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England and Wales High Court (Technology and Construction Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Naylor & Ors v Roamquest Ltd & Anor [2021] EWHC 567 (TCC) (10 March 2021) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2021/567.html Cite as: [2021] EWHC 567 (TCC) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Rolls Building Fetter Lane, London, EC4Y 1NL |
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B e f o r e :
____________________
| MISS ELAINE NAYLOR & Others |
Claimants |
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- and |
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| (1) ROAMQUEST LIMITED (2) GALLIARD CONSTRUCTION LIMITED |
Defendants |
____________________
Simon Goldstone (instructed by Howard Kennedy & IBB Law LLP) for the Defendants
Hearing date: 20th November 2020
Further submissions in writing: 25th November 2020 & 2nd December 2020
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Crown Copyright ©
"Covid-19 Protocol: This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to BAILII. The date and time for hand-down is deemed to be Wednesday 10th March 2021 at 10:30am"
Mrs Justice O'Farrell:
Background facts
Proceedings
"Subsequent to further (non-intrusive) inspections carried out in 2019, the following further defects were detected and/or are reasonably suspected as being included in the construction of the Buildings of the Development. These amounted to defects and/or further breaches of the said requirements of the Building Regulations 2000. The Schedule of Defects provides a full list of these defects, their location, the statutory requirements that apply and particulars of the alleged breaches thereof, as well as the proposed remediation works and estimated cost of remediation (including the rain screen cladding which is item 1) "
"(1) Additional remedial works costs outside NHBC cover: the Buildmark Policy only covers "necessary repairs". Prior to further information and/or disclosure relating to the 'as built' remedial works and/or an opportunity for further expert inspection of the Buildings where remediation works are scheduled to be undertaken and/or are ongoing, the Claimants do not presently know whether the NHBC Works will include (or have included) full remediation of the defects noted in respect of the fire breaks or compartmentalisation measures, (which also amount to breaches of the Building Regulations), as more fully particularised above and in the Schedule of Defects, other than where those defects are immediately behind the ACM cladding or timber cladding.
(2) Accordingly the Claimants claim the cost of works associated with the remediation of such other defects. The Schedule of Defects is the best estimate the Claimants can currently give in respect of those likely costs.
(3) Diminution in value: Further to (1) or alternatively, (in which case the diminution in value must take account of the costs of remediating the matters complained of under (1) as well as the effect of the Cladding), prior to completion of all remedial works across the Development (and not merely the Buildings relevant to this claim) the value of the Claimants' flats has been diminished. Immediately after the Grenfell fire reportedly lenders were refusing to lend on such buildings, and valuers were being instructed to value flats in such developments at £nil. Other lenders adopted an approach of trying to balance their clients' risk of having to share in the cost of recladding via the Service Charge, with supporting their existing customers. As a result there was a loss of liquidity in the sales market, and the development of a period of Material Valuation Uncertainty as defined by RICS (in RICS Valuation - Global Standards, the Red Book under Valuation Practice Guidance Applications, VPGA10).
(4) This stagnation and uncertainty persisted until December 2019 when the RICS and the Council for Mortgage Lenders (CML) jointly produced a protocol for valuers and lenders considering flats in tall buildings and developments with Category 3 ACM cladding. The said protocol provides for lenders and valuers to agree that valuations of such properties should be at Market Value as defined by RICS with a retention to cover the potential cost (or share of the cost) of remediation.
(5) The overall effect of these matters is that the flats have lost the ability to be sold (or re-mortgaged) at a proper market value. This means the flats are valued at a discount from their "unaffected" Market Value
(6) Added to this discount there is the impact of the ongoing remedial works at the Development, on the ability for the flats to be sold at a proper market value
(7) A further source for uncertainty in the valuation of these flats is the question of how long any stigma will apply, (even after completion of the remedial works) and whether the damage to the standing of the Development (in comparison with other premium located riverfront developments) is permanent or transitory. An element of diminution in value now arises because of this.
(8) The resulting discount to reflect diminution in value is therefore dependent on all of the above matters. The Claimants' individual claims for diminution in value are set out in the Schedules of Information. The range of diminution in value for the flats owned by the Claimants is between £15,160 and £99,673, although the majority lie between £20,000 and £40,000."
" the Claimants now claim damages of approximately £5.8m to reflect the supposed costs of re-doing all of the Replacement Works to all of the blocks in which they have flats. This claim is brought on the basis of a concern that the new cladding might not comply with Building Regulations. The claim is not legitimate because:
(1) They do not positively assert a single example whereby the Replacement Works do not or will not comply with Building Regulations.
(2) In the event that the Replacement Works were to contravene Building Regulations the costs of re-doing the Replacement Works would be met by insurers. The NHBC confirmed to residents in January 2020 that they should be contacted in the event an issue arose with the completed works.
(3) There is no legal basis on which any group of tenants, let alone the small minority of the tenants that form the Claimants in these proceedings, are entitled to such relief."
"The second largest claim in terms of value is the claim for diminution in value. Notwithstanding that it is duplicative of these speculative defects claim (in that it would result in double recovery), it is in any event presented on an entirely illegitimate basis, namely the difference between the sale price paid and the (alleged) value as at 17 July 2017 (a month after Grenfell, and the day on which the presence of Class 3 cladding in the Buildings was first confirmed). That is the wrong approach. The appropriate assessment ought to be based on the value of the flats after the Replacement Works have been completed. Approached on the proper basis, it is denied there is or will be a diminution in value as a result of the ACM cladding all of which will have been replaced by November 2021. Further:
(1) The Claimants raise the possibility (but do not positively assert) that the values of their flats may be diminished by reason of a possible 'stigma' notwithstanding that their flats are in blocks that have never been affected by fire, and that following the Replacement Works the Cladding System will have been removed.
(2) The complaints include an allegation that lenders were refusing to lend on the properties. However between July 2017 and 26 March 2020 some 30 flats were re-sold and/or re-mortgaged and that some 10 different lenders were content to lend on the properties in question
(3) The detailed responses to these allegations are set out in paragraph 139 below."
The application
i) The additional defects claim is speculative and an abuse of process; no positive case is asserted regarding many of the alleged breaches and inadequate particulars have been provided.
ii) The remedial works required to remedy the breaches of the Building Regulations that pose a risk to safety are being funded by the NHBC pursuant to the Buildmark Policy. The Claimants are not entitled to claim the full costs of re-doing those remedial works to all six tower blocks the subject of the claim. Such rectification costs would not be reasonable or proportionate. Each Claimant's loss would be restricted to remedial works in respect of that individual's flat or block. In any event, the leases impose on the First Defendant obligations to repair the exterior and structure of the blocks and to ensure that they comply with the Building Regulations.
iii) The claims for diminution in value are calculated wrongly as at the date of discovery of the defects. It is accepted that there may be residual diminution in value ('blight') following the completion of the remedial works but the correct date would be the date of trial.
i) The Claimants do not accept that the buildings will be safe following the current remedial works. The Defendants' remedial scheme allows for retention of some components of the original external envelope, which would not result in compliance with the applicable regulations. There is an issue as to the applicable version of the Building Regulations; this turns on the date on which the remedial works were commenced, a matter that will have to be resolved at trial. Deficiencies have been identified in reports to date by consultants for the Defendants that give rise to a suspicion that such defects are replicated throughout the tower blocks.
ii) The Claimants do not assert that all the replacement cladding must be removed. If any of the remedial works are covered by the NHBC policy, or if the Defendants were to give undertakings to be responsible for the costs of carrying out any other necessary remedial works, the claim would be adjusted.
iii) The Defendants have accepted that the Claimants would be entitled to claim damages for residual diminution in value as a matter of principle. The calculation of such damages is a matter for trial.
The applicable test
"The court may strike out a statement of case if it appears to the court:
(a) that the statement of case discloses no reasonable grounds for bringing or defending the claim;
(b) that the statement of case is an abuse of the court's process or is otherwise likely to obstruct the just disposal of the proceedings "
"The court may give summary judgment against a claimant on the whole of a claim or on a particular issue if
(a) it considers that
(i) that claimant has no real prospect of succeeding on the claim or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 1 All ER 91.
ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8].
iii) In reaching its conclusion the court must not conduct a "mini-trial": Swain v Hillman.
iv) The court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550.
v) The court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63.
vi) If the court is satisfied that it has before it all the evidence necessary for the proper determination of a short point of law or construction and the parties have had an adequate opportunity to address the question in argument, it should grasp the nettle and decide it. It is not enough to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725.
vii) The burden of proof remains on the defendants to establish that the claimants have no real prospect of success and that there is no other reasons for a trial.
Additional defects claim
i) Item 1 of the Schedule includes as an alleged breach:
"Panels & Insulation The documents that have been disclosed do not demonstrate that, at the time of design or construction, the combustible ACM rain screen or Cedar rain screen cladding that were installed over combustible K15 insulation match the classification criteria or BR135 using test data from BS8414."
ii) At paragraph 73 of the Particulars of Claim the alleged breach in respect of the Backing Wall & Window Support is pleaded as follows:
"Behind the ACM and Kingspan K15 insulation, the backing wall to the rain screen system is a sheathing board that contains a content of wood chip that is likely to render the sheathing board Class B at best when classified in accordance with BS EN 13501 and pressure treated timber supports to windows that are believed to be Class C when classified in accordance with BS EN 13501. On this basis, (and in the absence of a BR 135 classification using test data from BS8414 and intrusive inspection) the curtain walling and windows did not comply with requirement B4(1) and paragraph 12.7 of Approved Document B."
iii) At paragraph 75 the pleaded allegation in respect of Cavity Barriers is:
"The documents disclosed for the proposed remedial Building Work do not demonstrate the test or certification evidence upon which the specification of the new open state cavity barriers has been based such that it would be ensured that the cavity barrier will close the cavity against articulated surfaces of the cladding system such as returns in the panel trays."
i) Item 3 original curtain walling and windows is pleaded at paragraph 76 as:
"The opaque and spandrel panels within the curtain wall and windows are assumed to have contained combustible materials and insulation "
ii) Likewise, item 4 is pleaded at paragraph 77 as:
"It is assumed that fire stopping should have been installed between the curtain wall and the compartment floor slab. Fire stopping on compartment floor lines between slab edges and internal faces of curtain walling is likely to be defective or missing in places "
"[37] In my judgment the key question must always be whether or not, at the time of issuing a Writ, the claimant was in a position properly to identify the essence of the tort or breach of contract complained of and if given appropriate time to marshal what it knew, to formulate Particulars of Claim. If the claimant was not in a position to do so, then the claimant could have no present intention of prosecuting proceedings, since it had no known basis for doing so. Whilst therefore the absence of present intention to prosecute proceedings is not enough to constitute an abuse of process, without the additional absence of known valid grounds for a claim, the latter carries with it, as a matter of necessity, the former. If a claimant cannot do that which is necessary to prosecute the claim by setting out the basis of it, even in a rudimentary way, a claimant has no business to issue a Claim Form at all "in the hope that something may turn up". The effect of issuing a Writ or Claim Form in such circumstances is, so the plaintiff/claimant hopes, to stop the limitation period running and thus deprive the defendant of a potential limitation defence. The plaintiff/claimant thus, unilaterally, by its own action, seeks to achieve for itself an extension of the time allowed by statute for the commencement of an action, even though it is in no position properly to formulate a claim against the relevant defendant. That must, in my judgment, be an abuse of process and one for which there can be no remedy save that of striking out the proceedings so as to deprive the claimant of its putative advantage. The illegitimate benefit hopefully achieved can only be nullified by this means. Whatever powers may be available to the court for other abuses, if this is an abuse, there is only one suitable sanction.
[40] Although defectively endorsed Writs could be cured by subsequent statements of claim in the ordinary way, such cure depended upon the plaintiff having a known genuine cause of action at the time of the issue of the Writ and the irregularity merely being the failure properly to set it out. As appears from the decisions discussed earlier, that principle is of no application where the plaintiff had no known basis for making the claim at the time when the Writ was issued."
Standing to bring claim
"[232] if there is a defect in the roof above a penthouse apartment caused by [the contractor's] poor workmanship so that the apartment is unfit for habitation, the loss sustained by the owner of the apartment is, in my opinion, the lack of, and need for, a sound roof. Ordinarily, the compensation for that loss would be the sum of money representing the cost of the necessary repairs. If it is the case that the carrying out of those repairs will necessarily benefit other leaseholders who are not claimants, I do not see how that can affect the particular claimant's right to compensation.
[233] In my judgment the owner of an apartment which has been rendered unfit for habitation because of a defect in the common parts is entitled to the cost of repairing that defect, or at least to the cost of carrying out those repairs necessary to make his flat fit for habitation.
[234] So, staying with my example, the owner of a penthouse apartment on the top floor which was rendered unfit for habitation because of the state of the roof is in my view entitled to recover the cost of the work to the roof that is necessary to render his apartment fit for habitation. Nothing less will restore him to the position that he would have been in if the breach had not occurred. If that owner is awarded only his share of the service charge, he will then be dependent on all the remaining leaseholders agreeing to fund the balance of the cost of repairing the roof. But if they or some of them refuse, then the work may never be done."
Residual diminution in value
Conclusion
i) The Defendants' application is adjourned, pending consideration of the Claimants' proposed amendments.
ii) All consequential or other matters, if not agreed, will be dealt with by the Court at a further hearing to be fixed by the parties.
