OUTER HOUSE, COURT OF SESSION

 

[2007] CSOH 22

 

A582/06

 

 

 

 

 

 

 

 

 

 

 

OPINION OF LADY PATON

 

in the cause

 

BARRY FIRTH and SHEILA MAGDALENE FIRTH

 

Pursuers;

 

against

 

BLINKBONNIE DEVELOPMENTS LIMITED and GARY WILLIAM DAVIDSON

 

Defenders:

 

 

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Pursuers: Richardson; Harper Macleod, LLP

Defenders: Govier; Morisons

 

7 February 2007

Motion for summary decree: defects in newly-built house

[1] The pursuers are a married couple, living in Dorset. They planned to have a house built in Scotland for their retirement. They contacted Blinkbonnie Developments Limited (the first defender). The second defender is a director of the first defender.

[2] The pursuers entered into a contract with the first defender dated 14 and 24 September 2003. The first defender undertook to construct and sell to the pursuers a house at Blinkbonnie, Rockliffe, Dalbeattie. In terms of clause 10 of the contract, the second defender guaranteed all the obligations undertaken by the first defender, and bound himself to indemnify the pursuers in respect of obligations not met by the first defender and any claims for payment or compensation.

[3] The first defender then contracted with an architect, Glynne Shackleton. The architect's duties included inspection of the construction work at certain stages, and issuing certificates.

[4] The house was built. After certain snagging work had been completed, the pursuers took entry in September 2004. However they found defects, defined in the pleadings as (i) the omission of structural beams resulting in visible dips in the lounge ceiling and the bedroom floor above, with structural implications for the integrity of the roof; (ii) a staircase not conform to certain regulations; and (iii) a defective substructure resulting in distortion of the timber frame of the house and off-level floors.

[5] As a result, the pursuers moved out. They sold the house to other purchasers at a price of г240,000. They raised the present action, seeking to recover damages from the defenders. In their pleadings, the pursuers describe the defects. Further in Article 3 of Condescendence the pursuers aver:

"In the foregoing circumstances, there was implied into the contract a term to the effect that the house would be built to reasonable workmanlike standards and free from such defects as would render it as unsafe or unsuitable for occupation as a domestic dwelling."

The pursuers state that the sale price of the house would have been г360,000, had the house been properly constructed. They also specify other losses and expenses.

 

[6] In response, the defenders make various admissions and denials. The defenders' response in Answer 3 is in the following terms:

"Admitted that there was an implied term of the contract that the first defender would exercise the ordinary standard of care and workmanship of a builder when engaged in building the house."

In Answer 7 the defenders aver -

"Denied. Explained and averred that the first defender did not act in breach of its obligations in terms of the contract. The first defender exercised the ordinary standard of care and workmanship of a builder when building the house. Quoad ultra denied ..."

[7] On 6 December 2006, on the basis of the pleadings in the Open Record, counsel for the pursuers sought summary decree in respect of liability, although conceding that there would have to be a proof on quantum.

Submissions for the pursuers

[8] Counsel for the pursuers invited the court to sustain the pursuers' first plea-in-law; to repel the defenders' first to third and sixth pleas-in-law; and to allow a proof restricted to quantum. Reference was made to rule 21.2 of the Rules of the Court of Session; Henderson v 3052775 Nova Scotia Ltd, 2006 S.C. (H.L.) 85 at paragraphs [13] to [19]; and to the parties' pleadings and productions, including the contractual documents. Counsel submitted that no defence on the issue of liability was disclosed in the defences or in any other document. Although the parties had averred different formulations of the implied contractual term upon which the pursuers relied, counsel was content to adopt the defenders' formulation in Answer 3 for the purposes of the debate.

 

[9] In relation to the three areas of defective construction, it was submitted that if the court accepted the pursuers' argument in relation to only one defect (for example, the supporting beams) then the pursuer's motion for summary decree should still be granted. That contention was advanced on the basis that a proof on quantum would give the defenders an opportunity to establish that any loss or expense connected with, say, the substructure did not represent a breach of contract on the part of the first defender, and accordingly that damages should not be awarded in respect of loss or expense connected with the substructure.

[10] In summary, the pursuers' position was that the defenders had not advanced any defence so far as liability was concerned. The relevancy of the pursuers' case had not been challenged. Applying the test in Henderson, cit. sup., the defenders had not raised any factual issue which was capable of resolution only by way of proof. Summary decree should be granted: cf. the circumstances in Ross v British Coal Corp., 1990 S.L.T. 854. The granting of summary decree would not prevent the defenders from seeking to recover damages from the architect.

Submissions for the defenders

[11] Counsel for the defenders opposed the motion for summary decree. Reference was made to rule 21.2(1) and (4) of the Rules of the Court of Session; Henderson, cit. sup., at paragraphs [12] and [13]; Pope v James McHugh Contracts Ltd, 2006 S.L.T. 386, at paragraphs [13] and [15] to [17]; and to the parties' pleadings and contractual documents.

[12] The defenders' primary position was that there was a defence disclosed in the defences. Neither the contract nor the specification made any detailed reference to a plan or a design for the property to be constructed. The pursuers' case was accordingly based upon breach of an implied term of contract: there were no averments about a breach of an express term. Against that background (i) in relation to the structural beams, the defenders had recently instructed a report from an expert and would shortly be in a position to expand the pleadings. Meantime the defenders had demonstrated candour by their admission that structural beams had not been incorporated in the building. Whether that non-incorporation amounted to a breach of an implied term of the contract was another matter. No admission was made in that respect. (ii) So far as the staircase was concerned, there was on record a denial that the staircase was defective. It was not accepted that non-compliance with certain regulations constituted a breach of an implied term. (iii) In relation to the substructure, the defenders' pleadings clearly denied that the substructure was defective.

[13] Counsel did not agree that the court should grant summary decree even if satisfied only in relation to one of the three matters said to be defective (for example, the structural beams). To do so would be to finalise the question of liability, and would preclude the defenders from defending themselves on liability in respect of the staircase and substructure. The court should refuse the pursuers' motion for summary decree.

[14] The defenders had a second or esto argument in opposition to the pursuers' motion. Even if the court were satisfied that no defence was disclosed in the pleadings or other documents, bearing in mind the early stage in the proceedings (viz. the Open Record, which was currently being adjusted in the light of further information being ascertained by investigations), the court should be cautious about granting a decree of the question of liability. The action had been signetted on 5 September 2006, and served on the defenders on 8 September 2006. A consultation with counsel and the defenders had taken place on 27 November 2006, when a decision was made to instruct an expert report in relation to the beams. Investigations were currently being pursued. A third party notice was in the process of being served upon the architect. A second third party notice was being considered. In those circumstances, even if the court were persuaded that no defence had been disclosed in the pleadings to date, the court should be cautious about foreclosing the question of liability at such an early stage, and should exercise its discretion by refusing the pursuers' motion. Further, there was little benefit in stopping the defenders from proceeding with a proof on the issue of liability, when a proof on apportionment and quantum would in any event take place: cf. dicta in Frew v Field Packaging Ltd, 1994 S.L.T. 1193, at page 1195F-G.

[15] As a final point, counsel for the defenders observed that the defenders' first plea-in-law could not be repelled at this stage, as it was equally relevant to quantum. The only pleas which could be repelled were the defenders' second, third and sixth.

Discussion

[16] The pursuers' and defenders' formulations of the implied contractual term said to have been breached are set out respectively in Article 3 of Condescendence and Answer 3, and are quoted in paragraphs [5] and [6] above. In my opinion, those different formulations clearly demonstrate that the parties are in dispute as to the appropriate implied term or test to be applied when assessing the first defender's performance. The pursuers contend for an implied term amounting almost to a guarantee or an assurance that the house, when built, would be "free from such defects as would render it unsafe or unsuitable for occupation as a domestic dwelling". By contrast, the defenders maintain that the implied term was that the first defender would exercise "the ordinary standard of care and workmanship of a builder when engaged in building the house". With the latter formulation, it is quite conceivable that a builder who, in the course of construction, relied upon the professional services of an architect in relation to inter alia design, structure, inspection, and certification, might be able to demonstrate that he exercised the ordinary standard of care and workmanship of a builder, yet the house, when finished, contained certain defects rendering it unsafe or unsuitable for occupation as a domestic dwelling. Accordingly on the basis of the defenders' formulation, I am not persuaded that the defenders are "bound to fail": cf. Henderson, cit. sup., at paragraph [19]. By contrast, if the pursuers' formulation for the implied term were to be adopted, any such defect in the house would prima facie amount to a breach of the implied term, and the pursuers would be in a better position to seek summary decree.

[17] For that reason alone, therefore, I do not accept that the pleadings reveal no defence on liability. In my view, there is at least one dispute in fact and law, as outlined above, which requires to be resolved. I should add that counsel for the pursuers' adoption of the defenders' formulation of the implied term for the purposes of the debate led me to the same conclusion (namely, that a defence was revealed in the pleadings, as a builder relying upon the professional services of an architect might be found to have exercised the ordinary standard of care and workmanship of a builder and not to be in breach of contract even although the house as constructed contained certain defects rendering it unsafe or unsuitable for occupation as a domestic dwelling).

[18] In addition however I considered that there was force in the defenders' submissions in relation to (i) the need for the court to be satisfied in respect of all three defects complained of before foreclosing the question of liability; and (ii) the relatively early stage in proceedings.

(i) I am unable to accept the pursuers' contention that the granting of summary decree on the issue of liability and the fixing of a proof (presumably before answer) restricted to quantum would still permit the defenders to seek to escape liability in respect of one or other of the elements of defective construction. I agree with Mr.Govier that the granting of a summary decree on the question of liability would prevent the defenders from further exploring that issue in relation to any of the areas of defect. While therefore it is not strictly necessary for me to reach a view on this argument (standing the conclusion reached in paragraphs [16] and [17] above), I add obiter that I was not persuaded that there was no defence disclosed in respect of all three areas of alleged defect. There is therefore another obstacle to summary decree.

(ii) Finally the pleadings are still at the stage of adjustment. Further information is being sought by the defenders, and the contents of the Open Record may change. That is a further circumstance in this particular case which militates against the granting of summary decree.

Decision

[19] For the reasons given above, I refuse the pursuers' motion for summary decree. I reserve the question of expenses to enable parties to address me on that matter.