Berry v Newport Borough Council

Damages for breach of a statutory duty to disclose that a council house is a designated defective dwelling are assessed on ordinary compensatory principles. The relevant loss is the amount by which the purchaser is worse off because the information was withheld. Where the purchaser completed the transaction, the usual measure is the difference between the price paid and the price that would have been paid for the property in its known defective condition, taking account of any applicable purchase discount. The duty is one to provide information. It is neither a duty not to sell the property nor a warranty that the property is free from defects. A purchaser who does not seek rescission cannot recover on the basis that the property should have been warranted sound or repurchased under the statutory assistance scheme.

The claimant purchased a former council house from the respondent under the right-to-buy provisions of the Housing Act 1985, receiving a 59 per cent discount. The property was subsequently identified as a defective dwelling, but the council had failed to give the statutory notice required before sale. Liability and the existence of a cause of action for breach of statutory duty were conceded.

The County Court awarded damages equal to the difference between the price paid and the price the claimant would have paid had the defect been known. The claimant appealed, arguing that damages should instead reflect the statutory repurchase or reinstatement-grant scheme, or the full difference between the sound and defective market values. The central issue was the correct measure of damages.

1. The appeal was dismissed. The award was upheld, with the respondents’ costs set off against the sum payable to the appellant.
2. The statutory duty under section 563(1) of the Housing Act 1985 was a duty to inform the purchaser, before sale, that the dwelling had been designated defective and that the purchaser would not qualify for statutory assistance. It was not a duty not to sell a defective dwelling and did not amount to a warranty that the dwelling was free from defects.
3. The claim was analogous to a claim in tort, so common law compensatory principles applied. The court adopted the approach that damages should put the claimant, so far as money could do so, in the position she would have occupied had the duty been performed.
4. The relevant counterfactual was that, if properly informed, the claimant would either have declined the purchase or bought the property at its market value with the defect known, less the applicable right-to-buy discount. Since she had completed the purchase and did not seek rescission, the appropriate award was the difference between the price paid and that counterfactual price.
5. The statutory repurchase and reinstatement-grant provisions did not determine the damages payable for a post-cut-off-date sale. Nor did the case justify awarding the cost of remedying defects or treating the council as having warranted the property’s condition.

• Court of Appeal (Civil Division): dismissed the appeal from the Newport County Court. The respondents’ costs were set off against the sum payable to the appellant.