H.H. Judge Richard Seymour Q. C. :
Introduction
- The Defendant in this action, Crest Nicholson Residential (South) Ltd. ("Crest"), carries on business as a developer of residential properties. It acquired the site of the former St. Luke's Hospital in Guildford, Surrey and has constructed an estate ("the Estate") of houses and flats upon it. The Estate is called St. Luke's Park. It was common ground before me that the Estate is now one of the more desirable residential areas in Guildford. The Estate was developed in two phases, to which it is convenient to refer, respectively, as "Phase 1" and "Phase 2". Each of the two phases involved the construction of dwellings in different parts of the Estate.
- The houses built on the Estate are of various designs and sizes, but most have either four or five bedrooms. However, at one end of that part of the Estate developed as Phase 2 there is a terrace of four three-bedroom houses. This terrace ("the Terrace") seems to be called Westcott Place, although the individual houses are numbered, respectively, 77, 79, 81 and 83, Lancaster Avenue, Guildford. Those houses were previously known, respectively, as Plot 78, Plot 79, Plot 80 and Plot 81. This action is concerned particularly with the house at 79, Lancaster Avenue, formerly Plot 79, ("the House"), which is one of the two houses in the middle of the Terrace. The Terrace is orientated so that the front faces north-east, towards an area of open rising ground on the far side of which is a somewhat monolithic curved terrace of houses which also forms part of the Estate.
- The House is of a design variously called in the documents put before me "The Westcott" or "Type H". In this judgment I shall refer to the generic design of the houses in the Terrace as "Type H". Only houses in the Terrace are of Type H. There are no other Type H houses on the Estate or, as I understand it, anywhere else in Guildford.
- The Estate as a whole is constructed on sloping ground, and the Terrace is no exception. In the case of the Terrace the ground slopes from front to rear. The design of Type H houses takes into account the slope of the land from front to rear, in particular by incorporating a lower ground floor level ("the Lower Ground Floor"). The Lower Ground Floor is constructed against a wall retaining the slope of the natural ground at the front, but because of the slope it is at ground level at the rear. There are two higher levels. What is called the ground floor is at street level at the front, but at first floor level to the rear. What is called the first floor is at that level at the front, but at second floor level at the rear.
- The accommodation on the Lower Ground Floor comprises, at the front, a room ("the Room") variously called, on different plans put in evidence, a study or a dining room. At the end of the Room nearest to the street there is an alcove ("the Alcove") above which is a skylight ("the Skylight") which projects forward of the main wall of the House at the front. The Skylight provides the only source of natural lighting for the Room. Beside the Room is a lavatory. The access to the lavatory is actually through a utility room to which access is gained from a hallway and stairwell from which there is a door into the Room. The hallway also gives access to a cupboard under the rising stairs. The other principal room on the Lower Ground Floor is a kitchen/breakfast room ("the Kitchen"). The Kitchen is above ground level at the rear and provides access to the garden through two pairs of doors.
- On the ground floor of the House approximately above, although smaller than, the Room is the smallest of the three bedrooms. That bedroom is thus at the front of the House at street level. There is a bathroom and a store on the ground floor, but the other principal room is what is called a drawing/dining room. Obviously if that room were used in whole or in part as a dining room it would involve the need to bring food up one storey from the Lower Ground Floor.
- On the top floor of the House are two bedrooms and two en suite shower rooms.
- A garage formed part of the property with which it was intended that each of the Type H houses should be sold, but the garages were all together in a block of four essentially at the bottom of the gardens of the houses.
- A sales brochure produced by Crest in relation to Type H houses indicated that the dimensions intended of the Room were 3.785 metres by 3.147 metres, an area of 11.91 square metres. It was common ground before me that those dimensions excluded the area of the Alcove. The dimensions given for the other rooms produced a total internal area of habitable rooms of some 84.99 square metres. It was common ground before me that the total area of the House was something of the order of 1300 square feet, or roughly 120 square metres.
- A number of construction drawings were produced for the purposes of enabling Type H houses to be built. One such was a drawing numbered So700/136 revision F dated September 1998 entitled "Floor Plans" ("Drawing 136F"). Drawing 136F showed two-leaf cavity walls around the perimeter of the house. It indicated that the internal width of the Alcove was 1684 millimetres. It did not in terms show the internal depth, although one could see from the drawing that the depth was to be 778 millimetres plus 278 millimetres, representing a cavity wall across the front of the house behind the projection for the Skylight, less the width of the cavity wall at the front end of the Alcove. The evidence thus suggested that the width of the cavity wall at the front of the Alcove would itself be of the order of 278 millimetres, so that the net internal depth of the Alcove was 778 millimetres. Drawing 136F did show a radiator across the wall at the end of the Alcove at the front of the house. Drawing 136F also included a note concerning the external cavity wall schedule. The material part of that note for present purposes read:-
"Lower Ground Floor 103mm face brickwork, 75 mm clear cavity, 25 mm Jablite insulation, 100mm 4.0N/mm2 blockwork.
Retaining wall specification and construction to structural engineers details."
Various other notes on Drawing 136F indicated that it was intended to be read with details emanating from the structural engineer. Particular notes were in these terms:-
"This drawing to be read in conjunction with the structural engineers details manual & drawings" and
"This drawing must be read in conjunction with the engineers drawings details and manual for specific structural information relating to this building."
There were also the following notes concerning damp proof courses:-
"DPC and Lintols
DPC to be pitch polymer to bs [British Standard] 743 with 150mm lapped joints.
DPC to be min 150mm above finished ground level.
Cavity trays over lintols, meter boxes, air bricks and stepped cavity trays and code 4 flashings at abutments "
- Another drawing which was produced for the purposes of enabling Type H houses to be built was a drawing number So700/137 revision A dated September 1998 entitled "Elevations" ("Drawing 137A"). Drawing 137A showed retaining walls on the side elevation, along with two notes, respectively, "Retaining wall see Eng'rs detail 3950/H2" and "Retaining wall see Eng'rs detail 3950/H3". Those details, which were in fact produced by Messrs. Walker Associates ("Walker"), themselves contained nothing obviously relevant to any issue which I have to decide without reference to attached notes referenced 3950/H5 and H6, for the details indicated various elements in the construction by reference to numbers. The attached notes which enabled the markings on the details to be interpreted included:-
"7. Internal face of retaining walls and top of ground slab to be tanked with bituthene or similar approved membrane lapped with Hyload dpc [damp proof course] where passing through load bearing walls.
8. External face of retaining walls to be faced up with polythene lapped and jointed to minimise moisture ingress.
9. Internal face retaining walls to be dry lined with 100 thermal blockwork with min 4.0N crushing strength laid in 1:1:6 mortar. Cavity between dry lining blockwork and retaining wall tanking to be solidly filled with mortar as work progresses."
- It was not in dispute before me that the original intention of Crest in respect of the construction of Type H houses in the Terrace was that damp proof courses should be provided at Lower Ground Floor level in accordance with the design shown on the details prepared by Walker as understood by reference to the attached notes.
The contract to purchase the House
- The Claimant, Mr. John Skinner, is a hedge fund analyst. In January 2002 he was a private equity analyst. He has lived in Guildford all of his life. He told me in his evidence that he was, in January 2002, and remains, interested in the possibility of studying in the United States for a Master's degree in Business Administration. In January 2002 his thinking was that he would need a source of income to finance his intended studies. He thought that a possible source of income would be to purchase a residential property which he could then let. With that thought in mind he went to the sales office on the Estate to see what properties might be available which he could afford. On the occasion of his visit, which he told me was a Saturday, Mr. Skinner saw Miss Rosie Cooper, who was employed at the time by Crest as a sales advisor. It would seem from the dates upon correspondence to which I shall come that the Saturday on which Mr. Skinner first visited the sales office was 12 January 2002. On that occasion he asked Miss Cooper what was available in his price-range. Miss Cooper told him about the houses in the Terrace. Mr. Skinner asked for details and was shown the sales brochure to which I have already referred. Miss Cooper told Mr. Skinner that the Terrace was still under construction, but that he could look at it from a distance. He did that and then returned to the sales office. Mr. Skinner's evidence was that on his return to the sales office he asked Miss Cooper whether she had any drawings of Type H houses. He was particularly interested in details such as the location of power points and lights. According to him in his oral evidence in chief, Miss Cooper produced a detailed plan drawing which he did not otherwise identify. In cross-examination he contended that he was provided by Miss Cooper on this occasion with copies of Drawing 136F and Drawing 137A. Miss Cooper herself did not give evidence at the trial. The evidence of Miss Claire Grove, who is employed by Crest as a sales manager and who previously worked for Crest as a sales advisor in a sales office, was that copies of construction drawings like Drawing 136F and Drawing 137A were not available in a sales office and it was company policy not to provide copies of construction drawings to potential purchasers. Miss Grove's evidence was that information as to the location of power points, lights, radiators, and so forth, as well as floor plans and elevations, was provided to potential purchasers after they had agreed to purchase and paid a reservation deposit. The means by which it was provided was in what was called a "CSI", or Customer Service Information, drawing included within a package of material in a "Home Manual". A copy of the CSI drawing relating to Type H houses was put in evidence. I reject the evidence of Mr. Skinner that he was given copies of Drawing 136F and Drawing 137A on the day of his first visit to the sales office. There was no obvious reason why he should have been given any drawings, even supposing that copies of Drawing 136F and Drawing 137F had been available in the sales office, which I do not accept was the case. Mr. Mark West, who appeared on behalf of Mr. Skinner, suggested, albeit in a slightly different context, that if Miss Cooper had found herself short of copies of the CSI drawing for Type H houses, she might have gone across the road to the site office and there obtained copies of construction drawings to supply the deficiency. I shall return to that suggestion and the context in which it was in fact made, but it seems to me wholly implausible in relation to the suggested provision of information to someone, who at the stage at which it first allegedly happened, was a casual enquirer, and, moreover, making his enquiries at a time when one would imagine that the site office was in fact shut. On balance it seems to me that the drawing which Mr. Skinner was shown by Miss Cooper on the occasion of his return to the sales office on the day of his first visit to that office was a copy of the CSI drawing relating to Type H houses. After being shown whatever drawing it was he saw, Mr. Skinner left the sales office.
- The CSI drawing for Type H houses was in fact numbered So700/135 revision A and dated September 1998. It showed the exterior walls of the Lower Ground Floor as having two-leaf cavity wall construction. It also showed a measurement of the length of the Room, going into the Alcove, as 3875 millimetres, a length excluding the Alcove of 3097 millimetres, and a width of the Room of 3235 millimetres. The internal width of the Alcove was not shown. By calculation the internal depth of the Alcove was thus shown as 778 millimetres. A note on the CSI drawing recorded the areas of the various floors in a Type H house. The area of the Lower Ground Floor was recorded as 43.7 square metres. The total area of a Type H house was recorded as 128.5 square metres. Another note on the drawing provided:-
"Dimensions & areas are taken to the inside finished face of the wall & are subject to normal building tolerances & site setting out.
Room sizes are maximum as shown."
- The asking price of the House in mid-January 2002 was £395,000. Mr. Skinner's evidence was that he returned to the sales office the day after his first visit, which was Sunday, 13 January 2002. He again saw Miss Cooper. He negotiated with her a sale of the House at a price of £385,000 inclusive of carpets, or £380,000 without carpets. He then decided to purchase on a "with carpets" basis and paid a reservation deposit of £2,000.
- Mr. Skinner retained Messrs. Russell-Cooke ("Russell-Cooke") to act as his solicitors in connection with his intended purchase of the House. Crest retained Messrs. DMH ("DMH") to act as its conveyancing solicitors.
- DMH wrote a letter dated 15 January 2002 to Russell-Cooke which was in the following terms:-
"Crest Nicholson Residential (South) Limited
Plot 79 St. Lukes Park, Warren Road, Guildford
Purchasers Mr. J. Skinner
Price £390,000.00
Exchange Expiry Date 25 January 2002
Completion Date April/May 2002
Allowances £5,000 discount and carpets for exchange by deadline.
We are informed that you act for the above named who are proposing to purchase the dwelling now in course of construction on the above mentioned land at the above mentioned price, subject to contract.
We now have pleasure in enclosing the Legal Handbook together with the documents stated therein which we trust will be of assistance to you.
We should be grateful if you could kindly confirm that you have received instructions and acknowledge receipt of the enclosed papers, and also let us know your Clients' full names and address for insertion in the documentation."
- A copy of the "Legal Handbook" referred to in the letter dated 15 January 2002 written by DMH to Russell-Cooke was put in evidence. It included this observation:-
"J. PLANS AND SPECIFICATIONS
Your client should by now have received direct from Crest the drawings and specifications referred to in the Contract. These documents should not be attached to the Contract. Copies are not available from this office."
The anticipation seems to have been that in the ordinary case a prospective purchaser would have received from Crest a Home Manual in relation to the property he was intending to purchase prior to his solicitors receiving the Legal Handbook from DMH. That did not happen in the present case. Mr. Skinner's evidence in cross-examination was that he had seen the Legal Handbook before exchange of contracts for the purchase of the House.
- Russell-Cooke responded to DMH's letter dated 15 January 2002 in a letter dated 16 January 2002:-
"Thank you for your letter of 15th January and we note the contents.
We enclose herewith some standard additional enquiries in duplicate.
We understand from our client that he has no related sale and that he is buying this property to let and is dealing with brokers recommended by your Site Office.
We further understand from our client that the purchase price is £385,000.00."
- In his first witness statement, dated 10 October 2003, Mr. Skinner said, at paragraph 13:-
"By letter dated 17 January 2002 I received from the Defendant a specification for the house and garage. The specification documents included:
(a) drawing number So700/136, Revision F, dated September 1998;
(b) drawing number So700/137, Revision A, dated September 1998;
(c) drawing number 1237A, dated 3 January 2001; and
(d) undated illustration and floor plans."
- In his oral evidence in chief Mr. Skinner elaborated upon the rather sparse details given of how he said he came to have, it seemed, two copies of Drawing 136F and Drawing 137A before entering into a contract to purchase the House. He said that he visited the site office again on 17 January 2002 and again saw Miss Cooper. On that occasion she gave him the letter dated 17 January 2002 to which he referred in his first witness statement, together with a blue folder which constituted the Home Manual in respect of the House. It was in that folder that he found copies of Drawing 136F and Drawing 137A, along with the drawing numbered 1237A. It was common ground that the latter was a layout drawing of the Kitchen and the adjacent utility room, and that a copy of it had indeed been included with the Home Manual which Mr. Skinner was given. Mr. Skinner gave no further information in his oral evidence as to what the "undated illustration and floor plans" referred to in his witness statement were and no copies of them were produced in evidence. He did not suggest that they were the same as the illustration and floor plans of a Type H house given in Crest's sales brochure, and there was no obviously logical reason why they should have been. He was asked in cross-examination about when he had first seen the CSI drawing relating to a Type H house. He said that he had first seen it about three weeks before the trial. It must follow that his evidence was that no copy of the CSI drawing was included in the Home Manual which he was given.
- The letter dated 17 January 2002 to which I have referred was a standard form, pre-printed letter with blanks to be completed as appropriate. It was signed by Miss Cooper. As completed, it showed the date, the name of Mr. Skinner, the address of the House, and went on:-
"I am pleased that you wish to purchase a new Crest Home at the price of £390,000, Subject to contract. I confirm that I am in receipt of your reservation deposit of £2000, and your exchange deadline is 25 Jan 02.
I enclose with this letter your Home Manual, containing detailed information on your new home, along with explanatory notes and forms, which I hope you will find both useful and informative. I would refer you to the specification enclosed within this manual as it may well differ from other homes or show homes that you have seen.
It is anticipated that your new home will be ready for occupation during May/June 02."
- It was common ground that the Home Manual which was given to Mr. Skinner did include a document entitled "St. Lukes Park, Guildford General Contents Specification Detail for 4 [sic] Bedroom Townhouse Type H Plots 78-81".
- As I shall explain, considerable importance was attached at the trial on behalf of Mr. Skinner by Mr. West to the question whether Mr. Skinner had been provided with copies of Drawing 136F and Drawing 137A before he entered into a contract to purchase the House. Although Miss Cooper did not give evidence at the trial, it was vigorously disputed on behalf of Crest by Miss Rachel Ansell that copies of the drawings in question had been provided. Reliance was placed in particular upon the evidence of Miss Grove to which I have already referred.
- There came a time when Mr. Skinner and the surveyor then acting for him, Mr. Andrew Norris, were provided by Crest with a copy of Drawing 136F. Certainly Mr. Norris, who gave evidence before me as an expert, told me in his second report dated 31 October 2003 that he obtained a copy of Drawing 136F not from Mr. Skinner, but from representatives of Crest at a meeting also attended by Mr. Skinner on 9 August 2002. On the same occasion Mr. Norris obtained from the same source a copy of the detail drawing 3950/H2 prepared by Walker. Mr. Robert Hudson, at the time Production Director of Crest and now its Build Executive, who was also present at the meeting on 9 August 2002, speculated at paragraph 22 of his witness statement dated 21 November 2003 that it was on that occasion that a copy of Drawing 137A was also provided. He said that a copy of Drawing 137A would have been provided on that occasion had it been requested.
- I regret to say that I did not find Mr. Skinner to be a very satisfactory witness. The only matters seriously in dispute in relation to his evidence were what drawings he received, when and in what circumstances. I accept the evidence of Miss Grove that copies of construction drawings were not kept in sales offices. Quite apart from the fact that I was impressed by Miss Grove as a careful witness whose evidence I accept without reservation, there is no logical reason why copies of construction drawings should be available in a sales office. I was invited by Mr. West to contemplate the possibility that Miss Cooper did not have available to her on the occasion of Mr. Skinner's visit to the sales office on 17 January 2002 a copy of the CSI drawing relating to Type H houses and had therefore, in breach of company policy, gone to the site office, which was across the road from the sales office, and there obtained copies of Drawing 136F and Drawing 137A to include in the Home Manual given to Mr. Skinner. The first problem with that speculation is that by that stage Mr. Skinner had decided to commit himself at least to paying a reservation deposit without seeking any further information. There was therefore no urgency about providing him with a copy of the CSI drawing in relation to Type H houses. If he had wanted one and one was not available, it could fairly easily have been sent on to him, or he could have called at the sales office to collect it. A further problem is that there is no reason to suppose that Miss Cooper, as a sales advisor, would know what construction drawings would provide the information which was otherwise contained on a CSI drawing. If she had asked someone who did know which was the relevant construction drawing showing floor plans and details like power points and lights, and that person had been inclined to help her, what would have been provided was a copy of Drawing 136F, not also a copy of the elevation Drawing 137A. The latter was not especially relevant to Mr. Skinner at that point, as he had seen the representation of the front elevation in the sales brochure, and it is difficult to imagine someone going to the trouble to make a copy, or to provide a copy, of a drawing which was not material to the information otherwise thought to be lacking. The unsatisfactory nature of the evidence of Mr. Skinner in relation to the provision of drawings is, in my judgment, emphasised by his evidence that he never received a copy of the CSI drawing relating to Type H houses, but did receive with his Home Manual otherwise unidentified "undated illustration and floor plans". One is being invited to postulate not one, but two, failures in the Crest system for providing information to potential purchasers first that copies of construction drawings which should not have been provided were, and, second, that a copy of a drawing which should have been provided was not. I reject the evidence of Mr. Skinner that he received copies of Drawing 136F and Drawing 137A with the Home Manual which was given to him on 17 January 2002. I find that there was included within that manual a copy of the CSI drawing relating to Type H houses, for what else could the "undated illustration and floor plans" be, notwithstanding that the CSI drawing was in fact dated. I find that Mr. Skinner first obtained copies of Drawing 136F and Drawing 137A on 9 August 2002 when they were made available to him and Mr. Norris at their meeting with representatives of Crest including Mr. Hudson.
- Mr. Skinner did indeed enter into a contract ("the Contract") in writing with Crest dated 25 January 2002 by which he agreed to purchase the House at a price, net of the agreed allowance of £5,000, of £385,000. The Contract contained the following provisions which are presently material:-
"DEFINITIONS
The terms "Crest" "Purchaser"
. "Property" "Development"
. "Plan"
shall have the same definitions as in the attached form of Transfer and the following definitions shall also apply:-
"Completion Certificate!: written notification given by Crest to the Purchaser that construction of the dwelling on the Property has been completed
"Legal Completion": completion of the sale and purchase of the Property.
.
1. A deposit of 10% of the Price shall be paid to Crest on the exchange of this Contract and the balance of the Price (together with any other moneys due from the Purchaser to Crest) shall be paid to Crest on Legal Completion.
2. Legal Completion shall take place and vacant possession be given on or before [the day of ] the eighth working day after whichever is the later of the following dates:-
2.1 the date of this Contract;
2.2 the date of issue of the Completion Certificate;
2.3 the date of issue of a Mortgage Offer (if the provisions of clause 16.1.2 apply); and
2.4 the date of issue of the result of the Local Search (if the provisions of clause 16.2.2 apply)
3. Crest shall complete the dwelling in course of erection on the Property in accordance with the relevant Planning Permission and Building Regulations Approval and specification produced to the Purchaser but to the intent that:-
3.2 whilst it is Crest's intention to comply with the specification it reserves to itself the right reasonably to determine the method of construction and appearance of and the materials used in the dwelling and ancillary facilities and to vary the same and make any reasonable alterations to the drawings and specification which it may in its absolute discretion deem expedient at any time provided that any such variation or alteration shall not diminish the value of the Property and that all necessary statutory consents have been obtained; and
3.3 the Completion Certificate shall be issued within eighteen calendar months of the date of this Contract.
10. The Plan represents Crest's intention as to the execution of development operations but neither any slight variation of the characteristics or dimensions of the Property from those shown on the Plan nor any variation in layout operations or facilities relating to the Development or the Property shall annul the sale or give rise to any claim by the Purchaser for compensation or otherwise.
17. In the event of the deposit actually paid on exchange of contracts being less than the normal 10% deposit and notwithstanding agreement for the payment of a lesser amount by way of deposit in the event of a repudiation of this contract by the Purchaser or failure by the Purchaser to complete on the date fixed for Legal Completion (through no fault of Crest) the Purchaser shall forthwith pay to Crest the difference between the normal 10% deposit and the amount actually paid."
- Mr. Skinner actually paid a deposit of 5% of £385,000, namely £19,250.
- The definitions set forth in the draft form of transfer attached to the Contract indicated that "Crest" meant Crest and "the Purchaser" meant Mr. Skinner. Other relevant definitions were:-
" "Property" the land shown edged red and numbered [79] on the Plan (being part of the land in the title mentioned above) and any Buildings on or over such land
"Plan" the plan attached to this Transfer"
The plan attached to the draft form of transfer showed the boundaries of Plot 79, including the House and the garage which went with the House.
- The expressions "specification" and "drawings" used in the Contract, particularly in clause 3.2, were not defined for the purposes of the Contract.
- It was pleaded on behalf of Mr. Skinner at paragraph 7 of the Amended Particulars of Claim, and admitted at paragraph 7 of the Defence and Counterclaim, that:-
"It was an implied term of the Contract that the Defendant would construct the house and garage:
(a) in a good and workmanlike manner;
(b) without prejudice to (a) above, in accordance with all relevant Building Regulations."
It became apparent during the course of the argument before me that Mr. West and Miss Ansell were at cross-purposes in relation to the implied term contended for. Mr. West submitted that the term which should be implied was a term, in effect, that at no point during the process of construction of the House would anything be done other than in a good and workmanlike manner, and, if it was, there was there and then an accrued right of action in Mr. Skinner. Mr. West relied in support of his submission on the decision of the Court of Appeal in Lintest Builders Ltd. v. Roberts (1980) 13 BLR 38. Miss Ansell, on the other hand, accepted only that a term should be implied that the House when completed should have been constructed in a good and workmanlike manner. Although Miss Ansell did not refer to any authority in support of her submission, it was consistent, in my judgment, with the terms normally implied into a contract to build and sell a house in the absence of relevant express terms see Hancock v. B.W. Brazier (Anerley) Ltd. [1966] 1 WLR 1317. Miss Ansell submitted that the reliance which Mr. West sought to place on the decision in Lintest Builders Ltd. v. Roberts was inappropriate because that case was concerned with the obligations of a contractor under a JCT 1963 form of building contract and the decision depended upon the particular terms of that form of contract. I accept that submission. I find that the appropriate term to imply into the Contract was a term that, when completed, the House should have been constructed in a good and workmanlike manner.
The problems of damp in the Terrace
- Mr. Skinner was in fact the second person to exchange contracts to purchase one of the houses in the Terrace. The first person to do so was Miss Sarah Selous, who exchanged contracts on 18 January 2002 to purchase Plot 81. The next purchasers after Mr. Skinner to exchange contracts were Mr. and Mrs. Matthew Smith, who agreed to purchase Plot 78. The terms of the contracts made between Crest and both Miss Selous and Mr. and Mrs. Smith were similar to the terms of the Contract in that they provided for completion of the sale to take place amongst other things eight days after the issue by Crest of a Completion Certificate. The fourth of the houses in the Terrace was sold to Mr. Simon Evans. Under the terms of the contract dated 5 April 2002 made between Crest and Mr. Evans completion of the sale was to take place on 26 July 2002. In the case of Mr. and Mrs. Smith Crest issued a Completion Certificate on 21 May 2002. Mr. and Mrs. Smith and their children moved into what had become 77, Lancaster Avenue on about 2 June 2002. Miss Selous was told by a letter dated 9 May 2002 that it was anticipated that completion of the construction operations on Plot 81 would be achieved on 21 June 2002, with completion of the purchase eight days after that.
- By a letter dated 22 May 2002 Miss Cooper notified Mr. Skinner that it was anticipated that Crest would be issuing a Completion Certificate in respect of the House on 28 June 2002. That information was repeated in a letter dated 29 May 2002.
- Mr. Smith is, apparently, a surveyor. The evidence of Mr. Jan Czezowski, who, until his retirement at the end of October 2002, was the managing director of Crest, was that in a letter dated 20 June 2002 written following his taking up occupation of 77, Lancaster Avenue, Mr. Smith expressed concern about dampness in the property. Mr. Czezowski's evidence was that Crest then engaged Messrs. Frank Bailey & Partners ("Bailey"), surveyors, to investigate, amongst other things, possibly defective damp proofing works in the houses in the Terrace. Mr. Paul Bailey of Bailey produced a report dated 26 June 2002 of which a copy was put in evidence. In short Mr. Bailey concluded that in the cases of the houses in the Terrace the design and construction of the water proofing details was defective.
- In his first witness statement Mr. Skinner said that he had discovered from speaking to Mr. Smith on about 6 June 2002 that Mr. Smith considered that there were damp problems in his house and that Crest had agreed to buy it back. Mr. Skinner said that at about the same time he had also spoken to Mr. Evans and to Miss Selous and that they had also told him that they had negotiated agreements with Crest to get out of their respective obligations to purchase houses in the Terrace. In fact Mr. Skinner is plainly wrong about the dates of these conversations, for documents put in evidence before me show that the agreements made between Crest and the other purchasers of houses in the Terrace were made at different dates, in the case of Mr. and Mrs. Smith, in July 2002 and, in the cases of Mr. Evans and Miss Selous, in or after September 2002.
- In a letter dated 18 June 2002 to Mr. Skinner Anne Huddleston, at that time Crest's sales manager, informed him that:-
"We have been advised by our Build Director that there will be a delay in the completion of your property due to an unforeseen problem, which is currently being investigated by our engineers.
Unfortunately, this will delay completion of your new home until the end of July, although every effort is being made by the Build Department to complete your house as soon as possible.
We will keep you advised of the situation and in the meantime please accept our apologies for the inconvenience this may cause."
- A scheme of remedial works was then devised which involved the application to the interior faces of the perimeter walls on the Lower Ground Floor and to the upper surface of the concrete floor slab at that level of a product called "Hey'di K11" ("Hey'di") manufactured by Sovereign Chemical Industries Ltd. ("Sovereign"). In literature produced by Sovereign of which copies were put in evidence Hey'di was described as:-
"an alkali-resistant synthetically modified cement which is mixed with styrene-butadiene and water, producing a waterproof coating against both moisture and hydrostatic ground water.
The chemicals in the slurry react, penetrate and fill off or block the capillaries, bonding onto the prepared surface."
- Mr. Skinner in his first witness statement seemed anxious to claim the credit for identifying the problem with damp proofing at the houses in the Terrace, for he volunteered that:-
"22. On or around 30 June 2002 I visited the property with my parents and saw that water was running out of the kitchen wall to the rear of the Property. The water appeared to be escaping through the mortar in the brickwork at the same level as the damp proof course. I was extremely concerned and agreed with my father that it would be sensible for me to telephone the Defendant's 24 hour emergency telephone number to report the problem.
23. Accordingly, later on that day, I telephoned the emergency number and reported the problem. I was informed that the problem would be entered on a database and an engineer would be sent out to the Property to investigate."
- Although it was not in dispute that there had been an occasion on which water running down the hill above the Terrace had penetrated into the houses there, Mr. Skinner did not, in his cross-examination, really grapple with the difficulty that he had, prior to 30 June 2002, already been notified by Anne Huddleston's letter of 18 June 2002 that there was a problem at the House which was being investigated by Crest's engineers and which would delay completion. He seemed to feel that he had confused his dates. Whether that is so or not, it is plain that the damp problems in the houses at the Terrace had been identified by no later than 18 June 2002 and were being addressed by Crest from that time.
- Mr. Skinner was informed of the then current thinking of Crest as to a remedial scheme by a letter dated 12 July 2002 written by Mr. Tim McEvoy, at that time the Sales and Marketing Director of Crest. Mr. McEvoy wrote:-
"Further to our telephone conversation, I apologise for the delay in coming back to you.
We have been investigating not only the problem with the installed work but also evaluating tanking remedial solutions using proprietary systems applied to the internal surfaces of the structure. To remedy the current problems we are considering using the Sovereign Hey'di K11 tanking system installed by an approved installer, which has been approved by the NHBC and carries a full warranty.
With regards to the detail of works to be carried out, it may be better for this to be detailed on site with our Build Director and our appointed chartered surveyor on hand to explain our proposals fully and we will be contacting you shortly to make the necessary appointment.
We are sorry remedial works have become necessary and apologise for the inconvenience and delay this is causing.
Our endeavours are designed to ensure the secondary tanking system ultimately used is fit for purpose and approved by the relevant bodies that regulate our industry."
- Mr. Bailey was asked to advise as to the proposed remedial works and did so in a report dated 2 August 2002 of which a copy was put in evidence. That report included:-
"2.0 GENERAL BACKGROUND
2.1 The sub-basement accommodation in Plots 79,80 and 81 has been cleared back to the original shell finish. The exposed blockwork walls and the floor slab have been treated with Sovereign Chemicals Limited Hey'di K11 cementitious waterproofing compound.
2.2 The material is vulnerable to damage if left exposed and requires special measures to be taken to accommodate fixings without breaching the membrane. This report considers the effect of the proposed measures in relation to these considerations.
3.0 PROTECTIVE MEASURES
3.1 It is proposed to protect the membrane applied to wall surfaces by the construction of an internal leaf of non-load bearing blockwork. It is assumed that the blockwork would be of a similar type to that used in the remainder of the construction, that is Celcon Hi-Seven.
3.2 Such a blockwork wall would effectively take the form of a non-load bearing internal partition. It could be constructed as close to the applied waterproofing membrane on the existing wall surface as irregularities in the line of the existing structures will allow. Care will need to be taken during construction to prevent accidental damage to the adjoining membrane by bricklayers trowels during the course of laying.
3.3 On the assumption that the new blockwork wall is restrained at its head by normal building-in or up to the overlying floor structure on completion the blockwork leaf will provide total protection to the applied waterproof membrane. It will accommodate all normal occupational requirements for fixings, service chases and the like without any risk of breach of the waterproof membrane.
3.4 To achieve this total protection there will obviously be a reduction in floor space equivalent to the thickness of the blockwork and finishes used. Careful detailing will also be needed in the area of the light well and around soil and vent pipe locations. It will not be possible to provide the blockwork leaf above the level of the stair flight but because of the position of the stair flight in relation to ground levels it is considered that the likelihood of breaches of waterproofing membrane through any other applied protective finish, plastering or plasterboard lining, are very slight. The likelihood of water entry appearing in this area if breaches of the waterproofing membrane did occur is considered to be highly improbable.
3.5 Protection of the Hey'di K11 on the ground floor slab will be achieved by the application of a sand and cement screed in the usual way as set out in the BBA Certificate relating to this material."
- The meeting envisaged by Mr. McEvoy in his letter dated 12 July 2002 took place on 9 August 2002. As I have said, Mr. Skinner was accompanied at that meeting by Mr. Norris. Mr. Norris has continued to advise Mr. Skinner since that time, and appeared as an expert surveying witness at the trial before me. In cross-examination Mr. Norris accepted that he does not specialise in problems of damp penetration and has no particular qualifications in that area. However, in his practice as a surveyor he seems to have had a number of bad experiences in relation to damp. Those seem to have prompted him to adopt a very cautious approach to any suggested schemes to remedy damp penetration. Following the meeting on 9 August 2002 Mr. Norris prepared a report for Mr. Skinner of which a copy was put in evidence. The report, dated 20 September 2002, included:-
"3.03 The tanking is penetrated by connections for underground drainage. In my experience, this is a common point of weakness (whichever system is employed) via which even minor movement (between dissimilar materials) can lead to ingress.
3.04 The building of internal lining walls to protect the tanking system would entail loss of floorspace.
3.05 The passage of any moisture through known and suspected deficiencies in the original system could only lead to dampness remaining entrapped behind the new Hey'di tanking system. It would be necessary to insert a physical damp proof course into the inner leaf wall at the top of the tanking system to ensure a full continuous system of protection to prevent the entrapped dampness rising above it. The ends of the side (party separation) walls will require the same. This will be very disruptive to achieve.
3.06 The original damp proof course system has been acknowledged as compromised but the proposed "additional" measures are not comprehensive either. Therefore, no comprehensive protection will be provided and I do not see how supplementing one leaking vessel with another leaking vessel can work reliably.
3.07 In my experience, the points at which there are changes in construction present planes of weakness at which varying thermal and moisture movement can cause sufficient stress for splits/cracks to develop in tanking systems, this varying with there [sic] long term flexibility and the thoroughness of detailing and care in workmanship. I have been only rarely involved in cases of post World War II traditional damp proof courses failing, whereas I have frequently engaged [sic] where proprietary render or liquid type tanking membrane systems have been used. Such failures can take a little time to develop (e.g. after expiry of guarantee periods) whereas faults in traditional systems tend, in my experience, to become apparent very quickly. My confidence in post construction tanking is therefore low.
3.08 The block containing this house acts as a barrier to water on the ground surface running directly down hill and this has already been cited as a reason for previous saturation. However, since then it is understood that completion of pavement and landscaping works effectively act to divert such run off before it reaches the houses. Nevertheless, rain accumulation in the front gardens against the front elevation is still possible and could provide a localised head of pressure leading to penetration below ground level of any weak points.
3.09 According to the Geological Map
for the area, the house stands on an Upper Chalk subsoil that ought not [sic] present high water label [sic presumably "table" was meant] problems. However, without having seen the precise conditions below ground for myself, I am reluctant to rely on this as anything more than a statistical likelihood. It should also be borne in mind that below ground water tends to follow paths of disturbance (lines of least resistance) and the very act of excavation increases irrigation around walls and foundations.
3.10 Overall, the resolution proffered appears to be more reliant on low statistical risk than a comprehensive approach having been adopted, with lack of confidence (and possibly the high cost involved) being presented as a reason for not redeeming the original design.
3.11 Upon sale in the future, it will be necessary to declare known problems and you would need to reflect on the potential consequences of not declaring a former problem that later re-manifested itself (even if you thought it cured). I consider that your position would be weakened if you had accepted a compromise solution. Declaring the problem (even if only potential) could well present sale difficulties, at the minimum by a repressive effect on value.
3.12 Unless there is some form of commercial incentive to enter into the risks presented, I see no point in entertaining a rescue solution for the convenience of Messrs. Crest Nicholson Residential (South) Ltd."
- As is apparent from the citation from Mr. Bailey's report dated 2 August 2002 set out earlier in this judgment, Hey'di was in fact applied to the internal perimeter walls and the floor slab of the Lower Ground Floor of the House, and the other houses in the Terrace, almost immediately after the suggestion had first been made that use of Hey'di might be an appropriate means of providing adequate damp proofing. However, again as appears from the passage from Mr. Bailey's report which I have set out, it was important to the efficacy of Hey'di, once applied, that the coating of it on the surfaces to which it was applied should not be penetrated, for example by picture pins or screws. For that reason the surfaces to which Hey'di had been applied needed to be protected from damage by a screen wall. For reasons which did not emerge in evidence, there was a delay in the commencement of the construction of the relevant screen walls until about January 2003.
The events leading up to the termination of the Contract
- Although the matter was not explored in evidence before me, it seems that DMH was replaced as solicitors acting for Crest, at least in relation to the issues concerning the House, by Messrs. Campbell Hooper ("Campbell Hooper"). It appears that there was contact between Russell-Cooke on behalf of Mr. Skinner and Campbell Hooper on behalf of Crest of which I was not made aware. I was told by Mr. Skinner of contact between him and Mr. McEvoy and Mr. Czezowski in September and October 2002 concerning possible financial arrangements between Crest and Mr. Skinner by way of compensation for the problems experienced with the House. That contact came to nothing. By about December 2002 the focus of attention seemed to have shifted to attempts by Russell-Cooke to insist that Crest accommodate the requirements of Mr. Norris for inspection of concealed parts of the structure of the House by drilling holes, accompanied by threats of legal proceedings. There was fairly extended correspondence between the solicitors in which the position adopted on behalf of Crest was that it intended to fulfil the Contract. After the construction of the screen walls in the House commenced in January 2003 Russell-Cooke wrote a long letter dated 30 January 2003 to Campbell Hooper, of which the most significant parts were:-
"As that report [that of Mr. Norris dated 20 September 2002] confirms, it has been accepted by your client that the intended damp proof course system has been incorrectly and inadequately formed.
There can be no dispute that your client, instead of taking steps to install the originally intended damp proof course system, made a unilateral decision to go ahead with an alternative, namely the application of a tanking system, as their solution to the problem.
In the circumstances it is incontrovertible that the tanking system amounts to a variation from the originally proposed damp proof course system. Whilst Clause 3.2 of the Contract of Sale between our clients, dated 25th January 2002, permits variations to the construction process, any such variations must provide a comprehensive and satisfactory alternative to that originally intended. Furthermore, any such variations must not diminish the value of the property. Our client has significant concerns as to both of these issues and we deal with those below.
The fact of the matter is that despite the remedial tanking system, which represents a vertical damp proof course, this is not tied satisfactorily to the horizontal damp proof course as would have been the case had the damp proof works been undertaken properly in accordance with the original specification. As Andrew Norris advises at paragraph 3.05 of his report, it would be necessary to insert a physical damp proof course into the inner leaf wall at the top of the tanking system to ensure a full continuous system of protection to prevent entrapped dampness rising above it. The ends of the side (party separation) walls will require the same.
However, even if those further works were undertaken, which we understand your client is not prepared to do, they would not provide a comprehensive solution to the problem.
It is clear from this report [one dated 27 January 2003 made by Mrs. Bridget Bagnall] that the alternative solution to damp proof protection, namely the tanking system and outstanding concerns as to deficiencies with that have had a significant detrimental impact on the value of the property. At a minimum the diminution in value attributable to those factors is £50,000.
In the light of the issues raised by Andrew Norris's enclosed report, it is our client's position that significant deficiencies remain in terms of damp proof protection of the property. In the circumstances it is our client's position that this remedial solution (tanking system) is a wholly inadequate repairing solution. The remedial solution is also a variation in the construction process which has sufficiently diminished the value of the property and is therefore in breach of the contract of sale. If the remedial solution is left at that, without further work to install a comprehensive damp proof course (as originally intended), then that is not in compliance with your client's contractual obligations.
All our client wants is to have the property built and completed properly, specifically in terms of the damp proof protection, as originally intended.
In the circumstances unless your client comes up with an acceptable programme of rebuilding or repair (such as to ameliorate any diminution in value) such programme to satisfy the concerns in Andrew Norris's report at paragraphs 3.03, 3.04, 3.05, 3.07, 3.08, 3.14, 4.01, 4.02, 4.06) then our client will have to regard your client's failure to do so as evidence that they have no intention of fulfilling the contract in respects which go to the root of it. "
- Campbell Hooper responded to the letter from Russell-Cooke dated 30 January 2003 denying that Crest was in breach of the Contract. After a further exchange of correspondence Russell-Cooke wrote to Campbell Hooper a letter dated 14 March 2003 which concluded in this way:-
"Our letter to you of 30th January gave a detailed explanation of our client's case and why he regards your client as being in breach of contract. That letter was sent not only to identify those matters, but in the hope that your client would avail itself of the opportunity given to remedy the material breaches complained of and to respond to our client's expert evidence. Unfortunately, as made clear in our letter to you of 28th February, our client's expert evidence has been ignored as have the outstanding issues detailed on page 4 of our letter of 30th January. Your letters since our letter of 30th January clearly confirm that your client has no intention of dealing with the concerns raised in Andrew Norris's report of 20th September 2002 and identified on page 4 of our letter of 30th January 2003. Your client has clearly shown from your correspondence that it will not remedy the material breaches of contract our client complains of and which have caused a significant diminution in value of the property.
Those issues go to the root of the contract. Furthermore, that would remain the case even if there were no concerns regarding the remedial tanking system; we say this because there has been a change in specification and drawings (both of those terms are referred to in Clause 3.2 of the contract) and a significant diminution in value as a result.
Unfortunately our client must therefore regard your client as having made clear, through your correspondence, that it has no intention of fulfilling the contract in those material respects which go to the root of it. Your client is in breach of Clause 3.2 and that breach is serious.
For all the reasons given in our earlier correspondence, in particular our letters of 30th January and 28th February 2003, our client is reluctantly drawn to the conclusion that your client's approach, identified above, amounts to a failure to properly perform the contract in material and serious respects. In the circumstances our client treats the contract as having been repudiated by your client and at an end. Our client is therefore discharged from any further obligations thereunder and the deposit he paid should be returned, to him or us, forthwith.
Our client will look to your client for damages caused as a result of your client's material breach."
- This action was commenced by a claim form issued on 25 March 2003.
- By a letter dated 1 April 2003 written by DMH to Russell-Cooke notice was given in relation to the House that:-
"construction of the dwelling on the property is complete and ready for occupation and accordingly we look forward to hearing from you with regard to legal completion."
- Mr. Skinner has declined to complete the purchase of the House. It has since been resold, together with 77 and 81 Lancaster Avenue, to Mr. Jahan Shahab. The price paid by Mr. Shahab for each property which he bought, in the summer of 2003, was £385,000.
Did Crest repudiate the Contract?
- It was fundamental to Mr. Skinner's case in this action that Crest should have repudiated the Contract. If that were not the case, then it was not seriously disputed that he was in breach of the Contract in failing to complete on or before the eighth working day after the giving by DMH of a Completion Certificate by its letter dated 1 April 2003, and consequently liable to pay to Crest the balance of the 10% deposit for which the Contract provided which had not been paid.
- The significance of the issue whether copies of Drawing 136F and Drawing 137A were provided to Mr. Skinner before he entered into the Contract was that Mr. West contended that, as the expressions used in clause 3.2 "specification" and "drawings" were not defined, those expressions should be interpreted as incorporating not only any specification and any drawing of which a copy was in fact provided by Crest to Mr. Skinner before, or at the time of, the making of the Contract, but also any specification or drawing referred to in any such specification or drawing. By this means he sought to incorporate into the Contract as specifications or drawings for the purposes of clause 3.2 the details prepared by Walker, and thus to contend that it was a requirement of the "specification" or of the "drawings" that the damp proof course to be provided to the Lower Ground Floor of the House was that originally contemplated by Walker. Unless Mr. West was able to identify a "specification" or "drawing" falling within the meaning of clause 3.2 which provided that the damp proof course to be provided to the Lower Ground Floor of the House was that originally contemplated it was impossible for him sensibly to contend that the provision of a damp proof course in some other fashion amounted, potentially, to a breach of contract. Even if Mr. West was able to identify a "specification" or a "drawing" falling within the meaning of clause 3.2 which provided that the damp proof course to be provided on the Lower Ground Floor of the House should be that originally contemplated, an alteration in the method of providing a damp proof course was still permitted under clause 3.2 of the Contract unless such alteration diminished the value of the House.
- As an alternative to the argument that copies of Drawing 136F and Drawing 137A had in fact been provided to Mr. Skinner on at least one occasion by Miss Cooper and thus must have come within the meaning of the expressions "specification" or "drawings" in clause 3.2 of the Contract, Mr. West contended, as it was put in the Amended Particulars of Claim:-
"16A. Further and in the alternative, if (as is now alleged by the Defendant) under cover of a letter of 17th January 2002 the Claimant was provided with a CSI drawing No. So/700/135A dated September 1998 ("the CSI Drawing"), then without prejudice to the Claimant's primary case as to the documents provided to him, he will contend that the same was included in, or in the further alternative comprised, the Specification.
16B. Insofar as the CSI Drawing was included in or comprised the Specification, the same showed, and in so showing specified, that the outer walls of the house were to be constructed of a double skin of brickwork or blockwork separated by a cavity.
16C. Further and in the alternative the Claimant will contend that:
(a) the reference to "drawings" in clause 3.2 of the Contract is a reference to the drawings intended by the Defendant to be used for the purposes of constructing the Property;
(b) the drawings intended by the Defendant to be used for the construction of the Property were:
(i) the drawings referred to in paragraph 11(1) and (2) above, namely drawings number So700/136, revision F, and drawing number So700/137;
(ii) the engineers' detail drawings referred to in paragraph 13 above, namely 3950/H2 and 3950/H3.
16D. On the proper construction of clause 3 of the Contract the obligation on the part of the Defendant to complete the dwelling in accordance with the Specification extended to completion in accordance with the drawings referred to in clause 3.2, but subject to the right to vary as set out in clause 3.2"
- Miss Ansell submitted that the references to "specification" and "drawings" in clause 3.2 of the Contract should be construed against the background of the reference in section J of the Legal Handbook to the drawings and specifications referred to in the contract being such as were to be provided to the purchaser directly by Crest.
- But for the terms of section J of the Legal Handbook I should have been attracted by the submission that the references to "specification" and "drawings" in clause 3.2 of the Contract were to the specification and drawings to which Crest in fact intended to construct the House. However, it seems to me to be plain that the terms of the Contract fall to be construed against the background of the provisions of the Legal Handbook, delivery of which to Russell-Cooke preceded the making of the Contract, and that when so construed, clause 3.2 referred and referred only to those specifications and drawings intended to be, and, as I find in this case, actually, provided to a purchaser within the Home Manual.
- It remains to consider whether, on any sensible interpretation of the CSI drawing of a Type H house, what was shown imported a requirement that the construction of the perimeter walls of the Lower Ground Floor should comprise no more than a two-leaf cavity wall. That does not seem to me to be permissible. In my judgment the indication of the perimeter walls was intended to be conventional, without importing any information as to constructional details. To an informed reader of the CSI drawing it was obvious that it was unlikely in the extreme that the perimeter walls against rising ground would be ordinary two-leaf cavity walls. It was overwhelmingly probable that some sort of provision would be intended to retain the ground in front of the cavity wall, yet the CSI drawing showed no indication as to how that was to be done. As the CSI drawing was not intended as a construction or engineering drawing that was not in any way surprising.
- It follows, in my judgment, that Crest did not, by introducing the remedial scheme involving the use of Hey'di, seek to vary or to alter any "specification" or "drawing" to which the provisions of clause 3.2 of the Contract applied, and thus it is not strictly necessary to consider whether, by introducing that scheme, the value of the House was diminished.
- However, it is clear on the evidence led before me, in my judgment, that the introduction of the remedial scheme had no effect on the value of the House in any event. Such evidence as there was of a diminution in value came from Mrs. Bridget Bagnall, to whose first report, dated 27 January 2003, I have already made reference. Mrs. Bagnall was called as an expert witness on valuation on behalf of Mr. Skinner. A copy of her report dated 27 January 2003 was put in evidence, together with a copy of a later report dated 29 October 2003. The latter report to a significant extent reproduced material from the earlier.
- In a section of her report dated 27 January 2003 entitled "General Remarks" Mrs. Bagnall made, amongst others, these observations:-
"4. The property now offered will be marginally smaller than originally proposed i.e. by the thickness of the additional breeze-block skin applied to the lower ground floor to front and flank walls. This area has been calculated at approximately 3.5 sq. m.
5. The damp-proofing tanking, whilst guaranteed for ten years, is not as originally specified, there being no tying to the horizontal dpc and in any event such work must be considered as repair rather than new build.
6. The original defects to the property will always be apparent to any potential purchaser as it will be necessary for them to be declared in Enquiries before Contract prior to sale. This will have the effect of reducing marketability with the resultant affect [sic] on value. It is unlikely that in undertaking a mortgage valuation that [sic] the extent of the damp-proofing/tanking work together with the construction of the inner walls would be immediately apparent to a surveyor other than if they had failed and positive damp-meter readings were recorded."
- In a section of her report dated 27 January 2003 under the rubric "Valuation" Mrs. Bagnall said this:-
"Having considered this matter carefully and in the light of the above it is my view that the present value of the property, on a finished basis and subject to there having been no problems with regard to the original damp-proof-course (i.e. as originally specified), being a likely achievable sale price within a reasonable period, can correctly be stated to be in the order of £430,000 (Four Hundred and Thirty Thousand pounds) to £450,000 (For [sic] Hundred and Fifty Thousand pounds) freehold and with vacant possession on physical completion.
On the basis the property now being offered in its present form (but complete) it is considered the sale price in this order would not be achievable. This is due to the effects that:
(a) There has been a reduction in room sizes caused by the tanking system equating to approximately 3.5 sqm. On a pro rata basis and taking into account the gross internal square meterage as a whole this reduces the value by some £10,000.
(b) The fact that the developers failed to install the intended damp-proofing system correctly and adequately and that their remedial works is by way of a tanking system which, by its nature, will have possible deficiencies, despite a guarantee, and which would be known to any prospective purchaser by way of the enquiries before Contract, will result in a diminution in value which, whilst difficult to calculate, is again likely to be in the order of 10% of market value.
(c) As a result of the developers remedial/repair work, should you continue with the purchase of this property, then you will be buying a repaired rather than a new home, as was originally intended and expected. Again there will be an element of diminution in value in respect of this and it is normal that when buying a new home there is a new build premium of up to 10% over and above a similar "second hand" home. Such has been entirely removed.
(d) I am aware of the fact that many of the estate agents in the Guildford area are appraised of the problems with this and the adjoining properties which will further depress the value on the basis that it is considered "blighted".
In the light of a [sic] all of the above I assess that a significant discount would be sought and the value of the property, having regard to its many deficiencies is now considered to be in the order of £380,000 (Three Hundred and Eighty Thousand pounds) to £400,000 (Four Hundred Thousand pounds) only freehold with vacant possessions [sic] upon completion."
- In her second report, that dated 29 October 2003, Mrs. Bagnall expressed the same views as to the actual valuations as those set out in her report dated 27 January 2003. About the issues of reduction in floor areas, loss of a new build premium, blight, and status as a "repaired" property, Mrs. Bagnall said:-
"8.3 Floor Areas
In the light of the damp-proofing work undertaken and the additional inner skin being formed, the property now offered will be marginally smaller than originally proposed ie by the thickness of the additional breeze-block skin applied to the lower ground floor to front and flank walls. This area is calculated at approximately 3.5 sqm to the property as a whole. The internal gross area of the house as per the original specification is approximately 130 sq m. The loss thus being approximately 2.5% of the area as a whole (approximately 8.6% of the lower ground floor accommodation, this being a material diminution in floor size of this part of the house), and 2.5% of the agreed purchase price equates to £9,625 (say £10,000). Floor areas as calculated from the site plan are as outlined in Appendix 3. These show reductions as follows: [There followed a table which I do not reproduce]
8.3a It should be noted that there are inevitably discrepancies in floor area figures provided, for example, between the original Sales Brochure and the subsequent Crest Nicholson Sales Brochure (Appendix 3a). Mr. Chatterji, acting on behalf of Crest Nicholson refers to figures within the subsequent Sales Brochure within his report. Neither specifically identify the alcove within the study which by its nature would have been materially affected by the construction of the inner skin. The area here is diminished by approximately 45.7%. This would significantly affect the usefulness of this area, limiting the size for, for example, an average sized piece of furniture - (i.e. a desk) and reducing the natural daylight given from the glazed light-well to the room as a whole. It is agreed that such areas as the cloakroom and WC would not be materially affected by the dimensional changes and that there would be marginal effect only on the kitchen.
8.4 New Build Premium
The damp-proofing tanking, whilst guaranteed for ten years, is not as originally specified, and in any event such works must be considered as repair rather than new build. This has been agreed between the building surveyors and will inevitably negate any "new build premium", normally associated with a new home and which is over and above the price paid for a similar "second hand" unit. This premium has been entirely removed and is considered to reduce the value of the property.
8.5 Blight
The original defects to the property will always be apparent to any potential purchaser as it will be necessary for them to be declared prior to sale by way of "enquiries before contract". This will have the effect of reducing marketability with the resultant effect on value. Mr. Skinner's knowledge of the property would create a duty of care for information to be disclosed by him before a sale. In any event I am aware that many of the Estate Agents in the Guildford area are appraised of the problems pertaining to this (and indeed the adjoining properties) which will depress the value on the basis that it is considered "blighted". This is indeed accepted by the number of the local Estate Agents whose letters are produced as evidence by Mr. Chatterji.
8.5a This diminution in value is similar to one which might be expected where a property is underpinned. The market perception in such cases is that such a property will not command a similar market price to an identical house which has suffered no structural movement nor remedial work despite the work being subject to contractors guarantees. However on completion of successful underpinning insurance is normally obtainable on normal terms and such properties are mortgageable providing the full history of works carried out are known and guarantees available. These are available here but pertain to a repaired rather than a new build home.
8.5b I consider that the loss of premium and blighting affects the value with a reduction of 10% from the value of the defect free house (ie £43-45,000) being appropriate."
- Crest engaged as its expert valuer for the purposes of this action Mr. Charles Chatterji. He prepared a report at short notice which was dated 3 July 2003. Subsequently he prepared a fuller report, dated 30 October 2003. In each report he expressed the view that the reduction in the size of the Room in the House as a result of carrying out the remedial work was immaterial so far as the value of the House was concerned. In his first report he dealt with the matter in this way:-
"I think most people would therefore agree that a small variation in room size is not uncommon in housing and would not reflect on the open market value. In the case of the subject property I would not expect many people to notice the difference because it is very small. It has no bearing on the use and function of the rooms affected, the study is still of a size reflected by other properties, and also the breakfast kitchen. I can see no demonstrable harm to the enjoyment or function of these rooms.
I do not consider one can take the simplistic view as suggested by the claimant's expert Bridget Bagnall, which if the overall differences in size between two similar properties between 2% and 3% that one can apply that reduction to its value. A variation in size that is barely noticeable and would not be at all obvious from visual inspection and does not in any way affect the use and function of the room should have no bearing on value, because the buyer is not aware of it. If the difference were so obvious that it is easily recognisable or affects the form and function of the room I would expect it to impact on the value. This is not the case here and the claimant's expert Bridget Bagnall offers no evidence to the contrary. If there were rooms missing room [sic] I would expect it to impact on the value, but this is not the case here. Most buyers if asked to estimate the size of a room would not be able to tell that a room which is say 3500 mm in length is plus or minus 100mm, (a variation of just 3%) and I think it is untenable to suggest that the value is therefore affected."
Mr. Chatterji also pointed out that he had in fact acted for the purchaser of 83 Lancaster Avenue, the former Plot 81, in 2003, Mrs. Viv Nutt. Mrs. Nutt, he said, like he himself, was initially unaware of the carrying out of remedial works in the house she was interested in purchasing. On her behalf he negotiated a purchase at a price of £410,000, representing a reduction from the asking price of £425,000, in ignorance of the remedial works. Although funds were tight for Mrs. Nutt, she did not seek to negotiate a further reduction once she became aware of the carrying out of the remedial works. In his oral evidence Mr. Chatterji told me that the price of £410,000 had been agreed subject to contract on 14 February 2003. 83 Lancaster Avenue is one of the end houses of the Terrace and has a rather larger garden than the other houses in the Terrace because of the positioning of the garage block across the bottom of the gardens of the other houses.
- For the purposes of his second report Mr. Chatterji went to the House and measured the Room after the completion of the remedial works. He found the maximum dimensions to be 3466 millimetres by 3767 millimetres. Those figures may be compared with maximum dimensions of 3875 millimetres by 3235 millimetres shown on the CSI drawing for Type H houses. It is apparent from those dimensions that the Lower Ground Floor was reordered to a degree during the carrying out of the remedial works. It was not simply a case of some dimensions of the existing room being made smaller as a result of having an inner skin of blockwork added. Mr. Chatterji also measured the dimensions of the Kitchen. He found them to be 4450 millimetres by 3662 millimetres, which is to be compared with dimensions of 4735 millimetres by 3644 millimetres shown on the CSI drawing. On Mr. Chatterji's measurements the Room was actually slightly larger after the carrying out of the remedial work than it was shown on the CSI drawing. Mrs. Bagnall was unable to contest Mr. Chatterji's measurements because she had not made any actual measurements of her own. She had, however, undertaken a calculation of the reduction in the size of the Alcove on the assumption that the introduction of an inner skin of blockwork on each of three sides of it would have reduced its depth by 138 millimetres and reduced its width by twice that amount because two walls needed to be taken into account. She apparently took 138 millimetres as equivalent to 5 inches, whereas a more conventional conversion would produce a figure of 127 millimetres. Mr. Chatterji actually measured the dimensions of the inner skin and cavity behind in the Alcove in 83 Lancaster Avenue and found the thickness to be 115 millimetres. On those figures the Alcove would be 115 millimetres shallower and 230 millimetres less wide than it might otherwise have been. However, Mr. Chatterji also measured the depth of the Alcove in 83 Lancaster Avenue and found it to be 777 millimetres. On the CSI drawing of a Type H house the depth, by calculation, was shown as 778 millimetres. By calculation, therefore, the alcove as constructed in 83 Lancaster Avenue following remedial work was 1 millimetre shallower than shown on the CSI drawing. Mr. Chatterji measured the width of the Alcove in 83 Lancaster Avenue after completion of the remedial work at 1300 millimetres. No internal dimension for the width of the Alcove appeared on the CSI drawing. The only internal dimension of that width which appeared on any drawing put in evidence was 1684 millimetres on Drawing 136F. Mr. Chatterji also noted that the height to which the inner skin of blockwork extended in the Alcove against the front wall was to the height of the ceiling in the Room, and not upwards into the Skylight. It was for that reason that he was able to measure the thickness of the inner skin and the cavity behind it.
- In the week before the trial Mr. Chatterji returned to 83 Lancaster Avenue and took a photograph showing a desk comfortably accommodated in the Alcove in the Room in that property.
- For the purposes of his first report Mr. Chatterji decided to test the contention that estate agents in Guildford knew of the problems with the houses in the Terrace and considered them to be blighted. It was common ground between Mrs. Bagnall and Mr. Chatterji that there are some twelve estate agents in Guildford. Mr. Chatterji produced written comments from five agents. Messrs. Clarke Gammon Wellers, in a letter dated 3 July 2003, Messrs. Seymours, in a letter dated 2 July 2003, Messrs. Curchods, in a letter dated 1 July 2003, Messrs. Hill Clements, in a letter dated 4 July 2003 and Messrs. Hamptons, in a letter dated 2 July 2003 all expressed the view that the value of houses in the Terrace had not been diminished by the undertaking of remedial work or the circumstances which had given rise to the undertaking of such work. Messrs. Clarke Gammon Wellers and Messrs. Hamptons stated in terms in their letters that they did not consider the houses in the Terrace to be blighted. Messrs. Seymours did not deal expressly with that matter. Messrs. Curchods and Messrs. Hill Clements stated the opinions, respectively, that:-
"In the short term, because many people on St. Lukes are aware of the works that have been carried out to 78-81, it will undoubtedly have some impact on saleability, particularly to local people. However, as time moves on, this will become less of a talking point and I cannot see any reason why these properties should be harder to sell than others on the estate." and
"However, I do feel that word of mouth around St. Lukes and Guildford has had a detrimental effect on the sale of these properties. Problems such as these are always blown out of proportion by the general public and the local gossip has been rife."
Mr. West relied heavily upon these two comments as supporting Mrs. Bagnall's view that estate agents considered the value of houses in the Terrace to have been reduced because of blight. That, however, is not what either Messrs. Curchods or Messrs. Hill Clements said. Each in terms expressed the view that value had been unaffected. Messrs. Curchods' views on "saleability" can, in context, only refer to the time which it was likely to take to achieve a sale, not the price at which a sale would be achieved eventually. Messrs. Hill Clements' comment must also, in context, have been directed to the same point, albeit that it was actually focused not on the informed views of estate agents, but on the ill-informed views of the general public.
- Mr. West sought to cast doubt upon the value of the expressions of view in the letters from estate agents obtained by Mr. Chatterji. The evidence in the letters is obviously hearsay and has not been tested in cross-examination. However, each opinion was expressed by an identified member of the firm in question on the stationery of the relevant firm, and signed. Mrs. Bagnall produced no evidence of any sort to support her expressed view as to the opinions of estate agents in Guildford.
- Mr. Chatterji disputed the view of Mrs. Bagnall that the House after the remedial works had been carried out had somehow ceased to be new. He pointed out that it had, as at March and April 2003, never been occupied.
- I reject the views of Mrs. Bagnall that the carrying out of the remedial work in the House or any alteration in the overall size of the Lower Ground Floor had an impact on the value of the House. In her cross-examination Mrs. Bagnall accepted that the dimensions of no room on the Lower Ground Floor, other than the Room, had been affected significantly by the carrying out of remedial work. She accepted that the form and function of the Room had not been adversely affected by the carrying out of the remedial work. As I have said, she was unable to dispute the fact that actually, as a result of reordering of the space on the Lower Ground Floor as part of the remedial work, the Room was slightly larger overall than originally intended. Thus her attention came to focus on the effect of the remedial work on the Alcove. She was constrained to accept the photographic evidence that, if one wanted to place a desk against the radiator in the Alcove, there was the space to do so. She accepted that she had not inspected the Room since the completion of the remedial works and thus had made no assessment of her own of any impediments to the use of the Room or of any reduction in natural light. However, she accepted that the only natural light to the Room entered indirectly via the Skylight at one end of the Room and was quite inadequate to avoid the need for artificial light if the Room was to be useable at all. It was common ground between Mrs. Bagnall and Mr. Chatterji that the effect of the introduction of the inner skin of blockwork around the perimeter walls on the north-east, east and west walls of the Lower Ground Floor was to reduce the internal area of the House by 2.5%. However, Mrs. Bagnall did not refer to any principle of valuation in support of her expressed view that, by virtue of that fact alone, the value of the House was 2.5% less than it would otherwise have been. On the contrary, she seemed to accept that residential accommodation is valued by reference to the prices achieved on sales of what are perceived to be comparable properties, not on the sort of value per square metre of net lettable space which is used in the valuation of some commercial property. On the basis that the area of the Room in total was probably unaffected by the remedial works, that the Alcove remained a useable space, and that the form and function of the Room were quite unaffected I am totally unpersuaded that any overall reduction in the internal area of the Lower Ground Floor had any effect on the value of the House. The evidence just did not support Mrs. Bagnall's view that the value of the House had been reduced by reason of some "blight" effect. The suggestion that the value of the House was reduced because it had somehow ceased to be "new" seemed to me to be palpable nonsense. At the relevant time it had never been occupied, but more significantly, in the hands of Mr. Skinner it could never have had a "new build premium". If such a thing exists, it only exists in favour of the house-builder who first sells a property.
- In the result I find that, if the undertaking of remedial work to the House constituted some variation to or alteration of a "specification" or "drawing", within the meaning of clause 3.2 of the Contract, it was a permitted variation or alteration because it did not diminish the value of the House.
- It remains to consider whether Crest had repudiated the Contract by insisting on carrying out a remedial scheme in the House which was such that, when the execution of the scheme was completed, the House would not have been, and was not, built in a good and workmanlike manner.
- In the light of expressions of concern as to the remedial solution proposed using Hey'di, Crest instructed Mr. Philip Hewitt to advise concerning the proposal. Mr. Hewitt is an expert in structural waterproofing. Those instructions were given in October 2002, by which time Hey'di had been applied to the perimeter walls of the Lower Ground Floor and Mr. Hewitt was able to inspect it. He prepared a report dated 21 October 2002 of which a copy was put in evidence. In his report he said that:-
"I examined the finished Hey'di K11 surfaces at the time of my visit, and can confirm that there was no visible shrinkage cracking. I could not see anything that would lead me to believe that unacceptable shrinkage is likely to occur in the future."
Mr. Hewitt gave evidence at the trial as an expert on behalf of Crest. I was very impressed by him. He seemed to me to be knowledgeable and experienced in the rather arcane field of waterproofing. I am confident that, although he did not say in terms in his evidence that the quality of the workmanship of application of Hey'di which he observed was satisfactory, he would have mentioned that in his report dated 21 October 2002 had that been his opinion.
- Mr. Hewitt did produce a further report specifically for the purposes of this action. That report was dated 30 October 2003. It was produced following discussions between him and Mr. Norris to seek to narrow issues. As a result of those discussions there were, by 30 October 2003, just two issues concerning the remedial scheme. The first was whether it was necessary to provide a chemical damp proof course at the top of the new inner skin of blockwork in the Lower Ground Floor to protect the floor joists of the ground floor of the House from risk of fungal attack resulting from them becoming excessively damp, that is to say, with a moisture content in excess of 22%. Mr. Norris was concerned that water could penetrate between the original Bituthene damp proof membrane and the coating of Hey'di on the inner side of the inner skin of blockwork and that, if it did, it could rise up in the cavity behind the inner skin the 2.5 metres to the floor joists of the floor above. The second issue as formulated at that time was as to the longevity of the Product. Mr. Hewitt summarised his conclusions on those two issues at section 7 of his second report in this way:-
"7.1 At meetings of experts on behalf of the Claimant and the Defendant, a report dated 18 September [as to what was agreed and what not agreed] was produced.
7.2 There were two areas where the experts could not agree:
i The likelihood that timbers at high level in the basement, such as the floor joints [sic presumably joists was meant] at ground floor level, would become damp and at risk of fungal attack.
ii The longevity of the Hey'di K11 system.
7.3 There are two ways in which the timbers at high level could become damp:
i Because of water ingress through defective waterproofing and cavity tray details at the top of the wall.
ii By damp rising from the base of the wall.
7.3.1 Remedial work has been undertaken to remedy the defects at the top of the wall and to prevent ingress occurring.
7.3.2 The likelihood of damp rising 2.5 m from the base of the wall and thus reaching the timbers is so remote as to be discountable.
7.3.3 Even if there was a risk of these timbers becoming damp, to prevent this occurring would be a simple matter, involving the injecting of a chemical damp proof course around the underside of these timbers. The cost of this would be small (significantly less than £1,000.00)
7.3.4 Hey'di K11 has been in use in the UK for in excess of 25 years and its durability has never been found wanting. Furthermore, the Agrement certificate for the product confirms that its durability is expected to be for the lifetime of the structure."
- The reference to the Agrement Certificate was to Agrement Certificate No. 91/2608 issued by the British Board of Agrement that in the opinion of the Board Hey'di was satisfactory if used as set out in the Certificate. The Certificate was issued on 21 March 1991. A certificate of the Board is generally considered evidence that a product used in accordance with the methodology set out in the certificate is a suitable one to use for the application the subject of the certificate. Mr. Norris in cross-examination accepted that in fact he had no objection to Hey'di as a product. His concern was simply that it might not have been properly applied in the House. That concern seems to me to be purely theoretical. It should have been allayed by the facts that both Mr. Norris himself, and Mr. Hewitt, had inspected the application of Hey'di in the House. Mr. Hewitt was satisfied with it. Presumably Mr. Norris felt himself insufficiently qualified to judge. I find that this concern of Mr. Norris was not justified.
- The difference between Mr. Hewitt and Mr. Norris as to the need for a chemical damp proof course at the top of the inner skin of blockwork in the Lower Ground Floor was simply one of how each assessed the degree of risk. Mr. Norris considered that he had seen instances in which water had risen by 2.5 metres, and thus that the risk of that happening in the House should be eliminated. Mr. Hewitt considered that the risk was so small as not to require any precautions against it happening to be taken in the House. I accept the opinion of Mr. Hewitt on this issue.
- I therefore reject the suggestion that the completion of the remedial scheme in the Lower Ground Floor did not mean that the House when completed would not be, or was not, built in a good and workmanlike manner.
- It follows that this action fails.
Mr. Skinner's claims for damages
- In the circumstances it is not strictly necessary for me to consider the claims for damages made on behalf of Mr. Skinner. However, as I have heard the relevant evidence and argument, it may be convenient for me briefly to indicate my conclusions as to those claims.
- The claims for damages particularised under paragraph 29 of the Amended Particulars of Claim really fell into five categories. The first, set out in particulars (a) to (f) inclusive, were various alleged out of pocket expenses. They were not really challenged and I need say no more about them. At particular (i) was claimed the fees of Mr. Norris, I imagine for his work done prior to the commencement of the litigation. Those were fees which Crest agreed to pay in a letter dated 22 August 2002 written by Mr. McEvoy to Mr. Skinner. The third element of claim was a claim for damages quantified at £65,000 in respect of alleged loss of bargain. The philosophy underlying this element of claim was essentially that, if the House had been built as it should have been, according to the case of Mr. Skinner, he would have benefited from a general rise in market prices between January 2002, when he agreed to buy the House, and March 2003, when he purported to accept the alleged repudiation of Crest. Although I have rejected the suggestion that the House was worth any less than it otherwise would have been as a result of the carrying out of the remedial works, there does remain the issue whether the market for the House in fact rose between January 2002 and March 2003, and I shall comment briefly on the evidence in relation to that. The last category of claim was for alleged loss of rental income from 1 July 2002 until March 2003. The contention advanced by Mr. West was that, but for the breach of the implied term to build the House in a good and workmanlike manner which he submitted the inadequate construction of the original damp proof course in the House represented, the House would have been completed and Mr. Skinner would have been able to let it as from 1 July 2002 at a rent of £2,650 per month and thus suffered a loss, net of the mortgage payments which he would have had to have paid, and letting agents' fees, of £9,306.94. The short answer to the latter element of claim is that I have found that the term to be implied into the Contract was not that for which Mr. West contended, but that for which Miss Ansell contended, and by clause 3.3 of the Contract Crest was not bound to issue a Completion Certificate, and thus trigger the obligation to complete the sale of the House until 18 months after the date of the Contract, that is to say, 25 July 2003. However, it is appropriate to comment upon the evidence as to the rental which the House could have commanded in any event.
- The evidence of Mr. Chatterji, in his first report, concerning movement in the housing market in Guildford between February 2002 and January 2003 was this:-
"My research thus far is evidenced by opinions from local estate agents and in particular those I approached have sold properties at, or have strong local knowledge of St. Lukes and the surrounding area. I consider that the market from February 2002 continued to rise until around July 2002 and flattened out throughout the summer until September/October 2002, thereafter it slowly started to fall back to levels slightly above those of February 2002 by the date of 29th January 2003.
From the base of the date of 28th February I consider the market rose between 10% and 15% and fell back by about 5% as at 29th January 2003, however, I would say there is [sic] quite some variations dependant on location, type of property and condition.
I would accept the claimant's expert's view that the market increased by 12% as she states at the closing sentence of page 6 of her [first] report.
.
Since the end of February 2003 and 09th April 2003 I believe the market has continued to fall perhaps a further 5%, which would give a value between £382,000 and £399,000 for the subject property as at 09th April 2003. This is supported by the sales price achieved for plot 81 of £410,000 that was negotiated in May 2003, making an adjustment for the additional benefits of :
- Full bathroom to bedroom 1
- Garden more than four times larger than plot 79."
Mr. Chatterji also relied upon the sale of the House to Mr. Shahab at the price of £385,000.
- In her first report Mrs. Bagnall did not rely upon any specific comparable properties as justifying her valuations of the House, whether in its actual condition or if it had not been the subject of remedial work. Rather she seemed to rely upon evidence of general market trends. In her second report Mrs. Bagnall also relied on evidence of general market trends, none of it very specific. However, she did rely on sales of considerably larger properties on the Estate, sales of flats in a new development, and sales of properties on the Queen Elizabeth Park development, which it was common ground was less well-favoured than the Estate. She referred to the sales of 83 Lancaster Avenue and of the House itself. However, apart from those sales, the only sale which she relied upon which was of a property bearing some comparison with the House was the sale in April 2003 of a property at 8, The Sells ("the Comparable"), which is on the Estate, at a price of £437,500. Mr. Chatterji agreed that the Comparable was indeed a property the sale of which needed to be taken into consideration in valuing the House in March or April 2003.
- The Comparable lies some distance from the House, in a cul de sac. The Comparable is constructed on three floors, all above ground, and features four bedrooms on the two upper floors. The principal living room is on the first floor and is considerably larger than the principal living room in the House. The kitchen/family room in the Comparable is also considerably larger than the Kitchen. Overall, it was agreed between Mrs. Bagnall and Mr. Chatterji, the internal area of the Comparable was some 100 square feet, or roughly 9.3 square metres, larger than the House. The Comparable features an integral garage. The front is south-facing, but opposite is a four storey block of flats. The rear garden slopes steeply upwards to the rear. Mrs. Bagnall contended that the House was a better property than the Comparable, notwithstanding the difference in internal area and the differences in layout, principally, as I understood it, because of the view across open ground to the front of the House, the view across falling ground to the rear towards the centre of Guildford, and what she contended was the more flexible accommodation. She also asserted that the House was in a better part of the Estate. Mr. Chatterji, on the other hand, contended that the Comparable was a better property than the House. He drew attention to the fact that the House lay on the main access road to the Estate from the centre of Guildford. He also relied on the fact that a bedroom in the House was at street level at the front, and the fact that the Room lacked worthwhile natural light. I found the assessment of Mr. Chatterji of the respective merits of the House and the Comparable more persuasive.
- In his second report Mr. Chatterji revised the opinion of market movement expressed in his first report. In the light of research among house-builders active in the Guildford area he concluded that the market had in fact fallen by March or April 2003 back to the level it had been at in January 2003, so that if he had sold the House in March or April 2003 Mr. Skinner would not have made a profit at all. While I accept that the market for new houses generally in the Guildford area may well have been in March or April 2003 exactly where it had been in January of the previous year, I do not accept that that consideration is relevant to the value of the House as at March or April 2003. It was common ground between Mr. Chatterji and Mrs. Bagnall that the Estate is a desirable area of Guildford in which to live, not least because of its proximity to the town centre. It was plain from the inability of either Mrs. Bagnall or Mr. Chatterji to find more than three really comparable transactions to consider in the context of valuing the House in March or April 2003 that properties on the Estate, and particularly the smaller ones, rarely come on the market. Although there was a dispute as to why precisely the House was sold to Mr. Shahab at a discount, it was common ground that it was sold at a discount. Mr. Skinner's case was that the discount reflected the fact of the remedial works. Crest's case was that Mr. Shahab got a discounted price because he purchased three properties at the same time. I accept Crest's case on this point, but actually it does not matter for present purposes. What matters for the moment was that the sale was at a discount and what that tells one is that, undiscounted, the House was worth more than Mr. Skinner had agreed to pay for it. The sale of 83 Lancaster Avenue was in the open market to a purchaser of a single property. I accept that, for the reasons identified by Mr. Chatterji, it was a better property than the House. In cross-examination Mrs. Bagnall put the net increase since January 2002 in house prices in the Guildford area, allowing for the decline which she accepted there had been since the autumn of 2002, at 7 10%. If I had had to put a value on the House in its actual condition as at March or April 2003, I should have valued it at £405,000.
- The evidence upon which Mr. Skinner sought to rely in support of his case that he would have been able to let the House from 1 July 2002 at a rent of £2,650 per month took the form of a letter dated 26 February 2002 written to him by Messrs. Bradford & Bingley Gascoigne-Pees ("BBGP") in which they expressed the view that they would expect to achieve a letting at a rental of around £2,500 per calendar month, a letter dated 4 March 2002 written to him by Messrs. Seymours in which they expressed the view that they would expect be achieve a letting at a rental of around £2,600 per month, and letters dated November 2003 from each firm confirming that they had told him in 2002 what the letters then written to him said. Mr. West sought to suggest that the recent letters confirmed the accuracy, in the opinions of the writers, of what had been said in 2002, but actually they only confirmed that what had been said had been said. Mr. Chatterji for the purposes of his second report sought to test the market, with the co-operation of Mrs. Nutt, by inviting letting agents to suggest at what level of rent 83 Lancaster Avenue could be let in October 2003. With the exception of BBGP, who suggested a rental of £2000 per month, the other agents approached, Messrs. Principal, Messrs. Hamptons, and Messrs. Clarke Gammon Wellers, suggested, respectively, £1,500, £1,600 and £1,600 - £1,650 per month. The only other evidence as to rental levels which was put before me was that of Mr. Skinner that his father, who owned a property at 69 Lancaster Avenue for which he had paid £525,000 and which was obviously considerably larger than the House, had let it in the summer of 2003 at a rent of £2,800 per month. In the light of the evidence, to which I have referred, of a decline in the property market in Guildford since October 2002, which presumably would also have had an effect on the letting market, had I had to make an assessment of the rental value of the House in July 2002, I should have found it to be £2,500 per month.
Conclusion
- For the reasons which I have set out this action fails and is dismissed. There will be judgment for the Defendant on the Counterclaim for the sum of £19,250, together with interest, as to which I will hear Counsel. I also declare that the Defendant has been discharged from its obligation to sell the House to the Claimant and that he has forfeited to the Defendant that part of the deposit which has already been paid.
