Wol (London) LLP v Croydon Investments Limited & Ors

On an application for strike-out or summary judgment, the claimant need show a realistic, rather than fanciful, prospect of success. The court must avoid a mini-trial, but may decide a short point of law or construction where the evidence is sufficient.

Contractual obligations requiring an employer to procure performance of a building contract may arguably impose liability additional to liabilities under collateral warranties. The scope of contractual references to defects is a matter of construction and may require evidence of the parties’ common factual understanding. A causation case that is apparent but inadequately pleaded should ordinarily be clarified by amendment rather than struck out.

Wol (London) LLP purchased a converted office complex from Croydon Investments Limited. The sale and purchase agreement required Croydon to administer the building contract, procure the contractor’s performance and ensure that defects were remedied. Wol later alleged substantial defects and claimed losses against Croydon for breach of the sale and purchase agreement, against RGB under a collateral warranty and the Defective Premises Act 1972, and against Stroma under a collateral warranty.

Croydon applied to strike out the claim or obtain summary judgment, arguing that its liability was excluded or limited by the collateral warranties and that causation was not adequately pleaded.

1. Application test. The court accepted the guidance in Easyair Ltd v Opal Telecom [2009] EWHC 339. A claimant must have a realistic prospect of success. The court must not conduct a mini-trial, but may decide a short point of law or construction where the evidence is sufficient and the parties have had a proper opportunity to address it.
2. Construction of the sale and purchase agreement. The court applied the approach in Arnold v Britton [2015] UKSC 26; [2015] AC 1610. The language of the agreement is central. Commercial common sense cannot be used retrospectively to alter clear language or relieve a party from an imprudent bargain. On that approach, Wol’s case that paragraph 4 of Schedule 5A imposed an obligation on Croydon akin to a guarantee, additional to the collateral warranties, was well arguable.
3. Scope of defects. The definition of defects in Schedule 5A was arguably wide enough to include the substantial defects pleaded, rather than being confined to snagging defects. The evidence did not establish at this stage any common factual understanding of the property’s condition capable of resolving the construction issue without a trial.
4. Admissibility. Pre-contract negotiations were excluded from consideration, applying Prenn v Simmonds [1971] 1 WLR 1381 and Chartbrook v Persimmon Homes [2009] UKHL 38; [2009] AC 1101. The entire agreement clause provided an additional reason for rejecting the evidence.
5. Causation and disposal. The causation case against Croydon was not expressly pleaded, although its intended nature was tolerably clear. Croydon was entitled to a properly pleaded case, but striking out or summary judgment was inappropriate. Wol was required to provide a re-amended pleading clearly setting out its case against Croydon. The court invited submissions on the appropriate order.