National House-building Council Against Scott Hogarth Homes (a/k/a Scotthogarth Homes) And Robert Geoffrey Scott And Neil Hogarth
| Jurisdiction | Scotland |
| Judge | Lord Doherty |
| Neutral Citation | [2017] CSOH 7 |
| Court | Court of Session |
| Docket Number | CA184/15 |
| Published date | 17 January 2017 |
| Date | 17 January 2017 |
| Year | 2017 |
OUTER HOUSE, COURT OF SESSION
[2017] CSOH 7
CA184/15
OPINION OF LORD DOHERTY
In the cause
NATIONAL HOUSE-BUILDING COUNCIL
Pursuer
against
SCOTT HOGARTH HOMES (also known as SCOTTHOGARTH HOMES), and ROBERT GEOFFREY SCOTT and NEIL HOGARTH
Defenders
Pursuer: McLean QC; Shepherd and Wedderburn LLP
Defenders: McShane; Blacklocks (for Friel & Co)
17 January 2017
Introduction
[1] The pursuer is the National House-Building Council (“NHBC”) a company limited by guarantee. It provides warranty and insurance products in relation to new (and newly converted) homes across the United Kingdom. One such product is the Buildmark policy in terms of which the pursuer provides the purchaser of the home with insurance cover against losses caused through the builder or developer having failed to meet NHBC standards in relation to the home. A builder or developer who wishes the pursuer’s products to be offered to prospective purchasers of homes must apply to the pursuer and be accepted on to the NHBC register. Only builders and developers registered with the pursuer may apply to the pursuer to register homes for the purposes of obtaining cover under the Buildmark policy.
[2] Dan Brownlie carried on business as a builder in Strathaven using the trading name Dan Brownlie & Son. At all material times he was registered as a builder with the pursuer. It is common ground that during 2002 and early 2003 the first defenders were a partnership and the second and third defenders were its partners. On 30 August 2002 the first defenders applied to be registered with the pursuer as a developer. An offer of registration was made by the pursuer to the first defenders on 14 February 2003 and was accepted by them on 15 February 2003. The first defenders were given registration number S3608.
[3] On 10 March 2003 Scott Hogarth Homes Limited (“SHL”) was incorporated as a company under the Companies Acts. At all material times SHL was controlled by the second and third defenders who were its only shareholders.
[4] In 2003/4 and 2005 two small housing developments at Eskbank were registered for Buildmark with the pursuer by registered developer S3608. The developments were completed and Buildmark cover was granted by the pursuer to the purchasers of the homes.
[5] In about 2004 the second and third defenders and the third defender’s father, Stan Hogarth (“Mr Hogarth”), invested together in the purchase of a site in Gorebridge. Planning permission and building warrant for the construction of houses were granted but the development did not proceed. Eventually, in about 2013, the site was sold.
[6] On 20 July 2006 a further application was submitted by registered developer S3608 to the pursuer to register a housing development at Falconer Court, 47 Commercial Road, Strathaven for Buildmark cover. The pursuer accepted the application. The fourteen homes in the development were completed and sold to individual purchasers in the latter part of 2007. Buildmark cover certificates were issued for the homes between 27 July 2007 and 7 December 2007.
[7] Following completion, defects became apparent in the homes. The owners made claims on the Buildmark policies in respect of the defects. Following investigations the pursuer paid for remedial work and made other related payments to the owners in respect of the claims. In the present action the pursuer seeks to recoup those sums from the defenders.
[8] The defenders deny that they are liable to make any payment to the pursuer. They submit that the first defenders were dissolved when SHL was incorporated. They maintain that the developer registration S3608 was transferred from the first defenders to SHL on about 19 March 2003; that from that moment the registered developer was SHL; and that accordingly SHL was the registered developer who applied for Buildmark cover for Falconer Court. They maintain that on a proper construction of the relevant conditions of registration and the NHBC Rules, the pursuer is not entitled to recover any sum from the defenders or SHL: but that if they are wrong about their interpretation of the conditions and Rules it is the registered developer which is liable, and that the registered developer is SHL not the defenders. If the first defenders are the registered developer, and if on a proper construction of the conditions and Rules they are liable to indemnify the pursuer, the defenders maintain that some of the costs claimed are not recoverable.
[9] I heard a proof before answer on the commercial roll. The pursuer called nine witnesses, namely, Brian Sharples, a senior claims consultant with the pursuer; John Aitken, a chartered structural engineer employed by the pursuer; Peter Bannister, a building surveyor with Hutton & Rostron; Richard Johnson, a chartered structural engineer with Clancy Consulting; Jim Pettifor, a chartered structural engineer employed by Clancy Consulting; Brian Burn, a chartered structural engineer employed by Clancy Consulting; Alistair Christie, a chartered structural engineer from Cadogans; Robert Campbell, an architect from Cadogans; and Douglas Fiddes, a quantity surveyor. Mr Christie, Mr Campbell and Mr Fiddes prepared reports and gave evidence as independent expert witnesses. The defenders led four witnesses, namely, the second defender; the third defender; Scott Horner, a regional commercial manager with Marley Contract Services; and Mr Hogarth. In terms of two joint minutes of agreement it was agreed that witness statements of nineteen other witnesses (together in some cases with further specified documents) should be treated as their evidence. The evidence was completed within six days. Counsel then prepared written submissions and I heard oral submissions over the course of two days. I am grateful to counsel for their efforts to agree matters and narrow the issues in dispute, and for the assistance provided by their submissions.
Credibility and Reliability
[10] I shall deal first with the credibility and reliability of the witnesses apart from the second and third defenders. Each of those witnesses appeared to me to be doing his best to tell the truth and to assist the court. Mr Hogarth impressed me as an honest witness who did not shy away from admitting his own shortcomings. Except where I indicate otherwise I have accepted the evidence of these witnesses as being credible and reliable in all material respects.
[11] Unfortunately, I did not find the evidence of the second and third defenders to be quite as straightforward. I have reservations about their evidence, and there are parts of the evidence of each which I have not accepted.
[12] The second defender was vague, and his recollection of matters appeared to be poor. He was not an impressive witness. His evidence did not inspire confidence. He appeared to have a very poor understanding of the NHBC Rules and the legal effects of the Buildmark policy. He conveyed the impression that he was content to delegate to Mr Hogarth almost everything connected to Falconer Court. On the basis of his evidence and the other material placed before me it is very far from evident that care, attention to detail, or good administration had been features of the second defender’s actings at the material times.
[13] The third defender was a better witness than the second defender, but he too demonstrated a poor comprehension of the NHBC Rules and of the legal effects of the Buildmark policy. Like the second defender, he appeared to have been content to delegate to Mr Hogarth most matters related to the Falconer Court development. Significant parts of his evidence were reliant upon his understanding of what the second defender had done.
[14] As I discuss below, at the material times both witnesses appeared to me to have a fairly casual approach to the use of the NHBC registration. There are other aspects of their conduct which make me cautious about their evidence. After 2003 (and especially following upon the Buildmark application) it must have been plain to them that the pursuer was proceeding on the basis that the registered developer was the first defenders but they did nothing to alter that understanding. They allowed the pursuer to assume obligations on that basis. The copy letter of 23 March 2003 was not mentioned until after the action was raised in 2013. The suggestions that Mr Hogarth did not have the first defenders’ authority, and that the partnership had been dissolved in 2003, also emerged very late in the day.
The First Defenders’ Application for Registration
[15] The first defenders’ application for registration (Production 6/581, Joint Bundle (“JB”) 593) dated 30 August 2002 was submitted on behalf of “Scotthogarth Homes (Mr R G Scott and Mr N Hogarth)”. It appears that following submission of the application there was some further communication between the pursuer and the defenders in relation to it. One of the things that the pursuer asked for was a copy of the partnership agreement. The second defender’s evidence was that it was a pre-requisite of registration that the agreement was provided to the pursuer. In February 2003 the defenders sent the pursuer a copy of the partnership agreement (which had been executed on 20 January 2003). It stated:
“…
WHEREAS:
The parties have agreed to enter into partnership together in the development of residential property on the terms and conditions hereinafter specified.
…
1. Mr Scott and Mr Hogarth shall be Co-Partners in carrying on the business of developing residential property, under the name of “Scott Hogarth Homes” (the Partnership”).
2. The Partnership shall be deemed to have commenced on the date of last execution hereof and subject to the provisions hereinafter contained, shall continue until either shall give to the other not less than three months prior written notice of dissolution of the same.
…
7. All transactions shall be entered into and all correspondence conducted in the name of the firm…
…
14. Subject always...
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