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Harrison & Others v Shepherd Homes Ltd [2011] EWHC 1811 (TCC)

Judgment was handed down on 11 July 2011 in this case in which Andrew Bartlett QC, Robert Stokell and Crispin Winser, instructed by Tilly Bailey and Irvine LLP, appeared for the claimants, the owners of houses on the Eden Park estate in Hartlepool.

The houses were built by Shepherd Homes in 2001-2004 on piled foundations which were negligently designed and/or constructed. Despite the defects, some of the houses had only suffered minimal physical damage, but had proved difficult (if not impossible) to sell or remortgage. A trial of the claims against Shepherd Homes in respect of 10 sample properties was heard over 5 weeks in the TCC in June-July 2010. Those claimants who were original purchasers relied on their contracts of sale, and they all relied on the Defective Premises Act 1972 (‘DPA’) and the NHBC Buildmark guarantee. Shepherd Homes denied liability, contending that it owed the claimants no obligations under the contracts of sale; breach of the duty under the DPA required unfitness for habitation, and none of the houses were unfit for habitation; and the claimants had failed to give the necessary written notice under Buildmark.

Giving judgment for the claimants, Mr Justice Ramsey held:

  1. On the proper construction of the contracts for sale, Shepherd Homes was obliged to carry out the design with proper skill and care and complete the work so that the houses were fit for habitation. Alternatively, such a term would be implied notwithstanding the entire agreement clause. The obligation did not merge on completion as the contract was of a dual nature: sale of land and supply of goods and services. Alternatively, if the contracts of sale were to be construed as Shepherd Homes contended, they would be unfair within the meaning of the Unfair Terms in Consumer Contracts Regulations 1999 and the Unfair Contract Terms Act 1977.
  2. That he was bound by the decision of the Court of Appeal in Alexander v Mercouris [1979] 1 WLR 1270 to hold that the duty under the DPA was a single duty to ensure the dwelling is fit for habitation when completed. If not constrained by authority, he would have accepted the claimants’ submission that it was a threefold duty, to do the work (a) in a workmanlike or, as the case may be, professional manner, (b) with proper materials and (c) so that as regards that work the dwelling will be fit for habitation when completed. However, the defective piles meant that the houses were unfit for habitation within the meaning of the DPA notwithstanding the minimal physical damage.
  3. Shepherd Homes could not rely on an absence of notice under Buildmark as its actual knowledge of the problems on the Eden Park estate generally meant that it had constructive notice of the problems on the particular houses. Further, letters written by its solicitors at the time established that it had waived the notice requirements.

In light of his findings on liability, and having heard extensive expert evidence from engineers and valuers (including the use of “hot-tubbing” or concurrent evidence), Mr Justice Ramsey awarded all 10 lead claimants damages by reference to (amongst other things) the diminution in value of their houses. Permission to appeal was refused.

The judgment is available here.

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