Rickards & Anor v Jones & Ors

Where a purchaser and mortgagee require NHBC protection as a condition of a new-build purchase, a conveyancing solicitor must take reasonable steps before completion to verify that the builder remains an NHBC member and is authorised to pass on the relevant documentation. This may require direct confirmation from NHBC and advice to postpone completion until cover is confirmed. A solicitor cannot rely on a supposed reasonable belief that the documentation created cover while maintaining an inconsistent case that NHBC was not bound. Failure to make the necessary checks is causative where a timely warning would have led the purchaser not to complete. Obtaining or confirming the Ten Year Notice may also be required where the house is complete, although that was an alternative and non-essential ground.

The claimants purchased land and a newly built house with mortgage finance. Both they and the mortgagee required NHBC protection. The defendant solicitors completed the purchase without checking the NHBC documentation, confirming the builder’s continuing membership or obtaining the Ten Year Notice.

The house contained serious defects, the builder became insolvent and NHBC refused cover. The claimants brought negligence proceedings against the solicitors. They appealed from Aberystwyth County Court, where the defendants’ case included an assertion that the claimants would have completed despite the absence of cover. The central issues were whether the solicitors should have verified the availability of NHBC cover before completion and whether the defendants could rely on an unpleaded contention that NHBC was nevertheless bound.

1. Appeal allowed. The appellants were awarded judgment for damages to be assessed. Costs were awarded below, in the Court of Appeal and in the mediation, subject to detailed assessment.
2. Mance LJ held, with Latham LJ agreeing, that the appeal could be resolved on the primary ground. On the basis on which the case had been pleaded and contested, NHBC cover depended on the builder’s continuing membership and authority to pass on the documentation. The defendants had not pleaded that NHBC was bound, and had consistently proceeded on the basis that no cover existed. They therefore could not rely on an inconsistent argument based on ostensible authority or a reasonable reading of the documentation.
3. Given the importance of NHBC cover to both the purchasers and the mortgagee, the solicitors were required to contact NHBC, at least to confirm the builder’s continuing membership and authority and that valid cover would arise. They failed to do so. Had they made the enquiry, the lack of membership would have been discovered and the purchasers would not have completed, so the breach caused the loss.
4. Mance LJ identified an alternative, narrower ground. Because the house had been completed before legal completion, and the mortgagee’s instructions required the Ten Year Certificate, the solicitors were probably also required to obtain the Ten Year Notice or confirm that it would be issued. This ground was expressly treated as unnecessary to the decision.
5. Simon Brown LJ reached the same conclusion. If NHBC was not liable, the risk was apparent and required protection against; if NHBC was liable, that affirmative case had not been pleaded and could not be raised.

• Court of Appeal (Civil Division) Appeal allowed. The appellants were awarded judgment for damages to be assessed.
• Aberystwyth County Court Appeal brought from the decision of His Honour Judge Moseley QC.