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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> BDW Trading Ltd v Opticlife Ltd [2010] EWHC 1951 (Ch) (29 July 2010)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2010/1951.html
Cite as: [2010] EWHC 1951 (Ch)
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CHANCERY DIVISION
Strand, London, WC2A 2LL |
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B e f o r e :
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| Bdw Trading Limited |
Claimant |
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| - And - |
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| Opticlife Limited |
Defendant |
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Mr Stephen Jourdan QC (instructed by Howard Kennedy) for the Defendant
Hearing dates : 16, 17 and 18 March, 14 and 15 June 2010
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Crown Copyright ©
- In this action the Claimant, BDW Trading Limited ("BDW"), claims a declaration that it has forfeited a deposit paid by the Defendant, Opticlife Limited ("Opticlife"), under an agreement for the construction and sale of certain flats ("the Agreement"), and damages for breach of the Agreement. Opticlife counterclaims for return of the deposit with interest.
- The Agreement is in writing and dated 11 September 2007. I will have to give more details of its terms in due course but in essence it provided for BDW to construct 59 flats on the 1st to 7th floors of a block in Colindale, London NW9 in accordance with a detailed specification, and to sell each of the flats when constructed to Opticlife for a total sum of £14.76m (apportioned between the flats). Opticlife paid a deposit of 10% or £1.476m. The Agreement provided for BDW to serve a "Completion Notice" in respect of any flat when it had been duly constructed; this fixed the date for completion of the purchase of the flat in question at 10 working days after service of the relevant Completion Notice.
- BDW in the event served Completion Notices for each of the 59 flats on 3 November 2008. These had the effect (assuming they were valid) of fixing the completion date for each flat at 17 November 2008. Opticlife did not complete on that date, and on 18 November 2008 BDW therefore served a "Notice to Complete" in respect of each flat under the Standard Conditions of Sale which were incorporated into the Agreement. A Notice to Complete is to be distinguished from a Completion Notice: whereas the latter merely has the effect of fixing the contractual date for completion, a Notice to Complete requires completion within a further 10 working days and for this purpose makes time of the essence of the contract, with the result that if the buyer fails to complete on that date the seller may treat this as a repudiatory breach of contract, accept the repudiation and treat the contract as terminated, forfeit the deposit and any accrued interest, resell the property and claim damages.
- In the present case the Notices to Complete (again assuming they were valid) had the effect of requiring Opticlife to complete the purchase of each flat on 2 December 2008. Opticlife did not complete on that date and on 3 December 2008 BDW by its solicitors Boyes Turner wrote to Opticlife's solicitors Howard Kennedy terminating the Agreement and forfeiting the deposit. Howard Kennedy responded on 10 December 2008 asserting that BDW's actions were themselves a repudiatory breach of the Agreement which Opticlife accepted as bringing the Agreement to an end, and claiming return of the deposit.
- Howard Kennedy registered a unilateral notice at HM Land Registry to protect Opticlife's claim to a lien for the return of the deposit, and these proceedings originally included a claim by BDW to vacate this notice. In February 2009 however the parties sensibly agreed that the notice should be vacated on payment of a sum representing the deposit and accrued interest into an account in the joint names of their solicitors to abide the outcome of this action. This enabled BDW to complete a resale of the flats which it had entered into at the considerably lower price of £8.4m, the market for residential property having suffered a significant downturn since September 2007 when the Agreement was made.
- At trial it was common ground that if the Completion Notices were valid, then so were the Notices to Complete and BDW were entitled to forfeit the deposit and claim damages. If however the Completion Notices were invalid, then so were the Notices to Complete, and BDW's purported termination of the Agreement was indeed a repudiation which Opticlife had been entitled to and did accept, and which would entitle Opticlife to return of the deposit with interest. The critical question therefore is whether the Completion Notices were valid.
- Mr Jourdan QC, who appeared for Opticlife, advanced two arguments why the Completion Notices were invalid. The first was that the flats were not built to contractual specification. The specification required BDW to construct the flats with a particular type of sound insulation between the flats and BDW admittedly did not construct the flats in this way, but provided a different type of sound insulation. Mr Halpern QC, who appeared with Mr Jefferies for BDW, relies on a provision in the Agreement entitling BDW to make minor variations from specification. The issues which arise on this argument are whether the variation was within the limits permitted by the Agreement (an "authorised variation") or was outside those limits (an "unauthorised variation"); and if it was an unauthorised variation, whether this had the effect of making all the Completion Notices, or some of them, or none, invalid.
- The second argument advanced by Mr Jourdan is that at the date of the Completion Notices certain planning conditions, namely the "pre-occupation planning requirements" had not been satisfied. The issues which arise on this argument are whether the pre-occupation planning requirements were satisfied at that date; and if they were not, whether this means that the Completion Notices were invalid. This second argument was not originally pleaded but was introduced by amendment pursuant to permission which I gave in the course of the hearing on 18 March 2010 for the reasons that I then gave. This led to an adjournment of the hearing and further evidence and argument being adduced which explains why the hearing had to be broken off and resumed in June.
- Despite the fact that the pre-occupation planning point was the second point to be raised, it is more convenient to take it first. There are therefore 4 issues before me, which can be summarised as follows
- I must now set out the terms of the Agreement in rather more detail.
- It was as I have said made in writing on 11 September 2007. It was made between BDW (then called Barratt Homes Limited and referred to as "the Company" in the Agreement) and Opticlife (then called AR and V (Colindale) Limited, and referred to as "the Buyer" in the Agreement).
- Clause 1.1 contained various definitions including the following:
- The description of the Property in the first schedule was "Flats 1 to 59 First to Seventh Floors Block C Silkstream Colindale London NW9" (this is now known as Warneford Court); and the plans annexed to the contract showed the 59 flats arranged over those floors, with 11 on each of the 1st to 3rd floors, 9 on each of the 4th and 5th floors, 6 on the 6th floor and 2 penthouse flats on the 7th floor.
- Clause 1.3 provided:
- Clause 2 of the Agreement provided for BDW to sell and Opticlife to buy the Property; and clause 2.2 provided:
- I shall have to set out most of clause 3. This provided, so far as material, as follows:
- Clause 4.1 provided for Opticlife to pay a deposit of 10% in 2 equal tranches (which it did on 12 September and 14 December 2007). Clause 4.2 provided for the deposit to be apportioned between the Flats in the same way as the Purchase Price. Clause 4.3 required Opticlife to pay the balance of the Purchase Price for any given Flat on the Completion Date.
- Clause 5, so far as material, provided as follows:
- Clause 15 incorporated the Standard Conditions of Sale (4th edition) subject to certain variations. Of these I need only refer to the following:
- Annexed to the Agreement was a specification for the Flats. This included under the heading "Carpentry/ Internal Construction" the following entry:
- I can now turn to the issues I have identified above at paragraph [9].
- In my judgment the answer to this question is No.
- Planning permission for the development which included the Flats was granted by the London Borough of Barnet ("Barnet") to Conrad Phoenix (London) Ltd on 27 October 2006. (This is the permission referred to in clause 3.1(b) of the Agreement). This was subject in the usual way to a variety of conditions, 33 in all, some of which required certain things to be done before the Flats were occupied. Two of these are relied on in particular by Mr Jourdan, and Mr Halpern accepts that they are pre-occupation planning conditions. These are conditions 11 and 17 which provide as follows:
- Condition 17 clearly requires that before any of the Flats are occupied the following must all take place: (i) submission of a full schedule of sustainable drainage works to Barnet; (ii) agreement in writing to the schedule by Barnet; (iii) completion of the agreed drainage works in their entirety.
- Condition 11 is not quite so clearly drafted as it does not expressly say that the details have to be submitted to and approved by Barnet before the Flats are occupied, only that the sewage works have to be completed before then. But they have to be completed in accordance with details submitted to and approved in writing by Barnet and I think it is clear that the sense is that the details have to be submitted and approved in writing before occupation, as until this is done it cannot be said that the works have been completed in accordance with approved details. Mr Halpern did not suggest to the contrary.
- Most of the evidence on this aspect of the case was documentary although I heard some oral evidence. In particular I heard from Mr Mark Bryan, a technical co-ordinator now employed by BDW (he was formerly a consultant to them) whose role included obtaining the discharge of the 33 planning conditions.
- I find the facts to be as follows.
- It was necessary for BDW to obtain approval of the sewage and drainage from the relevant water company, which in this case was Thames Water. Thames Water confirmed that the lay out was acceptable by letter dated 30 June 2008.
- Attention then turned to obtaining discharge of the planning conditions from Barnet in July 2008, initially it appears because this was holding up the hand over of the social housing elements of the development (which were in Blocks A and B). On 28 July 2008 Stuart Salter of BDW, who was dealing with the social housing, circulated by e-mail a schedule of the planning conditions which had been prepared by HTA Architects Limited ("HTA"), the architects for the development, and which showed the then position with each of the conditions. The e-mail was circulated to, among others, Mr Bryan, Ms Phoebe Heinrich of HTA and Mr Christopher Legg of JSA Consulting Engineers ("JSA"), who were the consulting engineers for the development. The schedule showed that no submission had then been made in respect of conditions 11 and 17 and that the responsibility was that of JSA.
- By 7 August 2008 Mr Martin Jennings, HTA's Technical Design Leader, had made contact with Mr Martin Cowie of Barnet's planning department and told him that conditions 11 and 17 were the responsibility of the engineers. Mr Cowie was in January 2009 the Head of Planning and Development Management for Barnet. I have no clear evidence whether he was already in this post by August 2008 (although Mr Bryan at one point in his oral evidence referred to his dealing with the Acting Chief Planning Officer, which I take to be a reference to Mr Cowie); but he was no doubt a senior figure in the planning department.
- On 18 August 2008 Anthony Dinsdale of JSA e-mailed the relevant drawings for conditions 11, 17, 20, 21 and 22 to Mr Jennings at HTA; Mr Jennings asked him to send 4 copies to Mr Cowie and gave him the address. There is in the bundle a copy of a letter dated 20 August 2008 from Mr Dinsdale to Mr Cowie which is said to enclose 4 copies of the relevant drawings. There is a question whether this letter was ever in fact received by Barnet: I consider this below.
- By August or September 2008 Mr Bryan was trying to hurry Barnet along but finding it difficult to contact Mr Cowie who was no doubt a very busy man. On 23 September 2008, Mr Jennings asked Mr Cowie to contact Mr Bryan, but Mr Bryan did not in fact hear from him despite chasing him; and on 29 September Ms Heinrich suggested to Mr Bryan that he try Mr Matthew Corcoran instead. Mr Corcoran was a Planning Officer at Barnet and in a rather more junior position to Mr Cowie; he had assisted on the discharge of condition 18 concerning gates and railings. He proved rather easier to get hold of and Mr Bryan was able to speak to him on the telephone that morning. In this conversation Mr Corcoran told Mr Bryan that "there are some outstanding issues" and specifically mentioned conditions 6, 13, 19, 20 and 21. After the telephone call Mr Bryan e-mailed Ms Heinrich saying that:
- On the same day Mr Corcoran e-mailed Mr Bryan. Since reliance is placed on this e-mail by Mr Halpern for BDW I should set it out it in full:
- By 16 October Mr Bryan had not received any formal discharge and e-mailed Mr Cowie asking two questions:
- So far as the documentary evidence before me is concerned, that is how matters stood at the date when the Completion Notices were served, on 3 November 2008. Mr Bryan said in his witness statement that on the basis of his telephone conversation with Mr Corcoran on 29 September and the e-mail he received from him on that date he felt able to inform Mr Jones that "the planning conditions had been satisfied although we were waiting for formal written approval"; and on 30 October 2008 Mr Gary Ennis, a director of BDW, signed a letter confirming that all the pre-occupation planning conditions had been satisfied. This confirmation was required under clause 5.6(f) of the Agreement, and Mr Ennis, who gave evidence before me, explained in his witness statement that he had spoken with BDW's Technical Department and was informed that
- In the event the formal written approval was not given until January 2009. This came about as follows. By 8 January 2009 the social housing had still not been handed over and Mr Salter e-mailed Mr Cowie explaining that BDW had had to delay the handover twice "due to the planning conditions not having been formally signed off" and asking for the discharge notices to be issued urgently. Mr Cowie replied the same day apologising and saying he would have the conditions discharged forthwith. These e-mails were copied in to Mr Bryan who e-mailed Mr Cowie (also on 8 January) saying
- 3, 5, 8, 11, 17, 22, 23, 28, 29, 31 and 32"
- On 12 January Mr Corcoran followed this up by e-mailing Mr Bryan. This confirmed that
- On the same day formal written approval was given in respect of 9 conditions, including 11 and 17. This is a formal document headed "Town and Country Planning Act 1990" and "Approval of Planning Permission" and it provides
- As set out above, conditions 11 and 17 respectively required Barnet (i) to have approved details of the sewage works in writing and (ii) to have agreed in writing the schedule of drainage works, in each case before the Flats were occupied. If one asks when Barnet gave such approval and agreement in writing, the obvious answer is on 26 January 2009 when formal written approval to the detail of sewage works and schedule of drainage works was given. In my judgment this is not only the obvious answer but the correct one.
- Mr Halpern relies on Mr Corcoran's e-mail of 29 September 2008 (which I have set out at paragraph [33] above). He invites me to read this in the light of the telephone conversation between Mr Bryan and Mr Corcoran that morning, to infer that Barnet was by then satisfied with the other conditions not listed, and to read the e-mail as in effect indicating that all other conditions were approved and no longer outstanding.
- I am unable to accept this submission, for three reasons. First, the e-mail only refers to conditions 6, 13 and 19-21. It does not refer to the other conditions at all. I can see that Mr Bryan might assume from reading it that the only conditions which Mr Corcoran thought needed further investigation were those he referred to, but it does not in fact even say that. All it says in terms is that "there are a few conditions outstanding which I am hoping to discharge within the next few days or so." This is clearly not an express approval in writing of all the other conditions not mentioned, and I do not think it can be read as an implied approval either. It is in fact silent about the other conditions. This is not just a technical point. As appears below, the application for approval of details for conditions 11 and 17, even if received, does not appear to have been formally accepted by Barnet and logged into their system. It is entirely possible – indeed I think quite likely – that all Mr Corcoran intended to convey was that he did not have a problem with the other outstanding applications of which he was aware. If he was not aware of the application for approval of conditions 11 and 17, his silence in relation to them cannot be interpreted as saying anything about them. I have not overlooked that Mr Bryan said that in his telephone conversation he went through all the conditions one by one, but the question is whether the e-mail is a written approval for the purposes of conditions 11 and 17 and in my judgment it is plainly not.
- Second, in any event, there is a difference between a planning officer indicating that he has no problems with the details submitted or that a condition will be approved or agreed in due course, and the approval or agreement itself. It is the approval or agreement that needs to be given before the condition is satisfied, and even an explicit assurance by Mr Corcoran that the details were acceptable and would be approved or agreed in due course cannot in my judgment be treated as the approval or agreement. In fact the evidence from Mr Bryan was no more than that he went through the list of conditions with Mr Corcoran on the telephone and Mr Corcoran indicated that the only outstanding ones were the 5 he mentioned, and that he hoped to discharge all the conditions by the end of the week. Mr Bryan says that he regarded this as confirming that Barnet were happy with all of the information provided in respect of all 33 conditions.
- I did not hear from Mr Corcoran but I heard from Mr Scott Goldstein, a solicitor at Howard Kennedy, who had spoken recently to him. As recorded by Mr Goldstein in an attendance note, Mr Corcoran told him that he had no recollection at all of BDW's application or what he might or might not have said to BDW's employees; but he accepted that he might, if comfortable with the information submitted, say things such as "this condition will be discharged at the end of the week" or "as far as officers are concerned, they are comfortable with the information submitted" or "the condition will be signed off in due course" or "we are comfortable with the detail required" or "we have enough information on this". I find none of this evidence surprising and although it is hearsay, I accept it. But since what one is looking for is an approval or agreement in writing, it does not in the end matter what Mr Corcoran might or might not have said on the telephone: even if he had said all these things to Mr Bryan on the telephone, he did not say them in the e-mail. And even if he had, none of them in my judgment amounts to approval or agreement in writing. They amount to no more than an indication that Mr Corcoran was comfortable with the details submitted and expected (no doubt entirely justifiably) that approval or agreement would be forthcoming in due course. It is noticeable that Mr Ennis' evidence was that he understood that Barnet had given assurances that the written formal approval in respect of the outstanding conditions "would be given"; for the reasons I have given, even if this was accurate, it would not be the same as approval itself.
- I should add that Mr Bryan said in his witness statement that he interpreted Mr Corcoran's e-mail as indicating that in respect of the conditions other than the 5 mentioned Barnet was "treating them as discharged". It does not seem to me that there is anything in the e-mail which would justify this interpretation being placed on it.
- Third, and in any event, Mr Corcoran did not have authority to give approval to planning details. The evidence on this again came from Mr Goldstein and is again hearsay, but it was not challenged and I accept it. The approval or agreement required is that of Barnet, which is the Local Planning Authority. Barnet publishes on its website details of delegated powers in relation to planning matters. As at November 2009, this showed that the determination of any application for the approval of details required by a condition on a grant of planning permission was delegated to the Head of Planning, and to Planning Managers. The Head of Planning was then Mr Cowie and there were 7 named Planning Managers (including Ms Feldman who signed off the approval of 26 January 2009). Mr Goldstein checked the position with Ms Feldman which led to an e-mail from her confirming that a decision notice granting formal approval of an application to discharge planning conditions can be signed only by those officers with delegated authority; and that Mr Corcoran was not one of the authorised officers in 2008 and would not have been able to sign a decision notice.
- I do not see any answer to this point. It means that even if Mr Corcoran had expressly said in the e-mail "I hereby approve the details submitted for conditions 11 and 17" it would not have been an approval by Barnet and the conditions would not have been satisfied. Mr Halpern addressed a submission to me that although Mr Corcoran had no authority to sign off the formal approval he had authority to communicate the decision to approve. So he may have done but I do not see how this assists BDW. It is the approval or agreement by Barnet which has to be in writing, not the communication of the fact of such approval. So even if Mr Corcoran had said in the e-mail "I confirm that Barnet has decided to approve the details for conditions 11 and 17" this would still not satisfy the condition unless that decision had been recorded in writing and signed by someone with delegated authority.
- No other document was put forward by Mr Halpern as satisfying conditions 11 and 17 before 3 November 2008 when the Completion Notices were served. It follows inevitably in my judgment that the pre-occupation planning conditions were not satisfied by that date. I heard some evidence tending to suggest that developers in practice are content to proceed on the basis of oral assurances from planning officers in the confident expectation that conditions will be formally discharged in due course; but however widespread this practice is, and however justified it may be as a practical matter, I do not think it can affect the rights of a party such as Opticlife under a contract if it is entitled to have a planning requirement satisfied. A confident and justified expectation that a requirement will be satisfied is simply not the same thing as the requirement being satisfied.
- This makes it unnecessary to decide an issue which is left unclear by the evidence, which is whether JSA's letter of 20 August 2008 was actually received by Barnet. It will be recalled that Mr Corcoran was unable in January 2009 to trace Barnet having received the drawings enclosed with that letter, and they were then resubmitted. This suggests that they may never have been received, as do the facts that Mr Bryan could not find a record of them on Barnet's internet access system, and that no evidence was produced of any letter acknowledging receipt. In some other cases where details were submitted for approval, Barnet sent a formal letter acknowledging receipt: an example is the submission of details for conditions 19, 20 and 21 which were sent by BDW to Mr Cowie on 31 July 2007. Barnet sent an acknowledgment of the application for approval of details on 13 August 2007 saying that it had received the application on 6 August; it gave a reference number for the application and said that its progress could be tracked online. Mr Corcoran's report recommending approval for these conditions therefore referred to the application as having been received and accepted on 6 August 2007. By contrast Mr Corcoran's report for the approval of conditions 11 and 17 referred to the application as having been received on 20 January 2009 and accepted on 22 January 2009.
- In the light of this, Mr Jourdan invites me to find that the details for conditions 11 and 17 were not even submitted by 3 November 2008, let alone approved. The evidence certainly suggests that JSA's letter of 20 August 2008 was not received and accepted as a formal application and logged into Barnet's system. What is impossible to tell on the state of the evidence is whether the letter never arrived at Barnet at all, or duly arrived but was not processed correctly. Neither strikes me as inherently more likely than the other, so if it had been necessary to resolve the question, I think it would have been necessary to fall back on the burden of proof and hold that BDW had failed to establish that the details had been duly submitted. But it is as I say neither necessary nor possible to form any concluded view on this.
- In my judgment the answer to this question is Yes.
- The Agreement does not provide for a fixed completion date, but it provides a mechanism for determining it. The date for completion of any particular Flat is 10 working days after service of the Completion Notice for the Flat in question (cl 1.1.7). The Completion Notice is the notice referred to in clause 5.5 (cl 1.1.18). Clause 5.5 requires BDW's solicitors to serve a Completion Notice for a particular Flat "as soon as any given Flat has been completed in accordance with the provisions herein before contained" (and the other conditions, relating to the Reserved Property and the lifts, satisfied).
- The question therefore is when a Flat is to be regarded as "completed in accordance with the provisions herein before contained." In my judgment clause 3.4 operates to answer this question. By its own terms it applies "for the purposes of determining the Completion Date", and as I read it the very purpose of clause 3.4 is to identify when a Flat is to be regarded as completed for the purposes of clause 5.5.
- If this is right a Flat is not to be regarded as completed for the purposes of clause 5.5 until (i) the Buildmark Cover Note has been issued (ii) the pre-occupation planning requirements have been satisfied and (iii) all fixtures fittings and contents referred to in the Plans and Specification have been installed. That means that until the pre-occupation planning requirements have been satisfied the Flat is not to be regarded as "complete in accordance with this clause 3"; it is not therefore to be regarded as "completed in accordance with the provisions herein before contained" for the purposes of clause 5.5; and the time for service of the Completion Notice has therefore not arrived.
- It follows that if (as I have held) the pre-occupation planning requirements were not satisfied on 3 November 2008, the Completion Notices served on that date were premature and of no contractual effect.
- Mr Halpern's submissions to the contrary were premised on the basis that clause 3.4 was a deeming provision introduced for the benefit of BDW. On this view the Agreement gave BDW two alternative routes to getting to the stage at which it could serve a Completion Notice under clause 5.5. One was to actually complete the Flats (or any given Flat) in accordance with clause 3.1. The other, which it could use despite not fully complying with clause 3.1, was to rely on deemed completion under clause 3.4. He accepted that if BDW sought to rely on deemed completion under clause 3.4, it could only do so if the pre-occupation planning requirements had been satisfied; but said that if (as in his submission was the case) BDW had completed the Flats in accordance with clause 3.1 this was not a pre-requisite.
- I do not accept this submission. I accept that in some cases a deeming provision is only intended to operate as an alternative where a party cannot rely on what actually took place, ie as a fallback provision. But in other cases a provision that provides when something is deemed to take place is designed to operate as a definitive provision determining when, for the purposes of the contract, that thing is to be treated or regarded as having taken place (regardless of the actual position): compare the recent case of Hotgroup v RBS [2010] EWHC 1241 where Mr Charles Hollander QC had to consider a similar point. In the present case it seems to me that clause 3.4 is of the latter type: it tells one when a Flat is to be regarded as complete. It is appropriate to have such a provision as otherwise there might be room for a great deal of argument as to the precise date when a particular Flat had been completed. As I have already said, by its own terms it operates "for the purposes of determining the Completion Date"; whereas on Mr Halpern's submission it would only operate for this purpose in some cases.
- Moreover, and to my mind compellingly, the logical consequence of Mr Halpern's submission (and indeed its avowed purpose) is that if BDW was able to satisfy clause 3.1, it did not have to ensure satisfaction of the pre-occupation planning requirements before being in a position to require Opticlife to complete. This seems to me neither to make good commercial sense nor to fit with clause 5.6(f) which requires BDW to confirm on or before service of the Completion Notice that the pre-occupation planning requirements have indeed been complied with. I regard clause 5.6(f) as a clear indication that the intention of the Agreement was that the pre-occupation planning requirements had to be satisfied in all cases before service of the Completion Notice. The construction of clause 3.4 which I have preferred provides for this; Mr Halpern's construction does not. On his construction the result is that so long only as BDW can give a confirmation under clause 5.6(f) in good faith (he accepts this is implicit), it can require Opticlife to complete even though the confirmation is wrong (as on my findings on issue i) it was in this case), and even though this means that Opticlife has to complete and pay for a property which could not then be lawfully occupied. This seems to me a most unattractive result and an uncommercial intention to ascribe to the parties. It is not one that I consider should be adopted unless the language of the contract fairly compels it, which in my judgment it does not.
- I should add that Mr Halpern invited me to approach this, and indeed all the issues, on the basis that Opticlife were obviously keen to get out of the Agreement (which had become a bad bargain for them) and that I should not be astute to adopt a wide construction of the Agreement which enabled them to escape on a purely technical objection. I accept that Opticlife were looking for any reason to avoid completion, and that the fact that conditions 11 and 17 were not satisfied in November 2008 in practice would have made no difference to them, but I do not regard this as entitling me to adopt anything other than what I regard as the most natural construction of the Agreement. BDW were also well aware by November 2008 that Opticlife were looking to avoid completion: Mr Ennis says this was clear to him by early 2008. In these circumstances it was necessary for BDW to ensure that all the necessary formalities, however technical they might be, were complied with; and Mr Ennis sought to achieve this when giving the confirmation under clause 5.6(f). It is BDW's misfortune that in the result it failed to do this, but it cannot be surprised that Opticlife now seeks to rely on the point.
- I may also add that Mr Ennis says in his witness statement that his contemporary understanding of the Agreement (based on advice given to BDW) was that in order to be able to serve Completion Notices, BDW had to satisfy a number of contractual obligations "which … are contained in clauses 3.4 and 5.5 of the Sale Agreement … including meeting the pre-occupation planning requirements." I have naturally taken no account of this evidence when reaching my conclusion on the construction of the Agreement, which is a matter of law and cannot be affected by the views of the parties or their advisers, but it illustrates that the construction I have adopted is in fact the same as the understanding BDW had at the time, which perhaps suggests that it is not an unreasonably wide view of the Agreement.
- Be that as it may, my conclusion on this issue is that the Completion Notices served on 3 November 2008 were invalid. This applies to all 59 of them, there being no distinction on this point between the various Flats.
- That means that the Notices to Complete served on 18 November 2008 were also all invalid, as a valid Notice to Complete can only be served under Standard Condition 6.8 "on or after completion date", which had not then arrived. It is as I have said accepted by Mr Halpern that if this is the case, the purported termination of the Agreement and forfeiture of the deposit by BDW was a repudiatory breach of the Agreement which Opticlife was entitled to and did accept. In these circumstances it is not disputed that BDW's claims fail in their entirety and that Opticlife is entitled on its counterclaim to return of the deposit with accrued interest.
- As I have already mentioned, in February 2009 the parties agreed to the vacation of Opticlife's unilateral notice and its replacement by payment of the deposit into an account in the joint names of their solicitors. Under an agreement scheduled to a consent Order of Warren J dated 20 February 2009, the amount to be credited to the account included accrued interest for the period between the dates of payment of the two tranches of the deposit by Opticlife, and the date of payment into the joint account; and under a trust deed dated 19 February 2009 regulating the rights of the parties in respect of the joint account, any further interest accrued since then is for the benefit of the joint account. Mr Jourdan does not claim any interest beyond that. The trust deed also provides that the deposit should be paid to BDW or Opticlife as the case may be pursuant to an order of the Court on the determination of any issue in these proceedings as to the return or forfeiture of the deposit. In these circumstances I think the only substantive Order I need make is an Order that the monies standing to the credit of the joint account be paid to Opticlife, but I will hear Counsel if necessary.
- My conclusions on issues i) and ii) make it strictly unnecessary to consider issues iii) and iv). But in case I am wrong on issues i) and ii), I will state my findings and conclusions on them.
- In my judgment the answer to issue iii) is No.
- It is not disputed that BDW did not build the flats in accordance with the contractual specification. This required a 65 mm sand and cement screed throughout, on insulation on the podium deck and on a sound absorption quilt on the upper floors: see paragraph [20] above. (Mr Halpern accepts that the podium deck is the concrete slab between ground and 1st floors.) I will refer to this requirement as the "screed requirement". In fact no screed was provided on any of the floors; instead all the flats were laid with "Isorubber", which is a mat made by a manufacturer called Thermal Economics out of cork and recycled rubber and is designed to provide acoustic insulation between floors.
- BDW therefore relies on clause 3.2(d) of the Agreement which permitted it to make minor modifications or variations to the Plans and Specification without Opticlife's consent. Its case is that laying the isorubber instead of providing the sound absorption quilt and screed is a minor variation within the scope of that provision. Mr Jourdan identifies no less than 6 requirements which he says must be satisfied before BDW can bring itself within clause 3.2(d):
- It is as I have said not now disputed that the screed requirement forms part of the contractual specification. It appears to have been included by mistake, and although I heard some evidence about this, it was never satisfactorily explained quite how it came to be included in the specification. Until shortly before trial it was part of BDW's case that the mistake was an obvious one and the Agreement should be construed as if the screed requirement were omitted, but this contention was not pursued at trial.
- The design of the development was divided between JSA, the structural engineers, HTA, the architects, and BDW itself. JSA were responsible for the structural design. They specified precast concrete floors for Blocks A and B but a reinforced concrete frame for Block C, which was considerably higher and needed a stronger construction. Mr Legg of JSA gave evidence and said that as far as JSA were concerned, they never intended there to be a screed on the Block C floors. He said it was not necessary either for density (the structural slab having sufficient density itself) or to produce a suitable finish (the concrete being able to be finished to a suitable standard, unlike a pre-cast floor which has an uneven finish). But he accepted in cross-examination that JSA were not responsible for features of the design that related to acoustic matters; and that he was aware of other projects, including one that JSA itself was involved in, where the specification had been for a reinforced concrete slab, an acoustic layer to provide sound insulation, and a sand and cement screed on top.
- After JSA had produced the structural design, HTA were instructed to provide architects' drawings. Mr Timothy Crowther, the head of Technical Design at HTA, gave evidence that HTA never specified a screed for Block C. The earliest version of HTA's outline specification (marked "superceded 24 Apr 07") provided for the Block C floors (both the 1st floor (Commercial to Flat) and the upper floors (Flat to Flat)) to be finished with a 24mm platform floor consisting of 6mm of isorubber and 18mm of chipboard. HTA however produced architects' drawings on 18 May 2007 which showed a 75mm difference between the finished floor levels for Block C and the structural slab levels specified by JSA: Mr Crowther said that the 75mm was a zone for some kind of floating floor but could not explain why it was 75mm rather than the 24mm in HTA's outline specification.
- On 5 June 2007 HTA revised their specification, and replaced the 24mm floor with a simple isorubber top. The "Revision Log" which summarises the changes refers to this as a 5mm isorubber top, but the body of the specification refers to a minimum 3mm isorubber top on Thermal Economics' Isobond glue. On 8 June 2007 Mr Jennings of HTA commented in an e-mail that "instead of a 75mm build up we have only 5mm of the Isotop floor material over the slab". On 6 and 7 September HTA revised the drawings to remove the 75mm zone: this revision was marked "screed removed from floor build up". Although this took place before the Agreement was signed on 11 September 2007, the list of plans annexed to the Agreement did not refer to this latest revision but to the version of 10 July 2007 which still showed the 75mm. From November 2007 onwards HTA produced a number of drawings showing details to the intermediate floors at Block C which showed a 3mm isorubber top acoustic overlay.
- Mr Crowther said that the reference to the "screed" being removed in the revision of September 2007 was wrong and it should have referred to a "floating floor". He was not personally involved in either the original drawings showing the 75mm zone, which were prepared by Mr Dinesh Chandegra, or the revisions of 10 July 2007 which continued to show it, which were carried out by Mr Andrew Wesson, or the revisions in September 2007 referring to the screed being removed, which were carried out by a Mr Felipe Prado, but he said in cross-examination that he thought (without having spoken to the individuals who were involved) that both the original inclusion of the 75mm zone and the reference to the screed must have been mistakes. In the absence of any further evidence, these points must remain unexplained.
- Meanwhile BDW had prepared the specification which found its way into the Agreement. This is dated 1 May 2007 and marked "draft" and "First Issue … For Comment". There was no evidence before me explaining how it came to include the screed requirement; Mr Jones who gave evidence for BDW, readily accepted that this was a mistake by BDW. There were later versions of the specification: on 19 July 2007, Mr Marinus Venter, a technical co-ordinator, circulated a revised version (marked "Revision A") which amended the specification for the fittings in the bathrooms. It appears that none of those circulated, who included Mr Jones, picked up that the specification mistakenly included the screed requirement; and in cross-examination Mr Jones was prepared to accept that it was his error not to have picked this up. On 16 August 2007 Mr Venter told Mr Peter Daniel, a solicitor at Boyes Turner, that Mr Steve Hudson, BDW's Commercial Director, was in the process of revising the specification. The next day Mr Hudson did circulate a revised specification which included a number of upgrades to the original specification including the addition against "Internal Floors" after the screed requirement of "Oak laminate flooring to reception and hallway, 80/20 carpet in bedrooms." These were not agreed changes but possible changes that remained to be negotiated with Opticlife, and there is nothing to suggest they ever were agreed; but again it appears that none of those circulated picked up the erroneous inclusion of the screed requirement even though in this instance one of the changes was to the very same paragraph of the specification.
- In the event the version of the specification that was annexed to the Agreement was the first issue draft dated 1 May 2007. It therefore included the screed requirement (and did not include the amendments to the bathroom fittings in Revision A). The copy annexed to the Agreement has a fax header showing it was faxed from "Barratts", presumably to Boyes Turner, on 4 September 2007; Mr Jones said that it had been sent out by mistake and that he had tried to find out from the file who sent it, but had failed to do so.
- The upshot was that although neither JSA, nor HTA, nor BDW itself intended there to be a screed over an acoustic layer in Block C, the Agreement provided for one. BDW proceeded to build Block C without a screed over an acoustic layer, intending to lay isorubber to all the Flats.
- The specification provided for the floors in the bathrooms and kitchens to be tiled. The kitchens were not separate rooms but areas off the main living rooms. When BDW started tiling the flats it did not put the isorubber under the tiles, but laid the tiles directly onto the concrete slab. On 13 May 2008, Cass Allen Associates ("Cass Allen"), who were BDW's acoustic consultants, visited the site and carried out a sound insulation test on one of the flats which had been tiled without the isorubber. This was Flat 16 on the 2nd floor and the test was carried out directly on the tiled area of the kitchen, the impact sound being measured in Flat 5 which was on the 1st floor directly beneath Flat 16. The result of the test was that the floor achieved an impact sound insulation of 62dB. Under Part E of schedule 1 to the Building Regulations 2000 SI 2000/2531 as amended ("Part E"), it is a requirement that dwelling houses and flats are designed and constructed in such a way that they provide reasonable resistance to sound from other parts of the same building. The relevant requirements for resistance to the passage of sound are found in a document called "Approved Document E" ("ADE") issued in 2004 by the then Office of the Deputy Prime Minister. Under ADE the requirement for impact sound insulation for floors in purpose built flats is a maximum value of 62dB. Cass Allen's test on the floor of Flat 16 therefore satisfied the requirement but only just.
- On 14 May 2008 Mr Chris McNeillie of Cass Allen e-mailed Mr Bryan to report the result of the test. He said among other things in that e-mail that he understood that a number of plots had had tiles fitted to the bathroom and kitchen areas without the 3mm resilient layer "which should have been laid beneath the tiles"; and that although the test showed that the tiled area passed the test,
- On 15 May 2008 Mr Donagh O'Sullivan wrote to Mr Jones with a number of queries about the construction of the building. Mr O'Sullivan is the Construction Director of Galliard Construction Limited and Galliard Homes Limited, and provides his expertise in overseeing construction projects to companies in the Galliard group: this includes Opticlife which is a single-purpose vehicle controlled by Galliard. He inspected the site on 7 April 2008 and then asked BDW for a copy of the construction drawings so that he could make meaningful comments. He received these on 1 May 2008 and having reviewed them wrote to Mr Jones on 15 May 2008. He listed 12 issues in numbered paragraphs where he criticised the method of construction. The first and last were as follows:
- Mr O'Sullivan sent a copy of the letter to the NHBC. As appears from the Agreement, the role of the NHBC in relation to the development was a dual one. The NHBC provides 10-year insurance cover for newly-built developments: see the definition of Buildmark Cover Note in clause 1.1.3 of the Agreement (paragraph [12.i)] above). Under clause 3.4, it is the issue of the Buildmark Cover Note which triggers the Completion Notice provided the other requirements of the clause are met, and a copy of the Cover Note is one of the documents which have to be provided on or before service of the Completion Notice under clause 5.6(a). In addition the NHBC was responsible for ensuring that the Building Regulations were complied with, and this was handled by the Building Control Department. When they were satisfied with this, they would issue what is referred to in the Agreement as the final completion certificate, which is another of the documents which had to be provided under clause 5.6: see clause 5.6(c).
- Drawing D.1 5285 was labelled "Block C – Intermediate floors" and does appear to show a 65mm screed due to be constructed over a carport. In fact, according to Mr Crowther's evidence, which I accept, that drawing relates to Block A (there being no carports in Block C) and appears to have been mislabelled, although it is understandable that Mr O'Sullivan did not appreciate this at the time.
- On 19 May 2008 Mr O'Sullivan visited the site with Mr Philip Lawlor, who was the site manager for BDW. The next day he wrote again to Mr Jones, again copying in the NHBC. He said that Mr Lawlor had confirmed to him that floor tiling works had been suspended on site and that an acoustic separating mat had been ordered and would be used in the remaining areas to be tiled. He added:
- On 21 May Mr Jones sent two letters to Mr O'Sullivan. In one he replied to his letter of 15 May and explained that the drawing Mr O'Sullivan had referred to in fact referred to Block A and had been incorrectly titled; he did not respond at all to Mr O'Sullivan's reference to the screed requirement in the specification. In the other he replied to Mr O'Sullivan's letter of 20 May: he objected to Mr O'Sullivan copying in the NHBC as it was BDW's contractual responsibility to get NHBC approval and said that no notice to complete would be issued until NHBC had given full approval "both with regard to Building Regulations and Warranty". He then referred to Mr Lawlor's denial that he had agreed to stripping back floor tiles already laid – although I do not think Mr O'Sullivan had suggested that Mr Lawlor had agreed this, just that this was what should be done – and also said that the 24 flats which had been constructed without the use of the acoustic separation mat had been checked for impact and airborne resistance and had passed the required standard, offering to make the test results available. If this was a reference to the Cass Allen test (which as far as the evidence shows was the only test that had then been carried out) it was an overstatement as only 1 flat had been tested and that only for resistance to impact noise not to airborne noise. Mr Jones did add that it had been agreed that the other flats would have isorubber fitted under the tiles.
- Mr O'Sullivan replied on 21 May asserting that it was appropriate for him to copy in the NHBC in correspondence regarding fundamental breaches of the Building Regulations. He sent a further reply on 28 May noting Mr Jones' comment about the incorrectly titled drawing but again referring to the screed requirement in the specification. Mr Jones replied on 30 May reiterating that drawing D1.5285 referred to Block A and was incorrectly titled and was in any event not noted within the contract – this latter point was correct as it was dated 2 October 2007 and was not one of the drawings listed in the Agreement. He also baldly said that "the contract for sale does not indicate sand and cement detail as implied by you", which was of course incorrect. He again confirmed that 24 flats had been built without an acoustic separation mat under floor tiles and that noise tests had been obtained which indicated compliance with Part E of the Building Regulations, and referred to an e-mail attached. The e-mail attached was from Mr McNeillie of Cass Allen to Mr Jones and dated 30 May. It reproduced much of the text of Mr McNeillie's e-mail of 14 May but omitted the statements that the 3mm resilient layer should have been laid beneath the tiles, that the pass was marginal and that Cass Allen recommended laying a resilient layer beneath the tiles in the remaining units. The obvious inference – although Mr Jones was reluctant to accept this in evidence – was that Mr McNeillie had been asked by Mr Jones to re-send his e-mail omitting anything which he did not want Mr O'Sullivan to see. I so find, although I do not regard this as improper: the e-mail which was sent was accurate as far as it went, and I do not think it was necessary for Mr Jones to pass on to Mr O'Sullivan all the advice he was receiving.
- There was further correspondence between the parties and then their solicitors which I do not think it necessary to detail, as matters were never resolved. It is however worth noting that on 10 June 2008 Howard Kennedy wrote to Boyes Turner drawing express attention to clause 3.2 of the Agreement and inviting Boyes Turner, where BDW had sought to vary matters, to identify the exact nature of the variations and justify exactly how they came within the proviso in clause 3.2. Boyes Turner replied on 13 June 2008 denying that there had been any departure from specification.
- On 11 June 2008 Cass Allen carried out more tests. These were not in the tiled areas, but in the living rooms and bedrooms. They tested 4 flats for impact sound, and recorded measurements of between 38 and 42dB which therefore comfortably passed the ADE requirement of 62dB. The results were incorporated in a formal report dated 17 June 2008.
- On 23 June 2008 Mr David Cummins of the NHBC Building Control Department wrote to Mr Jones. He had visited the previous week and found the level of workmanship good and no outstanding contravention items. He added:
- On 25 June 2008 Cass Allen tested 2 more of the flats where the tiles had been laid without isorubber underneath, namely the kitchens in Flat 28 and Flat 17 (measured in the kitchens of Flats 17 and 6 respectively which were directly below). Both passed the ADE requirement of 62dB, Flat 28 measuring exactly 62dB (the copy is not very clear but this is the most likely reading) and Flat 17 60dB. That meant that 3 out of the 24 flats without isorubber under the tiles had now been tested and passed; and since ADE only required 10% of a group of flats to be tested so long as there were no fails, that should have been sufficient testing to satisfy Part E.
- On 10 September 2008 Mr Cummins of the NHBC Building Control Department wrote to Mr Jones with an updated approval for Building Regulation purposes. This took the form of a list of outstanding matters. One of the items on the list was
- Meanwhile BDW had instructed a second firm of acoustic consultants, Hann Tucker Associates ("Hann Tucker") to carry out a further series of tests. Since Mr O'Sullivan had queried the independence of a surveyor instructed by BDW to look at the building, Mr Jones thought it better to use a firm they had not used before so there could be no doubt about their independence.
- Hann Tucker carried out tests on a number of occasions. On 16 September 2008 they carried out impact tests on the kitchens of 12 of the flats without isorubber under the tiles. These were Flats 16 and 18-22 on the 2nd floor, and 27 and 29-33 on the 3rd floor. Of these 4 failed the test, albeit only just with 63dB recorded in Flats 18, 30 and 31 and 64dB in Flat 29. One, Flat 19, was a marginal pass at 62dB; and another, Flat 20, was 61dB. The rest were between 57 and 59dB. Flat 16, which was the first flat to be tested by Cass Allen and had been 62dB was now 59dB; these are not however inconsistent as some variation in results is expected and anyway Cass Allen had noted at the time that there were penetrations in the suspended ceilings and when these had been sealed they would expect an improvement of up to 3dB.
- As a result of the failures, in October 2008 BDW took up the tiling on the flats which had failed or borderline passed and laid isorubber underneath: these were the 4 flats which had failed and also Flat 19. Hann Tucker then retested them on 13 October 2008; all showed a reduction to between 53 and 56dB. Hann Tucker also retested Flat 20 which was 61dB again; and although BDW's evidence was that all 6 of these flats had had the tiles relaid on isorubber, I agree with Mr Jourdan that it is a safe inference that only the other 5 flats were dealt with in this way.
- As well as testing the kitchens of flats where the tiles had not been laid on isorubber, Hann Tucker carried out between August and October 2008 a series of impact tests on the bedrooms and living rooms of the flats. A report dated 21 October details 53 tests carried out to flats on the 3rd to 6th floors between 1 and 3 October. The results in the bedrooms varied from 39 to 46dB; those in the "living room/kitchens" from 42 to 58dB. These were therefore noisier than the bedrooms but well within the ADE requirement of 62dB. A further report dated 24 October details 32 tests to flats on the 2nd floor and above carried out on various dates between 26 August and 8 October: again all passed, mostly with results between 39 and 55 dB, although there were one or two higher values including one at 62dB. Between them these tests seem to have tested every flat on the 2nd floor and above.
- On 10 October 2008 Mr Cummins issued the Final Certificate for Building Regulation purposes on behalf of the NHBC. On the same day NHBC also issued the Buildmark Cover Note. On 28 October 2008 NHBC issued what is described as a Plans Certificate. On the next day Mr Steve Catt, a Regional Director of NHBC, e-mailed Mr O'Sullivan to the effect that the inspector had noted no contraventions and
- On 31 October Boyes Turner warned Howard Kennedy that it was their intention to serve Completion Notices on 3 November; and as I have already mentioned Completion Notices for each of the 59 flats were then served on that day, with Notices to Complete following on 18 November.
- The position as at service of the Completion Notices can now be summarised:
- The parties each called an acoustic expert. BDW called Mr John Gibbs of Hann Tucker; Opticlife called Mr Tim Redmore of the Sharps Redmore Partnership ("Sharps Redmore").
- Mr Redmore's assistant carried out more impact sound tests, on 4 March 2009. He tested the bathrooms and kitchens in 8 flats, and the living rooms in 2 of them. The 2 living rooms were fine, but of the 8 bathrooms, 2 were 63dB (and so would have failed the ADE requirement), one was at 62 dB and all but one of the others were between 59 and 61 dB. Of the 8 kitchens, one was a fail at 63 dB, and 4 were 58 or 59 dB. The kitchen which failed was in Flat 20 where Hann Tucker had recorded 61 dB and on my findings the tiles had not been relaid on isorubber.
- Mr Gibbs and Mr Redmore were both plainly experienced in their field and careful in their evidence, and they very helpfully sought to agree as much as possible. I do not need to record all the matters they agreed but the more significant seem to me to be as follows, with my comments added:
- There were some matters on which they were not agreed. Mr Redmore said that if there had been a Type 2 floor he would have expected the ADE requirements to have been achieved with a good margin; he would normally expect the result to be around 50dB. Mr Gibbs did not accept this as he said it all depended on what type of resilient layer was used under the screed. In cross-examination Mr Redmore accepted that the effectiveness of a Type 2 floor depended on the thickness and quality of the resilient layer, but said that most contractors followed the guidance in ADE and if one did that, he would still expect results of about 50dB. (The decibel scale is a logarithmic one and Mr Redmore said this would sound less than half as loud as 62 dB.) Mr Gibbs in cross-examination accepted that with Type 2 floors you could get around 50dB but said you could get higher results depending on the resilient layer used. In the end I do not think there is a significant difference between them; I find that Type 2 floors could often produce results of around 50dB, but could produce higher results depending on the resilient layer used.
- Another area of disagreement was that Mr Redmore said that he would consider 5dB to be a reasonable margin so that he would regard a reading of 57dB to have passed the ADE requirement with a reasonable margin; Mr Gibbs preferred to say that 3dB was a reasonable margin. This is the sort of point which is as much as anything a matter of personal preference and I do not find it necessary to choose between them. Many of the test results on either test passed with a reasonable margin; some did not.
- As already indicated, Mr Gibbs did not accept that tests could be carried out meaningfully in the bathrooms because they were so small; but he accepted in cross-examination that in order to comply with ADE this meant that the isorubber should have been laid under the tiles throughout the bathrooms.
- Both experts dealt with a number of other issues which I do not think I need record. I find on the basis of their evidence that although a Type 1 floor such as the isorubber is in general a perfectly acceptable method of meeting the ADE requirement, there are certain practical differences between the Type 2 floor specified in the screed requirement and the isorubber actually laid. The most significant is that if a Type 2 floor had been laid it would have run under the tiles in the bathrooms and kitchens of all the flats whereas the isorubber was in the event not installed under all the tiled areas; both experts agreed that this meant that the impact sound insulation required by ADE would not be consistently achieved. In addition, a Type 2 floor would have run under internal walls and fixtures and fittings and this would have reduced the energy transmitted to the slab. Thirdly, a Type 2 floor is never likely to be taken up; a Type 1 floor can cause problems if the resilient mat is removed. Although it is designed to be glued down and covered by a floor covering, it is inevitably more vulnerable to being removed.
- The parties each called a valuer. BDW called Mr Steven Atkinson of Colliers CRE; Opticlife called Mr Simon Jones of Lambert Smith Hampton.
- Their evidence was essentially directed to the question whether a purchaser would in November 2008 pay less for the flats as they were actually built with the isorubber as compared to the flats as they would have been had they been built with the screed requirement. Mr Jourdan refined this exercise in oral evidence by asking each of them to make a number of assumptions – whether the purchaser was a bulk purchaser of all 59 flats or a single purchaser of one flat; whether the purchaser knew there had been a dispute about the specification; whether noise was audible from other flats – and in each case asking whether the purchaser would have sought and obtained a discount as compared with the price he would have paid for the flat(s) with the screed requirement.
- I do not think I need set out the results of this useful but rather elaborate exercise. Rather I will identify what I consider to be the correct approach. The question that has to be decided under clause 3.2(d) is whether the variation "adversely affected the value of the Flats". For reasons that I give below in my judgment the hypothetical purchaser for this purpose should be assumed to be a bulk purchaser of the 59 flats, not an individual purchaser. I also take the view that such a bulk purchaser must be assumed to know what the variation consists of: it cannot be right that BDW could depart from specification in some way that was not apparent to a purchaser and then rely on the hidden nature of the variation to claim that there was no effect on value. In the present case this means that the purchaser must be assumed to have known that the isorubber had not been laid under the kitchens and bathrooms in those flats where it had not in fact been. On the other hand I do not consider that the purchaser should be assumed to know that there had been a dispute between BDW and Opticlife about the variation: the question is whether the variation had affected the value, not whether any consequential dispute had.
- Mr Jones' evidence was that a bulk purchaser who was unaware of a dispute but who saw the isorubber (which he regarded as an unusual floor covering) would seek a small discount, perhaps of 5%, simply for the presence of the isorubber. He took into account the fact that in November 2008 (as both valuers agreed) it was a very difficult market and the bulk purchaser going for on-sales would have to explain the position to his purchasers. Mr Atkinson did not think there would be any reduction in such circumstances. It is of course a very difficult task for a valuer to answer such hypothetical questions on value and it is not surprising that different valuers can take different views but having seen them both give evidence, I am inclined to prefer the evidence of Mr Jones. When one adds to the mere presence of the isorubber the facts which I consider the purchaser should be regarded as aware of, namely that in some of the flats the isorubber had not been laid below the tiles in the kitchens and bathrooms, I am left in no real doubt that the bulk purchaser would have sought and obtained a discount. If he did not himself have the experience to know what the effect would be of omitting the isorubber from below the tiles in those flats, he would be likely to take advice before committing to a purchase of £10m or so and such advice would be likely to be to the same effect as that given by Mr Gibbs and Mr Redmore. It is of course not possible to be precise, but I think the evidence amply justifies a conclusion that such a discount would be of the order of 5% at the lowest.
- I can now answer the question whether the variation was an authorised one under clause 3.2(d) or not. In my judgment it was not.
- I will start with the proviso that the variation must not adversely affect the value of the Flats. Two points of construction were argued. First, although Mr Halpern accepted, in my view correctly, that this aspect of the proviso was not governed by the words "by more than 5%" which only applied to the requirement that the variation should not "adversely affect ... the size of the Flats", he submitted that it was subject to a de minimis exception, perhaps of the order of 1%.
- I do not accept this, although on my findings it does not matter anyway. The purpose of clauses 3.1 and 3.2 is to identify the extent of BDW's contractual obligation to build, and I see no reason why the words should not mean what they say. The whole of clause 3.2(d) is introduced for the benefit of BDW and is a derogation from its prima facie obligation in clause 3.1 to build in accordance with specification; and in these circumstances I do not think it should be given any wider operation than the language naturally bears. It is a quite different question (which is issue iv) below) whether a trivial breach of clause 3.1 disables BDW from serving a Completion Notice, but in my judgment a variation from specification which adversely affects the value of the Flats by any discernible amount however small is a breach of clause 3.1, even if the damages attributable to such a breach are likely to be minimal.
- The second question of construction is whether this aspect of the proviso should be looked at by reference to the 59 flats together or by reference to a particular flat. In my judgment it is the former. I accept, as is clear from the terms of the Agreement, that it was contemplated that completion of the sale would take place on what was called in argument a "flat-by-flat" basis. Thus the Agreement not only provides for the purchase price to be apportioned between the flats, and for the sale of each flat to be completed by the grant of a separate lease (clause 2.2 and schedule 2); it also plainly envisages that the sales of the flats would be subject to separate Completion Notices which might be served at different times leading to different completion dates: see the reference in clause 5.5 to "as soon as any given Flat has been completed" and to service of the Completion Notice "in relation to the Flat in question" and the definition in clause 1.1.7 of the Completion Date, which identifies the date "for any given Flat" by reference to service of the Completion Notice "for the Flat in question".
- But, to repeat myself, clause 3.2(d) is not concerned with completion of a particular Flat. It is concerned with what BDW has to build in accordance with clause 3.1. BDW's obligation in clause 3.1 is a single obligation to build "the Flats", not 59 separate obligations to build a Flat. Any particular departure from specification either puts it in breach of that single obligation or it does not, depending on whether it comes within clause 3.2(d). And given that Opticlife is a bulk purchaser of all 59 Flats, I see no reason why the proviso should again not mean what it says which is that a variation from specification is only an authorised variation if it does not affect the value of the Flats as a whole, that being what Opticlife has agreed to pay for. The Agreement in fact provides for the plural to include the singular where the context so admits (clause 1.3) but I do not think this justifies adopting a singular construction where a plural construction makes more sense.
- It is for this reason that I consider that the hypothetical purchaser to test the question whether a variation adversely affects the value of the Flats should be assumed to be a bulk purchaser; and on my findings on this question the substitution of isorubber so as to provide acoustic insulation for the screed requirement did adversely affect value and was therefore not an authorised variation.
- That makes it doubly unnecessary for me to resolve the other aspects of clause 3.2(d) that were argued so I will simply briefly record my conclusions:
- However for the reasons I have given, I conclude that BDW's departure from the contractual specification was not an authorised variation within clause 3.2(d) of the Agreement.
- In my judgment the answer to this question is that it does not automatically have this effect, but in the circumstances they are all in fact invalid.
- On this issue both Mr Jourdan and Mr Halpern advanced submissions which to my mind were too extreme. Mr Jourdan's case was that any unauthorised variation had the effect that BDW could not require Opticlife to complete any of the Flats. As I understood it, this meant that if for example, a single flat was built with a minor but unauthorised variation to the internal fittings in the kitchen, Opticlife could refuse not only to complete the purchase of that flat, but also the other 58 flats as well despite the fact that they were completely unaffected by the breach. This seems to me a wholly uncommercial construction to place on the Agreement, and not one that should be adopted unless the language of the Agreement explicitly requires it, which to my mind it does not.
- Mr Halpern on the other hand advanced a submission that a breach of the specification in a particular Flat could only be relied on in relation to the sale of that Flat, and then only if it adversely affected that Flat. So where Flat B was over Flat A, and a breach of specification in Flat B had no effect on Flat B itself but did affect Flat A, Opticlife could not resist completion of either Flat B (where there was a breach but no adverse effect) or Flat A (where there was an adverse effect but no breach). This would be so on this argument however serious the breach and even if it had a significant effect on the value of Flat A. I do not think this can be right either.
- It is fair to say that the draftsman of the Agreement has not spelt out clearly what the consequences are of a breach of the obligation in clause 3.1. One must try however and interpret the Agreement as far as possible to produce a coherent and workable scheme. In my judgment the way it works is this:
- If this is right, how does it apply here ? I have found that the substitution of the isorubber for the screed requirement was an unauthorised departure from specification. This would not prevent a completion notice from being served so long as (i) clause 3.4 were satisfied and (ii) the breach did not prevent Opticlife substantially getting what it agreed to buy. But in fact clause 3.4 is not satisfied for the reasons I have already given. That means that one never gets to the question whether Opticlife is getting substantially what it contracted to buy.
- I heard some argument whether, if BDW could require completion at all, it could only do so at an abated price. This is an interesting and difficult point, involving a number of authorities which are not entirely easy to reconcile with each other. But since it does not arise, I do not propose to lengthen this judgment with a discussion of the point.
- In the result BDW's claims fail and Opticlife is entitled on its counterclaim to return of the deposit with accrued interest.
- I am grateful to all 3 counsel for their considerable assistance.
Mr Christopher Nugee QC:
Introduction
i) Were the pre-occupation planning requirements satisfied on 3 November 2008 (being the date of service of the Completion Notices) ?ii) If not, does this have the effect that the Completion Notices were invalid ?
iii) Was BDW's departure from specification an authorised variation ?
iv) If not, does this have the effect that the Completion Notices (or some of them and if so which ones) were invalid ?
The Agreement
i) By clause 1.1.3 "the Buildmark Cover Note""means the NHBC Buildmark Cover Note by which the NHBC agree to provide the ten (10) year insurance cover described in the Buildmark Choice Policy issued for each of the Flats"ii) By clause 1.1.7 "the Completion Date"
"for any given Flat means 10 working days from but excluding the date of service of the completion notice for the Flat in question"iii) By clause 1.1.9 "the Flats"
"means the Flats erected or to be erected on the Property by the Company and shall where the context so admits or requires include such fixtures thereto and fittings therein as are included in the sale and purchase hereunder (and the phrase "Flat" shall be construed accordingly)"iv) By clause 1.1.15 "the Plans and Specification"
"means the plans approved by the local planning authority and the relevant competent authority for the purposes of the Building Regulations the floor layout plans and the specification annexed to this contract as may from time to time be varied as hereinafter provided"v) By clause 1.1.16 "the Property"
"means the land shown edged red on the plans annexed hereto and also the Flats erected or to be erected thereon by the Company and all briefly described in the First Schedule hereto."vi) By clause 1.1.18 "the Completion Notice"
"means the notice referred to in clause 5.5 hereof."
"Words importing the singular meaning (where the context so admits) include the plural meaning and vice versa ..."
"There shall be a separate lease of each Flat and the Purchase Price shall be divided between the Flats as per the Second Schedule."
The second schedule divided the total Purchase Price of £14.76m between the flats; the individual prices ranged from £210,000 for the smallest 1-bed flats on the 1st floor to £322,000 for the largest 3-bed flat on the 4th floor.
"3. CONSTRUCTION OF THE FLATS ROADS AND SEWERS
3.1 The Company covenants to erect and complete the Flats in a good and workmanlike manner with good quality materials as soon as reasonably practical and subject to the overriding proviso at the end of this clause to the reasonable satisfaction of the Buyer's Surveyor or (if applicable) the Buyer's mortgagee's Surveyor in accordance with
(a) the Plans and Specification
(b) the planning permission dated 31 July 2006 (application number W00084AE/06) Section 106 dated 27 October 2006 between the Mayor and Burgesses of the London Borough of Barnet (1) and Conrad Phoenix (London) Limited (2) and building regulations approval granted therefor and
(c) the Standards and Technical Requirements of the NHBC current at the date of concreting the foundations of the Flats and in all other respects in accordance with NHBC requirements
3.2 The Company reserves to itself the right to:-
(a) determine the form and method of construction and materials of the Flats (so far as the same are not specified in the Plans and Specification)
(b) substitute materials for those specified in the Plans and Specification provided that the new materials are as nearly as may be of the same value and quality as those they are replacing if
(i) by reason of circumstances beyond the control of the Company the Company is unable (despite having used all reasonable endeavours) to obtain any of the materials referred to in the Plans and Specification within a reasonable time or at a reasonable cost or
(ii) variations of any of the said materials are necessary to comply with the requirements of any statute building or fire regulations
Provided further such substitute materials are comparable materials of similar appearance and of equal or better specification and quality to those previously specified in the Plans and Specifications as shall be readily obtainable
(c) vary the form and method of construction arising from the use of such substituted materials and/or
(d) make such minor modifications or variations to the Plans and Specification from time to time as may be expedient or necessary and as the Company in its reasonable discretion thinks fit
PROVIDED THAT (A) no such variation shall adversely affect the value of the Flats the size of the Flats by more than 5% the accommodation intended to be provided by them or the amenities benefiting the Flats (B) subject to complying with the provisions set out above the Company shall not be obliged to obtain the approval thereto of the Buyer but subject in every case to any necessary prior approval of the relevant competent authorities and the Technical Requirements of the NHBC
3.3 … [deals with delay in completion]
3.4 For the purposes of determining the Completion Date the Flats shall be deemed to [be] complete in accordance with this clause 3 upon issue of the Buildmark Cover Note so long as all the pre-occupation planning requirements have been satisfied and all fixtures fittings and contents referred to [in] the Plans and Specification have been installed.
3.5 ... [deals with construction of the remainder of the Estate]"
Clause 3.4 was subject to last minute amendments and the words in brackets do not appear in the copy of the Agreement in evidence where the final amendments appear in manuscript, but they are obvious omissions (and do in fact appear in a letter sent by Howard Kennedy to Boyes Turner confirming exchange and setting out the agreed text of clause 3.4). I have omitted a stray "and" at the end of clause 3.2.
"5. COMPLETION OF THE SALE AND PURCHASE OF THE PROPERTY
5.1 The sale and purchase of any given Flat and the grant of the lease of the Flat shall be completed on the Completion Date for the Flat in question at the offices of the Company's Conveyancers
5.2 The Company shall be deemed to have completed a Flat notwithstanding the non completion of items of a minor snagging nature not being such as would inconvenience the Buyer in the use enjoyment and occupation of the Flats which items the Company will use its best endeavours to complete with reasonable dispatch and the Buyer shall not be entitled to delay completion by reason of such items
5 .3 ... [provides for vacant possession to be given on completion]
5.4 ... [provides for Opticlife to pay an additional £100 on completion of a Flat towards costs if BDW has had to serve a Notice to Complete]
5.5 As soon as any given Flat has been completed in accordance with the provisions herein before contained and the Reserved Property has been completed so as to enable reasonable safe and uninterrupted access to and egress from the Flat in question and the lifts in the Reserved Property are operational and available for use the Company's Conveyancer shall serve the Completion Notice on the Buyers Conveyancer in relation to the Flat in question
5.6 On or before the service of the Completion Notice for any given Flat the Company's Conveyancer shall provide to the Buyer's Conveyancer:
(a) a copy of the Buildmark Cover Note
(b) a copy of the Seller's Contractors Insurance policy in respect of the Property
(c) the final completion certificate issued by the Building Control Department of NHBC
(d) a test certificate relating to the supplies of gas, electricity and other utilities installed in the Flats
(e) all manufacturer's guarantees and warranties instructions and service manuals for equipment in the Flats
(f) confirmation from the Seller that the Flats are capable of being occupied pursuant to the planning permission and all requisite approvals
(g) a certificate from the Seller certifying that the lifts at the Property (required by the Buyer for access to the Flats) are in good working order."
i) Standard Condition 6.8, so far as material, provides:
"6.8 Notice to complete
6.8.1 At any time on or after completion date, a party who is ready, able and willing to complete may give the other a notice to complete.
6.8.2 The parties are to complete the contract within ten working days of giving a notice to complete, excluding the day on which the notice is given. For this purpose, time is of the essence of the contract."
ii) The consequences of the buyer's failure to comply with a notice to complete are dealt with in Standard Condition 7.5, but this was amended by clause 15.1.10 of the Agreement. As so amended, it provided:
"7.5 Buyer's failure to comply with notice to complete
7.5.1 If the buyer fails to complete in accordance with a notice to complete, the following terms apply.
7.5.2 The Seller may treat the failure to comply with a notice to complete as a repudiatory breach by the Buyer and if he does so
(a) he may
(i) accept that repudiation
(ii) treat the contract as terminated by the breach
(iii) forfeit and keep any deposit and accrued interest
(iv) resell the property and any chattels included in the contract
(v) claim damages
(b) the Buyer is to return any documents he received from the Seller and is to cancel any registration of the contract."
iii) Standard Condition 7.1 provides as follows:
"7.1 Errors and omissions
7.1.1 If any plan or statement in the contract, or in the negotiations leading to it, is or was misleading or inaccurate due to an error or omission, the remedies available are as follows.
7.1.2 When there is a material difference between the description or value of the property, or of any of the chattels included in the contract, as represented and as it is, the buyer is entitled to damages.
7.1.3 An error or omission only entitles the buyer to rescind the contract:
(a) where it results from fraud or recklessness, or
(b) where he would be obliged, to his prejudice, to accept property differing substantially (in quantity, quality or tenure) from what the error or omission had led him to expect."
"Internal Floors 65mm Sand & Cement screed throughout, on insulation on podium deck, and sound absorbsion [sic] quilt on upper floors. Vinyl finish to wet areas only (insulated ground floor) with screed over."
(The second sentence, which only relates to the ground floor, is not material and can be ignored for present purposes).
Issue i): Were the pre-occupation planning requirements satisfied on 3 November 2008 ?
"11 None of the dwellings shall be occupied until works for the disposal of sewage have been provided on the site to serve the development hereby permitted, in accordance with details to be submitted to and approved in writing by the Local Planning Authority."
and:
"17 Before any of the residential units hereby permitted are occupied a full schedule of sustainable drainage works shall be submitted to and agreed in writing by the Local Planning Authority. The agreed sustainable drainage works shall be completed in their entirety before any of the proposed units are occupied."
Facts
"He was the man to speak to ! He is going to discharge all conditions by the end of this week !?"
"Further to our phone conversation. There are a few conditions outstanding which I am hoping to discharge within the next few days or so. These relate to conditions –
13 – Landscaping
19 – Access points, estate roads and footways
20 – Crossover details
21 – Visibility splays
6 – Materials
As mentioned I need to chase up comments from internal departments relating to conditions 13,19,20,21.
Condition 6 is acceptable
Hope this is of use, please contact me if you require further assistance
Kind Regards
Matthew Corcoran"
Mr Bryan forwarded this e-mail to Mr Salter and Mr Philip Jones (BDW's Technical Director) with the comment:
"Matthew Corcoran is aiming to have all conditions formally discharged by the end of this week. He is satisfied with information received to date and there are no actions for BNL."
(BNL is a reference to Barratts North London, the trading name of BDW).
"1 – Are Barratts OK to proceed with the landscaping works as per the revised layout
2 – Are you in a position to discharge all outstanding planning conditions yet and confirm in writing ?"
Mr Cowie replied on 17 October asking what the differences were between the old and new landscaping schemes. He did not reply to the second question.
"we had provided the London Borough of Barnet Planning Department with all the necessary documents they needed to deal with the outstanding planning conditions and that they had given assurances that the written formal approval in respect of the outstanding conditions would be given."
It was on this basis that he signed the confirmation.
"It appears that we have received verbal confirmation of approval for the following conditions but there is no paperwork in support of the approval (even on your internet access system, there is no record of these conditions)
Mr Cowie replied saying that he would have it resolved right away.
"all details that have been submitted and received by the council have been successfully discharged, with the exception of condition 16 (external lighting)"
It then however listed in table form the relevant conditions and details with the date of decision for each condition; and this list of conditions did not include conditions 11 or 17. Mr Bryan then spoke to Mr Corcoran on the telephone who told him he could not trace Barnet having received the drawings which JSA had sent in August 2008. That resulted in Mr Bryan resubmitting a copy of JSA's letter of 20 August 2008. Mr Corcoran e-mailed Mr Bryan the next day (13 January) listing the outstanding conditions (which included 11 and 17). In the event a report recommending approval of the details submitted under the outstanding conditions was made on 26 January 2009.
"TAKE NOTICE that the Barnet London Borough Council, in exercise of its powers as Local Planning Authority under the above Act, hereby
APPROVES PLANNING PERMISSION for:-
Submission of details of conditions … 11 (Disposal of Sewage), 17 (Drainage works – schedule) …"
It lists the plans accompanying the application, and is signed by Ms Lesley Feldman, acting for Mr Cowie (who as already stated was then the Head of Planning and Development Management).
Discussion
Issue ii): Does this have the effect that the Completion Notices were invalid ?
Issue iii): Was BDW's departure from specification an authorised variation ?
i) the modification or variation must be "minor"ii) it must be "expedient or necessary"
iii) BDW must have exercised its discretion to make the modification or variation
iv) that exercise of discretion must be reasonable
v) it must not adversely affect the value of the Flats
vi) it must not adversely affect the amenities benefiting the Flats.
I will consider these points after setting out the relevant facts.
Facts
"considering the pass is marginal – we would recommend that a 3mm resilient layer (such as Thermal Economics IsoRubber Top or Regupol 4515) is laid beneath the tiles in the remaining units."
"1. Drawing BAR-COL D.1 5285 and Page 9 of 11 – Sales and Marketing Specification; the floors are described as having 65mm sand and cement screed on a sound absorption quilt – this has not been constructed on site (Photograph D). This omission has led to a construction detail on site that contravenes Part E of the Building Regulations. There is no separating layer for dealing with the transmission of impact sound under the partition walls or under the ceramic tiled finished floors.
12. The bathrooms on site are in the process of being tiled (floor) at the moment. There is no separating layer being used in the detail – this omission has led to a construction detail on site that contravenes Part E of the Building Regulations."
He summarised his concerns as
"The discrepancies between the details as shown and those constructed on site, fundamentally breach the Building Regulations on several fronts and require your most urgent attention and action."
"I confirm my comments to Mr Lawlor that the 24 apartments which were tiled without the acoustic layer should be stripped and relaid properly."
This shows that Mr O'Sullivan was then aware that there had been 24 flats which had already been tiled without the isorubber. Mr Lawlor's reaction (both at the time in a written note and in oral evidence before me) was that there was no mention of stripping back laid tiles to lay an acoustic layer. He was confident in oral evidence that he could identify which were the 24 flats in question: they were the flats at the northwestern end of the building on the 1st to 3rd floors, namely flats 4 to 11 on the 1st floor, 15 to 22 on the 2nd floor and 26 to 33 on the 3rd floor, which he clearly remembered as being the first flats to be finished. I accept this evidence. What is not however clear is whether Mr O'Sullivan knew which the flats were at the time; it is possible that he did, since he had been on site and could have seen with his own eyes which flats had been tiled; but it is equally possible that he did not. Mr Lawlor accepted that as far as he was aware there was nothing sent to Opticlife identifying the 24 flats in question.
"Issues with the sound insulation are still ongoing but I am satisfied that the level of proposed and previous sound level tests will prove an acceptable level of compliance."
"Following your successful sound test results prepared by Cass Allen Associates please provide the remaining tests as agreed."
This is marked "Cleared." I understand this to mean that Mr Cummins was satisfied with the Cass Allen tests and that there were no outstanding issues in relation to Part E so far as he was concerned.
"we were satisfied that sufficient sound testing had been carried out to apartments and that these tests all demonstrated passes with regard to Building Regulation requirements."
He also pointed out that NHBC could not become involved in contractual disputes unless any omissions constituted a breach of its Technical Requirements or Building Regulations.
i) Of the 59 flats, none were built with an absorption quilt or a sand and cement screed as required by the specification.ii) All 59 flats had 3mm isorubber laid to the floors other than the tiled areas in the kitchens and bathrooms. All 59 flats had been subject to sound impact tests by Hann Tucker in either the living room or a bedroom or both, and all had passed the ADE requirement of a maximum of 62dB. So far as the evidence before me establishes, none of the Hann Tucker test results had been given to Opticlife.
iii) 24 flats on the 1st to 3rd floors were initially tiled in the kitchens and bathrooms without isorubber underneath. Mr O'Sullivan was aware of this, but it is unclear whether he knew which the 24 flats were: he was never told this by BDW.
iv) Of these 24 flats, 3 were tested by Cass Allen and passed, albeit only just with readings of 60, 62 and 62dB. Mr O'Sullivan knew about the test on Flat 16 and its result. He did not know about the further tests, although he had been told by the NHBC that they were satisfied sufficient sound testing had been carried out, and that all tests demonstrated passes for Building Regulation purposes.
v) 12 of the 24 flats (including Flat 16 again but otherwise different flats to those tested by Cass Allen) had also been tested by Hann Tucker. 4 had failed, had had the isorubber laid under the tiles and then passed on a re-test, as had one flat with a marginal pass. All the rest had passed and had been left without isorubber under the tiles. Opticlife does not appear to have been told anything about this.
vi) The remaining 35 flats were all built with isorubber under the tiled floors. Mr O'Sullivan had been told that this was what BDW was going to do, but unless he knew which the 24 flats were, he would not have known which the 35 were either.
Acoustic experts
i) When tiles are laid directly onto a concrete slab they will not consistently achieve the impact sound insulation required by ADE.(This is borne out by Hann Tucker's initial testing of the kitchens in the flats without isorubber under the tiles; and by Sharps Redmore's testing of the kitchen in Flat 20. It is also consistent with Sharps Redmore's testing of the bathrooms, although Mr Gibbs said that the bathrooms were too small to test properly under ADE, and that the bathroom measurements were unreliable).ii) When tiles are laid on a resilient mat (such as isorubber) they will generally achieve the ADE requirement, but neither Mr Gibbs nor Mr Redmore knew the extent of the resilient mat in the kitchens and bathrooms at Block C.
iii) The reference in the screed requirement to a screed laid over a sound absorption quilt should be understood as a reference to what ADE calls a Type 2(b) floor, which requires a sand and cement screed laid over a resilient layer.
(It may not be technically correct to refer to this as a quilt but the experts were agreed this was what was intended).iv) If a Type 2 floor (screed on resilient layer) had been installed, it would normally have run throughout the flat so that internal walls, and kitchen and bathroom furniture and fittings, would be built on top of the screed.
(By contrast the isorubber, which is a Type 1 floor, is laid after the internal walls and fixtures and fittings have been installed and so is not laid under the kitchen units and bathroom fittings).v) If kitchen or bathroom furniture were built on a screed on resilient layer this would reduce the energy transmitted into the concrete slab.
vi) If internal partitions were built on a screed on resilient layer, there would be a benefit as this would reduce the transmission of impact energy on the partition below or to the side, although this benefit has not been evaluated.
vii) If the current resilient layer (the isorubber) were removed from the bedrooms halls or living rooms, the noise from footsteps could significantly increase unless it is replaced with a suitable alternative. A screed on resilient layer would not normally be removed.
Valuation experts
Was the variation authorised ?
i) I do not consider that the isorubber adversely affected the amenities benefiting the Flats. I agree with Mr Halpern that this phrase (rather than say the "amenity of the Flats") refers to matters outside the Flats which are intended to be enjoyed with it, such as the communal roof terrace.ii) As to whether the variation was expedient or necessary, it was clearly not necessary but I consider it was expedient. Mr Jourdan sought to give this a meaning (based on the OED) of "advantageous, fit, proper, suitable to the circumstances of the case" but this does not entirely capture the flavour of "expedient" which to my mind is more akin to "convenient". It was no doubt expedient for BDW to build a Type 1 floor as it had always intended.
iii) I also reject Mr Jourdan's submission that BDW could not rely on clause 3.2(d) as it did not positively decide to vary the specification. As a matter of fact BDW built the Flats with isorubber rather than the screed because it had always intended to, and it appears that it simply did not appreciate that the specification required a screed. But I see no reason why this should not be encompassed within the words "make such variations ... as [BDW] ... thinks fit." The isorubber was a variation to the specification; and BDW plainly did decide to lay it and this in my judgment was enough.
iv) More debatable is whether this decision was a reasonable one. I have considerable doubts about this. It is true that the purpose of the screed requirement (or a Type 2 floor) was to provide insulation against impact noise for the purposes of meeting the ADE requirement; and that in principle isorubber (or a Type 1 floor) was a recognised alternative method of achieving the same end. And it is noticeable that Mr O'Sullivan's complaints were framed in terms of the building contravening Part E of the Building Regulations, and it is not surprising that BDW's focus was on ensuring that the building did pass Part E and obtain approval from the NHBC as in the event it did. On the other hand, I think a fair reading of what happened is that BDW assumed that the only relevant obligation was to ensure a pass of Part E and it never considered whether the isorubber was as good in all respects as a screed floor, partly no doubt because it refused to acknowledge that the contract so provided. Overall I am rather doubtful whether BDW's decision to use isorubber can be said to be a reasonable exercise of its discretion to vary when it did not understand what it was varying from. But I do not need to decide this.
v) Nor do I need to decide whether the variation was a minor one, although I incline to the view it was. This is obviously a question of degree which cannot be given a precise answer, but viewed against the overall obligation to build the Flats, this was a relatively minor change to the specification. The protection for Opticlife lies not so much in the word "minor" as in the proviso that the value of the Flats should not be adversely affected.
Issue iv): Does this have the effect that the Completion Notices (or some of them and if so which ones) were invalid ?
i) Any departure from specification unless authorised under clause 3.2 means that BDW is in breach of its obligation in clause 3.1 to build in accordance with specification. This breach of contract entitles Opticlife to damages for breach of contract in the usual way.ii) Under clause 5.5 the obligation to serve a Completion Notice is triggered when any given Flat is completed "in accordance with the provisions herein before contained". In the absence of clause 3.4, this would have given Opticlife an argument that any unauthorised departure from specification prevented service of a Completion Notice but only if it could be said that the Flat in question had not been completed in accordance with clause 3.1. It would not in any event have given Opticlife the ability to resist completion of Flats which were wholly unaffected by the breach.
iii) The effect of clause 3.4 however is to deem a Flat to be complete in accordance with clause 3 once the provisions of clause 3.4 are satisfied. This therefore prevents Opticlife from relying on the mere fact that a Flat was not completed in accordance with clause 3: if it is deemed to be complete, then clause 5.5 is triggered.
iv) But this does not mean that BDW can force on Opticlife something substantially different from what it contracted to buy. It is well established that in a case of misdescription, a vendor cannot rely on a clause in the contract which purports to provide that a misdescription will not annul the sale if the misdescription is "so far affecting the subject matter of the contract that it may reasonably be supposed that, but for such misdescription, the purchaser might never have entered into the contract at all": Flight v Booth (1834) 1 Bing NC 370 per Tindal CJ. I do not think one would normally describe a failure to build in accordance with specification as a "misdescription", but there is a close analogy between the two cases. In each case the vendor agrees to sell one thing but when the time comes for completion offers to convey something else. I do not think it makes any difference in principle whether the vendor describes existing property as A when in fact it is B; or contracts to build property answering to the description A and then builds B. In Donnelly v Weybridge Construction [2006] EWHC 2678 (TCC), (2006) 111 Con LR 112 Ramsey J in fact treated a failure to build in accordance with specification as a case of misdescription and applied the Flight v Booth test: see at paragraphs [226]-[241].
v) There was some argument whether Standard Condition 7.1 would apply to such a case. I do not propose to resolve this – the test in Standard Condition 7.1.3(b) ("property differing substantially (in quantity, quality or tenure) from what the error or omission had led him to expect") does not seem very different from the Flight v Booth test, although I suppose it might make a difference in a particular case.
vi) But whether technically under Standard Condition 7.1.3(b), or as a misdescription, or by analogy with the case of misdescription, I consider that even in a case where clause 3.4 is satisfied, it remains open to Opticlife to resist completion where the effect of the breach of clause 3.1 or unauthorised departure from specification is such that the particular Flat in question is substantially different from that which it agreed to buy. And this also answers Mr Halpern's flat-by-flat point: Opticlife could in my view resist completion of Flat A where there was a breach of clause 3.1 leading to a substantial difference in Flat A even where the unauthorised departure consisted of a failure to build Flat B in accordance with specification.
Conclusion