Farley v. Skinner

Contract damages do not generally compensate distress caused merely by breach. However, damages may be awarded where a major or important part of the contractual bargain is to secure pleasure, relaxation, peace of mind or freedom from molestation. That part need not be the sole or principal object of the entire contract.

The exception can apply to a professional's negligent failure to investigate and report on a matter which the client has made specifically important. It does not require a contractual guarantee of a result. Damages also remain available for real inconvenience and discomfort caused by breach, including sensory interference such as serious aircraft noise. Awards for non-pecuniary loss should be restrained and modest.

The buyer retained a surveyor to report on a country property and expressly asked him to investigate aircraft noise. The surveyor negligently gave reassuring advice. The buyer purchased the property, later discovered substantial aircraft noise, and would not have bought had he been properly advised.

The trial judge dismissed the claim for diminution in value because the noise did not reduce the property's market value. He nevertheless awarded £10,000 for discomfort and impaired enjoyment. Following an inconclusive first hearing, the Court of Appeal, by a majority, allowed the surveyor's appeal: [2000] Lloyd's Rep PN 516. The central issue was whether contractual damages for non-pecuniary loss were recoverable despite the surveyor having undertaken only a duty of reasonable care.

1. Appeal allowed unanimously. The House restored the trial judge's £10,000 award. Lord Steyn gave the leading reasoning. Lord Browne-Wilkinson agreed, for the reasons given by Lord Steyn and Lord Scott. Lords Clyde, Hutton and Scott each gave reasons supporting the same result.
2. Per Lord Steyn, the surveyor's specific obligation to investigate aircraft noise was a major and important part of the bargain. The exceptional principle in Watts v Morrow [1991] 1 WLR 1421 does not require pleasure, relaxation or peace of mind to be the object of the contract taken as a whole. It is enough that an important contractual object has that character. The House overruled Knott v Bolton (1995) 11 Const LJ 375, which had treated the contrary distinction as decisive.
3. The exception also does not depend upon a guarantee of an outcome. A professional who undertakes to exercise reasonable care to investigate a matter which the client has identified as important may be liable for the resulting non-pecuniary loss if negligent. Lords Clyde and Hutton likewise treated the specific request for information about peaceful enjoyment as sufficient to bring the case within the exceptional category.
4. There was an independent basis for recovery. Per Lords Steyn, Clyde, Hutton and Scott, serious aircraft noise could amount to real inconvenience and discomfort rather than mere disappointment at breach. The claimant's continued occupation did not break the causal connection. It was reasonable for him to remain after expending substantial sums improving the property.
5. The reasoning in Ruxley Electronics and Construction Ltd v Forsyth [1996] AC 344 confirmed that a valuable contractual amenity may justify modest compensation where ordinary financial measures do not reflect the loss. The award was high and at the upper limit of what was appropriate, but the House would not disturb it on the unusual facts. Lord Scott added that damages for discomfort could not be cumulated with a reduction in market value for the same loss.

• House of Lords: Allowed the buyer's appeal and restored the trial judge's award: [2001] UKHL 49.
• Court of Appeal: On reargument, Stuart-Smith and Mummery LJJ allowed the surveyor's appeal and set aside the award; Clarke LJ dissented: [2000] Lloyd's Rep PN 516.
• Queen's Bench Division: Judge Peter Baker QC found the surveyor negligent, dismissed the diminution-in-value claim, and awarded £10,000 for discomfort and impaired enjoyment.