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Should speculation give way to the court's benefit of hindsight?

When awarding compensation the courts endeavour to give the claimants a sum of money to put them in the same position they would have been in had they not suffered the wrong in the first place. In some cases, such as those involving money, it is relatively easy to calculate the financial compensation to be paid. In others, such as those involving loss of life or limb, compensation can only be quantified with reference to previous similar cases and complex tables.

The basic principle behind the award of damages is, however, compensatory. The claimant can only recover their actual losses and not any hypothetical loss. So no matter how likely it may have been for them, for example, to have been driving their expensive car, rather than their beaten-up city run-about on the day their vehicle was written off, if they weren't, they cannot recover the cost of a new limo.

Cases to do with defective properties give rise to more than their fair share of problems with the quantification of damages.

A purchaser who buys a property relying on a negligent survey pays more than they would have done had the surveyor accurately pointed out the problems with the roof, the foundations or the damp. When calculating the losses, though, is the starting point the value of the property at the date of purchase in its true condition as subsequently discovered by detailed investigation and monitoring, or the value a competent surveyor acting on the spot would have given?

The calculation is further complicated in cases involving structural movement, where the progressive nature of the movement may not be known, either to the surveyor at the time or to the court subsequently.

The court grappled with some of these problems in the case of McKinnon v E.Surv (judgment 14.1.03). The claimant bought a property in Essex that had suffered structural movement but that the defendant surveyor said was 'longstanding, unlikely to be progressive and within acceptable tolerances'. On the strength of this advice the claimant paid £185,000. Subsequently the surveyor admitted that it had missed more serious signs of movement and that it ought to have advised the claimant to have further investigations carried out to ascertain whether the movement was indeed progressive.

A single expert appointed by the parties was of the view that if the property had stopped moving, a competent surveyor would have valued the property at £148,000. If it were still moving the property would be worth little more than its site value of £92,000. By the time the matter reached the courts, the expert believed that the movement had stopped, but a further 12 months monitoring was required to be certain. The negligent surveyor could not have possibly known, at the time of the survey, that the movement was not continuing and, therefore, the claimant argued, it was entitled to have back the £90,000 it had overpaid on the strength of the negligent survey.

When calculating the claimant's losses, the relevant date was the date of the breach. Anything that happened subsequently was irrelevant, or as we used to say before Lord Woolf forbade latin, res inter alios acta , which loosely translated means 'mind your own business'.

On the other hand, argued the surveyor, if the movement had stopped, as it believed it had, the loss to the claimant was much less, in the region of £37,000.

So why should the claimant receive a windfall of overcompensation? The key question here was whether the court was entitled to use the benefit of hindsight when assessing damages.

Relying on a principle of law described as 'the Bwllfa principle' after a case of the same name, the court held that when assessing compensatory damages the court should not speculate when it actually knows, and should therefore take into account all the information available to it at the time. There would be no advantage in the court putting itself, notionally, into a position of ignorance. To do so would only add pointless and avoidable uncertainties.

The judge concluded that the court not only may, but must, operate with the benefit of hindsight, and on that basis awarded the claimant the lower sum of £37,000.

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