Pizza Hut & Ors v Cranbrook & Anor

Where fire damage requires repair or refurbishment, the reasonable cost of properly designed and carried-out works is recoverable in full where there is no suggestion that the scope or advice concerning the works was negligent or otherwise improper. Lost rent may be recoverable until the tenant is liable to resume rent, including the period required for fitting out after the building shell is complete. Unsupported ancillary losses are not recoverable. Interest may run from the date of the first relevant payment rather than automatically from the date of the damaging event.

A fire caused by roofing works damaged neighbouring premises occupied or owned by the claimants. Judgment in default had been entered against the second defendant, and the claims against the first defendant had been compromised. The court was required to assess the claimants’ quantum against the second defendant.

The claims covered tenant’s fixtures, contents, stock, business interruption, reinstatement works, temporary accommodation, equipment, staff costs, policy excess and lost rent. The central issues were the recoverability and proof of those losses, the proper deduction for sums paid by the first defendant, and the appropriate date from which interest should run.

1. Quantum and liability for repair costs. The court allowed Pizza Hut’s claims for tenant’s fixtures, contents, stock and business interruption in full, accepting the evidence supporting the claimed gross profit rate. It allowed Alliance & Leicester’s building, contents and computer-equipment claims, but rejected unsupported claims for staff costs and the policy excess.
2. Recoverability of refurbishment costs. The reinstatement works were designed by professional advisers, tendered competitively, administered carefully and subject to cost-saving changes. In the absence of any suggestion that the advice on the scope of the works was negligent or could otherwise be criticised, the defendant was liable for the actual refurbishment cost in full. The court treated Hospitals for Sick Children v McLaughlin & Harvey [1990] 19 ConLR 25 as defining the relevant construction-law approach.
3. Lost rent. British Land proved its claim for lost rent. The court held that rent was payable from completion of the building shell, so the period required for the tenant’s fitting out was recoverable as loss of rent.
4. Interest and deductions. The court deducted the sums previously paid by Cranbrook from each claimant’s damages. Interest was calculated at 8 per cent from the date of the first payment, rather than from the date of the fire.
5. Disposition. Judgment was entered against Mr Varnham, including interest, for £1,809,860.70 in favour of Pizza Hut, £1,082,836.30 in favour of Alliance & Leicester, and £1,166,827.12 in favour of British Land.