The cost of putting bad building work right: what can be claimed

When building work is defective or left unfinished, the question that follows is what the law treats as the customer's loss. The answer is not simply whatever the next builder charges. This guide explains the principles the courts of England and Wales apply, for homeowners and small businesses in dispute with a builder. It does not say what any claim is worth, which depends on the evidence in each case. For when a builder's conduct amounts to a breach in the first place, see the overview of what happens when a contractor walks off the job.

The aim of damages

Contract damages are compensation, not punishment. The principle was stated in Robinson v Harman (1848): a party who suffers loss through a breach of contract is, so far as money can do it, to be placed in the same situation as if the contract had been performed.

The usual measure: the reasonable cost of reinstatement

For defective building work, the ordinary measure is the cost of reinstatement, sometimes called the cost of cure: what it reasonably costs to make the work conform to the contract. Where the work was left unfinished, the same logic applies to the reasonable cost of completing it.

The leading case is Ruxley Electronics and Construction Ltd v Forsyth [1995] UKHL 8. Lord Lloyd explained that in many ordinary cases, where reinstatement presents no special problem, its cost will be the obvious measure even if the defect makes little or no difference to the value of the property.

Credit for what has not been paid

The comparison is with the contract being properly performed, and in that case the customer would have paid the full price. Any part of the price not yet paid is therefore brought into account. A building-law textbook passage quoted in Ruxley expresses the measure as the difference between the contract price of the work and the cost of making the work conform to the contract. Disputes about what was due to the original builder are covered in withholding payment or ending the contract with a builder.

When the cost of cure is refused

The cost of reinstatement is recoverable only where it is reasonable to insist on reinstatement. Ruxley shows the limit. A builder contracted to construct a swimming pool with a maximum depth of 7 ft 6 in and built it shallower. The trial judge found that:

• the pool as built was perfectly safe to dive into;
• there was no evidence that the shortfall had reduced its value;
• the only way to achieve the specified depth was to demolish the pool and build a new one; and
• that cost would be wholly disproportionate to the disadvantage of having a shallower pool.

The House of Lords held that the owner was not entitled to the cost of rebuilding. Lord Lloyd said that the cost of reinstatement is not the appropriate measure if the expenditure would be out of all proportion to the benefit to be obtained. Lord Jauncey said that damages are designed to compensate for an established loss and not to provide a gratuitous benefit, and that the owner's loss was not the lack of a usable pool.

Three further points come out of the case:

1. Diminution in value. Where reinstatement is unreasonable, the alternative financial measure is the difference in value between the work as built and the work as promised. In Ruxley that was nil.
2. Loss of amenity. The owner was not left with nothing. The trial judge's award of a sum for loss of amenity, which the builder did not challenge on appeal, was restored. Lord Mustill said there are not two alternative measures but only one, the loss truly suffered, and that the law must cater for a promise that is worth more to the customer than any financial gain performance would bring.
3. Intention to do the work. The courts are not normally concerned with what a claimant does with damages. But Lord Jauncey and Lord Lloyd both said that whether the customer genuinely intends to carry out the work can be relevant to whether claiming its cost is reasonable.

Betterment

Remedial work sometimes leaves the customer with something better than the contract promised. The Court of Appeal distinguished two situations in Endurance Corporate Capital Ltd v Sartex Quilts & Textiles Ltd [2020] EWCA Civ 308, an insurance case decided on the ordinary rules for contract damages:

• Chosen improvements. Where a claimant chooses to make improvements at additional cost, that additional cost is not part of the cost of reinstatement at all.
• Unavoidable improvements. Where a better result is an incidental consequence of a reasonable repair scheme, a deduction is made for money the claimant will save, or can reasonably be expected to save, as a result. No deduction is made for a benefit that leaves the claimant no better off in money terms. The burden of proving a saving lies on the party in breach.

The duty to mitigate

In British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd (1912), in a passage quoted in Ruxley, Viscount Haldane described the compensation principle as qualified by a second one, which imposes on a claimant the duty of taking all reasonable steps to mitigate the loss.

The standard is reasonableness. In a building dispute the argument is usually about whether the remedial scheme and its price were reasonable, which is why records of how the replacement contractor was chosen, and of any comparable quotes, tend to matter. See evidence in a builder dispute.

Consequential losses and remoteness

Bad building work can cause losses beyond the cost of repair, such as the cost of living elsewhere while work is redone, or of storing furniture. Whether such losses are recoverable depends on the remoteness rule in Hadley v Baxendale (1854). Damages are recoverable for loss that arises naturally, according to the usual course of things, from the breach, or that may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of breaching it.

In Attorney General of the Virgin Islands v Global Water Associates Ltd [2020] UKPC 18 the Privy Council summarised the modern test: the type of loss must have been reasonably contemplated as a serious possibility when the contract was made, judged by what the party in breach then knew.

Distress and inconvenience

The general rule is that damages for breach of contract do not compensate injured feelings. There are exceptions. In Ruxley, Lord Lloyd referred to the established exception where the object of the contract is to afford pleasure. Separately, the courts award general damages for physical inconvenience and discomfort caused by a breach.

In AXA Insurance UK plc v Cunningham Lindsey United Kingdom [2007] EWHC 3023 (TCC), a case arising from repair works to a house, Akenhead J said that general damages are allowed for inconvenience, distress and discomfort caused by breaches of contract, and that the amount allowable will be modest. The Court of Appeal applied that guidance in West v Ian Finlay & Associates [2014] EWCA Civ 316, a homeowners' claim against their architect, and reduced the trial judge's award.

No recovering twice

A consumer may also have a statutory right to a price reduction under the Consumer Rights Act 2015. Section 54(6) allows other remedies, including damages, to be sought instead of or in addition to it, but not so as to recover twice for the same loss.

What a solicitor will want from you

• The contract, quote or specification, and any agreed variations.
• A record of every payment made to the original builder, and what remains unpaid.
• Dated photographs of the defective or unfinished work before anything was put right.
• Any expert or surveyor's report on the defects and the remedial work needed.
• Quotes and invoices for the remedial work, showing any items that go beyond the original specification.
• Receipts for other losses, such as accommodation or storage, and the dates they cover.

Run the free case check

This guide is general information about the law of England and Wales. It is not legal advice. What can be recovered in any case depends on its facts and usually on expert evidence, and time limits apply to bringing a claim.