Disputes arose between the parties relating to the level of McLaren's fee and a claim by Abercromby alleging that McLaren was negligent in the design of the heating system for the showrooms and workshops.
In accordance with McLaren's design, underfloor heating was installed in both the workshops and showrooms, but Abercromby maintained that it failed to adequately heat the premises during the winter. Accordingly, Abercromby replaced the entire system with a gas-fired system. McLaren accepted that it was at fault in the design of the heating system, but argued that replacing the system was an unreasonable and disproportionate response to the failings in the original system.
Relying upon Ruxley Electronics Ltd v. Forsyth (1996) AC 344, McLaren argued that the cost of replacing the heating system was disproportionate to the benefit to be obtained and thus not the appropriate measure of damages. This argument was rejected by Lord Drummond Young who held that Abercromby's decision to replace the existing heating system was not disproportionate to any benefit to be obtained.
In circumstances such as this case, Lord Drummond Young confirmed that where there has been a breach of an obligation to exercise reasonable care, the innocent party is entitled to be placed in the position that he would have been had the party in breach exercised due care. The loss is normally measured in one of two ways; either the cost of making the works conform to the contract, or the difference between the value of the works as built and the value of the works as they ought to have been built.
However, the cost of making the works conform to contract is often the more natural and obvious measure of damages given the difficulties that can arise in assessing the difference in value of the works as intended as compared to the works as they ought to have been built. Lord Drummond Young confirmed that the cost of making works conform to contract are the normal measure of damages accept as follows:
"Firstly, where the cost involved is manifestly disproportionate to any benefit that will be obtained from it, in which case the court should take notice of the disproportion; and, secondly where the defender leads evidence to show that there is a significant disproportion between the cost and the benefit."
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This case confirms the somewhat narrow application of the decision of the House of Lords in Ruxley Electronics Limited v. Forsyth (1996) AC 344.
In circumstances where there has been negligence or breach of contract in the design or installation of work, ordinarily a party will be entitled to the cost of making the works conform to what was contracted for.
However, in circumstances where the deficiency in the design or workmanship does not impact upon functionality, it does not represent a danger to health and safety and there are no aesthetic concerns then this may interplay an argument that the cost of rectification would be disproportionate to any benefit to be gained.
It this particular case it would appear that the heating system as installed failed to adequately warm the premises in winter and in these circumstances replacing the system with a system that worked would not seem unreasonable.
Further, it should be noted that Lord Drummond Young was at pains to emphasise that the reasonableness of aggrieved parties' remedial works is not to be "weighed in fine scales" on the basis that the victim of a breach of contract should not have to overcome unreasonable obstacles by way of the recovery of damages.