Hodgson v National House Building Council

On summary judgment and strike-out applications, the court must assess whether the claim has a real prospect of success or reasonable grounds, without conducting a mini-trial. A claim under a settlement agreement may create a distinct obligation to pay the cost of remedial works, assessed by reference to the obligation undertaken when the agreement was made. Whether the claimant has suffered recoverable loss, including whether remedial cost or diminution in value is the appropriate measure, may require factual investigation.

Claims already determined in an earlier arbitration cannot be re-litigated under the settlement agreement. They may also constitute an abuse of process, even where the later proceedings are against a non-party to the arbitration, but that conclusion requires a close merits-based analysis.

Mr Hodgson owned a bungalow covered by an NHBC Buildmark policy. He had previously arbitrated against the builder concerning alleged defects and obtained a partial award. After the builder became insolvent, Mr Hodgson and the NHBC entered into a settlement agreement under which he would submit claims under section 2 of the policy and the NHBC would determine and pay qualifying claims.

Mr Hodgson later submitted further claims. The NHBC rejected them, and he brought proceedings claiming payment or damages for breach of the settlement agreement. By then, he had sold the property without carrying out remedial works. The NHBC applied for summary judgment and strike-out, arguing that there was no recoverable loss and that the claims had already been determined in the arbitration.

1. Applications and applicable tests. The applications were considered under CPR Part 24.2(a) and CPR Part 3.4(2)(a) and (b). The claimant needed a case better than merely arguable, but the court should not conduct a mini-trial. The relevant question was whether there was a real prospect of success or reasonable grounds for bringing the claim.
2. Recoverable loss. The claim was brought under the settlement agreement, not directly under the policy. It was reasonably arguable that the settlement agreement was a distinct agreement to pay what the NHBC would have been liable to pay under section 2. The relevant “Cost” could arguably be assessed by reference to the cost the NHBC would have incurred when the agreement was made. The later sale of the property and the absence of remedial works did not conclusively defeat the claim.
3. The court declined to decide finally whether the policy operated as an indemnity, whether remedial cost could be recovered without actual reinstatement, or whether diminution in value was excluded. The observations in Great Lakes Reinsurance v Western Trading [2016] EWCA Civ 1003 were obiter and the policy wording was materially different. These issues involved disputed questions of construction, fact and degree. Summary judgment on the no-loss ground was therefore dismissed.
4. Arbitration and abuse of process. Under the settlement agreement, claims already determined in the arbitration, or claims forming part of it but not pursued, could not be raised again against the NHBC. Alternatively, re-litigating such claims would be an abuse of process. The relevant inquiry required a close merits-based analysis and consideration of whether allowing the litigation would be manifestly unfair. The fact that the NHBC had not been a party to the arbitration was not conclusive.
5. On the documents, claims concerning the radon barrier, oversite fill, concrete slab, frost-damaged or weak mortar, insulation, wall ties, cavity trays, consequential works, windows, gutters and leadwork had no real prospect of success because they had already been determined, withdrawn or subsumed in the arbitration. The claim concerning joint filling remained arguable. Item 2, concerning foundations, also survived because the court could not determine on the available material whether it had already been decided. The application therefore succeeded in part, with item 2 left for the claimant to pursue if he wished.