COURT OF APPEAL (CIVIL DIVISION) ON APPEAL
FROM THE COUNTY COURT AT WORCESTER
(MR RECORDER RUNDELL)
Strand, London, WC2A 2LL
Friday 16th March 2001
B e f o r e :
LORD JUSTICE JONATHAN PARKER
| (1) MARY RUSHTON
(2) MICHAEL RUSHTON
|- and -
|WORCESTER CITY COUNCIL
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Giles Harrison-Hall (instructed by Hulme & Co, Worcester), for the respondent
Crown Copyright ©
LORD JUSTICE POTTER:
THE RELEVANT HISTORY
"Any building where HAC concrete beams have been used must now be regarded as suspect"
"You are asked to bring this letter and annex to the attention of any of your tenants who may be in the process of buying an Orlit dwelling or who enquire about doing so in the future."
"You will see from the Minister's statement that he wishes local authorities and other public owners of such houses to pay particular attention to the condition and durability of the structure on valuing such houses for sale . . Structural components are very often concealed. Their present condition and future performance may be very variable and are capable of being assessed only by expert investigation. The Minister's statement should be drawn to the attention of all prospective purchasers of these dwellings immediately."
".. the houses in Durham Road would appear to present quite a problem due to their HAC content in the stitch joints. The depth of carbonation would appear to be deeper than the depth of the steel with the result that higher risk of corrosion failure is to be expected . I would not recommend that sales proceed with houses similarly constructed to those in Durham Road which have a High Alumina Cement stitch joint"
"The concrete in the in situ stitches, however, was of a comparatively poor quality and easily cut out. It was fully carbonated and tests reveal that high alumina cement had been used and was 55% converted . The concrete frame has in all instances been found to be in sound condition and unlikely to show serious defects in the near future. Nevertheless, the stitch joints have been found to be of poorer quality highly carbonated concrete containing high alumina cement . . There is, therefore, every possibility that future deterioration will occur we suggest that the structure of a similar sample of these houses i.e. approximately 10% should be re-inspected after a period of ten years."
"The general conclusion contained in these reports was that although no structurally unsafe conditions were found, the concrete will continue to deteriorate. Therefore, the way the concrete is used in the structure of the dwelling is a significant factor in determining whether it is practical and cost effective to consider a policy of extending the life of all the dwellings."
"(1) the price of which, in the landlord's opinion, you are entitled to have the freehold conveyed to you is £9,8000
(2) This price has been arrived at as follows: -
Market value at 28th January 1991 £24,500
Less discount £14,700 60%
"The following structural defects are known to exist: -
Description of Defect
This property is defined as defective under the Housing Act 1985"
"No structural survey has been made in connection with the following valuation, nor have the services been tested. Moreover, those parts of the property which are covered, unexposed or inaccessible, including the roof space, have not been inspected and the Council's Valuer is, therefore unable to report that such parts of the property are free from insect infestation, rot, or any other defect, apart from those listed below. It is for the intending Purchaser of the above property to satisfy himself or herself as to the condition of the property. An intending purchaser is strongly advised to obtain a full survey of the property."
THE STATUTORY PROVISIONS
"A secure tenant has the right to buy, that is to say, the right, in the circumstances and subject to the conditions and exceptions stated in the following provisions of Part V.
(a) if the dwelling-house is a house and the landlord owns the freehold, to acquire the freehold of the dwelling-house"
"(1) A secure tenant claims to exercise the right to buy by written notice to that effect served on the landlord.
(3) The notice may be withdrawn at any time by notice in writing served on the landlord."
"(2) The notice shall describe the dwelling-house shall state the price at which, in the opinion of the landlord, the tenant is entitled to have the freehold conveyed and shall, for the purpose of showing how the price has been arrived at, state
(a) the value a the relevant time
(b) the improvements disregarded in pursuance of section 127 (Improvements to be disregarded in determining value) and
(c) discount to which the tenant is entitled, stating the period to be taken into account under section 129 (Discount)
(3) The notice shall state the provisions which, in the opinion of the landlord, should be contained in the conveyance or grant.
(4A) The notice shall contain a description of any structural defect known to the landlord affecting the dwelling-house or the building in which it is situated or any other building over which the tenant will have rights under the conveyance or lease.
(5) The notice shall also inform the tenant of
(a) the effect of sections 125D and 125E(1) and (4) (Tenant's Notice of Intention, Landlord's Notice in Default and Effect of Failure to Comply)
(b) his right under section 128 to have the value of the dwelling house at the relevant time determined or re-determined by the District Valuer
(d) the effect of sections 140 and 141(1), (2) and (4), (Landlord's Notices to Complete and Effect of Failure to Comply),
(e) the effect of the Provisions of this part relating to the right to acquire or rent to mortgage terms "
"The value of a dwelling-house at the relevant time shall be taken to be the price which at the time it would realise if sold on the open market by a willing vendor
(a) on the assumptions stated for a conveyance in subsection (2) ."
THE JUDGE'S DECISION
"I find that in 1991, based on the documents to which I have already referred, [see paragraphs 6-8 above] the Worcester City Council did know that Orlit houses were built with HAC, that that rendered the houses at risk of failure of the stitch joints and, therefore, possible collapse; and that the conversion of the HAC in the stitch joints was continuing. In my judgment, therefore, that was a significant defect which required remedial work in the not too distant future.
The offer notice at page 725 made no mention of HAC, but only disclosed the fact that the property was defective under the statutory provisions and it is common ground that the statutory scheme did not include HAC in stitch joints. It therefore follows, in my judgment, that the City Council were in breach of their statutory duty in failing to disclose the presence of HAC in the stitch joints in 33, Durham Road."
" that potential purchasers with knowledge of the use of HAC in the stitch joints would simply not have proceeded. It, therefore, follows, both on that view and the notional house in good repair less cost of repair approach, that the value in 1991 was nil or minimal. The cleared site value at the time is agreed between the experts at £1,150 and the cost of demolition is agreed at £11,000. In those circumstances, it seems to me that Mr Humphries is correct to say that in 1991 the house had a nil value."
"I . remind myself that that is in respect of defects only. In these circumstances it seems to me that the correct measure of damage is the difference between the price paid (£9,800) and the value of the item acquired (Nil); that is, £9,800 to which interest since the purchase on 16th December 1991 must be added. The short-term investment account rate to date is 67.32%, which produces an interest figure £6,597.36, producing a total of £16,397.36"
"A purchase in 2000 of a fully repaired house, the value of which is not known but it is agreed in 1991 would have been £38,000 so no doubt significantly greater now."
"The defendants contend that Mrs Rushton failed to act reasonably in failing to have a proper structural survey or taking proper advice prior to the purchase. In fact, the evidence shows that some 80% of purchasers fail to have a proper survey and I find in those circumstances it is difficult to brand them all as acting unreasonably. But Mrs Rushton did have a survey. She instructed Mr Moore, a qualified surveyor, albeit a quantity surveyor, and in doing so I find that she took a reasonably prudent course. I am also inclined to the view that as a council tenant she is entitled to place considerable reliance on the duties of the City Council, her longstanding landlord to disclose any serious defects, that being a statutory duty. I unhesitatingly, therefore, acquit her of any contributory negligence."
THE GROUNDS OF APPEAL
The Knowledge of the Council
Is a remedy under s.2 of the 1967 Act available?
"It seems to me to be quite clear that in the instant case any cause of action which the applicant has derived from statute and from the statute alone. Apart from the statutory provisions, he could have no claim and it is only by virtue of the statute and of the regulations made thereunder that there can be ascertained the amount of the price to be paid under the statutory contract, the terms of which can be gathered only from the sections of the Act and Schedules."
".. the legal compulsion both as to the creation of the relationship and the fixing of its terms is inconsistent with the existence of a contract" (per Dyson J at 959f).
" a speculative purchase carried out without a survey and, therefore, it is not known whether HAC was used nor, if it was used, whether the purchaser knew of that fact. It is of some significance that prior to the sale, the selling agent, Mr Rozier offered the property back to the City Council who were not interested. I find Mr Saggers places an unrealistic reliance on this sale, given that it is a single market transaction whose details are unknown and no survey was carried out. It is probable, indeed almost certain, that the presence of HAC was not known to the purchaser. Mr Saggers accepted that if there were no valid comparables the only sensible method of valuation is to take the value of a notional house in good condition and then deduct from that value the cost of repair. It is the approach set out on page 108B of the bundle. If that is applied to 33, Durham Road, on the agreed figures contained in page 377 the property had a negative value in 1991.
I accept Mr Humphries' view that potential purchasers with knowledge of the use of HAC in the stitch joints would simply not have proceeded. It therefore, follows both on that view and the notional house in good repair less the cost of repair approach, that the value in 1991 was nil or minimal. The cleared site value at the time is agreed between the experts at £1,150 and the cost of demolition is agreed at £11,000. In those circumstances, it seems to me that Mr Humphries is correct to say that in 1991 the house had a nil value."
" the loss of the benefit of the alternative transaction .. is a purchase in 2000 of a fully repaired house, the value of which is not known but it is agreed in 1991 would have been £38,000, so no doubt significantly greater now . The loss of the alternative transaction comes about in the circumstances where Mrs Rushton would have waited for demolition and exercised her right to buy., she would have acquired a house worth at least £38,000, probably significantly more, but, of course, it would have cost her more. I am satisfied on the limited evidence available that she would probably, with the help of her son, have been able to afford such a purchase at an increased price
What has she lost? Firstly, she has lost the discount which on a £38,000 house at 60% would be some £22,800. The Defendants urge upon me the provisions of section 131 of the Act which imposes a cost floor. Mr Waring in re-examination explained very briefly but did not go into detail and no one has produced the Secretary of State's Determination under section 131 and, therefore, I am completely in the dark as to what the cost floor was and when it would bite. I am not prepared to speculate in the absence of any evidence and, therefore, I have to ignore any potential cost floor that might have been imposed."
The Cost Floor
"(1) Except where the Secretary of State so determines, the discount shall not reduce the price below the amount which, in accordance with a determination made by him, is to be taken as representing so much of the costs incurred in respect of the dwelling-house as, in accordance with the determination
(a) is to be treated as incurred at or after the beginning of that period of account of the landlord in which falls the date which is eight years, or such other period of time as may be specified in an order made by the Secretary of State, earlier than the relevant time, and
(b) is to be treated as relevant for the purposes of this sub-section; and if the price before discount is below that amount, there shall be no discount.
(2) The discount shall not in any case reduce the price by more than such sum as the Secretary of State may by order prescribe."