Bella Casa Ltd v Vinestone Ltd & Ors

Loss of use damages in building cases must reflect proved loss caused by being unable to occupy or use the property. Special damages, such as service charges and utility costs incurred without benefit, may be recoverable subject to causation, proof and mitigation.

A company cannot recover general damages for loss of enjoyment traditionally awarded to a natural person. Nor may it calculate general damages by applying a judgment-rate interest figure to a purchase price incurred in any event. Interest-based calculations used for depreciating commercial assets, such as ships or buses, do not provide a general method for valuing temporary loss of use of a non-depreciating property.

Bella Casa Ltd claimed damages against its landlord, architects and contractor for defective refurbishment works at a property in Soho. The property was assumed to have been unfit for human habitation between 16 July 1999 and 18 December 2002.

The preliminary issue concerned three categories of alleged loss of use: interest calculated at 8 per cent on the balance of the purchase price, service charges, and utility and related expenses. The court was asked whether, assuming the pleaded facts were correct, those claims were legally irrecoverable.

1. Preliminary issue. The court applied the approach described in McLoughlin v Jones [2002] 2 WLR 1279: the issue was potentially decisive, concerned questions of law, and could be tried on assumed facts without delaying the action.
2. Special damages. The service charges and utility-related expenses were not irrecoverable in principle merely because they would have been incurred in any event. On the assumed case, they were expenses incurred without tangible benefit while the property was uninhabitable. They remained subject to causation, proof and mitigation. If proved, they could in principle be recovered for breach of section 1 of the Defective Premises Act 1972, as well as potentially in contract.
3. General damages. The principal claim was not a claim for actual interest paid. It was general damages calculated by applying the judgment rate to the purchase-price balance. The traditional award for loss of use or enjoyment in building cases was a modest sum, sometimes forming part of compensation for inconvenience and distress. Such an award was unavailable to this claimant because it was a limited company rather than a natural person.
4. Purchase-price interest. The proposed calculation was contrary to the usual approach in building and property cases. Calabar Properties Ltd v Stitcher [1984] 1 WLR 287 rejected a comparable valuation-based loss of use claim. The shipping and commercial authorities involving depreciating assets did not establish a general rule applicable to the property in issue. The property was not purchased to generate income, was not shown to be a wasting asset, and the purchase price would have been incurred regardless of the defects.
5. The claims for general damages in paragraphs 40.2(Ai), 42.2(Ai) and 44.2(Ai) of the Particulars of Claim were invalid in principle and had no realistic prospect of success on the assumed facts. The smaller special-damages claims were not struck out as legally irrecoverable.