Sear v Kingfisher Builders (a firm) (No 3) (Rev 1)

Damages for repudiatory breach are assessed to restore the claimant to the position that proper performance would have produced. Overpayments and reasonable additional completion costs were recoverable, but personal borrowing costs were not within the first limb of Hadley v Baxendale where the financing arrangements were not communicated.

Fraudulent misrepresentation permits recovery of all actual loss directly flowing from the fraud, without the contractual restriction of reasonable contemplation. The causal chain nevertheless ends when the loss can no longer sensibly be attributed to the inducement. Recovery must reflect the claimant’s overall financial position and cannot isolate increased expenditure while ignoring corresponding savings.

The judgment determined quantum following earlier judgments concerning a building contract between Mr Sear and Kingfisher Builders, and fraudulent misrepresentations by Mrs Whale concerning Kingfisher Builders and its principal. Kingfisher Builders had repudiated the agreement by withdrawing from the works after an overpayment, and Mrs Whale was liable both as a partner and for fraudulent misrepresentation.

The issues were the damages caused by the repudiatory breach, the recoverability of financing costs and VAT rebates, and the losses directly caused by the fraudulent inducement, including property transactions, borrowing costs and continuing accommodation expenses.

1. Kingfisher Builders. The value of completed work was £186,613.31, whereas £243,524.80 had been paid. Withdrawal from the site for alleged non-payment was therefore unjustified and amounted to repudiation. Mr Sear accepted the repudiation.

2. Damages for the breach comprised the £56,911.49 overpayment and £10,051.61 representing the reasonable additional cost of completing the works. The total damages were £66,963.10.

3. Interest on personal loans was not recoverable as contractual damages. Such loss did not arise naturally from the breach under the first limb of Hadley v Baxendale, and there was no evidence that the relevant financing arrangements had been communicated. Interest was instead awarded under section 35 of the Senior Courts Act 1981, at 5.19%, producing £14,091.34.

4. VAT rebates obtained by Kingfisher Builders did not give rise to a claim. The agreement was silent as to VAT and, in an agreement between a builder and a private individual, prices were treated as VAT-inclusive.

5. Fraudulent misrepresentation. The appropriate measure was the loss directly flowing from the fraud and necessary to restore the claimant to the financial position before the contract. The contractual test of reasonable contemplation did not apply. Recoverable losses included additional borrowing costs, the costs and reduced value associated with the sale of Lammas Lane, temporary storage and the costs of purchasing the replacement property.

6. The causal effect of the fraud ended when Mr Sear moved from Lammas Lane to the replacement property. Later sale, storage, rental, mortgage and future purchase losses were not directly caused by the original inducement. In any event, increased accommodation costs could not be assessed without accounting for reduced household expenditure.

7. Mr Sear was entitled to £81,054.44 from Kingfisher Builders, alternatively from Mrs Whale, and £295,378.37 in additional damages and interest from Mrs Whale. The total award against Mrs Whale was £376,432.81. Costs were left for written submissions.

First-instance quantum determination following earlier liability judgments in the same proceedings. No appellate decision is stated.