A recent decision of the House of Lords, Farley v Skinner [2001]3 WLR 899 illustrates only too well the difficulties of applying legal principles and authorities to the assessment of damages in unusual cases.

Mr Farley, a successful businessman, wanted to retire to the country and became interested in a house in Sussex, some 15 miles from Gatwick Airport. He engaged Mr. Skinner to survey the property. As well as having to investigate the usual matters expected of a surveyor, Mr. Skinner was specifically asked by Mr. Farley to investigate whether the property would be affected by aircraft noise. Mr. Farley told Mr. Skinner he did not want a property on a flight path. Mr. Skinner provided a satisfactory report on the property. On the subject of aircraft noise, he reported:

"You have also asked whether we felt the property might be affected by aircraft noise, but we were not conscious of this during the time of our inspection, and think it unlikely that the property will suffer greatly from such noise, although some planes will inevitably cross the area, depending on the direction of the wind and the positioning of the flight path."

In fact, the house was not far from a navigation beacon, the Mayfield Stack, and at certain busy times, especially in the morning, the early evening, and weekends, aircraft waiting to land at Gatwick would be stacked up maintaining a spiral course around the beacon until there was a landing slot at the airport. Aircraft frequently passed directly over or nearly over the house. The impact of aircraft noise on the property was marked, as Mr. Skinner could have readily discovered if he had checked with Gatwick. Ignorant of the aircraft noise problem, Mr. Farley proceeded to purchase the house and spent £125,000 refurbishing it. When he moved, in he promptly discovered the noise problem, but decided not to sell. Mr. Farley duly sued Mr. Skinner for damages for a diminution in the value of the property caused by the aircraft noise. The trial judge found that Mr. Skinner had been negligent and that if he had carried out his instructions properly, Mr. Farley would not have bought the property. He found however that the purchase price paid by Mr. Skinner coincided with the market value of the property taking the aircraft noise into account so that the claim for diminution in value failed. Mr. Farley also claimed for non-pecuniary damage in the form of his diminished enjoyment of the property. The trial judge held that Mr. Farley was not a man of excessive susceptibilities but that he found the noise a "confounded nuisance".

He held that Mr. Farley was entitled not to move and should not be penalised for not moving and awarded him £10,000 for discomfort.

Skinner's appeal was first heard by a two-member Court of Appeal. Lord Justice Judge thought the trial judge's decision was correct and would have dismissed the appeal. Lord Justice Hale took the opposite view and would have allowed the appeal. For her, the insuperable obstacle to Mr. Farley's claim for non-pecuniary damage was the application of the principle that Mr. Skinner, as a professional engaged to do a job, had not guaranteed a result but only undertaken a duty to exercise reasonable care in carrying out the job in accordance with the standards of common practice. With the Court of Appeal evenly split, the appeal was re-argued before a three member Court of Appeal. A majority held the award of non-pecuniary damages was contrary to principle and allowed the appeal. Not to be thwarted, Mr. Farley appealed to the House of Lords. The House of Lords unanimously allowed the appeal and gave Mr. Farley his £10,000.

In the opening paragraph of his judgment, Lord Steyn noted that the Court of Appeal and the House of Lords had been deluged with legal authorities and that the hearings of what was a comparatively simple case had taken up an exorbitant amount of time. His Lordship said that the time taken underlined the importance of simple and practical rules in the quest for coherent and just solutions in such cases. Their Lordships' quest for simple and practical rules to apply to the case runs to 32 pages in the law reports. Lord Hutton restated the well-established general rule that damages cannot be awarded to the innocent party for the vexation or anxiety or similar states of mind resulting from a breach of contract. He cited the following statement from Lord Justice Bingham in Watts v Morrow:

"A contract-breaker is not in general liable for any distress, frustration, anxiety, displeasure, vexation, tension or aggravation which his breach of contract may cause to the innocent party. This rule is not, I think, founded on the assumption that such reactions are not foreseeable, which they surely are or may be, but on considerations of policy." and the following statement of Lord Cooke of Thorndon in Johnson v Gore Wood & Co:
"Contract-breaking is treated as an incident of commercial life which players in the game are expected to meet with mental fortitude."
As might be expected, there are exceptions to the general principle. One
category of exceptions covers the "holiday" cases beginning with Jarvis v Swans Tours Limited in 1973 where the plaintiff recovered damages for mental distress after a disastrous holiday resulting from a travel agent's negligent representations. In these cases, the courts have held that where the very object of the contract is to provide pleasure and relaxation, peace of mind, or freedom from molestation, a disappointed plaintiff is entitled to be compensated for mental distress caused by the defendant's breach of contract.

Their Lordships all accepted the principle that general damages cannot be awarded in respect of a plaintiff's state of mind caused by the mere fact of a contract being broken. Lords Steyn, Browne-Wilkinson, Clyde and Hutton, however, thought general damages could be awarded in respect of disappointment at loss of a pleasurable amenity that was of no economic value, but was of importance to the plaintiff, if the provision of that amenity had been a major or important part of the contract. Lord Scott of Foscote thought the case could be decided by the principles stated in 1854 in Hadley v Baxendale to the effect that, if Mr. Skinner had done his job properly Mr. Farley would have obtained the correct information about aircraft noise (i.e. the benefit of his bargain with Mr. Skinner) and would not have bought the house. Having bought the house, he was entitled to be compensated for the discomfort caused by the aircraft noise which would have been reasonably within the contemplation of the parties at the time of contract as a consequence of Mr. Skinner's failure to do his job properly.

Their Lordships had no difficulty in dismissing the argument which had troubled Lord Justice Hale in the Court of Appeal, that a professional person normally only undertakes to exercise reasonable skill and care in carrying out his/her duties and does not guarantee a result. Their Lordships thought the distinction had no bearing on the question of Mr. Farley's right to recover non-pecuniary damages.

Contract-breaking is treated as an incident of commercial life in which players in the game are expected to meet with mental fortitude.

Finally, their Lordships all thought that the damages of £10,000 awarded by the trial judge were on the high side, but decided not to disagree with the figure. Lord Clyde noted that the trial judge thought the award of £10,000 would be regarded by Mr. Farley as almost derisory, but His Lordship thought it erred on the side of generosity. The policy reason for limiting such non-pecuniary damages is apparent from the following comment in Lord Steyn's decision:

"It is important that logical and beneficial developments in this corner of the law should not contribute to the creation of a society bent on litigation."

In conclusion, what Lord Steyn described as a comparatively simple case, took four hearings to resolve with eight judges finding for Mr. Farley and three against him. It is a fair assumption that the legal costs were many times the £10,000 at stake. It is also a fair assumption that the case will encourage plaintiffs to claim non-pecuniary damages for distress and disappointment in exceptional circumstances.

This article is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances and no liability will be accepted for any losses incurred by those relying solely
on this article.

Copyright Phillips Fox, December 2001

Author - Ian Law, senior associate: ian.law@phillipsfox.com

Web site: Phillips Fox