Niklas Zennstrom v Kevin Fagot (2013)
The redevelopment of a property had not been carried out during the course of a business in connection with the provision of dwellings so as to make the vendors liable to the purchasers for breach of their duty under the Defective Premises Act 1972 s.1(1).
The court was required to determine as a preliminary issue whether the second and third defendant vendors (D) of a property owed a duty to the claimant purchasers (C) under the Defective Premises Act 1972.
The property had been completely redesigned and rebuilt by D. The purchase price was £1.1 million. C claimed that the property was structurally unsafe, to the extent that it had had to be demolished. They alleged that the house had been developed by D purely for profit, in the course of a business of providing dwellings, and was neither built in a workmanlike manner nor fit for habitation. D stated that they had built the property as their dream home in which they had intended to live permanently. D had bought the house in 2004 for £360,000 and initially carried out limited improvement work. They successfully applied for planning permission in 2006 to extend the property, which involved extensive work and demolition of most of the existing building. A final certificate was issued in April 2009 by building inspectors appointed by the local authority. D's evidence was that their financial circumstances subsequently changed and they could no longer afford the mortgage on the property. C had also brought separate claims against the builder (F), the architect and a structural engineering company. Judgment had already been entered against D's builder (F), who appeared to have no assets.
(1) The person subject to the duty under s.1(1) of the Act had to have arranged for the taking on of the work for the provision of a dwelling "in the course of a business which consists of or includes providing or arranging for the provision of dwellings". However, it was not necessary for that person to have previously developed a dwelling in the course of that business. If it were otherwise, developers could circumvent the application of the Act by setting up a separate company for each dwelling to be developed, Mirza v Bhandal Independent, June 14, 1999 considered. Also, the expression "arranges for another to take on work" in s.1(4) was prospective in the sense that the work in question had to be in the future, because taking on work included the act of agreeing to do it as well as carrying it out. The business of providing dwellings had to therefore be in existence when both those events occurred. In the instant case, that had to be no later than when F agreed to undertake the work, which appeared to be during August 2007. If, at the time D contracted with F to build the new house, they had decided that they were not going to live in it as their home once completed, but had instead resolved to sell it on, it was reasonably arguable that they would have been carrying out the development as a business venture. However, a person who demolished their home and then arranged for another house to be built on the same site with the intention of living in it before selling it on, could not necessarily be said to be acting in the course of a business which included arranging for the provision of dwellings. It was a matter of fact and degree. That was not just because the person lived in the house after it was rebuilt, as a duty could still be owed under s.1(1) in those circumstances, but because it would be relevant to the question of whether they had arranged for the house to be built in the course of a business of providing dwellings. If the person used the dwelling as a home after its construction and before selling it on, and had always intended to use it as a dwelling, it would be more difficult to say that they were acting in the course of a business of the type described in s.1(4) when they arranged for the work to be done. It was not disputed that D had lived in the house for about 12 months after it was substantially completed. C therefore had to fail on the preliminary issue unless they could prove at least that: at or before the time D entered into the contract with F, they intended to sell it as soon as they reasonably could after its completion, and at the same time, they did not intend to occupy it as their home after it had been rebuilt for a period that was more than minimal (see paras 35-44 of judgment). (2) Taking the evidence as a whole, D had no intention of selling the house when they embarked on rebuilding it. The evidence pointed overwhelmingly to the conclusion that they built it as their dream home as contended. D were honest witnesses, even if their recollection of particular events, many of which had occurred over five years previously, was not always reliable. The contemporaneous correspondence and the evidence of other witnesses all pointed in favour of D's case. It was not a case where C had failed to prove their case; D had made good their defence. They were not aware of any defects of any significance in the construction of the property. There were a couple of matters that might have given them concern, but they were not matters complained of by C (paras 119-123).
Preliminary issue determined in favour of defendants
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21 Feb 2013
Queen's Bench Division
LTL 28/2/2013 :  EWHC 288 (TCC)
Richard Morgan QC