Criminal Law - Essay - Non-pecuniary loss

In Jarvis, Lord Denning stated that Mr Jarvis was “entitled to damages for the lack of those facilities and for his loss of enjoyment” and in Jackson, too, the defendant could recover damages for similar reasons. Thus, these two cases caused a considerable widening of the scope for awarding damages for mental distress caused by the breach of contract.

Following these Jarvis and Jackson, a number of cases held that damages could be awarded for mental distress in situations other than the holiday context, some of which will be mentioned here. In Cox v Philipps Industries Ltd, damages were more widely available as an employee was able to recover damages for distress and anxiety caused by his wrongful demotion. In the case Perry v Sidney Phillips & Son, damages were awarded for the mental distress caused by the failure of a negligent surveyor to discover major structural defects in a dwelling house. Furthermore, in Heywood v Wellers, the Court of Appeal held that the plaintiff could recover for mental distress caused by the breach of contract. She had employed the defendant solicitors to secure a method of preventing a former male friend from molesting her, because of the defendant’s negligent work, however, the plaintiff was molested on further occasions, causing her mental distress.

All these cases applied Jarvis and Jackson but at the same time widened the scope for the award of damages for anxiety by awarding damages in cases, where the object was not primarily to provide pleasure, as in the ‘holiday cases’.

After this group of cases, there was a movement in the courts towards a considerable tightening up of awards of damages for such types of losses. Thus, in the case Shove v Downs Surgical plc, the decision in Addis was reaffirmed and Lord Justice Sheen found that damages for mental distress caused by wrongful dismissal were irrecoverable. More importantly shortly afterwards in Bliss v South East Thames Regional Health Authority, the Court of Appeal reversed the decision at first instance that the mental distress and anxiety caused by the suspension of an orthopaedic surgeon for refusing to submit to an examination by a psychiatrist was recoverable. This decision substantially overruled Cox and reaffirmed Addis. In the course of their judgments, the members of the Court of Appeal confined liability for damages for mental distress to facts such as those seen in Jarvis and Jackson, where the provision of pleasure or ‘peace of mind’ was a central feature of the contract. This decision received affirmation in Hayes where Lord Justice Staughton stated that damages could not be recovered for distress that might result from breaching a commercial contract. The reason for this being that such contracts are contracts of profit and monetary loss would have to be proved in such cases. He further stated in relation to the ‘peace of mind’ criterion discussed in Bliss: “it may be that the class is somewhat wider than that. But it should not […] include any case where the object of the contract was not comfort or pleasure, or the relief of discomfort, but simply carrying on a commercial contract with a view to profit”.

Moreover, in Watts v Morrow, Lord Bingham reiterated the principle that damages are not generally recoverable for “any distress, frustration, anxiety, displeasure, vexation, tension or aggravation” caused by the breach. He stated that only “where the very object of a contract is to provide pleasure, relaxation, peace of mind or freedom from molestation, damages will be awarded if the fruit of the contract is not provided for or if the contrary result is procured instead”. One reason being that such non-pecuniary or non-physical harm presents difficulties of measurement and proof and the courts would have the very onerous task of “plucking a figure out of the air”. As the Law Commission stated in its paper Aggravated, Exemplary and Restitutionary Damages, there is “no standard measure of assessment by reference to which the harm can be converted into monetary form”, however, it needs to be noted here that in tort law this is common practise.

Thus, in Watts it was held that damages for non-pecuniary loss could solely be awarded where pleasure was the main object of the contract or where physical inconvenience flowed from the breach of contract. The first exception to the general rule equated largely to the situations which occurred in the ‘holiday cases’, Jarvis and Jackson, though a subtle tightening of the exception is found here in that the ‘very object’ of the contract must be to provide pleasure rather than where it is simply a central feature of the contract.

The application of this first exception can be seen in the decision of the House of Lords in Ruxley Electronics and Construction Ltd v Forsyth where it was stated that the exceptions to the rule from Addis were not closed. In this case, the defendant was a tall man who specifically contracted with the two plaintiff companies for the construction on a pool with a maximum depth of seven feet and six inches, in fact the pool was however only six feet nine inches deep which caused the defendant mental distress and discomfort. Lord Lloyd held that the contract was one “for the provision of a pleasurable amenity”, the loss of which was compensable. Lord Lloyd was of the opinion that the decision to make an award was a simple extension of the Jarvis and Jackson cases rather than another exception to the Addis case.

In his judgment, however, Lord Lloyd went a little further and questioned whether there was any reason for a court to not compensate, for example, the buyer of a house which does not conform to some minor specification of the contract where there would be no measurable difference in the value of the house but mental distress might well be caused. Lord Lloyd questioned: “Is the law of damages so inflexible… that it cannot find some middle ground in such a case?”. He considered that there could be an alternative basis for an award of damages for loss of amenity where the exceptions to the principle in Addis may not apply. This approach did not find general favour in the subsequent cases Alexander v Rolls Royce Motor Cars Ltd and Knott v Bolton where it was stated that damages for disappointment would not be awarded where the contract was a commercial one or where pleasurable amenity was not the main purpose of the contract.

A further change in this field was brought about by Farley v Skinner. In this case, the position of whether the ‘very object’ requirement of the contract is flexible enough to include contracts where the pleasure is merely an important feature of the contract was again considered by the House of Lords. In Farley, a surveyor had negligently and falsely reported that the plaintiff’s retirement home would not be affected by the aircraft noise of nearby Gatwick airport, causing the plaintiff much discomfort and distress.

The court considered that the case fell outside the scope of the two exceptions stated by Lord Bingham in Watts since, firstly, the facts did not support an action for an award arising from physical inconvenience. Secondly and possibly more importantly, the case was outside the category where the ‘very object’ of the contract was to provide pleasure, relaxation or peace of mind. When the case came before the House of Lords, their Lordships allowed Mr Farley’s appeal stating that it did not matter that the object of the contract was not to provide “pleasure, relaxation, peace of mind” provided this was an important part of the contract and that the surveyor had been specifically requested to report on the issue of aircraft noise. Their Lordships thus reinterpreted the first exception as set out in Watts moving it back in line with Jarvis and Jackson. Lord Steyn in particular disagreed with the ‘very object of the contract’ criterion interpretation as he considered it was sufficient if a “major or important object of the contract is to give pleasure, relaxation or peace of mind”. 

In the most recent case on this matter, Regus Ltd v Epcot Solutions Ltd, where the work on a defective air conditioning system was not carried out, it was held that there could not be recovery for loss of amenity because the object of this commercial contact was not to provide pleasure. Furthermore, in Hamilton-Jones v David & Snape, involving mental distress as result from  a solicitors' negligence claim, Farley was applied. Farley is authority that the exception to the general rule is now that a major or important object of a contract must be to give pleasure in order for non-pecuniary damages to be available. The significant redefining of the exceptional category gives scope for many more claims which, pre-Farley, would have been viewed as insufficiently central to the contract, an example for this being Knott v Bolton, discussed above.

Farley thus represents a significant step forward in allowing claims for damages with respect to non-pecuniary losses and provides a realistic interpretation of the two exceptions to the principle set out in Addis. Furthermore, it can be argued that after the widening and narrowing of the scope for awarding damages for non-pecuniary losses, the law has now arrived again in more or less the same position as it had been in 30 years earlier as the ratio of Farley has the same scope as the ratio in Jarvis and Jackson and thus, a ’full circle’ seems to have travelled back to the ‘holiday cases’.

However, the law is likely to develop further and change again and consequently, Farley is unlikely to be the defining case. A number of commentators strongly argue that non-pecuniary damages should be more widely awarded in the commercial context. Moreover, it is argued that the rule in Addis is “premised on foundations of sand and is out of sync with modern realities”, that the rule and its exceptions are “unnecessary and needlessly complicate the area” and that the decision in Farley failed to resolve the existing problems and instead added to the confusion. Furthermore, as already mentioned, not only is the position contrary to usual damages principles in contract law, but it also does not fall in line with awarding damages for non-pecuniary losses in tort law.

It is therefore proposed by some academics that it would be a “more honest and principled approach” if the courts allowed damages for consequential mental distress on the usual remoteness tests (the leading case on this being Hadley v Baxendale). Since the law on this area is termed by such commentators as “unacceptable” and due to the fact that there has always been so much change and development on non-pecuniary damages, it is submitted that the development is highly likely to continue and the law might even be changed by legislature in order to render damages for mental distress as just, as suggested by Phang.

It is concluded that the law on non-pecuniary damages has indeed been subject to much change since Jarvis and Jackson and the law on such damages might well be described as having ‘travelled a full circle’ as the law is now, since the decision in Farley, again very similar to how it was after the decisions in the ‘holiday cases’. However, this development did not start with Jarvis and Jackson in the 1970s but much earlier, even before the case of Addis and it is to be expected to undergo further change as there is still much dissatisfaction with the law on awarding damages for non-pecuniary losses.

Bibliography

• Aggravated, Examplary and Restitutionary Damages (1993) (Law Com. No. 132).
• Bowen, Andrew. Watts v Morrow and the consumer surplus. S.L.T. 2003, 1, 1-6.
• Clarke, Linda. Remedial responses to breach of confidence: the question of damages. C.J.Q. 2005, 24(Jul), 316-336.
• Dugdale, Tony. Beyond measurable loss. P.N. 2007, 23(4), 213-217.
• Elliott, Catherine and Quinn, Frances. Contract law. 2007. 6th edn. Harlow: Pearson Education Limited.
• Furmston, Michael Philip. Cheshire, Fifoot and Furmston’s law of contract. 2007. Oxford: Oxford University Press.
• Holmes, Renee. Mental distress damages for breach of contract. (2004) 35 VUWLR. 
• McKendrick, Ewan. Contract law. 2007. 7th edn. New York: Palgrave MacMillan.
• Phang, Andrew. The crumbling edifice? The award of contractual damages for mental distress. J.B.L. 2003, Jul, 341-388.
• Phang, Andrew. Subjectivity, objectivity and policy – contractual damages in the House of Lords. J.B.L. 1996, Jul, 362-381.
• Poole, Jill. Casebook on contract law. 2008. 9th edn. New York: Oxford University Press.
• Richards, Paul. Law of contract. 2007. 8th edn.  Harlow: Pearson Education Limited.

Table of Cases

Addis v Gramophone Co Ltd [1909] AC 488, HL

Alexander v Rolls Royce Motor Cars Ltd [1996] RTR 95, CA

Bliss v South East Thames Regional Health Authority [1987] ICR 700, CA

Cox v Phillips Industries Ltd [1976] 3 All ER 161, QBD

Diesen v Samson 1971 SLT (Sh Ct) 49, Sh Ct (Glasgow)

Farley v Skinner [2001] UKHL 49, HL

Hadley v Baxendale (1864) 9 Ex 341, Ex Ct

Hamilton-Jones v David & Snape (a firm) [2003] EWHC 3147, Ch D

Hamlin v Great Northern Railway Co (1856) 156 ER 1261, Ex Ct

Hayes v James and Charles Dodd (a firm) [1990] 2 All ER 815, CA

Heywood v Wellers (a firm) [1976] QB 446, CA

Hobbs v London & South Western Railway Co (1974-75) LR 10 QB 111, QBD

Jackson v Horizon Holidays Ltd [1975] 1 WLR 1468, CA

Jarvis v Swans Tours Ltd [1973] QB 233, CA

Knott v Bolton (1995) 11 Const LJ 375, CA

Perry v Sidney Phillips and Son [1982] 1 WLR 1297, CA

Regus (UK) Ltd v Epcot Solutions Ltd [2007] EWHC 938 (Comm)

Robinson v Harman (1848) 1 Ex 850, Ex Ct

Ruxley Electronics and Construction Ltd v Forsyth [1996] 1 AC 344, HL

Shove v Downs Surgical plc [1984] 1 All ER 7, QBD

Watts v Morrow [1991] 1 WLR 1421, CA

---