Building contract – Arbitration – Defective premises – Remedial works – House built with benefit of NHBC Buildmark policy – Claimant owner claiming for defects in property – Partial award being made in arbitration – Claimant making further claim – Defendant NHBC applying for summary judgment and/or strike out of claim – Whether reasonably arguable that claimant incurred loss of cost of remedial works recoverable against defendant under settlement agreement – Whether claims dealt with in prior arbitration could be raised against defendant – Application granted in part
The claimant and his ex-wife owned a bungalow, Lentune House, Church Brampton, Northamptonshire. The bungalow was constructed in around 2002 with the benefit of an NHBC Buildmark policy. In September 2004, the claimant made a claim under the policy against the builder in arbitration in respect of which there was a partial award. The award in the claimant’s favour was largely met by the defendant, discharging its liability under section 2 of the Buildmark Policy. The claimant then commenced a further arbitration under the JCT contract with the builder. By March 2010, the builder was heading for insolvency and subsequently became insolvent. A settlement agreement was reached between the claimant and the defendant under which the claimant discontinued the JCT arbitration and made a claim against the defendant which refused to make any further payments to the claimant, on the basis that the claims had already been dealt with and determined in the arbitration. In February 2013, the claimant sold the property without having carried out any remedial works. Proceedings were commenced in September 2017. The defendant applied for summary judgment and/or to strike out the whole or part of the claim.
The defendant argued that since the claimant had sold the property he had suffered no recoverable loss because he would never incur the costs of remedial works. The policy was a contract of indemnity and he could not be entitled to an indemnity against loss he would not suffer. The only loss he could suffer would be diminution in value but that was expressly excluded by the terms of the policy. Each of the claims now made by the claimant had already been dealt with in the arbitration and could not now be the subject of a claim under the settlement agreement.
Held: The application was granted in part.
(1) Although the claimant had to have a case that was more than merely arguable, the bar on either a summary judgment or strike out application was not to be set too high and there should be no need for a mini-trial of the issues between the parties. The criterion to be applied was the absence of reality. The application for summary judgment was made under CPR 24.2(a) and might be given on the whole of a claim or on an issue if the court considered that the claimant had no real prospect of succeeding on the claim or issue. The effect of the granting of summary judgment against a claimant was necessarily to bring that claim to an end but the refusal of summary judgment merely meant that the claim might proceed. The application to strike out was made under CPR 3.4. The statement of case had to disclose reasonable grounds for bringing the claim and, if it did not, it was liable to be struck out. The use of the word “reasonable” connoted something more than merely arguable but the court was concerned only with whether there were reasonable grounds for bringing the claim, rather than whether it would ultimately succeed. The court would not strike out a claim that raised an issue of fact that could only be determined at trial or an issue of law on which the claimant was not bound to fail: Crown House Technologies Ltd v Cardiff Commissioning Ltd[2018] EWHC 54 (TCC) applied.
(2) The claim was made under the settlement agreement and not per se under the policy. The parties agreed that the claimant would submit a claim which would be dealt with by the defendant as if the builder were insolvent (as it was by the time the agreement was concluded). In those circumstances, the defendant undertook to pay the cost of any work which the builder would otherwise have been liable to pay under the policy. There were numerous issues that potentially arose, the end result of which was that the “no loss” defence was not suitable for determination on a summary basis. An insurance policy might indemnify the insured against loss, under which it was a question of law and fact what loss had been suffered. The policy might by express inclusion or exclusion identify how loss was to be assessed. It was arguable that the issue in this case was not the appropriate measure of loss but what the defendant had undertaken to pay in accordance with the definition of cost. It was certainly arguable that, under the policy, a claim for diminution in value was not excluded. The exclusion on which the defendant relied had to be read in the context that the express primary liability of the defendant was to carry out remedial works or pay the cost of remedial works. Read in the context of the primary liability, the claimant had a real prospect of succeeding in the argument that that referred to residual loss of value and was not be construed as a general exclusion of liability for diminution in value. The claim for summary judgment on the basis that there was no real prospect of showing that there had been recoverable loss was dismissed.
(3) For later proceedings to amount to an abuse of process, it was not necessary that they were brought against a party to the previous proceedings. The identification of whether the same issues were being re-litigated or re-argued involved a close merits-based analysis of the facts. If the court concluded that the same issues were being re-litigated, the issue was whether it would be manifestly unfair to a party to the later proceedings to allow that to be the case. It was clear that the parties had agreed that claims which had been the subject matter of an award, or had formed part of the arbitration but not been pursued, could not be raised again against the defendant directly. What was required was a careful consideration of the issues on the documentary evidence available. In this case, all but two of the items claimed had been determined in the arbitration. One of those two had no real prospect of success. The court could not conclude that the respondent had no real prospect of success in the other. It was a matter for the claimant whether he wished to pursue a claim on that item alone: Michael Wilson & Partners Ltdv Sinclair[2017] EWCA Civ 3 applied.
Daniel Goodkin (instructed by White & Black Ltd) appeared for the claimant; Samuel Townend (instructed by Howes Percival LLP) appeared for the defendant.
Eileen O’Grady, barrister
Click here to read transcript: Hodgson v National House Building Council
