Zennstrom and another v Fagot and others

Sale of land – Defective premises – Liability – Defendants selling property to claimants following redevelopment – Property being demolished as structurally unsafe – Claimants suing defendants for damages – Court ordering trial of preliminary issue whether defendants owed duty of care to claimants under Defective Premises Act 1972 — Preliminary issue determined in favour of defendants In November 2009 the claimants, as purchasers, and the second and third defendants, as vendors, exchanged contracts in respect of a property in Southampton for £1.1m. The property was in a private road with a view over the marina and was been completely rebuilt by the second and third defendants (the defendants). However, according to the claimants and their advisers, the building was structurally unsafe and had to be demolished. The defendants said that they had built the property as their dream home in which they intended to live permanently. The claimants, by contrast, alleged that it was built purely for profit and that the defendants were therefore liable under the Defective Premises Act 1972 because they developed the property in the course of a business of providing dwellings and the building was neither built in a workmanlike manner nor was it fit for habitation when completed. The claimants sued the defendants together with the first defendant builder, the fourth defendant architect and the fifth defendant company which had carried out certain structural calculations in relation to the steelwork for the building. As part of the contract of sale, the claimants took assignments of the second and third defendants’ causes of action against those parties. Judgment was been entered against the builder, who appeared to have no assets, and it was possible that the architect might have had no insurance cover. The court ordered a trial of a preliminary issue of whether or not the second and third defendants owed a duty to the claimants under the 1972 Act. The main questions for the court were whether, at or before the time when the defendants had entered into the contract with the first defendant builder for the demolition and rebuilding of the property they had intended to sell it as soon as possible after completion of those works; and whether they had not intended to occupy the property as their home after it had been rebuild for a period that was more than minimal. Held: The preliminary was determined in favour of the defendants. (1) The person under the duty imposed by section 1(4) of the 1972 Act had to arrange 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 that the person in question must have already developed a dwelling in the course of that business before he or she could be under the statutory duty in respect of the dwelling in question. If it were otherwise, developers could circumvent the application of the Act by the expedient of setting up a separate company for each dwelling that was to be developed.  (2) The expression “arranges for another to take on work” in section 1(4) of the 1972 Act 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. Thus the business of providing dwellings had to be in existence when both those events occurred. In the context of the present case, that could be no later than the date on which the first defendant agreed to undertake the work at some time during August 2007. (3) The duty was owed in relation to the provision of a dwelling. Merely enlarging an existing dwelling by, for example, adding a back extension or an extra bedroom in the roof space did not involve the provision of a dwelling, because the dwelling already existed. By contrast, converting a house that was in single occupation into flats would involve the provision of dwellings and thus fall within the scope of the 1972 Act which could not have been intended to extend to couples who in the ordinary course of events bought a property, improved it with a view to selling it and then moved on and buy a larger property. (4) If, at the time the defendants contracted with the first defendant to build the new house, they had decided that they were not going to live in it as their home once the work was completed but instead had resolved that they would sell it on, it was reasonably arguable that they would have been carrying out the development as a business venture and not as the normal incident of ownership of a property. However, the court was not persuaded that it could be said that a person who demolished his home and then arranged for another house to be built on the same site with the intention of living in it for some time before selling it on could necessarily be said to be acting in the course of the business which included arranging for the provision of dwellings. On the facts of the present case, it was hopeless to suggest that the defendants had bought the property as a development project. Taking the evidence as a whole, when the defendants had embarked on the rebuilding of the property, they had not had any intention of selling it. The evidence pointed overwhelmingly to the conclusion that they had rebuilt the property as their dream home as they had always contented. Richard Morgan QC (instructed by Harbottle & Lewis LLP) appeared for the claimants; Daniel Crowley and David Thomas (instructed by Fisher Scoggins Waters LLP) appeared for the defendants. Eileen O’Grady, barrister