Complaint by purchasers against builder alleging defective construction of bungalow–Dampness–Two contracts–Warranty in second contract giving purchaser rights under National House-Builders Registration Council certificate scheme–Purchasers unsuccessful in arbitration on second contract–Purchasers estopped from claiming under first contract–Substantially same claim–Purchasers’ appeal dismissed
This was an
appeal by Mr and Mrs Willday from the dismissal by Judge Heron at the Evesham
County Court, on a preliminary issue, of their action for breach of contract
based on alleged defects of construction in a bungalow built by the respondent,
Harry Taylor.
D G Readings
(instructed by Cross, Son & Hodgetts, of Evesham) appeared for the
appellants, and N W Budgen (instructed by New & Saunders, of Evesham)
represented the respondent.
The court did
not call on counsel for the respondent.
Giving
judgment, CAIRNS LJ said: The parties had entered into two contracts with
regard to this bungalow. The first was dated October 29 1970, and the second
was dated January 4 1971. The purpose of the second agreement was to supplement
the first one and to give the purchaser certain additional rights in connection
with an organisation called the National House-Builders Registration Council.
Each of the agreements contained an arbitration clause. The plaintiffs, who
were the purchasers, proceeded to arbitration under the second agreement. An
arbitrator was duly appointed and heard the case, and gave an award in which he
dismissed most of the plaintiffs’ claims, though he did award in their favour a
small sum of £28. Included in the complaints which the arbitrator dismissed was
a complaint of defects in construction, giving rise to dampness. The plaintiffs
afterwards started this action, which is an action under the first of the
contracts, claiming (and claiming only) damages in respect of defects in
construction causing dampness. The preliminary issue which the learned judge
heard was as to whether, by reason of the terms of the two contracts and of the
matter having gone to arbitration and the arbitrator’s award having been made,
the plaintiffs were estopped from bringing this action. The learned judge held
that they were so estopped. The contention on this appeal on behalf of the
plaintiffs has been that the arbitration was an arbitration under the second
contract and not under the first one, and that despite the award against the
plaintiffs in respect of this dampness, it is still open to them to claim under
the first contract.
The first
contract provided in its third clause: ‘The vendor’–that is the builder, the
defendant–‘will in proper and workmanlike manner complete the erection of the
said bungalow in accordance with the approved plans deposited with the local
authority and whereof the plan and specification are annexed to this
contract.’ The arbitration clause was in
these terms: ‘In case any question shall arise between the parties hereto as to
the workmanship and/or materials in connection with the erection of the said
bungalow the same shall be referred to a chartered architect to be appointed by
the president for the time being of the Royal Institute of British Architects
and the decision of such referee shall conclusively settle the matter.’ The later agreement provided in its second
recital: ‘This agreement is supplemental to the said contract’–that was the one
that I have just referred to–‘and is intended to ensure that the dwelling
will be or has been erected and completed at least in accordance with certain minimum
standards and to afford a guarantee and remedies to the purchaser additional to
any guarantee or remedies contained in the said contract.’ Clause 3 contains warranties by the builder
in these terms: ‘The builder hereby warrants that the dwelling has been built
or agrees that it will be built: (1) in an efficient and workmanlike manner and
of proper materials and so as to be fit for habitation and (2) so as to comply
in all respects with the Council’s requirements and (3) so as to qualify for
the certificate.’ That was a certificate
of the NHBRC. Then it goes on: ‘Provided that (i) if the Council’s requirements
conflict with any drawings or specification contained or referred to in the
said contract then to the extent that the Council’s requirements provide for a
higher standard of construction or for additional work to be done the Council’s
requirements shall prevail and (ii) the builder shall during office hours show
to the purchaser upon his request a specimen of the certificate and the
Council’s conditions of registration and rules.’ I should refer to clause 5 of this contract,
because some reliance was placed on it by the plaintiffs’ counsel on this
appeal:
‘The builder
shall make good within a reasonable time after receipt of the purchaser’s report
and at his own expense any defects in the dwelling which are consequent upon
any breach by the builder of the Council’s requirements and which are reported
in writing to the builder within the initial guarantee period. Nothing in this
agreement shall oblige the builder to make good defects in the dwelling caused
by wear and tear or by normal shrinkage. . . .’
The latter
part of it is not relevant here. The ‘initial guarantee period’ is defined in
the definition clause as being a period of two years from the date of the
certificate of the National House-Builders Registration Council. Clauses 10 and
11 provide:
’10 The
rights conferred on the purchaser by the terms of this agreement are in
addition to any rights conferred on the purchaser by any other contract between
the purchaser and the builder.
’11. Nothing
contained in any other contract made between the purchaser and the builder
relating to the dwelling shall restrict or over-ride in any way whatsoever that
which is contained in this agreement and subject to proviso (i) to clause 3
hereof in so far as any term in any such other contract is inconsistent with
the terms of this agreement the terms of this agreement shall prevail provided
that a higher standard or additional requirements called for by the said
contract shall not be deemed inconsistent.’
Then the
arbitration clause, clause 12, is in somewhat different terms:
‘If any
dispute shall arise between the purchaser and the builder concerning any matter
or thing arising hereunder or in connection herewith such dispute shall be and
is hereby referred to the arbitration and final decision of an arbitrator to be
appointed at the request of either party by the presidents of the Royal
Institute of British Architects and of the Royal Institution of Chartered
Surveyors from a panel of arbitrators nominated by them and such reference
shall be deemed to be a reference to arbitration within the meaning of the
Arbitration Act 1950 or any subsequent re-enactment or modification thereof.’
Then there is
a sentence about the awarding of damages; then a rather curious proviso:
‘Provided
that if there shall be any other dispute or difference between the purchaser
and the builder in any way connected with the contract to which this agreement
is supplemental and which the builder does not agree to being referred to the
arbitration of the same arbitrator in the same reference as any dispute arising
hereunder is referred the purchaser shall not be obliged to refer any dispute
arising hereunder to arbitration but may take such other proceedings in
connection therewith as he may be advised.’
Now, I have
said that an arbitrator was appointed under that second contract. He was
appointed in pursuance of two applications duly made by the plaintiffs for the
appointment of such an arbitrator, and in each of those applications there
appeared the sentence: ‘As a condition of the appointment I hereby agree as
follows: (1) That the arbitrator’s award will be in complete satisfaction of my
claim.’
It will be
observed from the parts that I have read from the two contracts that the
provisions of the later contract are decidedly more, favourable to the
purchaser in relation to the undertakings as to the quality of the workmanship
and so forth by the builder than the provisions of the earlier one. It will
further be observed that it is expressly provided in the later contract that
the terms thereof shall prevail where there is any inconsistency between the
two, provided that if there is a higher standard under the earlier contract it
shall not be deemed to be inconsistent. It seems to me that it is impossible
for the plaintiffs, having gone to arbitration under that second contract, to
say that they can pursue the same claim under the first contract as has already
been unsuccessfully arbitrated by them under the second contract. I am
referring, of course, to the claim in respect of the dampness. First of all
they set out in particulars of claim the express terms of the first contract,
that the defendant would in proper and workmanlike manner complete the erection
of the bungalow, and then allege the breach of that contract in negligently
carrying it out because he so constructed and fitted the lintels etc as to
allow damp to enter, and in the premises that the defendant was in breach of
the contract. Those are the very matters which were alleged in relation to the
dampness in the arbitration. In respect of constructing the bungalow in a
proper and workmanlike manner, in effect the provisions of the two contracts
were the same. If they did differ, then the higher standard was provided by the
second contract and that had been arbitrated on, and on this part of the case
the plaintiffs had been unsuccessful. It seems to me clear beyond a
peradventure that the plaintiffs having gone to arbitration under the second
contract, having expressly agreed that the award in that arbitration should be
in complete satisfaction of their claim, this action is misconceived.
Reliance was
placed on a recent decision of Forbes J in Purser & Co (Hillingdon)
Ltd v Jackson [1976] 3 WLR 700 where that learned judge held that
where there were two different defects or classes of defect under a building
contract, there can be two separate arbitrations. That, of course, is quite a
different matter from the present case, where it is exactly the same defects
which are being complained of. Reference was also made to Conquer v Boot
[1928] 2 KB 336, a decision of the Queen’s Bench Divisional Court on appeal
from a county court. That, if it can have any bearing on the present case, would
be against the plaintiffs, because it was held in the particular circumstances
of that case that when there had been one action for breach of contract in
completing a building in a good and workmanlike manner, there could not be a
second action of the same nature, even though some different defects were
alleged. This case is fundamentally different from that, but, in so far as it
is different, it is not to the advantage of the plaintiffs but to their
disadvantage.
The one point
in this appeal which did seem as if it might have some possible chance of
success was based upon this fact, that either accompanying his award or a
little later the arbitrator addressed a letter to the plaintiffs or their
advisers, saying that the reason why he had rejected the claim in respect of
this dampness was that it was out of time under the two-year provision in the
second contract. Mr Readings did not feel that he could base any argument upon
that communication, having regard to the simple terms of the award dismissing
that part of the plaintiffs’ claim. I think he was right in taking that view.
If any argument had been founded upon it, if it were open to the court to
consider the letter in addition to the award itself, I think that the further
answer
contract, that, if it is to be regarded as inconsistent with the first
contract, would prevail; the two-year period would apply to both of them. There
is no relevant provision of the first contract which is in any way saved by the
latter part of clause 11 of the second contract. For these reasons, I would
dismiss the appeal.
ORMROD LJ: I
agree, and would only add one word. It seems to me probable that the two
plaintiffs in this case feel, or have felt, that their complaint about
defective workmanship, which they say was the cause of this dampness, was never
in fact adjudicated upon by the arbitrator, because of the two-year limitation
period. No doubt, as a matter of simple fact, that is right. But if they had
brought this action in the county court they would have been faced with the
same difficulty, having not complained within the period limited by the
contract, and so they would have failed in that litigation, apart altogether
from the fact that if they wanted to go back and try to litigate on the first
contract, they would have found themselves once more prevented by the
arbitration clause in that contract. So the proceedings, in my judgment, in the
county court were totally misconceived for a number of quite different reasons.
I agree that this appeal should be dismissed.
WALLER LJ: I
also agree.
The appeal
was dismissed with costs.
