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A new approach to home refurbishment claims

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Unfortunately, residential construction conflicts between homeowners and their builders are all too prevalent, usually centred on the value of a bill or the quality of completed construction work, or both. Such disagreements frequently lead to the parties becoming entangled in protracted (and costly) litigation, which is fuelled by a sense of injustice and the inability to reach an agreement. But how much will it cost? The financial, the physical and mental toll of enduring a protracted legal battle, and strained relationships are all factors to consider.

This article is a brief review of HH Judge Stephen Davies suggests a procedure[AC1]  for settling domestic building disputes. This was a contested home renovation construction dispute between Dr Mirza and his builder Sky, in The Sky’s the Limit Transformations Ltd v Dr Mohamed Mirza [2022] EWHC 29 (TCC), in which the judge who heard the case tried to alleviate the high expenses and limit the persistent conflict inherent in this type of litigation for future cases.

The dispute case

A dispute arose between a homeowner (Dr Mirza) and a contractor (The Sky's the Limit) over a final account of over £120,000, which included overdue invoices and damages for loss of profit. The trial lasted five days and included the reports of eight specialists, including building surveyors, mechanical and electrical engineers, and quantity surveyors.

The parties were left with an unsatisfying conclusion after an arduous trial procedure and over a week of numerous experts being questioned in the witness box, the final outcome was that nothing more was owed to the contractor, and in the absence of a counterclaim, nothing more was owed to the defendant.

Suggestions made by the Judge

Against this background, Judge Davies makes a number of suggestions (at paragraphs 6-9) about how such cases maybe managed in the future. These comments may be significant for claimants, defendants and legal professionals and are worth reviewing in full, on a paragraph by paragraph basis: 

“6. In my view concrete steps to address the challenge of finding a time and cost effective means of fairly resolving domestic property renovation building contract disputes are required. … I would suggest that one option well worth considering in such cases would be for directions to be given at the first CCMC along the following lines: (a) disclosure limited to documents relied upon and to known adverse documents; (b) a single joint expert building surveyor to be instructed in all cases to address all items in issue, both liability and valuation, with questions to the expert strictly for the purposes of clarification only; (c) a stay for mediation on receipt of the report and questions.  If the parties are not willing to mediate and the judge does not consider it appropriate to order mediation, then there should be an order for compulsory early neutral evaluation before another TCC Judge.”

Renovation conflicts are, without a doubt, numerous, often complex, and consume a disproportionate amount of court time and money. The joint expert the judge proposes (instead of each party having experts of their own) is frequently used in practice; nevertheless, the fact that he advises it even when parties have experts is novel. This, I believe, is to urge the parties to agree on a single joint expert before proceeding.

An order requiring mandatory Early Neutral Evaluation is daring, and it is unlikely that litigants or practitioners will appreciate it. For those unfamiliar Early Neutral Evaluation is a process where the claim is presented to a Judge who gives a non binding view on how they think the case will go. This is on the one hand very helpful as it usually gives a reliable guide to the issues and how the court may decide them however it is only a guide and it is not binding. This means it often represents additional cost without concrete results, this is hard to sell to any party in litigation.

Further case management suggestions by the Judge

“7.  If no settlement is achieved then there should be further directions as follows: (d) witness statements, limited to matters remaining in dispute, strictly complying with PD57AC and limited in length and/or number ; (e) a trial, which should not normally exceed 1 day in length, at which: (i) each party would have produced in advance detailed written opening submissions; (ii) no oral openings would be permitted; (iii) no more than 1 hour each for cross examination of each party’s witnesses on their key evidence would be permitted; (iv) the single joint expert would attend remotely to answer questions from the judge and parties for no more than 1 hour in total; (v) there should be 1 hour each for oral closing submissions, followed by: (f) a judgment, orally or in writing at the judge’s discretion, which would be as summary as the trial process.  To make the trial workable and fair the judge would probably require a half day pre-reading time and up to a full day judgment time, ideally the day before and the day after the trial respectively, with the latter being used either to produce a written judgment or to give an oral judgment in the afternoon following a morning of judgment preparation.”

The majority of the procedures here are aimed at making the trial run smoothly and without putting undue strain on the court's resources. This case took up 5 court days, plus reading and judgment time, putting a significant strain on the court's resources, something Judge Davies hopes to prevent in the future.

If this strategy is implemented, Claimants/Defendants will have more confidence about the amount of court time they will need, which might be a very helpful innovation.

Limiting costs and trial times

“8. In terms of costs budgeting, the approved costs going forwards should not normally exceed £25,000 per party, broken down as to £2,500 for disclosure; £5,000 for expert evidence (which would include the party’s half share of the expert’s fee); £5,000 for mediation (including a half share of the mediator’s fee); £2,500 for witness statements; and £10,000 for trial preparation, trial and post judgment matters. “

This would be a very useful innovation in terms of limiting legal expenses, and it would also provide prospective litigants with a degree of confidence regarding their risk and where it would fall. The idea is that if the Judge suggests that settling would be far more beneficial to the parties than going to trial at this point, the matter will be put to rest. If the case proceeds to trial, HH Judge Davies proposes limiting the trial to one day in duration to avoid a lengthy hearing.

“9. Whilst this process would not enable a judge to produce anything like the sort of judgment I have produced in this case in terms of length and detail, it would enable the judge to produce a judgment after a fair and open, but summary, trial process in which the key issues were ventilated and which, importantly, was reasonably speedy and reasonably inexpensive. I am not suggesting that an order for directions along the above lines would be appropriate in every case or that it would be a panacea in every case.”

This section is crucial. Judge Davies clarifies that this is not a one-size-fits-all solution that will apply in every situation, but rather a starting point for better handling of these types of cases. In the footnotes, he even admits that this trial would have taken at least two days. However, 2 days is a lot less than the 5 days it actually took.

As a result, this strategy is simply a beginning point, one that generally simplifies the process and results in speedier, more cost-effective justice. This judgment is relatively new and we must wait and see whether Judge Davies suggestions are widely adopted.

What are the suggested procedure limitations?

The proposed schedule, as HH Judge Davies pointed out, does not shield the parties from incurring significant pre-action costs. However, if a judge so desires, he suggests that any unreasonable expenditures be recorded in the cost management order to "help in focussing minds."

A cost cap has the benefit of levelling the playing field and guaranteeing that no party suffers severe financial hardship as a result of the dispute. However, it would be necessary to investigate whether a ceiling of £25,000 is possible or even practical.

Residential occupiers involved in domestic building disputes will continue to face a challenging route through potentially costly Court procedures until any improvements are implemented. The parties will continue to benefit from seeking expert counsel from experienced construction solicitors at the earliest feasible moment. Parties will be able to make educated judgments about which approach to pursue in order to reach a timely and cost-effective resolution armed with such information.

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