1. Betterment: does a wrongdoer's bill for the damage caused include fixing unknown existing defects discovered?
What if construction works cause damage but reveal unknown existing defects that have to be dealt with in repairing the original damage? Is the person responsible liable for all the costs involved?
In a case involving damage caused by party wall works, the Court of Appeal had to deal with this question and drew on previous case law on the issue of betterment. One of those decisions established the principle that, if the owner of destroyed property (reasonably) rebuilds it, they do not have to give credit for the fact that they get a new property instead of an old one. The Court noted in this latest case that the same must apply where the owner of damaged property (reasonably) repairs the damage. Any repair will involve replacing old materials with new, but in practice you cannot do anything else and the defendant is not entitled to an allowance for that.
In a previous House of Lords case it was said that it is for the defendant who seeks a deduction from expenditure in mitigation, on the ground of betterment, to make out their case for doing so. It is not enough that an element of betterment can be identified. It has to be shown that the claimant had a choice, and that they would have been able to mitigate their loss at less cost, but the wrongdoer is not entitled to demand of the injured party that they incur a loss, bear a burden or make unreasonable sacrifices in the mitigation of their damages. They are, however, entitled to demand that, where there are choices to be made, the least expensive route which will achieve mitigation must be selected.
In a subsequent insurance case, the Court of Appeal provided further guidance. In summary:
- there are different types of betterment. One type is where an insured chooses to make improvements rather than simply reinstate property as it was before. The additional cost of doing so is not part of the reinstatement cost and is not recoverable;
- a second type of betterment is where an insured derives a benefit as an incidental consequence of adopting a reasonable reinstatement scheme, for example by using modern materials, or replacing an old machine with a new one on the basis that this is unavoidable. Here a distinction needs to be made between benefits that take the form of money (or which the claimant could reasonably be expected to realise in terms of money) and non-pecuniary benefits;
- where the insured will save, or can reasonably be expected to save, money as a result of getting something better, a deduction should be made;
- where there are non-pecuniary benefits, however, to make a deduction for betterment from the damages awarded would be unjust, as it would force the claimant to pay for an advantage which it has not chosen and which makes it no better off in money terms.
The Court noted that the position is the same in other (non-insurance) cases of contractual liability and said that there is no reason to think the same would not apply in respect of liability in tort. It also noted, from the insurance case, that the burden of proving that damages should be reduced on the basis that the insured will save money as a result of reinstatement lies on the insurer.
In applying these principles to the facts of the case, the Court identified a further question, whether the work that needed to be done had to be done in order to repair the relevant damage, i.e. the damage caused by the party wall works.
Taylor v Jones & Anor (Rev1) [2024] EWCA Civ 170
2. Adjudication survives false start to stop conclusive evidence clause from shutting the door
Some contracts have a conclusive evidence clause which says, for example, that a notice is conclusive evidence that all extensions of time that are due have been given or that reimbursement of loss and expense is in final settlement of all relevant claims. These serious consequences can, however, be deferred in respect of disputed matters by starting adjudication or other proceedings before, or within a specified period after, the notice. In a subcontract dispute there was just such a clause, with the final payment notice being conclusive evidence in respect of time and money matters unless proceedings were started prior to, or within, 10 days of receipt of the notice.
The subcontractor started an adjudication prior to the notice but did not serve a referral in the required time. There was a dispute as to whether an extension of time for service had been agreed but the subcontractor subsequently served a new notice of adjudication, the substance of the dispute under the second notice being the same as that originally notified, and the same adjudicator delivered a decision.
The saving provision had been triggered by the original notice of adjudication issued in time but the court ruled that the adjudication became a nullity because the subcontractor failed to serve the referral by the relevant date. Did that mean, however, that the adjudication had consequently reached a 'conclusion', as described in the conclusive evidence clause, so as to shut out the subcontractor's claim? Alternatively, had the subcontractor abandoned the adjudication?
The court rejected the submission that an adjudication which becomes a nullity has reached a conclusion and case law made clear that no distinction should be drawn between adjudications which are rendered a nullity by reason of fault of the referring party and those which are rendered a nullity for reasons outside its control.
What mattered was that the adjudication which became a nullity had never reached a conclusion, irrespective of the cause of it having become a nullity. It therefore did not matter that a second notice of adjudication had to be issued in order for the adjudication proceedings to reach a conclusion. The adjudication proceedings were concluded by the adjudicator's decision in the second adjudication unless, by then, the subcontractor had already abandoned the proceedings.
The court also ruled that the subcontractor did not abuse the position or demonstrate that it lacked the requisite intention to resolve the dispute and had consequently not abandoned the adjudication proceedings.
Battersea Project Phase 2 Development Company Ltd v QFS Scaffolding Ltd [2024] EWHC 591
3. Court looks at what a DPA 'unfit for habitation' claim might mean
The Building Safety Act put claims under the Defective Premises Act centre stage in terms of limitation periods and widening its scope. The test of fitness for habitation, however, did not change but what, exactly, does it mean in practice?
In Vainker v Marbank Construction, involving a claim under the Act, the court had to deal with this question and referred to a case concerning defects in an apartment building, Rendlesham Estates Plc v Barr Ltd, where the court considered the case law and set out these principles:
- When considering whether or not an apartment is fit for habitation, its condition has to be considered at the date when the work was completed (considered to extend to the end of any relevant defects liability period);
- the defects in any particular apartment must be considered as a whole when determining whether or not it was fit for habitation on completion;
- the apartments must be fit for habitation by all the types of person who might reasonably be expected to occupy them, including babies and those who suffer from common conditions such as asthma or hay fever;
- whether or not an apartment is fit for habitation is to be judged by reference to the standards current at the time when it was built;
- if, at the time of completion, the state of an apartment is such that a local authority with knowledge of its condition would not approve it as fit for occupation under the Building Regulations (for example, for lack of suitable means of escape in the case of fire), it is probably unfit for habitation;
- the fact that a particular defect which renders an apartment unfit for habitation could be remedied at relatively modest cost, does not of itself mean that there is no breach of duty under section 1 (of the DPA). That is relevant only to the measure of damages;
- a defect may render an apartment unfit for habitation even though both the owner and the builder were unaware of its existence at the time: for example, defective foundations;
- a state of affairs that arises only because the owner does not carry out or has not carried out maintenance or refurbishment that a building owner would reasonably be expected to carry out, even if that state of affairs would not have arisen but for the presence of a defect created by poor design or workmanship in breach of section 1, does not mean that the apartment was unfit for habitation when completed. However, if the need to remedy the defect would make normal maintenance a waste of money, or render it abortive or futile, the failure to carry out such maintenance is unlikely to negate the breach of duty;
- serious inconvenience that is not transient may make a dwelling unfit for habitation. For example, a lift in a tower block that was poorly installed so that it frequently broke down could well make apartments on the higher floors unfit for habitation;
- a risk of failure within the design life of the building of a structural element of the dwelling (or of the building of which the dwelling forms part) which exists at the date of completion (whether known about or not) may make the dwelling unfit for habitation;
- evidence of a need to vacate the dwelling in order to carry out work necessary to remedy work that was done in breach of the standard set by section 1 of the Act, is relevant to the question of fitness for habitation.
The court also noted that the application of these criteria will be very fact-specific in any particular case.
Vainker & Anor v Marbank Construction Ltd & Ors [2024] EWHC 667
4. Defective Premises Act provision sinks architect's bid to rely on net contribution clause
An architect defending a claim under the Defective Premises Act sought to rely on a net contribution clause in its appointment, in the RIBA Standard Conditions of Appointment for an Architect 2010, submitting that its responsibility for glass defects should be no more than 20%. But did the DPA permit that?
Section 6(3) of the Act says that:
"(3) Any term of an agreement which purports to exclude or restrict, or has the effect of excluding or restricting, the operation of any of the provisions of this Act, or any liability arising by virtue of any such provision, shall be void."
The court noted that, without the net contribution clause, the architect's liability under the Act in respect of the relevant loss would be for the whole of the recoverable damages (however calculated or assessed). Because, however, the net contribution clause sought to limit that liability to a lesser amount (if that was the sum that it was just and equitable for the architect to pay, having regard to the extent of its responsibility), that was a restriction on its liability arising out of the Act. The court ruled that the net contribution clause fell foul of section 6(3) and could not be relied upon by the architect in respect of liability under the Defective Premises Act.
Vainker & Anor v Marbank Construction Ltd & Ors [2024] EWHC 667
5. New D & B edition starts April launch of JCT 2024
A new edition of the Design and Build family of contracts this month launched JCT 2024, with an online launch event, giving an overview explaining the main changes and features, in conjunction with Building Magazine, on 1 May.
Key themes of JCT 2024 are:
- modernising and streamlining: including adoption of gender neutral language, and increased flexibility around the use of electronic notices;
- Target Cost Contract: the introduction of a new family, comprising main contract, sub-contract, and guide;
- legislative changes – major updates in relation to the new Part 2A of the Building Regulations, termination accounting and payment provisions reflecting the Construction Act, new insolvency grounds reflecting the Corporate Insolvency and Governance Act 2020;
- future proofing – including changes to reflect the objectives of the Construction Playbook, and the incorporation of previously optional supplemental provisions relating to Collaborative Working, and Sustainable Development and Environmental Considerations, into the main document.
See: JCT Announces Release of 2024 Edition of Contracts – The Joint Contracts Tribunal (jctltd.co.uk)
6. Searchable HRB register
The Building Safety Regulator now has a searchable register of high-rise residential buildings.
The Regulator holds information about the building’s principal accountable person and accountable persons and, for each structure within a building, information about its height, number of floors and when it was built.
See: https://www.gov.uk/guidance/find-a-high-rise-residential-building
7. BSR extends competence assessment period for registered Class 1 RBIs
The BSR has extended the competency assessment period for building control professionals. From 6 April to 6 July 2024, experienced building inspectors in England can complete their competency assessment and upgrade their registration.
For details of eligibility and the conditions that apply see
and
https://www.gov.uk/guidance/register-as-a-building-inspector#full-publication-update-history
8. New Fire Safety Reinsurance Facility for HRBs awaiting fire safety work
A fire safety reinsurance facility has been launched to help improve the availability of insurance for higher-risk residential buildings awaiting work to fix fire safety issues. The facility is intended to be in place for between three and five years while remediation takes place.
9. BSR April start in directing PAPs to apply for Building Assessment Certificates
The Building Safety Regulator is making a start, this month, in directing Principal Accountable Persons to apply for Building Assessment Certificates. The BSR will contact PAPs directly when they need to apply and they will have 28 days to provide the information.
The length of time between registering the building with the BSR and being asked to apply for a certificate depends on the building information supplied at registration. Buildings which will be prioritised for a certificate in year 1 meet at least one of the following criteria:
- ·over 50 metres high with more than 11 residential units
- ·over 30 metres to 49.99 metres high, with more than 217 residential units
- clad with combustible aluminium composite material
- large panel systems built between 1957 and 1973 with gas networks, and it is unclear if reinforcement work has been carried out
The BSR will refuse a certificate application if it is not satisfied that the legal duties of a PAP under Part 4 of the Act are being met. The BSR will then send either a contravention letter or a compliance notice stating:
- why the application is refused
- the issues to be fixed and the deadline for doing so.
See: Read guidance on preparing a BAC application and Apply for a BAC
10. HSE guidance on design and building work competence requirements and HRB golden thread information
HSE guidance on the new competence requirements can be found at:
Design and building work: meeting building requirements
HSE guidance on the HRB golden thread information can be found at:
Keeping information about a higher-risk building: the golden thread
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