Average read time: 4 Minutes.

Under s110 (1) of the Housing Grants, Construction and Regeneration Act 1996 (as amended) (the Construction Act), parties are required to:

1. “provide an adequate mechanism for determining what payments become due under the contract and when, and
2. provide for a final date for payment in relation to any
   sum which becomes due.”

To some extent, parties are free to agree contractual payment terms. This has resulted in the courts hearing numerous cases about applications and payment notices. Until recently, however, little guidance has been given on s110 of the Act. The appeal case of Bennett (Construction) Ltd v CIMC MBS Ltd (formerly CIMC Systems Ltd) [2019] EWCA Civ 1515, helps to clarify the position.

Background

Bennett was the main contractor for the construction of a new hotel in London. Bennett subcontracted to CIMC the design, supply and installation of 78 prefabricated modular bedroom units for the hotel. These were to be manufactured in China and shipped to the UK. The contract price was over £2 million.

Whilst CIMC was appointed by Bennett under a standard form JCT contract, the predetermined interim payment clauses were replaced with revised payment terms called ‘Milestones’.

Milestone 1: “20% deposit payable on execution of the contract;”

Milestone 2: “30% on sign-off of a prototype room in China by Bennett;”

Milestone 3: “30% on sign-off of all snagging items by Bennett;”

Milestone 4: “10% on sign-off of units in Southampton;”

Milestone 5: “10% on completion of installation and snagging.”

Following numerous defects with the 78 modular units, milestones 2 and 3 were not signed off, despite CIMC transporting some of the units to the UK at its own risk.

CIMC argued that the milestones did not amount to an adequate payment mechanism as the payment terms and the specification did not state by what date the “sign-off” must be done by Bennett. Consequently, as no deadline was given, and the sign off was at Bennett’s discretion, CIMC argued that there was no due date or final date for payment.

TCC

The TCC concluded that milestones 2 and 3 did not comply with the provisions of the Construction Act. They contained a specific “sign-off” process but lacked specific criteria and timescales about what payments became due and when in accordance with s110.

Accordingly, CIMC was entitled to interim payments in respect of the value of the work it had undertaken and it was irrelevant whether the units had reached a stage of completion at which they could have been signed off.

Court of Appeal

Bennett appealed and the CA had to consider:

1. whether a regime requiring payment of a percentage of the contract sum on “sign-off” of a particular stage of the works complied with the Construction Act; and
2. if it does not, should the whole stage payment process be replaced with the Scheme of Construction Contract’s monthly valuation and values based upon the amount of work completed.

Issue 1

The CA overturned the TCC’s finding on the first issue. It found that there was no reference in the agreement to an actual “sign-off” being required. It concluded that, as a matter of construction, “sign-off” was a generic reference to the achievement of a stage and would inevitably be assessed objectively. In other words, the CA did not consider that the wording used meant that a certificate was needed as a condition precedent of the amount becoming due.

The CA also concluded that having no express date for payment was irrelevant as the milestones would be paid on the completion of the relevant stage.

Issue 2

The CA reiterated the existing principle that the payment provisions in Part II of the Scheme for Construction Contracts are only necessary if and to the extent that the contract is non-compliant, as provided in s110(3) of the Construction Act.

When considering the Scheme, Coulson LJ noted that:

“[the Scheme] was not designed to delete a workable payment regime which the parties had agreed and replace it with an entirely different payment regime based on a radically changed set of parameters.”

As such, the CA favoured a common sense approach which caused no harm to the parties’ original agreement and only applied paragraph 7 of Part II of the Scheme. This “catch all” provision made “commercial sense” – where a mechanism is inadequate due to there being no agreement as to the timetable for payment, the timetable is provided by paragraph 7 (7 days after completion).

Conclusions

This decision of the CA is interesting because it considered that the words requiring a “sign off” was, on an objective test, not a pre-condition of payment and was therefore compliant with the Act. However, there are many contracts which include arrangements where the payer issues a certificate stating that the works have been completed, before the monies become due. Whether these are a pre-condition of payment and are therefore, unlawful, is a matter of wording used in the contract. Of course, in the context of an off-site manufacturing scenario, a pre-condition of receiving a vesting certificate is an acceptable pre-condition.

This case also makes clear the courts’ commitment to seek to honour the payment regime actually agreed between those parties.

One of the first duties of an executor of a Will is to check that the Will is valid – i.e. it has been correctly executed and is the last Will. The next step is to try to identify the beneficiaries of the Will. If there are charitable beneficiaries steps should be taken to correctly identify which charity is intended to benefit.

On the face of it, the above sounds very straightforward, however, this is not always the case. Charities do change names or merge or sometimes have ceased to exist by the time of the testator’s death. Complications can also arise if the Will has been drafted poorly leading to uncertainty about which charity should benefit. If a charity is named in a Will the Will drafter should check the Charity Commission website to ensure that there have been no name changes or mergers and not only recite the correct charity name in full but also quote the charity’s Registered Charity Number – RCN. Charities details can quickly and easily be verified using this link.

If the Will does not make alternative provisions for the above events, and where uncertainty has arisen, what should an executor do?

It is a common misconception that the bequest will immediately fail for uncertainty and therefore fall to form part of the residuary estate. This is not the case. The executor in this circumstance must act carefully and with due diligence to mitigate becoming personally liable for incorrectly administering that bequest.

In the first instance the executor must try to establish what the deceased’s intentions were. If there was a clear intention to benefit a charitable cause and that intention was important to the deceased then the executor should consider the doctrine of cy-près. This doctrine allows the redirection of the intended bequest to a similar charity to the one specified in the Will rather than letting the bequest fail.

The executor, however, should still be careful not to take matters fully into their own hands. They should consult the Charity Commission in the first circumstance.

In certain scenarios the Charity Commission will not be able to intervene and it may be necessary for the executors to apply to the courts or the Attorney General for a direction under the Royal Sign Manual.

In order to safeguard their personal liability, executors would be wise to seek professional advice from a specialist probate solicitor if the above circumstance has arisen.

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We are regularly asked by developer clients, to advise on disputes which have arisen as a result of an alleged failure to use reasonable endeavours to perform obligations. The property market is ever-changing and what may have been a priority or a good prospect for a developer at the time of entering into the contract, which is very often before the development has even got off the ground in terms of viability and planning, may not be when the time comes for performance. All too often the eagerness of the developer to secure the site from its competitors drives an early exchange of conditional contracts with the developer being bound by obligations that it later does not want to carry out.

It seems that the perception among some developers is that an obligation to use reasonable endeavours is so vague in its nature that it will encompass all manner of sins and excuses for non-performance. Unfortunately, the Courts do not agree and the case of Gaia Ventures Limited V Abbeygate Helical (Leisure Plaza) Limited serves as a useful reminder.

The facts and background

The facts and background of the case are complex, but, essentially, Abbeygate was liable to pay overage of £1.4m under a contract if the various conditions were satisfied prior to the long stop date. Abbeygate was to use reasonable endeavours to satisfy those conditions as soon as reasonably practicable, and it will come as no surprise that the conditions were not satisfied in time and the overage was avoided. Gaia pursued Abbeygate for breach of contract seeking payment of the overage.

Disputes concerning the exercise of reasonable endeavours, or not as the case may be, are always very fact-sensitive, but, it is fairly widely accepted that where a party is to use reasonable endeavours it is entitled to have regard to its own commercial interests. It was obviously in Abbeygate’s interest to avoid the overage payment if possible and so, in seeking to avoid payment, it engineered a timetable that resulted in the conditions being satisfied after the long stop date. However, the court found against Abbeygate and held that the reasonable endeavours caveat did not extend to the timing for performance. It held that the obligations on Abbeygate were effectively two-fold; it had to use reasonable endeavours to satisfy the conditions and, distinct from that, it had to do so as soon as reasonably practicable. The result was that if it was reasonable for Abbeygate to satisfy a condition, to which commercial interests could be weighed into the mix, then Abbeygate had to take such action as soon as reasonably practicable. Abbeygate was not entitled to take into account its commercial interests in deciding when the obligation should be performed.

Worst still for Abbeygate (although it would not have changed the outcome) it was found that it had not used reasonable endeavours to satisfy the conditions. Abbeygate had been careful to create a complicated structure for the development to give the impression that the delays were necessitated by ensuring adequate funding was in place; a valid commercial concern. However, the court found that Abbeygate had in fact manipulated the timetable, not to address funding concerns, but to achieve its aim of avoiding the payment.

Abbeygate was punished for what was viewed as sharp-practice and was required to pay the overage.

What you can do

There are some clear lessons to be learned from this case not just for developers, but for any party subject to a requirement to use reasonable endeavours:-

1. Make sure you understand the extent of the obligation; not just what you have to do, but when you have to do it.
2. Ensure that where delay or non-performance is necessary, the reasoning is carefully documented and founded on reasons of commercial soundness. The excuse cannot be that the market has changed and it is no longer a good deal.
3. If you anticipate not wanting or not being able to comply with obligations take early advice on the steps that can be taken to protect you from a breach of contract claim. The evidence the Court considers when determining whether there has been a breach is the conduct of the parties prior to the breach and so it is important to understand the options available to you when considering the extent to which contractual obligations have to be complied when the deal to which they relate is no longer commercially or financially sound.

The property litigation team at Michelmores has a wealth of experience in advising clients on the issues raised in this article; both from a tactical perspective with the aim of avoiding litigation or the threat of it, or once litigation is afoot. For more information please contact Charlotte Curtis.

Carr v Evelyn and Others is a Decision of the First-tier Tribunal handed down on 16 August 2019. The case provides welcome guidance on the law governing the ground of sound estate management, used to recover possession of a farm protected under the Agricultural Holdings Act 1986.

Background Legal Structure

Section 27(3) of the Agricultural Holdings Act 1986 (“1986 Act”) contains various grounds on which a landlord can seek to recover possession of an agricultural holding protected under the 1986 Act. The list includes:

• bad husbandry;
• a requirement for non-agricultural use where planning permission is unnecessary; and
• where the landlord seeks to recover possession on the ground of sound estate management.

Whenever a landlord gives a notice to quit in reliance upon a section 27(3) ground, if the tenant gives a counter-notice, then the landlord must apply to the First-tier Tribunal (“FTT”) for consent to the operation of the notice to quit. Before the FTT, the landlord faces two hurdles. First, he must establish the particular ground on which the notice to quit is given under section 27(3). Secondly, he must persuade the FTT that the Tribunal should not withhold consent on the basis that “in all the circumstances it appears to them that a fair and reasonable landlord would not insist on possession”.

Where a tenant has died, and the process of succession is underway before the FTT, then a landlord can make an application under section 44 of the 1986 Act to rely upon any of the grounds contained in section 27(3). Where a landlord makes such an application within succession proceedings, he must still satisfy the fair and reasonable landlord requirement.

The Case

The crux of the case was whether the Landlords were entitled to have consent granted by the FTT to the operation of a Notice to Quit, where the Landlords argued that they should do so in the interests of the sound management of their estate.

The submission made on behalf of William Carr was that the real underlying motivation behind the Landlords’ application was a desire to remove the Carr family from the estate and that the application was, in effect, “a construct to achieve that purpose”. The Tribunal concluded that it was “satisfied that the motive underlying the section 44 application had been the [Landlords] wish to remove the Carr family from the estate. The Tribunal does not form that view lightly”.

Importance of the Case

The importance of this case is not about the Landlords’ motivation or the FTT’s findings with regard to that. The interest lies in the bigger picture as to the FTT’s analysis of the law relating to a landlord’s wish to rely upon the ground of sound estate management to recover possession of a farm protected under the 1986 Act and features relevant to that analysis.

The Facts

By a tenancy agreement dated 3 July 1964, Graham Carr became the tenant of an agricultural holding known as Home and Pishill Farm, extending to some 158 hectares, and forming part of the Stonor Estate in Oxfordshire. It was common ground that the Holding is protected under the 1986 Act.

Graham died on 15 July 2016, and one of his sons, William, applied for succession. The application was opposed by the Landlords, who, as trustees of the J P M H Evelyn 1997 Settlement, are the owners of the Stonor Estate. The Landlords served a notice to quit under Case G, but also issued their own application, under section 44 of the 1986 Act, for the FTT’s consent to the operation of the notice to quit, based upon the ground of sound estate management.

In 2018, the Landlords conceded that William was an eligible person for the purposes of the application, satisfying all three of the ‘close relative’ condition, the ‘livelihood’ condition and the ‘occupancy’ condition. The Landlords also conceded that William was suitable, having regard to (a) the extent to which he had been trained in, or has practical experience of, agriculture; and (b) to his age, health and financial standing. The Landlords however reserved their right to challenge William’s suitability, having regard to other ‘relevant matters’. Those relevant matters included historic issues which existed between Graham and the Landlords. The FTT concluded that William was “a more than suitable person, or candidate, to take on the tenancy of the holding”.

William’s Financial Standing

One ground upon which the Landlords opposed William’s suitability was based on the contention that William and his wife were “persons of substantial wealth”. Full disclosure of the Carr family’s financial position was made and it was then analysed by the FTT in the Decision.

The FTT rejected the Landlords’ submission that a person (such as William) who, independently of his economic relationship with the holding, has sufficient income and resources for his economic survival, is not a person suitable to take on a tenancy of an agricultural holding, because the purpose of the succession provisions is intended only to be available to those who, without the benefit of such provisions, would suffer hardship.

In determining that William was, in all respects (training, skills, resources, health and character) a suitable person to carry on the farming of the land and to be tenant of the holding, the FTT went on to observe that:

“Far from his wealth, or resources, constituting a handicap, or bar, to his suitability as a tenant, they reinforced that suitability, in that they afford the [Landlords] the security and satisfaction that he has the resources available to ensure the proper farming of the holding and to meet, in full, all his obligations as the tenant of the holding”.

Sound Estate Management

In its 40-page Decision, the FTT addressed thoroughly the principles that apply and the previous case law.

The starting point is the decision of the Divisional Court in National Coal Board v Naylor [1972]. From that case the principle was established that sound management referred, not to the management of the estate, as an economic unit, but the management of the land comprised in the estate; that is to say, the management of the estate as an agricultural unit. It follows that a proposal based on sound estate management is not to be judged by the effect upon the ‘landlords’ pocket’, but the effect that the proposal would have on the management of the particular farming estate.

The FTT considered the proposition where the purpose of the termination of the tenancy was to sell, or to develop, land or buildings within a holding, in order to raise money for necessary expenditure on the estate. The Tribunal concluded that this would or could constitute sound management of the estate.

The FTT considered the impact of an earlier decision of the Agricultural Land Tribunal (“ALT”) in Collins v Spofforth (2008). The FTT agreed with the ALT’s proposition that the fact that the landlord hopes, or intends, that a particular course of action will be profitable, does not preclude that activity from constituting sound estate management, if, otherwise, it falls within the ambit of sound estate management. The amalgamation of holdings on an estate might constitute sound estate management. However, that is dependent upon whether, for example, the estate was made up of a number of unviable holdings, the farming of which was likely to fail.

The Landlords’ Plan

It was not until May 2017, some 9 months after Graham’s death, that the Landlords launched their Section 44 application. The sound estate management ground was based upon the Carrs losing the entirety of their tenancy and the holding being divided between two tenants. 132 hectares of the Carr holding land (327 acres) would pass to the Stracey family and 25 hectares (62 acres) to the Hunt family. Inevitably that resulted in a focus upon the farming enterprise of the Straceys.

As regards that, the FTT accepted the expert evidence which expressed concern as to the Straceys’ capital base. The FTT concluded:

“Taking all matters together, the Tribunal is not at all persuaded that the proposed extension of the Straceys’ holding would do anything other than impose serious potential strains on the Straceys’ business. Far from improving the long term viability of the Straceys’ business and so protecting the farming and husbandry of the land farmed and, under the [Landlords] proposals, to be farmed by the Straceys, it seems clear to the Tribunal that the proposed amalgamation might very well have the opposite effect and, in consequence, put at risk the continued farming and husbandry both of the Straceys’ current holding and of the prospectively expanded holding”.

The FTT decided that these risks reinforced its view that there was no basis upon which the FTT could be satisfied that the current proposals are desirable upon grounds of sound estate management.

Fair and Reasonable Landlord

The FTT went on to consider the fair and reasonable landlord test, albeit that it was unnecessary given the conclusions that it had reached. The Tribunal concluded that the Landlords’ case did not satisfy that test.

Conclusion

The above is the briefest summary of a complicated case, reflected in the 40-page Decision. However, as in the Spofforth case, the attempt on the part of the Landlords here to use sound estate management as a ground to recover possession failed. Whether this case will spark an interest on the part of other landlords, in relation to this ground for the recovery of possession, remains to be seen.

The Tribunal agreed that the first respondent’s response querying the need for the full extent of Code rights was perfectly reasonable. However, the first respondent was criticised for not waiting for an explanation and adopting   a confrontational tone, together with making unnecessary demands for technical information. Such demands had not been considered necessary when the basic site survey terms had been agreed.

The Tribunal decided that the standoff had been caused  by CTIL gold plating its access requirements and the obstructive approach of the first respondent. The second respondent also sought its costs stating that it could not grant access when the freeholder was refusing it. The Tribunal did not agree that this was a correct reading of the legal relationship between the respondents and could not see why the housing association needed separate representation.

The decision

The Tribunal decided that the successful parties were the first and second respondents in the light of the agreement reached. The fact of that agreement meant the Tribunal did not have to consider the respondents’ arguments to resist the granting of Code rights. However, in another warning, it confirmed that overly technical arguments about the form of Code notices would not succeed, in line with the decision of Cornerstone Telecommunications Infrastructure Ltd v Keast [2019].

Arguments about whether a Code agreement should be enforced were described by the Tribunal as “window dressing”, although CTIL can be said to have won that point, as the agreement reached conceded such rights should be granted.

The other main issue, apart from the indemnity, was how the rights of access should be expressed. The row was provoked by CTIL when they adopted a scattergun approach in asking for all Code rights. However, the Tribunal found the first respondent’s position“at best obtuse, and at worst deliberately obstructive.”

So, whilst the respondents were the successful parties,  the proceedings were conducted in a manner which was wholly disproportionate to the dispute. As such, although CTIL was ordered to pay the costs of the respondents, they were capped at £5,000 each. The overall costs were over £100,000 so it seems likely that only about 20% of the actual costs incurred by the respondents were recovered.

Tribunal’s conclusion

The judgment makes it clear that rows about surveys are unwelcome and if they have to be heard, recovery of costs on the scale incurred in this case will not be permitted.

However, landowners will welcome the Tribunal’s parting shot which is that unquestioning cooperation from property owners cannot be demanded. As the Deputy President observed, “the claimant’s wooing of potential site providers has become a little less rough, but its technique still has a long way to go.”

In July 2019 the government released their response to the public consultation on the biodiversity net gain provisions to be included in the forthcoming Environment Bill.

The Bill has been hailed as “world-leading” by Michael Gove and upon review of the proposed provisions, it is easy to see why.

To provide a flavour of the contents, there is to be an “Extended Producer Responsibility” scheme to ensure producers take responsibility and compensate for the waste they produce. Producers must also improve the labelling on packaging to aid recycling. Consumers will further be encouraged to recycle by participating in a “deposit return scheme” which allows individuals to reclaim their deposit when recycling disposable water bottles. The Bill directs that water companies must collaborate to mitigate against water shortages and become more environmentally friendly. Failure by companies to abide by the new regulations could lead to a referral to the new environmental watchdog, the Office for Environmental Protection. This office will be able to undertake investigations into government and public bodies for failing to follow environmental law.

To return to the recently released government response, the Bill will also impose new requirements for developers to deliver an overall 10% net gain in biodiversity on the land being developed which must be maintained for a minimum of 30 years. The 10% net gain can be obtained either through the enhancement of existing biodiversity, or through the creation of new habitats on a “like for like” basis.  This will usually take place on the development site itself, however, if not possible, the developer will be required to enhance or create a biodiverse site which has been identified on a publically accessible register.

To determine the 10% net gain requirement, biodiversity will be quantified through measurable “Biodiversity Units” which will be calculated using the DEFRA Biodiversity Metric. Different habitats will be assessed using factors such as distinctiveness, condition, connectivity, strategic significance and size, resulting in an assigned amount of biodiversity units. The higher the amount of biodiversity units, the more biodiverse the site is.

There are some (admittedly few) exceptions to the 10% net gain requirement, including sites which do not contain habitats pre-development (but these will be required to incorporate green space) and brownfield sites which face genuine difficulties in delivering a viable development. Nationally significant infrastructure and marine developments are also currently excluded, due to the biodiversity metric not being advanced enough to fully assess these areas.

In recognition of the tight budgets of small developers, developments of less than 10 residential units or sites covering an area of less than 0.5 hectares will be permitted to follow a simplified biodiversity surveying process. The government have not yet released specific details on this.

The government are also promising training to local planning authorities for the systems required for calculating net gain, to enable them to cope with these additional requirements.

It will be interesting to see whether the Environment Act, that is given Royal Assent, manages to maintain the breadth of environmental protection and substance contained within the draft Bill.

The Construction & Engineering team at Michelmores are pleased to be one of the authors to another publication from Constructing Excellence South West. The Guide to Appointing an Architect follows on from the Legal Guide to Offsite Manufacturing which was published last year. This latest guide covers a number of topics which should be considered when appointing an Architect, or other consultants. The authors within the guide include Solicitors, an Architect and an Insurance Broker. Topics include: the RIBA Work Stages; Forms of Appointment; The functions of a ‘designer’, ‘lead designer’ and lead consultant’ the CDM Regulations, Copyright and BIM models, fee arrangements; and Professional Indemnity Insurance cover. If you would like to discuss any of the topics raised in this guide then please contact Alan Tate in the Construction & Engineering team at Michelmores.

Read the guide here: CESW Guide to Appointing an Architect 

British Airways suffered a high profile cyberattack in Summer 2018.

The cause of the attack is currently unclear. British Airways alleged at the time that it was a “sophisticated, malicious criminal attack“. The ICO’s news statement indicates it was due to “poor security arrangements” allowing traffic to be diverted to a fraudulent website.

British Airways announced to the London Stock Exchange on 8 July 2019 that the Information Commissioner’s Office (“ICO”) intended to fine British Airways £183.39 million for 2018 cyberattack. The ICO’s response indicates around 500,000 customers were affected and compromised information included “log in, payment card, and travel booking details as well name and address information“.

Further detail may become clear once the ICO issues the formal Monetary Penalty Notice.

This is the first major UK fine under the GDPR regime. As such, it is a very important step and clear signal of the ICO’s intention in terms of fine levels.

The proposed fine emphasizes the possible consequences of breaching the GDPR and the need for data protection and cybersecurity to be boardroom issues. The ICO can fine controllers up to the greater of €20 million and 4% of global turnover. For some time commentators wondered how the fines to be imposed for breaches of the GDPR will be implemented. Some of you may recall my colleague, Tom Torkar‘s article on Equifax and Facebook being fined £500,000 (the maximum possible under the old data protection regime) for their failure to protect the personal data of UK citizens where Tom highlighted the ICO’s comment in relation to the Facebook breach that the “fine would inevitably have been significantly higher under the GDPR”, indicating that they will not be afraid in the future of imposing super fines on companies that reflect the severity of the breach. This proposed fine equates to 1.5% of British Airways’ global turnover for the calendar year ending 31 December 2017.

Today’s reaction to the proposed fine in the press and social media should remind all controllers of the reputational damage and cost one can suffer if a cyber incident becomes public.

As regards the formal Monetary Penalty Notice, it will be interesting to see if it provides the view of the panel of non-executive advisors to the Commissioner’s Office regarding the investigation findings and representations made. The Regulatory Action Policy refers to the panel possibly being convened for “very significant penalties (expected to be those over the threshold of £1M)“. Given this is the first major UK fine under the GDPR and the level of the proposed fine, we anticipate such panel will have been convened.

The Monetary Penalty Notice may also provide some further detail as to the cause of the breach. There are online suggestions a company insider may have “tampered with the website and app’s code for malicious purposes“.

Process Going Forward

According to the ICO’s own Regulatory Action Policy, British Airways will now have at least 21 days to make representations about the imposition of the penalty and its level.  This period may include a face-face meeting between the ICO and British Airways where British Airways submit mitigating factors and no doubt will request a reduction in the proposed fine. Willie Walsh has already indicated British Airways will “take all appropriate steps to defend the airline’s position vigorously, including making any necessary appeals“. The ICO has also liaised with other EU national data protection authorities whose residents have been affected. The ICO’s statement advised that such other authorities “will also have the chance to comment on the ICO’s findings“.

Given the severity of the fine and British Airways announcement to the London Stock Exchange, we anticipate it will be longer than 21 days before any fine is announced.

UPDATE:

The day after the intention of the UK’s Information Commissioner’s Office (ICO) to levy a record fine against British Airways, Marriott International announced to the US Securities and Exchange Commission that the ICO intended to fine it £99.2 million for the personal data breach that it originally announced in November 2018 in connection with security vulnerabilities within the hotel group Starwood which Marriott purchased in 2016.

Businesses should note that super fines now appear to be the norm under the GDPR for significant personal data breaches that the ICO investigates.

This particular case also emphasises the importance of undertaking thorough technical due diligence when purchasing any target. Marriott appear to have been held responsible for security vulnerabilities that were exploited two years before they purchased Starwood. The ICO’s statement in response to Marriott’s announcement suggests the fact it took Marriott two years post-completion to discover the vulnerability and subsequent breach was an aggravating factor in the level of the proposed fine.

Further detail may become clear once the ICO issues the formal Monetary Penalty Notice.

Fiona Pearson has co-authored an article in the respected journal, Corporate Rescue and Insolvency, on the Hague Convention on Choice of Court Agreements. In summary, as a Member State of the European Union, the United Kingdom participates in a number of agreements relating to jurisdiction and enforcement in civil and commercial matters, principally the Brussels Regulation, the Brussels Regulation (recast) and the Lugano Convention. Those agreements will, however, cease to apply to the UK when it leaves the EU. The Hague Convention, to which the UK is currently a party by proxy as a Member State of the EU, will instead – following the UK’s accession to that Convention in its own right – provide a basis for the recognition of jurisdiction and enforcement in the future. However, not a like-for-like replacement or watertight solution.

You can access a copy of their article here, with kind permission from LexisNexis.

The winners of the 17th annual Michelmores Property Awards have been announced, celebrating outstanding property and construction projects in Devon, Somerset, Bristol, Dorset and Cornwall, across ten categories.

Taunton’s Hydrographic Office was awarded the coveted Building of the Year prize, for its new development to accommodate the world’s leading geospatial companies. The building is highly sustainable and maximises natural daylight to better support employee wellbeing.

Tolvaddon House in Camborne, won the Project of the Year (over £5m) category. Tolvaddon House is the new head office for social and affordable housing developer LiveWest, previously located across five different offices in the South West. The building features a range of flexible working spaces, offering staff a high-quality work environment.

Winner of the Residential Property of the Year category (36 units and over) was Great Court Farm, in Totnes. Formerly a working dairy farm, the site has been transformed into a collection of luxury homes, including coach houses, bungalows and barns.

Bristol’s ‘Being Brunel’ visitor attraction took home the prize for Leisure & Tourism Project of the Year. The project saw the restoration of the partly derelict 20^th century dockside buildings which run alongside the SS Great Britain, a Grade II listed building and Brunel’s drawing office. The buildings have been transformed into a new visitor experience, based on the life and legacy of Isambard Kingdom Brunel.

The John Laurence Special Contribution Award, which spotlights outstanding property and construction professionals in the region, was awarded to Steve Hindley CBE, Chairman of Midas Group for his career-long commitment to the South West property world.

The other winning projects for 2019 include: Chester Long Court in Exeter – Residential Project of the Year (35 units and under); The Farmers Arms in Woolsery, Devon – Innovative Property Investment Project of the Year; St Helen’s Church on Lundy Island – Heritage Project of the Year; Kingswood Prep School in Bath – Education Project of the Year; Tre, Pol & Pen near Launceston – Project of the Year (under £5m).

Emma Honey, Head of Real Estate at Michelmores, said: “Congratulations to all of this year’s Michelmores Property Awards winners. Once again, the quality of the entries has been exceptional, highlighting the excellence of the South West’s property and construction sector. Well done to all of the winning projects, the teams involved, and to those shortlisted.  

“I would also like to extend my thanks to our esteemed judges and sponsors, without whom this fantastic event would not be possible.”

The award-winning property and construction projects were announced at a Gala Dinner on Thursday 13 June at Sandy Park Conference Centre in Exeter, hosted by actor and writer Sally Phillips.

The 2019 Michelmores Property Awards winning projects in full:

In our spring 2018 edition of Agricultural Lore we reported on the first instance decision in the farming proprietary estoppel case of Habberfield v Habberfield [2019].

The Court of Appeal has now presided over the case and upheld the first instance decision of Justice Birrs, who awarded the successful claimant, Lucy, a sum of £1.2m in satisfaction of her claim.

Jane, the defendant who is Lucy’s mother, appealed on the following grounds:-

1. that an offer made to Lucy in 2008, which would have resulted in Lucy receiving a viable dairy farm, meant that it was not unconscionable for Jane and her late husband, Frank, to resile from their assurances;
2. the award was disproportionate to the detriment; and
3. the cash award should not have to be paid during Jane’s lifetime.

The appeal and cross-appeal were dismissed.

Court of Appeal decision

The Court of Appeal found that:-

• Lucy’s rejection of the offer was not a complete defence to the claim; it was a factor to be taken into account when determining how the equity was to be satisfied.
• The 2008 offer was not put to Lucy on the basis that if she rejected it that she would lose all prospects of future inheritance. Lucy continued to rely on the assurances that had been made to her after 2008 and the Judge at first instance had been right to conclude so.
• When looking at proportionality, Lucy’s expectation is not determinative of the relief to be granted. The question was whether the award was out of all proportion to the detriment suffered. Unless there are exceptional circumstances, it would not be equitable to award a claimant more than their expectation.
• Payment had to be made during Jane’s lifetime. The inevitable consequence of this is that the farm must be sold.

The Court of Appeal took the opportunity to emphasise the wide discretion that Judges have when determining proprietary estoppel claims. This makes it increasingly difficult, if an estoppel claim is litigated through the courts, to predict with any certainty how the Court might apply its discretion and what the outcome might be.

Guest v Guest [2019]

In yet another recent successful farming proprietary estoppel case, Guest v Guest [2019], the judgment of which was handed down back in April, the Judge was clear that the breakdown in family relations meant that a clean break solution had to be achieved. In exercising his discretion, the Judge decided that the appropriate remedy was for a lump sum to be paid to the claimant, Andrew, by his parents, David and Josephine, the defendants.

The lump sum to be awarded was 50% (after tax) of the market value of the dairy farming business that was carried on at the farm together with 40% (after tax) of the value of the farm land and buildings. A significant sum is going to have to be raised by David and Josephine, which is likely to lead to the farm or parts of it having to be sold.

In proprietary estoppel cases so much depends on the witness evidence at trial and the view taken by the judge. Early resolution is always in the best interests of the parties.

Owners of newly built homes frequently find construction defects in their buildings, but sometimes those defects are ‘latent’ and do not transpire until some time after the purchase. They are likely to have purchased their new home from a developer under a contract of sale of land which, although it will contain warranties about the standard of construction of the building, is typically subject to a six year limitation period. If the limitation period for a claim in contract has expired they may have no contractual remedy by the time the defect comes to light. In such a scenario can the homeowner instead bring a claim against the developer (if it is still solvent), or the actual builder, in negligence?

Lord Bridge’s “Exception” in Murphy v Brentwood

The case of Murphy v Brentwood [1991] UKHL 2 is well-known within the construction industry. Mr Murphy sued Brentwood District Council for negligently approving the design for the construction of concrete raft foundations for a house. The designs included insufficient steel reinforcement and this was overlooked and, as a result, cracks in the house and its foundations were discovered 11 years after construction. However, no-one had been injured, nor was any other property damaged; only the house itself was defective. Murphy later sold the house for a price £35,000 lower than the market value would have been if the foundations had been built correctly. In the absence of any surviving contractual remedy against the developer, Murphy sued the Council on the basis of an alleged duty of care by its building control team, seeking to recover his £35,000 loss (a “pure economic loss”).

In his 1991 decision, Lord Bridge in the House of Lords held that where a defect, “becomes apparent before any injury or damage has been caused, the loss sustained by the building owner is purely economic.” These economic losses are, “recoverable if they flow from breach of a relevant contractual duty, but… in the absence of a special relationship of proximity they are not recoverable in tort“. As no personal injury or damage to property had been caused and the relationship between the Council and Murphy did not satisfy the ‘special relationship of proximity’ test, Murphy was unable to recover his loss from the Council.

However, in obiter, Lord Bridge’s went on to propose the following exception to this rule:

“…if a building stands so close to the boundary of the building owner’s land that after discovery of the dangerous defect it remains a potential source of injury to persons or property on neighbouring land or on the highway, the building owner ought, in principle, to be entitled to recover in tort from the negligent builder the cost of obviating the danger, whether by repair or by demolition, so far as that cost is necessarily incurred in order to protect himself from potential liability to third parties“.

Therefore, in a situation where the defect could lead to personal injury or damage to property on neighbouring land (or a highway), can the homeowner successfully claim against the housebuilder in negligence (for a breach of a duty of care owed to the homeowner)?

Reconsidering Murphy

Lord Bridge’s proposed exception in Murphy was revisited in the recent case of Thomas and another v Taylor Wimpey Developments Ltd and others [2019] EWHC 1134 (TCC). In this case, Mr and Mrs Thomas brought claims against the housebuilder in respect of defective log retaining walls in the rear gardens of their new-build home. The homeowners brought the claim on the basis of common law negligence (relying on Lord Bridge’s exception in Murphy to allege that the builder owed them a duty of care in relation to these defects), as well as under section 1 of the Defective Premises Act 1972 for defective construction and, separately, for misrepresentation. Claims were also brought against the insurer of the homes under an NHBC new home warranty policy and against the solicitor who represented them when purchasing their homes. The scope of this note addresses only the claim against the builder for common law negligence in light of Lord Bridge’s exception in Murphy. In respect of that claim, the housebuilder denied that it owed any duty of care to the homeowners. HHJ Keyser QC had to deal with 5 preliminary issues, the first of which concerned whether Taylor Wimpey owed Mr and Mrs Thomas a duty of care in negligence.

In coming to his decision, HHJ Keyser QC considered the following precedents:

1. The Court of Appeal decision in  Robinson v PE Jones [2011] EWCA Civ 9,  which considered that the only basis for recovery of economic loss outside a contractual relationship is an “assumption of responsibility” for the homeowner by the builder, described by Lord Bridge in Murphy as a, “special relationship of proximity“; and
2. The High Court decision in George Fischer Holding Ltd v Multi Design Consultants Ltd (1998) 61 Con LR 85, in which HHJ Hicks QC did not apply Lord Bridge’s exception as it was, “minority obiter dictum [non-binding], contrary to the ratio [binding] of the decision of the House“.

Lord Bridge’s exception was inconsistent with the more recent Court of Appeal (‘CA‘) decision in Robinson, as it sought to create a basis for recovery of economic loss on the basis of tort which was not based on an “assumption of responsibility”. The reader may well ask why it is that ‘first purchasers’ (like Mr and Mrs Thomas), do not automatically qualify for the ‘special relationship of proximity’ or an ‘assumption of responsibility’ when they had been in contract with the developer or builder? The clearest explanation why this is not the case can be found at paragraphs 65 – 89 of the CA’s Robinson judgment; basically, where builders and developers are concerned, one cannot assume that just because there was a contract, there was a parallel duty in tort (i.e. negligence), let alone one which could survive the expiry of the contractual limitation period. In this case, HHJ Keyser QC took the view that, “[T]he argument that recovery ought to be permitted because expenditure would be required to obviate the risk to third parties would, logically, imply that, where the risk of injury was only to persons on the premises, the owner ought to be able to recover the cost of moving from the premises“. Such a decision would muddy the waters in this area of law; in particular the decisions in the Murphy and Robinson cases.

On the basis of the above, HHJ Keyser QC rejected the homeowners’ argument, stating that “Lord Bridge’s qualification [exception] in Murphy does not represent the law“. This was because, primarily, Lord Bridge’s exception was set out in the non-binding section of the judgment and was not supported by the binding section or the reasoning behind that binding section of the other Law Lords in the case. Lord Bridge’s exception was largely unsupported by subsequent case law (for example, in the Robinson and George Fischer cases cited above).

HHJ Keyser QC also noted that Lord Bridge’s exception had no compelling policy justification. This is because, in such circumstances, the builder would already have potential liability in contract, under the Defective Premises Act 1972 and in the tort of negligence (in respect of injury to persons/property).

Therefore, HHJ Keyser QC concluded that Lord Bridge’s obiter dictum comments in Murphy v Brentwood [1991] UKHL 2 did not create an exception to the rule prohibiting tortious claims for pure economic loss in certain circumstances. On that basis, he did not need to consider whether the Mr and Mrs Thomas’ claim in negligence had become statute barred, and he went on to hold that claims under the Defective Premises Act 1972 and the Misrepresentation Act 1967 were statute barred since they accrued more than six years before Mr and Mrs Thomas issued proceedings.

What does this mean for you or your business?

This decision confirms that Lord Bridge’s exception does not represent the position at law in relation to liability of a housebuilder for purely economic loss suffered by a homeowner.

It should be remembered that, where a property owner is required to repair defects to protect against the risk of personal injury or damage to neighbouring property, the owner may be able to bring a claim against the housebuilder under the Defective Premises Act 1972. New homes, as in this case, will also usually be covered under a warranty policy such as that provided by the NHBC. Such warranties typically last ten years and are insisted upon by the Council of Mortgage Lenders. It is unlikely, therefore, that a homeowner would be left to pick up the pieces without recourse. As HHJ Keyser QC noted, there is therefore no policy justification for an additional route of claim for purely economic loss.

From the housebuilder’s perspective, this judgment does not affect the fact that economic losses can still be recovered under the Defective Premises Act 1972, or where losses arise from a breach of a contractual duty, or indeed tortious liability where there is a “special relationship of proximity” with a homeowner (which Robinson suggests will be a rare scenario).

For more information

If you require advice in connection with any construction related query, please contact alan.tate@michelmores.com or any other member of the Construction and Engineering Team.