Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2014] CSOH 120

OPINION OF LORD WOOLMAN

In the cause

NATIONAL HOUSE BUILDING COUNCIL

Pursuer;

against

JOHN PENMAN and ELIZABETH PENMAN

Defenders:

Pursuer:  MacGregor;  Tods Murray LLP

Defenders:  Party

1 August 2014

[1]        In this action, the National House-Building Council concludes for payment of £957,157.59 from Mr and Mrs Penman.

[2]        Mr and Mrs Penman were formerly directors of JAD Homes Ltd ("the company").  The company developed and sold residential properties.  In June 2004 it applied to be placed on the NHBC register as a builder.  As a condition of registration, Mr and Mrs Penman provided personal guarantees to the NHBC in respect of the company’s obligations.

[3]        The company undertook to comply with the NHBC rules as they applied from time to time.  Rule 10 required that all properties offered for sale met the applicable "NHBC Requirements", which set out the standards dealt with which builders had to comply.

[4]        In 2005 the company began developing a residential site at Lyoncross, Glasgow Road, Falkirk.  It registered each of the 27 properties built at the site with the NHBC and sold them with the benefit of ‘Buildmark’ cover issued by the NHBC.  Subsequently, the owners of 15 of the properties made claims under the ‘Buildmark’ policies.  The NHBC appointed independent experts to investigate the claims.  Although they rejected some of them, they found defects in the design and construction at each of the houses.

[5]        The NHBC rules afforded the company an opportunity to remedy its failure to comply with the NHBC requirements.  It failed to do so and was placed into administration on 16 May 2008.  As there was then no prospect of the company rectifying the problems, the NHBC arranged for remedial work to be carried out and also made certain payments to the owners in lieu of carrying out such remedial works.

[6]        The summons sets out the defects in each of the 15 properties, the remedial works carried out and the payments made in lieu.  In addition, the NHBC has lodged a spreadsheet which sets out the claim reference number, the policy number, the defects, the remedial works, and the remedial and administration costs in relation to each claim.  That spreadsheet is incorporated into the pleadings. The NHBC has also lodged the investigation reports.

[7]        The defences do not provide any substantive answers to those averments. Instead they call for further details, by way of independent reports and schedules of works.  The defences were drafted when Mr and Mrs Penman still had the benefit of legal representation.  Their solicitors instructed an expert, Mr Robertson, to prepare a report.  He carried out a desktop exercise and requested further information.  In his draft report, however, he stated that “there do appear to be a catalogue of defects in the properties”.

[8]        Mr MacGregor appeared on behalf of the NHBC.  At a hearing on 27 June 2014, he indicated that he would move for decree at the next hearing.  Mr Penman explained that this case had caused great stress to him and his wife.  The Scottish Legal Aid Board had withdrawn legal aid and they had no funds to pay Mr Robertson to complete his expert report.  I suggested that if Mr and Mrs Penman were unable to secure the benefit of legal advice, they should prepare a written statement setting out their position.

[9]        Prior to the hearing on 25 July, Mr and Mrs Penman lodged a document in which they made a number of points, which I summarise as follows:

1. Some of the problems at the properties were attributable to defects in the sewer and rainwater system. Scottish Water monitored its construction.
2. The problems with the windows and doors were attributable to Guardian Windows Systems.
3. The NHBC passed the houses after inspection at each stage. It should have detected problems itself.
4. The cost of some of the remedial works appeared excessive, particularly in relation to numbers 1, 32 and 36 Lyoncross.
5. The company went into administration because of the banking crisis in 2008. If that had not happened, all the houses in the development would have been completed to a satisfactory standard.
6. Mr and Mrs Penman have insufficient assets to meet any decree passed against them.

[10]      Mr and Mrs Penman also stated, however, that “some of the remedial works were necessary”.  They believed that if the bank had not withdrawn its support, the company would have been able to remedy matters.

[11]      The central issue is whether there is a substantive defence.  At the stage of preparing his report, Mr Robertson did not have access to a number of important documents.  He asked to see a Scott Schedule, which the NHBC has now lodged.  It has also lodged further documents in respect of each property to vouch its claim. It is difficult to imagine what details the NHBC has omitted.

[12]      Mr MacGregor directly confronted the concerns expressed by Mr and Mrs Penman in respect of numbers 1, 32 and 36 Lyoncross.  The NHBC has lodged a revised schedule.  By excluding the costs associated with those properties, the total figure amounts to £300,550.06.

[13]      Mr MacGregor’s principal submission was that I should grant decree de plano for the costs incurred by the NHBC in respect of all 15 properties. That figure had been revised down to £908,807.72.  His subsidiary position was that I should grant decree at this stage for the lesser sum, by taking out the three specified properties.

[14]      I am satisfied that there is no substantive defence to the claim as so restricted.  Although I have carefully considered the points made by Mr and Mrs Penman, they do not afford a basis for going to proof on these matters.  Taking their other points in turn (a) the NHBC does not make any claim in respect of the sewer system, (b) the company is responsible for any problem caused by Guardian Windows Systems, (c) rule 10 places liability on the company, so any inspection by NHBC is irrelevant, (e) any issue arising from the withdrawal of financial support is a matter between the company and the bank, and (f) it is not normally pertinent for the court to consider a defender’s financial position when granting decree for payment.

[15]      Accordingly, I shall grant summary decree against Mr and Mrs Penman for payment of £300,550.06.  Mr MacGregor undertook to inform the court within one month from today’s date of whether the NHBC intended to proceed with the elements of the claim relating to the properties at 1, 32 and 36 Lyoncross.