Claims for distress: Bit of an upset

While there can be little doubt that many people in the UK are suffering from anxiety and stress concerning the events of the last few weeks, I suspect that for those involved in building projects, particularly domestic projects on their own home, the overwhelming concerns of an overrunning building project or one where what has been built is not as anticipated will have drowned out all other concerns.

Anyone involved in any capacity in a construction project not going according to plan will be aware, putting aside the not insignificant issues of direct financial concerns, that emotional stresses and strains often have more effect on disputes than the actual numbers themselves.

However, when it comes to considering recompense for such distress, the law has little alternative but to try to value this in financial terms. So what does the law say, and is it enough?

While it may be the case that the misfortune is so significant that evidence can be provided of ill health, the view of the courts is that any award for damages will be modest

The starting point, as a general rule, is that damages cannot be recovered by a party for non-pecuniary losses, distress and inconvenience, save where the object of the contract was to provide peace of mind and freedom from distress.

As Lord Hutton has said in the case of Farley vs Skinner [2001]: “It is clearly established as a general rule that where there has been a breach of contract damages cannot be awarded for the vexation or anxiety or aggravation or similar states of mind resulting from the breach.”

However, in the case of Watts vs Morrow [1991], Lord Justice Bingham stated an exceptional category to this rule, described as “where the very object of the contract is to provide pleasure, relaxation, peace of mind or freedom from molestation, damages will be awarded if the fruit of the contract is not provided or if a contrary result is procured instead. If the law did not cater for this exceptional category of case it would be defective”. By way of example, one can understand how that exception applies to a terrible holiday.

Regarding the world of construction, such claims may be sustainable where there is loss of amenity or loss of expectation, for example, an incorrect depth of swimming pool, or where distress and inconvenience is caused by the physical consequences of the breach of contract, by way of example, where private individuals are left to live in a house that is in effect a building site over a period of time. While it may be the case in such circumstances that the misfortune is so significant that evidence can be provided of ill health by way of medical reports, the view of the courts is that any such award for damages for stress and inconvenience will be modest.

A summary of the current position is usefully found in the case of Axa Insurance UK PLC vs Cunningham Lindsey [2007] where Mr Justice Akenhead summarised the position as follows:

Pure compensation for stress and inconvenience is unlikely to exceed £3,000 per year at its highest

“a. General damages will be allowed to each of the claimants for inconvenience, distress and discomfort caused by breaches of contract;

b. The amount allowable for this will be modest;

c. In the absence of particular physical symptoms or illnesses caused by the breaches it is unlikely that general damages, as at 2001, would exceed the rate £2,000 per person per year. In many cases it may be less;

d. Allowing for inflation up to the end of 2007 the maximum for this type of general damages would not generally exceed £2,500 per person per year.”

This approach was more recently applied in the case of West & Anor vs Ian Finlay & Associates (a firm) [2014] where an adjusted maximum in 2014 was seen to be around £3,000 per year.

So it appears that, subject to actual proof of physical illness, however emotionally drained, upset and inconvenienced a party is through the process of carrying out a building project, and obviously subject to all of the usual financial claims available in law, pure compensation for stress and inconvenience is unlikely to exceed £3,000 per year at its highest.

While there can be no doubt that a building project that goes wrong can be extremely distressing and one can understand the reluctance of the courts to see money for a cure where distress and inconvenience is going to mean something different to the people involved, perhaps the knowledge that having a very upset client could lead to serious financial pain for a defaulter, may suggest that it is time to increase that level of compensation significantly. This is part of the bigger question as to whether we want a compensation culture or a “grin and bear it” culture. Perhaps we should have a referendum on it. But, then again, maybe not.

Laurence Cobb is a partner in the construction and engineering team at Taylor Wessing