DAMAGES FOR COST OF REINSTATEMENT

Birse Construction Ltd v Eastern Telegraph Company Ltd [2004] EWHC 2512 (TCC); [2004] All ER (D) 92 (Nov)

In Birse Construction Ltd v Eastern Telegraph Company Ltd [2004] EWHC 2512 (TCC); [2004] All ER (D) 92 (Nov), Judge Humphrey LLoyd QC held that the essence of the approach in Ruxley Electronics v Forsyth [1996] AC 344 (on which see our August 1995 issue, pp. 1–6) to determining the appropriate measure of damages is the use of common sense. The normal measure of damages for defective works is the cost of reinstatement, but in every instance it has to be reasonable to apply it; where that measure is out of proportion to the claimant’s real loss then some other measure should be used. Judge LLoyd also held that if a building owner disposes of a property with defects attributable to some breach of duty by a contractor and for which the cost of reinstatement was the appropriate measure, but does so without any reduction or loss on account of its condition, then the loss that the law supposes is avoided and no damages are recoverable. However, in some cases it might be reasonable (or even proportionate) to award a sum of money by way of damages so that the contractor does not receive payment for work that was not done (if it was not done at all then either an appropriate contractual reduction in the price or a comparable award of damages should be made).