Catlin Estates Ltd and another v Carter Jonas (a firm)

Negligence — Surveyor — Damages — Supervision of building contract — Extent of duties of supervising building surveyor/architect — Defects — Alternative remedial schemes — Measure of damages — Defective Premises Act 1972 — Whether building surveyor/architect negligent — Whether claim under 1972 Act — Whether alternative measure of damages to reinstatement costs — Determination of alternative remedial schemes — Measure of damages

In 1997, the first claimant (CEL) acquired an estate in County Durham. The second claimant (C) was, and remained, the principal and controlling shareholder in CEL. In 1998, following the provision of earlier services by the defendant firm of surveyors, CEL engaged the defendant to undertake services in connection with the erection of a nine-bedroomed shooting lodge and ancillary facilities. In March 1998, a building contractor was appointed to carry out the work for a tender price of £917,000. The works were not carried out satisfactorily, and the contractor was required to remedy an extensive list of defects. However, in February 1999, the defendant’s surveyor issued a certificate of practical completion. The building continued to manifest defects, including water penetration. In March 1999, CEL contracted to convey the lodge to C, but completion did not take place. In April 1999, C confirmed with the building contractor the amount of a final payment, subject to a retention and other reservations. The defendant had no further involvement with the project after 12 May 1999. Problems with the building, including water penetration, continued. CEL issued proceedings against the defendant claiming damages for breach of contract and/or of a duty of care in the sum of £819,840 plus VAT.

By its defence, the defendant denied liability on the facts, contending that it was not responsible for any loss or damage caused by the structural engineers appointed by CEL, and that CEL had suffered no damage because its beneficial interest in the lodge had been transferred to C. The defendant also counterclaimed for alleged unpaid fees. C was then joined as a claimant, claiming damages under the Defective Premises Act 1972. At trial, the claimant’s expert advanced two alternative remedial schemes to address the problem of damp ingress through the external walls. The first scheme involved an additional third skin of stonework at a cost of £655.937, the second involved rebuilding the existing stonework skin at a cost of £403,390.

Held: Judgment was given to the first claimant in the sum of £487,772; the counterclaim was dismissed. CEL, having retained legal title to the property, had standing to bring proceedings against the defendant. In considering whether a claimant is entitled to the normal measure of damages, the cost of reinstatement or some other measure, a claimant is entitled to recover damages for a genuine loss but not for what is merely a technical breach of contract that is being used to secure an uncovenanted profit. C did not have an alternative claim under the 1972 Act so as to debar him from claiming through CEL. The defendant had primary responsibility for design and inspection, as well for identifying defects. The defendant should have provided drawings showing, for example, a breather membrane as a continuous membrane. The following were defects that required remedy and for which damages were recoverable: incorrectly specified breather membrane; the lack of a vapour control layer; inadequate cavity widths of external stonework; chimney flue ventilation problems; the lack of a continuous tanking system to the basement; minor works to the roof; leaking window frames; defects in services, ponding in the car park, and other miscellaneous matters. Having regard to the existence of a restrictive covenant, the claimants had not established any claim to loss of profits that may have been made by using the property as a conference centre. The second alternative provided the appropriate remedial scheme.

The following cases are referred to in this report.

Alexander v Mercouris [1979] 1 WLR 1270; [1979] 3 All ER 305; [1979] 2 EGLR 116; (1979) 252 EG 911, CA

Alfred McAlpine Construction Ltd v Panatown Ltd (No 1); sub nom Panatown Ltd v Alfred McAlpine Construction Ltd [2001] 1 AC 518; [2000] 3 WLR 946; [2000] 4 All ER 97, HL

British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673; (1912) 81 LJKB 1132; 107 LT 325, HL

Brown & Root Technology Ltd v Sun Alliance & London Assurance Co Ltd [2001] Ch 733; [2000] 2 WLR 566; (1997) 75 P &CR 223; [1997] 1 EGLR 39; [1997] 18 EG 123, CA

Birse Construction Ltd v Eastern Telegraph Co Ltd

[2004] EWHC 2512 (TCC); [2004] 47 EG 164 (CS)

Deepak Fertilisers & Petrochemicals Corp Ltd v Davy McKee (UK) London Ltd; sub nom Deepak Fertilisers & Petrochemical Ltd v Davy McKee (UK) London Ltd [2002] EWCA Civ 1396

Gardner v Marsh & Parsons [1997] 1 WLR 489; [1997] 3 All ER 871; (1998) 75 P&CR 319; [1997] 1 EGLR 111; [1997] 15 EG 137, CA

Hancock v BW Brazier (Anerley) Ltd [1966] 1 WLR 1317; [1966] 2 All ER 901, CA

Hussey v Eels [1990] 2 QB 227; [1990] 2 WLR 234; [1990] 1 All ER 449; [1990] 1 EGLR 215; [1990] 19 EG 77, CA

Linden Gardens Trust Ltd v Lenesta Sludge Disposal Ltd; St Martins Property Corp Ltd v Sir Robert McAlpine & Sons [1994] 1 AC 85; [1993] 3 WLR 408; [1993] 3 All ER 417, HL

Livingstone v Rawyards Coal Company (1880) LR 5 App Cas 25, HL

National Justice Compania Naviera SA v Prudential Assurance Co Ltd: The Ikarian Reefer [1993] 2 Lloyd’s Rep 68; [1993] 2 EGLR 183; [1993] 37 EG 158; [1993] FSR 563, QB

Owners of cargo laden on board the Albacruz v Owners of the Albazero; sub nom Concord Petroleum Corp v Gosford Marine Panama SA: The Albazero [1977] AC 774; [1976] 3 WLR 419; [1976] 3 All ER 129; [1976] 2 Lloyd’s Rep 467, HL

Radford v De Froberville [1977] 1 WLR 1262; [1978] 1 All ER 33; (1977) 35 P&CR 316, Ch

Robinson v Harman (1848) 1 Ex 850; [1848] 154 All ER 383, Ex Ct

Ruxley Electronics & Construction Ltd v Forsyth [1996] AC 344; [1995] 3 WLR 118; [1995] 3 All ER 268, HL

Thompson v Clive Alexander & Partners 59 BLR 77, QB |page:140|

Uratemp Ventures Ltd v Collins; Uratemp Ventures Ltd v Carrell [2001] UKHL 43; [2002] 1 AC 301; [2001] 3 WLR 806; [2002] 1 All ER 46; [2001] 3 EGLR 93; (2001) 33 HLR 85; [2002] RVR 162

This was the hearing of a claim by the claimants, Catlin Estates Ltd and Stephen Catlin, for damages for breach of contract, duty of care and breach of statutory duty under the Defective Premises Act 1972 against the defendant, Carter Jonas, and a counterclaim by the defendant against the claimants for professional fees.

Adrian Williamson QC and Piers Stansfield (instructed by Denton Wilde Sapte) appeared for the claimants; Ben Quiney (instructed by Halliwells LLP) represented the defendant.

Giving judgment, Judge Toulmin CMG QC said:

[1] In this action, Catlin Estates Ltd (CEL) claims damages against Carter Jonas, a well-known firm of surveyors and property consultants, for breach of contract in respect of services that Carter Jonas provided in connection with the demolition and construction of a shooting lodge (the lodge) on the Burnhope and Ousby moors in the county of Durham. It is not disputed that the site is located in a rural and exposed location and is exposed to very wet and windy weather.

[2] The claim against Carter Jonas, originally brought by CEL in contract but, as amended, also in tort, is that it failed to exercise the reasonable skill and care and/or diligence to be expected of a competent building surveyor in exercising its duties.

[3] In the particulars of claim, CEL set out a number of defects in the lodge, which, it said, it is entitled to remedy at Carter Jonas’s expense. It claimed damages in the sum of £819,840 plus VAT, making a total of £963,510. The quantum experts have subsequently and most helpfully agreed damages on various factual bases, and I will return to this topic later.

[4] Apart from defending the claim on the facts, Carter Jonas claims that, in any event, it is not responsible for any loss or damage caused by the negligence of the structural engineer, Robert T Horne & Partners (Horne), which, it claims, was separately instructed by the claimants. CEL deny this and say that it was Carter Jonas that had agreed to take overall charge of the project and had instructed Horne. Horne became a party to the action as second defendant to the claimants and as Part 20 defendant to Carter Jonas. Both claims were settled on 27 May 2005.

[5] By its defence and counterclaim, Carter Jonas also contends that CEL subsequently transferred its interest in the lodge to Mr Stephen Catlin for full value and that, after that date, CEL no longer had any interest in the lodge, whether as a matter of law or in equity. Carter Jonas claims that CEL is therefore the wrong claimant and cannot, in any event, recover any damages from Carter Jonas because CEL has suffered no loss.

[6] CEL, in its reply, asserts that although, on 5 March 1999, it entered into an agreement with Mr Catlin for the sale of the lodge, the sale has not been completed and CEL remains the legal owner of the building. It contends that, in any event, the arrangement to enter into a contract to transfer the lodge to Mr Catlin was a family arrangement, undertaken for the legitimate purpose of minimising tax, and that CEL is therefore claiming in its own right but is bound to account, in due course, to Mr Catlin. The action is, however, properly constituted.

[7] This remains the claimants’ primary submission, but they have introduced a claim on behalf of Mr Catlin personally in the event that the submission is not accepted. The claim is made under section 1 of the Defective Premises Act 1972 (the 1972 Act) and in tort.

[8] Carter Jonas contends that although if any loss was suffered it was suffered by Mr Catlin personally, his claim cannot succeed because:

(i) the lodge is not a dwelling within the terms of the Act;

(ii) the lodge is fit for habitation;

(iii) Carter Jonas owed Mr Catlin no duty in tort; and

(iv) the claim is statute-barred.

[9] Carter Jonas contends, therefore, that it is entitled to succeed against both claimants without the necessity for any consideration of the merits. It contends that it is also entitled to succeed on the merits.

[10] At a late stage in the trial, the claimants made a claim for the professional fees of Mr Alex Roberts, who was also acting as the claimants’ expert planning and architectural witness. As the claimants’ expert, he worked on a scheme that the claimants had put forward as being appropriate to remedy the defects that, they claim, exist in the construction of the lodge. Having done so, the claimants asked Mr Roberts to develop the advice that he had already given into a full design, for which he would be paid separately. The claimants say that they are entitled to recover Mr Roberts’ professional fees, which they have paid him for working up the design even if his preferred scheme is held not to be the appropriate one. The defendant objects to the claim being admitted at such a late stage and further says that, on the merits, the claim is not well founded.

[11] Apart from the substantive defences in relation to its conduct in the construction of the lodge, Carter Jonas contends that serious defects were introduced by the contractor, Guildford Construction (York) Ltd, (Guildford), which, it says, continued to work on the lodge after Carter Jonas had left the site in April 1999 and created the problems that now exist. Had Carter Jonas been permitted to carry out its obligations during the defects liability period, the defects would not have been introduced. Defects that became apparent during the defects liability period would also have been remedied.

[12] There are, therefore, a considerable number of issues of fact and law for me to decide. The scheme of the judgment is therefore as follows:

(A) to assess the general credibility of the witnesses of fact and the experts: [13];

(B) the factual narrative: [46];

(C) legal and factual issues relating to Carter Jonas’s claim that CEL has no standing to sue in these proceedings and/or can recover only nominal damages: [245];

(D) Mr Catlin’s claim under the 1972 Act: [291];

(E) substantive issues:

(a) responsibility for structural design and inspection: [305];

(b) Horne’s settlement of the claims against it: [320];

(d) method of specification of design: [338];

(F) specific topics: [343];

(G) work on the lodge after May 1999: [490];

(H) claim for Mr Robert’s additional fees: [531];

(I) the clause 1.1.5 agreement: [546];

(J) Carter Jonas’s counterclaim: [548];

(K) damages: which remedial scheme?: [561];

(L) conclusion: [571].

A. Witnesses

Factual witnesses

[13] This is a case in which the credibility of the witnesses is of considerable importance.

[14] For the claimants, Mr Catlin was and is a director and the principal shareholder in CEL. He said in his witness statement, and I accept, that although he used the claimant company for the purpose of his contractual dealings with Carter Jonas in relation to the project of demolishing and rebuilding the lodge, it was understood by all concerned that the contract and the project were principally for his own benefit. He was the only factual witness for the claimants. He was a truthful witness and, in general, I am able to accept his evidence.

[15] Although she did not give oral evidence, his eyes and ears on the project were those of his housekeeper, Mrs Shirley Johnson. She reported regularly to Mr Catlin on the state of the project and also attended meetings and had discussions with Carter Jonas.

[16] Where the evidence has not been challenged on the documents, for example Mrs Johnson’s snagging list, I am entitled to and do accept the evidence. In practice, her evidence, as evidenced by the documents before me, is largely undisputed.

[17] There were four factual witnesses for the defendant. Its principal witness was Mr Nigel Lindley, a qualified chartered surveyor, who has now left the firm but who, from 1992 to April 2001, was a |page:141| partner of Carter Jonas in charge of the building surveying department at the firm’s York office. He gave a long and detailed written statement and was extensively cross-examined in oral evidence.

[18] I did not find his evidence satisfactory or reliable. Without departing from the generality of this observation, there are two matters that should be highlighted. The first is his decision to leave in place the wrong breather membrane, Typar, which had been prescribed by his firm, and, second, not to discuss his decision with his client. This must not only be a matter of concern but must also, along with other matters, affect adversely any view of his credibility.

[19] It is contended, on Mr Lindley’s behalf, that the explanation for his conduct is that this defect was not significant and that it was a technical matter. I do not agree. Accepting, for this purpose, his view that the defect was not significant, Mr Lindley should have fully explained the mistake and why he was taking no action to Mr Catlin or at least to Mr Anthony Pardoe, his own partner, who was looking after Mr Catlin’s interests. Later, I shall have to consider the substance of the issue of the breather membrane.

[20] The other particular aspect of significant concern in relation to Mr Lindley is his poor standard of record keeping, particularly at a time when he was under pressure from the client. This is of particular relevance in relation to his evidence over the remedying of defects in the snagging lists in the period immediately before practical completion in February 1999.

[21] The fact that, in general, I find that he was an unreliable witness does not exempt me from the obligation to consider each contentious item of evidence on its merits.

[22] Mr Karl Tumman also gave evidence for Carter Jonas. He joined Carter Jonas in 1988 as an architect technician. He was admitted as a chartered building surveyor (ARICS) in December 1994 and joined the building consultancy division of Carter Jonas’s York office until he left in December 1998, shortly after the events that relate to this litigation. He therefore worked under Mr Lindley. He was given primary responsibility for this project until July/August 1998 by Mr Pardoe, with whom he had worked on several projects for CEL. This responsibility included the design of the project and the establishment of relationships with other professionals.

[23] On 26 August 1998, he was taken off the project at the insistence of Mr Catlin. This project was by far the largest for which he had had responsibility. I have little doubt that he was left to deal with matters that should have been dealt with by someone with considerably more experience. In very difficult circumstances, where his own conduct was bound to be criticised, he was a transparently honest witness.

[24] Mr Mark Granger is now the chief executive of Carter Jonas based in the firm’s Harrogate office. In 1999, his title was managing partner of the firm. He holds the qualification of RICS and has considerable experience in the management of agricultural estates.

[25] His evidence related primarily to Carter Jonas’s claim for outstanding fees and to discussions with Mr Catlin (and a letter sent to Mr Catlin dated 20 April 1999) in relation to those fees. Unfortunately, he attested to the truth of the claim that the firm had sent invoices to Mr Catlin in the sum of £68,750 without having verified the fact, which was not correct. He was not a well-prepared witness.

[26] The fourth witness for Carter Jonas was Mr Dion Singleton, an associate in the York office of Carter Jonas, who holds the qualification of FRICS and is a chartered building surveyor. His role was to act as planning supervisor under the Construction (Design and Management) Regulations 1994. His evidence was therefore of secondary importance in relation to the issues that I have to decide. His oral evidence was brief and he was not always able to help with regard to questions put to him.

[27] The other person from Carter Jonas who would have been a key witness but who did not give evidence was Mr Pardoe, a partner in Carter Jonas who had introduced Mr Catlin as a client of the firm. Previously, he had acted as CEL’s agent. In his role as an intermediary between Mr Catlin and his firm, Mr Pardoe’s notes to his colleagues reflect the concern and embarrassment that he obviously felt that the project was not proceeding smoothly and successfully.

Expert witnesses

[28] It is unfortunately necessary to set out the requirements that expert witnesses must observe when giving expert evidence to the court.

[29] Paragraph 35.3 of the CPR prescribes:

(1) It is the duty of an expert to help the court on matters within his expertise.

(2) This duty overrides any obligation to the person from whom he has received instructions or by whom he is paid.

[30] These requirements are supplemented by the practice direction that sets out the general requirements for an expert when giving expert evidence and the form and contents of the expert’s reports. These guidelines follow very much the law as it has been developed in the cases and, in particular, as it was set out by Cresswell J in National Justice Compania Naviera SA v Prudential Assurance Co Ltd: The Ikarian Reefer [1993] 2 Lloyd’s Rep 68, at p81*.

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* Editor’s note: Also reported at [1993] 2 EGLR 183; [1993] 37 EG 158

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[31] The practice direction requires the expert to assist the court by providing an objective and unbiased opinion on matters within his expertise and emphasises that he should not assume the role of advocate: see para 1.3. He should consider all material facts, including those that may detract from his opinion: see para 1.4. He should make it clear when a matter falls outside his expertise and when he is not able to reach a definitive opinion, for example because he has insufficient information: see para 1.5. If after producing a report an expert changes his view on any matter, such change of view should be communicated to the parties without delay, and when appropriate to the court: see para 1.6.

[32] As The Ikarian Reefer and other cases make clear, an expert should not omit to consider material facts that could detract from his concluded opinion.

[33] The requirement that an expert is meticulous in observing these rules is underlined not only by the requirements of justice but also by the practical consequences to the parties of his failure to do so. These not only relate to the possibility that the court itself will be misled. Parties are now normally involved in discussions to try to resolve disputes long before cases come to trial. The parties themselves need to have experts’ reports that conform to the rules in order that they can evaluate their own and the other side’s case in order to reach a proper and fair settlement. This process requires the building up of trust between the parties. Experts can play a valuable part in this process. If experts do not conduct themselves in this way it can reinforce mistrust between the parties and mislead them in the process of evaluating their cases. It will also result in experts failing to reach agreement on matters that should not be in dispute. At the very least, this adds to the cost of the litigation.

[34] I commend the work of the quantity surveyors Mr David Chelmick FRICS, for the claimants, and Mr David Vinden FRICS MCIArb, for the defendant. They were able, after very considerable work, to agree the costings of the various alternatives depending upon my findings of fact. This was a very considerable achievement, and it meant that they did not need to give oral evidence.

[35] I also equally commend the work of the structural engineering experts, Mr Gooud, Mr Peters and Mr Johnston, who were also able to reach agreement and therefore did not need to give oral evidence.

[36] I heard oral evidence from two other experts, Mr Roberts and Mr John Laundon.

[37] Mr Roberts, whose qualification is as an architect, was an impressive witness, who followed the requirements of the rules for expert witnesses that I have set out. Although he was the expert for the claimants, he was candid with the court when he was asked questions upon which he felt unable to express a professional opinion. He set out his conclusions carefully and fully in his reports. |page:142|

[38] Carter Jonas criticised his evidence for a lack of frankness in failing to disclose to the court that, having reached the conclusion that what came to be known as the third-skin option was the most appropriate for the remedial works, he was then asked by Mr Catlin, in November 2001, to develop and did develop the design of the third-skin option. Mr Roberts conceded in evidence that it would have been better if he had done so. He was paid £62,995.27 plus VAT by Mr Catlin for this work. Carter Jonas says that this commitment to the scheme upon which he had worked affected the independence of his judgment and tainted his evidence, so that where it is in conflict with that of Mr Laundon I should not rely upon it.

[39] I shall consider the question of Mr Roberts’ fees as a separate topic but, in relation to the question of whether I can properly rely upon Mr Roberts’ evidence as objective and unbiased, I am satisfied, having heard his evidence, including extensive cross-examination, that I can do so. I note that the issue about which complaint is now made was not raised with Mr Roberts in cross-examination even though Carter Jonas knew by the start of the trial at the latest that Mr Roberts had carried out substantial detailed design work for which he would have been charged additional fees.

[40] Unfortunately, my reminder of the duties of an expert witness is directed at Mr Laundon. He is qualified as a building surveyor. He acted too much as an advocate for Carter Jonas rather than as an expert witness. He did not include all material facts, including those that would have detracted from his opinion and that were favourable to Catlin. In particular, in his reports he expressed no opinion on a number of topics upon which he must have formed an opinion adverse to the interests of Carter Jonas.

[41] The clearest examples are, first, that, in cross-examination, he eventually had to agree that it was and always had been his opinion that Carter Jonas had made a fundamental error in the design of the fireplaces at the lodge, although this opinion was not expressed in his report.

[42] Second, although he had not expressed such a view in his reports, he had to admit in cross-examination that the incorrect specification of the breather membrane was a fundamental error in Carter Jonas’s design. He also had to admit that the design of the external envelope of the building fell far short of the requisite standard. Like the question of the fireplaces, these were not topics upon which Mr Laundon had changed his opinion. They were topics where he had failed in his reports to express his opinion as he should have done.

[43] He was also an unsatisfactory and evasive witness. A prime example of this related to the issue of whether Mr Lindley should have told Mr Catlin, or at least his own partner, Mr Pardoe, that the wrong breather membrane had been specified by Carter Jonas, and the implications for Carter Jonas should the decision be taken to replace Typar with Tyvek.

[44] I also take into account that Mr Catlin was spending around £1m on demolition and reconstruction of the lodge. The perspective of the architect is particularly important in relation to some of the issues that I have to decide, but the fact that Mr Roberts is an architect and Mr Laundon is a building surveyor is not on its own a decisive factor, and it is not so suggested by the claimants.

[45] However, taking all factors into account, in principle I have no hesitation, in general, in preferring the expert evidence of Mr Roberts to that of Mr Laundon. It is necessary, of course, to consider separately the evidence of each expert on each issue in relation to the surrounding facts.

B. Factual narrative

[46] In 1997, CEL purchased an estate on the Burnhope and Ousby moors in County Durham. Mr Catlin, a very successful businessman, was and is the principal and controlling shareholder in CEL. He said in his witness statement, and I accept it as an accurate representation of the position:

Through the Claimant company I purchased an estate on the Burnhope and Ousby moors which I intended to use for grouse shooting.

[47] Mr Pardoe was a senior partner in Carter Jonas, who had been Mr Catlin’s company’s estate manager on various projects. He was not involved in the present project directly, but he acted as a link between Mr Catlin, as the client, and his colleagues at Carter Jonas whose responsibility it was to discharge Carter Jonas’s contractual obligations towards Mr Catlin. The work at Carter Jonas was carried out principally by Mr Tumman and Mr Lindley, although others in the firm were also involved.

[48] Immediately before the events that I am about to describe, Mr Pardoe told Mr Catlin that Carter Jonas had set up an architectural/surveying practice. Mr Catlin was persuaded to use this practice to design and oversee the demolition and rebuilding of the lodge. Mr Catlin also relied upon Carter Jonas for the smooth running and completion of the project.

[49] In the summer of 1997, Mr Catlin discussed with Mr Pardoe the feasibility of buying the old reservoir manager’s house on the estate and turning it into a shooting lodge.

[50] In his note to Mr Tumman, dated 10 June 1997, asking him to carry out the feasibility study, Mr Pardoe made it clear that Mr Catlin would need:

A really good house with some good heating and at least nine bedrooms each with its own bathroom or shower.

Some idea of what was needed can be gauged from the fact that the cost of demolishing the house on the estate and building the shooting lodge amounted to £1m. Mr Catlin was paying for, and was entitled to have built a high-quality building designed to a high standard.

[51] On 22 July 1997, Mr Catlin entered into an agreement with Carter Jonas (Mr Tumman) for Carter Jonas to carry out a feasibility study for the alteration of the house from a four-bedroom house to a nine-bedroom, all en-suite, property. Carter Jonas was asked to consider not only the feasibility of adapting the existing lodge but also total demolition and rebuild.

[52] The feasibility study was carried out. In August 1997, Mr Tumman involved Mr Lindley in the project while he was on holiday.

[53] An early indication that Mr Catlin would be an exacting employer (as he was fully entitled to be) is contained in a file note from Mr Tumman to Mr Lindley dated 27 August 1997, where he notes that if an adaptation of the existing building is undertaken:

We may end up spending a lot of money on repairing the existing building and it would still not be perfect.

(Emphasis added.)

[54] Mr Tumman suggested that the best approach might be to demolish the existing building and to start again.

[55] On 27 August 1997, Mr Tumman suggested to Mr Lindley that Mr Lindley should meet Mr Catlin to discuss the proposed scheme.

[56] On 4 September 1997, Mr Lindley met Mr Catlin at Burnhope Lodge in order to discuss the project. It was agreed that the best way forward would be to demolish and rebuild. There is no dispute that, at a very early stage, it was understood that the rebuilt lodge had to be ready for the 1998 shooting season, and a completion date was required at the beginning of August 1998.

[57] The work on the site required the obtaining of planning permission. Mr John Goodwin MRTPI, a planning partner at Carter Jonas was involved. He wrote to Mr Catlin setting out the preliminary discussions that he had had with the Wear Valley District Council planning department. He advised that Mr Catlin should proceed to submit a planning application for a replacement building. He noted that Mr Catlin wished to have the property available for his first guests on 14 August 1998, and said that he would liaise closely with Mr Pardoe and Mr Lindley with a view to putting together a detailed timetable to enable this to be achieved.

[58] On 24 September 1997, Mr Tumman sent Mr Catlin a fee proposal for the new building with an outline proposal for the construction of the work. |page:143|

[59] On 3 October 1997, Mr Goodwin submitted the formal planning application on behalf of CEL for the building of a shooting lodge to be used by guests. It was, so the application outlined, likely to be used on approximately 18 days per year. Mr Lindley and Mr Tumman discussed the design of the building and decided that a steel-frame construction with concrete plank floors was appropriate.

[60] On 24 October 1997, Carter Jonas, through Mr Tumman, instructed Horne as structural engineer on the project. The letter from Mr Don Routledge, of Horne, to Mr Tumman, also on 24 October 1997, noted a fee estimate of £5,750 plus VAT. The letter was not copied to Mr Catlin but was enclosed with Mr Tumman’s letter to Mr Catlin of 27 October 1997.

[61] On 27 October 1997, Mr Tumman wrote to Mr Catlin. The letter was copied to Mr Pardoe and Mr Goodwin. In relation to Horne, he wrote:

I had an extremely useful and positive meeting last week with an engineer that we use quite often and who is very good with steel frames. He is now designing the main structure and I can confirm that, whilst he will be working directly for you, his basic costs will be omitted from our final fee.

[62] Carter Jonas rely upon this statement as divesting itself of responsibility for Horne’s work. Mr Catlin contends that his understanding with Carter Jonas was and remained that Carter Jonas would deal with, and be ultimately responsible for, all matters necessary for the completion of the project. He said that he had never had any direct dealings with Horne. He paid Horne’s invoices, but these were sent by Carter Jonas alongside the other expenses for the project.

[63] On 28 October 1997, Horne instructed Mini Bore, a specialist site-investigation company, to drill three trial bores to test the suitability of the site for the construction of the proposed lodge. Mr Routledge told them that its client would be CEL. The letter was copied to Mr Tumman but not to Mr Catlin.

[64] On 31 October 1997, Mini Bore drilled the three trial bores. On 3 November 1997, it submitted its invoice to Carter Jonas, addressed to CEL. CEL paid it.

[65] On 31 October 1997, Mr Tumman reported to Mr Catlin. He referred in passing to the fact that he had explained to the Environment Agency that:

We were having some Mini Bore tests done and from there we would hope to establish the make up of the sub-soil.

[66] Also on 31 October 1997, Mr Tumman submitted his first interim fee account in the sum of £2,000 plus VAT.

[67] On 7 November 1997, Mr Tumman sent Mr Catlin a copy of the site-investigation report.

[68] The planning meeting on 12 November 1997 went well and Mr Goodwin was able to write to Mr Catlin on 13 November 1997 to say that the application had been approved subject to 10 conditions, none of which needed to cause concern. The decision itself was dated 18 November 1997.

[69] Northumbrian Water submitted its separate planning application to relocate its compound on 11 November 1997.

[70] On 28 November 1997, Horne submitted its first invoice in the sum of £2,000. It was originally in the name of Mr Catlin, but, following prompting from Carter Jonas, a substitute invoice was issued addressed to CEL. It was sent on to CEL. The further invoice was sent with a letter from Carter Jonas:

May I provide you with a copy of Robert T Horne & Partners (Engineers) first interim account and which relates to their quotation dated 24 October 1997. Although this is due for payment please note that those amounts expended by the engineer in the normal course of his duties will be deducted from our final fee account.

[71] This invoice was acknowledged as having been paid on 8 January 1998. All further invoices from Horne were addressed to and paid by CEL.

[72] Northumbria Water was at all times concerned that the lodge should not be used as a separate business. Mr Giles Bilton FRICS, another partner of Carter Jonas, wrote to Mr PJ Horn at Manches, solicitor, in a letter dated 5 December 1997.

[73] Part of the letter is as follows:

2. I am not clear as to the correct definition of residential purposes, however I do know that Northumbrian Water Ltd wish to restrict the house from being used for a business. They have known all along that the property will be used for entertaining shooting parties and if this comes outside the scope of residential use it should not be excluded.

[74] This approach was confirmed in an attendance note by Mr Horn, of Manches, dated 8 December 1997, reporting two telephone conversations with Eversheds (Northumbrian Water’s solicitor):

6. Eversheds are instructed that the property to be sold to my clients may not be used for business/commercial purposes but may be used for recreational purposes. It is understood that the guests may include both social and business acquaintances.

[75] The note of a conversation between Mr Horn and Mr Catlin on 9 December 1997 indicates that Mr Catlin was furious because, in his view, this restriction had not been made clear to him at the outset. It is clear from the note of a further telephone conversation between Mr Catlin and Mr Horn that Mr Catlin felt that Carter Jonas had let him down in failing to make clear to Northumbrian Water at the outset that CEL was proposing to charge for the use of the shooting lodge.

[76] It also appears from a discussion between solicitors on 12 January 1998 that the covenant against having paying guests in connection with the sporting and recreational facilities might be relaxed.

[77] There were extensive discussions between the parties, prior to completion on 26 February 1998, on the form of the restrictive covenant relating to the use of the lodge. In its final form, the covenant was as follows:

1. Not to carry out any trade, manufacture or business on the premises PROVIDED THAT ancillary to the ownership or use or occupation of the adjoining land by the covenantor for shooting, fishing and other sporting activities the covenantor may use the property as a shooting Lodge or shooting Lodges for the accommodation of persons shooting and/or fishing and/or carrying out other sporting activities on the adjoining land and for the accommodation of domestic staff…

PROVIDED FURTHER that the total number of paying guests shall not exceed 34 including domestic staff but for the avoidance of doubt and without prejudice to the generality of this paragraph this proviso shall not extend to the use of the property as a hotel, guest house or other similar use.

[78] Meanwhile, on 30 January 1998, Carter Jonas submitted a second interim account for work undertaken to tender stage in the sum of £10,000.

[79] By an agreement dated 9 February 1998, but in fact signed by Mr Catlin on 24 February 1998, CEL engaged Carter Jonas to undertake RICS building work in connection with the erection of the “new nine bedroomed shooting Lodge complete with ancillary facilities”. The fee was to be 9% of the contract sum exclusive of VAT. The building was to be commissioned by 5 August 1998.

[80] The agreement was subject to the RICS conditions of engagement for building surveying services. The surveyor’s obligations were set out in clause 1.

[81] The following clauses are particularly relevant:

1.1.3 Where during the course of Building works the surveyor makes periodic visits to site to monitor the contractor’s workmanship and progress, to check on the use of materials, to check on the works conformity to specification and to report generally on the progress and quality of the works, having regard to the Terms of Contract between the employer and the contractor, the surveyor shall not be required to make exhaustive or continuous inspections and liability for the works shall be limited to that which is reasonably discoverable by the surveyor undertaking periodic inspections of the site.

[82] There was no resident surveyor-clerk of the works for the project to supervise the day-to-day execution of the contract, so clause 1.1.4 did not apply. If Carter Jonas had appointed a resident-clerk of the works, such a person would have been appointed by the surveyor |page:144| (under this contract, Mr Tumman) with the consent of CEL and at CEL’s expense. It is perhaps unfortunate that this was not done.

[83] Under clause 1.1.5, upon which Carter Jonas rely:

Where the employer employs a contractor under a separate agreement to undertake construction or other works, the employer will hold the contractor and not the surveyor responsible for the contractor’s operational methods and for the proper execution of the works.

[84] Clauses 1.3 and 1.4 deal with the relationship of the employer, Carter Jonas, to other specialists.

[85] Clause 1.3 provides:

Where the services of specialists or other consultants are required the surveyor may recommend to the employer that he engage directly such specialists or consultants as the surveyor deems necessary. As an alternative the surveyor may instruct the aforementioned specialist or consultants on the employer’s behalf subject to the prior approval of the employer.

The surveyor will assume [and maintain – my interpolation] responsibility for the direction and integration of their work but, and it is expressly agreed, will not be held responsible by the Employer for the design, inspection and performance of that work entrusted to specialists and consultants. All fees and expenses, disbursements and value added tax for the execution of such services shall be in addition to those set out in the agreement and payable by the employer to the surveyor…

[86] Clause 1.4 provides:

1.4 The surveyor may recommend that main specialist sub-contractors and/or suppliers are retained by the Employer to design and execute any part of the work in which case the surveyor shall be responsible to the Employer for co-ordinating this work. The surveyor shall be responsible for the direction or integration of the work through the main contractor but does not undertake responsibility for the detail of design matters.

The surveyor shall not in any way whatsoever be responsible for any loss, expense and/or damages or legal costs in connection with the recovery thereof incurred by the Employer in respect of any failure of any design or work carried out by specialists, specialist consultants, specialist suppliers and/or specialist sub-contractors whether or not they are carrying on their normal business when any such claim against the Employer arises.

[87] The last stage of the tendering process for contractors for the construction of the lodge had started on 23 January 1998. The tender package, which was sent out by Mr Tumman, included a specification and drawings but not a bill of quantities. This tendering process was completed and, on 9/10 March 1998, CEL entered into a contract with Guildford on the terms contained in the JCT form (intermediate) IFC84. Carter Jonas (Mr Tumman) was the designated contract administrator and also (Mr Dion Singleton) the planning supervisor. Under the contract, Carter Jonas was responsible for and specified the building works to be carried out under the contract. The price of construction was £967,099.22.

[88] On 13 March 1998, Carter Jonas confirmed to Guildford that a performance bonus of £50,000 would be paid if the project were completed on or before 1 August 1998. After cost savings/efficiencies had been negotiated, the total price had been reduced to £917,000, and this £50,000 bonus gave Guildford the opportunity to achieve the original price.

[89] This offer was made after Mr Catlin had had discussions with Mr Lindley, who had temporarily taken charge of the project after Mr Tumman had unfortunately had to be rushed to hospital with appendicitis.

[90] There is no doubt that the subsequent work was beset with difficulties.

[91] On 11 March 1998, Mr Lindley visited the site and was able to report that the site had been cleared except for small quantities of debris that were to be removed on the following day.

[92] On 13 March 1998, in the course of discussions, Mr Lindley was asked by Mr Guildford what type of breather membrane was required. Mr Lindley said that he told Mr Guildford “Typar or something”. Mr Lindley explained that he could not remember at that particular time precisely what should have been specified and all he was doing was giving some sort of indication.

[93] The first site meeting took place on-site, also on 18 March 1998. Mr Lindley and Mr Tumman were both present for Carter Jonas. Mr Ede, contracts manager, Mr Brown, projects manager and Mr Bell, the foreman, were present for Guildford. Mr Routledge was present for Horne.

[94] Mrs Johnson also attended. She was following the project on behalf of CEL and Mr Catlin. She had no particular expertise in building matters. At a meeting on 15 June 1998, Mr Lindley encapsulated her role correctly as follows:

She is the client’s eyes and ears. She is concerned with attendance and progress and not with any technical aspects of the construction. Mr Catlin as a busy and successful businessman wished to have someone who was able to follow the work on his behalf at first hand.

[95] It is clear that Mr Catlin was taking a close personal interest in the project. He kept in close touch with the work as it progressed, was on the distribution list for minutes and made a number of visits to the site. He was due to visit the site the following weekend. Mr Lindley said that he was confident of Mr Tumman’s ability to handle the project and was not involved in day-to-day matters.

[96] On 6 April 1998, Carter Jonas issued contract instruction no 3 to Guildford; it included item 16 “external stonework to be 100mm on bed subject to engineers confirmation”. Previously, it had been specified as 150mm. It appears that no drawing or further instruction to this effect was sent.

[97] Item 22 of the same instruction specified “Typar to be fixed over timber framing as per detailed drawings with all laps sealed”. It is conceded that Carter Jonas specified the wrong breather membrane.

[98] At the contract meeting on 9 April 1998, Mr Ede, for Guildford, stated that a sump might be required for tanking the basement. Protim Services, the specialist, reinforced Mr Ede’s advice in a letter dated 30 April 1998:

Should the basement be prone to flooding for any reason, then a sump pump should be installed prior to our commencement of work.

[99] Its sketch plan specified:

Studded membrane system from floor to ceiling (based on ceiling height being approx 2.6mts).

[100] On 7 May 1998, Horne gave instructions to Guildford on a number of matters relating to fixings to wall panels, wall ties and wall fixings. These matters had been discussed at the site meeting on 6 May 1998, at which Carter Jonas, Horne and Guildford had all been present.

[101] On 13 May 1998, Mr Tumman wrote to Mr Ede to inform him that the wall ties to the timber panels were generally fixed into the boarding when they should have been fixed through the vertical ribs. Mr Ede confirmed to Carter Jonas on 14 May 1998 that they would be fixed onto the framing and not onto the plywood.

[102] On 23 May 1998, Mr Tumman noted a number of workmanship defects, including the fact that some cavity wall ties had not been fixed as requested and that there was mortar in the cavities. The note of his site visit is critical of Guildford. It took place two days before Mr Catlin himself arrived to see how the work was progressing.

[103] It is clear that Mr Catlin, who on this visit went round with Mr Pardoe, was not impressed by what he saw. Mr Pardoe was of the same opinion. Mr Tumman recorded:

Tony (Pardoe) explained that he and Stephen (Catlin) were rather alarmed by the standards of workmanship especially the mortar droppings in the cavities and the wall ties.

Tony stated that Stephen Catlin was looking for a possible external second opinion on the project but that Tony suggested Nigel Lindley have a look at it and provide assessment.

[104] Mr Tumman sent Mr Lindley a briefing note on 28 May 1998. He also sent Mr Ede a letter expressing serious concerns over Guildford’s performance, including nine specific items. |page:145|

[105] Mr Pardoe sent his own note to Mr Lindley dated 29 May 1998 marked “private and confidential”, but copied to Mr Tumman. He was blunt:

Putting it at its simplest, our client feels let down by Karl and indeed yourself to the extent that you said you would keep an eye on his project – and equally me for not making certain that everything went smoothly. You will have heard that he has actually threatened to go to another firm and I am rather keen for that not to happen…

The client has made the point that he is paying good money to both the contractor and ourselves and he expects us to deliver on time a top quality Lodge…

[106] On 28 May 1998, Carter Jonas wrote to Guildford giving it a formal warning of the need to improve the quality of its workmanship on-site.

[107] A flavour of Guildford’s performance appears from the note of the site meeting on 29 May 1998, which noted that roof sheeting was three-quarters finished and felting was half-finished. The storm on the previous night had caused rain to pour into the building via the central flat roof and the flooring on the first and ground floors were mainly saturated:

JG (Mr Guildford) admitted that they had taken a gamble and it had not paid off…

[108] This work was condemned by Mr Lindley at his inspection on 1 June 1998.

[109] At the site meeting on 29 May 1998, there was also a discussion about wall ties. Mr Guildford admitted that, of those exposed, some had been fitted wrongly. He said that it was for Carter Jonas to prove that those that were hidden had also been fitted wrongly. Mr Tumman said that common sense dictated that in view of the proportion of those exposed that were fitted wrongly, a similar proportion of those hidden would also have been fitted wrongly.

[110] Mr Guildford offered to pull down the walls to see what would need to be replaced on the basis that his firm would replace those that had been wrongly fitted but would charge for those correctly fitted as day works. Mr Tumman did not agree.

[111] In evidence, Mr Lindley said that he was perturbed by what was happening and he went hotfoot to the site on 1 June 1998. There were problems with the construction of the external walls. The wrong cavity width was shown in the drawings. There was no specification of a continuous breather membrane, no vapour control layer and no protective measures.

[112] Although the specification called for wall ties at 450mm, centred horizontally and vertically staggered, Guildford had provided ties at 350mm. Far less than six ties per square metre had been provided. Mr Lindley agreed with Mr Ede that 1,000 Helifix drive-in ties should be fitted.

[113] Under “other matters”, Mr Lindley told the site foreman that he should:

Give a rocket to the stonework sub-contractors for the DPC detailing and wall tie omission faults. He should tell them that the visual finish of the stonework was good but that Carter Jonas and the client wanted to see clean cavities and good concealed detailing.

[114] There was a serious concern over the quality of the stone, whether it was porous and whether, if it rained, water would permeate into the building. Mr Lindley agreed in evidence that from then on and for many months thereafter he was concerned that Carter Jonas should take every reasonable step to ensure that the walls were properly constructed.

[115] Mr Lindley said that he felt, nevertheless, that the problem of incorrectly falling wall tiles was not as serious as that suggested by Mr Pardoe or Mr Catlin.

[116] In the course of his inspection, Mr Lindley noted that there appeared to be a gap in the sheathing membrane and the damp-proof course that extended from the right bay of the front west elevation around the right-hand wall. It was agreed that the problem could be corrected with a bituthene “bandage”.

[117] Also on this site visit on 1 June 1998, although not referred to in the note of the visit, Mr Lindley said that he realised that the wrong type of breather membrane was being used to sheath the inner frame of the building. On his return to the office, he confirmed that Mr Tumman had specified Typar 3267, when he should have specified Tyvek 1060B.

[118] Although Mr Lindley said that he had discussed the problem with Mr Tumman and Mr Singleton, he did not mention it to Mr Catlin, or even to his partner, Mr Pardoe. In oral evidence, he conceded that the correct procedure would at least have involved discussing the problem with Mr Pardoe.

[119] Mr Lindley said that he did discuss the matter with a colleague, Ms Melanie Smith, who was a consultant in the building surveying department. She was asked to investigate the position. There are no documents to support the fact that there was any investigation. Mr Lindley was forced to admit in cross-examination that the decision to leave the wrong product in place had been taken by him without any paperwork having been produced within the firm. I have no means of evaluating what advice, if any, Ms Smith gave. In the absence of any documents, I cannot give any weight to this alleged consultation.

[120] Mr Lindley said that the type of membrane did not matter unduly because the key issue was to ensure that the cavity width was correct and that the detailing was correct.

[121] In the end, the argument, as I understand it, is whether the purpose of the breather membrane is to protect the property only during construction or whether, in addition, it can contribute significantly to the water tightness of the building. In cross-examination Mr Lindley baulked at the suggestion that the breather membrane was a valuable second line of defence, but he agreed that it might be a third line of defence.

[122] This issue is a matter that I shall consider further when I come to consider the expert evidence, but the implication of ordering a change from Typar to Tyvek would have been considerable, both in relation to the additional overall cost of the building and to meeting the deadline of 1 August 1998.

[123] The Tyvek would have had to have been sourced, delivered and installed. The external stonework, which was 66% complete, would have had to have been rebuilt from scratch. The contractor would have made a substantial claim against Carter Jonas for disruption and delay, which would have had considerable prospects of success. Finally, admitting the mistake to Mr Catlin would have destroyed completely any fragile confidence that Mr Catlin retained in Carter Jonas and, as Mr Lindley frankly admitted in evidence, it would have been a disaster for the project as a whole.

[124] Mr Lindley asked a colleague, Ms Winfield, to visit the site again on 3 July 1998. She was unable to inspect the wall cavities that were to be cleared so that they could be inspected during the following week. On this visit, she was shown a sample of a remedial wall tie that Guildford proposed to use to increase the number of cavity wall ties on areas where Carter Jonas said that the density was inadequate.

[125] In the event, the inspection could not take place on 9 July or on 20 July 1998. On the 24 July site visit, it was noted that “cavity inspection to be made”.

[126] To go back to early June 1998, on 5 June 1998 Mr Lindley spoke to Mr Catlin to reassure him that everything was now back on track.

[127] Mr Lindley said that, from this time onwards, he became more involved in the project. He visited the site on 9 and 13 June 1998 and concluded that the problems that had been identified earlier were being addressed and that the project was generally on course for completion on 1 August 1998.

[128] However, before the 13 June 1998 visit, Mr Pardoe sent Mr Lindley a note saying that one of the stonemasons had told him that the stone was of an inferior quality and would not last. Mr Lindley asked Mr Guildford to contact the stone suppliers, Dunhouse Quarry & Co, which confirmed, in a letter dated 20 June 1998, that the stone met all the relevant requirements. Mr Lindley was reassured. |page:146|

[129] On 28 June 1998, Guildford produced a revised works programme that showed completion of all the works by the end of July 1998, with a final clean-up due to take place on 1 or 2 August 1998.

[130] On 1 July 1998, encouraged by what Mr Lindley had told him, Mr Catlin offered to pay the £50,000 bonus to Guildford provided that all internal work was completed by 1 August 1998, external work by 8 August 1998 and snagging by 15 August 1998.

[131] Mr Lindley visited the site again on 3 July 1998, and told Mr Ede that he wanted to inspect the wall cavities before they were closed up. He drew Mr Ede’s attention to the fact that the bituthene bandage had not been applied to the top of the damp-proof course.

[132] On 6 July 1998, Mr Lindley spoke to Mr Catlin on the telephone. He again reassured him that everything was on course, although there was a problem with the plumber. Mr Catlin told Mr Lindley that he would be at the lodge on 8 August 1998 and then for 10 days from 20 August 1998.

[133] Mr Lindley visited the site again on 9, 20 and 24 July 1998 and was still satisfied that the works were on course.

[134] He made a final inspection on 30 July 1998 before going on holiday. He said that he had carried out a full inspection of the wall cavities. He passed the workmanship and said that Guildford could proceed to close up the cavities. All the other work appeared to Mr Lindley to be going well, and he said in his witness statement that he was confident that everything would be finished by the time he returned to work on 18 August 1998, having had his holiday.

[135] The first of August 1998 was a crucial date, since it was the date by which, originally, the work on the lodge was to have been completed. Under the revised agreement, the internal work was to have been completed by 1 August 1998, although a further week was allowed for completion of the external work. The next crucial date was 20 August 1998, the date upon which Mr Catlin had told Mr Lindley that he would be occupying the lodge with a shooting party.

[136] Mr Tumman appears to have offered partial practical completion for the internal works on 1 August 1998, subject to the plumber sorting out the plumbing installation on 3 August 1998. It may be that Mr Tumman felt able to do this at least in part because of the confidence that Mr Lindley had been expressing, not only in his recent inspections but, in particular, in the inspection that he had made at the site immediately before he went on holiday on 30 July 1998.

[137] Mr Lindley told me in evidence, and I accept, that in fact the works were nowhere near being practically complete. It was apparent that there were numerous other serious defects in addition to those set out in the various snagging lists. A snagging list was compiled by Mr Tumman on 2 August 1998. A further snagging list was issued on 4 August 1998, and a yet further list was issued on 11 August 1998. Problems included serious water penetration to the windows during the weekend of 1 and 2 August 1998, when there had been strong winds and rain. Part of the problem at least had been caused by the manufacturers, Blair Joinery, which, at the factory, had fitted the wrong seals to the window sashes.

[138] On 7 August 1998, Mr Pardoe telephoned Mr Tumman to say that “he had had another rough ride from Stephen Catlin”. Mr Pardoe said that there was a rumour that Mr Tumman had offered practical completion. Mr Tumman gave the explanation that I have already set out. Assuming that the rumour had reached Mr Catlin, it can have done nothing to boost Mr Catlin’s confidence in Mr Tumman and Carter Jonas’s ability and judgment.

[139] Also on 7 August 1998, Mr Tumman and Mrs Johnson went round every room and produced a comprehensive snagging list of more than 300 items. Mr Tumman telephoned Mr Catlin, who said that he would visit the lodge that night.

[140] Mr Catlin and Mr Pardoe visited the site on the following day, 8 August 1998. Mr Tumman, Mr Guildford and Mr Ede were also present. Mr Catlin said that he thought the finishes were “crap”. The heating system had not been commissioned because parts for the boiler had not been delivered. Mr Catlin said that the priority was to get the property into a state where he could use it on 18 August 1998 to prepare for his shooting party on 20 August 1998, and then Carter Jonas and the contractors could come back at the end of October 1998, after the shooting season, to sort out the other items.

[141] On 17 August 1998, when Mr Tumman visited the lodge, there were a number of problems, including some water penetration problems with the electrics “tripping out” and two leaking radiators. Smoke tests had not been carried out on the fireplaces and the generators had not been delivered.

[142] Mr Lindley visited the lodge on 19 August 1998 upon his return from holiday. He thought that the lodge was useable but that the quality of the finish was poor. The final-fix joinery had been very badly done. The bringing forward prior to final decoration was sub-standard. There were also problems with leaking plumbing pipework and the electrics were still tripping out. The plumbing had been piped with plastic pipes. The connection joints were leaking and bursting open when carrying hot water under pressure.

[143] On 20 August 1998, Mr and Mrs Catlin and their guests arrived at the lodge for their 10-day stay. Unfortunately, their stay was not trouble-free. On 21 August 1998, as a result of a mains failure to supply the lodge, the hot and cold water tanks ran dry. More problems were to follow.

[144] Mr Lindley and Mr Ede met on 24 August 1998. Mr Tumman was also present but, by now, Mr Lindley was taking the lead and, on 26 August 1998, at Mr Catlin’s request, Mr Tumman ceased effectively to be involved in the project on behalf of Carter Jonas.

[145] On 24 August 1998, at the meeting with Mr Ede, Mr Lindley went through the various problems that had occurred since 15 August 1998. In evidence, he agreed that there were numerous problems and that the work was not practically complete. Among the more serious problems were those relating to the plumbing and heating installations, the electrical installation and also to the problem of water leaking into bedroom five and the basement.

[146] In relation to the electrical plumbing and heating problems, it was agreed that an independent opinion should be obtained from the Jackson-Coulson Partnership (chartered engineer). Mr Lindley’s poor opinion, particularly of the plumbing and heating installations, is set out in his letter of instruction dated 25 August 1998.

[147] Mr Laundon said in his first report that Jackson-Coulson, or a similar consultant, should have been appointed at a much earlier stage in the contract to take responsibility for ensuring that the services had been properly designed and installed. Mr Laundon did not regard Carter Jonas as having discharged its responsibility for services by asking Jackson-Coulson to inspect and prepare a report after the event.

[148] Jackson-Coulson’s letter of instruction from Mr Lindley, dated 25 August 1998, records one aspect of the way in which Mr Catlin must have felt badly let down:

since the property has been filled with guests from last Thursday 20 August 1998, there have been a number of occurrences which have led to a wholesale failure of the water supply to the property resulting in the stored water being used up by approximately 10.00pm on Friday last week (21 August). The quality of the plumbing installation is below standard and there was a minor flood in the ground floor cloakroom from 2.00am on Monday morning this week (24 August) and which was from a hot water supply connection which had failed the commissioning test and apparently been repaired.

[149] Mr Lindley’s record of events relating to the mains water problems experienced between 21 and 25 August 1998 sets out the sorry history in more detail.

[150] The Jackson-Coulson report of 3 September 1998 was endorsed by Mr Lindley “draft report attached – not issued – do not copy to anyone”. The installation was clearly not of an acceptable standard, and the report made nine separate recommendations.

[151] Meanwhile, despite all the problems, Guildford was pressing hard for payment and was threatening to serve a 14-day notice of breach of contract with a view to terminating the contract unless some payment was made.

[152] In a fax to Mr Pardoe of 28 August 1998, Mr Lindley described Mr Catlin’s attitude as “Stephen only wants the job right – not just a fight!!”. Mr Lindley’s letter to Mr Catlin, dated 28 August 1998, |page:147| suggested that he should make a further payment to Mr Guildford, despite all the problems, of the sum of £98,233.

[153] By 4 September 1998, Mr Lindley was noting that his relations with Guildford were poor:

Feel we are taking one step forward and two back… getting to the end of my tether with them.

[154] On 7 September 1998, Mr Lindley wrote a three-page letter setting out further defects. On 8 September 1998, Guildford replied to each of the points and said that it needed to have the final account agreed as a matter of urgency. Mr Lindley replied on 9 September 1998, noting that the defects, which he was asking Guildford to remedy, were not snagging items but serious defects that were required to be remedied.

[155] On 9 September 1998, Mr Lindley noted to Mr Ede that Jackson-Coulson had reported serious deficiencies in the plumbing/heating systems. He said that Guildford would be responsible for the cost of the report, and that after Mr and Mrs Catlin had left the property the mechanical services would need to be opened up and tested.

[156] Within the lodge the problems continued. For example, on 10 September 1998, Mrs Johnson said that, after investigation, it was evident that, in the area of the chapel, the drinking water and the sewage had been combined, and in this area the water was running yellow.

[157] Mrs Johnson lit fires in three rooms. The drawing-room fire was not smoking on that occasion. The study fire was smoking and had to be put out and the dining room fire was smoking to such an extent that the smoke had filled up a part of the ground floor. Later the same day, she noted that the carpet in bedroom five was again wet and she believed that water was getting through to the head of the bay.

[158] On 11 September 1998, Mrs Johnson noted further problems, including the fact that, despite the carpenter having attempted to seal the windows in bedroom five, water was still penetrating and the carpet was saturated. After heavy rain on the previous day, there was also water in the bay of bedroom one.

[159] It is clear that Mr Pardoe was extremely embarrassed by what was happening. In a memorandum of 15 September 1998, he made it clear to Mr Lindley that Mr Catlin had lost a great deal of faith and trust in Carter Jonas as a firm and in the building surveying division in particular. He amplified this:

Again, rightly or wrongly, our client feels that you have “broke him” and he and/or his wife feel that there have been occasions when we have pulled wool over his eyes or tried to.

[160] When writing this, Mr Pardoe did not, of course, know about the deception over the breather membrane or the Jackson-Coulson report.

[161] Also on 15 September 1998, Mrs Johnson produced a snagging list of 62 items. It included a number of items of ingress of water/wet patches in the building. These included bedrooms one and five, the study window and the front door all on the west elevation, the back door on the east elevation and the French doors on the south elevation.

[162] Following a site meeting with Mrs Johnson and Mr Ede on 15 September 1998, Mr Lindley and Mr Singleton produced an up-to-date schedule of works required to complete the construction and to remedy defects that had become apparent. Mr Lindley said in evidence that because the lodge had been used, it was normal for defects to come to light. The authors of the schedule made it clear that reference was also to be made to Mrs Johnson’s schedule.

[163] The Carter Jonas list made reference to the smoking fires. It prescribed immediate action on the fires in the drawing room and dining room. It recorded that the fireplace in the study “smokes profusely and preliminary works to be carried out as agreed 15 September 1998”: item 54. The site minutes recorded:

Drawing room was ok smoked later in the evening, study is not good and the dining room is poor – flues not drawing.

[164] The report also noted:

55. Intumescent seal parting company from door frame and these require pinning as the self-adhesive strips appear insufficient. This is a general item and requires attention throughout the property.

[165] The schedule demonstrated further, if this was necessary, that practical completion had not been achieved in August 1998.

[166] It is clear that the possibility of a final break between Mr Catlin and Carter Jonas, on the one side, and Guildford, on the other, was dangerously close. Nevertheless, discussions still continued over the defects.

[167] Unfortunately, problems continued at the lodge. There was a hot water failure on 23 September 1998 and, on 24 September 1998, the fire alarms went off at 4.00am as a result of faulty fitting.

[168] Matters with Guildford moved a stage nearer conclusion when, on 1 October 1998, Carter Jonas issued a certificate of non-completion of the project dated 1 August 1998, together with a certificate of payment. The letter sets out Carter Jonas’s opinion that:

practical completion has not occurred and that under Clause 2.9 of the contract, the CA is prevented from certifying Practical Completion as there are patent defects in the work.

[169] The letter noted that the project:

could not have been assessed by any right minded person as being practically complete on 1 August 1998.

[170] The letter listed among the particulars:

(i) The windows are leaking through the beading and the floors are wet.

(ii) The boiler had not been commissioned.

(iii) There was water penetration to the windows.

(iv) There were leaks in the plumbing.

(v) There were defects in the heating system once the boiler had been commissioned.

[171] The letter assessed the value of the works in the schedule of 15 September 1998, together with a 10% contingency, at £76,239 excluding VAT and fees.

[172] The letter enclosed a certificate that certified that Mr Catlin was due to pay the contractor £47,000.

[173] Mr Guildford and Mr Lindley met on 2 October 1998. Mr Lindley handed Mr Guildford the certificate of non-completion. Mr Guildford complained to Mr Lindley that he was favouring the employer when, as the independent surveyor on the project, he was supposed to be neutral. By this time, Mr Guildford was instructing his own adviser, Pavilion Associates, led by Mr Hudson, who is a qualified barrister and building surveyor, who wrote to Mr Lindley on 5 October 1998.

[174] On 6 October 1998, Mr Lindley responded to Mr Guildford in writing. He said that the patent defects in the work had become far more apparent during the second and third weeks of August 1998.

[175] In relation to the plumbing, Mr Lindley noted:

Neither you nor I, nor anyone else, except possibly the plumber, Alan (now sacked I understand) quite knows how extensive are the defects in the plumbing system now concealed within the ceilings and walls of the Lodge.

[176] In a confidential memorandum from Mr Pardoe to Mr Lindley dated 7 October 1998, Mr Pardoe told Mr Lindley that Mr Catlin was extremely angry generally about what had happened and blamed Carter Jonas as well as Guildford. He was also angry about the interim certificate of 1 October 1998, which required him to pay £47,000 to the contractor. He was aware that the state of the lodge meant that there would be a dispute between Carter Jonas and the contractor as to which was liable to pay for what. His view of Carter Jonas was:

So far as we are concerned, he is talking about dereliction of duty and negligence if not fraud.

[177] On 7 October 1998, Mr Guildford responded to Mr Lindley saying that the contractors would carry out all defective works in accordance with the specification and would start work on |page:148| 16 November 1998. This was later brought forward after discussion to 26 October 1998.

[178] At a site meeting on 16 October 1998, Mr Guildford accepted liability for almost all the items on the snagging schedules, although he asked for some clarification in relation to 15 items.

[179] Wet weather now intervened. On 17 October 1998, there was flooding in bedroom five and water was dripping steadily into bedroom one. Water was also running down into the study and the sitting room. Despite some temporary work, the water penetration was not stopped, although it was slowed temporarily. Mr Lindley thought that the recurrent problem had been caused by the fact that Blairs were reluctant to come on site and reglaze the bay window units because they were owed a considerable sum of money by Guildford.

[180] On 26 October 1998, the site was handed back to Guildford to carry out remedial works. On 27 October 1998, Mr Lindley put to Mr Tumman the allegation that the water ingress was Carter Jonas’s fault:

There is a whole lot of water running (not just dripping) in through the bays and John Guildford is adamant that this is because the cavity trays are not installed as he wanted to put them in – he says he wrote to you and you wrote back to him saying that “the trays were to be omitted”. I find this hard to believe…

[181] In oral evidence, Mr Tumman denied that he had said that the trays were to be omitted.

[182] After opening up the walls in around 12 positions to examine the cavities and bays, a number of deficiencies in the cavity tray work were discovered. The trays were to be remade and the roofs stripped and reformed. Mr Lindley said that water was entering the roof voids and then being caught by the bituthene sheet that had been laid the full length and width of the roof voids over the ceilings so as to form a tray. The water had been lying on the tray and trickling through holes in the bituthene and penetrating into the rooms below long after the rainfall had stopped.

[183] On 3 November 1998, Guildford’s site foreman reported water ingress through the gun-room window. Heavy rain had been driving at the south wall and water had, for the first time, been penetrating the first-floor bedroom window heads at this elevation.

[184] On 6 November 1998, Carter Jonas prepared an “irritation schedule”, which indicated defects on a scale of one to 10, with one being normal snagging, five being serious irritation, seven very serious inconvenience, nine intolerable inconvenience and 10 equalling elements or portions of the building becoming unusable. The schedule was stamped “prepared in anticipation of litigation”. I was told that this was put on later, but it was clearly prepared against a background of possible litigation. It included the following:

Water penetration through bays	10
Drainage smells	9
Fire alarms	10
Plumbing leaks	5-10
Leaking windows (water and draughts)	3-7
Smoking chimneys	8
Defective plumbing generally	3-9
Leaking front door (water damage and failure of burglar alarm contact)	7

[185] This irritation list, in effect, acknowledged the nature and extent of the problems that Mr and Mrs Catlin were experiencing at the lodge. It is not surprising that Mr Catlin was angry about what was happening.

[186] The remedial works proceeded. On 10 November 1998, Mr Lindley again visited the site. This was only one of a considerable number of site visits that he made around this time. He inspected the progress of the remedial works. It was agreed with Guildford that further opening up was required on the rear east gable.

[187] On 12 November 1998, a supplementary schedule of works was issued to be read in conjunction with the schedule of 15 September 1998. This further schedule covered all defects, on an item-by-item basis, that had come to light since 26 October 1998.

[188] On 18 November 1998, Mr Lindley issued a revised schedule of work for mechanical services consisting of 18 items. The instructions did not require Guildford to do precisely what Jackson-Coulson had advised.

[189] On 27 November 1998, Blair Windows returned to site and carried out remedial works on the windows. This work does not appear to have cured the water ingress through the windows.

[190] On 1 December 1998, Mr Lindley sent Guildford a letter cancelling the letter of non-completion and replacing it with one certifying that the works were not complete on 18 August 1998.

[191] On 10 December 1998, Jackson-Coulson inspected the site and set out a significant number of items that still needed to be done.

[192] On 15 December 1998, Carter Jonas produced a draft final account for Mr Catlin in the sum of £947,861.40. This provoked an angry response from Mr Catlin to Mr Lindley, that he thought that Mr Lindley was messing him about. Mr Catlin was concerned that the figure would increase by the value of works done after 1 December 1998. At the end of a difficult conversation with Mr Lindley, Mr Catlin said that if he had a further £80,000 as a retention he would send Guildford a cheque for £47,000. It is clear from the strength of his reaction that Mr Catlin’s relations with Carter Jonas and, in particular, with Mr Lindley were and remained extremely brittle.

[193] On 23 December 1998, Mr Lindley visited the site with Mr Ede. The majority of the external work had, in Mr Lindley’s view, been completed, but there were a number of internal items that remained.

[194] On 26 December 1998, there were severe gales and there was some minor storm damage, including slight water penetration into bedroom five. Mr Catlin asked Mr Lindley, in a telephone conversation on 5 January 1999, whether the storm damage was a result of defectively executed works. Mr Lindley told him that he thought that the dislodged heater tapes on the lead roof were the result of defective work but that the other damage to the roof was storm damage.

[195] With regard to water penetration, a drip had started in the corner of the bay in bedroom one. It was thought by Mr Ede that this was a result of an old cavity tray above the ceiling holding water.

[196] It appears that there had been driving rain in the gales and that Mr Lindley thought that this was the test of bad weather that the building needed and that the building had passed the test in that only minor damage had resulted.

[197] A schedule prepared by Mr Lindley on 12 January 1999 appeared to show that most of the substantial number of 206 defects had been remedied to Mr Lindley’s satisfaction.

[198] On 14 and 20 January 1999, Mr Lindley issued further lists of snagging items that needed to be completed. The list for 20 January 1999 included the completion of remedial works to the car park to eliminate ponding and also resurfacing works.

[199] A further list of items was produced by Mr Lindley on 2 February 1999. The list added items that had not been in earlier lists. It was said that this list was not necessarily exhaustive. In addition, Mrs Johnson produced her own handwritten list on 2 February 1998. It included more than 100 items. Mr Lindley agreed in evidence that this list was fair and reasonable. However, when Mr Lindley spoke to Mrs Johnson on the telephone on 5 February 1999 he said that Mrs Johnson had felt that “we were pretty well there”.

[200] Unfortunately, Mr Lindley was unable to produce any document to show that he had worked through these snagging lists and signed off the items on them. In the absence of any such contemporaneous evidence, I am unable to accept Mr Lindley’s evidence that the work on each of them had been completed. The additional question is whether these could properly have been described as snagging items or whether the problems were the result of more fundamental defects of design or construction or were too serious properly to be described as snagging items.

[201] On 9 February 1999, Mr Lindley wrote to Mr Ede indicating frustration that the remedial works had not been completed and that the preparation works and redecoration had barely started. He said that he would return on 10 February 1999 and that it was agreed that, by then, |page:149| one room would be decorated and be offered to him for inspection in a furnished condition. Mr Lindley said that he would not consider practical completion to have occurred until items of non-completion had been dealt with to such an extent that what remained could be described properly as “de minimis“.

[202] On 16 February 1999, Mr Lindley, surprisingly, was able to write to Mr Guildford that, following his site visit, he was pleased to enclose a certificate of practical completion as having occurred on 10 February 1999. This certificate was unqualified and made no reference to the car-park ponding that had not been corrected. Mr Lindley said in evidence that the car park had been left outstanding at practical completion. It had, but there is no reference to that in the certificate.

[203] In his witness statement, Mr Lindley said:

I was 100% happy that all outstanding defects had been completed. I did not consider that there were any further identifiable defects that existed.

[204] I note that the lodge had not been occupied since the snagging work started at the end of October 1998. It would not be occupied until May 1999.

[205] On 28 February 1999, in an urgent fax, Mr Lindley informed Mr Ede that he had been telephoned by Mr Catlin and Mrs Johnson to say that water had entered the building. Ingress had occurred in bedrooms one, four and five. In the front hall, water had entered at the door head, which had triggered the alarm, which could not be switched off. The door itself was not leaking.

[206] Mr Lindley visited the site again on 3 March 1999. In a subsequent discussion, Mr Catlin indicated that the current water ingress was much less severe than before but that the cause needed to be tracked down carefully. Mr Lindley felt that it was the first water ingress since Boxing Day 1998 and could be dealt with under the defects liability clause. There were also problems with the hot-water system.

[207] As a result of the site inspection on 3 March 1999, Mr Lindley wrote to Mr Ede on 5 March 1999 asking him to undertake work to the front and rear replacement French doors. Mr Laundon, Carter Jonas’s expert, said that, in his opinion, these matters, if identified previously, would not have prevented him from certifying practical completion if he had been the supervising architect.

[208] In another letter dated 5 March 1999, Mr Lindley detailed works that needed to be carried out to deal with the water penetration. This required extensive further work and advice. Mr Lindley said that Dunhouse Quarries should be asked to state the porosity of the stone and to advise whether or not the porosity would lessen with weathering and how long they anticipated that this might take and whether or not the porosity could be lessened by surface treatment.

[209] Blair Joinery was to be asked to return to site to remedy deficiencies in the front elevation first-floor window installations.

[210] It was on 5 March 1999 that CEL entered into an agreement with Mr Catlin for the sale and purchase of the lodge. Although the purchase price was paid, the transfer has not been entered at the Land Registry. This gives rise to the separate issue of whether, in these circumstances, CEL has any standing to sue in these proceedings or has suffered any loss. These are discrete issues, which I will consider separately.

[211] At the time the contract was made, Mr Catlin no doubt thought that all the construction problems had been resolved.

[212] On 18 March 1999, Mr Lindley notified Mr Ede that a gutter had fallen off the building. In his memorandum to Mr Lindley dated 6 April 1999, Mr Pardoe said that he hoped that the supports were sufficient.

[213] On 1 April 1999, Mrs Johnson sent Mr Lindley a message to say that water was coming in through part of the glazing in the front elevation. This was occurring in the lounge bay window, the bay windows in bedrooms one and five and in bedroom four. Mr Lindley sent Mrs Johnson’s fax to Guildford asking it to attend to the leaking glazing.

[214] Meanwhile, discussions over the final account were nearing completion. On 11 March 1999, Mr Hudson, of Pavilion Associates, acting for Guildford, claimed the sum of £1,189,608. On 31 March 1999, Carter Jonas advised Mr Catlin that the correct figure was £959,915.85 and provided supporting schedules to substantiate the figures. On 15 March 1999, there had been a discussion between Mr Catlin and Mr Lindley over whether Mr Catlin should meet Mr Guildford on his own to try to agree the final account. The upshot of the discussions between Mr Catlin, Mr Pardoe and Mr Lindley was that Mr Catlin agreed to meet Mr Guildford at his office in London on 7 April 1999.

[215] On 7 April 1999, Mr Catlin and Mr Guildford did meet and reached an agreement. Mr Catlin’s explanation for carrying out this exercise on his own was that Mr Lindley had been “making a meal” of agreeing the final account with Guildford and Mr Catlin felt that nothing had been resolved. In these circumstances, he said that he went ahead and agreed the final account, which he thought and hoped would be an end of the matter.

[216] On 12 April 1999, Mr Catlin wrote to Mr Guildford confirming their agreement. In essence, Mr Catlin agreed to pay Guildford the sum of £1.025m subject to a 2.5% retention, that is, £999,375 less an amount to be paid for any works not yet completed (for example, the car park). It was agreed that Guildford would make no further claim on CEL over and above this figure. Nothing in the letter was said to constitute a waiver of Mr Catlin’s rights under the contract, all of which he reserved.

[217] On 20 April 1999, Mr Pardoe wrote to Mr Catlin on Carter Jonas notepaper concerning his firm’s fees. The letter was copied to Mr Lindley and Mr Granger. It was written on the basis that, in normal circumstances, these fees would be charged. The letter ended:

could we have a further chat about this matter and try to resolve it?

[218] In the course of Mr Catlin’s cross-examination, Mr Ben Quiney, for Carter Jonas, conceded that there was no other document from Carter Jonas that could be construed as a demand for payment. Mr Granger had to concede that this letter did not constitute a demand for payment and in none of the subsequent letters not marked “without prejudice” was a demand for payment made. It appears that fees may have been mentioned at a meeting between Mr Catlin and Mr Granger on 27 April 2000, to which I will refer.

[219] On 8 May 1999, Mr Pardoe met Mr Catlin at the lodge. On 12 May 1999, he wrote to him to record what had been discussed at the meeting.

[220] The letter referred to the fact that Mr Pardoe was to have a consultancy to sub-instruct Carter Jonas on matters that were not connected with the lodge. He was to be paid a consultancy payment of £550 per month plus VAT.

[221] With regard to this contract he wrote:

8. I confirm that you will deal directly with the contractor on Burnhope Lodge and that you require nothing further from me or indeed Carter Jonas and Nigel Lindley at this stage. Assuming this contract is satisfactorily concluded, I think it fair to say that you would be minded to settle Carter Jonas’ fees for the work undertaken by Giles (Bilton) but under no circumstances would you be prepared to pay any more fees to Carter Jonas in respect of any work undertaken by Nigel Lindley and his team. Furthermore you are unlikely to settle any of Carter Jonas’ fees whether it be Nigel Lindley’s or Giles Bilton’s work until such time as there has been a satisfactory conclusion to the Burnhope Lodge contract.

[222] On 12 May 1999, Mr Catlin paid Guildford £50,000 on account with a cheque drawn on his Burnhope Lodge account.

[223] Carter Jonas had no further direct involvement with the project. I will deal later with its claims that the continuing problems were caused by the further works, which, they say, had been carried out by Guildford and which they were unable to supervise.

[224] By the winter of 1999-2000, it was clear that the problems of serious and widespread water ingress still existed and that, as Mr Catlin put it: |page:150|

The chimneys were smoking alarmingly inside the property making it difficult to breathe.

These problems continue to this day.

[225] Mr Granger met Mr Catlin on 27 April 2000. Mr Catlin said that, at this meeting, the question of fees was discussed and at the beginning of the conversation Carter Jonas was asserting that Mr Catlin owed it money, but no formal claim was made and I accept Mr Catlin’s evidence that, in the course of the meeting, Mr Granger had said that no further sum would be charged by Carter Jonas for its work on the project.

[226] On 28 April 2000, Mr Granger wrote a letter to Mr Catlin marked “private and confidential”. The letter was clearly intended to be constructive. Mr Granger said that he would speak to an expert, Mr Peel, to ask him for an opinion on the wall construction of the lodge. He said that he would contact the northern representative of the Solid Fuel Advisory Service to obtain an opinion about the design of the fireplaces and chimneys, together with a recommendation for solving the problem of smoking fireplaces, which, he acknowledged, currently existed. If they could not deal with the problem in the immediate future, Mr Granger might suggest Mr Peel as an alternative expert on this issue.

[227] In the letter to Mr Catlin, Mr Granger said that he was very sorry for all the problems that there had been. I note that, at this stage, there was no suggestion by Carter Jonas that the current problems had been caused by Guildford’s remedial works after Carter Jonas had left the site.

[228] On 16 June 2000, Mr Granger wrote again to Mr Catlin. The letter was again marked “private and confidential”. It proposed a date upon which he and Mr Peel could visit the lodge. He said that he hoped that they could bring a chimney specialist with them.

[229] Mr Peel and Mr Catlin met at the lodge on 7 July 2000. This was substantially after the remedial works by Guildford about which Carter Jonas now complains. Mr Peel wrote a letter to Mr Catlin on 10 July 2000 referring to “the major defects which are evident”. He listed them as:

(i) water ingress through the external envelope;

(ii) report on windows; and

(iii) report on chimneys.

[230] Mr Peel said in his letter that he believed that the remedial work would involve:

(i) removal of the external skin of the building and incorporation of some form of effective rain screen into the cavity;

(ii) improvement or replacement of the existing windows; and

(iii) demolition of the existing chimney flues or improvements to the current fan systems.

[231] On 11 October 2000, surveyors representing Mr Catlin and Carter Jonas met. The Building Research Establishment (BRE) had produced a report that Mr Peel appeared to find conclusive. He wrote to Mr Granger:

I believe that the initial paragraphs along with supportive calculations are conclusive and we should urgently meet to discuss the necessary remedial work and the appointment of a designer suitably qualified in detailing and production of tender documents.

[232] Again, there is no mention that any of the serious problems that were alleged by Carter Jonas to have been caused by defective remedial works after Carter Jonas left the site.

[233] Mr Granger’s letter to Mr Catlin dated 6 December 2000 was less accommodating. It purported to set out Carter Jonas’s formal position. Mr Granger said that the building envelope was designed to withstand the most severe weather conditions and that the cavity wall design was appropriate for the location and weather conditions that were being experienced at the lodge. He alleged for the first time that the water ingress had been caused by the defective workmanship of Guildford. He claimed that many examples of defective workmanship had not been apparent during the period before practical completion but that since practical completion they had become patent defects. The letter asserted that this situation is recognised in the building contract, which requires the contractor to remedy the defects during the defects period.

[234] Mr Granger went on to claim that “a significant number of defects appear to have been built into the building over the last 18 months”. This is the first reference to the claim that damage was caused by Guildford after Carter Jonas had left the site.

[235] The letter conceded that the breather membrane had been incorrectly specified, but said “the breather membrane only provides a second line of defence”.

[236] In cross-examination, Mr Granger said that Mr Lindley had carried out a number of internal reviews into the design of the building. Mr Granger agreed that this was the first time that Carter Jonas had suggested that there was nothing wrong with the design of the building and that the problems had been caused by bad workmanship by the contractors after Carter Jonas had left the site. No mention was made in this letter of the problems relating to the fireplaces, although Mr Granger agreed that the design and specification of the fireplaces was wrong and in breach of building regulations. This point was conceded in the subsequent letter dated 14 December 2000.

[237] In that letter, Mr Granger did acknowledge that the chimneys at the lodge had not been correctly designed. He said that the problems could be sorted out “by the correct installation of suitable extractor fans into the undersized chimney flues”. He agreed that Carter Jonas would pay the cost of installing the extractor fans.

[238] An intrusive inspection of the lodge was due to take place on 16-17 January 2001. At this meeting, representatives of all parties were due to be present. Thereafter, there were discussions between the parties (without prejudice) that did not resolve the dispute.

[239] In his witness statement, Mr Catlin gave a compelling picture of problems that persist at the lodge. Water penetration remains a constant problem. This generally occurs during the winter months, when there is heavy rainfall that occurs most frequently when there is a south-west or westerly wind.

[240] Water has penetrated through the windows in bedrooms eight, nine, three and two and the gun room, mainly through the glazing, but also under the sashes.

[241] During the winter months, when the heavy rain is associated with high winds, water shows itself on both gables in the attic facing the reservoir.

[242] A graphic illustration of the problem that then occurs is as follows:

The plywood becomes saturated, the water comes through the screw holes to which the wall ties are fastened, the joins in the plywood, and where the boards are fastened to the wooden framework. Eventually, once the boards are saturated, the water drips into the void below and runs along the tracking for the suspended ceiling. Bedrooms 1 and 5 which are below the gables then get wet ceilings.

[243] Mr Catlin describes extensive and continuing problems relating to wall ties, water ingress through bedrooms one, four and five and water penetration through the outer skin of the building. Mrs Johnson has noticed that in the winter months, when the heating is not working properly, there is a smell of damp plaster and a mouldy smell. The cellar is constantly flooding. Quite often, the water is several inches deep. The chimneys are still smoking very badly, with the result that even when the fans are running it is not possible to light the fires without rooms becoming smoky.

[244] Mr Catlin has explained that it is necessary to continue with his shooting parties because the lodge is on a grouse moor and the grouse need culling. He said, and I accept, that he has been increasingly and severely embarrassed by the water ingress and the flooding problems. He says that the lodge is not habitable in the winter because of the ingress of water. Nevertheless, 716 guests have stayed at the lodge over the past seven years.

C. CEL has no standing in the proceedings

Parties’ contentions

[245] Carter Jonas has put forward a number of defences apart from its detailed defences on the merits, which, its says, mean that either the |page:151| claims against it should be dismissed or, at worst, it should pay only nominal damages.

[246] First, Carter Jonas argues that CEL no longer has any legal or equitable title in the lodge, having sold it to Mr Catlin for value. It argues that the contract of sale to Mr Catlin for value extinguished CEL’s interest in the lodge. Second, Carter Jonas argues that CEL cannot recover damages on its own behalf when it has been paid full value by Mr Catlin because it has suffered no loss. Further, CEL cannot recover damages on behalf of Mr Catlin. Third, Carter Jonas argues that neither CEL nor Mr Catlin has suffered any more than nominal damage because the work on building the lodge has been substantially completed and there is little or no diminution in the value of the property as a result of the remaining defects, and that to order a major reconstruction would be disproportionate. Fourth, Carter Jonas argues that, as a matter of law, Mr Catlin cannot succeed in the 1972 Act claim.

[247] The claimants emphasise that if they have a legitimate claim it would be unjust to deny them damages to which they would be entitled because of a legal technicality. They argue that CEL does have a legitimate interest in the lodge, which is sufficient to give it standing to sue by reason of the fact that the sale and purchase have never been formally completed. Second, they claim that since the transaction was a family arrangement, either CEL can recover on its own account (subject, no doubt, to its accounting in a private arrangement to Mr Catlin) or on behalf of Mr Catlin. Third, CEL and Mr Catlin argue that they are entitled to “a really good home” and may recover on the basis of one of the extensive remedial schemes that, they say, is necessary to achieve what Carter Jonas agreed to provide in relation to a really good-quality property. Finally, if they have to rely upon it, they argue that Mr Catlin has a good claim under the 1972 Act or in tort.

Background facts in relation to these issues

[248] The undisputed evidence is that, on 5 March 1999, very close to the date upon which Carter Jonas left the site (11 May 1999) and after Mr Lindley had certified practical completion on 16 February 1999, CEL and Mr Catlin entered into a contract of sale for the sale and purchase of the lodge. Under this contract, CEL received the sum of £1,274,575 for the sale of the lodge. The completion date was said to be 12 March 1999.

[249] Clause 8 of the contract provided that completion was to take place on the completion date, when the balance of the price (in fact, the entire price since no deposit had been paid) and all other moneys due were to be paid to the vendor’s solicitor. The money was in fact paid by Mr Catlin to CEL, but no completion has taken place.

[250] The purchase price was assessed after advice had been received from Mr Cruse, Mr Catlin’s accountant, in a letter dated 17 February 1999. He advised that:

It is vitally important that you do not acquire the Lodge for less than market value. In assessing market value I think we should assume that it is the value should it be assessed as part of the estate.

[251] The letter emphasised that this was important:

If you were to acquire it at its stand alone value the Revenue would argue that you have received benefit from the company and this would produce tax problems including the possible withdrawal of the re-investment relief which you have already received.

[252] Mr Cruse’s letter dated 23 February 1999 enclosed a schedule that valued the lodge at £1,274,575. This was the accountant’s valuation. Neither letter referred to a possible lawsuit or to the fact that there was a substantial dispute with Carter Jonas in relation to the lodge. This was probably because the contract was signed at a date when Mr Catlin and CEL had hoped that the troubles relating to the construction of the lodge were finally behind them. There was no reservation in the contract in respect of potential outstanding claims.

[253] Carter Jonas says that the income and expenditure of the company is kept separate from that of Mr Catlin. It says that this demonstrates that they are completely separate entities.

[254] In this regard, Carter Jonas also relies upon the fact that the income from the lodge is Mr Catlin’s personal income. He operates as a sole trader under the name “Burnhope Lodge”. He is registered for VAT under this name. All sums for the use of the lodge are paid to the Burnhope Lodge account, whether the lodge is being used by guests of CEL or by his private guests. He pays the costs of running the lodge. After the date of transfer, Mr Catlin, not CEL, paid Guildford for its work on the lodge and also paid the sums that were outstanding on the contract.

[255] Carter Jonas says, and it is correct, that, after 5 March 1999, two separate income streams were maintained in relation to activities on the estate. Income received from the lodge activities was paid to Mr Catlin’s Burnhope Lodge account, whereas income from the grouse moor was paid to CEL.

[256] The purpose of the change has, so Carter Jonas says, been successfully accomplished. Mr Catlin successfully offsets the lodge losses created by the lodge against his own income (and thereby reduces his tax burden). He obtains the personal benefit of the reinvestment relief resulting from the transfer of the property.

[257] There is no doubt that this was a family arrangement for legitimate tax planning reasons. Either as the majority shareholder in CEL or on his own behalf, Mr Catlin has in fact suffered substantial losses if he can establish his claim on the merits.

Legal and equitable title

[258] The first issue is one of conveyancing law. Under English law, the sale of real property takes place in two stages. The parties enter into a contract to purchase property, which is an executory contract and provides for the payment of purchase money and the transfer of the legal title to take place in the future.

[259] The second stage is completion. Section 22(1) of the Land Registration Act 1925 (the 1925 Act) (in force at the time of the agreement for sale) provides as follows:

22.1 The transfer of a registered estate in the land or part thereof shall be completed by the Registrar entering on the register the transferee as the proprietor of the estate transferred but until such entry is made the transferor shall be deemed to remain the proprietor of the transferred estate…

[260] Completion of purchase is defined in Emmet and Farrand on Title (19th ed) 2001, in para 8011 as:

complete conveyance of the estate and final settlement of the business.

[261] In the view of the learned authors:

Final settlement of the business normally involves the handing over of documents of title and if the sale is with vacant possession giving up of possession in return for payment of the purchase money or the balance.

[262] I am referred to Brown & Root Technology Ltd v Sun Alliance & London Assurance Co Ltd [2001] Ch 733*, a case involving the termination of a lease. In that case, the Court of Appeal made it clear that until there has been a transfer in accordance with the provisions of the 1925 Act, the legal title to the estate remains with the vendor (in this case CEL).

[263] It is argued by Carter Jonas that the effect of this would be to unravel the contract of sale. I do not agree. All it does in this case is to enable CEL to retain the right to bring proceedings in relation to its contract with Carter Jonas (and other parties to the building contract with which it has contracts). This does not, of course, dispose of the argument that CEL has suffered no loss itself and cannot sue on behalf of Mr Catlin. It does mean that it has standing to bring a claim because it has the legal title in the property.

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* Editor’s note: Also reported at [1997] 1 EGLR 39; [1997] 18 EG 123

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General principles of damages

[264] The basic general principles of the law of damages were set out by Lord Haldane in British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673, at p689 and have been cited since as good law. |page:152|

(i) The fundamental basis of damages is compensation for the pecuniary loss to a party naturally flowing from the breach.

(ii) This principle is qualified by the duty of a plaintiff to take all reasonable steps to mitigate the loss consequent upon the breach.

(iii) Where, in the course of business, a party has taken action arising out of the transaction that has mitigated its loss, the effect in actual diminution of the loss it has suffered may be taken into account even if it had no duty to act.

(iv) Where the subsequent arrangement was not between those parties, but between a claimant and a third party, the court should look at what actually happened and balance loss and gain: see p691.

[265] This formulation is another formulation of the general principles set out in two earlier cases, also often quoted. The first is by Parke B in Robinson v Harman (1848) 1 Ex 850, at p855:

The rule of the common law is that when a party suffers a loss by breach of contract he is, so far as money can do it, to be placed in the same situation with respect to damages as if the contract had been performed.

[266] In Livingstone v Rawyards Coal Company (1880) LR 5 App Cas 25, at p39, Lord Blackburne referred to the general rule that compensatory damages should, as nearly as possible:

put a party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong…

[267] The House of Lords in Ruxley Electronics & Construction Ltd v Forsyth [1996] AC 344 considered the issue of the level of damages that can be recovered for breach of contract where there has been substantial completion of the work. At p357E, Lord Jauncey set out the following general guiding principle:

Damages are designed to compensate for an established loss and not provide a gratuitous benefit to the aggrieved party from which it follows that the reasonableness of an award of damages is to be linked directly to the loss sustained.

[268] This general approach was also taken by Hirst LJ in Gardner v Marsh & Parsons [1997] 1 WLR 489*, at p498. Hirst LJ referred to Westinghouse and Hussey v Eels† and went on at 503F:

In evaluating these arguments I bear very much in mind Mustill LJ’s salutary warning [in Hussey v Eels [1990] 2 QB 227] against laying down potentially unreliable statements of principle in the field of damages, and I respectfully adopt his approach, namely that the issue is primarily one of fact, and that the relevant considerations are mutatis mutandis those cited by him in his conclusion, which seems to me in line with the Westinghouse case…

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* Editor’s note: Also reported at [1997] 1 EGLR 111; [1997] 15 EG 137

† Editor’s note: Reported at [1990] 1 EGLR 215; [1990] 19 EG 77

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Can CEL sue on behalf of Mr Catlin?

[269] This case predates the Contracts (Rights of Third Parties) Act 1999, which enables a third party, in its own right, to enforce a term of a contract under certain conditions. It must be decided on the law before the Act. The question of third-party rights and remedies was considered in a number of relatively recent decisions of the House of Lords. The starting point is the decision of the House of Lords in the Owners of cargo laden on board the Albacruz v Owners of the Albazero: The Albazero [1977] AC 774 and in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd; St Martins Property Corp Ltd v Sir Robert McAlpine & Sons Ltd [1994] 1 AC 85.

[270] The normal rule is that where there is no privity of contract a party may not sue on behalf of a third party even if it has suffered loss. Mr Catlin cannot claim through CEL unless he can bring himself within an exception to the general rule. As an exception, the House of Lords held in The Albazero that the consignor of goods might recover substantial damages from the carrier if there was privity of contract between them for the carriage of goods, even though the goods had passed to the consignee. If the goods were no longer its property or its risk it would be accountable to the true owner for the proceeds of the judgment: see, for example, Lord Diplock’s speech, at p844.

[271] In St Martins Property, the majority in the House of Lords extended the reasoning in The Albazero to cover the case where A enters into a contract with B relating to a property and it is envisaged by the parties that the property may be transferred to C. A has a cause of action to recover from B the loss by C. However, A is accountable to C for any damages recovered by A from B as C’s loss. Further, this exceptional principle does not apply (because it is not needed) where C has itself a direct remedy against B.

[272] In Alfred McAlpine Construction Ltd v Panatown Ltd (No 1) [2001] 1 AC 518, the House of Lords again considered the principles relating to third-party claims where there was no privity of contract, this time in the circumstances of a family arrangement. At p533B, Lord Clyde identified two formulations:

In the first formulation this approach can be seen as identifying a loss upon the innocent party who requires to instruct the remedial work. That loss is, or may be measured by, the cost of the repair.

[273] The second formulation is that the fact that the innocent party did not receive the bargain for which it contracted is itself a loss.

[274] Lord Clyde went on to set these formulations in the context of general principles particularly applicable in a family context. At p535E, he said:

The solution is required where the law will not tolerate a loss caused by the breach of contract to go uncompensated through an absence of privity between the party suffering the loss and the party causing it. In such a case, to avoid the legal black hole, the law will deem the innocent party to be claiming on behalf of himself and any others who have suffered loss. It does not matter that he is not the owner of the property affected, nor that he himself has not suffered economic loss. He sues for all the loss which has been sustained and is accountable to the others to the extent of their particular losses…

The problem which has arisen in the present case is one which is most likely to arise in the context of the domestic affairs of a family group or the commercial affairs of a group of companies. How the members of such a group choose to arrange their own affairs among themselves should not be a matter of necessary concern to a third party who has undertaken to one of their number to perform services in which they all have the same interest. It should not be a ground of escaping liability that the party who instructed the work should not be the one who sustained the loss or all of the loss which in whole or part has fallen on another member or members of the group. But the resolution of the problem in any particular case has to be reached in the light of its own circumstances.

[275] The purpose of damages is that where a party has suffered loss and damage by breach of contract it should, in so far as money can do it, be placed in the same position as though the contract had been performed. It is clear that the rules that have been evolved in relation to third-party losses are to enable a party that should recover damages to do so and not be prevented from doing so on a technicality.

[276] The evidence is clear, namely that Mr Catlin was the controlling shareholder in the private family company. The family company for its domestic purposes, contracted to sell the house to Mr Catlin soon after Mr Lindley had certified practical completion. This was a family arrangement that was tax efficient. There is no doubt that if, on the evidence, I find that Carter Jonas was in breach of its contract with CEL, Mr Catlin would have been the very substantial beneficiary had I awarded damages to CEL against Carter Jonas. It would be he who suffered the very substantial loss were he or CEL to succeed in the claim, either in his capacity as controlling shareholder in CEL or on his own account.

[277] It seems to me that the law should not tolerate a situation in which Carter Jonas can play what Mr Adrian Williamson QC called a “get out of jail free card” because Mr Catlin has made a family arrangement in relation to the property. This conclusion is, of course, subject to the requirement that I have yet to consider as to whether Mr Catlin can recover damages on his own behalf. If he cannot do so, there is no problem. If he does have a distinct claim under the 1972 Act (although I have concluded to the contrary), I must go on to consider whether that prevents him from making a claim against Carter Jonas for breach of contract as a third party claiming through CEL because he has a direct remedy of his own. |page:153|

[278] It may be that, if he is successful in this claim, Mr Catlin would have to reopen discussions with the Inland Revenue because losses that may have been claimable against the Revenue would now have been recovered from a third party, but that is not my concern.

Compensatory damages

[279] The defendant says that if it is liable to pay any damages it should be on a very modest basis.

[280] It says that there has been no diminution in the value of the lodge as a result of the defects and this is demonstrated by the value placed upon the lodge by the accountants at the time of the contract of transfer. This submission is reinforced by the fact that if it were to be accepted by the Revenue as a genuine transaction it had to be at an arm’s-length price.

[281] It also says that the cost and scope of the proposed rebuilding scheme is out of all proportion to the cost of remedying the relatively minor defects that remain. To take a graphic example, it argues that it would be quite wrong for the court to order the correct breather membrane to be installed if its argument is accepted that little or no damage, or potential damage, to the building has been suffered by leaving the existing breather membrane in place.

[282] Again, the starting point is the basic proposition in Westinghouse that the fundamental basis of damages is compensation for the pecuniary loss to a party naturally flowing from the breach: see [1912] AC 673, at p689.

[283] In Radford v De Froberville [1977] 1 WLR 1262, at p1270D, Oliver J said that:

If [the Plaintiff] contracts for the supply of that which he thinks serves his interest – be they commercial, aesthetic or merely eccentric – then if that which is contracted for is not supplied by the other contracting party I do not see why, in principle, he should not be compensated… with the cost of supplying it through someone else or in a different way, subject to the proviso, of course, that he is seeking compensation for a genuine loss and not merely using a technical breach to secure an uncovenanted profit.

[284] In Ruxley Electronics, the House of Lords reversed the Court of Appeal’s decision on this issue. The case was principally concerned with the issue of the level of damages where a contract had been substantially completed but there were minor defects, the cost of remedying which were out of all proportion to the benefit to be obtained. The House of Lords held that, on the facts of that case, the proper measure of damages was not the cost of reinstatement but the diminution in the value of the building. Lord Bridge said, at p353, that:

To hold in a case such as this that the measure of a building owner’s loss is the cost of re-instatement however unreasonable it would be to incur that cost, seems to me to fly in the face of common sense.

[285] At p357, Lord Jauncey emphasised that damages were designed to compensate for an established loss, not to provide a gratuitous benefit. He went on to emphasise, at p358D, that:

What constitutes the aggrieved party’s loss is in every case a question of fact and degree.

[286] At p370, Lord Lloyd of Berwick made the point that this did not mean that personal preferences were irrelevant in choosing the appropriate measure of damages. He agreed that, in the circumstances in Radford, where the eccentric landowner decided to build a folly in his garden, it was no defence to paying the full claim for defective workmanship to say that the folly diminished the value of the land.

[287] In Panatown, Lord Goff, at p550, in the course of his general review of the law, agreed with Oliver J’s proposition in Radford emphasising that the cost of reinstatement cannot be recovered if the breach is “technical” or the party is seeking an uncovenanted profit. Although dissenting in the result, Lord Goff made it clear, at p551, that:

Oliver J’s proposition is, in my opinion, equally applicable where the work contracted for is to be performed on another person’s property for family reasons, or (as in the present case) for the benefit of a group of companies of which the plaintiff is a member…

[288] I have also had cited to me Judge Humphrey Lloyd’s careful judgment in Birse Construction Ltd v Eastern Telegraph Co Ltd [2004] EWHC 2512 (TCC)*, decided on 5 November 2004. He concluded, after a review of the authorities:

51. In my judgment it is now clear from Ruxley that (and indeed from many of the other cases referred to in the speeches) the normal measure of damages for defective works is the cost of re-instatement (ie the cost of the remedial works) but in every instance it has to be reasonable to apply it. Thus, where that measure is out of proportion to the claimant’s real loss then some other measure should be useful. This is the case where there has been a modest effect on the utility of the works and where it would be reasonable to assess the loss on the basis of diminution in value. A pragmatic approach may have to be applied although the claimant is not too readily deprived of the ordinary measure of compensation.

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* Editor’s note: Reported at [2004] 47 EG 164 (CS)

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[289] I agree entirely with the spirit of this summary, but I am concerned not to add yet another test to those that have been already formulated. Oliver J and the judges of the House of Lords in Panatown talked about a genuine, rather than a reasonable, loss.

[290] I conclude that the test that I should apply in relation to this aspect of damages is that a party (all other considerations aside) is entitled to recover damages for a genuine loss but not for what is merely a technical breach of contract that is being used to secure an uncovenanted profit.

D. Mr Catlin’s claim under the 1972 Act

[291] The parties are agreed that the claimants’ primary claim is the contractual claim made by CEL. Since Carter Jonas had pleaded in its defence that CEL had suffered no loss since ownership had been transferred to Mr Catlin for full value, Mr Catlin started proceedings against Carter Jonas claiming a breach of the 1972 Act.

[292] Section 1(1) of the Act provides:

A person taking on work for or in connection with the provision of a dwelling (whether the dwelling is provided by the erection or by the conversion or enlargement of a building) owes a duty –

(a) if the dwelling is provided to the order of any person, to that person and

(b) without prejudice to paragraph (a) above, to every person who acquires an interest (whether legal or equitable) in the dwelling

to see that the work which he takes on is done in a workmanlike manner or, as the case may be, professional manner… and so that as regards that work, the dwelling will be fit for habitation when completed.

[293] Carter Jonas contends that the requirements under the statute are not fulfilled:

(a) the lodge is not a dwelling. In Uratemp Ventures Ltd v Collins [2001] UKHL 43; [2002] 1 AC 301†, Lord Millett said that, in the context of section 1 of the Housing Act 1988, the word “dwelling” should be given its common usage. The common usage does not encompass the lodge because Mr Catlin visits the lodge only very occasionally for the purpose of shooting. It was never intended to be used as a home.

(i) This contention is supported by the Law Commission report upon which the Act is based. The report excluded commercial and industrial premises from the ambit of the Act.

(ii) The lodge is rented out to private shooting parties. The parties pay for food and drink. This is not consistent with its use as a domestic dwelling.

(b) The claim issued in January 2005 is statute-barred since the dwelling was completed when possession was taken in August 1998, namely more than six years from the issue of the summons.

(i) The dwelling was fit for human habitation and it was inhabited from time to time by Mr Catlin and his guests and occasionally by other shooting parties. |page:154|

(ii) Linked with (i) Mr Catlin has not said why the lodge is unfit for human habitation or sought to support the allegations with specific evidence. Following the decision in Thompson v Clive Alexander & Partners 59 BLR 77, I am invited to conclude that the necessary evidential foundation for such a claim has not been made.

[294] In answer to these points the claimants contend that:

(a) I should follow the learned editors of Keating on Building Contracts (7th ed) 2001 in para 15-02 and conclude that the word “dwelling” “applies to any building used or capable of being used as a residence”.

(b) Section 1(5) of the 1972 Act provides that:

Any cause of action in respect of a breach of the duty imposed by this section shall be deemed, for the purposes of [The Limitation Act] to have accrued at the time when the dwelling was completed, but if after that time the person who has done the work for or in connection with the provision of the dwelling does further work to rectify the work he has already done, any such cause of action in respect of that further work shall be deemed for those purposes to have accrued at the time when the further work was finished.

Mr Catlin argues that the date of completion in this case must have occurred at a date upon which Mr Lindley certified practical completion and not before, namely in February 1999, which comes just within the six-year limitation period. It is argued that no one could have suggested that practical completion could have taken place at an earlier date. Certainly, Mr Lindley did not do so.

(c) By reason of the level of water penetration and the smoking fireplaces, the building was not fit for human habitation and was unsafe. Further, Mr Catlin argues that the test should be read in the context of the usual implied terms upon the sale of a dwelling-house in the course of erection, namely that the builder will do its work in a good and workmanlike manner, will supply good and proper materials and that it will be reasonably fit for human habitation: see Hancock v BW Brazier (Anerley) Ltd [1966] 1 WLR 1317.

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† Editor’s note: Also reported at [2001] 3 EGLR 93

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[295] It is conceded that, in Thompson, it was held by Judge Esyr Lewis QC to be necessary to prove in all cases that the defect or defects make the property unfit for habitation. I am invited not to follow this decision.

[296] In relation to the claim that the lodge is not a dwelling, I conclude that a dwelling-house is a building used, or capable of being used, as a dwelling-house, not being a building that is used predominantly for commercial and industrial purposes. I have concluded that the claim that the building would have been used as a conference centre was misconceived, not least because the covenant imposed by the vendor, Northumbrian Water, was designed to ensure that the building was not used predominantly for commercial purposes. I set out my reasons in detail later. There, I conclude that it is a dwelling-house, being a building that is used, or capable of being used, as a dwelling-house, and that it is not used predominantly for commercial or industrial purposes. The evidence is that Mr Catlin uses it for his family and when entertaining business associates.

[297] In relation to Carter Jonas’s contentions on limitation that had the test under the statute been the date upon which the lodge was completed, that date is a matter of fact in each case. In this case, the building was not completed until, at the earliest, the date upon which which Mr Lindley gave practical completion in February 1999. Therefore, on this argument, the claim would not be statute-barred. However, in my view, this is not the correct test. This issue is addressed further below.

[298] Carter Jonas’s next issue is whether or not the building is fit for human habitation. I accept Mr Catlin’s evidence that the lodge has problems in the winter months when fires may not be lit because chimneys smoke and when there is a substantial risk that the wind and rain will penetrate the building causing some damage. I have had no authorities cited to me, but it seems to me on balance that it cannot be said that the lodge is unfit for human habitation, although it is clear that there are substantial defects in its construction that need to be remedied.

[299] In relation to the limitation question, the relevant point, so it seems to me, is not the point raised by Carter Jonas but the date upon which the cause of action accrued under the statute. I have considered carefully the judgment of Judge Esyr Lewis QC in Thompson. It is founded on the observations made by three lords justice in Alexander v Mercouris [1979] 1 WLR 1270*. As I understand, the decision that was followed by Judge Esyr Lewis QC is encapsulated in a passage that he cited from the judgment of Buckley LJ, at p1274A, with which Goff and Waller LJJ concurred, using slightly different language:

It seems to me clear upon the language of section 1(1) that the duty is intended to arise when a person takes on the work. The word “owes” is used in the present tense, and the duty is not to ensure that the work has been done in a workmanlike manner with proper materials so that the dwelling is fit for habitation when completed, but to see that the work is done in a workmanlike manner with proper materials, so that the dwelling will be fit for habitation when completed. The duty is one to be performed during the carrying on of the work. The reference to the dwelling being fit for habitation indicates the intended consequence of the proper performance of the duty and provides a measure of the standard of the requisite work and materials. It is not, I think, part of the duty itself. If, at an early stage in the provision of the dwelling – for instance, the putting in of the foundations – someone who had taken on that part of the work failed to do it in a workmanlike manner, then in my judgment, assuming that the section applied, an immediate cause of action would arise. It would not be necessary to await the completion of the dwelling to claim relief on the basis of a breach of statutory duty.

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* Editor’s note: Also reported at [1979] 2 EGLR 116; (1979) 252 EG 911

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[300] In some cases, the employer will be much assisted by this interpretation since it will not be necessary to wait until the building is completed months if not years later before bringing an action. In cases such as the present, it has the consequence that it may not be until a later stage, when the building is completed, that it becomes apparent that the building is unfit for human habitation and that the cause is a failure that occurred at a date much earlier in the process of construction, and that, therefore, time begins to run from that earlier date. Like Judge Esyr Lewis QC, I conclude that I am bound by the reasoning of the Court of Appeal. Even if I were not so bound, I should conclude with great respect that this construction of the statute must be right. The claim was brought outside the six-year period and is statute-barred.

[301] In these circumstances, I conclude that Mr Catlin does not have an alternative claim under the 1972 Act so as to debar him, under the Albazero principle, from claiming through CEL.

[302] In any event, I conclude that the Albazero principle would not have debarred Mr Catlin from claiming through CEL. A claim under the 1972 Act is a separate and distinct claim and is not a direct claim in contract or tort that he is entitled to bring on his own behalf.

[303] This case is to be distinguished from The Albazero, where the third party had its own right to bring a separate claim under a duty of care deed. In Panatown, the majority of the House of Lords held that where the owner was provided with an independent remedy against the contractor for losses arising from the contractor’s defective performance of the contract with the employers, the owner could recover nominal damages only in such proceedings. See the speech of Lord Browne-Wilkinson in Panatown, at p576.

[304] That is not this case. The principle that a party cannot bring a claim through a third party where it has a substantial claim on its own must relate to a claim that can be brought on the same conditions as the original claim. A claim under the contract with Carter Jonas is clearly a claim on a different basis to any claim that may be made or that might have been made under the 1972 Act had the claim by Mr Catlin been made in time. I conclude, therefore, that he is not debarred from recovering under a third-party claim that is made by CEL and that is essentially a claim made by Mr Catlin through CEL.

E. Substantive issues

(a) Responsibility for structural design and inspection

[305] Under the contract, Carter Jonas agreed to provide a full design service. Under clause 1.3 of the RICS conditions, Carter Jonas was entitled to divest itself of such responsibility |page:155| but only if the requirements under the clause were fulfilled. The clause provided:

Where the services of specialists or other consultants are required the surveyor may recommend to the Employer that he engage directly such specialists or consultants as the surveyor deems necessary. As an alternative the surveyor may instruct the aforementioned specialists or consultants on the employer’s behalf subject to the prior approval of the employer.

The surveyor will assume responsibility for the direction and integration of their work but and it is hereby expressly agreed, will not be held responsible by the Employer for the design, inspection and performance of that work entrusted to such specialists and consultants. All fees and expenses, disbursements and Value Added Tax for the execution of such services shall be in addition to those set out in the agreement and payable by the Employer to the surveyor…

[306] It is of course the case that the claimants and the defendant entered into their formal contract some months after the engagement of Horne.

[307] The background to Carter Jonas’s employment on the project was that the firm had been Catlin’s estate manager for some time. Mr Pardoe had persuaded Mr Catlin to use Carter Jonas in connection with the project on the understanding that it was to look after all aspects for him.

[308] I accept Mr Catlin’s description of the relationship given in oral evidence as follows:

My understanding of the relationship between myself and Carter Jonas was that I paid them a fee of 9% of the full contract value. In return for that, they managed the project and in the event of them needing experts outside their own expertise, they would engage them and the payment for them would come from the 9% that I paid Carter Jonas.

[309] Nothing apparently was said in these preliminary discussions about Carter Jonas divesting itself of responsibility in these circumstances.

[310] I have already set out the history, from which it is clear that, on 24 October 1997, Mr Tumman, on behalf of Carter Jonas, instructed Horne to be the structural engineer on the project. It was only on 27 October 1997, a few days later, that Mr Tumman told Mr Catlin that he had done so and enclosed the letter dated 24 October 1997 to Horne.

[311] The letter of October 27, 1997 indicated that the claimants should pay Horne direct. The letter did not ask Mr Catlin for his agreement even after Horne had been instructed and the letter did not say anything that would lead Mr Catlin to conclude that Carter Jonas was divesting itself from any existing responsibility for Horne’s work. The letter of 27 October 1997 was in line with Mr Catlin’s prior understanding that Carter Jonas would instruct other professionals if necessary but would retain responsibility for their work.

[312] It is suggested by the claimants that even if the defendant succeeds in showing that it has divested itself of its responsibility in relation to design, it has not divested its responsibility for inspecting Horne’s work. The letter dated 27 October 1997 related to design. Carter Jonas, in any event under the terms of the contract, has not divested itself of the duty of inspection in relation to its overall direction and integration of the work.

[313] Mr Tumman made it clear in his oral evidence that Carter Jonas would rely upon Horne to provide its expertise in respect of structural engineering design. He agreed that, as overall administrators of the contract, Carter Jonas was competent to inspect the work that Horne had carried out. This view was consistent with that expressed by Mr Lindley, who agreed in evidence that, under clause 1.3, Carter Jonas would remain responsible for the direction and integration of Horne’s work.

[314] I am satisfied that Carter Jonas engaged Horne directly and that the terms of engagement did not vary the scope of the obligations of care that Carter Jonas undertook for the claimants. Although the words in Mr Tumman’s letter, namely “he will be working directly for you”, could be taken to refer to the relationship between the claimants and Horne, they must be put in the context that I have described. There was no agreement on the part of the claimants that Carter Jonas would divest itself of its contractual responsibility for the structural engineering design work. It is not sufficient to say, as Carter Jonas does, that Catlin must have realised when he started paying Horne direct that “things had moved on”. In one sense they had “moved on”, since Mr Catlin had been told (not invited to agree, let alone in advance) that Horne would be doing the structural work, but this does not release Carter Jonas from its responsibility under the contract with the claimants.

[315] It is argued by Carter Jonas that, under the rubric of either promissory estoppel or estoppel by convention, the claimants are estopped from denying that Horne was engaged directly by the claimants. It is said that, by its words and actions, CEL and/or Mr Catlin induced Carter Jonas reasonably to believe that CEL accepted that it had appointed Horne. In my view, this is not the case. Carter Jonas told the claimants that it was instructing Horne, that CEL would be invoiced direct and would pay Horne direct, and that such sums would be deducted from Carter Jonas’s fees. The claimants then did as they were told by Carter Jonas. CEL did nothing by its words and actions (or absence of the same) to induce Carter Jonas to believe that it had appointed Horne and agreed that Carter Jonas was discharged from the liability that it had previously undertaken.

[316] I conclude, therefore, that, in relation to Horne and other subcontractors that they instructed at around the same time, Carter Jonas did not divest itself of its responsibility under the contract.

[317] There is no dispute that Carter Jonas retained, in any event, some responsibility for inspection. It makes a clear distinction between defects where a reasonable building surveyor should have identified the failure and those that would require a specialist structural engineer to identify. The defendant concedes that, in any event, it retained responsibility for the former.

[318] The joint statement of the structural engineers must be considered in the context of these findings. The joint statement identifies, in respect of each item, whether there has been a breach of the design requirement or inspection or both. In each case, the experts have concluded that either the breach relates to design and inspection or inspection alone.

[319] I have found that Carter Jonas does have primary responsibility for design and inspection as well as responsibility for identifying defects as a result of its residual obligation to direct and integrate Horne’s work.

(b) Horne’s settlement of the claims against it

[320] It is convenient at this stage to deal with the sum of £30,000 that Horne has agreed to pay in full settlement of all the claims against it. There was no specific agreed order in relation to costs. There is no dispute that, if successful, the claimants must give credit in respect of this sum.

[321] The claimants argue that the sum of £30,000 must be taken to have included the costs that they incurred. They claimed originally that they had incurred costs in relation to their claim in the sum of £29,681.38, leaving £318.62 available to abate any sum that they recover against Carter Jonas. They now claim that the costs exceed £30,000.

[322] Carter Jonas argues that since no specific reference was made to costs, the sum must be taken to relate to damages only and that each side would pay its own costs, and that therefore the entire sum of £30,000 must abate any damages award against Carter Jonas.

[323] I construe the settlement as meaning that the £30,000 was intended to be the sum paid by Horne in full and final settlement of claims against it, including costs.

[323.1] By letter dated 2 December 2005, Halliwells, acting for Carter Jonas, helpfully wrote to the court as follows:

It has now been agreed between the Solicitors for the Claimants and the Solicitors for the Defendant that the Claimants costs attributable to the claims against Robert T Horne & Partners are likely to exceed £30,000 and that the final quantification of these costs should be dealt with at the final assessment of costs for the entire action. On the basis of the same there is no need for these costs to be taken into account in the Judgment… |page:156|

[324] By an agreement dated 9 February 1998, but in fact signed by Mr Catlin on 24 February 1998, CEL engaged Carter Jonas to undertake RICS building work in connection with the erection of the lodge. The contract incorporated the RICS conditions of engagement for building surveying services. This included a full design service and periodic inspection of the site and the administration of the building contract.

[325] The contract was entered into against the background that Carter Jonas could look after every aspect of the project for Mr Catlin.

[326] In relation to design, there is no dispute that, under the RICS conditions, this included the following:

(i) preparation and presentation for approval, a complete design of the scheme;

(ii) in co-operation with other appointed consultants, the preparation of full working drawings sufficient for the construction of the project;

(iii) preparation of subcontract specifications;

(iv) preparation of specifications;

(v) preparation of contract documents;

and

(vi) supplying all necessary information to the contractor.

[327] With regard to inspection, clause 1.1.3, set out in the historical narrative above, limits Carter Jonas’s liability for poor workmanship to what is reasonably discoverable by the surveyor undertaking periodic inspections of the site.

[328] If Carter Jonas had been able to divest itself of responsibility for the work of specialists and other consultants, under clause 1.3 of the RICS conditions, it would still have assumed (and, in my view, maintained) continuous responsibility for the direction and integration of those works but not for the design, inspection and performance of those works.

[329] Similarly, under clause 1.4 of the RICS conditions, Carter Jonas was responsible for the co-ordination of the design work of specialist subcontractors and the direction and integration of the execution of their work through the contractor.

[330] The way in which the surveyor carries out these duties will depend upon the particular facts of the case. In a contract like the present, it is almost inconceivable that Carter Jonas would have been able to discharge even its limited responsibility in relation to nominated consultants and subcontractors without carrying out periodic inspections on-site to ensure that the work was proceeding according to the overall plan and that the work of the specialist and other consultants and specialist contractors was being integrated within that plan. It is clear from the level of inspection that Carter Jonas carried out that it took the same view. Indeed, in cross-examination, Mr Lindley agreed with this proposition.

[331] I do not understand Carter Jonas to be arguing now that, under the terms of the contract, it cannot be held liable for failing to inspect, even if it did not carry out any site inspections at all in relation to consultants and specialist subcontractors. In any event, the key issue in this case is not whether Carter Jonas carried out any inspections but, rather, in relation to the quality and effectiveness of those inspections.

[332] As far as patent defects in workmanship are concerned, although the contract excludes Carter Jonas’s obligations in relation to the design, inspection and performance of the work, Carter Jonas remains responsible for the direction and integration of the work. If the work is incorrect according to the specification, or very badly done, it may well be that it cannot be integrated into the overall work required under the contract.

[333] Carter Jonas was also responsible for administering the contract. As the contract administrator, Carter Jonas had wide powers in relation to the contractor. These included (as Mr Lindley agreed in cross-examination):

(i) instructing the contractor that defective work be removed from site or otherwise put right by the contractor, and issuing such instructions as he considered reasonably necessary (clause 3.14.1 and 2);

(ii) bringing in others to remedy defective work at the contractor’s expense, if defective work is not remedied within seven days (clause 3.5.1);

(iii) deciding how much to certify to the contractor for interim payment in respect of the total value of the work properly executed (clause 4.2.1);

(iv) deciding when the works were practically complete and issuing a certificate to that effect (clause 2.9), that is, that if there are no patent defects and the building can be used for the intended purpose;

(v) notifying defects to the contractor during the defects liability period that the contractor is then required to rectify (clause 2.10).

[334] Carter Jonas therefore had ample powers under (i) to (iv) above to ensure rectification of workmanship defects that were or ought to have been apparent from its site inspections.

[335] The claimants argue that Carter Jonas failed in this regard in relation to the workmanship defects relating to the external envelope. They also make a similar claim in relation to many more minor defects of workmanship.

[336] Carter Jonas emphasises that it was asked to leave site in May 1999, around three months into the defects liability period. It says that it cannot be held liable for defects that were not rectified since it had no opportunity to supervise the rectification of such defects. Had it had an opportunity to do so, it says that, on the balance of probabilities, all those defects that arose during the defects liability period would have been rectified. I must consider this claim in relation to each allegation of bad workmanship raised by the claimants.

[337] In relation to design, Mr Catlin said in evidence that it was never suggested to him that design responsibility for services – “plumbing, electrics and the like” – was not the responsibility of Carter Jonas. Mr Lindley agreed that no such exclusion of responsibility had been communicated to Mr Catlin. In these circumstances, Carter Jonas retained responsibility for the design of these services.

(d) Method of specification of design

[338] The claimants criticised the way in which Carter Jonas specified the design. Mr Roberts, the architect expert for the claimants, said that Carter Jonas should have designed the works fully. He said that references to British Standards in the specification was an inadequate method of communicating the design because builders do not have copies of all British Standards in their site huts.

[339] Carter Jonas’s expert, Mr Laundon, says that the approach that Carter Jonas took on-site was reasonable, particularly bearing in mind that this was a fast-track project. Mr Laundon, a professional building surveyor, said that it was normal to communicate design by way of drawings, British Standards, guidance documents and on-site instructions. He agreed that it would be unusual to have British Standards in the site hut, but he said that it was normal for relevant copies of site documents, manufacturers’ literature and sketch drawings to be handed to the contractor. Mr Laundon agreed that for good order this ought to be done under a formal issue sheet so that everyone knew where they stood, but that the practice was very different. It was put to him that it was not satisfactory if the information was not in the drawings. He replied tentatively:

I think it can be if the information is provided, yes.

[340] Despite the fact that this is a topic upon which a building surveyor should have particular expertise, I prefer the evidence of Mr Roberts. The duty on Carter Jonas was to communicate the design to the contractor in a manner that was clear and unambiguous. There might be circumstances in which the designer and the contractor have worked closely together, where the designer can be confident (with inspection as appropriate) that the design will be put into effect using the method that Mr Laundon said could work. The position might also be different where there is a site manager resident on-site.

[341] In this case, I am satisfied that it was reasonably necessary for Carter Jonas to produce accurate and complete drawings from which Guildford would work.

[342] Carter Jonas admits that various information was missing from the drawings supplied to Guildford but deny that the information needed to be on the drawings. I do not agree. For example, |page:157| the breather membrane should have been specified on the drawings as a continuous membrane.

F. Specific topics

(a) Design of external envelope

[343] By far the largest part of Catlin’s claim relates to remedial works, which they claim are necessary as a result of the faulty design of the external envelope.

[344] The claimants contend that, in a number of respects, Carter Jonas fell far short of the standards of skill and care to be expected of a reasonably competent architect and designer, and that the faulty design resulted in problems that needed to be remedied by extensive remedial works.

[345] Carter Jonas accepts that it was negligent in relation to the design of the breather membrane, but it argues that this is of no consequence since the main purpose of the membrane was to protect the structure during construction. It says in relation to this defect that, since the building has been completed, the way forward is simply to leave the defective breather membrane in place.

[346] The claimants divide the design work for analytical purposes into four phases:

Phase 1: The design prepared by Carter Jonas up to the date upon which the building contract was let. This relates to the lack of a continuous breather membrane and the absence of a vapour control layer in the design.

Phase 2: The decision of Carter Jonas to specify Typar rather than Tyvek for the breather membrane.

Phase 3: Carter Jonas’s contract instruction no 3 to reduce the width of the stone from 150mm to 100mm.

Phase 4: The decision by Mr Lindley to leave the Typar in place, even though he knew that Tyvek should have been specified.

[347] I shall now deal with the breather membrane, the vapour control layer and contract instruction no 3 as discrete issues.

(b) Breather membrane

[348] It is not in dispute that the wrong breather membrane was specified by Carter Jonas and installed by Guildford. Mr Tumman specified Typar when he should have specified Tyvek. In oral evidence, he also readily conceded that he should have drawn a continuous membrane on the drawings but did not do so. Mr Lindley discovered the mistake of specifying Typar (although he did not record the fact) at a site visit on 1 June 1998, when the building work was at least 66% complete. Mr Lindley said that, after internal discussions, he decided not to do anything about it and not to tell either Mr Pardoe or the client.

[349] Mr Lindley said that the breather membrane no longer mattered because its purpose was to protect the timber during construction. In this, he was originally supported by Mr Laundon. In the course of his cross-examination, Mr Laundon conceded that a properly installed breather membrane might have some useful function once construction was completed.

[350] In his letter to Mr Catlin dated 6 December 2000, the lowest that Mr Granger, Mr Lindley’s senior partner, was able to put it was that:

The breather membrane only provided a second line of defence.

[351] The industry guidance is clear. The Timber Research and Development Association (TRADA) guidance, chapter 4, headed “Walls”, makes it clear, in its various editions, that the breather membrane is installed not only to assist in protecting the timber during construction but also, in para 4.1.2.6:

To provide a second line of defence against any wind driven rain that may penetrate the cladding during the life of the building. The breather membrane may also contribute to air sealing the wall and reducing ventilation heat losses.

[352] It is clear from the manufacturer’s literature that Tyvek is able to perform both the primary and secondary role:

TYVEK 1060V is water resistant… and is therefore ideal for protecting timber structure during construction.

Once construction is complete Tyvek will continue to prevent water passing through the outer skin from coming into contact with the timber structure…

[353] The British Board of Agrément is the body designated by the government to issue European technical approvals. It made it clear that the Tyvek construction membrane can meet, or contribute to, the requirements of resistance to weather and ground moisture, conservation of fuel and power in dwellings and other buildings. It can also enable a wall to satisfy approved document C requirement C4.

[354] The section on installation sets out a specific procedure for fixing. Mr Laundon agreed in cross-examination that the whole purpose of the fitting procedure is to have a membrane that is fixed flat without rucking and creasing.

[355] The BRE, which reported in February 2001, ended its report with a clear recommendation:

It is understood that the outer leaf will be dismantled in order to replace the breather membrane. At this stage an assessment can be made of the position and number of wall ties and other ties fitted to restrain the outer leaf.

A high performance breather membrane which complies to TRADA “Breather membranes for timber walls”… should be installed.

[356] I accept Mr Roberts’ evidence that Tyvek should have been installed to perform both the primary and secondary functions. I also accept his evidence that Typar not only does not perform the function of helping to keep out the rain once a building is complete but, as Mr Laundon was forced to concede in cross-examination, the effect of the rucking and creasing is to reduce the effective width of the cavity and make water ingress more likely.

[357] Mr Roberts’ evidence is clear on this point. He said:

I would suggest it is probably doing harm on two grounds, first of all because it is rucking, and in places quite severely rucking, as the photographs have shown. It is reducing the cavity very significantly and secondly, because it is such a porous material, any water that does hit it will actually tend to be drawn into it rather than through it…

[358] Mr Laundon’s initial position at the start of his cross-examination on this topic was that it was of no consequence that the wrong membrane had been specified and installed.

[359] He had to agree in the course of the cross-examination:

(i) that the incorrect specification of the breather membrane was a fundamental design error by Carter Jonas;

(ii) that the breather membrane did provide a further line of defence against water ingress once the building was complete;

(iii) having suggested in oral evidence that the breather membrane was not necessary at all and that his view was supported by the TRADA guidance, he had to concede that none of the conditions to enable the breather membrane to be dispensed with had been met, namely it was a very exposed location, impregnated soft-board sheathing had not been specified or used, and there was no requirement to tape or seal the joints; and

(iv) that the incorrect breather membrane coupled with the (poor) standards of workmanship and the exposed location combined to make water penetration inevitable. It was suggested that Mr Laundon was fussed by having the matter put to him in the form of a proposition. I am satisfied that his was a genuine unfussed answer and was a genuine concession on his part.

[360] I am satisfied on the evidence, and, in particular, accepting the evidence of Mr Roberts, that the existing breather membrane represents a significant defect and cannot be left in place. I also accept Mr Roberts’ evidence (and reject Mr Laundon’s evidence) that the provision of the correct breather membrane provides a significant and necessary protection to this building after construction and not merely during the period in which the building was being constructed.

[361] The specification item 12.87 called for a vapour-check membrane to the inner framing. The drawings do not include a |page:158| vapour-control layer (VCL). Mr Roberts said that there is no evidence that one was included.

[362] Mr Roberts told the court that in the absence of a VCL:

… There is nothing to stop condensation recurring within the timber frame construction which has two problems, first of all it reduces the quality of the insulation and secondly it can cause deterioration of the timber framework.

[363] There is no evidence that a VCL was specified on the drawings.

[364] Paragraph 9.4 of the experts’ joint statement said, at p6:

Mr Roberts and Mr Laundon agree that some form of vapour check should be provided to the rear of the plaster board. It was agreed that the use of fold back plaster board would be suitable. To what extent that is provided on site is unclear. A further investigation is required.

[365] The further investigation that was carried out did not show clearly any VCL. Mr Roberts reached the conclusion that he said it was reasonable to reach, that there was no VCL in the building.

[366] Mr Laundon said, in para 6.24 of his report, that, in his opinion, the guidelines permitted either polythene VCL or a plasterboard VCL with a backing. Mr Roberts agreed that either would have been an acceptable solution, but said that neither had been installed. He said that there was no sign of polythene sheeting or foil-backed plasterboard having been installed. He went on to say that the VCL should have been continuous over the floor voids in the attic.

[367] Mr Laundon agreed that he had not seen any evidence of a VCL. He said that there should have been one of one kind or another, but not within the floor void or the roof void. He was not able to infer from their absence in those areas that there was no VCL. The highest he was able to put the case one way or the other was to say that he did not deal with the issue in his report because:

He had not seen any evidence to suggest that there is not a vapour control layer.

[368] I found Mr Laundon’s evidence unconvincing on this point and prefer the evidence of Mr Roberts. There should have been a VCL in the places he suggested and for the reasons that he gave. It should be present in a construction of this cost and supposed quality.

(d) Contract instruction no 3: Cavity width of external stonework

[369] On 6 April 1998, Carter Jonas issued contract instruction no 3 to Guildford. Item 16 implemented Carter Jonas’s instruction to reduce the width of the external stonework from 150mm to 100mm. The instruction read:

16. External stonework to be 100mm on bed subject to engineer’s confirmation.

[370] In evidence, Mr Lindley agreed that the purpose of the instruction was to save costs.

[371] Mr Lindley also confirmed that no drawing or instruction had been issued to the contractor in relation to the change. He said that, in retrospect, he thought that Carter Jonas should have issued a drawing telling the contractor precisely what to do:

It would have been nice to have a piece of paper in the file that confirmed that he was told that the stone work was to be reduced to 100mm and thereby forming the cavity of 135mm.

[372] The contract instruction itself makes no mention of a cavity of 135mm. The cavity width had been previously specified incorrectly at 85mm. I have no doubt that Carter Jonas ought to have spelt out the instruction clearly. The real question in relation to damage is whether or not the cavity width of 135mm was achieved and, if not, whether a predominant cause was Carter Jonas’s failure to spell out the instruction clearly and to make sure that it was carried out.

[373] Mr Tumman thought that the cavity width may have been discussed at the time of contract instruction no 3 but could not recall any document being sent to the contractor to the following effect:

Whatever you do make sure that you achieve a cavity width of at least 100mm.

[374] Mr Lindley said in evidence that by the time he became closely involved it was too late, because the walls had been constructed.

[375] However, Mr Lindley went on to say that although he had checked the cavity widths, there was no documentary evidence because he saw no need to make a note since the appropriate cavity width was present. In view of my general impression of Mr Lindley’s evidence, I am not prepared on its own to give decisive weight to his answer.

[376] Carter Jonas refers to the site minutes of 1 June 1998, in which there is a reference to:

Stewart (Ede) pointed out that it was not practical to use cavity batons in a 140mm wide cavity and NCL accepted this.

[377] Mr Lindley explained that Mr Ede, of Guildford, was pointing out that it was not practical to use cavity batons in a cavity that was 140mm wide. This provides some evidence that Guildford knew that the cavities were to be more than 100mm wide. There is also some evidence that Mr Ede discussed cavity widths of 140mm, but this is no substitute for a proper instruction.

[378] The experts’ evidence is of considerable importance as to what happened in practice. The endoscopic investigation carried out by Mr Roberts and Mr Laundon in February 2005 provides a small sample of seven endoscopes. Of the seven endoscopes, one failed to achieve an adequate cavity width.

[379] In February 2004, Mr Roberts and Mr Laundon investigated the east gable. This produced measurements of between 70-100mm.

[380] The BRE investigation in relation to the west elevation showed a failure to achieve cavity widths of 100mm.

[381] The claimants also argue that if the breather membrane is rucked and creased, the effect is to reduce substantially whatever cavity width has been provided. Mr Roberts expressed the opinion that the rucking was severe – sometimes as much as 50mm and sometimes right across the cavity.

[382] Mr Laundon was prepared to agree that, typically, the maximum amount of rucking was 25mm but was worse in some places. However, Mr Laundon was clear that, in his opinion, the rucking did not have any effect upon the water-tightness of the wall.

[383] Carter Jonas does not really dispute that, on the west elevation, the cavity width was less than 100mm. It argues that on the north, south and east elevations the cavity was generally (my emphasis) in excess of 100mm.

[384] On this issue, I prefer the evidence of Mr Roberts.

(e) Outer leaf

[385] In Mr Roberts’ witness statement (para 8.10), he lists the three key factors that affect the integrity of the walls of the building as being:

(a) the water permeability of the outer masonry;

(b) the width of the cavity; and

[386] The experts’ joint statement from Mr Roberts and Mr Laundon (para 11) said:

Mr Roberts and Mr Laundon agree that the stone was fit for the purpose but that the reduced fitness brings into focus a need for a good standard of workmanship. Mr Roberts was of the view that good workmanship itself would not resolve the structural or weather resistance aspects.

[387] Mr Roberts agreed with Mr Quiney that water may enter into the inner side of the outer leaf through absorption or driving wind. The water may penetrate the outer leaf by percolating through the stone. Mr Roberts said that the propensity of water to get through the outer leaf was directly related to the quality of the detailing. He said that an example of poor detailing was mortar no more than 15mm thick when it should have been 100mm thick.

[388] The failure to provide a secure outer leaf could be said to be a question of workmanship. However, I find that if the quality of the contractor’s work is not known in advance to be of a very high standard it might be poor design to design a building that will be water-tight only |page:159| if there is a very high standard of workmanship. This is particularly the case on a site as exposed to severe wind and weather as this one.

[389] In evidence, Mr Lindley said that all the vertical mortar joints were solid and at full depth at the date of practical completion. He was challenged about this and shown a photograph. He said that he would not have missed something like that at practical completion. It must therefore have occurred after practical completion, either as a result of deterioration or later bad workmanship. Mr Roberts said that the photograph was taken on the south elevation.

[390] I am not prepared, in the circumstances, to accept that Mr Lindley would not have missed such poor detailing at practical completion. His final inspection was done at a time when many defects were outstanding.

[391] I observe that in a letter to Guildford dated 15 January 1999, Mr Lindley noted that heavy rainfall had penetrated through the stone skins causing considerable wetting to parts of the structure, furniture and fittings of the lodge:

It was my view then and it is my view now that the water penetration through the external stonework to the front elevation (the west elevation) was far greater than it could possibly have been had the walls been thoroughly treated with two coats of appropriate water proofing agent.

[392] Mr Lindley said in the letter that, in October 1998, during heavy rain:

The stone was absorbing water like blotting paper.

[393] In his evidence, Mr Laundon noted other examples of poor detailing and workmanship. There was an example on the parapet of the east elevation and there were examples of deficient and problematic construction on the bays of the west elevation.

[394] In his evidence, Mr Catlin said that water penetration remains a constant problem in the winter months, most frequently when there is a south-west or westerly wind. He said in terms that water penetration has continued to occur through the outer skin of the building. I accept his evidence.

[395] Mr Roberts also gave evidence, which I accept, that at random points the mortar jointing is inadequate.

(f) Cavity detailing

[396] The claimants classify this as a separate item. They contend that not only is the detailing within the cavities inadequate but problems are caused by bad workmanship within the cavity, which enables a bridge to be created between one side of a cavity and the other allowing water to pass along it.

[397] Mr Roberts said that, as a general rule from his and Mr Laundon’s inspections of the boreholes, they felt that the cavity ties were not unreasonable in terms of cleanliness although there were examples that Mr Roberts would not expect to pass an inspection. Mr Roberts said that cavity ties going the wrong way and not having trays should have been noted on an inspection.

[398] In relation to a photograph of the east gable, Mr Roberts noted ties that were questionable. There was a stone face that was rough and there was mortar oozing out between the joints. All of these provided drip points in the cavity.

[399] The claimants contend that the cavity detailing was seriously compromised as a line of defence by the poor workmanship that should have been identified by Carter Jonas and corrected by the contractors before the certificate of final completion was given.

[400] In his first report, Mr Laundon said that, as a result of the irregular stone thickness on the north-west gable, a consistent cavity had not been achieved; accordingly, any water ingress through the external stone leaf had a lesser distance to travel before potentially coming into contact with the inner leaf of wall construction. This he said was exacerbated by the mortar extrusions into the cavity.

[401] He said that in some areas there is a designated reduction in the width of the cavity. This can reduce the cavity to an effective width of 45mm. He said that this is not best practice but is acceptable.

[402] I am not sure what yardstick is to be applied to the words “acceptable but not best practice” in relation to a building of the cost and quality of the lodge. The consequence of the reduced cavity according to Mr Laundon is that:

It can either impose a greater reliance on workmanship as quite clearly any water entering the cavity has a lesser distance to travel or require further detailing.

[403] I do not find that the designated reduction of the width of the cavity is “acceptable” in a building of this quality.

(g) Water ingress

[404] I need to consider water ingress as a specific topic. Carter Jonas’s case is that water ingress occurred only on the western elevation. Carter Jonas, of course, contends that even in relation to the western elevation it has no liability because the problems were caused by faulty workmanship after it had left the site. It also says that any defects that became apparent during the defects liability period would have been rectified under its supervision if it had been permitted to remain on site after mid-May 1999.

[405] Carter Jonas contends that there is something distinctive about the construction of the west elevation in that it was essentially reconstructed by Guildford after Carter Jonas had left the site.

[406] There is a clear dispute between the parties as to how the question of remedial works should be approached. The defendant contends that the claimants are entitled to have any defects remedied in the cheapest way in which they can be rectified. The claimants say that the starting point is that they are entitled to receive a building that is free from defects.

[407] There are three sources of evidence:

(a) contemporaneous documents and evidence as to what happened during the construction period and the period immediately thereafter;

(b) factual evidence as to what has happened since practical completion, including the evidence of Mr Catlin;

and

[408] I have already set out much of the evidence. It is clear that there was significant water ingress in times of storm and high winds.

[409] Mr Lindley said initially that the problems of water ingress had been dealt with at practical completion. He felt that the lodge had weathered the driving rain and severe gales on 26 December 1998 well. These appear to have caused little water penetration.

[410] However, on 28 February 1999, within a few days of Mr Lindley certifying practical completion on 10 February 1999, there was a severe storm and water had entered the building in a number of places. Mr Lindley rightly conceded that this was not acceptable.

[411] Unfortunately, the problem does not appear to have been solved either during the three months that Carter Jonas remained on the site or thereafter. Mr Catlin gave evidence that he was told by Mrs Johnson that there was significant water ingress on the east, west and south elevations.

[412] Mr Roberts has been involved in the problems of the lodge for a number of years. He made two inspections in May and June 2001, as well as two joint inspections with Mr Laundon in 2004 and 2005. Mr Laundon has had a considerable involvement since his initial inspection on 20 January 2004.

[413] In his evidence, Mr Roberts said that in the first of his inspections there were still signs of decorative damage in the areas where Mrs Johnson had pointed out previous damp ingress.

[414] In the course of his investigations, he has taken photographs and he was able to annotate Mr Laundon’s plan to show the location of the photographs in his report. His evidence is that these showed significant signs of water ingress in the gun room and the drying room. His expert opinion is that this meant that there was water ingress in the north, east and south elevations as well as the west elevation.

[415] Mr Laundon gave evidence that was intended to support Carter Jonas’s contention that there had been water ingress only to the west elevation and that remedial works should be confined to the west elevation. In his evidence, Mr Laundon volunteered that there was |page:160| evidence of water ingress to the east elevation. This was a reference to para 2.1.4 of his report of 15 June 2005, where he referred to Mr Catlin’s witness statement (para 12) referring to water ingress to the gables, drying room and gun room along with staining over the door of the utility room and over the door to the second hallway that Mr Catlin said had occurred during the winter months of 2002-03. Mr Laundon said that he thought that this ingress had been caused by defective cavity trays above the lean-to roof. Mr Laundon also said that since he had first investigated the problem there had been evidence of problems only with the west elevation.

[416] In oral evidence, Mr Laundon was shown documents starting in September 1998. He originally said that he had reviewed the earlier documents, but said a little later:

I would not like to say that I have had absolutely every one of the documents in this bundle because it would take me a while to cross reference but certainly I was sent the documents.

[417] It was evident that he had not carried out any proper analysis of the documents for the purpose of his own report, and his evidence was uncertain.

[418] Mr Laundon also agreed in cross-examination that he had not produced anything in terms of reports or notes of opening up or evidence of any investigation that he himself had undertaken in relation to the issue of water ingress.

[419] He was shown the photographs upon which Mr Roberts relied. In relation to the gun room, he said that the dampness in the middle of the wall in the gun room was consistent with the cavity being bridged at that point. His explanation for this was:

It could be a dirty wall tie: it could be a wall tie running in the reverse direction: it could be a piece of rubble. There are a variety of issues but without opening up one could not say.

[420] He agreed that those were workmanship issues that Carter Jonas should have picked up.

[421] In relation to the drying room, there was some genuine concern in his mind as to which way up the photographs should be viewed, but he did suggest that the photograph could well be consistent with Mr Catlin’s written statement that there was evidence of water running along the ceiling line. In re-examination, Mr Laundon said that the likely source of ingress was a defective cavity tray.

[422] The claimants contend that they do not need to show damage to the other elevations in order to make good the claim that all four elevations need to be rebuilt. They contend that Mr Catlin is entitled to have the lodge built according to the appropriate specification and that this includes the insertion of the correct breather membrane and sufficient air cavities of at least 100mm. They go on to say that, in fact, there is sufficient evidence of water ingress in relation to other elevations to justify further those elevations being rebuilt in accordance with the specification.

[423] Mr Laundon explains any problems on other elevations than the west elevation by saying that:

It should be noted that for a building of this type I consider that it is inevitable that one or two ties may be dirty or incorrectly positioned and could be missed on inspection by a competent building surveyor. Such a limited number of ties makes no difference to the efficacy of the cavity.

[424] I prefer Mr Roberts’ evidence to that of Mr Laundon on this issue, and find that there is some evidence of water ingress on the north, east and south elevations.

[425] The claimants make a further claim against Carter Jonas in the sum of £10,416. The claim is pleaded at para 47.24 of the particulars of claim as follows:

The Claimant has incurred other costs in relation to additional staff costs, costs of renewal of furniture and upholstery due to water damage and other costs relating to water damage in the sum of £10,416 which it claims from the First Defendant and/or Horne. The statement of truth at the end of the pleading is signed by Mr Rosenheim of Denton Wilde Sapte, solicitors acting for the Claimants.

[425.1] In the defence, in para 65, Carter Jonas denies that the claimants are entitled to succeed in claims made under paras 47.22 to 47.25 on the general grounds that the claims are unreasonable, unnecessary and disproportionate or due to any acts or omission of the defendants.

[425.2] In para 29 of the reply, the claimants say generally, in relation to para 65 of the defence and counterclaim, that the remedial works proposed by them are a reasonable means of dealing with the defects in the building and note that Carter Jonas has not produced an alternative scheme of remedial works.

[425.3] In his first witness statement, in para 2, Mr Catlin confirms the truth of the matters set out in the particulars of claim.

[425.4] In para 10 of his first witness statement, Mr Catlin states that “the defects at the Lodge persist and I am advised that the defects in design and construction are so serious that it may cost a million pounds to put right. In addition I have incurred costs in relation to staff costs, costs of renewal of furniture and upholstery due to water damage and other costs relating to water damage in excess of £10,000.”

[425.5] Carter Jonas makes three points. First, it says that the claim should be rejected because it was not particularised with any clarity. Second, it says that the claimants failed to establish any causal connection between the findings of breach of duty and these losses. Third, it argues that, in any event, this loss was, as Mr Catlin put it in his statement, his personal loss and not that of CEL and, therefore, it is not in any event recoverable. As an example, Carter Jonas says that the cost of staff is the personal liability of Mr Catlin, incurred under a contract for services rather than related to damage to the lodge itself.

[425.6] The claimants respond by noting that none of these points was put to Mr Catlin in the course of a lengthy cross-examination. In relation to the argument that the loss is that of Mr Catlin rather than CEL, the claimants contend that this is a similar argument to that which is made by Carter Jonas elsewhere, and is dealt with in [287] to [290] and [302] to [304] of this judgment, namely Mr Catlin is seeking compensation for a genuine loss and not using a technical breach to secure an uncovenanted profit: see Panatown, at p550, and that Mr Catlin is entitled to make the claim in his own right as part of an independent remedy.

[425.7] I conclude that I am entitled to accept the evidence of Mr Catlin where I find that he is a truthful witness and the defendant has done no more than formally to join issue with his evidence on the pleadings. It is significant that Carter Jonas did not even ask for particulars of how the £10,416 was made up. Furthermore, it did not challenge Mr Catlin’s evidence on the costs in its final submissions.

[425.8] I note the general rule expressed in Deepak Fertilisers & Petrochemicals Corp Ltd v Davy McKee (UK) London Ltd [2002] EWCA Civ 1396, in para 49:

The general rule in adversarial proceedings, as between the parties, is that one party should not be entitled to impugn the evidence of another party’s witness if he has not asked appropriate questions enabling the witness to deal with the criticisms that are being made.

[425.9] In this case, no questions on this part of the claim were asked in cross-examination, and no written submissions were made in the course of final written submissions that could have been answered in further written or oral submissions. I accept that even where this is the case, the judge must consider the claim and decide whether or not to accept Mr Catlin’s evidence on this issue. I am prepared to accept Mr Catlin’s evidence that the costs were incurred and resulted from the effects of the water damage to the lodge. I find that he is entitled to recover the sum claimed, namely £10,416, through CEL.

(h) Workmanship generally

[426] In their joint statement dated 28 June 2005, the expert structural engineers set out an agreed schedule of 11 items of remedial structural works necessitated by a failure to achieve a proper standard of workmanship. They noted that all items would require design prior to execution. These are significant structural defects and most relate to the construction of the external envelope. In relation to the wall ties, the original Carter Jonas instruction required the contractor to fix wall ties |page:161| to the plywood rather than the studs. Horne’s letter dated 7 May 1998 was ambiguous.

[427] At the site meeting on 29 May 1998, Guildford admitted that some wall ties had been fitted wrongly. At the site meeting on 1 June 1998, attended by Mr Lindley, Mr Lindley told the contractor’s foreman that the stonework subcontractor should “be given a rocket” for the detailing and the wall-tie omission faults.

[428] I am satisfied that this is one example of the poor standards of workmanship throughout the building. This finding is important since it increases the need for the breather membrane.

(i) Fireplaces

[429] From the time Mr Catlin first occupied the lodge in August 1998, there have been constant complaints about smoking fires. Although attempts were made to rectify the problems, these were not successful.

[430] The root causes of the problems are as follows:

(a) the flues designed by Carter Jonas are too small so that the fires smoke excessively; and

(b) the ventilation to the rooms with open fires is insufficient.

[431] In relation to the flues, the experts’ joint statement makes it clear that Mr Roberts and Mr Laundon are in agreement that the chimney flues above the fireplaces are too small and do not comply with the Building Regulations. This is clearly a fundamental error in Carter Jonas’s design.

[432] Mr Catlin’s clear evidence is that the chimneys are still smoking very badly inside the lodge, with the result that even with the fans running it is not possible to light the fires without the rooms becoming smoky and those who are in the rooms finding it difficult to breathe.

[433] Mr Roberts’ evidence in his report is clear and in accordance with one’s own experience of badly smoking wood fires, namely that the wood provides substantial quantities of carbon monoxide so that the intrusion of smoke into the room constitutes a significant safety hazard as well as being unpleasant and dirty.

[434] Equally, open fires require proper ventilation to allow the gasses to escape up the flue. There is no dispute that the ventilation of the rooms with fireplaces in them is inadequate. In cross-examination, Mr Lindley accepted that the absence of ventilation to the fireplaces was an omission on his part.

[435] The claimants fitted fans to the chimneys in order to try to solve the problem. In Mr Granger’s letter dated 14 December 2000, Carter Jonas agreed to pay the costs. Carter Jonas has not provided any more than, putting it at its highest, a partial solution. Mr Catlin is entitled to have a lodge with open fires that do not smoke.

[436] Mr Roberts’ solution, set out in his report in paras 21.04 to 21.07, is to take down the chimney flues and rebuild them to the correct size at the correct height and to provide additional ventilation.

[437] In their experts’ joint statement, Mr Laundon agreed that there was no realistic alternative to rebuilding the fireplaces. Mr Laundon now appears to consider that the provision of further ventilation could be sufficient. In answer to a question from me, he was, however, unable to go so far as to say that increased ventilation would probably cure the smoking fireplaces.

[438] Having considered the various submissions, I accept the evidence of Mr Roberts. The claimants are entitled to recover the cost of the remedial works to the chimney flues and the ventilation. The cost is agreed at £94,320.

[439] In addition, in its letter dated 14 December 2000, Carter Jonas agreed to pay for fans to ventilate the chimneys. It was hoped that this would solve the problem of smoking chimneys, but it has not done so. The cost was £3,953, which the claimants are entitled to recover.

(j) Basement

[440] The basement is liable to flood. The claimants say that they are entitled to have a fully tanked basement. The cost of that is agreed at £10,947. In evidence, Mr Catlin said that the basement was constantly flooding. During the joint inspection of the experts in February 2005, they noted a watermark on the cellar walls from earlier flooding.

[441] Carter Jonas says that the pump is defective and that to replace the pump at a very modest cost would solve the problem. It goes on to say that this is not, in any event, Carter Jonas’s responsibility.

[442] The original design of the basement prepared by Horne shows a bituthene membrane forming a fully tanked box in the basement area. This would have sealed the basement and prevented groundwater from entering the area. It would have eliminated the need to have a sump to remove groundwater from the basement. The original design was not constructed. Instead, Protim Services Ltd constructed a more superficial tanking membrane. This has not proved to be sufficient to prevent flooding.

[443] Mr Roberts’ evidence was that the pump to the existing sump had failed on a number of occasions. He said that the tanking system, which was designed by Protim, was suitable for old buildings. He did not regard the system as acceptable in a building of this type and quality.

[444] It was put to him directly that all that was required was a new pump. He disagreed. He said that the system was not designed for buildings of this nature but to pump out water in the basement of old buildings. If a pump and sump were required, the sump would need to be sealed. If the membrane had been installed as designed there would be no need for a sump in the basement.

[445] Mr Laundon agreed that if a continuous tanking system had been provided there would be no risk of flooding.

[446] I note that Mr Tumman said in evidence that he expected a fully tanked basement to be constructed.

[447] Mr Roberts now proposes to cover over the sump in the basement with a waterproof membrane. The sump would then be drained to the outside of the building. This would eliminate entirely the risk of flooding.

[448] Mr Catlin is entitled to be compensated for a genuine loss but is not entitled to use a technical breach to secure an uncovenanted profit. I have to consider whether a replacement pump would solve the problem or whether he is entitled to have the continuous tanking system installed as it was originally designed.

[449] I accept Mr Roberts’ evidence that in a house of this quality and cost Mr Catlin was entitled to have the continuous tanking system installed as designed. This system eliminates completely the risk of flooding. Carter Jonas should have supervised the original work and ensured that the continuous tanking system was installed. This was something that it should have identified in the course of inspection and/or Horne should have identified. I have little doubt that if Carter Jonas had remained on-site it would have insisted on only the minor remedial work, which it says is all that is necessary. This is not a satisfactory solution. Carter Jonas is liable, therefore, to pay the cost of the reasonable remedial works set out in Mr Roberts’ evidence.

(k) Roofing

[450] The main dispute between the parties relates to Carter Jonas’s claim that it was not responsible for the design and inspection of structural engineering matters upon which I have already found against them.

[451] The building surveying experts and the structural engineering experts have produced joint statements. They are agreed as follows:

(i) the Tactray eaves connections required to be made good at a cost of £1,000;

(ii) the Tactray eaves support requires strengthening with a provision of new purlins. The cost is agreed at £1,750;

(iii) the Tactray requires stiffening around the openings, at a cost of £200;

(iv) the support to the valley gutters is inadequate and needs work on the underside of the gutters that will cost £1,000;

(v) the absence of insulation to the gable walls to the attic area is not a structural item; and

(vi) the copings to the gun room and changing room gables are unstable and this has occurred because of inadequate design.

[452] Carter Jonas is liable to pay the cost of items (i), (ii), (iii) and (iv). |page:162|

(l) Leaking window frames

[453] This problem has been described by various witnesses. Mr Roberts said that on at least two occasions when he visited he saw towels on window sills.

[454] The claimants contend that the windows were not correctly designed or constructed in that:

(i) they do not have a rebate between the inner and outer leaves and the damp-proof course does not connect with the window frames as is shown on Carter Jonas’s drawings;

(ii) on the first-floor eastern side, the windows are designed to operate as sash windows and open inwards; and

(iii) the windows have a shallow upstand and are difficult to close to achieve a seal along their length. This item is not being pursued by the claimants.

[455] In evidence, Mr Lindley accepted the criticism of the drawings but said that since the requirements were set out in British Standard 5263: 1985 part 3, it did not matter that the correct detail was not shown on the drawings.

[456] Mr Roberts criticised the design on the basis that the builders could not be expected to have British Standards in their site huts and, even if they did so, their operatives could not be expected to interpret them accurately. Mr Roberts said in evidence that, as a result of the failure of the damp-proof course to connect with the window frames, the deterioration of the window frames was greater than one would expect and the windows would require some remedial work.

[457] In relation to the second item, the problem was that the windows had been assembled in such a way that daylight can be seen through the beads. Mr Roberts’ evidence is that the installation of the windows did not conform to the manufacturer’s detail.

[458] Carter Jonas contends that the leaking window frames were the responsibility of Guildford and Blairs. It says that the extent of these defects is very unclear.

[459] Although there is evidence that attempts were made to rectify leaking window frames, I accept Mr Roberts’ evidence that the problems are the ones that relate to interpretation of design caused by Mr Lindley and Mr Tumman’s failure to provide adequate drawings.

[460] I therefore find for the claimants. Damages for carrying out the necessary remedial works is agreed at £10,910.

(m) Floors

[461] There are two defects in the floors. Liability is agreed subject to Carter Jonas’s claim in relation to the first that it is not responsible for structural matters. I have already found against Carter Jonas on this issue.

[462] The two defects are:

(a) at attic level, a floor of precast concrete beams laid alongside each other had been constructed to support the water cylinders in the roof-space area. In the absence of any infill blocking between the beams, they do not act compositely and are inadequate to support the water cylinders securely;

(b) some of the timber batons spanning between the bay steelwork and the main first-floor precast concrete are loose.

[463] The cost of (a) is agreed at £3,850 and (b) at £250.

(n) Stonework

[464] It is now agreed in the building surveyors’ joint statement that the stone is fit for its purpose. The claimants are accordingly not pursuing their claim.

(o) Doors

[465] It is agreed that many of the doors in the lodge are defective. Carter Jonas does not accept that the doors were defective at the time of its involvement on-site. It argues that, in any event, the doors are Guildford’s responsibility and were to be dealt with during the defects liability period.

(i) The front door on the west side of the building leaks. The sill to the closing edge is interrupted and fouled by the door handle, which prevents a proper seal. Further, the door timber has been cut away, which exacerbates the potential for water ingress.

(ii) The sitting room french windows are warped and were warped before security bolts were provided. There are also defects in the detailing around the doors and frame.

(iii) The rear double doors leak and there is a significant gap in the sill at one end.

[466] It is clear that there were a number of defects in the doors at the time at which practical completion was certified. In the absence of any claim that there were design problems, I am satisfied that the work to rectify the defects could and should have been dealt with by Guildford during the defects liability period. There can be no suggestion that the defects could and should have prevented Mr Lindley from certifying practical completion. In these circumstances, I find against the claimants on this item.

(p) Services

[467] It is agreed that the services are defective in the following respects:

(i) there is insufficient ventilation in the boiler room in the basement. The work required to remedy this defect was also agreed in the building surveyor’s experts’ joint statement;

(ii) the hot and cold pipework run too close together;

(iii) the overflow pipes are defective in that they are too small;

(iv) one of the water tanks is cracked. It is alleged that this should have been observed by Carter Jonas at or before practical completion, when the experts agree on the balance of probabilities that the defect was present;

(v) the allegations relating to the lightning conductor are not pursued.

[468] In relation to the design of services, Mr Catlin said in evidence that Carter Jonas had never suggested to him that although it had overall responsibility for design this did not include services. Mr Lindley said in evidence that no such exclusion of responsibility had been communicated to Mr Catlin.

[469] Carter Jonas argues that the services were Guildford’s responsibility and that it had discharged its duty to inspect the works by engaging Jackson-Coulson to do so. Apart from the point that this exclusion was not communicated to Mr Catlin, Mr Laundon has made the further point that Jackson-Coulson should have been retained much earlier to supervise the plumbing and electrical services and not merely after the event to report on defects.

[470] Carter Jonas further contends that the defects were identified in its schedule of works required to be completed and defects to be remedied dated 15 September 1998, some five months before practical completion was certified.

[471] In any event, it argues that all these defects would have been identified and remedied in the defects liability period had Carter Jonas remained on-site. In this connection, Carter Jonas also relies upon the evidence of Mr Roberts. Mr Roberts’ evidence was that these defects should have been spotted at an early stage and they should have been rectified. He said he would have expected them to be included in the snagging list at that time. Mr Quiney asked him:

But nonetheless if it was not, it would still be subject to being remedied in the defects liability period, would it not?

A. I would think that would be the case.

[472] The question, therefore, is whether or not these defects, having been identified and not having been remedied in the period between September 1998 and practical completion in February 1999, would have been rectified during the remaining period of the defects liability period. On the balance of probabilities, I conclude that since they had not been remedied while Carter Jonas was on-site, they would not have been remedied during the remaining months of the defects liability period. I therefore find for the claimants.

(q) Study floor

[473] There appears to be no dispute that Mr Catlin had asked for a solid oak wood floor in the study. Mr Lindley agreed in evidence that it should have been provided and said that it had been provided. |page:163|

[474] In his report, Mr Roberts said that it appeared that a veneered hardwood floor should be provided.

[475] Mr Quiney’s cross-examination on this subject reflected Carter Jonas’s approach to the project:

Q. You have also heard about the oak flooring in the study: it still works as a floor does it not?

A. Yes.

Q. And it looks like oak?

[476] It is wholly irrelevant that what was laid works as a floor and looks like oak. The simple question is that Mr Catlin, having contracted for an oak floor in the study (and no doubt having paid for it), was entitled to have an oak floor.

[477] Having said this, I am not satisfied on the evidence, on the balance of probabilities, that an oak floor was not provided. If it had not been provided, Mr Roberts, who was a careful witness, would have been able to give clear evidence to that effect.

(r) Car park

[478] A claim is made for the cost of resurfacing the car park to eliminate ponding. The cost of resurfacing is agreed at £17,316. The cost of filling in areas of ponding is £924.

[479] Carter Jonas says that it was clearly an ongoing matter and would have been remedied in the defects liability period. It was put to Mr Roberts that “it still works as a car park”. Mr Roberts reply, which I accept, is:

My experience of patching a car park is that you just move the puddle a little further along.

[480] Mr Roberts was asked whether, none the less, these are exactly the sort of things that would be remedied during the defects liability period?

[481] Mr Roberts replied: “Quite possibly so, yes.” In answer to a question from me, he amplified his answer:

I would hope so, yes, I would hope it had been spotted before that.

[482] Mr Lindley said that practical completion had been given on the understanding that further work to the car park would be carried out. This was not recorded in the certificate of practical completion or in the correspondence at the time.

[483] Subsequently, Mr Pardoe informed Mr Catlin that, in his view, the specification for the car park was inadequate and inappropriate. He noted that the contractor had completed the work according to specification, as Mr Catlin recorded in a letter to Guildford dated 13 August 1999.

[484] Carter Jonas argues that the matter would have been corrected during the defects liability period.

[485] I conclude that, during the defects liability period, Carter Jonas would have done no more than provide the patching-up solution that it is contending for in this litigation. In my view, this solution would have been wholly inadequate.

[486] Furthermore, the fundamental problem, as Mr Pardoe understood, related to the specification of the car park. This was the responsibility of Carter Jonas. It is liable to pay the sum of £17,316, being the cost of providing the car park of a quality commensurate with the lodge.

(s) Miscellanous items

[487] There are a number of items of defective work that have been noted on inspection and are agreed in the building surveyors’ joint statement dated 21 June 2005:

(i) Where the Aga and main toilet extracts penetrate the roof, these have been sealed with a mastic, but there are no collars over to protect the joints.

(ii) Swan-neck sections at the foot of the rainwater pipes have dropped away from the main downpipe owing to inadequate fixing.

(iii) There are two PVC downpipes on the front elevation with inadequate/insufficient fixing brackets.

(iv) The bottom copings to the gun room, the changing room and those to the rear porch, have angled cramps at the bottom. They have not been fitted correctly and have required packings that look very unsightly. In addition, one of the cramps is a bent wall tie, which is not suitable and is beginning to rust.

(v) Certain fixings to the gutter along the rear single-story eaves are missing.

[488] The claimants say that they are entitled to recover the cost of remedying these items. Carter Jonas says that if it had not been discharged prematurely from its obligations under the contract, these items would have been identified by it during the defects liability period and would have been remedied.

[489] I have had no evidence from the experts on this issue. I conclude on the balance of probabilities that if these items had been of any consequence (rather than de minimis) they would have been identified by Carter Jonas and rectified by Guildford in the defects liability period. In these circumstances, the claimants are not entitled to recover the cost of these items.

G. Work on the lodge after 12 May 1999

[490] Carter Jonas claims that Guildford carried out work after Carter Jonas had left the site on 12 May 1999, which caused the problems of which complaint is now made.

[491] On 25 May 1999, Mrs Johnson faxed a snagging list to Guildford. It included a number of items and, in particular, referred to car-park ponding, mortar to the lean-to roof and a number of minor matters.

[492] On 9 June 1999, Mrs Johnson noted that Guildford had completed all that it had been asked to do.

[493] On 14 June 1999, Guildford wrote to Blairs in response to Blairs’ message of 8 June 1999. Blairs had started work on replacing the double-glazed window units. It said that 116 double-glazing units had now been reworked and the remaining 64 units would be reworked by 21 June 1999.

[494] On 13 August 1999, Mr Catlin noted to Mr Guildford that the work on the car park remained unsatisfactory and unfinished. He sent a cheque for the outstanding moneys less a sum of £12,751.12, which he deducted in respect of additional costs arising from delays on the project.

[495] In relation to storms in early December 1999, Guildford noted that a number of slates and ridge tiles had become dislodged and asked Barclay Roofing to attend site to rectify the damage.

[496] It appears that there was substantial water ingress around 1 February 2000. This involved remedial works. “Major works” were said to have been finished around 18 March 2000. I have not seen any documents that say what works were undertaken.

[497] On 14, 15, 16 and 18 March 2000, the staff were engaged in a substantial clean-up operation.

[498] More work was to be carried out by August 2000. This included the fitting of new double doors (the main doors). These doors were painted during August 2000.

[499] Reverting to questions of snagging, on 8 February 2000 Mrs Johnson had issued the snagging list at the end of the defects liability period. It included some 69 items. Bay windows in bedrooms one and five showed cracks opening up in the wood. Bedroom five had marks on the ceiling owing to wet coming in. There is a reference to the French doors in the lounge and dining room leaking and sticking, and to leaks under the main doors to the entrance hall. The roof was said not to have been finished. There were still problems with ponding in the car park.

[500] Two other items were emphasised in the evidence:

Generally all bay windows remove 4″ x 1″ behind stone mullions fill cavity with expanding foam (water resistant type) re-fix timbers caulk and paint and

External windows generally stick check maitre (ie sealant to prevent water ingress) between sill and masonry. Where mastic has not sealed correctly remove dry and re-mastic.

[501] Mr Ede agreed to carry out work based upon this list. Mr Peel, who acted as Carter Jonas’s consultant, was concerned as to whether |page:164| the snagging defects were just that or whether there were design defects. He did not suggest that the defects had been caused subsequent to Carter Jonas’s departure from the site.

[502] In a letter to Mr Catlin dated 3 April 2000, Mr Peel noted that the contractors had carried out a programme of remedial works with the intention of resolving the problems of water ingress through the structure. He suggested that Mr Catlin:

1. Await the outcome of the success or otherwise of this most recent attempt to resolve the problem.

2. If the problems continue it will be necessary to contact the architect to establish the whereabouts of drawings which may identify a design defect which, following construction, is allowing the water ingress.

3. If no such details exist it may be necessary to carry out a site inspection to perhaps identify a construction defect which would perhaps allow the water ingress.

[503] On 25 May 2000, Guildford issued a further snagging list, but this one is of no present significance.

[504] In a letter dated 16 June 2000, Mr Granger referred to his discussion with Mr Peel in his letter to Mr Catlin. He said that Mr Peel was carrying out an inspection visit on 21 June 2000 and that this would include looking at the chimney.

[505] On 10 July 2000, Mr Peel wrote to Mr Catlin with his recommendations after undertaking a brief inspection of the property. He referred to what he described as the major defects that were evident, namely water ingress through the external envelope, the windows and the smoking chimneys. He indicated that major work would be required:

1. Removal of the external skin of the building and the incorporation of some form of effective rain screen into the cavity.

2. Improvement or replacement of the existing windows.

3. Demolition of the existing flues or improvements to the current fan systems.

[506] Mr Peel again makes no suggestion that the major defects were caused or contributed to by work undertaken by Guildford after Carter Jonas had left the site.

[507] On 6 December 2000, in a letter to Mr Catlin, Mr Granger set out Carter Jonas’s allegation that the problems at the lodge were caused by the defective workmanship of Guildford after Carter Jonas had left the site.

[508] On 16 January 2001, BRE carried out a second inspection of the lodge and reported to Mr Peel on 26 February 2001.

[509] On 21 February 2001, Guildford wrote to Mr Peel outlining extensive works that it proposed to carry out on site at a cost of £310,000 plus VAT. I note that it was to include:

6. The work will include the removal of the existing stone external skin and the rebuilding of a similar dressed elevation of stone but sawn square to the back and all bed and perpend joints and built up solid wall style with 102mm thickness of class B engineering bricks. New walls to be bonded on existing wall ties to inner leaf.

[510] Mr Roberts was asked about this proposal when he gave evidence. It was put to him that it was more appropriate and far less expensive than his third-skin proposal. I shall deal with this in my conclusions. However, in his letter to Mr Peel dated 25 April 2001 he said:

The building was constructed with a steel frame and timber-framed type of construction around it, and has experienced severe leakage from weather ingress in this very exposed position. Some remedial works have been carried out but to little apparent effect and there are also other defects such as ineffective chimneys and leaking frames.

[511] Apart from this documentary evidence I have the evidence of Mr Lindley, particularly of his visit on 2 February 2005. He said that he saw no evidence of water penetration on the south, east and north elevations. He makes reference to the presence of beige-coloured expanding insulation foam that was not present in the cavities when practical completion was certified in February 1999. I am not clear whether it is in fact the case, but it might be a reference to the expanding foam that was used to try to repair the cavities in the bay windows.

[512] Mr Lindley said that there was very clear water staining showing to the marine plyboard at the gable peaks to both the south and north peaks and the west elevation. He noticed that some sealing with mastic had been carried out on the north gable. A considerable quantity of water could penetrate this position, so he said. It would appear that the mastic solution had been tried and had failed.

[513] Mr Lindley noticed that at the west elevation, in a number of places the plastic shaped weep hole pieces that had been installed when Mr Lindley gave practical completion had been removed. The result of this work was that these open perpends were mostly open into the cavity or into the cavity-tray void.

[514] In relation to the fireplace, Mr Lindley noticed that there was no combustion and provision to the fireplace in breach of Building Regulation requirements. In cross-examination, when asked why he did not see to it that this was provided, he had to concede that this was an omission on his part.

[515] In his evidence, Mr Lindley said that extensive work was carried out on the west elevation after practical completion and, in particular, on the cavity details. He said that the quality of the work was “so fundamentally different that any competent building surveyor could not possibly accept that standard of workmanship”.

[516] The claimants invite me to view Mr Lindley’s claim with considerable scepticism. First, they say that there was a history of persistent poor workmanship throughout the contract. Second, they observe that there is no reliable documentary evidence as to what remedial works had been carried out by the time Mr Lindley left the site. Third, it would appear that there were more than 100 items of snagging lists outstanding only eight days before practical completion was certified. They say it is simply not credible to find that all were done satisfactorily, particularly when there is no documentary evidence. Fourth, they say that it was clear that significant and widespread problems came to light within weeks of practical completion. They refer by way of example to the consequences of water ingress at the end of February 1999 and suggest that Mr Lindley himself was concerned that there were widespread defects of workmanship.

[517] In his letter to Mr Ede dated 5 March 1999, Mr Lindley himself wrote that Mr Ede should ask the stone suppliers to inspect and comment on Mr Ede’s and Mr Lindley’s belief that “water was striking through the sawn stone head to the front door (bypassing the damp-proofing, the cavity-tray work and the seals to the new door)”.

[518] He said that the stone supplier should also be asked to inspect and comment upon the possibility of water striking straight through the sawn stone mullions, cut stone heads and sills at the first-floor bay windows. Dunhouse Quarries should be asked to state the porosity of the stone and advise whether or not the porosity will lessen with weathering and how long it anticipates this might take and whether or not the porosity can be lessened by surface treatments.

[519] In relation in particular to the western elevation, it was apparent that this area was problematic and had leaked regularly in times of heavy storms and wind since it was constructed.

[520] The claimants contend that expert evidence does not assist at all on this issue. Mr Roberts, they say, properly declined to express any view as to what work was carried out after Carter Jonas had left the site. Although Mr Laundon had no such inhibitions, the claimants contend that his evidence should be disregarded both because this should not be regarded as a matter of expert evidence and also because Mr Laundon’s evidence was so biased that it should be discounted.

[521] It seems to me that the crucial issue is whether or not there were fundamental defects in the design and workmanship of the building that continued to defy efforts to remedy them. I note that on 10 July 2000, Mr Peel and Mr Granger had inspected the property, albeit briefly, and that Mr Peel was concerned to note continuing defects that were evident, namely water ingress through the external envelope, the problems to the windows and the smoking chimneys.

[522] In relation to the work actually carried out by Guildford after June 1999, the evidence is in a rather unsatisfactory state. It appears |page:165| that it did some remedial works that are identified on the documents and in respect of which Mr Lindley takes exception, as also does Mr Laundon. This does not deal with the basic issue. The complaint of poor workmanship by Guildford after June 1999 could have been developed by Carter Jonas in its ongoing discussions with Mr Catlin and his representatives during 2000. Carter Jonas could have asked to visit the lodge at the end of the defects period. Mr Peel, instructed by Carter Jonas, did visit the site in July 2000. There is no suggestion in the documents before me that he thought that the problems had been created by Guildford after Carter Jonas had left the site. As far as the work carried out by Guildford after May 1999 is concerned, I conclude that I can accept only that work set out in the documents to which I have referred in the judgment actually took place. In the case of the “major work”, I have little particularity. This work may or may not have been carried out well. I am not prepared to accept Mr Laundon’s and Mr Lindley’s evidence that the work was carried out on the west elevation after Carter Jonas had left site to such a dramatically inferior standard and in a manner that itself caused the damage with which I am concerned in this case. In order to succeed in this plea, Carter Jonas has to show not only that the work was carried out to a very poor standard but also that if the work had been carried out to a good standard it would have cured any fundamental defects that existed in the design and construction of the building. This claim, so it seems to me, stands or falls on whether those fundamental defects existed and the costs (if any) of correcting them.

[523] Having heard Mr Lindley and Mr Laundon give evidence, I am satisfied that their evidence on this issue is substantially exaggerated and that the real problems that existed were largely ones of design that required fundamental solutions in order for them to be cured and for Mr Catlin to have the building that Carter Jonas had contracted to design for him. This will require exhaustive works on site to remedy defects to the external envelope, the water ingress through the windows and the problems relating to the smoking chimneys. I reject the defendant’s claim, supported by Mr Laundon, that all, or a significant part, of the remedial works that are now required are required because of Guildford’s remedial works after Carter Jonas had left the site. In saying this, I am conscious of, and take into account, Guildford’s continuing record of poor workmanship throughout the contract period.

Conference centre claim

[524] The claimants contend that Mr Catlin intended to use the lodge as a conference centre outside the shooting season and that, because of the defects in the lodge, he has been unable to do so. The resulting loss is claimed at £20,000 pa. Mr Catlin said that he had mentioned the idea to Mr Pardoe in 1997.

[525] In evidence, Mr Catlin estimated that he would be able to obtain fees of £175 per day based upon a group of 12; this would result in receipts of £2,000 per day, of which one-half would be spent on the running costs.

[526] Mr Williamson was right to concede that the idea was no more than at the drawing-board stage. The claimants did not prepare any detailed business plan at the outset that could be put before the court to signal Mr Catlin’s clear intention to market the lodge as a conference centre. What was submitted in evidence was a document marked “business plan”, which consisted of rough estimates based upon Mr Catlin’s experience and which was drawn up at the end of December 2004, after proceedings had been started. It was said to be a reconstituted version of another business plan that Mr Catlin said he had produced in 1998, but that was not produced to the court.

[527] I am prepared to accept that Mr Catlin hoped initially that he would be able to develop the lodge as a conference centre, but it was no more than an aspiration. In so far as Mr Catlin said that it was more than this, I reject his evidence. In reaching this conclusion, I take into account his evidence, in which he discussed the possibility of using the lodge as a conference centre with his then solicitor Mr Horn, of Manches, who was engaged to undertake the purchase of the lodge in 1997.

[528] I am fortified in this view by the fact that the covenant under which CEL purchased the original property from the owner, Northumbrian Water, clearly prohibited such use. CEL covenanted:

Not to carry out any trade, manufacture or business on the property provided that ancillary to the ownership or use or occupation of the adjoining land by the covenantor or any group company of the covenantor for shooting, fishing or other sporting activities, the covenantor may use the property as a shooting lodge or shooting lodges for the accommodation of persons shooting and/or fishing and/or carrying out other sporting activities on the adjoining land… but for the avoidance of doubt and without prejudice to the generality of this paragraph, this proviso shall not extend to the use of the property as a hotel, guest house, public house or other similar use.

[529] I am satisfied that this clause effectively excluded the use of the lodge as a conference centre.

[530] In these circumstances, I find that the claimants have not proved this part of this claim and are not entitled to any damages in relation to it.

H. Claim for Mr Roberts’ fees for further work on his professional remedial scheme

[531] The claimants are claiming to recover, as a separate head of claim, the fees paid to Mr Roberts for the further development of the third-skin option. If this scheme is accepted by the court, it is agreed that the claim will be subsumed in the damages relating to that scheme.

[532] The claim was made by the claimants by way of a very late amendment. I decided (and the parties did not demur) that I should hear the evidence de bene esse and, in this judgment, I should decide:

(i) whether to admit the claim at this late stage; and

(ii) if I admit it, decide the claim on the merits.

[533] Initially, Carter Jonas objected to my admitting the evidence and to allowing the amendment to the pleading. In his final submission, Mr Quiney made it clear that Carter Jonas no longer had any objection to the evidence being admitted (Mr Roberts was recalled for this purpose), but Carter Jonas maintains its objection to the amendment.

[534] It is claimed that to admit the amendment would be prejudicial to Carter Jonas. First, it says that it represents a new case that puts in issue the competence of Mr Roberts as an architect (which it says was not previously in issue). Second, it says that in order to test the reasonableness of the claim, documents relating to the development of the design and the pricing of the works have not been disclosed. Third, it says that the claim is fundamentally flawed because the fees are being reclaimed by Mr Catlin, with whom Carter Jonas had no privity of contract. It further says that only Mr Catlin can give the appropriate evidence as to why the fees were incurred and whether Mr Catlin in fact relied upon Mr Roberts’ advice. Finally, it is said that the legal basis for the claim is misconceived.

[535] The claimants answer the points made by Carter Jonas by saying that Carter Jonas suffered no prejudice and that Carter Jonas was able to deal properly with what was admittedly a new claim.

[536] There is no suggestion that Mr Laundon was not available to provide any expert advice that was needed by Carter Jonas, or that he could not do so in the time available, or that the lateness of the amendment hampered the further cross-examination of Mr Roberts. I do not understand that Mr Roberts’ competence as an architect was any more or less in issue than it had been previously. In relation to disclosure of documents, Carter Jonas does not identify any documents that are crucial that have not been disclosed. It did not suggest to Mr Roberts, in the course of his second cross-examination, that there were any documents that it needed to see that might be relevant to its cross-examination.

[537] In relation to the contention that the claim is fundamentally flawed, it seems to me that there is an issue as to whether Mr Catlin can claim these fees as part of his third-party claim, and this issue is dealt with in my consideration of the claim as a whole. I will deal with the other points that are raised in the course of my consideration of the substantive claim. |page:166|

[538] On the threshold procedural question, I conclude that despite the fact that the issue has been raised at a very late stage, this has not caused any significant prejudice to Carter Jonas. I therefore admit the amendment.

[539] The facts are that, by December 2000, the claimant was complaining of defects in the construction of the lodge. Carter Jonas was denying liability. Mr Catlin instructed Mr Roberts to investigate and report. Mr Roberts, in his report, suggested a particular remedial solution. Thus far it is agreed that his fees form part of the normal costs incidental to the litigation.

[540] By a letter dated 9 November 2001, Mr Catlin instructed Mr Roberts to work up the advice into a full design. The claimants say that it was reasonable for Mr Catlin to do so and that they are entitled to recover the cost of the fees paid by Mr Catlin to Mr Roberts and Markhams, the quantity surveyor, in working up the design even if, in the event, the third-skin option favoured by Mr Roberts is not adopted. The claim for just over £72,000 (being £62,995.27 plus VAT) in respect of these fees is based upon a construction cost of £595,000. Three invoices have been issued in respect of these fees dated 21 March 2002, 23 July 2002 and 26 August 2003.

[541] There is no real dispute that the fees were paid. The dispute centres around whether the work should have been carried out in advance of a decision as to which was the appropriate remedial scheme. The claimants argue that, having ascertained Mr Roberts’ view, it was reasonable to ask him to work up the scheme. They argue that the additional work was instructed on competent professional advice.

[542] The principle upon which they rely is set out in para 8-50 in Keating on Building Contracts:

A claimant who acts upon apparently competent expert advice will normally be taken to have acted reasonably unless some quite clearly unreasonable course was adopted and unless perhaps the expert’s proposals were outside the range of those which an ordinarily competent equivalent expert would have prepared so as to have been negligent.

[543] Further, the claimants contend that they did act reasonably. The contractors were of doubtful solvency. Carter Jonas was not accepting liability. The working up of the scheme was an attempt to mitigate their loss in circumstances where it is argued that the main purpose of the additional instructions was not related to the cost of obtaining evidence in the proceedings but to further the remedial scheme that was to be put in place afterwards.

[544] The question is whether it was reasonable to instruct Mr Roberts to carry out work in addition to that which was required in the litigation in advance of a determination by the court, not only on the issue of liability but on which was the appropriate remedial scheme.

[545] The answer to this question must depend upon the facts of the case. In this case, there is no evidence that, in the event that Mr Roberts’ scheme was not chosen as the appropriate remedial scheme, Mr Catlin was doing anything to mitigate his loss. Mr Roberts was asked by Mr Catlin to develop his preferred option and did so at a time when Mr Catlin had commenced proceedings and there was no agreement between the experts on the remedial scheme to be undertaken. In my view, he did so against the risk that if his preferred option was not the correct one, Mr Catlin would not be able to recover the additional fees that he had paid to Mr Roberts and Markhams, which could not otherwise be recovered as costs in the litigation. The question of what costs can be recovered in the litigation is not an issue before me at this stage.

I. Clause 1.1.5 argument

[546] Under clause 1.1.5:

Where the employer employs a contractor under a separate agreement to undertake construction or other works the employer will hold the contractor and not the surveyor responsible for the operational methods and the proper execution of the works.

[547] Carter Jonas claims that if CEL or Mr Catlin are holding £25,000 under the building contract, this sum should be taken into account in Carter Jonas’s favour in any computation of damages. Second, it contends that CEL was advised by Mr Lindley, in a letter dated 8 March 1999, that it had a good claim for liquidated damages against Guildford in the sum of £109,000, which it did not pursue. Carter Jonas contends that this sum should also be set off against any damages recovered against Carter Jonas.

[547.1] In para 19.1 of the defence, Carter Jonas sets out clause 1.1.5. In paras 20 and 21, Carter Jonas pleads the composite effect of clauses 1.1.5, 1.2, 1.3 and 1.4. Clause 1.1.5 is not referred to in the counterclaim. There has been no request by Carter Jonas to amend its pleading to make the claim that is now sought.

[547.2] In the defence, Carter Jonas claims that the effect of clauses 1.1.5 (and the other clauses) is that the claimants are not entitled to claim for losses that were caused by and/or contributed to and/or related to the acts and omissions of Guildford (para 20) and that any claim that the claimants make against Carter Jonas is conditional upon them having first pursued those claims against Guildford.

[547.3] In para 6 of the reply, the claimants plead: “Clause 1.1.5 does not exclude liability for the first Defendant’s failure to monitor the progress and quality of the work and/or administer the terms of the building contract.”

[547.4] Carter Jonas acknowledges that there has been no amendment to the pleading but says that it was established only in the course of the evidence that Mr Catlin still held moneys under Catlin’s contract with Guildford that arises from its agreement in relation to the final account made on 12 April 1999. Under this agreement, it claims that Mr Catlin agreed to pay Guildford £1.025m subject to a 2.5% retention, namely £25,625 less an agreed amount for other works not yet completed.

[547.5] Carter Jonas’s case on clause 1.1.5 is that where there is a relationship between the allegations found against Carter Jonas and the failures of Guildford, the moneys held by the claimants should be deducted from the damages. Under clause 1.1.5, CEL should seek to recover or retain moneys as against third parties before proceeding against Carter Jonas. In the case of the work to be done on the car park assessed in value at £17,316, Carter Jonas argues that the claimants already hold the sum of £25,625 by way of retention from Guildford, which more than pays for the cost. In fact, Carter Jonas argues that the whole of the retained sum of £25,625 must be set off against the cost of remedial works, whether pursuant to clause 1.1.5 or as a matter of a duty to mitigate.

[547.6] This, Carter Jonas argues, is part of a larger argument. It is claimed that, either pursuant to clause 1.1.5 or pursuant to the duty to mitigate, the claimants were under a duty to obtain the best possible settlement with Guildford and failed to do so. Had they done so, the settlement figure would have been £916,000, or £109,000 less than the settlement figure of £1.025m. This sum should also be deducted from the claimants’ damages.

[547.7] In para 123 of Carter Jonas’s final submissions, it says on this point: “This (ie the figure of £1,025,000) failed to take into account the fact that CEL had a good claim for liquidated damages of £109,000 (as advised by Nigel Lindley on 8 March 1999). The failure to set these damages off against the final account, which Mr Catlin was entitled to do, is another failure to comply with Clause 1.1.5 irrespective of Guildford’s later liquidation. This sum should also be deducted from any damages that the Claimants might recover.”

[547.8] In relation to the claim for a deduction of £109,000 from the damages, the letter dated 8 March 1999 from Mr Lindley to CEL was added late to the core bundle and Mr Catlin was never asked about it. Nor was Mr Lindley. It said: “Now, it is calculated that the number of days from the period of extension of time to the date of Practical Completion less the days when it was agreed that the Contractor would vacate site between August and October 1998 is 109. It is my opinion in accordance with the above that Liquidated Damages may be applied at £1,000 per day for this number of days.”

[547.9] In response to the two claims, the claimants say, first, that these claims have not been properly pleaded. Second, it is said that, on a true construction of clause 1.1.5, the clause has force in relation to claims made against Carter Jonas only in respect of operational methods |page:167| of construction and the proper execution of the works. It does not apply to claims that Carter Jonas failed adequately to inspect the works.

[547.10] Further, in order for Carter Jonas to succeed in relation to the first claim, it would need to identify items of overlap. In so far as Carter Jonas’s claim is related to the car park, the claimants say that there has been no overlap.

[547.11] The claimants argue that Carter Jonas has misread the settlement letter. The relevant part of the letter, dated 12 April 1999, reads as follows:

I will pay you £1,025,000 (less 2.5%) less an amount to be agreed for any works not yet completed (eg the car park)

They claim that, on a proper reading of the letter, two deductions were agreed: (i) 2.5% of £1.025m; and (ii) a further sum for any works not yet completed (which includes the car park).

[547.12] In relation to the claim for a deduction of £109,000, the claimants note that Carter Jonas concedes that the settlement with Guildford is “not necessarily unreasonable in a strict sense”. The claimants say that if the settlement was reasonable, this is hardly evidence of a failure to mitigate.

[547.13] I conclude that these claims were made very late and were never pleaded. Both claims are substantial. The claimants had no reason to attach the importance to them that Carter Jonas now claims. It would be unfair to admit either claim when they are not pleaded and when the facts relating to Mr Catlin’s overall settlement with Guildford, including these two items, have not been fully investigated in evidence with Mr Catlin and Mr Lindley.

[547.14] Having declined to admit the claims, I should simply add that the claim for the credit in relation to work on the car park is based upon a misreading of the letter dated 12 April 1999. In so far as there was a reduction in the sum paid to Guildford, it was part of an overall settlement that reduced the figure paid below the £1.025m. In respect of the claim for a credit of £109,000 in respect of the Guildford settlement, the letter dated 8 March 1999 simply sets out Mr Lindley’s opinion without explaining in detail how the number of days was arrived at and that liquidated damages may be applied at £1,000 per day for 109 days. This figure might well have been the subject of detailed discussion significant if the dispute with Guildford had continued. It would have been only one of the matters to be considered in any settlement discussion. Once Carter Jonas concedes, in my own view rightly on the evidence as it stands, that the settlement with Guildford cannot be impugned as being unreasonable, it seems to me that it is conceding that it cannot prove its case that the claimants failed to mitigate their loss.

J. Counterclaim

[548] Carter Jonas’s counterclaim is set out in para 74 of the defence. As pleaded, it has five elements:

(a) a percentage claim on the “Proper Final Account” of 9% for fees and 1% CDM. The total claim is £29,433.10;

(b) Carter Jonas’s fees for dealing with patent defects between August 1998 and practical completion claimed at £8,952;

(c) Carter Jonas’s fees for work done in dealing with Guildford and its claims consultants between August 1998 and February 1999 claimed at £23,225;

(d) Carter Jonas’s expenses in using a consultant, M&E Engineer, to check Guildford’s M&E design and installation claimed at £3,275.78;

(e) Carter Jonas’s expense in instructing Jackson-Coulson to deal with Guildford’s claims consultants claimed at £3,620.25.

[549] Claims (b), (c), (d) and (e) have now been abandoned. In relation to (b), Mr Lindley had to accept in cross-examination that patent defects fell to be dealt with in the overall fee of 9% and could not be charged as an additional item. Similarly, Mr Lindley had to concede that there was no separate contractual entitlement to fees under (c) and (e) and that the work carried out was exactly what a contract administrator was expected to do.

[550] In relation to claim (d), Mr Lindley said that Jackson-Coulson was instructed in August 1998 to prepare a report on a basis expressly made known to Mr Catlin and accepted by him on the footing that if Jackson-Coulson discovered defects in Guildford’s work, its fees would be deducted from the final account, but if they failed to discover any defects, its fees would be the liability of Carter Jonas. Mr Lindley’s assertion that he explained this to Mr Catlin was not supported by evidence. Although Mr Lindley continued to assert that he had discussed the matter with Mr Catlin, it is not referred to in his witness statement nor does the correspondence that I have seen make any reference as to who was to pay for the report. The matter was not put to Mr Catlin in cross-examination. I reject Mr Lindley’s evidence that the question of payment was discussed between him and Mr Catlin. If any further point is needed, the cost of the Jackson-Coulson report does not appear in the final account documents. Carter Jonas was, in the circumstances, right to abandon the claim.

[551] In relation to the CDM 1% element of the original claim for £29,433.10, this has now also been abandoned. Mr Granger conceded in oral evidence that there was no contractual basis for this claim.

[552] This leaves the claim for £19,730.44, which Carter Jonas is still pursuing. The claim was put very succinctly by Mr Quiney in his final written submission:

It is claimed under the contract on the basis of the Carter Jonas letter dated 20 April 1999. In the alternative it is claimed as a quantum meruit as pleaded at paragraph 77 of the counterclaim.

[553] There is no dispute that Carter Jonas’s entitlement to fees arises pursuant to its agreement with the claimants dated 9 February 1998. It is common ground that, under the agreement, Carter Jonas is entitled to 9% of the contract sum for performing agreed services and that those services included the responsibility for design, inspection and certification (subject to the Horne position).

[554] Pursuant to clause 4.1 of the conditions, CEL was obliged to pay Carter Jonas all fees due to the surveyor within 28 days of the surveyor’s account.

[555] It is common ground that no invoice has been raised that includes the sum of £19,730.44. It is clear that the letter dated 20 April 1999, upon which Carter Jonas relies, does not constitute an invoice. The terms of the letter are not in the form of a demand for payment. The letter is written by Mr Pardoe to Mr Catlin after Mr Pardoe had received a note from Mr Lindley on 19 April 1999 giving his estimate of the firm’s outstanding fees. It was written against the background that, against Carter Jonas’s advice, Mr Catlin had, on 12 April 1999, reached agreement with Guildford on its outstanding fees and, on 8 April 1999, Mr Lindley had sent Mr Catlin a draft final account upon which the 9% figure was based.

[556] The letter of 20 April 1999 from Mr Pardoe to Mr Catlin made it clear what sums Carter Jonas would be claiming “in normal circumstances”. The letter must be read in the light of the correspondence between Mr Pardoe and Mr Catlin, which demonstrated that Mr Pardoe recognised that these were not normal circumstances. Indeed, this is recognised implicitly in the letter itself, which ends “could we have a further chat about this matter and try to resolve it?”. Although I have reached my conclusion independently of Mr Granger, I note that, in his evidence, he agreed that this letter did not constitute a demand for payment.

[557] I am satisfied that the letter dated 20 April 1999 does not constitute the surveyor’s account for the purpose of clause 4.1 of the conditions of contract. Equally, I am satisfied that Carter Jonas made no subsequent demand for payment apart from the claim made in the defence and counterclaim.

[558] In so far as it is necessary to do so, I prefer the evidence of Mr Catlin to that of Mr Granger, that in subsequent conversations Mr Granger assured Mr Catlin that he would not be charged further fees by Carter Jonas for its work on the project.

[559] There can therefore be no question, on a factual basis, that Carter Jonas was entitled to be paid additional fees on a quantum meruit. Additionally, para 4.24 of Keating on Building Contracts must be right when it concludes that:

A claim on a quantum meruit cannot arise if there is an existing contract between the parties to pay an agreed sum. |page:168|

[560] In these circumstances, I dismiss the counterclaim.

K. Damages claim: Which remedial scheme?

[561] The issue can be formulated as follows:

On my findings of fact which remedial scheme is reasonably necessary in order to repair the defects in the Lodge?

[562] The quantum experts produced a revised agreed joint statement on quantum dated 1 July 2005. This enables the court and the parties to see what are the agreed costs of the various schemes subject to liability.

[563] Both parties are agreed that some remedial work is necessary. Carter Jonas contends that it is not liable to pay for any remedial work but it says (supported by Mr Laundon) that a relatively modest amount of work needs to be done, namely:

(a) rebuild the west elevation;

(b) remedy the problems with the chimneys by providing more ventilation or by rebuilding;

(i) the need to reinforce the window and door framing;

(ii) reinforcement of the bay windows;

(iii) some remedial work on the wall ties;

(iv) studding to the gables;

(v) fixings between the external wall and the steel frames;

(vi) additional straps;

(vii) work on tactrays and gutters;

(viii) minor work on timber flooring;

(d) minor additional work as follows:

(i) replacing the pump in the basement;

(ii) carrying out work on the doors;

(iii) some defects in the services;

(iv) minor work on the car park at a cost of £125.

[564] The claimants’ case is that an altogether more radical solution is required in order that Mr Catlin can be provided with what Carter Jonas contracted to provide, namely a really good nine-bedroom shooting lodge that was costing (including demolition of the existing building) around £1m in 1997-98.

[565] Mr Catlin’s primary claim is that, in order to remedy the defects, the scheme proposed by Mr Roberts involving an additional stonework skin should be built around the parameter of the lodge. The costing is based upon the original bill of quantities prepared by Markhams. The claimants justify the extensive work required either for this scheme or the alternative but less favoured extensive work on all four elevations for the following reasons:

(i) the wrong breather membrane was installed with significant consequences for the building as a whole;

(ii) there are other defects in the design and construction of the external envelope that must be remedied;

(iii) there is and always has been a persistent problem of water ingress, principally, but not exclusively, to the west elevation; and

(iv) there are numerous other defects of design and construction relating to the fireplaces, the basement, the roofing, leaking door frames, floors, doors, services, the car park, the study floor and some miscellaneous items.

[566] I have dealt with these topics separately in the course of this judgment.

[567] In relation to the breather membrane, I have already concluded that the existing breather membrane represents a significant defect and cannot be left in place and that it is necessary for the correct breather membrane to be inserted throughout the building to provide the level of protection that the building requires. Second, I am satisfied that the cavity widths do not conform uniformly to the BRE requirement of a cavity width of 100mm. Third, the cavity detailing was inadequate. Fourth, there was no VCL to prevent condensation occurring within the timber-frame construction. Finally, I have concluded that the problem of water ingress has been persistent and remains so.

[568] In all the circumstances, I have preferred Mr Roberts’ evidence to that of Mr Laundon and I must now consider Mr Roberts’ two options. The first, scheme 1, is the third-skin option that involves providing an additional stonework skin around the perimeter of the lodge. The cost of this option, together with rebuilding the chimneys, is agreed as £655,937.

[569] Mr Roberts’ alternative scheme is scheme 3, which involves taking down and rebuilding the stone external skin on all elevations, including the provision of new wall and other ties, breather membrane and vertical timber supports. This increases the overall width of the wall by increasing the foundations. The cost of this scheme is £403,390.

[570] These two schemes are both alternative methods of remedying the defects in the building and providing a building that conforms to what Mr Catlin contracted and paid for. It is clear that Mr Roberts has always been unhappy with the concept of a timber-frame construction on this particular site. Although he would not have designed a similar building himself, he is unable to say that such a design would be inadequate. The third-skin option would enable him to deliver a building more in keeping with his own traditional concept. I have no doubt that it is a well-thought-out solution, but it costs significantly more than the alternative solution. The scheme 3 option provides what is reasonably necessary to enable Mr Catlin to have the lodge for which he contracted. It deals not only with design problems in the past but should also enable the lodge to be able to withstand the problems inherent on such a difficult site in the future. I conclude that Mr Roberts’ alternative scheme provides the appropriate remedial scheme for the lodge.

L. Conclusion

[571] I conclude, therefore, that the claimant is entitled to recover

(a) the cost of Mr Roberts’ scheme 3;

(b) below-the-line items and other losses as set out in the judgment.

[572] I reject the claimants’ claims as I have set out in the judgment and, in particular, claims made in respect of the conference centre and professional fees. I also reject Carter Jonas’s counterclaim.

[573] I therefore give judgment for the claimant in the sum of £487,772, in accordance with the schedule annexed to the judgment.

Judgment given to first claimant; counterclaim dismissed.

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