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Defective Cladding and Defective Claims: Naylor & Ors v Roamquest & Anor25 March 2021

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In the recent case of Naylor & Ors v Roamquest Ltd & Anor¹, the English Technology and Construction Court (“TCC”) considered an application to strike out parts of a cladding claim on the grounds that they were insufficiently particularised. The case, which emphasises the importance of proper pleading, will be of particular interest to parties which are, or may become, involved in such claims in England and Wales.

"The decision in Naylor underscores the importance of claimants sufficiently particularising their claims so as to enable the defendant to understand the case that they have to meet."

BACKGROUND

The claim was brought by the leasehold owners of flats in the New Capital Quay development in London, a mixed residential and commercial development comprising eleven tower blocks. The external envelope of the tower blocks was constructed using aluminium composite cladding and timber rainscreen cladding with K15 insulation. Following the Grenfell Tower fire tragedy, testing revealed that this envelope had no flame-retardant properties and that it failed to comply with applicable building regulations.

Although an NHBC Building Policy covered the cladding replacement works, the claimants sought damages from the developer and the contractor which carried out the design and construction of the development for their uninsured losses, including increased building insurance premiums, lost rental income, alternative accommodation costs and damages for distress and inconvenience. They relied on breaches of the applicable building regulations, breach of contract and breach of statutory duty under the Defective Premises Act 1972.

Claims were also made in respect of additional defects allegedly detected following further inspections of the cladding, cavity barriers and fire stopping. The estimated cost of rectification works in respect of those additional defects was approximately £5.8m.

However, the defendants argued that the additional defects claims were speculative, with no positive case asserted regarding many of the alleged breaches and that the particulars provided were inadequate. They also argued that it was not reasonable or proportionate for the claimants to claim for re-doing remedial works to the blocks in circumstances where works to remedy breaches of the Building Regulations were being funded by the NHBC pursuant to the Buildmark Policy.

The defendants also contended that the claimants had no standing to bring a claim for the full cost of any remedial works because they did not own the whole of the tower blocks in question (individually or collectively). Where a claimant has only a limited interest in the land, their damages are confined to the extent of their interest, yet each claimant claimed as damages all costs of all works to all blocks. Furthermore, the property leased to each claimant excluded the walls of the blocks and all parts of the main structure of the buildings, such that the claimants would not be entitled to carry out the remedial works. The claimants, in reply, submitted that the defendants’ assertions raised disputed factual issues not suitable for disposal on a summary basis or by way of strike out.

"The claimants sought damages from the developer and the contractor which carried out the design and construction of the development for their uninsured losses"

JUDGMENT

The TCC took the view that the defendants’ complaint as to the claimants’ pleaded case was well made. The TCC noted that the Particulars of Claim referred to “assumed or potential defects” but did not assert the nature, extent or location of those defects with any particularity, depriving the defendants of knowledge of the case they had to meet. Instead, the claimants relied on the absence of documents from the defendants to prove there were no further defects in construction.

Furthermore, the TCC noted that “the pleading does not distinguish between those defects that have been accepted by the NHBC and are the subject of ongoing remedial works, and any disputed/outstanding defects. It assumes that all cladding works will have to be replaced in full”. Though the claimants asserted that a letter of comfort from the NHBC, which stated that the remedial works included replacement of the cladding, insulation and cavity barriers, did not confirm that the works when completed would comply with the relevant Building Regulations, as the TCC pointed out this did not detract from the requirement for the claimants to establish a positive case for both the alleged breaches and the damages claimed.

The TCC observed:

The difficulty faced by the Claimants is that, contrary to good practice, the allegations of defects are not based on inspections or opening up works carried out by appropriately qualified experts and the subject of an expert report. The pleading is based on a suspicion that the remedial works will prove to be inadequate; it does not provide particulars of specific, identified defects, or their location and extent. In short, the pleading imposes on the Defendants the burden of identifying for themselves whether the defects in fact exist and proving their absence. That is not a proper basis on which to bring a claim for damages.”

The fact that the defendants had failed, despite requests by the claimants, to disclose documents which would enable the claimants to ascertain whether or not there were additional defects did not absolve the claimants from the need to carry out investigations, to identify any defects and to plead a coherent and adequately particularised case.

Accordingly, the TCC held that the claim should not be allowed to proceed on the basis of a defective pleading. However, the claimants were given the opportunity to correct the deficiencies in their Particulars by way of amendment.

The TCC did not make a decision as to the claimants’ standing to bring the claim, agreeing with the submission that the matter was one for full investigation at trial. However, the TCC noted part of the decision in Rendlesham Estates plc v Barr Ltd² in which Edwards-Stuart J considered the ability of individual flat owners to claim damages based on defects in the common part of an apartment block and concluded “the owner of an apartment which has been rendered unfit for habitation because of a defect in the common parts is entitled to the cost of repairing that defect, or at least to the cost of carrying out those repairs necessary to make his flat fit for habitation”. Edwards-Stuart J did not see how the fact that the carrying out of those repairs would necessarily benefit other leaseholders should affect the particular claimant’s right to compensation.

"The TCC took the view that the defendants’ complaint as to the claimants’ pleaded case was well made."

LESSONS LEARNED

The decision in Naylor underscores the importance of claimants sufficiently particularising their claims so as to enable the defendant to understand the case that they have to meet. The fact that a defendant has withheld documents which might prove crucial to a claimant’s claim will not allow the claimant to reverse the burden of proof: the onus is upon the claimant to establish their case, including by carrying out their own investigations if necessary. The court has therefore reiterated the fundamental principle of English law that defendants in cladding claims will not need to prove their innocence in the absence of a positive case against them.

However, this decision also demonstrates that, in circumstances where claimants fail to properly particularise part of their claim, the court may not be prepared to strike out that part of the claim immediately, without giving the claimants time to address those deficiencies. The approach taken by the TCC in Naylor may also, therefore, provide some comfort to cladding claimants facing a requirement to prove technically complex claims, particularly where limitation may be an issue³.

HOW CAN WFW HELP?

WFW regularly advises clients in the construction industry on complex disputes concerning developments in the UK. WFW’s depth of experience in litigating construction disputes before the English courts enables us to provide strategic advice from the earliest stages of a dispute, including identifying appropriate experts to investigate defects.

[1] [2021] EWHC 567 (TCC)
[2] [2014] EWHC 3968 (TCC)
[3] See our recent article on Martlet Homes Ltd v Mulalley and Co Ltd [2021] EWHC 296 (TCC) for the limitation issues that can arise in relation to combustible cladding claims.

 

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