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Loss in property market can be reasonably foreseeable says appeal judges

Date: (6 February 2013)    |    

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The appeal judges have ruled that fall in property prices at the start of recession was “reasonably foreseeable”.

In a ruling they said that a farmer could claim damages up to £400,000 for the loss in value of land he was preparing for a housing development from consulting engineers who delayed the project.

Sir David Greene, a former Lord Justice of Appeal, said such cases were fewer as property market normally moved slower than other types of market involving commodities and other goods and a breach of contract takes a long time before a provable loss of value can occur.
A few days or few weeks delay may not cause a definite loss on the property market but the appellant who delayed it for 15 months as per the words of the trial judge, was extremely bad delay, which in the instant case had given a rise to a quantifiable loss.
Giving the leading judgment in John Grimes Partnership v Gubbins [2013] EWCA Civ 37, Sir David said Mr Gubbins obtained planning permission for the development of a field next to an A road in East Taphouse, Cornwall, in 2006.
The permission included the building of a road within the site, to serve the new houses, and the farmer called in consulting engineers to design the road and get it adopted by Cornwall County Council.
Sir David said the judge at the first instance had found that the payment of a fee of £15,000, was an express term of the contract for the engineers to complete the work by March 2007 but instead Mr Gubbins had instructed another firm of engineers in April 2008 when the road was finally approved by the council in June 2008.
Mr Gubbins had been billed for another £2,900, on top of the £20,000 he had already paid the John Grimes Partnership. Mr Gubbins refused to pay any further and instead counterclaimed for all the sums previously paid, on the grounds that the work was defective, together with damages for failure to complete the work by March 2007.
The judge had in the beginning found that the development of the site had been delayed by 15 months and if there was no breach of contract by the engineers Mr Gubbins would have achieved completion of the development by June 2008.
Valuation done by both sides showed that the value of the site was £3.8m at that time, and as time went by it fell to £398,000 by July 2009. The judge said the precise loss would need to be assessed and dealt with the position “at law as a matter of principle”.
Sir David Greene said that there seem to be no evidence which could be said to have pointed to a general understanding in the property world that a party in the engineer’s position would not have taken the responsibility for the losses from any such movement in the property market where there had been delay in breach of contract.
He rejected the argument that the scale of the loss appeared to be disproportionate to the £15,000 fee paid. He dismissed the appeal and Lord Justices Tomlinson and Laws agreed.