The High Court heard an application last week by the Defendants in an ongoing cladding claim. The First Defendant was the developer/freeholder and the Second Defendant was the main contractor who carried out the design and build of the development.
Between 2009 and 2014 the Defendants carried out development of residential and commercial units, comprising eleven tower blocks (known as New Capital Quay in Greenwich, London). The claimants are some of the leasehold owners.
The external envelope of the blocks was constructed in Alucobond Aluminium Composite Material (ACM) cladding and timber rain screen cladding with Kingspan K15 insulation. After the Grenfell Tower fire in 2017, the ACM was tested and found to have no flame-retardant properties and therefore failed to comply with Building Regulations.
The Claimants had NHBC cover. In July 2018 the NHBC accepted the claim under the Policy for the remedial scheme required (including replacement of the Alucobond cladding, Kingspan insulation and cavity barriers), together with the ‘waking watch’ scheme put in place to ensure safety of the residents pending completion of the remedial works.
The Defendants commenced remedial works in 2018/2109 (the parties dispute when works started) and they are due to be completed in August 2021.
On 31 July 2019 the 124 Claimants (who are leasehold owners of 82 of the apartments across six of the blocks) commenced proceedings, seeking damages against the Defendants. The Claimants allege against the Defendants breach of the applicable Building Regulations, breach of contract and breach of statutory duty (under the Defective Premises Act 1972).
The Claimants do not pursue any claim in respect of the cladding replacement works to the extent that these have been accepted by the NHBC. However, they seek damages in respect of their uninsured losses, such as increased building insurance premiums, lost rental income, alternative accommodation costs, diminution in value and damages for distress and inconvenience. The Claimants also claim damages in respect of potential additional (uninsured) defects. The crux of this last allegation is that, because the remedial work already carried out by NHBC relates only to what the NHBC policy defines as “necessary repairs”, that remedial work might not have resolved all issues, particularly with regard to fire breaks and compartmentalisation measures.
The Claimants are also concerned that the remedial work itself might not comply with Building Regulations. Because the potential additional defects are hidden behind the newly replaced cladding, and because the remedial works to date need themselves to be inspected to ensure compliance with Building Regulations, the Claimants have thus far been unable to fully particularise (and cost) these elements of their claim.
The Defendants dispute the claim.
On 30 July 2020 the Defendants issued an application seeking an order that parts of the Claimants’ claim be struck out, or be determined early (summary judgment). They submitted that the Claimants had no reasonable cause of action and no real prospect of success.
The elements of the claim to which the application related was that relating to the alleged additional defects; and that relating to the alleged diminution in value. In respect of the alleged additional defects, the Defendants’ position was that it is entirely speculative because no specifics of those alleged additional defects have been provided, and the claim is largely based on an alleged absence of documents to prove that the installation complies with Building Regulations, rather than a positive case that some elements of the installation are non-compliant.
In respect of the alleged diminution in value, the Defendants’ position was that a proper measure of any diminution in value would be carried out following completion of all remedial work, not (as the Claimants allege) immediately after the defects were first discovered in 2017.
The Court had to decide, under Civil Procedure Rule (CPR) 3.4(2) whether to strike out the claim. The test for doing was whether it appeared 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 …
Under CPR 24.3 the Court was entitled to give summary judgment in favour of the Defendants where:-
(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.
The Court decided that the Claimants’ pleaded case in relation to the alleged additional defects is deficient, but that they have an arguable case. Accordingly, the Claimants have been given further time by the Court to properly particularise their claim in that respect.
As regards the appropriate point at which to measure of a diminution in value claim, the Court clarified that this was not an issue that was capable of being decided on a summary basis. Diminution in value claims are ordinarily valued as at completion of remedial work, to reflect the ongoing blight to a property thereafter. However, diminution in value claims are fact-specific and therefore not capable of being determined in advance of a trial.
The final matter the Court considered related to the Claimants’ legal standing to bring their claims. The Defendants argued that, because the Claimants do not own the whole of the six blocks to which the claims relate, they could not jointly claim for the whole of the remedial costs that would be incurred if all of the alleged defects had to be repaired; and that their claims should be limited to the individual shares of the service charge that would be recovered from each of them in the event that the cost of remedial work was prima facie found to be recoverable from the Defendants. The Court found that this issue was also not suitable for summary determination, and noted the decision in Rendlesham Estates plc v Barr , in which the High Court held that a leaseholder could recover the whole of the costs necessary to remedy a building defect that affected numerous properties in that building.
The Defendants’ application for summary judgment or strike out of the additional defects claim has therefore been stayed pending consideration of amendments to the particulars of the Claimants’ claim.
The judgment raises no new legal or procedural points, but does provide useful lessons for those considering similar claims:-
- The Claimants’ claim related to work outside of the NHBC warranty – for instance, diminution in value for the stigma of cladding defects, increased insurance premiums etc. Therefore, Claimants can consider claims for works outside of ACM/non-ACM remediation.
- Clarity on the subject of the claim is important – the Claimants sought damages for additional defects, alleging the NHBC repairs would be insufficient. However, the Court here decided that the claim was not precise enough. Detailed investigation of potential defects prior to issuing a claim is therefore very important (subject to not missing a limitation period by doing so).
- The Court confirmed the tenants had sufficient standing to bring the claim, but that entitlement to damages would depend on whether they can demonstrate the works were reasonable and proportionate.
We will be following this case as it progresses, with interest, given the impact and concern arising from the Grenfell Tower fire.
At Ellisons, we have a dedicated building safety team to assist you in any building safety matters. If you are a tenant, landlord, managing agent or contractor and you need advice on any aspect of building safety or cladding issues, please contact either Ian Seeley, Joe Brightman, Molly Frankham or James King.
Case: Naylor and others v Roamquest Ltd and another  EWHC 567 (TCC) (10 March 2021) (O’Farrell J).