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30 May 2013

Hunt & Others v Optima (Cambridge) Limited and Others

Michael Fahy considers the recent case of Hunt & Others v Optima (Cambridge) Limited and Others [2013] EWHC 681 (TCC).  The Technology and Construction Court held that: a property developer; landlord; and architect were liable to long-leaseholder residents for defects in a block of flats.

Background

The claim was brought by a number of leaseholders in a block of flats in Peterborough against the developer landlord (Optima) and the property consultants (Strutt & Parker (“S&P”)).  The flats and building experienced numerous defects.  Problems included leaking roofs, defective plumbing, inadequate sound proofing, floor movement and drainage issues.

The case

The leaseholders succeeded in claiming against Optima under the terms of the sales agreements and repairing covenants in the leases.  S&P were held liable for negligence in wrongly issuing certificates certifying that works on each property had been carried out to a satisfactory standard and in compliance with the approved drawings and building regulations.

Optima

The relevant clause of the Optima sales agreements, requiring the flats to be completed in a good and workmanlike manner with suitable materials, was breached when each unit was completed and again when the whole building was completed.  Optima was ordered to pay damages based on the cost of remedial works required, the funds to be placed in a trust account to ensure the works were completed.  An order for specific performance was not made due to the practical difficulties involved with carrying out works within other flats which were not subject to the proceedings.

Optima was also held to be in breach of the repairing covenant in the Claimant’s leases.  The Court held that the repairing obligations, in the leases, were to be construed broadly as Optima was the developer and obliged under the leases to deal with inherent defects to the building.

S&P

The Court rejected S&P’s argument that it owed no duty of care, in tort, to the buyers and that its certificates did not constitute any form of guarantee or warranty.  S&P was found to be in breach of its duty of care to the buyers when it certified each flat as complete and had the building control completion certificate.  The court found it was always the case that the buyers would rely upon the certificates which were held to be contractual warranties.  Further, a special relationship akin to a contractual duty was found to exist.

The duty of care concerned the giving of the certificates and the performance of services necessary for them to be issued.  In respect of the second, S&P had warranted that Mr Egford (the architect employed by them) had the requisite experience to certify the works and that he had undertaken his inspections with reasonable care.  Although the Court found fault with Mr Egford, it was held that he had no personal liability, but rather that S&P were liable for his failings.  Damages against S&P were ordered based on the actual reduced value of the flats as at the date of purchase.

Limitation

Optima argued that the cause of action arose when works had been completed sufficiently to allow occupation of each flat.  The Claimants asserted that the cause of action arose when the building as a whole was completed, and they were therefore not time-barred.

The Judge held that two causes of action could arise in relation to the same facts at different times.  An example, such as in this case, would be when the building as a whole was completed and again when a flat within a block was sold.

General damages

In respect of the distress and inconvenience suffered by the Claimants over a period of some 9 or 10 years as a consequence of the various defects, a relatively low award of damages was made.

“Fair and modest allowances” totalling between £213 and £1,100 were awarded for each relevant claim.

Comment

This case highlights the substantial duty owed to buyers by surveyors and architects acting for developers in addition to the responsibilities of the developer.  However, the serious difficulty in getting defects remedied experienced by long-leaseholders is once again emphasised.  Meanwhile, the modest damages awards for the decade of discomfort and distress suffered by residents will do little to prompt landlords into taking pre-emptive action to remedy defects in such buildings.