Negligence — NHBC cover — Solicitors instructed to ensure 10-year NHBC cover in place — Solicitors discovering after completion that no such cover in existence — Whether duty to confirm before completion that cover would apply — Appeal allowed
The appellants instructed the respondent solicitors to act for them in the purchase of a plot of land, together with a house that the vendor was to build. The purchase was to be funded by a mortgage from a building society. The appellants and the building society required the house to enjoy protection under the NHBC scheme. The building society’s instructions to the respondents specifically required them to ensure that the benefit of the NHBC’s 10-year protection certificate would pass to the borrower.
In the course of pre-contract enquiries, the respondents sought, and received, confirmation from the vendor and his solicitor that the house would have the benefit of NHBC cover and that NHBC papers would be delivered, as they were, upon exchange of contracts.
In July 1993, the respondents completed the purchase of the finished house, but failed to do anything with the NHBC documentation, and took no steps to obtain the 10-year certificate. In September, they sent off an “acceptance” of NHBC cover, whereupon the NHBC informed them that the builder had ceased to be a member in March 1993.
Defects in the construction of the house subsequently became apparent, rendering it effectively worthless. The NHBC took the view that no NHBC cover was in place, and it therefore refused to indemnify the appellants. The appellants’ claim for negligence against the respondents was dismissed after the judge accepted an argument that the respondents had reasonably believed the NHBC to be bound. The appellants appealed. The respondents argued that even if they had filled in and sent off the documentation prior to completion, this would not have revealed the absence of cover.
Held: The appeal was allowed.
The respondents could not reasonably claim to have held a reasonable belief that the NHBC would be bound. It was not disputed that the NHBC was not liable unless the builder remained a member at the date upon which the documentation was passed. It followed that the NHBC documentation did not give authority to the builder to pass on that documentation, since, if that were its effect, the NHBC would have been bound. Since the respondents accepted that that was the position in law, they could not, at the same time, say that it was reasonable for them to have come to the opposite conclusion. On the facts, they had simply, and negligently, assumed that cover was in place. They should at least have contacted the NHBC to confirm the builder’s continuing membership and authority, and so confirm that the NHCB cover would validly come into existence after they had filled in and returned the relevant form. Had they done this, they would have discovered the true position, and the claimants would not have completed the purchase.
Moreover, the respondents had been under specific instructions to ensure that the 10-year certificate was in place. Since the house had been completed prior to the exchange of contracts, and assuming that the builder had had authority to pass on the NHBC documentation, there would have been no reason why the NHBC could not have issued its 10-year certificate straight away. Accordingly, it had been incumbent upon the respondents to contact the NHBC prior to completion so as to obtain that certificate. Had they done so, they would, again, have discovered the true position.
Bryan Thomas (instructed by Colin Taylor, of Cardigan) appeared for the appellants; Michael Pooles QC (instructed by Morgan Cole, of Cardiff) appeared for the respondents.
Sally Dobson, barrister