Recoverable damages under the Defective Premises Act: Court of Appeal guidance
A recent Court of Appeal decision has considered the scope of damages recoverable under the Defective Premises Act 1972 in historic building safety cases where remediation has or will be undertaken by the developer. Whilst many of the claims considered by the Court were struck out as being speculative or too remote, the decision provides interesting comments on the equivalence of damages under the Act with damages in contract and on issues of double recovery where properties have been gifted or sold prior to remediation.
Wilson v HB (SWA) Ltd
Mr and Mrs Wilson were leaseholders of two flats in a development in Cardiff. The building was found to suffer from fire safety and other defects. The Wilsons were two of 41 individual leaseholders suing the developer for damages. The claims were for breach of contract and/or for breach of section 1 of the Defective Premises Act 1972 (“DPA”).
The developer had agreed with the management company to carry out a comprehensive programme of remedial works. As a result, no claim could be made for the cost of remedial works. Instead, the Particulars of Claim (“PoC”) submitted on behalf of all 41 claimants set out five heads of loss as follows:
- diminution in the value of the flats notwithstanding the remedy of defective works;
- loss of rental income;
- damage to health due to the presence of mould and damp;
- inconvenience and distress; and
- potential decanting costs.
Each claimant subsequent submitted a Schedule of Loss which contained their quantum of the above heads of losses. All of the Schedules of Loss were in accordance with the heads of loss noted above, except for the Wilsons’. Their Schedule of Loss listed nine different heads of loss, seven of which were struck out by the TCC as too remote, unclear or speculative. The Wilsons appealed.
Damages under the DPA
As a preliminary question, the Court of Appeal considered whether the quantum of damages recoverable under the DPA was different to that recoverable for breach of contract. The Court noted that neither party had challenged the TCC’s finding that “in the circumstances of this case there is unlikely to be any or any significant difference between the two.” The Court also noted that previous case authorities had not drawn a distinction between the damages recoverable in contract and under the DPA.
The Court did not, however, say that no such distinction could ever be made. There may theoretically be some scope, therefore, for arguments to be made in the future as to such a distinction in cases dealing with different circumstances.
Diminution in value where defects have or will be repaired
The first head of loss noted above claimed for diminution in value notwithstanding the planned remedial works. As the Court noted, this principally had in mind a claim for “blight”:
“It is common to find that, for example, flats in a block which has been the subject of extensive remedial work are worth less on the open market than flats in a block which has not been the subject of such work. This is commonly known as ‘blight’. Residual diminution in value is a proper head of loss in such circumstances …”
However, the Wilsons had sought to include a much greater claim for diminution in value based on the fact that they had gifted the flats to their daughters in November 2024 at a time when remediation, although likely, had not yet been confirmed. They claimed to have suffered an immediate diminution in value because the gifted assets were worth less than if they had been defect free.
The Wilsons relied on a previous Court of Appeal authority to the effect that the subsequent sale or destruction of property does not deprive the owner of a claim for diminution in value. In The London Corporation, a steamship was damaged by another vessel. The Court in that case held that diminution in value, represented by the cost of repairs, was recoverable by the steamship owner, despite the fact that the steamship was in fact sold for scrap.
Although the Court in the present case found that the Wilsons’ claim in this respect had not been properly pleaded, it noted that “it was a novel claim in law” and would not be straightforward to formulate. Among the questions it raised was how to quantify loss where the properties were gifted for nothing and whether the claim would result in “double jeopardy” for the developer:
“How could the defendant be liable to the Wilsons and/or their daughters under the DPA for the necessary remedial work to put the flats right, and also be liable to the Wilsons for the diminution in value calculated on the basis that the flats were defective when they gifted them? How is that the same as if the Wilsons had sold the flats at a loss in November 2024, when any purchasers at a lower figure may be regarded as having already been compensated for the defects (because they had paid less than they would otherwise have done for the flats), so would not necessarily be entitled to have the works to their flats done free of charge?”
Causation and remoteness
In respect of Wilsons’ other heads of losses, the Court took a robust approach in weeding out speculative and remote claims. It accepted, in principle, that residual diminution and loss of rental income can be recoverable. However, in this case, loss of rent had been claimed on a hypothetical basis by reference to what rent could have been sought had the defects not been present, but it did not address the rents actually charged and whether higher rents had been sought or advised against.
Similarly, a claim that the Wilsons had lost the opportunity to borrow against the value of the flats was too speculative and did not address any actual opportunities that the Wilsons had wanted to pursue but were unable to as a result of financial difficulties. Such losses were also too remote, not being ordinary losses and there being no allegation that the Wilsons made the developer aware of their reinvestment plans.
Conclusions and implications
Given the increasing prevalence of DPA claims since the enactment of the Building Safety Act 2022, this decision provides helpful guidance as to the bringing of damages claims under the Act by leaseholders against developers. Claims which are remote, unparticularised or speculative will be struck out. Individual Schedules of Loss should closely follow the agreed pleading framework and should not introduce new heads of claim.
The questions posed by the Court in relation to “double jeopardy” are also of note. Although not cited by the Court, the prospect of double recovery under the DPA has previously been considered by the Court of Appeal in Chartres v Taylor. In that case, reductions to the purchase price were found not to be on account of the defects claimed for under the DPA and double recovery had not, therefore, been established.
More difficult issues of double recovery may arise where remediation by a developer is carried out pursuant to obligations owed to the government under Developer Remediation Contracts and the Self-Remediation Terms contained within them agreed as part of the government’s Responsible Actors Scheme (for a detailed overview of such contracts and the Scheme, please see our Law-Now here). Such contracts provide for independent remediation obligations separately from the DPA or any contractual remedies held by an owner. Developers who have remediated in accordance with these obligations could potentially face claims from prior owners, relying on The London Corporation case noted above, who have gifted property (like the Wilsons) or sold at a reduced price. Whilst the potential for double recovery may have prevented the new owners from being entitled to remediation in such circumstances, the developer will have remediated, or be required to remediate, in accordance with its separate obligations owed to the government.
References:
The London Corporation [1935] P 70
Chartres v Taylor [1998] EWCA Civ 102
Wilson & Anor v HB (SWA) Ltd [2025] EWCA Civ 1360
