Can a building regulations certifier be sued in tort by the occupier of a defective building?

Zagora Management v Zurich Building Control Services [2019] EWC 140, TCC, 182 ConLR 180

Facts

This relates to the construction of “New Lawrence House”, a residential apartment development in Hulme, Manchester.  The freehold was acquired by Zagora, which was the first claimant; a number of other claimants were leasehold owners of individual flats.  Zurich Building Control (Zurich) had responsibility to issue Building Regulations Certificates.  When various defects emerged necessitating fire safety repairs estimated at about £10,000,000, the claimants brought proceedings, among other things, against Zurich for the tort of deceit, that was to say fraudulent misrepresentation that the Regulations had been complied with when in fact Zurich knew that they had not been.

It was established as a fact that Mr Mather, the inspector employed by Zurich, had issued the Certificates falsely i.e. neither knowing nor believing them to be true; but argued that the claimants had not relied upon the certificates, and that Zurich had not intended that they should rely upon the certificates.

Held

1. To establish the tort of deceit it must be shown (a) that a false statement has been made, (b) that the maker of the statement knows it to be false or has no reason to believe it to be true or is acting recklessly; (c) that it intends the recipients to rely upon it; and (d) that the recipient did rely.
2. Zagora was not intended by Zurich to rely upon the statement therefore Zagora could not prove deceit. As regards the leaseholders, however, they could be expected to rely upon certification and it followed that by issuing the certificates Zurich must have intended the recipients to rely upon them; BUT as a matter of fact the Court held that the leaseholders had not in fact relied upon the certificates.

Comment

1. This litigation can be seen in the context of the Grenfell tragedy. The facts showed that Mr Mather of Zurich knew when he issued the Building Regulations Final Certificates that “there were a number of serious fire safety defects in the development which had not been rectified and specifically he knew that the steel work had not been fire protected.”
2. There was an intention on the part of Zurich/Mather that the purchasers of leaseholds should rely upon the certification process - that is one of the purposes for which these certificates are issued. However, the detailed examination of evidence produced no instance of any of the claimants or of their conveyancing solicitors seeking copies of the final certificates before they exchanged contracts or completed the conveyancing purchases.  In other words they did not actually rely upon the certificates when deciding whether to enter into leasehold contracts.  The leaseholders’ claims against Zurich therefore failed as a matter of causation.
3. The primary moral of this case must be that the purchaser of any interest in a new or recently completed multi-storey building should ask to see satisfactory Building Regulations final certificate before going through with the conveyancing process.

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