The defendant water company, Thames Water admitted liability for loss and damage caused by water escaping from a burst water main. The water from the burst pipe damaged much of the valuable archives of Aerospace, a publishing company. Following the flood, Aerospace wished to restore the archives and asked the court to measure damages based on the cost of restoring the archives. Thames Water claimed that it would be unreasonable to restore the archives and that damages should be measured according to the reduced market value of the archives which in this case was significantly less than the cost of their replacement.
What is the proper measure of damages in tort where flooding causes damage to goods?
The judge began by restating the general principle that where goods are damaged in tort, the owner is on the face of it entitled to damages reflecting their market value. However, if the owner intends to replace the goods, and the market or resale value is inadequate for that purpose, then the higher replacement value may be the better measure of damages.
In this case, the judge found that as Aerospace had a genuine intention to reinstate the archives, an assessment based on reduced market value would be inadequate for that purpose. Thus the correct approach to assessing damages was to look at the cost of restoration and replacement rather than the market value.
*Full case details
Aerospace Publishing Ltd & Another vs Thames Water Utilities Ltd, High Court of Justice (Queen's Bench Division), Mr Justice Holland  EWHC 2987
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The question of the correct measure of damages arises frequently in many building contracts as well as in tort. The building cases leave no doubt that, wherever it is "reasonable" for the owner to insist upon reinstatement, the courts will treat reinstatement as the measure of damages. While there is no hard and fast rule that damages are only recoverable for reinstatement if the owner has carried out in fact or intends to carry out the reinstatement, the existence of that intention is a relevant factor for the court in determining "reasonableness".