England and Wales High Court (Technology and Construction Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

		St Dunstan's House 133-137 Fetter Lane London EC4A 1HD
		Thursday, 11 May 2006

No of Folios: 59

No of Words: 4251

Thursday, 11 May 2006

JUDGMENT
 


JUDGE MACKIE:

1. This is an application by the first defendant in effect to strike out as disclosing no reasonable cause of action or as an abuse of process, the claims brought against him by the claimant. I bear in mind the criteria in the CPR and the burden of proof which lies upon the first defendant. I reserved this judgment simply because this case was one of three in my list on one day and had been added following the indisposition of the judge to whom it was allocated and I ran out of time.
2. The two claimants live with their family in Garden Cottage, New Way Lane, Hurstpier Point. In the late 1990s they decided to have an extension constructed to their property. The first defendant was appointed as architect on a fee basis of an initial £2,400 plus a fee of 12 per cent for post-planning services. The second defendant, Cheesma(?), was appointed as building contractor under a JCT form and the project had a contract sum of just under £200,000. The work was carried out in 2000 and 2001, but before it finished, disputes broke out between the claimants and the first defendant about a payment mechanism, about repudiation and about alleged defects to which I will come.
3. The parties fell out towards the end of 2001. By an exchange of letters of 4 and 8 October each claimed that the other had repudiated the contract, a matter with which I am not concerned. But in the letter of 8 October, the claimant said that he would be making claims for the financial matters, and also additional costs incurred as a result of what he described as "your design defects".
4. Before that letter, the architect prepared a snagging list which the first defendant placed emphasis as forming part of the factual matrix. In that snagging list, various matters are identified, including some matters relating to the re-pointing to the brickwork under the windowsills, and also this:

"… the general quality of there external pointing is of poor quality and has been the subject of a report by the Brick Development Association, who report a variation in colour, the consistency of the mortar and an extremely poor standard of workmanship in most of the bricklaying. It would appear that the lime mortar suffered from frost attack during construction and to compound matters, the whole of the new brickwork was cleaned by the contractors with a jet washer, which in turn washed away the lime content of the mortar, leaving mainly the aggregates in the mortar and unacceptable pointing."

5. The architect's snag list was supplemented by a note prepared by Mr Mantegazza following his own site inspection as a layman on 27 September 2001. He identifies, amongst other things, a defect in the brick joint and areas where the pointing was corroded, even after the pointing was redone.
6. The statement by Mr Mantegazza in October that he would be bringing a claim was borne out, because he instructed Masons who wrote to the first defendant on 7 February 2002, making claims of three kinds. There were claims for reimbursement of unjustified extra fees amounting to some £31,000, of extra professional fees amounting to some £5,000, and what were described as "other losses". That portion of the letter said this:

"NHA [the first defendant] failed to properly design and administer the contract in the respects listed below…"

Then there are nine subparagraphs: (i) chimney detail, (ii) ridge alignment, where it is said that "the non-alignment of the ridge part of the roof was against any building practice and/or regulation. NHA should have been aware of this problem in the drawings and in any event should have realised the problem during construction."

7. (iii) is brickwork, and there is a quotation from an independent inspection carried out by a member of the Brick Development Association:

"A variation in colour consistency of the mortar and an extremely poor standard of workmanship in most of the bricklaying … and there was in fact a small area of brickwork that was in fact perfectly acceptable; there is no reason why all the brickwork should not be up to that standard.

The brickwork is of poor quality, not as per the approved sample and not as per the drawing."

(iv) to (ix) address windows, external doors, construction of the joint to the existing bay window and family room, details relating to the facia, brickwork to the internal fireplace, and a broad claim relating to administration of the contract:

"NHA failed in its obligations to administer the contract with due care and skill, in particular by approving work which was not of the highest standard regarding pointing of the brickwork."

The pointing, of course, is one sense an issue with the mortar.

8. On 6 March, Hill Dickinson responded to Mason's letter dealing with each of the allegations, saying as regards "other losses", that the chimney detail had been dealt with in a previous letter, as had the ridge alignment, and as regards the brickwork:

"… the poor quality of the brickwork was raised by our Clients with the Contractor and they raked out and repointed the sub-standard areas as identified in the snagging lists. The matter was proceeding at the time when your Client repudiated the Contract."

It was known, I think, that there had been some frost damage showing up a requirement for re-pointing.

9. There was a general denial accompanied by a Part 36 offer, offering a payment of £35,000 in full and final settlement of all claims made by the claimant, inclusive of interest and costs.
10. On 12 March that offer was accepted in the following terms:

"We thus now confirm that our client accepts your client's offer of £35,000 on that basis.

This constitutes full and final settlement of all claims made by our client (inclusive of interest and costs) and your client has now waived its entitlement to seek the recovery of any/all outstanding fees owed by our client."

11. Two years went by. In May 2004 battle was rejoined because Masons wrote to the first defendant with a second detailed letter of claim. The letter points out that their client had previously made claims regarding the brickwork and other matters and that the payment of £35,000 was in full and final settlement of all claims made up to that point. The letter states:

"For the avoidance of doubt, the previous claims are separate from the claim below.

Mr Mantegazza has however now discovered that the limestone mortar used in the building the brick walls of the extension was unsuitable, leading to the erosion of parts of the building where re-pointing was not completed. The full extent of this erosion is not currently known and further testing will be required. NHA failed in its obligation to administer the contract with the due skill and care, in particular by approving mortar work which was unsuitable."

12. Hill Dickinson came back rejecting that claim on a variety of grounds, but their position is summarised as follows:

"Clearly, the condition of the brickwork (and mortar) was known to your client and his advisers as at the date of the compromise of the original claim. The fact that your client, his legal advisers and/or expert(s) may not at that stage have reached the same conclusions now reached as to the cause of that condition is, if correct, unfortunate; but it does not alter the fact that your client is now estopped from taking the matter up with our client. It seems that your client's expert may have failed to analyse the cause of the condition of the brickwork and mortar as at the date of the compromise of the original claim. If that is right, then it is a pity that your client's expert was not more diligent."

13. Masons responded on 2 July, referring, amongst other things, to a quotation from Coleford Brick and a variation in colouration consistency of the mortar. They said this:

"This was the only mention of the mortar in a quote about the poor brickwork, and relates to the colour of the mortar. Our client's claim now is for the unsuitable mix of the mortar used which has led to the latent defect of erosion of parts of the building where re-pointing was not completed."

14. The fresh claim is for very substantive remedial works, which I shall refer to in a moment, which, if justified, are likely to run to a six figure sum.
15. There was a further lull until December 2005 when Charles Russell took over from Masons and produced a pre-action letter of claim. That letter is broadly consistent with the Masons' letter, although expanded in its claim. In essence, Charles Russell said that their claim was based on two matters, both of which had come to light since 2002. First it was alleged that an entirely lime sand mortar, not being non-hydraulic, had been used in the construction to the extension, giving rise to material safety and durability concerns. Secondly, it was alleged that an element of the extension wall structure had been negligently designed in breach of BS5628 Part I, giving rise to concerns over the extension's ability to withstand lateral wind loadings.
16. The claims were denied and this action was brought. The remedial scheme which forms the subject matter of the claims which are now brought is extensive. It is proposed that there should be a remedial scheme involving the complete reconstruction of all above ground facing external brickwork, including all the walls and gables, parapets and the chimney and complete reconstruction of all substructure walling. The need for the remedial scheme is said to spring from the fact that the brickwork to the gable parapet was so poorly bonded, the bricks had begun to fall from the parapet on the roof structure, giving rise to potential hazards.
17. The essence of the claim is set out in the particulars of breach of contract, negligence, breach of statutory duty at paragraph 34 of the claimant's pleading. There are allegations of failure to specify an appropriate type of mortar, specifying an inappropriate type of mortar and failing to identify that the lime sand mortar did not comply with the requirements of BS5628. Four more general allegations relate to failure to identify the use of a mortar that was appropriate, failing adequately to inspect, failing to prevent the incorrect mixing of mortar, and failing to instruct the second defendant to rebuild those parts of the extension built using inappropriate mortar. There are allegations concerning failure to design the structure of the extension to ensure that it would withstand natural loadings, and failure to instruct the second defendant to rebuild those parts of the extension that had been constructed contrary to the requirements of BS5628. In the course of argument it became clearer that (h) and (i) are distinct from any claim made in 2002 and I will not address those further. (j) is failing to prevent the second defendant from proceeding with brick or block laying when the temperature was zero degrees or lower; then finally (k) is a catch-all, failing to administer the building contract so as to ensure the extension was sufficiently safe, structurally sound and durable.
18. The defendant says in substance that these are a re-hash of the claims that have already been compromised and therefore they should not be permitted to proceed. There are two legal bases for the application. Firstly, there is the claim of compromise. At the hearing, Mr Hyam relied upon certain passages from Foskett on Compromise, in particular the central proposition that an unimpeached compromise represents the end of the dispute or disputes from which it arose, and that such issues of fact or law as may have formed the subject matter of the original disputation are buried beneath the surface of the compromise. The court will not permit them to be raised afresh in the context of a new action. That principle, of not being twice vexed by disputes which are the subject matter of compromise, applies whether or not litigation was in fact commenced in relation to the dispute. It is common ground that that is the law.
19. The first defendant submits that a proper analysis of the underlying claims in the compromise agreements demonstrates that "all claims made" should be construed as meaning every claim or cause of action that was brought or could have been brought in relation to the discharge of the first defendant's retainer, a proposition qualified in argument by reference to "with reasonable diligence".
20. The second basis upon which the claim is brought is abuse of process. The first defendant relies upon the line of authority leading up to the decision of the House of Lords in Johnson v Gore-Wood encapsulated in the following observation by Lord Bingham at 90B-C:

"The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to an abuse of process if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all."

That is carried forward where a matter has been concluded by way of settlement and not just by way of judgment, as the following passage from the speech of Lord Millett illustrates:

"I agree that it is capable of applying even where the first action concluded in a settlement. Here it is necessary to protect the integrity of the settlement and to prevent the defendant from being misled into believing that he was achieving a complete settlement of the matter in dispute when an unsuspected part remained outstanding."

21. As to abuse of process, the first defendant says that the claimant is attempting, after the initial settlement and the payment of the £35,000, to re-litigate a dispute which falls squarely within the scope of Lord Millett's statement. The claimant should be prevented from pursuing this claim, as it is in substance the same as the first claim.
22. The abuse of process argument is also supported by a claim that the claimant knew or should reasonably have known at the time of writing the first letter of complaint of the existence or potential of the claims now before the court, an argument which was put forward by reference to the Pirelli case. It is said that by parity of reasoning, the argument in Pirelli v Oscar Faber, which would link the first and second claims in this case is, by parity of reasoning, applicable to considering the extent to which these second claims should have been brought at the same time as the first, or are alternatively comprised within the settlement.
23. The first defendant's argument was developed in detail by reference to the Particulars of Claim which he says demonstrate on analysis that the two types of breach alleged are in substance the same. The essence of the case is that the brickwork and the mortar and the standard of workmanship relating to them were substandard, and it was in relation to that that the first defendant failed in its obligations to administer the contract with due care and skill. Mr Hyam developed that, identifying particular words and phrases by which he submitted the claims were shown to be the same or very similar.
24. Miss McCafferty for the claimant submitted that those propositions were misconceived and submitted that the issues in the claim now before the court are different from and unconnected to those compromised in March 2002. The claim outlined in the 2002 letter was that the brickwork was of poor quality, not as per the approved samples and not as per the drawing, that that this referred purely to a cosmetic complaint about variations in the bed joint and the thicknesses and there was no claim in respect of the mortar in the pre-action letter of 7 February 2002, the only reference to it being a quotation taken from the report to which I referred earlier.
25. She submits that none of the specific complaints raised in 7 February 2002 letter relating in any way to the specification of the mortar used in constructing the extension, to the quality or strength or durability of the mortar or to any structural implications arising from the type of mortar used.
26. She submits that since these defects and their consequences were not apparent in March 2002 and the claimants were unaware of their existence, it could not be that those defects formed part of the dispute settled in March 2002. She pointed out, as appears to have been the case, that in 2002 the claimant, as I say a lay person involved in a dispute with his architect, had not instructed any experts who could have taken things forward in the way suggested by the first defendant. She also submits what I think is now common ground that none of the specific complaints relate to the design of the cavity walls in the extension, and she places reliance and emphasis on the fact that the 2002 compromise was of claims actually made by her client.
27. There is no dispute about the law, although, in relation to abuse of process, Miss McCafferty draws attention to the other well-known passage in Lord Bingham's speech where he says:

"It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of … all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before."

28. In my judgment, this issue is primarily a question of construction; what was the intention of the parties is derived from the words they used when set in their proper context. The evidence provided of the claimant's subjective intentions is, of course, irrelevant.
29. Looked at in its context, it seems to me that the position is as follows. The 2002 compromise is in full and final settlement of all claims made. The claims made at that point are to be found in the letter of 7 February 2002. Are the new claims within it?
30. The words "all claims made" are not, as one might expect them to be, advised as both sides are by sophisticated firms of solicitors, expressed to be in full and final settlement of all claims whatsoever which either party has or may have against the other, or in terms of any of the other time-hallowed formulae which lawyers use when seeking to give effect to an intention by the parties to finally resolve all present and future disputes between them. To the extent that it is suggested that that wording compromises all claims present and future, I reject that suggestion. It is true, as Mr Hyam pointed out, that there is no express reservation of rights, but that does not then leave a neutral position. The question remains. What claims had been made in 2002?
31. "All claims made" refers to those which had actually been made rather than to potential claims which might have occurred to this layman had he instructed an expert and conducted some exercise into what potential problems might arise in the future. Reliance by Mr Hyam on the Pirelli reasoning is ingenious but of no application to the exercise of construction of an obligation and then application of the facts to that. I see no reason to read into "all claims made", all claims that could have been made with reasonable diligence.
32. It is common ground that two claims are not within the 2002 letter. As to the others it is true, as My Hyam showed, that there is a similarity in some of the wording. If one takes quotations out of context, one can say that both sets of claims are, in one sense, both about mortar. But it seems to me that when one comes to look at the substance, they are two quite distinct and different matters. The current claims are precisely what the claimant's solicitors claimed them to be in the claim letter back in December 2005 as now refined in the pleading. The claims are that there was an entirely inappropriate mortar used in the construction of the extension and that an element of the extension wall structure had been negligently designed. No matter how much one finds similarities of wording or expression, these are distinct and different claims from those made in 2002.
33. On the first limb of the defendant's application, the question of construction, I conclude that the new claims have not been compromised by the letter agreement in 2002.
34. The second limb is abuse of process. It seems to me that abuse of process has no application to claims which were not included in the compromise and did not become known until much later. A layman cannot be expected to dig around and spend money on claims which have not occurred to him in order to avoid a claim of abuse of process later.
35. There may be situations where there are claims which are not expressly or implicitly included within a compromise which should have been included and are, for some reason and in some circumstances, precluded from being advanced for reasons of abuse of process. This does not seem to me to be one of those situations. As I say, there was no obligation to make further enquiries. From what one reads about the heat between the parties back in 2002, it is improbable in the extreme that if Mr Mantegazza had known of a claim that he would not have been most anxious to put it forward at that time.
36. For those reasons this application is refused.