Zagora Management Ltd & Ors v Zurich Insurance Plc & Ors [2019] EWHC 140 (TCC)

“2.5 The reasonable cost of alternative accommodation where the new home is not fit for habitation as a result of the carrying out of remedial works by us covered under the terms of this policy provided that you have first obtained our written consent to such costs being incurred” (clause 2.4). “2.6 Professional fees incurred in connection with your claim, provided that you have first obtained our written consent to such costs being incurred.” 7.1.24. On the other side of the same page there then appeared a number of bullet point items under the heading “What we will not pay under section 2”

“3.1 The reasonable cost of rectifying or repairing major physical damage which is caused by a failure by the developer to comply with the requirements in the construction of the new home.” 7.1.26. “Major physical damage” was defined as “a material difference in the physical condition of a load bearing element of the new home from its intended physical condition which adversely affects its structural stability or resistance to damp and water penetration” and “requirements” had the same definition as under section 2. 7.1.27. ZIP also agreed to pay: “3.2 The reasonable cost of rectifying a present or imminent danger to the physical health and safety of the occupants caused by the failure of the developer to comply with the Bldg Regs in respect of the following: structure, fire safety, site preparation and resistance to moisture, hygiene, drainage and waste disposal, heat-producing appliances, glazing – safety in relation to impact, opening and cleaning.” 7.1.28. This, therefore, was identical to the cover provided by clause 2.3 of the policy. ZIP also agreed to pay the reasonable cost of alternative accommodation and professional fees, in precisely the same terms as under sections 2.4 and 2.5 above. 7.1.29. Again, on the other side of the page appeared a list of items which ZIP would not pay, in substantially the same terms as those applying to section 2. The only relevant difference was that instead of “any claim reported for the first time to the developer or to us more than two years after the effective date” the relevant item was “any claim that could reasonably have been reported in writing to the developer or to us within two years of the effective date but was not reported to the developer or to us”. 7.1.30. Finally, there were a number of conditions applying to all claims under the policy, including the following: “1. Claims notification. On discovery of any item of claim you shall as soon as reasonably possible: (a) take all reasonable steps to prevent further loss; (b) where section 2 applies, ensure written notice has been given to the developer; (c) give written notice to us; (d) if requested by us and at your expense, submit in writing full details of the claimant supply all reports, plans, certificates, specifications, quantities, statutory notices or other information and assistance as we may reasonably require to verify the claim. Where we subsequently accept the claim, we will reimburse the reasonable expenses incurred in obtaining such reports.” “2. Our rights. Where we accept a claim under this policy, we and the developer and our agents shall be entitled to have reasonable access to the new home and shall also be entitled to remain in occupation for as long as is necessary in order to carry out proper repairs to our satisfaction.” “3. Recoveries from Third Parties. We are entitled to take proceedings at our own expense, but in your name, to secure compensation from any third party in respect of any claim accepted by us under this policy.” 7.1.31. There are a number of significant issues as to the proper construction of certain elements of the policy, which I shall now address. 7.1.32. In the same way as with the leases the construction of the policy is governed by the principles applicable to the interpretation of contracts generally as summarised by the Supreme Court in Wood v Capita Insurance Services Limited [2017] UKSC 24 at paragraphs 8 – 15. The established rules are considered in a number of the established textbooks and I have reminded myself by reference to the summary in chapter 3 of Colinvaux’s Law of Insurance 11th edition. 7.1.33. In submissions the claimants contended that the proper construction of the policies ought to proceed from the premise that the policies were, putting it in broad terms, intended to provide effective building warranty insurance to individual flat owners both for their individual flats and for their common parts and that any particular terms of the policy which might have the effect of abrogating or limiting or restricting that cover in a material degree ought to be given a restrictive interpretation. In contrast, ZIP contended that this was a straightforward insurance policy entered into between an insurance company and individual property owners which contained a number of detailed terms and conditions which ought to be construed in accordance with their natural and ordinary meaning and without any presumption about what the policy “ought” to cover. 7.1.34. This point is addressed in Colinvaux at 3-011, where it says: “English law does not recognise the concept that the policy must be construed in accordance with the reasonable expectations of the assured, although it has been said that a policy should be construed other than in a way which would “unwarrantably diminish the indemnity which it was the purpose of the policy to afford. In some cases, however, the wording may be so clear that the court is constrained to construe them as they stand even though the result might not be commercially sensible ...” 7.1.35. It appears to me that the approach in this passage strikes the right balance. The starting point is the natural and ordinary meaning of the words used, which cannot be overridden by an argument that they should be construed in accordance with what the assured may reasonably have believed was being provided. However, where the words used leave reasonable room for doubt as to what was intended, a construction which would unreasonably limit the scope of the cover which it was the clear purpose of the policy to provide is to be avoided. That applies particularly where the insurer has put forward a policy which contains exclusions from cover which is otherwise afforded which are genuinely ambiguous, since the “contra proferentum” rule “consists of two quite distinct limbs: that words are to be construed against the person who put them forward; and that words of exclusion are to be construed narrowly”: see Colinvaux at 3-012. 7.1.36. It is however important to note that this is not a case in which the majority of the claimants, being buy-to-let investors, can seek to place reliance on the Unfair Terms in Consumer Contracts Regulations 1999 (now replaced by the Consumer Rights Act 2015). Moreover, although in their written closing submissions the claimants suggested that reliance could be placed on those Regulations by the two claimants who bought flats for occupation, in oral closing submissions they acknowledged that the Regulations could not be used to seek to construe core provisions of the policies so as to secure cover greater than that which was afforded on a proper construction of the policy. 7.1.37. There is a further general point as to the proper construction of the policies which is or may be relevant to a number of the debates in this case which I should address, which is the difference between cases where loss is caused concurrently by an insured and an uninsured peril and cases where a loss is caused concurrently by an insured and an excluded peril. The difference, as is made clear in the discussion in Colinvaux at paragraphs 5-057 to 5-061, is that in the former case the claimant can recover whereas in the latter case the claimant cannot: see Wayne Tank and Pump Co Ltd v Employers Liability Assurance Corp [1974] QB 57. (This point, it should be observed, is a separate and logically subsequent question to the question as to whether or not there was only one or more than one proximate cause, since if there is only one proximate cause the simple question is whether that is an insured cause or an uninsured or excluded cause: see the discussion in Colinvaux’s Law of Insurance 11th edition at 5-039 to 5-056.) 7.1.38. In this case it is not as easy as it might be to identify whether the items listed under the side of the page entitled “what we will not pay” are items which are uninsured or which are excluded or otherwise. The language “what we will not pay” is more obviously consistent with a description of items which are uninsured rather than exclusions. However, some of the items might be said only to make sense on the basis of being exclusions from or limitations upon cover otherwise provided. It appears to me that it will be necessary to consider the proper interpretation of particular items by focussing closely on their wording and on their inter-relationship with the items listed on the other side of the page in order to reach a clear conclusion where there may be scope for argument. 7.2. Claims relating to CJS and other non-claimant new homes 7.2.1. It is common ground that the claimants cannot recover under the policy for claims which relate solely to new homes owned by CJS or others and which do not relate to the common parts. In its written closing at [20] ZIP identifies one example, being service installations solely serving the flat in question. 7.2.2. However, it also identifies the doors to the flats as another example. That seems to me to be wrong because although the external doors to the flats are not expressly identified as being within or without the demise, in contrast to the internal doors which are expressly identified as being within the demise, the walls which enclose the flat are specifically excluded and the repairing covenant in clause 7.5.1 prohibits the tenant from decorating any part of the exterior of the flat “including the exterior of the external doors of the flat”. 7.2.3. Furthermore, ZIP contends that the claim for work to the compartment walls dividing the common parts from the individual flats cannot include any work to the internal sections of those walls. Again, however, that seems to me to be wrong. As I have said the walls which enclose the flat are specifically excluded from the demise and the only items expressly included within the demise are the “linings and surface finishes including lath plaster and board of the interior of all walls”

“load bearing walls should be designed to support and transfer loads to foundations safely and without undue movement” and that “suspended floors should be designed to support and transmit loads safely to the supporting structure without undue deflection”

“36. If that is wrong, then the issue between the parties is what the NHBC is now liable to pay under the Policy. There seem to me to be numerous issues that potentially arise, the end result of which is that the “no loss” defence is not one suitable for determination on a summary basis: (i) firstly, an insurance policy may indemnify the insured against loss. Under such a policy it is a question of law and fact what loss has been suffered. The policy may by express inclusion or exclusion identify how loss is to be assessed. (ii) There is no decided authority that where the claim is in respect of defects in or damage to property, such loss cannot include the cost of remedial works if the remedial works will not be carried out. The views expressed in the Great Lakes case are obiter and at odds with the views expressed in a leading textbook. (iii) That conflict of view is perhaps understandable if one sees the cost of remedial works as one measure of loss. In such cases, if the remedial works are never to be carried out or are wholly disproportionate, the court may regard the cost of remedial works as an inappropriate measure. That is likely to be a question of fact and degree not suitable for determination on a summary basis. (iv) In any case, the distinguishing feature here is that the Policy does not provide for the NHBC to indemnify against loss – rather it requires the NHBC to pay the Cost as defined. In that sense, it may be distinguished from the policy in the Great Lakes case in which the operative insuring provision insured against loss and the reinstatement clause provided the basis on which the amount payable was to be calculated. For the reasons I have already given, it is certainly arguable that the issue in this case is not the appropriate measure of loss but what the NHBC has undertaken to pay in accordance with the definition of Cost.” (i) firstly, an insurance policy may indemnify the insured against loss. Under such a policy it is a question of law and fact what loss has been suffered. The policy may by express inclusion or exclusion identify how loss is to be assessed. (ii) There is no decided authority that where the claim is in respect of defects in or damage to property, such loss cannot include the cost of remedial works if the remedial works will not be carried out. The views expressed in the Great Lakes case are obiter and at odds with the views expressed in a leading textbook. remedial works as an inappropriate measure. That is likely to be a question of fact and degree not suitable for determination on a summary basis. (iv) In any case, the distinguishing feature here is that the Policy does not provide for the NHBC to indemnify against loss – rather it requires the NHBC to pay the Cost as defined. In that sense, it may be distinguished from the policy in the Great Lakes case in which the operative insuring provision insured against loss and the reinstatement clause provided the basis on which the amount payable was to be calculated. For the reasons I have already given, it is certainly arguable that the issue in this case is not the appropriate measure of loss but what the NHBC has undertaken to pay in accordance with the definition of Cost.” 7.7.8. Since this observation is strictly obiter, and since Jefford J was saying no more than that it was at least arguable, for the purposes of a summary judgment application, that the obiter observations of Christopher Clarke LJ on the facts of that particular case might not dictate the outcome on the facts of the case before her at trial, what she said is plainly not in any way determinative of the issue before me. However her analysis is, if I may respectfully say so, illuminating in drawing attention to the need to focus on the particular terms of the policy in question, in a case where the relevant terms of the NHBC policy bear close similarities to those of the instant policies. 7.7.9. In this case, the policy clearly provides that ZIP “will pay … the reasonable cost of rectifying or repairing the physical damage [or] the reasonable cost of rectifying a present or imminent danger”

“A condition precedent may be created in a number of ways: the consequences of a breach of condition may be spelt out; the condition may be described as a “condition precedent”; the policy may contain a general clause which describes all conditions as conditions precedent; or the wording or the significance of the condition is such as to lead to the conclusion that it was intended to be a condition precedent.” 7.9.3. Here it is said by ZIP that the consequences of the provisions in sections 2 and 3 are spelt out (“we will not pay”). It is clear that ZIP cannot make the same argument in relation to condition 1 and further that condition 1 is neither described as a condition precedent nor is there a general clause to that effect. In relation to condition 1 ZIP would have to show that the significance of the condition is such as to lead to the conclusion that it was intended to be a condition precedent. The obvious difficulty for ZIP is that clause 1 contains at least 5 separate obligations, of varying significance. In the circumstances I am satisfied that it is not a condition precedent to liability. 7.9.4. No issue arises in relation to section 2. 7.9.5. In relation to section 3 the claimants do not contend that it should not be regarded as a condition precedent. They do however submit that it can only apply strictly in accordance with its terms, read with condition 1, so that the question is whether any claim falling within section 3 “could reasonably have been reported in writing to JCS or to us within two years of the effective date”

“… If there is only one cause of loss the assured is free to classify that cause as he thinks fit so as to bring it within the terms of the policy: Capel Cure Myers Capital Management Co Ltd v McCarthy [1995] L.R.L.R. 498.” 7.11. The maximum liability provision 7.11.1. The maximum liability provision was stated to apply specifically to sections 2 and 3 of the policy. Whilst the claimants contend that on its true construction it provided an overall limit of £25 million and, hence, is of no importance on the facts of this case, on ZIP’s case it limits each of the claimants to the value of the purchase price of their flat and, therefore, excluding the value of the CJS and other non-claimant flats. On that basis, taking the figure provided in ZIP’s closing submissions, the total limit on the claim would be £3,634,074.65, which is very significantly less than the full value of the claim. 7.11.2. “Maximum liability” was a defined term which, in view of the importance of the argument raised, I must set out in full. “Our maximum liability in respect of all claims under Sections 2 and 3 of this policy is as follows: (a) for a New Home which is entirely detached, the purchase price declared to Us, subject to a maximum of £25 million; (b) for a New Home which is part of a Continuous Structure, the maximum amount payable in respect of the New Home shall be the purchase price declared to Us subject to a maximum of £25million. Where the combined value of all New Homes within a Continuous Structure exceeds £25million, the total amount payable by Us in respect of all claims in relation to the New Homes and the

“Any latent defect in the machinery or hull”, where the ship sank apparently due to a defect in a nozzle that had deteriorated over time and caused damage to adjacent parts thereby permitting water ingress, and where the insurers’ case was that the loss was caused by ordinary wear and tear, which was excluded. Goff J held that the enquiry that he had to undertake was to look for the proximate cause of the loss: “In the present case, however, the casualty is not simply to be attributed to ordinary wear and tear. The defect upon which the owners rely consisted of the fatigue cracks in the wedge-shaped nozzle; and the presence of these cracks is to be attributed to two factors - the manner in which the ship was designed (viz., the welding of the gussets to the nozzle with fillet welds in proximity to the circumferential weld between the nozzle and the spool piece) and the effect upon the nozzle, in these circumstances, of the ordinary working of the ship. The result of this combination of circumstances was that the fracture opened up a significant period of time before the end of the natural life of this ship. I do not consider that recovery in respect of loss of the ship, consequent upon such a fracture, is excluded by s. 55(2)(c) of the Act. Let me take the example of a ship incorporating such a design, which results in a far swifter development of fatigue cracking, and the sinking of the ship within, say, two years of her entering service. The loss could not, in such a case, have been proximately caused by ordinary wear and tear. It is not like a case where a ship's plating simply wastes away through rust, or a ship sinks through general debility.” 7.15.3. In this case, therefore, the claimants say that by parity of reasoning the proximate cause of the loss is not the mere presence of condensation, rather the effect that the condensation has upon the physical condition of the roof, itself caused by a breach of the requirements or regulations. 7.15.4. In contrast, ZIP contends that even if the claim would otherwise fall within the scope of the cover, any such claim is clearly excluded where it falls within the scope of the condensation exception. In support of its argument ZIP referred at [70] of its written closing submissions to its internal claims handling document, but it seems to me that this is plainly irrelevant to the proper construction of the insurance policy. In contrast, the ZBG technical requirements, being referred to specifically in the policy, clearly fall within the factual matrix and thus at least of potential relevance to the proper construction of the policy. They make a number of references to the need to design and construct the building in order to address the risks of condensation. It would, therefore, be surprising if a failure to comply with the ZBG requirements in such a way as to lead to condensation and to the major physical damage or present or imminent danger cover being triggered should then be excepted, but of course if the policy on its proper construction leads inexorably to that result then that result must follow, however surprising. 7.15.5. I prefer and accept the claimants’ case in this respect and am satisfied that in such cases the condensation exclusion does not apply. In my view this is because whether one considers this case as being one of proximate cause or concurrent causes the position is that the failure by the developer to construct the building in accordance with the ZBG requirements or the Bldg Regs is either the proximate cause or at the very least a concurrent cause of the loss. It is the proximate cause because without the failure by the developer it would not have happened. It is the concurrent cause because even if one takes the view that the condensation itself is also a proximate cause, again without the failure by the developer the loss would not have happened. Furthermore, upon a proper construction of the policy the condensation exception is not an exclusion, but simply an uninsured cause, whereas the major physical damage and present or imminent danger items are insured causes. Therefore, the loss is covered. 7.16. Excess 7.16.1. Excess is defined as “the first amount (indexed) of each claim which is payable by you for which no insurance is provided under this policy and which is specified in the insurance certificate”

“Having visited the site I am now in a position to outline a way forward but I would like to discuss initially rather than just write to you”. 8.18 I am satisfied that during the course of the telephone conversation which took place it was suggested to Mr Broadhurst by Mr Parvin that it would assist if he could provide a schedule setting out the claims, both those said to fall within the building warranty and those which would have to be made against ZBC. I accept that there was a discussion along the lines that some claims which might not technically fall within the policy might nonetheless be able to be included as part of the overall remedial scheme, a result which would be beneficial to Zagora and the individual leaseholders and which would also have the advantage for both of mitigating the need for any expensive and – for Zurich – embarrassing litigation against ZBC. It was obviously in Mr Parvin’s interests to put this proposal over the phone, rather than commit himself to writing and I am satisfied that the impetus to do so was that, having visited the site for the first time, he had become fully aware of the problems which ZBC would face in defending any Bldg Regs claim. 8.19 Mr Broadhurst’s email to Mr Parvin of 20 June 2013, sent following the telephone conversation, is significant in that: (1) As requested, he divided the claims into the relevant sections of the Approved Document and further subdivided the claims into those which he believed would fall within the policy and those which he believed would fall within the Bldg Regs claim. (2) He began with Part B (Fire). He identified 13 separate items of which 12 were said to fall within the policy. They included incomplete compartmentation in the common parts and a lack of fire protection to structural steelwork. They also included safety issues in relation to the staircases and an apparent absence of cavity barriers to the cladding. Two were said to require investigation, namely the “internal party wall construction” (which, in context, plainly refers to the party walls between flats) and the external wall structure. (3) He then continued to deal with Part C (Resistance to Moisture), where he identified that the main roof was defective and problems with the entrance lobby roofs and external render, and Parts E, H, K, L, M and N. He emphasised that this was not an exhaustive list. (4) His proposed way forward involved, subject to agreeing funding, establishing the full extent of the defects through invasive investigations and then “establishing and agreeing a schedule of remedial works and liability”

“I think it was a very constructive meeting yesterday”

“As promised a letter is attached setting out Zurich’s position on matters at this point in time”

“In broad terms I would confirm that Zurich will accept the following items under the terms of the warranty subject to a single excess of £1,211”

“This is subject to further investigation and agreement as to scope of works, however at this point in time I can confirm that the works to the common corridors and stairs are accepted. I note that following our meeting Arup were to draw up a brief scope for the stage one works (to manage the risk and satisfy the council / Fire Brigade) and I look forward to receiving this information in due course. With regards to works to the compartmentation between the individual apartments, fire stopping in the external walls and with regards to Approved Document B 4 (external fire spread) the cedar wood panelling to the rear of block D, until the opening up has been carried out we cannot confirm what costs will be accepted. We look forward to receiving your proposals for the further opening up works.” 8.39. Again, both parties emphasise different aspects of this section. Thus, the claimants draw attention to the fact that works to the common corridors and stairs were accepted by ZIP, subject only to further investigation and agreement as to the scope of works, whereas ZIP emphasise that any agreement was expressly made subject to further investigation and agreement and, moreover, that no commitment was given in relation to compartmentation between flats or fire stopping in the external walls. 8.40. Similar arguments are made in relation to the next section, headed Part C, Resistance to Moisture, where the letter stated: “We agree that there are issues with the roof and that in all probability this will need replacement. The entrance lobby roofs to blocks C and D need to be completed and this cost is accepted. With regards the external render to the front elevation of block E, we do not accept that this is an item which will form a stand-alone claim under the warranty, however it may well be that remedial works are needed as a result of gaining access to deal with other issues. With regards to the elevations, as per my comments regarding the fire stopping, further investigation is needed here to actually confirm what the issues are so that we may agree then what costs may be covered and what action would need to be taken. In terms of our priority order, clearly the issues with approved document B are the ones which need to be addressed first. With regards to water penetration to the basement walls, at this point in time we do not accept that there has been a breach of the approved documents and regardless this is an item that would be considered under the warranty.” 8.41. Again, it can be seen that within this section David Robinson was stating that whilst the lobby roof claims were accepted and that the roof will “probably” need replacement, other items were not accepted, either at all or pending further investigation. The final sentence does not immediately make sense unless it is read on the basis that the word “not” has been omitted, which would be consistent with ZIP relying on the exclusion of the basement from the policy. 8.42. The next section addresses Part E, Resistance to Passage of Sound, where David Robinson stated that no claim would be accepted under the warranty, whilst suggesting - as noted above - that it might be addressed as part of the overall scheme in relation to fire compartmentation issues. 8.43. The remaining sections, addressing parts H, K, L, M and N contain a similar mix of statements to those relating to Part B. 8.44. The letter then continued as follows: “Turning to the strategy going forward, firstly a couple of comments regarding policy cover. With regards to the various heads of claim under the warranty as was discussed at the meeting it is our opinion that only one excess will apply to the overall claim of £1,211. Whilst a claim for those apartments belonging to the developers would not be covered if it was submitted as a standalone claim, again as discussed we will deal with the claim for the making good works to the structure, as your interest as freeholder allows you to claim instead of the developer. However any loss of rent and/or alternative accommodation claims made by them will not be covered.” 8.45. It is plain in my view that David Robinson was making it clear that ZIP was no longer advancing its arguments based on multiple excesses and a proportionate reduction for the CJS flats. I reject Mr Parvin’s evidence to the contrary. The approach in the letter is consistent in my judgment with Mr Broadhurst’s evidence that Mr Parvin was keen to find a way in which what appeared to be justified claims under the warranty could be accepted as a claim made by Zagora so as to achieve the objective of making the developments safe for occupation in terms of fire safety and structurally and without the impediment which would be caused by a strict application of the policy terms in relation to multiple excesses and the CJS flats, which would leave ZIP vulnerable to separate litigation and the risk of reputational damage to ZBC. In cross-examination Mr Parvin suggested that the acceptance that only one excess would be deducted did not represent a concession so much as an alternative approach based on an alternative interpretation of the policy. Whilst I accept that this is the correct interpretation of the present or imminent danger section of the policy, nonetheless it clearly did reflect ZIP taking a commercial approach to seek to resolve the claim on a pragmatic basis. The question, of course, is whether this apparent unqualified acceptance of liability on this basis formed part of a legally enforceable agreement or, as ZIP would contend, part of what was at best only an agreement in principle where all rights were reserved pending a final agreement. 8.46. The letter then turned to the next steps to be undertaken, which he identified as: (a) Zagora obtaining a price for a temporary fire alarm system and investigations; (b) opening up and agreeing a detailed specification for the fire stopping works to the common areas; (c) investigating the integrity of the individual apartments and Zagora’s proposals for the costs, methods and dates for this work. Mr Robinson confirmed that ZIP would be using Thomasons as its expert advisers and that agreement needed to be reached as to who should prepare the final specification. 8.47. David Robinson concluded by setting out in tabular format a “summary of immediate activities” which provided more details as to the next steps identified above. It is apparent in my view from this section that two separate activities were being proposed, the first being to undertake the steps necessary to install a fire alarm system in the development which would enable it to continue to be occupied in the short-term, and the second being to undertake further investigations before agreeing further remedial works and producing a schedule of those works. Against each activity David Robinson had identified who was responsible for taking action to implement the activity. After the temporary works had been undertaken and further investigations had been undertaken and assessed the next activity was to “agree extent of remedial works”, to be actioned by “Arup, Zurich Risks and Thomasons”. 8.48. Mr Selby made the point that, as Mr Parvin agreed, he was not part of the Zurich Risks team. It was put to Mr Parvin that he was not included because there was no question of ZIP being entitled at that stage to make a decision as to what works it was prepared to fund, since any issues of liability or cover had already been agreed. Mr Parvin disagreed. However I agree that the wording used is not apt to encompass a further stage at which Mr Broadhurst as the decision maker on behalf of Zagora and Mr Parvin as the decision maker on behalf of ZIP would then be required to confirm their respective agreement to the proposals which had been discussed and agreed between the experts including Mr Johnson as the Zurich Risks engineer. That point is not however, in my view, determinative as to the question as to what had been agreed and what, overall, the letter recorded as having been agreed. 8.49. In cross-examination Mr Parvin accepted that ZIP had agreed to fund the cost of the temporary works to allow the immediate fire safety concerns to be assuaged and thus to ensure that the development could continue to be occupied and insured. It is right to say, as Mr Selby submitted, that this does not expressly appear in David Robinson’s letter of 2 July 2013. Mr Selby submits that this shows that not everything which was agreed at the meeting was included within David Robinson’s letter. He also submits that since ZIP was willing to agree to fund these works there was no reason why it should not also have been willing to fund the works which were accepted in relation to the common corridors and stairs and the other works which Zagora says were agreed at the meeting. I accept the force of this point. Indeed, one can see from the wording used in David Robinson’s letter that the opening section (“we will accept the following items under the terms of the warranty”) when read with the closing summary of activities amounts to an implicit acknowledgement that ZIP would fund the costs of those activities. However, that does not in my judgment answer the crucial question, which is whether or not there was a contractually binding commitment and, if so, what were its terms. 8.50. Finally, and before I leave the correspondence, Zagora also relies upon a subsequent email of 5 July 2013 from David Robinson to an estate agent acting for some of the individual leaseholders, in which he says that Zurich would be “financially assisting”

“it’s bad enough they [JCS] build it badly, rob the residents and then leave you to fix it and for us [ZIP] to pay for it!”

“we … were near to agreement for [Zurich]”

“this puts us back in a position whereby either the management company or the Landlord will be making a claim against Zurich for the necessary repairs at the above under the terms of the original claim…”

“53. If and insofar as Zagora’s entitlement to sue is denied, Zagora will say that ZIP is estopped by representation or convention from denying Zagora’s entitlement and/or has waived any issues arising in connection with Zagora’s entitlement. In the letter to Zagora’s Mr Broadhurst dated 2 July 2013 (which evidences the Agreement to Rectify), ZIP’s loss adjuster (Cunningham Lindsey) specifically stated on behalf of ZIP: “I refer to our meeting of Thursday last week and the discussions at that time and write to confirm in principle what was agreed during the meeting. In broad terms I would confirm that Zurich will accept the following items under the terms of the warranty subject to a single excess of £1211.00” “ Whilst a claim for those apartments belonging to the developers would not be covered if it was submitted as a standalone claim, again as discussed we will deal with the claim for making good works to the structure, as, your interest as freeholder allows you to claim instead of the developer.”

“(1) The parties’ fire safety experts agree that it is universal: see item 2, column 3 of their joint statement and column C of their agreed remedial statement. Paragraph 6 of their joint statement records that ZIP’s expert, Mr Pagan, was asked to consider whether any further or different investigations should be carried out and that none were identified or proposed.” 10.2.3. The claimants correctly record the position. Paragraph 6 records Mr Pagan as seeking to reserve ZIP’s legal position about the “burden of proof with respect to those flats and areas which were not inspected”

“Mr Pagan, checked the steelwork in 10 external locations and 33 internal locations and never found any adequate fire protection: see paragraphs 10.7 to 10.17 of Mr Pagan’s report. It will not be lost on the Court that Mr Pagan was not ultimately called to give evidence.”

“The Claimants’ expert, Mr Lavender, concludes that the defect is universal: see section 6.3 of his first report, section 1.4 of his supplemental report and his annotated plans which collate all the evidence of unprotected steelwork. This evidence was not undermined in cross-examination. Although Mr Lavender was shown photographs of steelwork painted in other colours (in addition to the red oxide), none of that steelwork was fire protected.”

“Stotherm recommend a minimum 18mm OSB, I doubt 10mm OSB will be strong enough in terms of pull out”

“It [the deck] is giving way. I do not know if it is in danger of collapse yet. It will do so at some point. It is on its way, but that does not lead to it being a present or imminent danger, in my view”

“…The Bank has no genuine commercial interest in these proceedings in whole or in part. The Bank is the mortgagee of the 66 CJS flats but CJS’s claim was abandoned on 28 June 2017. This was because CJS could not claim against ZIP under the policies because it fell within the exclusion within the definition of Buyer and if not the reason that was in any event the case and CJS had no legitimate claim. Therefore neither CJS nor its mortgagee, the Bank, had a legitimate claim against ZIP. On the other hand both CJS and the Bank have the power pursuant to clause 9.3 of the Lease to enforce clause 8.6 and therefore clause 9.9. For the Bank to fund claims in the hope of achieving indirectly what it cannot achieve by a direct legitimate claim, (because its mortgagor was not entitled to claim or because it will not claim against Zagora) does not give the Bank a legitimate pre-existing interest in the proceedings and accordingly the funding is maintenance.” 10.13.2 As the claimants said in their written opening, the relevant principles are as follows: “[286] First, a person is guilty of maintenance if (a) he supports litigation, (b) in which he has no legitimate concern (c) without just cause or excuse. A person is guilty of champerty if, conditions (a) to (c) being met, he also stipulates for a share of the proceeds of the action or suit (Trendtex Trading Corp v Credit Suisse [1980] 1 QB 629, at 663). [287] Second, where a person is guilty of maintenance or champerty, the effect is that the contract of maintenance or champerty is unenforceable as between the parties to the contract (see Cole v Booker (1913) 29 TLR 295, at 297 and Hutley v Hutley (1873) LR 8 QB 112). The illegal maintenance of an action is not a defence to the action (Martell v Consett [1955] Ch 363). [288] Third, the court will not stay proceedings which are being maintained unless it constitutes an abuse of process or the action is commenced in bad faith: see Abraham v Thompson [1997] CLC 1370, 1385. The fact that any arrangement is champertous does not of itself mean that the underlying proceedings are an abuse of process: see Re Latreefers Inc [2001] BCC 174, 205-206.” 10.13.3. In my judgment there are a number of insuperable difficulties faced by ZIP in succeeding in this argument, which are as follows: (1) ZIP’s fundamental complaint is that this is an impermissible attempt by the Bank to recover through the back door what CJS could not recover against ZIP through the front door. However, that argument was only ever a good argument if it proved to be the case that either Zagora or the individual leaseholder claimants could somehow recover losses suffered by CJS which it could not recover directly against ZIP. As my decision has revealed: (a) if Zagora had succeeded against ZIP under the agreement to rectify it would have been on the basis that at the time ZIP (through David Robinson and Mr Parvin) was perfectly willing to allow Zagora to recover the cost of remedial works without deduction for the CJS flat percentage either on a commercial basis or – according to Mr Parvin – on the basis of a tenable interpretation of the policies; (b) the individual leaseholders have succeeded against ZIP on the basis that on the proper interpretation of the policy any individual flat-owner can recover the full cost of repairs to the common parts in a present or imminent danger case even if the other flat-owners could not also have recovered on that basis. In the circumstances there was nothing wrong in the Bank seeking to fund the claimants in litigating to recover on either basis. (2) ZIP also argued that the Bank was never interested in using any recovery to undertake repairs and simply wanted to secure a recovery and to take the money and run. I am not persuaded from the evidence before me that this was always the Bank’s fixed intention come what may. If that had been the case there would have been no point in setting up the detailed provisions of clause 5 of the Priority Deed which clearly envisaged that remedial works would be undertaken under the decision and direction of an independent person if there was sufficient money to do so. Indeed one may query why the individual leaseholders were willing to continue the action if their understanding or advice was that this was all an elaborate charade for the Bank to be paid out and for them to be left with a payout but an ongoing liability under the lease. (3) In the circumstances, and looking at the matter widely, the Bank had a genuine commercial interest in funding the litigation. In a recent case, Recovery Partners v Rukhadze & others [2018] EWHC 2918 (Comm), Cockerill J suggested, when considering an argument that an assignment was champertous and having considered the decision in Massai Aviation Services v Attorney General [2007] UKPC 12 and other relevant authorities, that the tide of recent authorities indicated a considerable relaxation of the approach to questions of assignment and champerty in favour of looking at the transaction as a whole rather than encouraging a narrowly focussed view of the commercial aspects. (4) The introduction of 123 Pay and the alteration in the commercial transaction addressed any offensive element which – if I am wrong in the above – previously existed. It would plainly be wrong to dismiss an action that has proceeded to trial and succeeded on the merits on the basis of what would, on this analysis, be a historic abuse which could, if necessary, be penalised in interest and/or costs. 10.14. Drawing together the threads 10.14.1 The claim against ZIP by the individual leaseholders succeeds but is capped to the total of their declared purchase prices. 10.14.2 I have not addressed the section 2 claims separately. There is no need to do so, since the maximum liability provision applies “in respect of all claims under sections 2 and 3 of this policy” and thus the individual leaseholder claimants cannot secure a greater recovery by seeking to add on any individual section 2 claims to the total of the section 3 claims. Apart from the reference in Scott Schedule G item 2 no mention is made of a section 2 claim in the claimants’ opening and closings, so that it does not appear that the claimants are seeking a separate award in relation to the section 2 claims on any other basis. 10.14.3 I have not addressed interest. Mr Baatz reminded me that in paragraph 572 of its closing submissions the claimants said: “Given that their claim is for future costs, the claimants accept that they cannot claim interest from ZIP on their damages up to the date of judgment. Of course, if there is any delay in satisfying the Court’s judgment, interest on judgment monies will accrue in the usual way under section 17 of the Judgments Act 1838”

“First, in order to sustain an action of deceit, there must be proof of fraud and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (i) knowingly, (ii) without belief in its truth, or (iii) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement from being fraudulent, there must, I think, always be an honest belief in its truth.” 11.4 It is accepted that as a matter of law it is not necessary to prove that Mr Mather had an intention to deceive the claimants: as Lord Herschell said “…if fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or injure the person to whom the statement was made.”

“the work described above has been completed and Zurich Building Control Services Ltd have performed the functions assigned by regulation 11 of the 2000 Regulations (as amended)”. 11.7. Regulation 11 of the Building (Approved Inspectors etc.) Regulations 2000 (as amended) is headed “Functions of approved inspectors” and provides so far as relevant that: “an approved inspector by whom an initial notice has been given shall, so long as the notice continues in force, take such steps as are reasonable to enable him to be satisfied within the limits of professional skill that…(a) regulations 4 and 6 of the Principal Regulations are complied with…”

“Building work shall be carried out so that it complies with the applicable requirements contained in Schedule 1". It is Schedule 1 which contains the detail of the requirements in Parts A through to N. 11.8. It is common ground and I am satisfied that by issuing the Bldg Regs final certificates in the terms which he did and in the context of the regulatory regime referred to Mr Mather represented that ZBC had taken such steps as were reasonable to enable it to be satisfied within the limits of professional skill and care that the works referred to had been completed in accordance with the Bldg Regs. 11.9. ZBC accepts that on an objective reading of the Bldg Regs final certificates they related to the relevant access and egress routes for the relevant flats, as well as the flats themselves. This was common ground between the experts. 11.10. ZBC also accepts that, as was common ground between the experts, it had not taken reasonable steps to satisfy itself that Bldg Regs had been complied with. Thus it admits that Mr Mather made misrepresentations in issuing the Bldg Regs final certificates. Did Mr Mather intend the claimants to rely on those misrepresentations 11.11. In closing submissions ZBC accepted that Mr Mather did intend the individual leaseholder claimants to rely on the representation made in the Bldg Regs final certificates, which was entirely sensible and realistic given his evidence as referred to below. ZBC did not, however, accept that Mr Mather intended Zagora to rely on the representation made in the Bldg Regs final certificates. 11.12. Mr Mather’s evidence in his witness statement at [44] was as follows: “We provided copies of the building control final certificate to the local authority and the developer, and also kept a copy for our records. The local authority building control documents cannot be viewed by the public. What the developer did with their copy was up to them, for example, if they used it as part of their marketing or sales documents. A developer does not have to use the final certificate as part of marketing a property, but I would be surprised if he did not do so. I expect that a subsequent purchaser of a flat (years down the line) might rely on the final certificate as proof that the flat had building regulations approval when it was completed.” 11.13. In cross-examination Mr Mather accepted that generally “a purchaser of the property, which is the subject of [the final] certificate” would ask for a copy of the Bldg Regs final certificate in order to assist them in deciding whether or not to purchase the property. As regards subsequent prospective purchasers he made the obvious point that such a purchaser could not reasonably assume that the building was in the same state as it was when the certificate was actually issued. He accepted that it would be a question of the time between the date of the Bldg Regs final certificate and the date of purchase. 11.14. In written closing submissions Mr Asquith made a discrete submission about flat 126, contending that since the evidence showed that flat 126 had been accidentally included in the 15 December 2009 Bldg Regs final certificate Mr Mather could not have intended its purchaser to rely upon it. In my judgment that is a non sequitur. It is irrelevant that flat 126 was included by mistake. It was included in the certificate and Mr Mather, who was unaware of the mistake at the time, knew that its prospective purchaser was likely to rely upon it in precisely the same way as would the prospective purchasers of the other flats. It follows that there was the necessary intention in relation to flat 126 as well. 11.15. Returning to Zagora, in his second witness statement Mr Mather had said that: “I am sceptical about a freeholder's reliance on the Final Certificate given the passage of time. In particular, certain alleged defects, for example a leaking roof, would have become obvious over the years, especially given the weather conditions in Manchester. At the time of signing off the Final Certificates I did not consider the possibility of a future freehold purchaser to relying on them”

“In order to give a cause of action in deceit, not only must the statement complained of be untrue to the defendant’s knowledge, but it must in addition be made with intent to deceive the claimant: with intent, that is to say, that it shall be acted upon by him. It seems that intent, for these purposes, includes not only the case where the defendant actually desires the claimant to rely on what he says, but also where he appreciates that in the absence of some unforeseen intervention he will actually do so.” 11.17. The footnote refers to the decision of Longmore J in Shinhan Bank Ltd v Sea Containers Ltd [2000] 2 Lloyd’s Rep. 406 (where a buyer who signed receipts for undelivered goods knowing that the seller would use them to obtain bank finance was held liable to the bank in deceit when the seller collapsed). At [26] Longmore J stated that this formulation of “intent” was used in the criminal law (see R. v Woollin [1999] 1 A.C.82) and, in his judgment, was “equally applicable when one has to assess intention for the purposes of the law of deceit”. 11.18. The editors consider the position of a representation not made to the claimant directly at 18-31 and, referring to authority, say that: “All that is required for these purposes is that the representation be intended, in one way or another, to reach the claimant in order to induce him to act on it. Nor is it even necessary that the defendant know precisely who the statement is intended for, provided he intends it to be relied on by someone in the claimant’s position: thus in another banker’s reference case a bank was held liable when it sent a fraudulent reference to another bank for the benefit of a customer of whose identity it was entirely unaware. Indeed, in one case it was even held that an action for deceit could be based on a newspaper advertisement, provided the claimant showed that he was one of the class of persons at whom it was directed.” 11.19. Applying those principles, it seems impossible to me to conclude that Mr Mather intended, in the legal sense, a subsequent purchaser of the freehold such as Zagora to rely upon the Bldg Regs final certificates over 2 to 3 years later. There is no evidence that Mr Mather ever expressly contemplated the position of a purchaser of the freehold, as opposed to the purchaser of the individual flats, at the time he issued the Bldg Regs final certificates. This is not surprising, since there is no suggestion that JCS intended to dispose of the freehold at the time Mr Mather was having dealings with its representatives. There is no evidence that Mr Mather was aware from previous experience that developers commonly transferred the freehold to companies such as Zagora whose commercial interest was to collect the ground rent or that there was a market in the purchase of such freehold interests. Nor is there any evidence that Mr Mather was aware from previous experience that any such purchasers would have any interest in whether or not the development had been passed for Bldg Regs purposes. 11.20. In the circumstances, whilst I would not necessarily simply have accepted Mr Mather’s assertion in his second witness statement as determinative, it seems to me to accord with the reality. It follows, in my judgment, that Zagora’s claim must fail on this basis alone. Dishonesty 11.21. I have already considered ZBC’s involvement with the development and Mr Mather’s actions in some detail in section 4 above and do not intend to repeat the findings made in that section here. 11.22. In short, the claimants’ case, insofar as it survives my factual findings in section 4 above, is as follows. (1) There were a significant number of defects, particularly in relation to fire safety in the common parts, which the experts agree ought to have been obvious to a reasonably competent building control inspector. The claimants point to Mr Easton’s agreement in the joint statement that: “the release of the Final Certificates, having regard to the number of defects that exist on the property, in his opinion shows actions that fell below that of a reasonably competent Building Control Officer. In his opinion, no reasonably competent Building Control Officer should have issued the 3 Final Certificates referred to”. (2) By 11 November 2009 Mr Mather knew that Manchester Building Control were seriously concerned about the state of the development and compliance with Bldg Regs. Mr Mather was keen to seek to complete the building control function in relation to New Lawrence House as soon as possible so as to avoid the difficulty of having to deal with the serious concerns expressed by Manchester Building Control with the associated risk of its taking back the building control function in relation to the development. He was also keen to seek to complete the building control function so as to, in popular parlance, get JCS off his back and reduce the overall amount of work on his plate. Knowing that Mr Eadsforth was about to leave ZBG at the end of December 2009 and knowing that Mr Nicholls was effectively no longer involved in undertaking the building warranty surveying function in relation to the development gave him another strong incentive to complete the building warranty function as soon as possible for similar reasons. (3) As at 15 and 21 December 2009, when Mr Mather issued the first 2 Bldg Regs final certificates, he knew from his own inspections in November and December 2009 that there were a number of serious fire safety defects in the development which had not been rectified and, specifically, he knew that the steelwork had not been fire protected. (4) As at 15 and 21 December 2009 Mr Mather had not been informed expressly, whether by Mr Nicholls or Mr Eadsforth, that they had inspected and issued building warranty final certificates in relation to all of the individual flats included in the first 2 Bldg Regs final certificates. (5) As at 15 and 21 December 2009 Mr Mather knew that neither he, Mr Nicholls or Mr Eadsforth had carried out the detailed inspection of all of the individual flats included in the first 2 Bldg Regs final certificates together with the common parts insofar as they formed part of the means of escape from those individual flats necessary before the 2 Bldg Regs final certificates could conscientiously be signed off. (6) By November 2009 and beyond, Mr Mather knew that he could not place any real reliance on information provided or assurances given by JCS, but nonetheless continued to do so because it was easier and simpler for him to do so. (7) Nothing that happened after December 2009 justified Mr Mather in believing that the serious fire safety issues at the development had been remedied. His continued involvement with the development from January 2010 was cursory in the extreme. The circumstances in which he signed off the remaining defects and issued the building warranty common parts certificates in September 2010 demonstrated the most perfunctory of investigations and a continued reliance on what he was told by JCS without independent verification. He had no proper basis for signing off the remaining flats in November 2010. (8) In the circumstances it can properly be concluded that Mr Mather knew that ZBC had not taken reasonable steps to satisfy itself that the Bldg Regs had been complied with. 11.23. Without doing Mr Asquith’s detailed and excellent submissions a discourtesy, the essential case advanced by ZBC in response is that: (1) Mr Mather was reasonably unaware of the nature and extent of the defects, because - as he was entitled to – he placed reliance both upon what he reasonably believed was the skill and expertise of the ZBG building warranty surveyors and upon the truth of what he was being told by JCS. (2) Mr Mather had no particular reason to be worried about the concerns being expressed by Mr Timperley or the possibility that Manchester Building Control might take back the building control function in relation to New Lawrence House. Insofar as there was a concern, it could not sensibly have operated on his mind so as to induce him to sign off Bldg Regs final certificates if, as the claimants contend, he knew that there were serious unremedied fire safety defects within the development which represented a real danger to the safety of occupants. (3) As at 15 and 21 December 2009 Mr Mather was still honestly and reasonably placing reliance on information provided by the ZBG building warranty surveyors and by JCS. He was unaware of the serious fire safety defects. He would not have consciously risked his employment and his reputation by signing off a seriously defective building, particularly given the risk that Mr Timperley might refer his concerns to other authorities and an investigation might reveal the true position. 11.24 I am properly conscious of the need to be satisfied that there is clear and compelling evidence before finding Mr Mather guilty of deceit. However, having carefully considered the evidence and rival submissions I am satisfied that the claimants have made out their case. In particular, I am satisfied that in December 2009 Mr Mather knew that the position was very different from how it would have been expected to be had the normal system been operating properly. He knew that there were real concerns about fire safety provision in the development which had to be addressed before Bldg Regs final certificates could properly be issued insofar as they impacted on the safety of the means of escape through the common areas. He knew, I am satisfied, that he and Mr Eadsforth were working together at this stage, without Mr Eadsforth being accompanied or supervised by Mr Nicholls, to satisfy themselves that the flats could be passed on the final stage 08 inspections and final building warranty insurance certificates issued as well as Bldg Regs final certificates issued before the Christmas shutdown. He undertook a number of joint inspections with Mr Eadsforth in November and December 2009. I am quite satisfied that he was as aware as Mr Eadsforth undoubtedly was as to the ongoing serious non-compliances with fire safety provision, particularly in relation to the absence of protection for structural steelwork and lack of fire compartmentation. I am quite satisfied that he was not informed by Mr Eadsforth at any time prior to 15 or 21 December 2009 that these non-compliances had been attended to and, from his own inspections he must have known that to be the case. I am quite satisfied that he could not have relied and did not rely upon the final stage 08 inspections or final building warranty insurance certificates issued by Mr Eadsforth in November and December 2009 as demonstrating that Mr Eadsforth was reasonably satisfied that these non-compliances had been attended to, when he was aware from his own inspections that they had not been attended to. In circumstances where he must have known, both from what he was told by Manchester Building Control and by JCS and from his own attendances, that at least some of the flats were already occupied, I am satisfied that he persuaded himself that it was safe to sign off the Bldg Regs final certificates on the basis that the individual flats could reasonably be signed off even though the means of escape were not safe, relying on JCS’ assurances that the fire safety non-compliances would be attended to in the New Year. 11.25 It is absolutely clear, I am quite satisfied, that in those circumstances Mr Mather positively knew that ZBC had not, whether directly through himself or indirectly through Mr Eadsforth as ZBG building warranty surveyor, taken reasonable steps to satisfy itself that the Bldg Regs had been complied with at the time he issued the Bldg Regs final certificates so far as fire safety in the common areas as relevant to the means of escape was concerned. At the very least I am satisfied Mr Mather could not positively have believed and did not positively believe, in the light of his involvement in November and December 2009, that ZBC had taken reasonable steps so far as compliance with fire safety was concerned. 11.26 I am conscious that these findings may raise the question as to what Mr Eadsforth’s state of mind was in December 2009 when he was signing off individual flats - and therefore generating the building warranty final insurance certificates - and at least one cover note. In the absence of his having been asked questions on the point it does not seem to me that I am in a position to make positive findings. Nor in my view is it necessary for me to do so for the purposes of this case. The case is pleaded and put solely against Mr Mather. It does not depend, either from a pleaded or a necessary basis, upon my having to find that there must have been some conspiracy as between Mr Mather and Mr Eadsforth. He was after all inexperienced and just about to leave ZBG and, since there were no open defects recorded in Live 27 against the individual flats, perfectly able to enter them as complete. His state of mind as regards the common parts defects is not known and not relevant to the state of mind of Mr Mather given, as I have said, that Mr Mather was attending the development himself at the time and relying on his own inspections. 11.27 That position remained unchanged through 2010 into November 2010, when the third Bldg Regs final certificate was issued. At no stage in that intervening period, when Mr Mather was the only person dealing with matters on behalf of ZBG, did anything happen which would have caused Mr Mather to believe that ZBC had taken reasonable steps. Specifically, I am quite satisfied that he did not and could not have believed that whatever he might have seen or might have been told in September 2010 could have changed the position. 11.28 It is, as I have already recorded, not necessary for me to make any positive finding as to Mr Mather’s motive in acting in this manner. Indeed Mr Asquith went further and submitted that I should not make a finding as to motive when the claimants had consciously declined to plead or assert a specific motive. Nonetheless I am satisfied that the explanation for Mr Mather acting in this way was, as I have already said in section 4 above, that whilst he knew that by November 2009 this was not a normal job where he could safely rely on the skill and experience of Mr Nicholls in surveying and certifying, he knew that he could not blindly rely on Mr Eadsforth as an inexperienced junior employee who he was effectively supervising, and he knew that he could not blithely rely on JCS’ assurance on matters as critical as fire safety in relation to means of escape, he was under such pressure of work that he did not conduct the careful and detailed inspections which he knew he needed to do before he could conscientiously issue Bldg Regs final certificates and, feeling himself between the rock of pressure from JCS and the hard place of the concerns being expressed by Manchester Building Control, decided that he just wanted to get this job off his desk regardless. All this explains why he did something which, I accept, he would not have done under normal circumstances. Reliance 11.29. The pleaded case, as it stood at the start of the trial, was that the ZBC claimants completed the purchases of their respective flats “in reliance upon (a) the existence of the [relevant Bldg Regs final certificate] and consequently (b) the misrepresentations contained therein”. 11.30. In their written opening the ZBC claimants referred to and relied upon the principles relevant to reliance and inducement as set out by Arden LJ in Dadourian Group International Inc v Simms [2009] EWCA Civ 169, at [99]: “(1) it is a question of fact whether a representee has been induced to enter into a transaction by a material misrepresentation intended by the representor to be relied upon by the representee; (2) if the misrepresentation is of such a nature that it would be likely to play a part in the decision of a reasonable person to enter into a transaction it will be presumed that it did so unless the representor satisfies the court to the contrary (see Morritt LJ in Barton v County NatWest Limited [1999] Lloyd's Rep Banking 408 at 421, paragraph 58); (3) the misrepresentation does not have to be the sole inducement for the representee to be able to rely on it: it is enough if the misrepresentation plays a real and substantial part, albeit not a decisive part, in inducing the representee to act; (4) the presumption of inducement is rebutted by the representor showing that the misrepresentation did not play a real and substantial part in the representee's decision to enter into the transaction; the representor does not have to go so far as to show that the misrepresentation played no part at all; and (5) the issue is to be decided by the court on a balance of probabilities on the whole of the evidence before it.” 11.31. Relying upon that statement, the ZBC claimants submitted that: “representations in a certificate certifying that works were complete and had been properly inspected by an Approved Inspector, are the sort of representations that a party would be presumed to rely on in the purchase of a flat or the freehold of a block of flats. Accordingly, ZBC will have to overcome the presumption that the ZBC Claimants did in fact so rely”. 11.32. Mr Asquith objected that this was not a pleaded case. I agreed, with the result that the ZBC claimants applied to amend their statement of case to plead the presumption. I refused permission to amend on the basis that it was a very late application and that I was satisfied that ZBC had been deprived of the opportunity to consider obtaining evidence, possibly from the relevant conveyancing solicitors, to overcome the presumption. 11.33. The ZBC claimants also submitted in their written opening that: “A common theme in the ZBC Leaseholders’ evidence is that many of them were relying on their conveyancers to make sure that the appropriate documentation was in place before they were willing to purchase their flats. Such documentation likely included the Final Certificates because (a) that is what a prudent conveyancer would seek to obtain (see section I1.4 of The Law Society’s Conveyancing Handbook (24th ed 2017)) … and (b) clause 11 of the sale agreements in which JCS specifically provided that the Development (not just the individual flat) was deemed to comply with Bldg Regs provided it had been inspected and approved by the Building Inspector. There is no suggestion that ZBC contends that reliance can not be through an agent (such as a conveyancer) …. In any event, reliance by an agent will suffice: see Gross v Hillman [1970] Ch 445, 461 and the final sentence of Chitty on Contracts (32nd ed 2015) paragraph 7-031.” 11.34. Again, Mr Asquith objected that reliance by the ZBC claimants upon their conveyancing solicitors was not a pleaded case. Again I agreed and again the ZBC claimants applied for permission to amend. I granted permission to amend to plead the allegation, on the basis that it would be addressed and determined solely on the basis of the documentary and witness statement evidence already adduced by the ZBC claimants, which I was satisfied that ZBC had come to trial prepared to meet. I also permitted the ZBC claimants to amend to include an allegation that their conveyancing solicitors had relied upon the Bldg Regs final certificates but refused them permission to include an allegation that it should be presumed that they had done so, either in accordance with the Dadourian case or on the basis of an argument that it would have been negligent for them not to have ensured that Bldg Regs final certificates were in place before exchange or completion. Thus the pleaded case in its amended form said that: “In reliance upon: (a) the existence of the [relevant Bldg Regs final certificate] and consequently (b) the misrepresentations contained therein and/or (c) their conveyancing solicitors, the [relevant ZBC claimant] and/or their conveyancing solicitors as their agents completed the purchases on their respective ZBC Flats”. 11.35. In closing submissions it was made clear on behalf of the ZBC claimants that, having reflected on the evidence which had been adduced, whilst all of them pursued the claim on the basis of reliance on their conveyancing solicitors who themselves relied upon the Bldg Regs final certificates, only four, namely Zagora, Mr Manchikalapati, Mr Gledhill and Mr Hussain were also pursuing claims based on their own reliance. Given my conclusions in section 5 I have no doubt that neither Mr Manchikalapati nor Mr Gledhill can succeed in establishing personal reliance. I shall return to Mr Hussain below. 11.36. I shall also consider the case of Zagora separately from and subsequent to the cases of the individual leaseholder ZBC claimants. There are two reasons for that. The first is that my consideration of its claim as regards reliance is strictly not necessary for the determination of its claim, which has already failed on the first hurdle of intention. The second is that it raises different factual issues from those raised by the individual leaseholders. 11.37. One overarching point made by the ZBC claimants is that it was not necessary for them or their conveyancing solicitors actually to have read the Bldg Regs final certificates to have relied upon them. This was not contested in terms by ZBC, in my view rightly so. That is because if it is possible to conclude on the evidence that either the individual claimant or his conveyancing solicitor had become aware of the existence of the relevant Bldg Regs final certificate prior to purchase or completion and was aware that it confirmed that the property had been inspected and signed off by the approved building inspector and, even if unconsciously, viewed this as confirmation that the job had been done properly by the approved building inspector, then that in my view would amount to sufficient reliance. 11.38. A further overarching point made by the ZBC claimants is that it was sufficient for them or their conveyancing solicitors to have become aware of the existence of the relevant Bldg Regs final certificate prior to completion, even if they were not aware of its existence prior to exchange. ZBC disputed this on the basis that once the ZBC claimants had exchanged contracts they were committed to the purchase of the flat and, therefore, becoming aware of and relying on the existence of the Bldg Regs final certificate between exchange and completion would be irrelevant. In my view that is true as a statement of the general position. However, given the terms and effect of the relevant sale contracts, as discussed in section 3 above at paragraphs [insert], it seems to me that in principle it might be possible for an individual ZBC claimant to prove that he or his conveyancing solicitors had relied upon the existence of the relevant Bldg Regs final certificate in the context of a decision whether or not to agree to proceed to completion or to contest being compelled to complete on the basis that the individual flat or the whole development had not been properly completed. 11.39. Another overarching point made by ZBC is that the only difference between the 11 leaseholder claimants who bring a claim against it and the remaining 15 who do not is that each of the ZBC claimants completed the purchase of their flats after the relevant Bldg Regs final certificate was issued, whereas each of the non-ZBC claimants did not. Indeed, in some cases the same claimants bring a claim against ZBC in respect of flats completed after the relevant Bldg Regs final certificate was issued but do not bring a claim in respect of flats purchased before that date. This is notwithstanding that in several cases the same firms of solicitors acted for the ZBC claimants and the non-ZBC claimants. 11.40. The ZBC claimants submit that this is a non-point, because it is obvious that those claimants who completed on their flats before the relevant Bldg Regs final certificate was issued cannot, as a matter of chronological logic, have relied on non-existent certificates and, hence, cannot have a claim against ZBC. ZBC, however, submits that this misunderstands the point which it is making, which is that if it was so important for a prospective purchaser and/or their conveyancing solicitors to know that there was a Bldg Regs final certificate in place, because of the additional security which that gave, then why did the non-ZBC claimants complete and, more pertinently, why did their – often the same - conveyancing solicitors not advise them that they should not complete unless and until a Bldg Regs final certificate had been issued? 11.41. The ZBC claimants are, it seems to me, unable to answer this point. They are unable to adduce any evidence from their conveyancing solicitors which might explain the apparent difference in view between those who completed before and those who completed after Bldg Regs final certificates were issued. The only obvious explanation, which would be fatal to the ZBC claimants’ case, is that the conveyancing solicitors who acted for the ZBC claimants did not in fact consider the Bldg Regs final certificates to be important. In my view this is the only sensible conclusion to be drawn from the evidence which has been placed before me. 11.42. There is a complete absence of evidence that any of the ZBC claimants or their conveyancing solicitors were provided with the relevant Bldg Regs final certificate either before exchange or before completion. There is no suggestion that they asked for it or sought to obtain some comfort, legal or otherwise, that it would be provided. Nor is that particularly surprising, given that any sensible purchaser and his conveyancing solicitor would be far more interested in the fact that JCS was able to offer a ZBG building warranty as part of the sale package, since that was a policy which was directly enforceable by the purchaser against a blue-chip insurer in accordance with its terms in the event of any breach of Bldg Regs whereas – as any lawyer would know, either through existing familiarity with Anns v Merton LBC or a modicum of research – no claim could be made against the building control inspector even on proof of negligence, since only proof of fraud would suffice. 11.43. If the contracts had provided for completion to take place once JCS had provided the purchasers with a copy of the Bldg Regs final certificate then I accept that the position would be very different. However they did not, making the trigger the provision of the cover note. There is no basis for inferring that the conveyancing solicitors would have believed there to have been a necessary correlation between the issue of the cover note and the issue of the Bldg Regs final certificate such that the issue of the cover note must have meant that the Bldg Regs final certificate had already been issued. Contractually, there is no relationship between the two. In practice, as this case has revealed, the cover note should be followed by the building warranty final certificate and then by the Bldg Regs final certificate, but the process of issuing a cover note is a separate process from the issue of the Bldg Regs final certificate. 11.44. Thus, in the absence of specific evidence in a particular case that the conveyancing solicitors did in fact come to know of the existence of the Bldg Regs final certificate and considered it relevant to whether or not their client was obliged to complete if their client was not willing to complete, then in my view the ZBC claimants’ case based on their relying upon the reliance placed by the conveyancing solicitors upon the Bldg Regs final certificate must fail. 11.45. I have already, in that context, considered Dr Ikpeme’s case and concluded that he cannot succeed on that basis given my assessment of the facts. 11.46. Mr Hussain’s case raises more difficult issues. I am satisfied that the real question is the reliance of Mr Syed who, I am satisfied, was undoubtedly acting as agent of Mr Hussain for all relevant purposes. The evidence shows clearly that before completion he had been made aware of and received a copy of the Bldg Regs final certificate. It is also clear that he was not prepared to accept that certificate as conclusive, because he was challenging both JCS and Mr Mather as regards what he regarded as the remaining unresolved defective state of the opening windows. Moreover, there is no clear documentary evidence which shows that he believed or he was being advised by the conveyancing solicitors that the issue of the certificate would prevent Mr Hussain from contesting his obligation to complete on the basis of the ongoing problem with the french windows and balcony. 11.47. In my view and on balance Mr Hussain has not succeeded in proving reliance. It must be borne in mind that at no time prior to exchange was the Bldg Regs final certificate even in existence, let alone referred to. It follows, in my view, that it could only have been relied upon prior to completion on the basis that it influenced the decision whether or not to complete. There is simply no documentary evidence which shows that it did influence that decision. It was only produced because Manchester Building Control suggested that Mr Syed should check that it related to the right flat. It was not deployed by JCS to force Mr Hussain to complete. There is no credible evidence that Mr Hussain’s solicitor or Mr Hussain or Mr Syed believed that it did. The email written to Mr Mather the day after completion is in my judgment not credible as an accurate record of fact; if Mr Syed had genuinely believed that Mr Hussain was compelled to purchase because of the certificate then I have no doubt that he would have continued to correspond with Mr Mather from March 2010 onwards to seek to persuade him to accept that the certificate should be withdrawn or suspended until the ongoing problem with the opening windows as he perceived it had been resolved. It seems to me that he is just writing to preserve Mr Hussain’s position in relation to any potential future claim. There is no credible evidence that Mr Syed had any positive belief in the accuracy of the certificate other than in relation to the opening doors. Indeed, there is no credible evidence that he had any positive belief in its accuracy at all. 11.48. In summary, I am satisfied that all of the individual leaseholder claimant cases fail in relation to reliance on and by their conveyancing solicitors and I am also satisfied that those who also allege personal reliance fail on the facts as well. 11.49. I should also add, for completeness, that even had I allowed the individual leaseholders to amend to plead the presumption of reliance and/or to plead that it should be presumed that the conveyancing solicitors relied because it would have been negligent not to obtain a copy of the Bldg Regs final certificate before exchange or completion I would not have found in favour of the claimants on the issue of reliance. In short, that is because: (a) All issues of reliance are fact-sensitive. (b) In a typical deceit case, where a representor has made a fraudulent misrepresentation, intending the representee to rely on it, and the representee has in fact entered into the transaction which the representor intended him to enter into, then it is relatively easy to make a presumption in favour of the representee. (c) Here, in the particular context of this case it cannot so easily be presumed that the representee has relied on the misrepresentation, given that the provisions of the sale contracts entered into by the individual leaseholders make it clear that: (i) the Bldg Regs final certificate has no particular contractual significance to the purchasers when compared to the cover note; (ii) the Bldg Regs final certificate has no particular commercial significance to the purchasers given that they are obtaining the benefit of the ZIP building warranty in any event. (d) When considering all of the evidence referred to above, I am satisfied that any presumption that might otherwise operate would have been discharged by ZBC in the particular circumstances of the case. (e) On the facts of this case it cannot be presumed that the conveyancing solicitors must have obtained and relied on the Bldg Regs final certificate when: (i) the evidence before the court is that very few in fact did obtain the Bldg Regs final certificate and there is no reason to believe that others did; (ii) the evidence before the court is that none actually relied on the Bld Regs final certificate and none advised their clients along the lines that this provided an assurance that the flat and common parts had been properly constructed in accordance with the Bldg Regs and that they could place legal reliance upon this assurance in certain circumstances; (iii) the authorities and standard forms placed before me by the claimants do not establish that it would have been either common practise to obtain, or negligent not to obtain, the Bldg Regs final certificate before exchange or completion on the particular facts of this case. 11.50. That leaves just Zagora, whose claim I have already held fails at the hurdle of intention. In short, and by reference to the evidence I summarise and findings I make at section 5 above, I would have found that Zagora itself did rely on the Bldg Regs final certificates when proceeding to exchange and complete. Reliance on and by its conveyancing solicitors does not arise because it is so plain that Mr Broadhurst and Mr Robinson were personally relying on the Bldg Regs final certificates being in place. Limitation 11.51. Given the conclusions I have already reached, there is no need to consider limitation in relation to any of the ZBC claimants, however for completeness I shall do so shortly. 11.52. First, it is common ground that there is no limitation issue in respect of Zagora’s claim against ZBC, whereas limitation issues are raised against the individual leaseholder ZBC claimants. 11.53. The individual leaseholder ZBC claimants rely on section 32(1) of the Limitation Act 1980, which provides that time for claims in fraud does not begin to run until “the plaintiff has discovered the fraud… or could with reasonable diligence have discovered it”

“The question is not whether the plaintiffs should have discovered the fraud sooner; but whether they could with reasonable diligence have done so. The burden of proof is on them. They must establish that they could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take. In this context the length of the applicable period of limitation is irrelevant. In the course of argument May LJ observed that reasonable diligence must be measured against some standard, but that the six-year limitation period did not provide the relevant standard. He suggested that the test was how a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency. I respectfully agree.” (Italics in original) 11.56 Applying these principles to the facts of this case, in my view the starting point must be to enquire at what point each of the individual leaseholders, acting with reasonable diligence, did in fact discover or ought to have discovered that: (a) his or her flat, including the common parts used as a means of escape in case of fire, were not compliant with the Bldg Regs; (b) given the nature and extent of the non-compliances, the building control inspector could not have taken reasonable care in inspecting and certifying the flat and associated common parts; (c) given the circumstances, the building control inspector must have known that reasonable care had not been taken (or at least have been reckless as to whether or not reasonable care had been taken). However, the acts or omissions of their agents or the knowledge which their agents in fact acquired or ought to have acquired will not be attributed to the individual leaseholder. 11.57 In my view it would follow that the starting point would have to be actual knowledge on the part of an individual leaseholder that the flat or associated common parts were Bldg Regs non-compliant in a serious way and that this must have been blindingly obvious to any building control inspector. 11.58 Taking Mr Tarasov as a good example, I am satisfied that he did not acquire nor could he with reasonable diligence have acquired this level of knowledge before August 2011, based only upon knowledge that the development was incomplete and that there were a number of serious defects such as an absence of lifts. Even his knowledge in August 2012, once he had been in contact with Freehold Managers and Mainstay and had received the risk assessments produced by BDW which clearly indicated problems with fire safety, would not have been sufficient. Nor would his knowledge by January 2013, when he obtained the surveyor’s report which identified fire safety and structural defects to the common parts, but did not make any reference to the possibility that the Bldg Regs final certificate ought never to have been issued, have been sufficient. In my view the starting point could only have been in April 2013, when he was informed by Mr Broadhurst that there was a claim against ZBC. 11.59 I reach the same conclusion in relation to Ms Bedi. Although she brought proceedings before August 2011 they did not involve claims against ZBC nor ZIP for that matter nor did they raise allegations of serious non-compliance with the Bldg Regs. Whilst it might be said that those advising her at the time might have considered investigating the possibility of a claim against ZIP and/or ZBC which might have brought the relevant facts home to Ms Bedi, that never happened and she is not to be fixed with knowledge which she could only have gained had her advisers acted differently. 11.60 Mr Dickie is more marginal. As I have recorded in section 5, by February 2011 he positively asserted that in some respects the Bldg Regs had not been complied with and, in my view, had he given the matter any thought at that time he would have appreciated that the effect of what he was asserting was that the development had been signed off by the building control inspector when it ought not to have been. Nonetheless on balance I do not consider that this was enough for him with reasonable diligence to commence an investigation with legal and expert assistance which would have provided him with sufficient knowledge by August 2011. In context, he was making a modest claim against ZIP and was not aware of serious structural or fire safety related defects making his flat unsafe to occupy – especially since it was being lived in by his daughter - or unsaleable. 11.61 The only individual leaseholder where I would have reached a different conclusion is Mr Hussain. Assuming I am wrong as regards reliance, by 5 July 2010 Mr Syed clearly believed at that point that the certificate was wrongly issued and that had reasonable steps been taken by Mr Mather it would not have been issued. By that stage Mr Syed had already previously been advised by Manchester Building Control to commission a survey and instruct a solicitor. Mr Hussain cannot seek to argue that this knowledge of his agent should not be attributed to him since the email was sent to him for him to send on to Mr Mather and he cannot say: “I did not bother reading it”

“ZBC is responsible for all the loss that flows from a transaction induced by its fraud. Accordingly, it does not lie in the mouth of ZBC to say that the losses claimed could not reasonably have been foreseen (Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158, at 167). The rule of law is that any damage directly flowing from the fraudulent inducement may be recovered unless it is caused by the claimant behaving completely without prudence or common sense (Doyle v Olby)”