Judgments - Farley v. Skinner

(back to preceding text)

    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:

    "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. This rule is not, I think, founded on the assumption that such reactions are not foreseeable, which they surely are or may be, but on considerations of policy".

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 :

    "Contract-breaking is treated as an incident of commercial life which players in the game are expected to meet with mental fortitude."

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:

    "Where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation, damages will be awarded if the fruit of the contract is not provided or if the contrary result is procured instead. If the law did not cater for this exceptional category of case it would be defective. A contract to survey the condition of a house for a prospective purchaser does not, however, fall within this exceptional category."

Bingham LJ. then stated:

    "In cases not falling within this exceptional category, damages are in my view recoverable for physical inconvenience and discomfort caused by the breach and mental suffering directly related to that inconvenience and discomfort"

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:

    "It is a common feature of small building works performed on residential property that the cost of the work is not fully reflected by an increase in the market value of the house, and that comparatively minor deviations from specification or sound workmanship may have no direct financial effect at all. Yet the householder must surely be entitled to say that he chose to obtain from the builder a promise to produce a particular result because he wanted to make his house more comfortable, more convenient and more conformable to his own particular tastes; not because he had in mind that the work might increase the amount which he would receive if, contrary to expectation, he thought it expedient in the future to exchange his home for cash. To say that in order to escape unscathed the builder has only to show that to the mind of the average onlooker, or the average potential buyer, the results which he has produced seem just as good as those which he had promised would make a part of the promise illusory, and unbalance the bargain. In the valuable analysis contained in Radford v. De Froberville [1977] 1 WLR 1262, Oliver J. emphasised, at p. 1270, that it was for the plaintiff to judge what performance he required in exchange for the price. The court should honour that choice. Pacta sunt servanda. If the plaintiff's argument leads to the conclusion that in all cases like the present the employer is entitled to no more than nominal damages, the average householder would say that there must be something wrong with the law".

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

    "and in particular those where the contract is designed to fulfil a purely commercial purpose, the loss will very often consist only of the monetary detriment brought about by the breach of contract. But these remedies are not exhaustive, for the law must cater for those occasions where the value of the promise to the promisee exceeds the financial enhancement of his position which full performance will secure. This excess, often referred to in the literature as the "consumer surplus" (see for example the valuable discussion by Harris, Ogus and Phillips, "Contract Remedies and the Consumer Surplus" (1979) 95 LQR 581) is usually incapable of precise valuation in terms of money, exactly because it represents a personal, subjective and non-monetary gain. Nevertheless where it exists the law should recognise it and compensate the promisee if the misperformance takes it away."

    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:

    "That leaves one last question for consideration. I have expressed agreement with the judge's approach to damages based on loss of amenity on the facts of the present case. But in most cases such an approach would not be available. What is then to be the position where, in the case of a new house, the building does not conform in some minor respect to the contract, as, for example, where there is a difference in level between two rooms, necessitating a step. Suppose there is no measurable difference in value of the complete house, and the cost of reinstatement would be prohibitive. Is there any reason why the court should not award by way of damages for breach of contract some modest sum, not based on difference in value, but solely to compensate the buyer for his disappointed expectations? Is the law of damages so inflexible, as I asked earlier, that it cannot find some middle ground in such a case? I do not give a final answer to that question in the present case. But it may be that it would have afforded an alternative ground for justifying the judge's award of damages. And if the judge had wanted a precedent, he could have found it in Sir David Cairns's judgment in G W Atkins Ltd v Scott (1991) 7 Const LJ 215, where, it will be remembered, the Court of Appeal upheld the judge's award of £250 for defective tiling. Sir David Cairns said, at p 221: 'There are many circumstances where a judge has nothing but his common sense to guide him in fixing the quantum of damages, for instance, for pain and suffering, for loss of pleasurable activities or for inconvenience of one kind or another'".

    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:

    "One or two comments upon that passage are apposite. In my judgment the words 'the very object of a contract' are crucial within the context of the instant case. The very object of the contract entered into by Mr Terence Bolton was to design for the Knotts their house. As an ancillary of that of course it was in the contemplation of Mr Bolton and of the Knotts that pleasure would be provided, but the provision of pleasure to the occupiers of the house was not the very object of the contract and there was nothing in the contractual relationship between Mr Bolton and the Knotts to indicate that he in any sense warranted or expressed himself to be contractually bound to provide for the Knotts the pleasure of occupation. Of course the pleasure of their occupation was an ancillary of the object of the contract, but it was not the very object of the contract".

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:

    "If, on learning of the defects which should have been but were not reported, a purchaser decides, for whatever reason, to retain the house and not move out and sell, I would question whether any loss he thereafter suffers, at least in the ordinary case, can be laid at the door of the contract-breaker"

    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:

    "I think there is no authority that personal inconvenience, where it is sufficiently serious, should not be the subject of damages to be recovered in an action of this kind".

    Mellor J stated, at pp 122-123:

    "I quite agree with my brother Parry, that for the mere inconvenience, such as annoyance and loss of temper, or vexation, or for being disappointed in a particular thing which you have set your mind upon, without real physical inconvenience resulting, you cannot recover damages …where the inconvenience is real and substantial arising from being obliged to walk home, I cannot see why that should not be capable of being assessed as damages in respect of inconvenience"

    And Archibald J stated, 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, and the parties here had the firm measure of that inconvenience in the damages given by the jury".

    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:

    "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 … such damages should be a modest sum for the amount of physical discomfort endured …"

    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 plaintiff's use and enjoyment of the property has been impaired by aircraft noise"

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.

 
continue previous