Watts v Morrow [1991] EWCA Civ 9 (30 July 1991)

Purchasers of a house sued their surveyor for a negligent report. They claimed for the cost of repairs and for mental distress. The court held that damages for mental distress are not recoverable for breach of a standard commercial contract.

Facts

The plaintiffs, Mr and Mrs Watts, wished to purchase a country house in Suffolk for use as a holiday home. They engaged the defendant, Mr Morrow, a surveyor, to carry out a full structural survey. The defendant’s report indicated that the property was sound, stable and in good condition, with only minor and easily rectifiable defects. Relying on this report, the plaintiffs purchased the property for £177,500. After taking possession, they discovered numerous serious defects not mentioned in the report, including a leaking roof, rotten windows, and damp, which required substantial repairs costing over £33,000. The plaintiffs sued the defendant for breach of contract, claiming damages for the financial loss and also for mental distress, vexation, and inconvenience caused by the discovery of the defects and the subsequent repair works. The trial judge awarded them £15,000 for the diminution in the property’s value, and a further £4,000 each (£8,000 in total) for mental distress and inconvenience. The defendant appealed against the award for mental distress.

Issues

The primary legal issue before the Court of Appeal was whether damages for mental distress, frustration, and vexation are recoverable for a breach of contract by a surveyor. A secondary issue concerned the proper measure of damages for the loss caused by the surveyor’s negligence.

Judgment

The Court of Appeal, with Bingham LJ giving the leading judgment, allowed the appeal in part.

Measure of Damages (Financial Loss)

The court affirmed the established principle from Philips v Ward [1956] 1 W.L.R. 471. The correct measure of damages is the difference between the market value of the property had it been as described in the report and its actual market value in its defective condition at the date of the breach. It is not, as a rule, the cost of the repairs. The trial judge’s award of £15,000 on this basis was upheld as a reasonable assessment of the diminution in value.

Damages for Mental Distress and Physical Inconvenience

This was the central issue of the appeal. Bingham LJ conducted a thorough review of the case law on damages for non-pecuniary loss in contract.

He established a general rule that damages for mental suffering are not recoverable in breach of contract claims:

“A contract-breaker is not in general liable for any distress, frustration, anxiety, displeasure, vexation, tension or aggravation which his breach of contract may cause to the innocent party. This rule is not, I think, founded on the assumption that such reactions are not foreseeable, which they surely are in any case of a breach of contract, but on considerations of policy.”

However, he identified a significant exception to this rule: damages for non-pecuniary loss can be recovered where the very object of the contract is to provide pleasure, relaxation, peace of mind, or freedom from molestation. He cited cases such as Jarvis v Swans Tours Ltd [1973] QB 233 (a ruined holiday) as examples.

Applying this principle, Bingham LJ determined that a contract for a pre-purchase survey of a house does not fall within the exception. He reasoned:

“A contract to survey a house for a prospective purchaser does not, however, in my opinion fall within this exceptional category. The surveyor is not contractually guaranteeing the purchaser’s happiness… The very object of the contract is to provide, not peace of mind or freedom from distress, but a careful and professional report on the structural condition of the house, and on this the purchaser will base a commercial decision whether to buy the house and if so at what price.”

Consequently, the award of damages for mental distress and vexation was held to be wrong in principle. However, Bingham LJ distinguished mental distress (which is not recoverable) from damages for physical inconvenience and discomfort caused by the breach, which are recoverable. He concluded that the plaintiffs had suffered physical discomfort as a result of having to live in the house during repairs. The court therefore set aside the judge’s award of £8,000 for mental distress and substituted it with a more modest sum of £750 for each plaintiff (£1,500 total) specifically for the physical inconvenience suffered.

Implications

The decision in Watts v Morrow is a landmark case in the law of contract damages. It clarifies and reinforces the general rule against awarding damages for mental distress for breach of contract, limiting recovery to a specific category of cases where the provision of a non-pecuniary benefit is a central object of the agreement. It establishes a crucial distinction between irrecoverable mental distress and recoverable physical inconvenience, providing a framework that has been consistently applied in subsequent cases involving professional negligence and other breaches of commercial contracts.

Verdict: The appeal was allowed in part. The trial judge’s award of £8,000 for distress and inconvenience was set aside and substituted with an award of £1,500 (£750 to each plaintiff) for physical inconvenience and discomfort. The award of £15,000 for diminution in value was upheld.

Source: Watts & Anor v Morrow [1991] EWCA Civ 9 (30 July 1991)