Munnelly v Calcon Ltd

• Jurisdiction: Ireland
• Judge: KENNY J.,Henchy J.
• Judgment Date: 05 May 1978
• Neutral Citation: 1978 WJSC-SC 1892
• Court: Supreme Court
• Docket Number: [1975 No. 3504 P.]
• Date: 05 May 1978

MUNNELLY v. CALCON LTD.

REVERSING HIGH - 30.7.76

MICHAEL MUNNELLY

v.

CALCON LTD. & ORS .

1978 WJSC-SC 1892

Henchy J.

Kenny J.

Parke J.

No. 3504P/1975

THE SUPREME COURT

1 Judgment of Henchy J.delivered the 5th May 1978

2 The central question in this case is, which measure of damages should be applied when the plaintiff's building has been negligently damaged or destroyed by the defendant? Is it to be the cost of reinstatement, or is it to be the amount by which the property has been diminished invalue?

3 In the High Court the judge, on consideration of the authorities that were opened to him, deduced inter alia that a plaintiff in such circumstances is entitled to the cost of reinstatement unless he has not a bona fide intention to restore or rebuild, or unless he has not availed himself of a reasonable alternative method of restoring the pre-damage position. For my part I would be slow to reach so broad a statement of the right to reinstatement damages. I do not consider that reinstatement damages, which may vastly exceed damages based on diminished value, are to be awarded as a prima facie right or, even if they are, thatthe plaintiff's intention as to reinstatement should be the determining factor. I do not think the authorities establish that there is a prima facie right to this measure of damages in any given case. The particular measure of damages allowed should, in my view, be objectively chosen by the court as being that which in all the circumstances of the particular case is best calculated to put the plaintiff fairly and reasonably, so far as a pecuniary award can do so, in the position in which he was to be found before the happening of the damage complained of.

4 Since this case was decided in the High Court the question of the correct measure of damages in circumstances such as those now before us was considered by May J. in C.R. Taylor (Wholesale) Ltd. v. Hepworths Ltd 1977 2 All E.R. 784. Among the passages cited with approval in the judgment in that case is the following from McGregor on Damages, 13th edn. (1972), para. 1061:

"The difficulty in deciding between diminution in value and the cost of reinstatement arises from the fact that the plaintiff may want his property in the same state as before the commission of the tort but the amount required to effect this may be substantially greater than the amount by which the value of the property has beendiminished. The test which appears to be the appropriate one is the reasonableness of the plaintiff's desire to reinstate the property; this will be judged in part by the advantages to him of reinstatement in relation to the extra cost to the defendant in having to pay damages for reinstatement rather than damages calculated by the diminution in the value of the land".

5 Accepting that this passage correctly reflects the state of the law, May J. went on to say (pp.791-2):

"The various decided cases on each side of the line to which my attention has been drawn, and to some of which I have referred in this judgment, reflect in my opinion merely the application in them of two basic principles of law to the facts of those various cases. These two basis principles are, first, that whenever damages are to be awarded against a tortfeasor or against a man who has broken a contract, then those damages shall be such as will, so far as money can, put the plaintiff in the same position as he would have been had the tort or breach of contract not occurred. But secondly, the damages to be awarded are to be reasonable, reasonable that is asbetween the plaintiff on the one hand and the defendant on theother".

6 I accept those two principles as being basic to, although not necessarily exhaustive of, the concept of restitutio inintegrum, on which the law of damages in cases such as this rests. It is in the application of those principles that difficulty may arise, for the court, in endeavouring to award a sum which will be both compensatory and reasonable, will be called on to give consideration, with emphasis varying from case to case, to matters such as the nature of the property, the plaintiff's relation to it, the nature of the wrongful act causing the damage, the conduct of the parties subsequent to the wrongful act, and the pecuniary, economic or other relevant implications or consequences of reinstatement damages as compared with diminished - value damages. The reported cases, therefore, require to be viewed primarily as exemplifications of the application to special facts of the two principles to which I have referred.

7 In the present case I consider that the correct measure of damages is the diminished value of the building. My reasons are as follows.

8 The building is 66 Aungier St., Dublin. The plaintiff purchased it as a freehold in 1972. From then until the damagecomplained of was done in 1975 he carried on business as an auctioneer in rooms on the ground floor, while the rest of the promises was let in eight lettings which brought in a gross weekly rent of £62.50. The pre-damage value of the premises has been found to have been£35,000 and it has also been found that that sum would purchase similar premises in the south side of the city. The diminished value of the premises, which have had to be totally demolished as a result of thedefendants" negligence, is therefore put at £35,000. It is to be noted, however, that while similar premises could be found in the south side of the city for £35,000. such premises would not be available in Aungier St. or in the immediate vicinity.

9 The plaintiff wishes to reinstate the premises. Reinstatement would cost£65,000 plus engineering and architectural fees. So reconstructed, the premises, which cost the plaintiff £7,000 in 1972, after which he renovated them at a cost of £12,000, and which had a market value of £35,000 when they were damaged, would have a letting value of between £2,000 and £2,500 a year over and above that of the old premises, and would have a capital value which one witness put at over £100,000. The plaintiff would therefore profit handsomely from reinstatement damages, in terms of both capital andincome.

10 In my judgment, reinstatement damages of £65,000 would not be justified in those circumstances. That measure of damages would excessively and unnecessarily enrich the plaintiff and unreasonably mulet the defendant. For damages measured at£35,000, i.e. the diminished value of the premises, the plaintiff, it has been found, can get premises no less suitable for his business purposes and with a similar income-potential from lettings. Such damages will be both compensatory and reasonable, whereas reinstatement damages of £65,000 would unjustifiably profit the plaintiff and unfairly penalise the defendants for their negligence.

11 It is true that, in order to set up in business elsewhere as an auctioneer, the plaintiff will have to spend the £35,000 in acquiring premises somewhere in the south side of the city and not in Aungier St. or in its immediate vicinity. This might be unfair or unreasonable if his business circumstances were different. But, prior to 1972 he had carried on his auctioneering business in Rathmines for six years, and there is no suggestion that it suffered by being transferred to Angier St. in 1972. And there is no evidence that it will suffer to any appreciable extent if it is now transferred to another premises in the south side of the city. It would be a different story if the plaintiff had a well-established business in Aungier St., such as that of a publican, a grocer or a bookmaker, which depended on the immediate locality for its custom. But the plaintiff is an auctioneer and, as the evidence shows, he draws his clients from all parts of the Dublin area. For the plaintiff's auctioneering business, Aungier St. provides an address rather than a catchment area. Whether it be looked on as an investment to provide rents or as the base for his auctioneering business, No. 66 Aungier St. has no special features or unique advantages which would justify ordering the defendants to pay for its reinstatement, particularly when the reinstatement would cost so much and would result in such a substantial aggrandisement of the plaintiff in terms of both capital appreciation and increased rents. In expressing his preference for No. 66 Aungier St. as the address of his auctioneering business, the plaintiff has adduced no factors in support of that preference other than that the bus stops at the door and that his business was doing well there. Nothing has been advanced in evidence to upset the contention that this auctioneering business, with its non-local clientele, can, apart from some temporary disruption, be successfully transferred to another address.

12 As well as the £35,000 representing the...