Building your dream home? Avoid these traps for the unwary

Like many couples who have been scarred by poor build quality on new-build homes, Mr and Mrs Griffiths were keenly aware of some of the challenges that building your own home can bring. Unfortunately, this did not stop them from sadly finding themselves in a dispute with their builder.

Unfortunate Beginnings

The Griffiths, attracted by C E Gilbert (Building Contractors) Limited’s (CEG) A1 status with the National House Building Council (NHBC), contracted with them to build a new home. The contract price was nearly £2 million.

As part of CEG’s obligations, they were to obtain new building insurance for defective works from the NHBC. CEG did so and Mr Griffiths signed a document accepting £1 million worth of cover.

Notwithstanding CEG’s A1 status, defects were found, along with asbestos contamination of the surrounding land, and the Griffiths successfully arbitrated against CEG. As would be usual for many small-time contractors, CEG couldn’t pay and they, therefore, went insolvent. On the bright side, the Griffiths managed to get the NHBC to pay out £1 million plus indexation under their insurance.

With a shortfall and CEG bust, the Griffiths resumed their proceedings against Mr Gilbert (the claim having been paused for the arbitration proceedings against CEG to play out), who was the director and shareholder of CEG: Griffiths & Griffiths v Gilbert [2022] EWHC 3122 (TCC).

The Claim (and result)

Mr Gilbert, the Griffiths say, had fraudulently misrepresented that CEG would take out NHBC cover to the full build costs of £2 million. Further, the Griffiths claimed, if the NHBC cover had been for £2 million, they would have obtained more from their settlement with the NHBC.

Facing a claim of fraudulent misrepresentation worth c.£1 million against himself in a personal capacity, Mr Gilbert denied these allegations. His defence was simple: he had told the Griffiths that CEG would obtain the NHBC’s standard insurance coverage of £1 million and had not represented that CEG would obtain NHBC cover for £2 million.

With the battlelines drawn, and the dispute now in the High Court, the judge examined the instances where the alleged misrepresentations happened.

What he concluded disappointed the Griffiths:

• Was there a representation in a pre-contract meeting? No. Perhaps surprisingly, the judge was persuaded by a note made by Mr Gilbert’s son of a pre-contract meeting. This note was transcribed from a smaller notebook into a larger notebook some 6 to 8 months after the meeting while adding some additional recollections. The small notebook had no mention of any NHBC value discussion, while the larger notebook contained the following: “NHBC – agreed same cover as Braggington + £1M as a comparable (maximum cover).”
• From Mr Griffiths’ enquiries with the NHBC, it would cost £5,838 for £2 million cover for the property. Could the inclusion of the figure of £7,000, later increased to £10,500, detailed against an “NHBC” line item in the draft costings, be a representation Mr Gilbert had obtained a quotation from the NHBC for a premium to cover the full build costs (rather than for £1 million) and that CEG would take out such cover? Again, no – those figures could not be a representation for insurance cover for specific amounts. The Griffiths’ argument unravelled when the timeline of their discussions with the NHBC was examined.
• Even if those figures were in valuations issued under the building contract? Even then, no.
• Was it plausible that Mr Griffiths had failed to spot the reference to £1 million cover, simply signing and filing the NHBC certificate of cover on receipt? No – the judge did not accept this and was unimpressed by the attempt to explain away Mr Griffiths’ lack of alarm.

This put a decisive end to the Griffiths’ claim.

Takeaways

Whilst the result must have left the Griffiths extremely unhappy, lessons can be learnt for those considering venturing out to build their dream home:

• probe the particulars of NHBC cover, including whether the level of cover is appropriate;
• obtain transparency over costings (to the extent possible), including examining supporting quotations;
• ensure key terms are written into the building contract – this protects all parties to the transaction – avoiding those dispute-prone grey areas;
• check any warranty documentation upon receipt; and
• avoid relying on a contractor’s or consultant’s solvency to pay out any damages due to defects, especially where the project value runs into the millions. Plan for the worst-case scenarios.

The tragedy of it all was that a simple sentence in the building contract explaining what NHBC insurance was required would have made the dispute redundant - although this advice won’t be of much use to the Griffiths now.