Harrison & Ors v Shepherd Homes Ltd & Ors

Where defective piling damages houses but full repiling is unreasonable, the basic measure of damages is diminution in value. Necessary remedial costs may be awarded separately if they have been excluded from the valuation, avoiding double recovery.

Mortgageability must be assessed realistically and on a gradated basis. It depends not only on the probability of future movement, but also on the likely terms of engineering and valuation reports obtained by a prospective purchaser. For probably mortgageable properties, capital comparison may be appropriate; for unmortgageable properties, an investment method may be used. A valuation figure supported by the evidence and within the reasonable range available to the trial judge will not ordinarily be disturbed on appeal.

The claimants owned houses on an estate constructed on a former landfill site. Defective design and installation of the piling caused significant cracking, which was generally non-structural but affected mortgageability and saleability.

Following a five-week trial, Ramsey J held Shepherd Homes Ltd liable in contract, under the Defective Premises Act 1972, and under section 2 of the Buildmark Cover. Those liability findings were not appealed. He awarded damages principally for diminution in value, together with present and future remedial costs, and rejected recovery of full repiling costs.

Shepherd Homes appealed on the classification of properties by mortgageability, the valuation percentage, the additional remedial-cost award, and the refusal to admit evidence concerning a later sale. The central issues concerned the proper assessment of diminution in value, avoidance of double recovery, and the scope of the judge’s case-management discretion.

1. Appeal dismissed. The liability findings were unchallenged. The court rejected each ground pursued by Shepherd Homes.
2. The judge was entitled to adopt a gradated approach to mortgageability. The probability of future foundation movement was not determinative. Even properties with remote or very remote movement risk required structural-engineer reports, and the particular terms and nuances of those reports could determine whether mortgage finance was available. It was therefore proper to assess the likely mortgageability of each property rather than place all properties in a rigid binary category (para [13]).
3. The judge was entitled to use capital comparison for probably mortgageable properties, the investment method for probably unmortgageable properties, and a mixture of methods for properties between those categories. His selection of a 32.5 per cent diminution figure was supported by the evidence, including the limited market and lack of sufficient comparables. There was a range of reasonable figures, and the chosen figure fell within the band open to the trial judge (paras [14]-[16]).
4. The basic measure was diminution in value because full repiling was unreasonable. The judge was also entitled to award the cost of immediate and future remedial works, provided those costs were excluded from the diminution assessment. The judgment showed that the judge understood the need to prevent double recovery and proceeded on the basis that future remedial work was not included in the valuation figure. The discounted award for two further sets of works was therefore permissible (paras [17]-[22]).
5. The refusal to admit further evidence about the later sale of 47 Meadowgate Drive was a permissible case-management decision. The evidence alone added little, further expert evidence and submissions would have been required, the sale circumstances were unusual, and the judge had effectively taken the matter into account. The cross-appeal was not pursued (paras [23]-[28]).

• Court of Appeal (Civil Division): appeal against the order of Ramsey J dated 11 July 2011 dismissed on 5 July 2012.
• High Court, Leeds District Registry: after a five-week trial, Ramsey J awarded diminution-in-value damages and remedial costs, while rejecting the claim for full repiling costs.