Civil Procedure – Precuniary loss – loss of profit – diminution of value – pecuniary loss

Whether plaintif could be awarded damages – Contract Act 1950-common law principal

The issues arising from the contract which entered between the plaintiff and third defendant is
whether the plaintiff may recover the loss of profit suffered by the plaintiff when she discover
that the pool is not build as she expected. The grounds of the claim by plaintiff is that the
express condition of the contract is entered by the plaintiff and the defendant on the condition
that the pool will have a depth of 7 feet but the plaintiff discovered that the pool build by the
defendant only had a depth of 6 feet. As a result, when she put her property up for sale, the
value of her property has since diminished.

In this issue, loss arising from breach of contract is pecuniary loss which relates to all financial
and material loss sustained due to a breach. The court in awarding damages will look into the
objective of granting damages which to protect the interest of the plaintiff. The most common
objective is to protect the plaintiff’s expectation interest. In this respect, if court have to award
damages it is to put the plaintiff in the position he would have been in had the contract been
performed as expected. Therefore, what would be discuss here is the principle of expectation
interest which is loss of profit.

The rational for the protection of a plaintiff’s expectation interest is from the basic contractual
principle that a binding promise creates in the promise an expectation of performance. To this
end, the breach of such binding promise entails a remedy that would fulfil if not, protect the
interest. There are two possible measure which may be adopted to put a plaintiff back into the
position he would have been in had the contract been performed that is “diminution of value”,
and “cost of cure”.

The decision in Ruxley Electronics & Construction Ltd v Forsyth (‘Ruxley’) illustrates the
significance of that distinction. The plaintiff in Ruxley, Mr Forsyth, contracted with the
defendant Ruxley Electronics & Construction Ltd to build a pool at a maximum depth of six
feet six inches. After completion of the pool, Mr Forsyth asked for the increase in the maximum
depth to seven feet six inches, explaining that he was ‘a big man and would feel safer when
diving and more comfortable with the greater depth of water’. When the pool was finished it
was only six foot nine inches deep. Ruxley argued the pool was still safe for diving despite the
breach and Forsyth had not, therefore, suffered any damage in terms of a loss to the value of
his home. Given the cost of re-building the pool was £21,560, it would be wholly unreasonable
and disproportionate to the loss Forsyth had suffered in not having the pool at his desired depth.
He further contended that Forsyth had no actual intention of having the re-building work
conducted and, therefore, he had not suffered any loss. Forsyth argued that Ruxley had failed
to perform his specific obligations under the contract and he should, therefore, be entitled to
damages which would place him in the position he would have been in had the obligations been
appropriately performed. He asserted it was irrelevant whether he chose to use the damages for
the re-building work. The term as to depth was agreed after the price for the pool had been
fixed and without any variation to that price. Even though of no obvious legal significance, it
is difficult not to think that that fact may have influenced the selection of general, instead of
rectification, damages in that case. For the purposes of the award of general damages, the Judge
accepted that Mr Forsyth did not feel safe and accordingly found that there was a lack of
amenity brought about by the lesser depth of water. The Judge found that there was no
difference in value of the pool or the home. The cost of rectification was between £5,000 9 and
£10,000. The cost of removal of the pool and further excavation was £21,560. The Judge held
that the cost of removal could only be justified if Mr Forsyth intended to carry out that work,
and if such a course of action was a reasonable one. The Judge was not satisfied that Mr Forsyth
intended to build a new pool. The Judge also found that the cost to do so was wholly
disproportionate to the disadvantage of having a pool slightly shallower and, therefore, not a
reasonable course to adopt. Forsyth could not recover the cost of re-building because this would
be totally out of proportion to the loss he had suffered. He could recover £2,500 for loss of
amenity but the law must cater for cases where full performance of the promise would vastly
exceed the loss which had truly been suffered. The pool was, in fact, worth no less because of
the breach but to award nothing would render the contractual promise illusory, and so a nominal
award was appropriate.

Applying to recent fact of the case, there is nothing to show in the fact that the plaintiff upon
discovered the pool had a depth of 6 feet instead of 7 feet as express in contract, had do either
renovation nor asking third defendant to rectify it. What she does in consequence to the breach
is she put her property up for sale but the value of her property has since diminished. In this
case court found that it is true that third defendant had failed to perform his specific obligations
under the contract and the plaintiff should, therefore, be entitled to damages which would place
him in the position he would have been in had the obligations been appropriately performed.
However, we found that there was no difference in value of the pool or the home because the
pool was still safe for diving despite the breach and the plaintiff had not, therefore, suffered
any damage in terms of a loss to the value of his home. The fact of the plaintiff’s house
diminished in its value has nothing to do with the pool which had a depth of 6 feet. There’s
also no issue of cost of cure because the plaintiff did not do anything to reinstate the pool.
Reinstatement costs were only recoverable if there was an intention to reinstate and the cost
was reasonable. But in this case, the plaintiff had no intention to rectify the works then it could
not be said that the plaintiff had lost the cost of reinstatement.

Therefore, since there is no diminution of value nor cost of cure, the court in the opinion that
there is no loss of profit but the court consider loss of amenity suffered by the plaintiff as to
the loss the use of the pool as desired by the plaintiff. (Ruxley’s cases is followed)

Thus, court decide that plaintiff cannot recover the loss of profit as there is no diminution in
value nor cost of cure. However, the court considered the failure of the enjoyment of the use
of the pool by plaintiff by awarding her the loss of amenity. The court by acknowledge the
right of plaintiff have been breached, therefore, a nominal damages is award.