Hodgson v National House Building Council

The application starts with the terms of the NHBC Buildmark Policy as set out above. The NHBC first argues that the part of Section 2 that is concerned with the NHBC insurance is plainly a contract of indemnity. Even if Section 2 is properly regarded as a guarantee rather than as a contract of indemnity, it is still subject to the indemnity principle, relying on the statement of principle in Andrews and Millett on the Law of Guarantees, 7^th ed., at 1-1013 that “An indemnity, in its widest sense, comprises an obligation imposed by operation of law or by contract on one person to make good a loss suffered by another. Thus most contracts of insurance and all contracts of guarantee fall within the broad definition.”

It follows, it is argued, that if the assured or beneficiary of the guarantee has suffered no loss, there is nothing in respect of which a claim can be made. Where a claim is a claim for the cost of remedial works, the NHBC submits that the position in law is best summarised by Christopher Clarke LJ in Great Lakes Reinsurance v Western Trading [2016] EWCA Civ 1003. In that case, a property was unused and awaiting redevelopment: it was insured for over £2 million which was its estimated rebuilding cost but its market value was only £75,000. The policy included a memorandum including a reinstatement clause that defined reinstatement as rebuilding to the same condition as when new and a special condition that no payment beyond the amount payable under the policy would be payable for reinstatement until the cost had actually been incurred. The property burnt down. Since no reinstatement had been carried out, the court had to consider what would have been payable under the policy if the memorandum had not been incorporated. Obiter, Christopher Clarke LJ expressed this view:

“72.

I doubt whether a claimant who has no intention of using the insurance money to reinstate, and whose property has increased in value on account of the fire, is entitled to claim the cost of reinstatement as the measure of indemnity unless the policy so provides. …. The true measure of indemnity is “a matter of fact and degree to be decided on the circumstances of each case” per Forbes J in Reynolds v Phoenix; and is materially affected by the insured’s intentions in relation to the property.

73.

The significance of intention begs the question as to (a) what exactly is the requisite degree of intention; and (b) what safeguard, if any, is available to an insurer who pays out the cost reinstatement to an insured who then finds that he cannot reinstate or, even if he can, in fact, sells the property. Neither of these issues were the subject of submission; so what I say on them must be regarded as tentative.

74.

… The problem arises in a case such as the present where there is a real possibility… that reinstatement may not take place either because it cannot do so… or because a markedly more attractive alternative presents itself.

75.

As to (a) it seems to me that the insured’s intention needs to be not only genuine, but also fixed and settled, and that what he intends must be at least something which there is a reasonable prospect of bringing about (at any rate if the insurance money is paid).

76.

As to (b) an insurer who pays out has, in general, no redress if none of the money is used in reinstatement. Once he has got it, it is for the insured to decide what to do with it… But I incline to the view that, in a case where, at the time the hearing, there is a real possibility that reinstatement may not in fact occur it is open to the court to decline to make an immediate award of damages and either to make some form of declaratory relief, alternatively to postpone assessment of the extent of indemnity (and the payment of it) until such time as it is apparent that reinstatement (i) can and (ii) will go ahead or, at least that there is a reasonable prospect that it will.

…..”

The NHBC recognises that in Colinvaux’s Law of Insurance (11^th ed.) at 11-031, the editors take a different view stating that “subject to the terms of the policy, the insurer will be liable on the cost of reinstatement basis even where actual reinstatement is no longer possible, as for instance where the damaged premises have been sold… in which case the cost is assessed on a notional reinstatement basis.”. Mr Townend submits, however, that this passage does not expressly address the circumstance where there is no loss of any kind to the insured. As I understand it, the basis of that argument is that the receipt of the purchase price for the property has “diminished the claimant’s loss in full”. Secondly, he points out that the passage appears to be derived from New Zealand authority and that no reference is made to the obiter remarks of Christopher Clarke LJ in the Great Lakes case.

The NHBC also relies on the characterisation of the NHBC Buildmark Policy in the decision of Fraser J in Larkfleet Limited v Allison Homes Eastern Ltd. [2016] EWHC 195 at [34]. In summary, the policy stays with the property, so that if the first purchaser sells, the subsequent purchaser takes the property with the comfort of the remaining period of the policy. It is argued that because of this nature of the policy, it cannot be possible for both Mr Hodgson and the subsequent purchaser to have a claim under the policy.

Finally, the NHBC submits that, even if there were any quantifiable loss, it could only be for diminution in value and that is expressly excluded by the NHBC policy.

Drawing those points together, the NHBC makes the following submissions:

It will be apparent from the complexity of these arguments why I questioned at the outset the nature of what I was being asked to decide on a short summary judgment application. That is not, in itself, of course, a reason to dismiss the application made on this basis but it is part of the background to why I decline to decide these issues and instead dismiss the application on the basis that it seems to me that the claimant does have real prospects of success, in the sense of a claim that is more than merely arguable. What I say below should be read in that context.

The claim is made under the Settlement Agreement and not per se under the Policy. By the Settlement Agreement, the parties agreed that the Claimant would submit a claim which would be dealt with by the NHBC as if the Builder were insolvent (as Groves was by the time the Agreement was concluded). Under Section 2, in those circumstances, the NHBC undertook to pay “the Cost of any work which [the Builder] would otherwise have been liable to pay under Section 2”.

Without deciding the point, it seems at the very least reasonably arguable that the Settlement Agreement itself was not a contract of indemnity or a guarantee but rather an additional and distinct layer of agreement to pay what the NHBC would have been liable to pay under Section 2 and what the NHBC would have been liable to pay under Section 2 was the “Cost” of any work for which the Builder would have been liable. It seems to me, therefore, well arguable that the Settlement Agreement is, contrary to the NHBC’s submission, to be construed as at the date it was entered into and by reference to the cost of remedial works that the NHBC would have paid for at that time.

That argument is, in any event, supported by the definition of the “Cost”: which is “the cost we would have had to pay if we had arranged for the work to be done”. The NHBC’s liability is for the cost that it would have incurred if it had arranged the remedial work. All of that is retrospective and it is certainly arguable that the effect of the Settlement Agreement is that the NHBC is liable to pay the cost it would have had to pay if it had arranged for the work to be done - the cost of the work if it is done (or not done) in the future is not the measure of the NHBC’s liability.

In support of his argument that subsequent events must be taken into consideration, Mr Townend gives the example of the circumstances in which Groves in fact paid Mr Hodgson after the Settlement Agreement was entered into and submits that, in that case, there could be no claim for the same sums against the NHBC. That is not a scenario expressly contemplated by the Settlement Agreement, the premise of which is that the Builder will not pay, and does not seem to me to assist in the construction of the agreement. If that unexpected event occurred, then it would be open to the NHBC to argue that it was not liable to pay the cost of remedial works under the Settlement Agreement because that cost had already been paid under the Policy. That is conceptually different from the circumstances on which, on the NHBC’s case, there ceases to be a liability under the Policy (and the Settlement Agreement) because of a change in the circumstances of the Owner.

If that is right, then Mr Hodgson has a potential claim under the terms of the Settlement Agreement and it is not a defence to say simply that he has suffered no loss because he will not carry out any remedial works.

If that is wrong, then the issue between the parties is what the NHBC is now liable to pay under the Policy. There seem to me to be numerous issues that potentially arise, the end result of which is that the “no loss” defence is not one suitable for determination on a summary basis:

For all these reasons, I dismiss the application for summary judgment made on the basis that Mr Hodgson has no real prospect of success on the issue as to whether he has suffered any recoverable loss.

The second strand of the NHBC’s application is altogether different. Put simply, the NHBC says that all the claims that Mr Hodgson now seeks to make in this litigation have already been determined in the arbitration with Groves and cannot be raised again. Self-evidently, the “claims” are different in the sense that Mr Hodgson claims greater sums of money apparently for further remedial works. The NHBC’s case is that the defects relied upon are the same and that the arbitrator has already decided what remedial works are required to be carried out and the cost thereof.

The NHBC puts its case on the basis of issue estoppel/ abuse of process relying on the following propositions of law set out by Lord Sumption in Virgin Atlantic Airways Ltd. v Zodiac Seats UK Ltd. [2014] AC 160 at 183 as derived from Arnold v National Westminster Bank plc [1991] 2 AC 93:

“…. (1) Cause of action estoppel is absolute in relation to all points which had to be and were decided in order to establish the existence or non-existence of a cause of action. (2) Cause of action estoppel also bars the raising in subsequent proceedings of points essential to the existence or non-existence of a cause of action which were not decided because they were not raised in the earlier proceedings, if they could with reasonable diligence and should in all the circumstances have been raised. (3) Except in special circumstances where this would cause injustice, issue estoppel bars the raising in subsequent proceedings of points which were (i) not raised in the earlier proceedings or (ii) were raised unsuccessfully. If the relevant point was not raised, the bar will usually be absolute if it could with reasonable diligence and should in all the circumstances have been raised.”

The NHBC based its submissions on points that had been raised and were decided including those on which the Claimant was unsuccessful, rather than any case that points ought to have been raised.

It is obviously the case here that the parties to the arbitration were not the same as the parties to this action but, it is submitted, that although therefore an issue estoppel cannot as such arise, pursuit of claims that would otherwise be subject to an issue estoppel is capable of being an abuse of process. For that proposition, the NHBC relies on the judgment of Lord Justice Simon in Michael Wilson & Partners Ltd. v Sinclair [2017] EWCA Civ 3.

In that case, the claimant had brought arbitral proceedings against a former director or employee alleging that he had received shares and cash as bribes. They invited the first defendant to join in that arbitration but he declined. The arbitral tribunal dismissed the claim, finding that the respondent had received the shares on behalf of the first defendant and had no control over them. The claimant then brought proceedings against the first defendant (and his company). The defendant sought to strike out the claim. The claim was struck out at first instance but the appeal was allowed. In giving judgment, Simon LJ identified the following themes that emerged from authority at [48]:

“(1)

In cases where there is no res judicata or issue estoppel, the power to strike out a claim for abuse of process is founded on two interests: the private interest of a party not to be vexed twice for the same reason and the public interest of the state in not having issues repeatedly litigated; …. These interests reflect unfairness to a party on the one hand, and the risk of the administration of public justice being brought into disrepute on the other. …. Both or either interest may be engaged.

(2)

An abuse may occur where it is sought to bring new proceedings in relation to issues that have been decided in prior proceedings. However, there is no prima facie assumption that such proceedings amount to an abuse …. and the court’s power is only used where justice and public policy demand it….

(3)

To determine whether proceedings are abusive the court must engage in a close “merits based” analysis of the facts. This will take into account the private and public interest involved and will focus on the crucial question: whether in all the circumstances a party is abusing or misusing the court’s process ….

(4)

In carrying out this analysis, it will be necessary to have in mind that: (a) the fact that the parties may not have been the same in the two proceedings is not dispositive, since the circumstances may such as to bring the case within “the spirit of the rules” …; thus (b) it may be an abuse of process, where the parties in the later civil proceedings were neither parties nor their privies in the earlier proceedings, if it would be manifestly unfair to a party in the later proceedings that the same issues should be relitigated ….

(5)

It will be a rare case where the litigation of an issue which has not previously been decided between the same parties or their privies will amount to an abuse of process….”

The Court of Appeal, however, repeated, with apparent approval, the observations at first instance that it would be a rare case where an action in court against a non-party to an arbitration could be said to be an abuse of the process of the court.

I take from that a number of propositions which seem to me pertinent to the present case:

These arguments were, on the face of the application, the basis for the NHBC’s application to strike out the claim (or part of it) rather than the basis of the application for summary judgment. It does not seem to me, however, that any material distinction can be drawn and I proceed on the basis that either procedural route may be available.

Both the Policy and the nature of the Settlement Agreement are, in my view, important considerations here. Under the Policy, if there are defects in the property, it is the Builder to whom the Owner first looks for the carrying out of remedial works or payment for the costs thereof. If the Builder fails to pay or is insolvent, the Owner has recourse against the NHBC. The Owner only has a claim against the NHBC for defects for which the Builder is liable under the Policy and for the cost of remedial works in respect of the same. If issues as to the defects, the relevant remedial works and the costs thereof have been determined between the Owner and the Builder, it would patently not be right that the Owner could re-open those issues as against the NHBC. Further, in this case, the Settlement Agreement was made against the background of the previous arbitrations and partial awards. Under the Agreement, Mr Hodgson would discontinue the then current arbitration against the Builder and submit his claims to the NHBC who would, in effect, then stand in the shoes of the Builder in respect of those claims. That can only have related to the claims not already determined in the arbitration. That point was explicit in the 10 March 2010 letter which forms part of the Settlement Agreement.

All those matters make it abundantly clear that the parties had agreed that claims (in the sense of the defects and the damages in respect of them) which had been the subject matter of an award, or had formed part of the arbitration but not been pursued, could not be raised again against the NHBC directly. If, in this litigation, Mr Hodgson seeks to do so, that would be contrary to the agreement of the parties. If I am wrong about that and/or it is necessary to go further, it would also be an abuse of process as it would be manifestly unfair to expose the NHBC to claims that have already been determined as between Mr Hodgson and Groves.

At least so far as the construction of the Settlement Agreement is concerned, there is no real dispute between the parties about this but Mr Hodgson says that the claims in the litigation are not ones already determined in the NHBC arbitration or, for the purposes of these applications, that he has a real prospect of success on that issue and/or that there are reasonable grounds for bringing the claims in respect of these items. In the alternative, Mr Goodkin submits that even if the court considers there to be an overlap between the claims made in the arbitration and in these proceedings, the claim(s) ought not to be struck out if new material is available as to the existence of defects and there may need to be a further investigation as to why such evidence was not previously adduced.

In the arbitration, Mr Hodgson’s claim was advanced by reference to a Scott Schedule (which I have referred to as the NHBC Scott Schedule) supported by expert evidence. For a claim to be made against Groves under the Policy in respect of a Defect, it had to have been notified within the first two years after the issue of the certificate, that is, in the Initial Guarantee Period. In his award, the arbitrator identified a letter sent by Mr Hodgson to Groves dated 6 September 2004 to which he attached a list described as his “schedule of NHBC standards that are in dispute”. The arbitrator said that he took this as Mr Hodgson’s written notification of defects or damage.

In the litigation, Mr Hodgson relies on a Scott Schedule (“the new Scott Schedule”) supported by the evidence of Mr Salisbury and Mr Jaggard that was submitted to the NHBC (Salisbury 2 and Jaggard 2).

Consideration of whether the claims in the new Scott Schedule are the same as the claims in the NHBC Scott Schedule required at the hearing, and requires in this judgment, detailed consideration of each item. Indeed, the NHBC submitted that the Claimant, in his witness statement for this application, had adopted a misleading approach to the substance of his claims – a proposition that equally required careful consideration of each item. That contributed significantly to the length of this hearing but I shall endeavour in this judgment to summarise the position where possible.

It is important in this context that this careful consideration of the issues involves principally the construction of documents and is not a matter that depends on any issues of law or evidence.

On behalf of Mr Hodgson, Mr Goodkin placed particular emphasis on paragraph 14 of the first Partial Award (“the award”) in which the arbitrator said this:

“In this arbitration Mr Hodgson has set out in a Scott Schedule all those matters that he alleges do not conform to NHBC standard. This award is confined to an assessment of those matters having regard to the endorsement on the policy. Although the parties have agreed that I may also consider disputes arising under the JCT contract at some time, Mr Hodgson has not pleaded his claim in that respect. Accordingly any disputes that may arise under the contract will have to await a further award.”

At paragraph 15, the arbitrator continued:

“The Scott Schedule includes 152 separate items. However, at the hearing of this matter Mr Hodgson redefined the matters in contention under 16 headings. I shall use those headings to identify the respective topics for my consideration and otherwise adopt the subjects classified by Mr Aeberli.”

Relying on the first sentence of paragraph 14, Mr Goodkin argued that the only documents to which the Court should have regard on this application were the NHBC Scott Schedule (which identified what had been referred to the arbitrator) and the award (which set out what he had decided on those matters). I do not agree. Firstly, the balance of the paragraph makes it clear that the point the arbitrator is making is simply that the disputes under the JCT contract have not been referred to him. Paragraph 15 also makes it clear that the things have moved on in the arbitration and that the arbitrator is considering the matters identified under the headings now used in the closing submissions. More generally, if it is evident on the face of the documents that Mr Hodgson has asked the arbitrator to decide a dispute which goes beyond the strict terms of the NHBC Scott Schedule and the arbitrator has done so, it makes no sense for Mr Hodgson now to argue that that dispute has not been decided in the arbitration.

Further, Mr Goodkin argued that expert evidence was needed to determine whether the defects and remedial works pleaded in these proceedings were the same as those determined in the First Partial Award. The Salisbury 2 report stated that it deal with “those defects not dealt with by Mr Dyer in his award” and Mr Goodkin submitted that this was the only expert evidence before the court.

Firstly, I do not accept that proposition. What is required is a careful consideration of the issues on the documentary evidence available: if the answer is then clear from that evidence, no further expert technical opinion is required as to whether the defects dealt with in the arbitration are the same as those sought to be pursued in the litigation. If the answer is unclear, it may be that further technical evidence is required to explain to the court the scope of what was in issue in the arbitration and is in issue in the litigation but it does not follow that such expert evidence is a pre-requisite to the court reaching a conclusion or that such evidence as is before the court must be accepted.

Secondly, as I have already observed at paragraph 12, Salisbury 2 was not the product of any further inspection or investigation. Without setting out the entirety of the report, it consists largely of repetition of Mr Salisbury’s previous opinion together with his view as to whether the matter was dealt with in the arbitration or commentary on what might be found on further investigation or rebuilding.

The item numbers below are item numbers in the new Scott Schedule. The Scott Schedule comprises four columns, headed Defect, NHBC Requirement and Building Regulations, Remedial Works, and Notification.

The only item in the NHBC Scott Schedule which related to the radon barrier was item no 23. In the column headed “Description of Breach”, the Claimant alleged that “Cavity has been filled to DPC to deal with radon barrier. However it is my understanding that weep holes should be installed.” The claim was put this way because the report of Mr Salisbury said that he was not able to ascertain whether the building had been provided with an uninterrupted membrane but he said that because the membrane has to extend over the cavity to make a complete barrier, it is usual to fill the cavity beneath it, but then it is necessary to leave weep-holes in the masonry immediately above the dpc. If that were where the matter rested, there would not seem to have been any allegation in the NHBC arbitration of any breach in not providing an adequate membrane and no allegation of breach other than in respect of the weep holes.

The sum claimed in respect of this item, however, was £133,837. Such detail as there was of the basis of that claim came from the report of Mr Jaggard which identified relevant remedial works (albeit not costing the amount claimed). Mr Jaggard costed extensive works to ground slabs followed by the laying of a radon resistant damp-proof membrane over the replacement ground slab; taping radon resistant damp proof membrane to damp proof courses/cavity trays; and forming radon resistant collars around penetrations through the damp-proof membrane. The area of the radon resistant damp-proof membrane was 146m^2; the length of taping was 161m; and there were to be 7 collars around penetrations. There were further works in respect of “radon ventilation” to include the installation of a radon sump; works to external walls (of which one element was the provision of pre-formed weepholes); and works to internal walls. Despite the wording of the Scott Schedule, therefore, the remedial works claimed were far more extensive than the provision of weepholes and assumed that the ground slabs would need to be replaced and a new radon barrier provided.

In the closing submissions, the Claimant grouped together items 23, 25 and 26 in the Scott Schedule described as “Defective radon precautions and Damp Proof Membrane.” Paragraphs 68 and 69 contained the following passages:

“At the hearing on the 5^th September 2006, Mr Fowler noted that a 1200 gauge barrier, not a 1000 gauge barrier, should have been used, and a sump and drain provided and said that what was provided would simply not work as a Radon barrier, evidence that Mr Dickinson [Groves’ expert] did not seriously dispute. The Claimant contends that it is irrelevant that many houses in the area do not have such a Radon barrier. This was a requirement of the Works, the Building Regulations and the NHBC which is necessary to avoid the risk of cancer to occupants. It was not adequately provided for and the Claimant is entitled to have it rectified. …. Other defects identified by Mr Salisbury and Mr Fowler and, no doubt, noted by the Arbitrator during his inspection, are the absence of a sump and pump, incorrect weep holes, and the failure to form a seal between the under-slab DPM and the DPCs through walls, the detail used not only being inadequate as a radon barrier, but creating a slip plain. The BRE requirements for Radon protection … have not been met.

In conclusion, the Claimant submits that the arbitrator should find that the Respondent failed to provide an adequate DPM and/or Radon Barrier to the Property, as required by the Building Regulations, that it was thereby in breach of Mandatory Requirements R1, R3 and/or R4, this being a Defect within the meaning of the Buildmark Cover …..”

It is quite clear from this that, however the defect may have been identified and the claim made in the Scott Schedule, by the time the arbitration hearing had reached its conclusion, the alleged defect encompassed all aspects of the allegedly defective radon barrier and was not limited to weepholes.

In his First Partial Award (“the award”), the arbitrator found that the substructure was unacceptable. Given the claim in item 3 below, it is convenient to set out first the arbitrator’s findings in that respect (at paragraph 24 of the award):

“The quality of the hardcore fill is itself the subject of argument. Mr Hodgson’s case is that it includes demolition materials from another site including organic matter. Evidence of that is available in the photographs referred to in the Scott Schedule. Besides I was able to see at my site inspection that the hardcore infill is less than satisfactory at the south west end of the house. Other parts have not been exposed….”

He found that the substructure was unacceptable because of the use of inadequate hardcore fill and the failure to reinforce the ground floor concrete slab at the south-western end of the house. His decision was limited to that corner of the house and the fill under the dining room, study and part of the sitting room and it is clear from the award, on its face, that that limitation was not the product of the claim being limited to particular areas of the house but rather of the evidence in support of the claim. He found that that “aspect of the construction [was] aggravated by the failure to install an effective radon barrier and [that] there is no indication that the builder installed a sump and the necessary ventilation.”

His award continued:

“However, it is crucial to this issue that Mr Hodgson’s apparently comprehensive schedule of defects sent on 6 September 2004 contains no complaint about the un-reinforced slab, nor any reference to the radon barrier.”

It followed, said that arbitrator, that any remedial work, or the costs thereof, had to be confined to making good the fill under the dining room, study and part of the sitting room, although he also found that that would inevitably require replacement of the concrete slab and replacement of the radon barrier. He made an award of £11,674.00 plus preliminaries accordingly.

On behalf of the NHBC, Mr Townend submits that the arbitrator thus concluded (i) that there was no notice in time of a defect in the radon barrier; (ii) that there was notice of other defects in the substructure; (iii) that the radon barrier was, in fact, inadequate or defective; but (iv) that any cost of remedial works to the radon barrier were recoverable only as part of, or consequential on, the carrying out of remedial works in respect of other defects. That is, in my view, an entirely accurate summary of the award.

Under the heading Defect, the new Scott Schedule states that the site required “full” radon protection, provided by an unbroken, properly jointed, vapour proof membrane that passes under the house, contiguous with all the external faces of the masonry. Further there should be either a ventilated gap under the building or, if built with the ground supported concrete floor, a reinforced concrete floor supported on the inner leaf of the building. A sump and underground pipework is also needed as a supplement to the membrane and to depressurise the sub-floor. It is then alleged that the radon protection constructed was adequate because (i) the damp proof membrane installed was not designed for or capable of providing radon protection; (ii) the membrane was not overlapped and properly jointed to make it gas tight; (iii) the sump was not placed in an appropriate position to depressurise the subfloor; (iv) the concrete floor slab was not supported on the inner leaf; (v) the slab was supported by the ground which was not properly prepared to carry its weight; and (vi) the membrane was not made in the manner required.

It is pleaded that the remedial works required are the provision of a full gas-tight membrane with depressurisation sumps below, which will require the removal of the whole of the ground floor and the defective hardcore, which in turn will probably necessitate replacing below ground drainage. No figure is attached to these works in the new Scott Schedule but Jaggard 2 Report provides a quantification. The works there set out in relation to the radon barrier are, in all material respects, identical to those in the first report including the quantities, such as the area of the radon barrier, length of taping and number of collars.

The Claimant’s position is that the claim in the NHBC arbitration was only in respect of the failure to provide weep holes and that no claim was made in respect of the radon barrier, whereas the claim now made is far wider in both its scope and the scope of remedial works claimed for. The Claimant argues that the arbitrator’s remark about the schedule of defects was only a finding that the radon barrier was not mentioned in Mr Hodgson’s schedule defects and the arbitrator had no reason to consider or make a finding on that issue because no claim for replacement of the radon barrier was before him.

It seems to me that that is completely wrong. Mr Hodgson’s claim in the NHBC arbitration was not so limited and Mr Hodgson is seeking to make in these proceedings the same allegations as to the defective radon barrier and the same claim for the cost of remedial works. That claim was determined in the NHBC arbitration in the manner set out above. Whether under the terms of the Settlement Agreement or because it would be an abuse of process, Mr Hodgson cannot re-litigate this claim in these proceedings – for one thing, he cannot seek to open up the arbitrator’s decision that the claim had not been notified and did not fall within Section 2.

Items 13 (below ground drainage), 14 (electrical installation) and 15 (external works and other considerations) in the new Scott Schedule are all claims for remedial works entirely consequential on item 1 and must be similarly claims on which there is no real prospect of success or for which there are no reasonable grounds.

This “defect” is said to be pleaded in the alternative to item 1, since the relevant remedial works would also be required under item 1. Item 2 continues: “Further wall cracks occurred on the dining room and the extended wing on (sic) at the rear of the house caused by deficiency in the foundations. The wall was not placed centrally.” I have to say that it is not at all clear from this pleading what deficiency is alleged. Mr Townend approached this item as if it were limited to an allegation that a wall was not placed centrally.

Mr Townend drew my attention to the following items in the NHBC Scott Schedule which related to foundations and walls: item 17 alleged that incorrect blocks were used in foundations; items 21 and 22 made allegations relating to the foundations of the garage and item 22 in particular alleged that “no foundation was found under the front central garage pillar; items 29 and 30 alleged that blockwork under ground was below strength. In Mr Hodgson’s closing submissions in the arbitration, these claims were not pursued. In the Award, at paragraph 20, the arbitrator recorded that that he had received no oral evidence on these items. He identified evidence in the form of reports as to whether there were trench fill or strip foundations. He conclude that from the evidence he had heard and his own site inspection, he was satisfied that there were strip foundations and that “the wall is located centrally on the foundation concrete.”

From the references shown to me, although it may well be that the “wall” complained about in the new Scott Schedule is one that the arbitrator has already found to be located centrally, I am unable to say with any degree of certainty that that is the case. In those circumstances, it would be wrong for me to conclude Mr Hodgson has no real prospect of success on item 2 but it should also be clear that that does not amount to a final decision on my part that this item has not already been decided in the arbitration. It remains open to the NHBC to run that defence.

This defect is also said to be pleaded in the alternative to item 1. The new Scott Schedule continues:

“Further, the Award dealt only with the oversite fill extending to the study, dining room and living room in the south west part of the house. The construction of the ground-bearing floor was consistent throughout the building. therefore, the remainder of the fill is also defective and needs to be replaced.”

In the NHBC Scott Schedule, items 13, 14 and 15 made allegations about there being demolition hardcore and vegetative material in fill. The items were thoroughly repetitive other than for reference numbers. There was nothing in the items to indicate that they were limited to particular areas of the property. Each item, however, included a reference to drawings 1397-10-S1. There was a further repetition of these items in item 20. Then at item 21, the Defect was described as “Slab not reinforced western wing garage block inappropriate material.” Under this item in the column headed “evidence of breach” express reference was made to the dining room, living room and study floors. The drawing reference was to drawing 1397-10-S2.

These items were addressed together in Mr Hodgson’s closing submissions at some length - it is apparent from these submissions that the arbitrator had received expert evidence and that some areas had been opened up. It was submitted that the arbitrator should find that Groves’ use of uncompacted and unsound hardcore, with an unacceptable organic and builders rubble content, was a defect. There was again nothing in these submissions to suggest that they were limited to particular areas of the house.

These matters form the background to and reinforce the conclusion I had already reached, when considering item 1, that, on the face of the award itself, the claim in respect of “oversite fill” had been submitted in full in the arbitration and dealt with in full. Mr Hodgson succeeded in part only and failed in part. He cannot now revive the part of the claim in respect of which he failed. It is not the case that his claim in the NHBC arbitration was made in respect of part only of the house and that he can now pursue his claim in respect of the remainder.

In the new Scott Schedule under Defect all that is said in relation to this item is that “The related remedial work is required for Defect 1” and Mr Hodgson says that these remedial works are required to rectify the radon barrier. The short answer to this claim, therefore, is that there is no real prospect of success on, or reasonable grounds to bring, the claim since it falls to be dealt with under item 1.

In any case, the remedial works are identified as the construction of a replacement reinforced suspended slab in those areas of the house where the made up ground exceeds a depth of 600mm.

It is unclear what items in the NHBC Scott Schedule this new item 4 may relate to and the explanation for that may well be that the Scott Schedule itself did not include a claim for replacement of the radon barrier.

Having said that, Item 21 contains the allegation that the slab is not reinforced in the western wing and garage block (and the evidence referred to is that relating to the dining room, living room and study). Item 24 describes the Defect as “Ground bearing slab over excess fill, western wing and garage block with no mesh”. In the description of breach, it is specifically alleged that the fill was greater than 600mm and that the engineer’s design was not followed in that no mesh was found to be present. So far as the NHBC Scott Schedule is concerned, therefore, and if the matter went no further, it might well appear that Mr Hodgson had previously only made a claim in respect of defects in a limited area of the ground slab and that it was now open to him to make a claim in respect of other areas of the property.

In Mr Hodgson’s closing submissions, he relied on the evidence of Ms Anderson, an engineer. Her report (dated 31 August 2006) was not before me in these proceedings but the award refers to her report and records that she gave oral evidence. Her evidence was that the ground slabs lacked reinforcement and had not been supported on the blockwork and inner leaf. This evidence and this defect were addressed in the closing submissions together with the complaints about the hardcore. At paragraph 73 of the submissions, it was then said that the Claimant’s case was that, because of the Defects in the hardcore, the ground slab and/or the DPM, the existing ground slabs would have to be replaced with reinforced ground slabs.

Mr Jaggard’s quantification of remedial works to the Substructure included two items for removal of ground floor slabs (with an area of 146m²) and the casting of a replacement suspended ground slab with the same area. The Jaggard 2 Report includes the identical items.

The arbitrator, in his award, explains the relevance of the reference to 600mm infill, namely that the NHBC guidance indicates that where more than 600mm infill is required at any point in a self-contained area, the floor over the whole of that area must be of suspended construction. The arbitrator was satisfied from the evidence and from his inspection that at the south-western end of the house, there was more than 600mm infill. His conclusions, however, were then those that I have already set out at paragraphs 65 - 67 above in relation to item 1 and which Mr Townend has, in my judgment correctly characterised.

It seems to me clear that the arbitrator was invited to and did consider whether there was a defect in the slab as a whole; he concluded that there was, in a specific area only; but that claim failed for lack of notice of a Defect in any area of the property. Mr Hodgson has no real prospect of successfully arguing that his claim was limited to a particular area and that the arbitrator’s award applied only to that area nor does he have any real prospect of success in arguing that this claim can be advanced on a different basis, namely as a claim for remedial works associated with the radon barrier.

In the new Scott Schedule, it is pleaded that the relevant remedial works would be required in respect of item 1 so that this claim is again made in the alternative. The distinct allegations under this item are (i) that the “original” mortar was much weaker than would be expected if an NHBC compliant mix had been used; (ii) that masonry was laid in cold weather and that there is damage consistent with frost damage; and (iii) that the internal mortar was partly removed and strengthened with a proprietary grouting system but that that should not have been necessary and that it is unlikely that the grouting process will have resulted in the complete fill of the joints. The remedial works identified include the provision of support to the roof when the outer leaf is dismantled if the outer leaf is carrying the roof.

In the NHBC Scott Schedule, the NHBC drew my attention to the following items:

From the description of the Defect, the only Defect alleged was, therefore, frost damage. From the award and the NHBC Scott Schedule, it is apparent that there were numerous other items which also alleged frost damage and one item (no. 68) which alleged that on internal blockwork walls, the mortar mix was too weak in areas of frost damage.

The total claimed is £392,356. I was not referred to what works were costed in Mr Jaggard’s report. There is a section relating to external walls but no specific section relating to internal walls.

Under the column heading “Reference to evidence of breach”, Mr Hodgson relied on Mr Salisbury’s report. In his report, Mr Salisbury said that he had inspected the exterior mortar and a small internal area. He expressed the opinion that the mortar was weaker that he would expect (in identical terms to what is now pleaded in the new Scott Schedule) and he said that the condition of the mortar was what he would expect from frost damage. His report thus extended the evidence of breach, at least, to the weakness of the mortar.

The closing submissions said that the claim in respect of the incorrect use of admixture was not pursued but that the claim for frost damaged mortar was. Those submissions clearly referred to frost damaged mortar on internal and external walls. It was said that the experts “in this arbitration” had focussed their attention on the mortar to the outer stone leaf of the external walls and the mortar to the cavity face of the inner leaf and it was submitted that expert evidence from a Mr Bennett as to the frost damage to the external walls applied equally to the inner leaf. The submissions also relied on the evidence of Mr Salisbury as to the weakness of the mortar.

In his award, the arbitrator set out the evidence he had heard, much of which was concerned with Groves’ responsibility for the condition of the mortar and stonework, particularly after their contract was terminated. He concluded that it was “not equitable to hold Groves alone … to account for the state of all the external mortar.” He further found that there were other defects in the external stonework that should be remedied. He noted that the schedule of works costed by Mr Jaggard assumed that the whole of the external skin should be taken down and rebuilt – which he was not convinced was necessary or advisable. The award continued (paragraph 34):

“If it were so it would probably be more economical to demolish the house and rebuild it but that is a course that Mr Hodgson’s own experts advised against. Account must be taken of the fact that no defects in the stonework above 1.6m high have been brought to my attention. At my meeting with expert witnesses on 27 September 2006 it was proposed that repairs to the external leaf can be undertaken in lengths of about 1m allowing a natural arch to support the masonry above each section, and that course of action recommends itself to me”. (My emphasis)

On behalf of the NHBC, Mr Townend then submits:

The position in relation to this item seems to me far from straightforward.

In my view, therefore, and subject to any issues of notification which are not before me, Mr Hodgson has a real prospect of success and/or there are reasonable grounds for pursuing the claim in respect of the inadequate joint filling only. Mr Hodgson has put forward no basis for arguing that the dismantling of the outer leaf could be the remedy for that defect and, in consequence, he has no real prospect of success on that claim.

In the new Scott Schedule, and in summary, the Defect alleged is that wall insulation was not laid between properly positioned walls ties but had been forced around them. It is pleaded (i) that this may leave gaps (which might not show in the thermographic imaging relied upon by the arbitrator) which may lead to condensation within the cavity and to the degradation of the water repellent quality of the insulation, thus compromising the water-proofing of the building and (ii) that, on testing, the mineral fibre insulation was found to be water absorbent. It is further alleged that this occurred both below and above the height of 1.6m; that the arbitrator found that the walls were defective up to a height of 1.6m; and that the walls were also defective above that height. The remedial works are identified as the rebuilding of the external leaf of the wall.

In the NHBC Scott Schedule, Mr Townend referred me to items 36 and 53:

It is not immediately obvious that the breach being complained of in the new Scott Schedule is the same that the breach alleged in the NHBC arbitration, the common element being only the allegation that the “material” (which would appear to be the Rockwool) is no longer water resistant. As with other items, however, the matter did not stop there.

In his report, Mr Salisbury was unable to reach a “definite opinion” on the overall quality of the insulation. He recorded that he had observed an area on the east side of the building where the cavity had not been filled.

In the closing submissions:

It is abundantly clear, therefore, that, however the matter had been expressed in the NHBC Scott Schedule, by the conclusion of the hearing the arbitrator was being asked to find a general or systemic failure in the installation of the insulation and that failure encompassed the allegations that the insulation had not been placed correctly and the cavities had not been properly filled.

In the award, the arbitrator concluded that remedial work was required to remedy failed insulation by opening up the cavity in the areas identified by the thermographic survey.

Read in context, it is, in my judgment, firstly clear that the claim referred to the arbitrator and which he decided was one in respect of the installation of the insulation generally and secondly equally clear that the new Scott Schedule clearly recognises that the breaches now alleged in the litigation were the subject matter of the arbitration and decided.

The Claimant, however, seeks to characterise the dispute determined in the arbitration as limited to the condition of the wall up to 1.6m. There is no basis for that contention at all.

The arbitrator’s award records that no defects in the stonework above 1.6m had been brought to his attention. On this basis, it is submitted that his award is not concerned with defects above that height and that any claim in respect of such defects is a new claim. The arbitrator’s remark appears in the context of his observations about the scope of remedial works and is part of his reasoning for rejecting the argument that the entire outer leaf needed to be removed and the roof supported in the meantime. It is nonsensical to construe that as meaning that he has not had referred to him defects above 1.6m and that they are not the subject matter of his award.

The new Scott Schedule alleges that wall ties compatible with uneven coursing ought to have been, but were not used, and that inappropriate butterfly ties were used instead. It is pleaded that this should be corrected throughout the property.

In the NHBC Scott Schedule, it was alleged (at item 66) that wall ties were distorted because the outer and inner courses did not match. Mr Salisbury’s report addressed this issue as did the closing submissions and the Claimant submitted that the arbitrator should find that the failure to install appropriate wall ties, and the failure to fit those that were installed correctly, was a Defect. The arbitrator accepted the evidence he had heard on this issue and did so find. Mr Hodgson cannot now raise this claim again against the NHBC.

Mr Hodgson’s argument for doing so is again that the award was limited to the condition of the wall up to a height of 1.6m and that his claim relates or may relate to the wall above that height (albeit that is not how the claim is pleaded in the new Scott Schedule). In my judgment, Mr Hodgson has no real prospect of success on that argument and thus on this claim.

In his award, at paragraph 37, dealing with this issue, the arbitrator observed that at his site inspection he had seen a significant number of wall ties that were inadequately bedded but he said that he had to bear in mind that work had been carried out by other contractors in re-pointing and other remedial work. He then said “Again, my attention has not been drawn to such matters above the 1.6m lower section of the walls and I must assume that the higher levels were closely supervised …”. A natural reading of that observation is that the arbitrator was referring to the workmanship above a height of 1.6m and instances of the inadequate bedding of ties rather than the use of inappropriate ties. Even if that were not the case, it does not seem to me arguable the arbitrator was recording that alleged defects in the wall ties above a height of 1.6m had not been referred to him in the arbitration and/or that he was not deciding whether there were any such defects. What he was doing was recording the absence of evidence in support of the claim that there were such defects throughout the walls.

The new Scott Schedule alleges that cavity trays inserted above the windows were defective. It is alleged that the cavity trays had been formed of dpc material and that (i) they did not have ends to prevent water flowing into cavities; (ii) the membrane dipped within the cavity forming a water trap; (ii) weepholes above the windows had been omitted or covered with mortar; (iv) the material was not supported across the cavity; (v) there was no 25mm projection beyond the outer face of the cavity closure. The remedial works claimed are the replacement of all cavity trays.

In the NHBC arbitration, cavity trays were referred to:

Taking these items together, it seems to me that, although slightly differently expressed, the same allegations of breach are being made in these proceedings as were made in the NHBC arbitration and that there is no real prospect of success in any contrary argument.

That view is reinforced by the terms of Mr Salisbury’s report (at paragraph 15). He said that he had been informed that instead of cavity trays, dpc material had been used and that “Unless this is supported across the cavity and is either turned up at the ends of has stop-ends fitted, this material will not ensure that water drains outwards and will fail to meet NHBC requirements. On my own inspection I saw no 25mm projection of any cavity tray beyond the outer face.” In other words, Mr Salisbury had identified and Mr Hodgson relied, in the arbitration, on the same breaches and defects that are alleged in the new Scott Schedule.

In the award, the arbitrator concluded that there were cavity trays “cut short”; no evidence of cavity trays on the outer face of the stonework (that is, no projections); and that there was evidence that cavity trays were missing. He concluded that remedial works were necessary and that was included in his assessment of the remedial works to external walls.

Again it the Claimant’s case that the award was limited to the condition of the walls up to a height of 1.6m. That argument is unsustainable for the reasons I have already given.

On this item, Mr Hodgson submits that the claim in the NHBC arbitration and the award related only to the garage lintels, so that this claim is a distinct claim. I very much doubt that that is right but it is not to the point because, in the new Scott Schedule, item 9 is said to be consequent on other remedial works. It is alleged that since masonry was “pinned”, “it is likely that concealed metal dowels were fixed between adjacent blocks with epoxy cement” and that they will, therefore, be damaged when other corrective work is undertaken and will have to be replaced.

The “other remedial works” relied upon in item 9 are not expressly identified, so that, on the face of the new Scott Schedule it is not possible to know whether this item stands or falls. Having said that, the only item I have concluded thus far that the Claimant has any real prospect of success on is item 2 (foundations) – this has nothing to do with works around windows and it follows that there is no real prospect of success on this item.

Despite the heading, this item in the new Scott Schedule makes no claim in respect of doors. So far as windows are concerned, it is first said that removing the windows to fix the surrounding masonry is likely to damage them. That claim is, therefore, entirely consequent on item 9 and can have no real prospect of success.

Further, it is alleged that if the walls are rebuilt using the originally specified bed thickness, the windows will be over-sized. I have already decided that the items in respect of which the claimed remedial works include the rebuilding of any walls have no real prospect of success so this element of item 10 must follow suit.

In the new Scott Schedule, this item has two elements:

In the NHBC Scott Schedule, there was a series of items nos. 146, 147, 149 and 150 which made complaints about the gutters. They included the allegation that gutters were not installed correctly; that they were laid to insufficient falls; and that “gutters discharge into walls”. Items 151 and 152 were specifically referable to the garages and alleged that the previous breaches applied to the garage block.

In the closing submissions under the heading “Roof gutters”, and with express reference to items 146, 151(part) and 152 (part), Mr Hodgson said that having considered the evidence adduced at the hearing (my emphasis) and, noting that the gutters would have to be taken down and replaced as part of remedial works to external walls, he did not pursue these claims. It seems to be evident that Mr Hodgson had formed the view that, on the basis of the evidence adduced in the arbitration, the claim would fail and it was not, therefore, pursued as a free standing claim.

What that evidence was is apparent from the award. It is easiest to quote from paragraph 46:

“The Claimant does not intend to pursue the claim in respect of roof gutters as a separate item as they will have to be taken down and replaced as part of other remedial works. ….. I should record that the gutters are not correctly fitted and at one point a valley gutter does not discharge into the eaves gutter. Nevertheless the Respondent’s case is that the gutters were not installed by Groves. In the absence of any evidence to the contrary I shall made no order or award on the point.”

In other words (i) a claim in respect of gutters was brought in the arbitration but abandoned; (ii) it appears to have been abandoned because the Claimant had no evidence to refute Groves’ case that it had not installed the gutters; and (iii) the arbitrator, therefore, made no award on the issue. None of that means that the claim was somehow removed from the scope of the arbitration such that it could now be pursued under the Settlement Agreement. On the contrary, it was a claim dealt with in the arbitration and decided against the Claimant either because it was withdrawn or because there was no evidence to support the claim against the Builder.

In the new Scott Schedule, the Defect is described as follows:

“Owing to the wide coursing of the rubble and the steepness of the pitch of the roofs a stepped flashing is not a practicable solution. The long tails of lead sheet will lift in a gale and will fail to protect the building as intended, a raking flashing should have been let into a sloping chase or raglet.”

The remedial works claimed are the removal and replacement of the leadwork.

The NHBC Scott Schedule contained two items (nos. 116 and 119) which identified a Defect as “Roof slates and leadwork” and “Roof leadwork” respectively. The evidence of breach included the report of Mr Salisbury. Mr Salisbury’s report, in a section headed “Roof Covering”, contained a paragraph which was in identical terms to what is now item 12 in the new Scott Schedule.

The award included a section headed “The roof including rafters, underlay, slates and leadwork”. Within that section were further subsections. Under the heading “Slates and other roof coverings”, the arbitrator identified defects in the slates and roof coverings but added that “there are generous allowances for purpose-made roof trusses and other repairs to the roof structure that I am not persuaded are necessary”. He awarded a total of £27,992 in respect of the roof.

Although, there was no discrete determination of a claim in respect of leadwork, it seems to me that Mr Townend is right to submit that the net result must be that the claim in respect of leadwork included the very matters now relied on and that the claim was either dismissed (as one of the matters the arbitrator was not persuaded of) or subsumed within the total awarded in respect of the roof. As Mr Townend pointed out, that is consistent with the fact that Mr Jaggard, in his 2011 Addendum Report includes only £383 in respect of the roof and makes no mention of leadwork.

On this item, Mr Hodgson relied on the letter from Mr Masson dated 16 September 2011. This letter was the lengthy response to Mr Hodgson’s claims against the NHBC, dealing with the Defects now relied upon and setting out the NHBC’s assessment of each. In that letter, Mr Masson expressly accepted that the arbitrator had not dealt with leadwork flashings and that the NHBC proposed to inspect the leadwork. Mr Masson now says that letter is wrong on this point. For the reasons I have given, it seems to me that he is right about that and I can see no basis on which the NHBC should be held to a position it had adopted in correspondence over 5 years ago. It is not a pre-action admission which could only be withdrawn with the permission of the court.

In my judgment, therefore, the following items or claims advanced by Mr Hodgson in the new Scott Schedule have no real prospect of success: items 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15. With the exception of the claim in respect of joint filling (which fails for the reasons in paragraph 98), these items or claims have already been determined in the arbitration and do not fall within the terms of the claims in respect of which the NHBC agreed to pay Mr. Hodgson the Cost of remedial work.

It is academic whether I give summary judgment for the Defendant on these items or strike these claims out. The only matter that survives is item 2. It will be a matter for the Claimant whether he wishes to pursue a claim on this item alone.