Fall in property prices foreseeable so consultants liable for damages

The Court of Appeal has held that the fall in property prices in the recession was “reasonably foreseeable” so a farmer can seek damages of up to £398,000 from engineering consultants who delayed work on a development by 15 months.

The case involved a farmer who obtained planning permission to build houses on a field next to an A road in 2006. He engaged a firm of consultants to design a service road and drainage system which would meet with local authority approval.

It was a requirement of the contract that the work should be completed by March 2007. Problems arose so the farmer hired another firm of engineers in April 2008 and the road was finally approved by the council in June 2008 – 15 months after the intended completion date.

The consultants successfully claimed for unpaid fees. However, the judge also allowed the farmer’s counterclaim for damages for the decline in value due to the fall in property prices during the period of delay caused by the consultants’ failure to complete their work on time.

The judge rejected the consultants’ argument that the loss had not been reasonably foreseeable.

The fall in value was estimated at £398,000. However, the judge said the precise loss would be assessed at another hearing as he was only dealing with the legal principle.

The Court of Appeal has now upheld the judge’s decision. It said he had correctly considered whether losses on the property market over a 15 month period were reasonably foreseeable and concluded that they were. His approach and principles could not be faulted.

There had been no evidence before the judge to suggest that there was a general understanding in the property world that anyone in the consultants’ position would not be responsible for losses where there had been delay or breach of contract.

Please contact Chris Jolly in our Westbury office on 01373 865577 if you would like more information about the issues raised in this article or any aspect of contract law. Or email cjolly@mulaw.co.uk.