AXA Insurance UK Plc v Cunningham Lindsey United Kingdom (An unlimited Company)

A claimant recovering damages for professional negligence or breach of contract must prove that the claimed loss was caused by the established breach, was reasonably incurred and was not too remote. In construction disputes, reinstatement costs are recoverable only to the extent reasonably necessary to remedy defects for which the defendant is responsible. Reliance on expert advice is relevant to reasonableness but does not itself establish causation or liability for unrelated works. A global “top-down” assessment is inappropriate where individual breaches and unrelated expenditure can be identified. A settlement with a third party is recoverable only if its reasonableness and causal connection with the defendant’s breach are proved. General damages for inconvenience, distress and discomfort remain modest.

AXA Insurance UK Plc claimed damages from Cunningham Lindsey United Kingdom, loss adjusters appointed to administer subsidence-related reinstatement works at an old farmhouse. AXA alleged professional negligence and breach of contract in the specification, supervision and administration of the works, and claimed that Cunningham’s failures caused substantial additional remedial expenditure, delay and settlement payments to the insured.

The court considered the scope of Cunningham’s retainer, the breaches established, causation, the reasonableness of remedial expenditure and settlement, and the appropriate measure of damages.

1. Liability. Cunningham’s retainer was limited principally to taking forward the existing repair scheme, procuring and supervising the remedial works, administering the building contract and adjusting related losses. It was not employed to redesign or supervise the insured’s extensive independent refurbishment works. The contractual duty was to exercise the reasonable care, skill and diligence expected of reasonably competent loss adjusters providing this service.
2. Cunningham was liable for specified failures, including the absence of an adequate condition survey, the inappropriate use and poor installation of concrete lintels for crack repairs, unsuitable lightweight plaster, bridging of the damp-proof course, defective repointing, certain defective brickwork, overpayments, failure to obtain a proper programme, inadequate supervision during a surveyor’s absence, and inadequate records of instructions, meetings and lintel locations. Other alleged breaches were not proved.
3. Causation and measure. The court applied the effective-cause approach in [1994] 1 WLR 1360 and held that AXA had to connect each recoverable item to an established breach. The extensive refurbishment, structural alterations and improvements undertaken or demanded by the insured were not attributable to Cunningham. A “top-down” claim for overall project expenditure was therefore inappropriate. Damages had to be assessed item by item, allowing reasonable enabling and consequential works but excluding betterment and unrelated defects.
4. Expert advice could materially support the reasonableness of a remedial decision, but it did not make expenditure recoverable where the underlying defect was outside Cunningham’s responsibility. The settlement with the insured was not shown to be reasonable or causally attributable to Cunningham, except for £5,400 representing general damages for twelve months’ delay and aggravation.
5. Judgment was entered for AXA in the sum of £282,902.67. The question of interest was reserved for further submissions.