Hooper v Oates

 

The Message

Damages for breach of a property sale contract may take account of post breach events.

The Case

Hooper v Oates [20 February 2013] considered the significant issue of whether a damages claim for breach of contract to buy property was to be measured by reference to the property’s value at the date of the breach, or rather by reference to its value at a later date. There was a large difference in the respective values, which had a major impact on the level of damages.

The Hoopers owned a property in Cheshire. In February 2008 they agreed to sell it to Mr Oates for £605,000, completion to occur by the end of June 2008. The property was already empty, since the Hoopers had moved into another property. When the time came to complete, Oates could not, or would not, complete. A notice to complete was served, but he still failed to complete. The Hoopers accepted his repudiation of the contract by notice dated 14 July 2008.

The Hoopers were anxious to sell the property, because it was subject to a mortgage of £500,000, and put the property back on the market at £585,000. They tried to sell it but failed despite 14 months’ marketing and dropping the price to £485,000. In October 2009 the Hoopers let the property to get some return from the property. When the tenants left late in 2010 the Hoopers marketed the property again, but still unsuccessfully. By summer 2011 they gave up marketing and moved back into the property. The property’s value had fallen substantially, because of the events of autumn 2008 and their impact on the property market.

The Hoopers had sued Oates for damages in May 2009. An earlier court decision had held Oates to be in breach of contract and liable to pay damages. The joint single expert valuer provided a figure for the property’s market value at 30 June 2008 and 13 September 2010. He took the market value to be the estimated amount for which a property should exchange at the valuation date between a willing buyer and willing seller in an arms length transaction after proper marketing. The valuer valued the property at £600,000 on 30 June 2008 and £495,000 on 13 September 2010. The county court held that damages should be assessed by reference to the 13 September figure with the result that the damages were greater because the loss was greater.

Oates appealed asserting that the property’s value at the date of the breach (14 July 2008) should be taken so that the Hoopers suffered no loss that was not covered by the deposit (to which the Hoopers were entitled). He denied any liability for a reduction in the property’s value after the breach date. No issue was raised as regards a failure to mitigate the Hoopers’ loss.

The Court of Appeal dismissed Oates’ appeal and decided in the Hoopers’ favour. The market value determined by the valuer involved an assumption that the property was exposed to the market for a reasonable time, likely to be for more than a month. The availability of a market is very relevant in relation to the date for assessing damages for breach of a contract to sell land where the buyer fails or refuses to complete the purchase. However, it is very rare that a seller of land can go into the market on the date of breach and find a buyer who will proceed to contract at once. The consequence is that the breach date is unlikely to be the date for assessing damages for a buyer’s breach of a contract to sell land.

The Court could see no basis for imposing on the Hoopers the value as at the breach date rather than the later date when, after taking steps to mitigate their loss, they finally decide to retain the property. The appropriate date was the date when they ended their reasonable attempts to resell and moved back to the property. The value at that date was £495,000.