued for failure to provide adequate legal services to the plaintiff in connection with proceedings to protect her from molestation by an ex boyfriend. The failure had the result that the plaintiff continued to suffer molestation. She was awarded damages as compensation for the vexation, anxiety and distress that the continuing molestation had caused her. This, in my opinion, is a clear example of compensation for consequential loss within the reasonable contemplation of the parties at the time of the contract as liable to be caused by the solicitors' failure to deal properly with the anti-molestation proceedings.

95. Contrast Cook v S [1967] 1 All ER 299 and Hayes v James & Charles Dodd [1990] 2 All ER 815, both solicitors' negligence cases where it was claimed that the solicitors' failure to provide the services to which the plaintiffs had been contractually entitled had caused the plaintiffs anguish, distress and vexation.

96. In Cook v S Lord Denning MR said, at p 302:

As Bingham LJ pointed out in Watts v Morrow [1991] 1 WLR 1421, 1445, these damages are ruled out on public policy grounds.

97. In Hayes v James & Charles Dodd Staughton LJ said, at p 824, that contractual damages for mental distress were, as a matter of policy limited to certain classes of case and that the classes -

So he disallowed the claim for damages for anguish and vexation.

98. In my opinion, the distinction between commercial contracts and other contracts is too imprecise to be satisfactory. I think the decision of Staughton LJ was plainly correct for the reason that the commercial character of the contract required a negative answer to the question whether the anguish and vexation caused by the breach and for which recovery was sought was within the reasonable contemplation of the parties at the time of the contract (see also Lord Reid's point in C Czarnikow Ltd v Koufos [1969] 1 AC 350, 383 that the loss in question should, to be recoverable, be "not very unusual and easily foreseeable").

99. In Perry v Sydney Phillips & Son [1982] 1 WLR 1297, contractual damages for distress and discomfort caused to the plaintiff by having to live for a while in a house with a leaking roof and defective drains were awarded as compensation for a surveyor's negligent failure to draw attention to these defects in his report. The Court of Appeal adopted a foreseeability approach.

100. In R v Investors Compensation Scheme Ex parte Bowden [1994] 1 WLR 17, 28 decided after Watts v Morrow [1991] 1 WLR 1421 had been reported, Mann LJ said this:

101. This statement is not, in my opinion, accurate. It concentrates only on the first part and ignores the second part of Bingham LJ's proposition. I agree with Mann LJ that a contract relating to the investment of money is not such a contract as Bingham LJ had in mind as a contract "the very object" of which is to provide pleasure etc. But if a breach of any contract has caused physical inconvenience or discomfort that is within the recognised rules of remoteness and mental distress is a part of that inconvenience or discomfort, it would, in my opinion, in principle be recoverable.

102. Mr Simpson referred to Johnson v Gore Wood & Co [2001] 2 WLR 72, which he said was indistinguishable from the present case. The case raised a number of difficult issues which have nothing whatever to do with the present case but the case did involve also a claim for damages for mental distress caused by solicitors' negligence. The alleged negligence was the solicitors' failure to advise Mr Johnson, the client, about various financial matters. Mr Johnson claimed, among other heads of damage, damages "for the mental distress and anxiety which he has suffered" as a result of the alleged negligence. Lord Bingham of Cornhill cited, at p 96, the first two paragraphs of the passage from his own judgment in Watts v Morrow [1991] 1 WLR 1421, 1445 that I have cited at paragraph 20 above. He referred to Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 and said, at p 97:

103. He did not, however, think that Mr Johnson's claim for damages for mental distress and anxiety came within the established principles for the recovery of such damages.

104. The decision in Johnson v Gore Wood & Co [2001] 2 WLR 72 is, in my view, plainly distinguishable from the present. It was not, in my view, remotely arguable that Mr Johnson's alleged mental distress was a consequence that, at the time he retained the solicitors, was reasonably in the contemplation of the parties as liable to result from a breach.

105. It is time for me to turn to the present case and apply the principles expressed in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 and Watts v Morrow [1991] 1 WLR 1421. In my judgment, Mr Farley is entitled to be compensated for the "real discomfort" that the judge found he suffered. He is so entitled on either of two alternative bases.

106. First, he was deprived of the contractual benefit to which he was entitled. He was entitled to information about the aircraft noise from Gatwick bound aircraft that Mr Skinner, through negligence, had failed to supply him with. If Mr Farley had, in the event, decided not to purchase Riverside House, the value to him of the contractual benefit of which he had been deprived would have been nil. But he did buy the property. And he took his decision to do so without the advantage of being able to take into account the information to which he was contractually entitled. If he had had that information he would not have bought. So the information clearly would have had a value to him. Prima facie, in my opinion, he is entitled to be compensated accordingly.

107. In these circumstances, it seems to me, it is open to the court to adopt a Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 approach and place a value on the contractual benefit of which Mr Farley has been deprived. In deciding on the amount, the discomfort experienced by Mr Farley can, in my view, properly be taken into account. If he had had the aircraft noise information he would not have bought Riverside House and would not have had that discomfort.

108. Alternatively, Mr Farley can, in my opinion, claim compensation for the discomfort as consequential loss. Had it not been for the breach of contract, he would not have suffered the discomfort. It was caused by the breach of contract in a causa sine qua non sense. Was the discomfort a consequence that should reasonably have been contemplated by the parties at the time of contract as liable to result from the breach? In my opinion, it was. It was obviously within the reasonable contemplation of the parties that, deprived of the information about aircraft noise that he ought to have had, Mr Farley would make a decision to purchase that he would not otherwise have made. Having purchased, he would, having become aware of the noise, either sell - in which case at least the expenses of the re-sale would have been recoverable as damages - or he would keep the property and put up with the noise. In the latter event, it was within the reasonable contemplation of the parties that he would experience discomfort from the noise of the aircraft. And the discomfort was "physical" in the sense that Bingham LJ in Watts v Morrow [1991] 1 WLR 1421, 1445 had in mind. In my opinion, the application of Watts v Morrow principles entitles Mr Farley to damages for discomfort caused by the aircraft noise.

109. I would add that if there had been an appreciable reduction in the market value of the property caused by the aircraft noise, Mr Farley could not have recovered both that difference in value and damages for discomfort. To allow both would allow double recovery for the same item.

110. Whether the approach to damages is on Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 lines, for deprivation of a contractual benefit, or on Watts v Morrow [1991] 1 WLR 1421 lines, for consequential damage within the applicable remoteness rules, the appropriate amount should, in my opinion, be modest. The degree of discomfort experienced by Mr Farley, although "real", was not very great. I think £10,000 may have been on the high side. But in principle, in my opinion, the judge was right to award damages and I am not, in the circumstances, disposed to disagree with his figure.

111. For the reasons I have given and for the reasons contained in the opinion of my noble and learned friend, Lord Steyn, I would allow the appeal and restore the judge's order.

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