Holding & Management (Solitaire) Ltd v Ideal Homes North West Ltd. & Ors, Court of Appeal - Technology and Construction Court, September 30, 2004, [2004] EWHC 2408 (TCC)

Issuing Organization:Technology and Construction Court
Actores:Holding & Management (Solitaire) Ltd v Ideal Homes North West Ltd. & Ors
Resolution Date:September 30, 2004
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Case No: HT 03 278

Neutral Citation Number: [2004] EWHC 2408 (TCC)

IN THE HIGH COURT OF JUSTICE

QUEENS BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 30 September 2004

Before :

HIS HONOUR JUDGE PETER COULSON Q.C.

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Between :

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Mr Darryl Royce (instructed by Graham Harvey) for the Claimant

Mr Andrew Nicol (instructed by Masons) for the Second, Fourth and Sixth Defendants

Hearing dates: 26th, 27th, 28th and 29th July 2004

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Judgment

His Honour Judge Peter Coulson Q.C:

INTRODUCTION

1. Pursuant to an action commenced on 11th August 2003, Holding & Management (Solitaire) Ltd., (hereafter referred to as ``HM''), who are the freehold owners of properties at Finland Street and Norway Gate in London, S.E.16 (``the properties'') claim damages against the Second, Fourth and Sixth Defendants arising out of problems with the rendering on the external elevations. It is agreed by the parties that the spalling of and damage to the rendering was caused by the use of Fletton bricks within the external walls themselves: Fletton bricks contain an abundance of soluble sulphates which, in the present case, disrupted the brickwork and caused the rendering to fail. Subject to arguments about liability causation and loss, the parties have helpfully agreed quantum in the figure of £881,892, this figure being derived from a number of competing figures said to represent the estimated cost of carrying out the necessary remedial works.

2. The claim against the Fifth Defendants has been compromised. Each of the three remaining Defendants in the action deny liability. They are the Second Defendants, Ideal Homes North West Ltd (``Ideal North West''), the original contractors who built the properties; the Fourth Defendants, Ideal Homes Southern Ltd. (``Ideal Southern''), who commissioned and carried out a remedial scheme in 1995-1996 which ultimately proved unsuccessful; and the Sixth Defendants, Persimmon Homes (South East) Ltd., (``Persimmon SE''), who became involved in the ongoing problems in 2002.

3. During the Trial, I produced a list of the Issues which appeared to arise between the parties. Counsel considered and agreed those Issues and have produced helpful Closing Submissions which are based upon them. Before I come, in my turn, to address those Issues in this Judgment, I should set out some of the factual background to the dispute and identify in detail the contractual regime relating to the construction of these properties.

BACKGROUND

4. The Original Contract

The properties were built between 1989 and 1991 by Ideal North West, pursuant to a Contract with the London Docklands Development Corporation (``LDDC''), the then freehold owners of the site. Accordingly, Ideal North West's primary contractual obligations arose under that Contract and were owed to LDDC. Unfortunately, no copy of that Contract has been found, and it is impossible to say what Ideal North West's contractual obligations were, either generally, or more particularly, regarding the use of Fletton bricks in external rendered walls. Therefore it is at least possible that, pursuant to their Contract with LDDC, Ideal North West were obliged to use those Fletton bricks in the rendered walls.

5. The NHBC Agreements

No copies of these Agreements were produced in Court. However the parties apparently agree See the court's letter to the parties' solicitors of 20.9.04 and the replies dated 22.9.04. that those who purchased leasehold interests in the individual properties (``the Lessees'') entered into agreements (presumably with Ideal North West) pursuant to which, in the event of defects in the properties which were not put right, the National House Building Council (``the NHBC'') would carry out/pay for all appropriate remedial works. Such agreements were and are typical of new developments carried out by building contractors registered under the NHBC Scheme. They provide a direct way in which the occupiers of the properties can pursue those responsible for any defective work, with the NHBC acting as a kind of guarantor should the building contractor fail to honour its obligations or go into liquidation.

6. The Leases

Each of the Lessees entered into Leases with the LDDC for a period of 125 years. These Leases contained a number of standard terms, and included extensive covenants provided in favour of the LDDC by the Lessees. But the Leases were also unusual in that they were made, not only between the Lessees and the LDDC, but also between the Claimant, HM, (as the company to whom LDDC would transfer the freehold interest in the properties following the sale of the last one) and Ideal North West, as the developer. Since it is the terms of these Leases which provide the foundation for HM's principal claim, it is necessary to set out the terms of the Leases in some detail. It is agreed by the parties that each Lease contained precisely the same terms.

7. The Recitals included the following:

``(A) LDDC is the estate owner of the freehold interest in the Block specified in paragraph 6 of the Particulars being part of the land comprised in the Title above referred to.

(B) The Developer [Ideal North West] is erecting the Block on behalf of LDDC, pursuant to arrangements made between the Developer and LDDC

(C) The Developer and LDDC are desirous of letting the flats in the block, subject to the regulations hereinafter mentioned to the intent that the Lessee for the time being of any of the said flats may enforce the observance of the Regulations by the Lessee for the time being of every other flat.

(D) LDDC has agreed with the Developer and the Company [HM] to transfer to the Company the freehold interest in the block within 28 days of the completion of the sale of the last flat or dwelling house on the Estate or as soon thereafter as is reasonably practicable.

(E) The Parties hereto have agreed that the LDDC shall grant and the Lessee shall accept a Lease of one of the said flats and that the Company shall give the covenants hereinafter contained to the intent that such covenant shall upon completion of the transfer hereinbefore referred to, be annexed to the freehold reversion expectant upon the determination of the leases of the flats in the Block''.

8. Clause 3 of the Lease sets out the Lessee's covenants, which included the obligations set out in the Third Schedule, Part I. These in turn included the obligations to pay rent, and to keep the property in good repair. Clause 3.1.2 also obliged the Lessee to pay both the Service Charge and the Estate Charge.

9. HM, referred to in the Lease as ``The Company'', covenanted with the Lessee at Clause 4 of the Lease, to carry out repairs and provide the maintenance services set out in the Fifth and Sixth Schedules, ``provided always that the Lessee shall have paid the Service Charge, the Estate Charge and any adjustment due...''. This covenant was the subject of an express proviso, in Clause 7.6, which stated:

``7.6 Exclusion of implied obligations:

The Lessee accepts the obligations of the Company for the performance of the matters specified in the Fifth Schedule and the Sixth Schedule in substitution for and to the entire exclusion of any implied obligations on the part of the Developer in respect of any such matters''

10. The covenants of Ideal North West, referred to in the Lease as ``the Developer'', and owed to both H.M. and the Lessees, were set out in Clause 5 as follows:

``COVENANTS OF THE DEVELOPER

The Developer hereby covenants with the Company and as a separate covenant with the Lessee (Provided that nothing contained in this Lease shall operate to prevent the Developer from developing the remainder of the Estate) as follows:-

5.1 That the Block and the Estate will be completed and the curtilage laid out in accordance with the plans and specifications approved by the local planning authority.

5.2 That the Developer will, when called upon by the appropriate authority (or earlier if the Developer shall think fit) procure that such of the sewers as are now or in the future to be included in any agreement made pursuant to Section 18 of the Public Health Act 1936 and adopted and maintained at public expense and/or which serve the Block shall be made and completed to the satisfaction of the relevant authority and will indemnify the Company and the Lessee against all liability in respect thereof.''

11. It will be noted at once that these covenants do not address the general quality of the work being or to be carried out by Ideal North West; the Lease is entirely silent on such matters. It is for this reason that, in these proceedings, HM seek to imply a series of terms into clause 5 of the Lease, an important aspect of this dispute that is dealt with in greater detail at paragraphs 27-42 below.

12. The Sale of the Properties

The properties were sold to the Lessees between March 1989 and July 1993, with something like 40% of the relevant completions occurring during 1989 and 1990. For reasons which have not been explained in evidence, the transfer by LDDC to HM of the freehold interest in the properties did not take place until 20th June 1997.

13. The Manifestation of the Defects

The problem with the spalling and cracking of the external render was noted by Solitaire Property Management Company Ltd. (``Solitaire''), the company managing the properties on behalf of HM, no later than April 1992. On 10th April 1992, they wrote to Ideal Southern about the problem with the render; there is no evidence that Ideal North West had any involvement in the properties whatsoever after they were completed. By the same token, Ideal Southern had had no prior involvement in the design or construction of the properties until their receipt of this letter in April 1992, although it appears that they had been carrying out a further phase of the development on an adjoining site. Ideal...

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