381 Southwark Park Road Rtm Company Ltd & Ors v Click St Andrews Ltd (in liquidation) & Anor

A contractual power described as rescission may, on its wording and context, operate as termination rather than rescission ab initio. Termination of a conditional development agreement does not extinguish accrued claims for earlier breaches unless the contract clearly says so.

A nominee purchaser under the enfranchisement legislation may recover losses for which it becomes liable as freeholder to participating leaseholders, including liabilities passing with the reversion. A duty under section 2A of the Defective Premises Act 1972 is a single duty directed to the outcome that the dwelling is fit for habitation, and applies only to work undertaken after that provision came into force.

Building defects involving structural failure or fire spread may constitute a relevant liability for the purposes of a building liability order. The court found liability for defective weather protection, fire compartmentation, structural support and other workmanship defects.

The claim concerned defects and water damage at a block of flats undergoing works to add three modular rooftop flats. The first claimant, a right-to-manage company, had agreed to acquire the freehold after completion of the works. The second defendant guaranteed the first defendant’s obligations.

The roof was removed during a period of weather warnings. Rain entered the building, and subsequent investigations identified defects in fire stopping, compartmentation, structural support, roofing and workmanship. The leaseholder claimants also claimed under their leases, in negligence, nuisance and under section 2A of the Defective Premises Act 1972.

The issues included the effect of the defendants’ purported rescission of the agreement, whether the right-to-manage company could recover leaseholder losses, the existence of contractual and statutory liabilities, and whether the defects constituted relevant liabilities under section 130 of the Building Safety Act 2022.

1. Contractual rescission. The purported rescission of the Freehold Purchase Agreement terminated the rights and obligations to sell and buy, but did not extinguish accrued rights arising from earlier breaches. The obligation to carry out the works was not treated as wholly conditional in a way that placed the works in a contractual vacuum. The first claimant therefore retained claims for breach and could recover under the guarantee.
2. Loss and nominee purchaser. The right-to-manage company was a separate legal person acting as principal, not agent for the individual leaseholders. The leaseholders did not acquire direct rights under the agreement through the nominee structure, and the third-party rights clause did not confer such rights. However, once the company acquired the freehold, the parties’ contemplation included liabilities owed by it to leaseholders. The burden of the landlord covenants passed with the reversion under section 3 of the Landlord and Tenant (Covenants) Act 1995. The company could therefore recover losses for which it was liable to the leaseholders, subject to no double recovery.
3. Defective premises. Section 2A of the Defective Premises Act 1972 came into force after the principal works. It could apply only to later remedial work. The duty was a single duty to ensure that, as regards the work, the dwelling was fit for habitation when completed. The pleaded case failed because no sufficiently specific post-commencement breach or loss was identified.
4. Defects and liability. Removing the temporary roof without adequate protection against rainfall breached the contractual requirement to carry out the works in a good and workmanlike manner. The crane lift should have been delayed in light of the weather warnings. Fire compartmentation, fire stopping, structural support and certain workmanship defects also breached the agreement and the covenant of quiet enjoyment. Those structural and fire defects created relevant liabilities under section 130(3)(b) of the Building Safety Act 2022. The making of any building liability order was reserved for a further hearing.
5. Alternative claims and damages. The insurance claims were not established in full, though an apparent breach of the contractual insurance obligation was identified. A fit-for-purpose tortious duty was not established or required. The nuisance and statutory nuisance claims added nothing. Judgment was given for the claimants on the established liabilities, with damages and consequential matters to be quantified in the final order. The freezing injunction remained in place.