How to calculate diminution of value damages

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Waterdance v Kingston Marine Services Limited [2014] BLR141, TCC, Stuart-Smith J

Waterdance were a fishing company which owned and operated a fishing boat called “The Joy of Ladram”.  In January 2007 Kingston Marine Services (KMS) caused serious damage to the vessel’s engine and it was agreed that the damage to the engine would have cost £435,000 to repair.  At the time of the damage, Waterdance had been in negotiations to sell at an asking price of £1.4m but then abandoned these negotiations, and instead entered into a government decommissioning scheme which paid it £1,119,000 for permanently taking the vessel out of the fishing fleet.

Waterdance sued KMS for the notional £435,000 costs of repair (even though it never carried out any repairs).  KMS argued that the selling price had never been realistic, and that the government’s scheme had paid the fair value of the trawler without regard to the engine damage.  KMS therefore argued that Waterdance had suffered no loss.

Held

Any event occurring after the infliction of damages was irrelevant to the loss which had been experienced at the time the damage was caused. Waterdance was therefore entitled to the £435,000 cost of repair which was taken to be the diminution in the vessel’s value – unless KMS was able to prove otherwise (which it was not).

Comment

The Judge took a robust line.  He specifically said that events occurring after the infliction of damage are irrelevant to calculating the diminution in value for purposes of measuring damages.  Thus the subsequent destruction of a chattel, or subsequent decision to delay repairs, or even an ability to have the repairs done at less than cost or for nothing, will not prevent the Claimant from recovering the diminution value of the chattel caused by the negligence of the wrong-doer.

The Judge also remarked that the burden of proof was on Kingston, the Defendant, to show there were circumstances in existence at the time of the damage so that the physical damage to the vessel caused no diminution in its value to Waterdance on that date.

The Judge went on to remark that diminution does not have to be by reference to “open market value”. The court does not have to determine what the open market value was before the physical damage was suffered.  What matters in principle is that diminution in value has been caused by the damage, not what the un-damaged value may have been.  KMS tried and failed to persuade the Judge that the common knowledge that the statutory scheme was pending meant that there was no diminution in value as at the time of physical damage.

The Judge therefore concluded that KMS had failed to show that there had been no diminution in value and therefore he applied the reasonable cost of repairs as the measure of damage.

For more information, help or advice please contact Rob Langley on 0191 211 7975.