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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Larkfleet Ltd v Allison Homes Eastern Ltd [2016] EWHC 195 (TCC) (05 February 2016) URL: https://www.bailii.org/ew/cases/EWHC/TCC/2016/195.html Cite as: [2016] BLR 172, [2016] EWHC 195 (TCC) |
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Fetter Lane, London EC2A 2NL |
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B e f o r e :
____________________
Larkfleet Limited |
Claimant |
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- and - |
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Allison Homes Eastern Limited |
Defendant |
____________________
James Thompson (instructed by Dentons UKMEA LLP) for the Defendant
Hearing date: 19/01/2016
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Crown Copyright ©
Mr Justice Fraser :
A: Introduction
"This certificate brings the Buildmark cover into operation. The protection for the Owner under the Buildmark cover expires on the end date given above. NHBC's liability is set out in the Buildmark booklet. NHBC does not accept any other liability for the Home."
The dates on the relevant certificates for each of the properties 19, 20 and 22 expired on 26 September 2012, 25 April 2012 and 14 March 2012 respectively. On all three certificates "The Builder" was specified as "Larkfleet Ltd" – the claimant – and the NHBC Registration No. was 79003. Practical Completion occurred for each of the properties on three different dates, each 10 years earlier than the date given as the expiry dates of the certificates.
"The Employer [ie the claimant] will register the site with NHBC under the Employers registration and the contractor [ie Swallow] warrants to accept responsibility for any defect and any expense incurred due to defective work for the period of 10 Years for the NHBC warranty."
Essentially, therefore, these plots and the houses built upon them were registered with the NHBC under the NHBC registration of the claimant, and not Swallow, and the parties agreed clause 2.5.5 to deal with this situation.
B: Procedural background
"At the outset, it is [the Defendant's] case that the claims set out in the Particulars of Claim are time barred pursuant to the Limitation Act 1980 for the reasons set out in Section B below. The remainder of this Defence is pleaded without prejudice to this primary position".
Section B of the pleading states that practical completion of the properties occurred more than six years prior to the issue of the Claim Form, and that the properties were registered with the NHBC on 21 January 2002, more than ten years prior to the issue of the Claim Form. So far as the claim for negligence is concerned, the defendant maintains that the claimant had the necessary knowledge to bring an action by 4 February 2011 at the latest, which is more than three years before the issue of the Claim Form. Accordingly, it is said, the claimant cannot rely upon section 14A of the Limitation Act 1980.
"5. There shall be a Preliminary Issues hearing at 10.30am on the first available date after 12 January 2016 on the issue of whether the Claimant's case is statute barred. The time estimate for this hearing is one day.
6. The parties shall prepare for the Preliminary Issues hearing in accordance with the Technology and Construction Court Guide."
1. The outcome of the appeal in that case was "attributable in large part to the parties' failure to use the procedure for determining preliminary issues properly";
2. The claim was highly fact-sensitive but no attempt had been made to establish the factual premise for the issue of law on which the judge was invited to rule;
3. "As Lord Scarman observed in Tilling v Whiteman [1980] AC 1, 25: 'Preliminary points of law are too often treacherous short cuts'. The dangers are all the greater where, as here, the preliminary issues are set in motion in a casual and unstructured way";
4. The right approach to preliminary issues should be (inter alia) that the questions should usually be questions of law and should be decided on the basis of a schedule of agreed or assumed facts.
(emphasis added)
C: The Preliminary Issues for determination
"Issue 1: When does the claimant's cause of action under clause 2.5.5 for breach of the obligation to accept responsibility for defects accrue?
Issue 2: When does the claimant's cause of action under clause 2.5.5 for expense incurred due to defective work accrue?"
It can be seen that these two issues presuppose the existence of two separate causes of action arising under clause 2.5.5.
"Issue 3: Does clause 2.5.5 of the Building Contract operate to preclude claims for defects (whether in contract or in tort) from being brought against the defendant after expiry of the 10 year NHBC warranty period?"
D: The Factual Background
"11. In the normal course, it would have been the builder (ie the Defendant) who would register the site with the NHBC (or take out similar insurance-based cover against defective building works) and it would be the builder who would deal with any claims of defective workmanship arising in the ten year period covered by the NHBC warranty.
12. I wanted to build up the Claimant's business of building residential dwelling houses and I was particularly keen that, in doing so, I should quickly build up a 'history' with the NHBC. This would enable the Claimant to establish a good NHBC rating and, in the process, obtain the benefit of discounted NHBC premiums which that rating would attract. It was for this reason that clause 2.5.5 was inserted into the Contract."
E: Legal Principles governing construction
"14. Over the past 45 years, the House of Lords and Supreme Court have discussed the correct approach to be adopted to the interpretation, or construction, of contracts in a number of cases starting with Prenn v Simmonds [1971] 1 WLR 1381 and culminating in Rainy Sky SA v Kookmin Bank [2011] UKSC 50; [2011] 1 WLR 2900. "
15. When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean", to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] 1 AC 1101, para 14. And it does so by focussing on the meaning of the relevant words, in this case clause 3(2) of each of the 25 leases, in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. In this connection, see Prenn at pp 1384-1386 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as HE Hansen-Tangen) [1976] 1 WLR 989, 995-997 per Lord Wilberforce, Bank of Credit and Commerce International SA (in liquidation) v Ali [2002] 1 AC 251, para 8, per Lord Bingham, and the survey of more recent authorities in Rainy Sky, per Lord Clarke at paras 21-30.
16. For present purposes, I think it is important to emphasise seven factors.
17. First, the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook, paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision.
18. Secondly, when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning. That is simply the obverse of the sensible proposition that the clearer the natural meaning the more difficult it is to justify departing from it. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. If there is a specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve.
19. The third point I should mention is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made. Judicial observations such as those of Lord Reid in Wickman Machine Tools Sales Ltd v L Schuler AG [1974] AC 235, 251 and Lord Diplock in Antaios Cia Naviera SA v Salen Rederierna AB (The Antaios) [1985] AC 191, 201, quoted by Lord Carnwath at para 110, have to be read and applied bearing that important point in mind.
20. Fourthly, while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill-advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party.
21. The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties. Given that a contract is a bilateral, or synallagmatic, arrangement involving both parties, it cannot be right, when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties.
22. Sixthly, in some cases, an event subsequently occurs which was plainly not intended or contemplated by the parties, judging from the language of their contract. In such a case, if it is clear what the parties would have intended, the court will give effect to that intention. An example of such a case is Aberdeen City Council v Stewart Milne Group Ltd [2011] UKSC 56, 2012 SCLR 114, where the court concluded that:
"any … approach" other than that which was adopted "would defeat the parties' clear objectives", but the conclusion was based on what the parties "had in mind when they entered into" the contract (see paras 17 and 22).""
F. The NHBC Scheme
"What is Premium Rating?
NHBC's Premium Rating scheme works on the same principle as your 'no claims' bonus for car insurance. Just as good drivers benefit from discount, good builders and developers pay reduced home-registration fees. Your premium rating is based on your claims record and the amount of time you have been on the NHBC Register. We [ie the NHBC] use this rating to calculate how much you should pay to register homes. The scheme aims to encourage quality in the industry as builders with a poor claims record inevitably pay higher premiums. This should motivate builders to improve their standards."
The fees for registration are calculated on two factors. One is how long a company has been on the NHBC Register. The other is how a company's claims record compares with the national average.
"A. The full Cost, if it is more than £500 indexed, of putting right any actual physical Damage caused by a Defect in any of the following parts of the house….
Foundations
Load-bearing walls
Non load-bearing walls
Wet-applied wall plaster…."
The list continues. Section B in the panel includes the cost of putting any defect in a chimney or flue, and section C includes reasonable costs for removal, storage and alternative accommodation if it is necessary to vacate the property.
F. Analysis
"No action or proceedings for any breach of this Agreement or arising out of or in connection with all or any of the Services undertaken by the Architect in or pursuant to this Agreement, shall be commenced against the Architect after the expiry of [6] years from completion of the Architect's Services…."
G. Conclusion
Issue 1: When does the claimant's cause of action under clause 2.5.5 for breach of acceptance of the obligation to accept responsibility for defects accrue?
Answer: The cause of action for breach of clause 2.5.5 accrued when the defendant refused to accept responsibility for the defects; alternatively, when the defendant failed to accept responsibility having been asked to do so. The defendant refused to accept responsibility in its letter to the claimant dated 3 September 2013. It failed to accept responsibility within a reasonable time after the letter dated 24 May 2011.
Issue 2: When does the claimant's cause of action under clause 2.5.5 for expense incurred due to defective work accrue?
Answer: There is only one cause of action under clause 2.5.5. This therefore arises at the same time as that under Preliminary Issue 1.
Issue 3: Does clause 2.5.5 of the Building Contract operate to preclude claims for defects (whether in contract or in tort) from being brought against the defendant after expiry of the 10 year NHBC warranty period?
Answer: No.