Farley v Skinner

The House of Lords held that a purchaser may recover non-pecuniary damages against a surveyor for negligent breach of a specific contractual obligation to investigate and report on matters of importance to the buyer where the breach deprived the buyer of the contractual benefit or caused physical inconvenience. The decision applies the principles in Watts v Morrow (consequential damages for physical inconvenience and related mental suffering) and Ruxley (compensation for loss of amenity or contractual benefits where conventional measures are inappropriate) and rejects a narrow reading that recovery is confined to cases where the very object of the whole contract is pleasure, relaxation or peace of mind.

The court also rejected the submission that a distinction should be drawn between a guarantee to achieve a result and an undertaking merely to exercise reasonable care for the purpose of excluding non-pecuniary damages, and rejected the contention that a claimant who elects to remain in the property necessarily foregoes recovery for non-pecuniary loss. On the facts the trial judge’s finding of negligence, that the buyer would not have purchased had he been properly informed, and the award of £10,000 for real discomfort were upheld.

The appellant purchaser (Farley) instructed the respondent surveyor (Skinner) to inspect a country house and specifically to investigate whether the property would be affected by aircraft noise. The surveyor reported that aircraft noise was unlikely to be a problem. Relying on the report the purchaser bought the house, carried out substantial refurbishments and then discovered the property was materially affected by aircraft noise arising from stacking of aircraft near Gatwick. The purchaser sued in negligence/breach of contract, claiming diminution in value and non-pecuniary damages for loss of amenity, discomfort and disappointment.

At first instance the judge found the surveyor negligent, found that but for proper advice the purchaser would not have bought, dismissed the claim for diminution in market value but awarded £10,000 for the discomfort sustained. On appeal the Court of Appeal (majority) set aside that award; the House of Lords allowed the purchaser’s appeal and restored the judgment.

Nature of the relief sought: damages for diminution in value (principal claim) and an alternative claim for non-pecuniary loss — loss of amenity, discomfort and disappointment — flowing from the surveyor's negligent failure to investigate aircraft noise.

Issues framed by the court:

• Whether non-pecuniary damages (for disappointment, distress or inconvenience) are recoverable in contract where the defendant negligently fails to investigate and report on a matter specifically made important by the claimant;
• Whether the exceptional category described in Watts v Morrow (contracts whose very object is pleasure, relaxation or peace of mind) should be confined to cases where that is the object of the whole contract;
• Whether a duty only to exercise reasonable care (as opposed to an absolute guarantee) bars recovery of non-pecuniary damages;
• Whether a claimant who elects to remain in the defect-affected property is precluded from recovering non-pecuniary damages;
• Whether the aircraft noise amounted to "physical inconvenience and discomfort" within the Watts framework.

Court’s reasoning (concise): the House treated Watts v Morrow as a useful starting point but read it in light of Ruxley. It emphasised that where a specific contractual term, plainly important to the claimant, is breached and that breach deprives him of the contractual benefit or causes sensory/physical inconvenience, modest non-pecuniary damages are recoverable. The court rejected a formalistic rule that the "very object" must be the whole contract's object and rejected a bar based on the promisor merely undertaking to use reasonable care. It also rejected the argument that remaining in the property precludes recovery where the decision to remain was reasonable (having incurred refurbishment costs). The award was held to be high but within the permissible range on the facts.

Appeal allowed. The House of Lords restored the trial judge's award of non-pecuniary damages (£10,000) because (1) the surveyor had negligently breached a specific and important contractual obligation to investigate aircraft noise, thereby depriving the purchaser of the contractual benefit or causing physical inconvenience; (2) the exceptional category in Watts v Morrow applies where a major or important object of a contract is to secure pleasure, relaxation or peace of mind and need not be the sole object of the whole contract; and (3) no rule bars recovery simply because the professional only undertook to exercise reasonable care or because the claimant elected to remain in the property on reasonable grounds.

Trial: Queen's Bench Division, Judge Peter Baker QC, May 1999 (negligence found, diminution in value dismissed, £10,000 awarded for non-pecuniary loss). Court of Appeal: two hearings, March 2000 reported at [2000] Lloyd's Rep PN 516 (majority allowed the surveyor's appeal and set aside non-pecuniary award; Clarke LJ dissenting). House of Lords: appeal allowed [2001] UKHL 49 (11 October 2001).