Ruxley Electronics and Construction Ltd v Forsyth [1995] UKHL 8; [1996] AC 344
Court: House of Lords. Judgment: 29 June 1995.
The cost of putting defective work right was not automatically the measure of damages. Where rebuilding a usable swimming pool would be disproportionate, the owner’s loss of the promised amenity could be compensated without awarding the full reconstruction cost.
Facts
Ruxley agreed to construct a swimming pool at Stephen Forsyth’s home in Kent. The agreed maximum depth was seven feet six inches. The completed pool was only six feet nine inches deep at its deepest point and six feet deep at the relevant diving point.
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The trial judge found that the pool was safe for diving and that the shortfall had not reduced its value. Achieving the specified depth would require demolishing the existing pool and rebuilding it, at a cost of £21,560. The judge found that this cost was wholly disproportionate to the benefit and that Forsyth did not genuinely intend to rebuild.
The proceedings began with the builders’ claims for unpaid sums. Forsyth counterclaimed for defective work. Judge Diamond QC refused reconstruction costs but awarded £2,500 for loss of amenity. The Court of Appeal, by a majority, substituted the cost of rebuilding. Ruxley appealed to the House of Lords.
Issue
Did Forsyth’s right to the performance he had contracted for entitle him to reconstruction costs, despite their disproportionate size? If market value was unchanged, was the court restricted to choosing between the full cost of rebuilding and no substantial compensation?
Decision and reasoning
The House unanimously allowed Ruxley’s appeal and restored the trial judge’s order, including the £2,500 award for loss of amenity.
Contract damages compensated the loss actually suffered; they did not punish the builder or automatically provide the monetary equivalent of specific performance. Reinstatement was the usual measure in many building cases, but it remained subject to reasonableness. Here, the owner had a safe, usable pool. Demolishing it to obtain the additional depth would cost far more than the benefit justified.
Reasonableness was not confined to mitigation after a loss had been identified. It also mattered when deciding the extent of that loss. The absence of any reduction in market value did not make otherwise unreasonable reconstruction reasonable.
Lord Mustill explained that market value did not necessarily capture everything a householder had paid to receive. A person might contract for comfort, convenience or an individual preference, without expecting a corresponding increase in the property’s sale value. Refusing rebuilding costs therefore did not necessarily mean that nothing of value had been lost.
The loss-of-amenity award recognised that personal benefit. It was compensation for a real loss, not merely nominal damages acknowledging that a breach had occurred. The builders had not challenged the amount. Lord Bridge supported the power to make such an award; Lord Lloyd treated the pool as a pleasurable amenity, while warning against assuming that the same approach would be available in most cases. Lord Jauncey found it unnecessary to decide the unchallenged award’s legal basis.
Forsyth’s intentions were relevant to whether reconstruction costs represented a reasonable assessment of his loss. This did not mean that courts generally controlled how damages must be spent once a loss had been established. Nor did his later undertaking to rebuild make the disproportionate expense recoverable.
The decision thus preserved both parts of the contractual bargain: the builder remained liable for failing to provide the agreed depth, but the remedy reflected the owner’s actual loss rather than the cost of unnecessary demolition.
