Satisfaction guaranteed?

The recent decision of the House of Lords in Farley versus Skinner (no 2, 2001) has highlighted the possibility of claims being made by disgruntled clients for the simple displeasure they suffer in not getting what was contracted for regardless of whether they have suffered any monetary, or pecuniary, loss.

In 1990 Mr Farley decided to buy a country house in which he could live when he retired. He found a likely house in Sussex. The property in question was 15 miles from Gatwick Airport so Mr Farley was understandably wary of being disturbed by aircraft flying overhead. When he instructed his surveyor, Mr Skinner, he added to his usual duties a specific instruction to investigate whether the property was affected by aircraft noise. Mr Skinner carried out his investigation and reported that, in his view, it was not.

In reliance on Mr Skinner's survey, Mr Farley purchased the property. Having spent considerable sums on improving the property Mr Farley moved in, only to find that the property was affected by aircraft noise. In fact, the house was close to a navigation beacon which was regularly circled by planes awaiting a landing slot at Gatwick.

The claim
Mr Farley brought a claim for damages against his surveyor. At the first trial in May 1999 Mr Farley's claim for damages due to diminution of the value of the property failed. The judge found the property's value to be undiminished. However, Mr Farley's claim for non-pecuniary damages as recompense for his displeasure and disappointment (ie compensation for the harm he had suffered which did not directly relate to a monetary loss) succeeded. The court found as a fact that Mr Skinner had acted negligently. If he had carried out his instructions properly, and informed Mr Farley about the aircraft noise, Mr Farley would never have bought the property. The court awarded Mr Farley £10 000 in non-pecuniary damages.

Mr Skinner (or his insurers) appealed to the Court of Appeal. At the first appeal hearing before a court of two no final decision was reached, as one judge found in favour of Mr Skinner and one judge against him. The appeal was then reheard before three judges. This time Mr Skinner's appeal succeeded, albeit with one Judge dissenting. However, Mr Farley was not finished yet. He appealed to the House of Lords. On 11 October 2001 the House of Lords found unanimously in Mr Farley's favour and reinstated the original judge's award of £10 000 non-pecuniary damages.

The legal issues
In finding in Mr Farley's favour the House of Lords ruled that in order to successfully claim non-pecuniary damages for breach of contract it is sufficient to show that a major or important object of the contract was to give pleasure, relaxation or peace of mind. It does not have to be the only object of the contract. In doing so the House of Lords overruled the decision of the Court of Appeal in Knott versus Bolton, 1995 (11 Const LJ 375) which, it had been argued, limited Mr Farley's ability to claim successfully.

Further, their Lordships stated that it was no defence for Mr Skinner to say that he had not guaranteed that there would be no aircraft noise: Mr Skinner was under a duty to use reasonable care and breach of this duty could justify the award of non-pecuniary damages. Their Lordships stated that it would be an unattractive result if a professional man, who undertook a specific obligation to exercise reasonable care, could then please himself whether or not to comply.

The ramifications
It is clear from the decision in Farley versus Skinner that a potential liability for non-pecuniary damages could cover other professionals who disappoint their clients, not just surveyors. For example, it is arguable that any consultant who carries out design work could fall under its scope. A failure to exercise reasonable care in such a case could lead to an award of damages even where no pecuniary loss was shown.

However professionals need not be too alarmed. First, it is not possible for a company to experience disappointment or distress. Thus the potential for awards of damages for non-pecuniary loss such as that in the Farley versus Skinner case is limited to cases involving private individuals and perhaps partnerships.

Secondly, the sum which courts will award as non-pecuniary damages is relatively small. Mr Farley was awarded £10 000. Although the House of Lords upheld the original Judge's decision in this respect, their Lordships were at pains to stress that this was at the upper end of the range.

Thirdly, it is important to note the context in which many claims for non-pecuniary damages arise. There are often cases where the wrong done cannot be fixed, for example Mr Skinner could not be ordered to stop planes flying over Gatwick.

However, sometimes the problem can be fixed, for example in the case of Ruxley Electronics and Construction Ltd versus Forsyth, 1996 (AC 344) where a swimming pool was built shallower than had been requested. In such cases clients usually claim for the cost of reinstatement; in Ruxley this would have meant rebuilding the swimming pool to the correct depth.

In awarding non-pecuniary damages the courts open up an alternative route to that of ordering reinstatement. In many cases the courts are striking a balance. By allowing a small claim for non-pecuniary damages to succeed the courts are recognising the harm done to the client without placing the onerous burden of reinstatement on the professional.

What can be learnt?
The real lesson to be learnt from the case of Farley versus Skinner is that professionals should be aware of their potential liability for disappointment caused to their clients. This liability should be recognised and valid complaints made by clients dealt with promptly so as to avoid litigation where any damages eventually awarded might well be dwarfed by the legal bill.