Scottish Sheriff Court Decisions

SHERIFFDOM OF TAYSIDE CENTRAL AND FIFE

AT DUNDEE

JUDGEMENT OF SHERIFF AG McCULLOCH

In the cause

DAVID HORBAN & MRS LESLEY HORBAN

-v-

TORITH LIMITED

A426/05

Act Henderson, instructed by Thorntons

Alt Clive, instructed by Simpson & Marwick

Dundee, 6 November 2007

The Sheriff having resumed consideration of the cause Sustains the Defenders first plea in law to the extent of excluding from probation the Pursuers case based on delict; reserves all other pleas meantime; Allows to parties a Proof before answer, on dates to be afterwards fixed; Reserves all questions of expenses until a hearing thereon at a date to be afterwards fixed; certifies the cause as suitable for Counsel.

NOTE :

[1].            This case called for a debate on the first and second pleas in law for the defenders. Both parties were represented by Counsel, whom I thank for their careful and helpful preparation, and submissions. I was urged to sustain both pleas for the defenders, and dismiss the action.

[2].            There was little between the parties on the background facts. The Pursuers visited a site at Drumoig, Fife at about Easter 1999, where the defenders were acting as main contractors to the development. The pursuers expressed interest in the purchase of a plot there, and the defenders offered to build a house on that plot. The pursuers discussed their specific requirements with a Mr Doig, an architect employed by the defenders. The pursuers wanted a specification which departed from the standard design of houses in the development. The defenders, by letter of 22 April 1999, advised the pursuers that missives required to be entered into as soon as possible to allow the defenders to proceed with the construction of the house. Alterations or additions to the standard design were to be dealt with as "a clients extra".

[3].            Missives were indeed entered into, by exchange of solicitors' letters dated 24 May, 3 and 7 June all 1999. These missives were between the pursuers and the landowners, Drumoig Limited. Correspondence continued to pass between the pursuers and the defenders, regarding the specification of the house, and the price of the house and clients extras. The principal extras were the use of ceramic tiled floors throughout the house, and underfloor central heating, and the pursuers gave specific reasons for this, known to the defenders. In due course, the pursuers paid the purchase price for the plot, the house thereon, and the clients extras. An NHBC Certificate was issued, naming the defenders as the builders. The pursuers subsequently moved in on 27 March 2000. Thereafter, according to the pursuers, there were significant problems with the tiling and underfloor heating. They claim damages from the defenders through breach of contract, specifically the implied terms thereof to exhibit the care and skill to be reasonably expected of competent building contractors of ordinary competence, and to ensure that the design work would be that reasonably expected of a competent architect exercising reasonable skill. Further the pursuers aver that the defenders are in breach of an express term of their contract with the defenders that the subjects would be suitably constructed conform to NHBC standards. The pursuers also claim to have suffered loss through the fault and negligence of the defenders.

[4].            The defenders seek dismissal . They point out that the pursuers purchased a new build property on land owned by Drumoig Limited, (hereafter "Drumoig") but Drumoig are not a party to the action. Missives were entered into between the pursuers and Drumoig for the purchase of land, with a house to be built thereon. But the pursuers proceed against Torith, who carried out the builder work, claiming the defenders have a liability under contract and delict. According to the defenders the pursuers pleadings show no averments sufficient to set up any contractual or delictual relationship between the pursuers and defenders. The defenders accept that they entered into the NHBC scheme, but they accept their responsibilities under that scheme.

[5].            The defenders submissions were in 4 parts. In the first place, the averments of contract between pursuers and defenders are irrelevant, and lacking in specification. Secondly, the pursuers' averments of alleged breach by the defenders re the NHBC documentation are lacking in specification. Thirdly, the averments anent delictual liability are irrelevant and lacking in specification. Finally, and this was not part of the Rule 22 Note, the averments of loss are insufficient to justify the crave.

[6].            In support of the first submission, the defenders Counsel referred to the productions, and Condescendence 3. He argued that defenders involvement in the building of the house was known to the pursuers, but regard must be had to the missives. Production 5/1 is the offer to purchase dated 24 May 1999. It is in what might be described as standard builders missive form. It purports to come from the pursuers, and is addressed to Drumoig, per their solicitors. It details the plot, the price and the entry date provisions. It details how Drumoig can vary the development. It obliged Drumoig to enter into NHBC documentation, which in fact was done by the defenders. Clause 10 dealt with extras, and the Schedule provided variations to the standard clauses. Drumoig's solicitors issued a qualified acceptance on 3 June, which was accepted and the bargain concluded on 7 June 1999. Turning then to the pleadings, the pursuers aver no contract with the defenders from the missives. They say "Although the missives formed a concluded contract between the landowners and the Pursuers, they were not so with regard to the Pursuers and the Defenders." The next two sentences aver that "the Pursuers engaged the defenders to carry out building work in respect to said plot. Said contract was partly oral and partly in writing". Counsel sought to argue that the Pursuers were unable to engage the defenders to carry out work as they did not, at that time, own the property. And in terms of the missives, the whole price was to be paid to Drumoig. The pursuers had no need or interest to enter into a contract with the defenders for the construction of the house: they had missives with Drumoig for that. In any event, if the contract was partly oral, what was said, by whom, to whom, and when? If there was a contract, inconsistent with the missives, then full, clear averments would be required to set it up. Accordingly, the pursuers' averments about a contract with the defenders were irrelevant and quite lacking in specification. Any correspondence between the pursuers and defenders was in implement of clause 10 of the missives, with the pursuers dealing with the defenders on a day to day basis, although the overall responsibility, and contract, was with Drumoig. Towards the end of Condescendence 3, the Pursuers aver that Drumoig were required to enter into NHBC documentation, but that they failed to do so, and the defenders entered into it instead, thus novating Drumoig's obligations to the defenders. This, according to the defenders, was immaterial, as the defenders do not seek to escape from their NHBC obligations.

[7].            In Condescendence 5 the pursuers aver an implied term of the contract between themselves and the defenders. How can this be, argue the defenders, if there is no contract? Given the terms of the missives, how can there be room for a contract between the pursuers and defenders? Towards the end of Condescendence 6 the pursuers aver as an express term of the contract that the subjects would "be suitably constructed conform to NHBC standards". If that refers back to Clause 8 of the offer of 24 May, it was an obligation on Drumoig. If it was an express term expressed elsewhere, it is incumbent on the pursuers to specify where it comes from. The Pursuers go on to aver "Separatim by entering into the Buildmark agreement, the defenders warranted that the subjects were built to (NHBC) standards". As the defenders accept their obligations under the NHBC scheme, there could be no need for any additional warranty by the defenders. Thus these passages are irrelevant, and add nothing to the pursuers' principal case that there is a contract with the defenders. As no such contract is sufficiently averred, the whole case is irrelevant and should be dismissed.

[8].            Objection was taken by the defenders to the references to the alleged breach of contract by the defenders by reference to the NHBC documentation. In Condescendence 9, at p15 on Record the pursuers aver "On taking entry the Pursuers issued the defenders with a number of complaints concerning the quality of workmanship. The Defenders corresponded with the NHBC and the pursuers anent the complaints made by the pursuers concerning the quality of workmanship. They did so on the basis that they represented they were responsible for the carrying out of remedial work. Inter alia they instructed Rehau and McGill Heating to visit the pursuers' house and consider remedial work to the central heating system". This passage is irrelevant, according to the defenders, as the defenders accept their obligations under the NHBC agreement. Various documentation was produced by both parties to show the progress of the complaints, with work done to the pursuers apparent satisfaction, and further work not so. Arbitration was offered under the NHBC scheme. The pursuers aver that the documentation was the NHBC Buildmark scheme, but the booklet lodged by the pursuers, 5/6 of process, sets out the purchasers rights , but only from 2005, and was therefore inapplicable to this case. In any event, there was no contract as between pursuers and defenders by reference to any NHBC documentation.

[9].            Further, the defenders complain that the pursuers case is lacking in specification. On p16 of the record the pursuers aver "The defenders corresponded and offered to perform remedial works because they were under a contractual obligation to do so. None of these offers amounted to a proper offer to remedy the defects". In the first place the defenders accept that they had an obligation to the pursuers under the NHBC scheme, but the quoted passage is wholly lacking in specification. If the pursuers have indeed made out a case against the defenders under their NHBC obligations, they need to specify what are the defenders obligations under the scheme, to specify which clause of the contract has been breached, to specify in what respect it has been breached, all against a background that the defenders did deal with remedial works to the satisfaction of NHBC, and, further the pursuers would have to quantify any resultant loss. The pursuers' pleadings are too vague. What, for example, is a proper offer? The pursuers claim personal bar, but the defenders do not deny any contractual obligations they might have which arise from the NHBC scheme. They deny that there is any other, wider contract with the pursuers, and say that no relevant case is plead against them by reference to the NHBC scheme.

[10].        The third submission related to a case which appeared to be founded in delict, at condescendence 12. The defenders argued that the averments here are an attempt to make the defenders, as builders, delictually liable, following Junior Books v Veitchi principles. But the defenders argued that that case is not for general application, that there was no physical loss to the pursuers, but only pure economic loss. As such it is irrelevant, and should not be admitted to probation.

[11].        Finally, the defenders averments of loss are not sufficient to justify their crave for damages. The total loss averred in condescendence 13 is in the region of £50000, but the defenders face a claim of five times that. Whilst accepting that this submission would not achieve dismissal, it was an amendment point, which should be brought to the Court's attention.

[12].        For three reasons therefore, the defenders seek dismissal. Firstly, there is no contract between these parties. Second, if the pursuers wish to make a case against the defenders under the NHBC documentation, then on the principle of fair notice, the defenders are entitled to know in what ways were their efforts to remedy defects falling below NHBC standards. Finally, there can be no relevant case based on delict.

[13].        In reply, the pursuers' Counsel sought a Proof before Answer, leaving all pleas standing. He argued that standing the well known test in Jamieson v Jamieson as all his averments would not fail to establish a case, the action should not be dismissed. He also noted that in his submissions, the defenders' Counsel had referred to various NHBC documents, but that these had not be incorporated into the pleadings in any way.

[14].        In answer to the first substantial criticism from the defenders, it was accepted for the pursuers that the missives that were entered into were between the pursuers and Drumoig, and related to land and a building. However there were two complaints against these defenders, namely cracked tiles, and underprovision of underfloor heating pipes. The pursuers were seeking damages to cure the defects, because the defenders, as builders, had failed in contract and delict to construct the house as it should have been. Counsel sought to explain his view of the contract he claimed to exist between pursuers and defenders by analogy. In general, if a builder was engaged to erect a shelf, there would be a contract by oral agreement. If the shelf fell, the owner could get another builder to carry out the remedial work, if that was a reasonable course of action. There would be no "Hunter v Hanley" defence, and the cost could be claimed from the first, deficient, builder. But where a builder owns land, and builds a house thereon, then sells it to a purchaser, the missives between them take over and supersede prior and subsequent communings. Missives in general make it clear that one cannot rely on prior communings. The present situation, however, is quite different from the usual model. Here the builder did not own the land; the missives are between the pursuers and Drumoig. Nothing in the missives refers to the defenders, and does not exclude prior communings with the defenders. Clause 18 of the missives (5/1) makes it clear that the missives represent "full and complete agreement between the Sellers (Drumoig) and the Purchaser (pursuers) relating to the sale of the subjects and shall supersede previous agreements between the Sellers and the purchaser relating thereto" Accordingly the missives did not deal with the construction of the house, nor did they exclude any prior agreements as between pursuers and defenders, such as the exchange of correspondence between pursuers and defenders which commenced with the defenders letter to the pursuers dated 22 April 1999.

[15].        The pleadings aver that there was an offer to build a house by the defenders, subject to missives (which turned out to be with Drumoig), then a series of letters adjusting the specification and price. This is sufficient to make out a contract between pursuers and defenders, that the pursuers purchase from Drumoig, but the defenders agree to build for the pursuers. The fact that payment is made to Drumoig does not indicate that there is no contract with the defenders. No price needs to be averred, there being no doctrine of causa. The rudiments of the contract are pled, the ownership of the land is of little consequence. Given that there is a discernible contract, there is a clear implication into the contract of the duty of a reasonable builder to exercise reasonable skill. Thus it becomes a matter for a Proof before Answer. The pursuers can prove there is a contract. The defenders seem to be saying that they were only carrying out work for Drumoig, but that can hardly be the case. Further, the disposition by Drumoig in favour of the pursuers bears to have the consent, inter alia, of the defenders. This is yet another departure from the norm, justifying investigation at a proof.

[16].        On the second ground for dismissal, the pursuers argued that the rights under the NHBC certificate are cumulative to any other rights in the contract between the pursuers and defenders. The defenders have taken the Sellers obligation under clause 8 of the missives, and they accept that the agreement applies to them, and obliges them in certain specified duties under the NHBC agreement. The pursuers do not need to specify anything other than the defects, and what needs to be done by way of remedial work. The tiling issue is pled as a straightforward point of whether the pursuers were entitled to reject replacement tiles which were not an exact match. The underfloor heating issue is fully and sufficiently set out in Condescendence 13.

[17].        The third issue related to suing in delict. Counsel for the pursuers argued that it was normal to sue in both contract and delict. The authorities cited seem to indicate that if there is a contract, then it can be breached by lack of reasonable care. This was not a pure economic loss situation such as would arise in a latent defect case. Here there had been physical damage to the pursuers property and it was perfectly proper to sue in delict as well as contract. The defenders were not an anonymous sub contractor, but were at least main contractors, who had full knowledge of the situation, and thus there were sufficiently proximate to the pursuers and to the damage to establish the necessary bridge to liability. It would be inappropriate to dismiss the delict case, either on its own, or together with the contract case.

[18].        The final point, regarding the sum sued for not being justified by the pleadings was reasonable, but got the defenders nowhere. There could be no dismissal for this. On a general observation, the defenders have no plea that they were acting as agents for Drumoig, or subcontractors. Accordingly, there were sufficient relevant pleadings to allow the case to go to proof, before answer.

[19].        I must have regard to the authorities cited to me. In the first place, Jamieson is regularly cited and it is helpful to note the relevant passage, from Lord Normand: "The true proposition is that an action will not be dismissed as irrelevant unless it must necessarily fail even if all the pursuer's averments are proved. The onus is on the defender who moves to have the action dismissed, and there is no onus on the pursuer to show that if he proves his averments he is bound to succeed." I am not satisfied, that applying this test, the defenders have shown that the pursuers are bound to fail. There clearly are missives, but they do not specify that a house will be built, nor who will build it. Nor do the missives deal with prior, (or indeed subsequent), communings as between pursuers and defenders. The defenders are on site when the pursuers arrive, and they offer to build the house, by reference to the pleadings and the letter on 22 April 1999. There are more letters and meetings involving the defenders, and it would appear that the defenders may have assumed the role of the developer by their actings. They certainly assumed the sellers obligations in terms of the missives with regard to NHBC documentation, and fully accept their obligations thereunder. The defenders made much of the assertion that the pursuers did not own anything, so how could they instruct or contract with anyone to build for them? This argument fails, as clearly the pursuers had a contractual interest in the plot, by virtue of their missives with Drumoig, the landowners. It cannot be said that the pursuers have not made out a case that they had a contract with the defenders, so the action cannot be dismissed on relevancy. Further, I am satisfied that there is sufficient specification of what the pursuers allege that the contract between the parties was, and therefore there can be no dismissal on this ground. The defenders first submission accordingly fails.

[20].        The defenders next submission related to the case based on the NHBC documentation. To the extent that it is a separate case, then there may be force in the defenders argument. The defenders do accept that they entered into the NHBC agreement, and that they have responsibilities to the pursuers under it. But I do not construe the pursuers' case as being made under the documentation; they instead rely upon it, and aver what took place, to reinforce their principal position that there was a contract with the defenders, which the defenders have breached, and thus are liable in damages. The averments in condescendence 9 support the pursuers 3^rd plea in law regarding personal bar, but they also set out what took place between the parties and NHBC with a view to resolution of the problems raised by the pursuers. As such they remain relevant to the claim for breach of contract, so this point fails as well. On the pleadings, the defenders clearly stepped into the obligations of Drumoig under clause 8 of the missives, and I am satisfied that an enquiry into the facts is justified on all the averments here. The defenders complaint about specification of the pursuers case, anent a "proper offer" is noted, but on any view, giving those words their ordinary meaning is sufficient to allow the matter to proceed to a proof. Only after evidence can it be established whether the defenders are, or are not, in breach of any terms of any contract proved to exist. The pursuers have sufficient relevant averments to be entitled to a proof.

[21].        The third submission relating to the case on delict is a different matter entirely. The defenders primary contention was that the Junior Books case is not for general application. In particular I was referred to the case of D & F Estates v Church Commissioners for England 1988 1 AC 177. This was, like Junior Books, a decision in the House of Lords. However it is commented upon in the D & F Estates case thus "The decision of your Lordships' House in Junior Books Ltd v Veitchi Co Ltd has been analysed in many subsequent decisions of the court of appeal. I do not intend to embark on a further such analysis. The consensus of judicial opinion, with which I concur, seems to be that the decision of the majority is so far dependent upon the unique, albeit non-contractual, relationship between the pursuer and the defender in that case and the unique scope of the duty of care owed by the defender to the pursuer arising from that relationship that the decision cannot be regarded as laying down any principle of general application in the law of tort or delict." (per Lord Bridge at 201). The Junior Books case was not followed by the court in the Queen's Bench Division case of Nitrigin Eireann Teoranta v Inco Alloys Ltd [1992] 1 All ER 854, where at p861 Mr Justice May said "It would be intellectually dishonest in this case to attempt to distinguish the Junior books case and I do not do so. I simply decline to accept it on the basis that it is unique and that it depends on the Hedley Byrne doctrine of reliance". In Scotland Lord Prosser considered the matter in the case of Parkhead Housing Association Ltd v Phoenix Preservation Ltd 1990 SLT 812. It was alleged in that case by the owners of property that a damp proof course had been installed negligently resulting in an outbreak of damp and dry rot in the groundfloor properties. The defenders argued that any loss suffered by the owners was purely economic loss and accordingly they owed no duty of care to the pursuers. At page 817, Lord Prosser said " Where the relationship between parties is itself purely in the field of advice, it appears to me that the reliance of one party on the other will be, as was submitted on behalf of the pursuers, the essential element in creating a nexus between them. Where there are other ways in which such a nexus can be found, as where one party is working on property belonging to the other, I am not satisfied that the rule of "reliance" or "acceptance of risk" will be quite the same. Nonetheless, it seems to me that if the only foreseeable damage to the pursuer is such that it must be described as purely economic, and where the various contractual connections are such that the person doing the work knows that the owner has contractual remedies against others, something quite unusual will be required to create a delictual "bridge" between the pursuer and the subcontractor. Junior Books is a case where such a bridge was held to exist, and, for myself, I find no insuperable difficulty in accepting it as established law of a kind which could be applied in different analogies circumstances. D.&F. Estates did not bear to overrule it and while the risks of allowing it to be applied too widely are both fundamental and evident I find it hard to judge hypothetically just how frequently a building owner and subcontractor may come into a similar direct relationship under the law of delict. In the present case I am doubtful whether the economic loss case on its own would have justified going to proof. However the physical damage case is going to proof in any event. I am not persuaded that a rigid separation of the one analysis from the other is desirable ab ante or indeed perhaps necessary in the end of the day." In the present case I was reminded that there was no physical damage, the claim was purely economic loss. Counsel for the defenders accepted that the Junior Books case has not been overruled but it is at best unique, and is not to lay down general principles. Lord Prosser doubted that he would let the delictual case of pure economic loss through to proof if it had not been for the case based on the other physical damage already proceeding to proof. As such the delictual case was irrelevant and should not be allowed to proof. There was, on the pursuers averments a contractual relationship between the parties, as opposed to the "unique albeit non-contractual" relationship that existed in the Junior Books case. It was clear that the Junior Books case did not apply here. The pursuers counsel argued, by reference to the Parkhead Housing Association case that the present case was similar to that one, and accordingly a proof before answer on both the contractual and delictual cases should be allowed. The pursuer was offering to prove that the pursuers and defenders were regularly corresponding about the building requirements, and the items complained of are both bespoke items undertaken by the defenders although subcontracted out. The defenders admit that they are main contractors, they have certain knowledge of the pursuer's requirements and of the whole circumstances of the development. They are much closer to the pursuers than anonymous subcontractors would be. Accordingly there existed the appropriate bridge envisaged in the Junior Books case and it would be competent to sue in delict. Here the argument was about broken tiles and poor heating. It was not a latent defect case, for example a building being erected 1° off vertical where there might be no problem for 25 years on the question was one of the damages at that time. In the present case there had been physical damage to the pursuer's property and accordingly the delict case was appropriate.

[22].        I am not satisfied that the pursuers have properly made out a relevant delictual case. The damage that they claim to have suffered as one of pure economic loss. Tiles have been supplied, fitted, have cracked in places, and the replacements offered have been of a different shade. The underfloor heating is inadequate in one room. There is the cost of repair. There is no consequential damage, nor any question of damage to the property of others. Nor is there any suggestion that the value of the pursuers property has been diminished in some way. It seems to me that the defects are in the items themselves rather than in loss to another person or other property. In all the circumstances I consider that the delictual claim is irrelevant and ought not to be admitted to probation. Allowing the case to go forward, just because the case based on alleged breach of contract is going to proof would be wrong. There is no relevant case in law, and to allow it to proceed would potentially substantially increase the scope of the enquiry at proof. As it can cleanly be cut away now, it should be. I am not satisfied that the doctrine set down in Junior Books is applicable here, not least because the pursuers seek to set up a direct contractual relationship between the parties, as opposed to there actually being the sort of "unique, albeit non-contractual" relationship that makes the Junior Books case so special to its own facts and circumstances. Accordingly condescendance 12 falls to be excluded, as do the words "et separatim fault and negligence" both at the beginning of condescendance 13 and in the first plea in law for the pursuers.

[23].        The final point related to quantum but was not seriously insisted on and in any event would not lead to dismissal by itself. It is probably sufficient to put the pursuers on notice that the sum sued for is not justified by the averments of loss; however the averments as they are, are sufficient meantime to allow proof thereon.

[24].        Parties are agreed that unless there was complete success for one or other side, expenses should be reserved, and accordingly I have done so as there has been mixed success. Both Counsel moved that I certify the cause as suitable for the instruction of Counsel in view of the variety and complexity of the issues. I agree that the cause is suitable and have so certified.