Hunt & Ors v Optima (Cambridge) Limited & Strutt & Parker


The Message

Surveyors or Architects acting for developers can owe substantial duties to purchasers.

The Case

The High Court has awarded substantial damages to purchasers of defective flats in a new development. Between 2001 and 2004, Optima developed a new 4 storey block of 26 flats known as Jubilee Mansions in Peterborough. Optima retained half of the flats to let out and the remainder were sold.

Optima acted as the contract administrator and the work was carried out by a number of different contractors. Strutt & Parker were retained by Optima in order to carry out periodic inspections of the works as they progressed so that they could produce Architects’ Certificates for the benefit of potential purchasers. The Certificates were to confirm that the work had been undertaken to a satisfactory standard and in general compliance with the approved drawings and Buildings Regulations.

Unfortunately, purchasers soon experienced substantial defects with their flats or in relation to the building generally. This was down to poor workmanship and supervision. A large number of defects were identified in the proceedings and these included leaking roofs, defective plumbing, inadequate soundproofing, deflection to the floors, inadequate rainwater guttering and breaches of the Buildings Regulations as to riser ducts and socket outlets.

Given the very poor standard of the works, the Court had no difficulty holding Optima liable for both breach of contract and for breaches of their repairing obligations as landlord under the leases entered into of the flats. The Court quantified the damages payable by Optima upon the basis of the cost of the necessary remedial works required. It refused to make an Order for Specific Performance requiring Optima to carry out all these works as this was impractical given they related to works required within other flats not subject to the proceedings

The Court considered the extent of Optima’s liability for repairs under the Leases. It held that the repairing obligations were to be construed broadly given Optima was the developer and it had an obligation under the Leases to deal with inherent defects in the construction of the building.

Strutt & Parker contested liability upon the basis that they owed no duty of care to the purchasers and that their Certificates did not constitute any form of guarantee or warranty. They also disputed that their surveyor, Mr Egford, had been negligent in failing to identify all of the defects relied upon.

The Court held that Mr Egford had been too dependent on assuming that Optima and others were putting right matters or that they had been approved by the Building Inspectors and that he was negligent in failing to ensure various, although not all, defects were dealt with. In particular, because of what he did note and the general poor standard of workmanship, he should have identified the major defects which resulted in the leaking roofs and plumbing and the deflection and bounciness of the floors and the lack of adequate sound insulation. In many cases, Mr Egford did actually appreciate there were issues but did not follow these up sufficiently to ensure they were rectified.

The Court held that Mr Egford had no personal responsibility to the Claimants but that Strutt & Parker were liable for his failings and that they owed a duty of care to the purchasers as it was always intended and understood that their Certificates would be relied upon by the purchasers. In fact, not a single purchaser actually proceeded to obtain their own survey. Accordingly, given that Strutt & Parker knew that the purchasers would rely upon their Certificates, it was held that there was a special relationship akin to a contractual duty and that Strutt & Parker not only had a duty of care as to the giving of the Certificates but also in relation to the performance of the services which were necessary for them to be able to issue such Certificates.

The Court then went on to hold that each Certificate amounted to a contractual warranty. The Certificates represented that Mr Egford had the appropriate experience to certify the works and they referred to Strutt & Parker remaining liable for 6 years from the date of the Certificates. The Court said that the Certificates made it explicit that they constituted a warranty based on the flats having been inspected as by an architect and that the work was satisfactory and that the inspections and certifying had been undertaken with reasonable care.

The Court held the claims had been brought within the requisite 6 years of the Certificates being issued and ordered damages against Strutt & Parker based upon the actual reduced value of the flats at the date of their purchase. This involved detailed consideration as to the repair costs relevant to each particular flat payable either directly or through the service charge and a total sum of about £250,000 was awarded in relation to the 6 flats in question. The Claimants will need to give credit for sums they recover from Optima re costs of the works. Interestingly, the Court only awarded very modest sums for distress and inconvenience suffered.

Jonathan Ross
Forsters LLP