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Background

 

In April 2017, the Oireachtas Joint Committee on Housing, Planning and Local Government opened a consultation in relation to building standards, building control and consumer protection.  Oral and written submissions were made by experts, industry bodies, construction professionals, home owners and representatives from the Department of Housing,

 

I was asked to address the Committee in light of my PhD research on this topic.  I outlined the problems facing homeowners to the Committee, including legal problems including poor legal remedies, lack of adequate defects insurance, and limited enforcement of Building Regulations for shoddy building work.

 

I explained to the Committee that home owners who find defects usually did not know where to turn for help, received little assistance to help with their problems, and were often left footing the bill to fix defects.

 

I made a number of recommendations to the Committee, including law reform to improve legal remedies; cost-effective dispute resolution instead of having to resort to the courts or arbitration; improved resourcing of local authorities to facilitate more inspections and better enforcement of Building Regulations, and the creation of a national regulatory authority to monitor and enforce the Regulations, and to have a regulatory role in licensing those involved in construction.

 

I was again invited to address the Committee in October in relation to the Construction Industry Register Ireland (CIRI); I expressed concerns about CIRI being located within a private body, the Construction Industry Federation, and recommended that the registration system, if it were introduced as a mandatory requirement for builders, should be administered by a national regulatory authority for building.

 

I am delighted to see the concerns and recommendations expressed in my submissions to the Committee taken on board in the Safe as Houses? Report published today.

 

The Report

 

The Committee summarised the problems that were highlighted by the various people who made submissions:

 

–       no mandatory inspections of construction works before 2014;

–       no comeback for buyers against the many developers and builders who became insolvent after the financial crash;

–       long-standing failure to introduce law reform to improve consumer protections, including warranties that would transfer on the sale of a home, a reasonable period in which to bring claims, minimum mandatory contract terms, and improved information for buyers.

–       No investigations of the full extent of defective building during the housing boom, particularly in multi-unit developments,

–       Low levels of inspection and enforcement of Building Regulations by local authorities.

 

The 26 Recommendations

 

The Report’s recommendations are under four headings:

 

Building Standards and Consumer Protection Agency

 

I was very glad to see the Committee recommend the creation of a Building Standards and Consumer Protection Agency, to support local authorities and to monitor compliance and enforcement of Building Regulations, as well as providing advice and dispute resolution services to consumers.

 

The Report also suggests that the Agency would be the home for the Building Control Management System (BCMS).  The is the nationwide online portal for all building control certificates and other documents that must be sent to building control authorities for most types of construction; at the moment, the BCMS lives in the Local Government Management Association, but a national body could use it to keep track of building activity and Building Regulations compliance right across the country.

 

The Agency would also provide an home for Construction Industry Register Ireland that is entirely independent of the construction industry itself; this would promote consumer confidence and make it easier for home owners to seek advice and assistance.

 

Making BCAR truly independent

 

The current inspection and certification system for building control is mainly dealt with in a set of regulations from 2014, the Building Control (Amendment) Regulations, colloquially referred to as ‘BCAR’ for those of us discussing them on a regular basis.    The BCAR system requires competent registered professionals to be retained to carry out inspections during construction, and to provide certificates of compliance with Building Regulations, for most new construction works (except one-off houses).    One significant criticism of the BCAR system is that the person inspecting and signing the certificate is employed directly by the developer, and may be an employee of the developer or be dependent on the developer for a stream of further work.

 

The Report, therefore, recommends that the certifiers required to be appointed under the BCAR system should be employed or engaged by local authorities, and that developers should pay local authorities directly for inspection and certification.  These inspectors and certifiers would presumably work alongside the local authority’s inspectors who are carrying out inspections at present, but it will not necessarily be the same pool of people; there is no requirement at the moment for local authority employees who do building control inspections to be registered professionals, for example.

 

The Report also interestingly recommends that non-disclosure orders on home owners who resolve their latent defects issues with the developer/builder should be outlawed.  Followers of the outcome of the Berkeley balcony collapse will know that Senate Bill No. 465 was introduced in 2016 to require any citations or actions against builders for health and safety breaches to be disclosed to the California State Licensing Board, which is responsible for licensing builders.  The Bill stopped short of requiring contractors to disclose civil settlements to the Regulator, but a recent report by the Licensing Board suggested that its regulatory role would be enhanced if it could gain access to information on judgments, arbitration awards, and settlement payments for residential defects, so it is possible that the Bill will be amended in due course to require this.   An Irish version of this suggestion might be to ensure that builders/developers who settle claims taken against them would have to report that to the Building Standards and Consumer Protection Agency.

 

Protecting against Latent Defects

 

The Report requires Latent Defects Insurance to be mandatory for all new homes, together with transmissible warranties of quality, amendment of the Statute of Limitations to allow proceedings to be brought within two years from discovery of a defect, and mandatory minimum terms in residential construction contracts.   (I had suggested to the Committee that the leading home warranty policy on the market would not always be sufficient to meet claims: see the playback here and the transcript here.)

 

Before you dismiss the idea that you might ever sign a residential construction contract, if you have bought a new house or apartment in Ireland then you probably already have.  Whether you were aware of it or not, it most likely contained a number of terms that might have come as a surprise if you had found a defect – the arbitration clause, for example, that appears in the Law Society standard form building contract, or other terms that developers have been known to include in such contracts, such as limiting buyers to one snag list,  and/or giving them only 7 days to produce it.  So, again, a re-balancing of terms between sellers and buyers of new housing would be very welcome.

 

The Report also recommends a review of existing sanctions and punishments on developers and builders who breach building and fire safety standards. This is an interesting one, as the sanctions that are in place at the moment are already pretty onerous – fines, imprisonment, and potential personal liability for directors or managers.  The main problem, in my view, is that enforcement and prosecution for breaches is so rare that the sanctions don’t deter wrongdoing.  A cultural and behavioural problem, and possibly a hard enough nut to crack. Still, good to see it highlighted as an issue.

 

Addressing the legacy of bad building and poor regulation

 

This will be the part that anyone dealing with defects today is most interested in; the Committee calls for the Government to establish a redress scheme to help home owners with latent defects, including an information and advice service for people affected.

 

A number of options are put forward for consideration, including an industry levy matched by Government funding, tax relief for homeowners doing repair works, and an interest-free loan scheme to help home owners fund the cost of remedial works.  It certainly seems unfair that a low-interest loan scheme would be made available, as Minister Murphy has announced this week, for people buying homes, but that the money can’t be found for loans to people left dealing with defects through no fault of their own.

 

Summary

 

I have been researching this area full-time since September 2014 when I started my PhD, and the launch of today’s report is a major milestone for Irish home owners and for anyone living in a defective house or apartment.

 

It is the first comprehensive review of the problems that people have faced in accessing help and remedies to fix the defects in their homes.

 

It takes account of input from right across the stakeholders, experts and public servants involved in building regulation and the construction industry.

 

It is a roadmap for what could be achieved in the coming years.

 

The Committee made clear today that they are committed to working with Government to implement these recommendations.

 

It will take political leadership, industry support, and the willingness that this Committee has shown to listen to all sides.  It is a very important step in acknowledging the suffering of people who have dealt with the stress of defects for years, in some cases, impacting on their lives, their health, and their finances.

 

 

 

 

I was invited to give evidence to the Joint Committee on Housing, planning, and Local Government in relation to the General Scheme for a Construction Industry Register Bill. I appeared before the committee today, and I have included below my opening statement to the committee. When the report of the session is available online, I will post a link to the full transcript.

Oireachtas Joint Committee on Housing, Planning and Local Government
Pre–legislative scrutiny: General Scheme for Construction Industry Register Island Bill
Deirdre Ní Fhloinn, Barrister at law and PhD Candidate, Trinity College Dublin
26 October 2017

Thank you for inviting me here today to address you in relation to the general scheme for the Construction Industry Register Ireland Bill. I am a barrister in the final year of my PhD research in relation to legal remedies and redress for defective housing.

In my previous submissions to this committee, I set out my concerns in relation to the system for construction regulation in Ireland. I have reviewed the scheme for this Bill. I thought that it would be beneficial to the Committee for me to examine how this proposed scheme fits within the existing legal and regulatory context for construction regulation in Ireland, and specifically whether it achieves the objective of consumer protection.

There are four issues in particular that I wish to highlight in my opening statement:

Consumer Protection
How to regulate?
Public accountability and conflicts of interest
Effective regulation & State involvement

Consumer protection – will CIRI protect consumers?

Consumer protection in construction regulation requires good quality housing to be built, with accessible remedies for poor quality housing. The Bill provides no remedies for consumers; it may be presented as part of a package of reforms, but those reforms do not address the most significant issues facing consumers. These include: poor legal remedies, no cost-effective access to dispute resolution procedures, and no mandatory defects insurance to cover the legal liability of insolvent builders, which could at least provide an ‘after the event’ pathway to a remedy for the home owner.

A private registration system might be thought satisfactory in a country with a greater State involvement in the construction process generally, and with better legal remedies for defects. It could have very negative consequences in Ireland, where the regulatory system and the legal regime for remedies are both inadequate from the perspective of consumer protection.

Example: a consumer dealing with defects in their home
A home owner dealing with defects may make a complaint to the CIRI Admissions and Registration Board, and the complaint may result in disciplinary action or prosecution against the builder – which will not fix the defects. To obtain compensation to fix the defects, the consumer will still have to pursue a long and expensive remedy through legal proceedings. If the defect is a breach of the Building Regulations, that person can also complain to the local building control authority, and possibly also the registration bodies of any professionals involved in the works, none of which is obliged to act or award compensation so that another builder can do the work. Only the building control authority can actually order the builder to put the work right, and then only (realistically) during the construction stage.

How should builders be regulated?
The Scheme will result in a private system to regulate builders, and a separate public system to regulate what they build. In my opinion, it is a missed opportunity to further develop the national building control management infrastructure as a central regulatory tool for regulation of both building and builders.

This will result in significant information gaps – for example, only the local building control authority will know of a registered CIRI member’s actual record on compliance with the Building Regulations. This information could be captured on the Building Control Management System and then used by the registration / licensing system for builders, if the two systems were operated under a common framework.

An independent regulator with responsibility for the Building Control Management System could use the system as a regulatory tool to monitor persons and entities involved in construction, using information submitted in relation to projects and any inspection and enforcement information supplied by building control authority authorised officers in respect of construction works.

Example: A builder with a history of poor compliance with the Building Regulations

Information that I have obtained from Building Control Authorities indicates that formal enforcement powers are seldom used under the Building Control Acts. A builder with a pattern of non-compliance in construction works may have negotiated on more than one occasion to avoid formal enforcement. Under the CIRI model, a person’s registration will not be affected by these non-compliances unless that person is convicted under the Act; even then, CIRI may only discover the conviction if the member discloses it.

Conflicts of interest

The proposed system will act as a gateway to being able to work for large numbers of people, and would be a significant transfer of power from the State to a private entity. Independence cannot be ensured simply through the composition of the CIRI Boards. The system will not be overseen by a Regulator, as the RECI and RGI systems are for electricians and gas installers. These functions have been specifically delegated by the Commission for Regulation of Utilities, and the Commission monitors the performance of these schemes as well as taking enforcement action where electrical or gas works are carried out illegally.

A leading Irish expert on the delegation of State powers to the private sector has observed that where similar delegations have occurred in the United States, the private delegates are exempt from requirements that apply to the Government and State agencies, such as ‘disclosure requirements, oversight structures, conflict of interest and reporting requirements, and ethical obligations’. (Donnelly, 2007).

There is no mention in this Bill of the Freedom of Information Act, the Ethics in Public Office Act, or whether CIRI will be subject to the Ombudsman Acts. There are no requirements on any committee or board members of CIRI to disclose their own financial interests.

There are a number of examples of other Irish regulatory bodies where such information is available, and for good reason: this Bill entrusts a significant amount of power to a private entity over who can work, and what work they can do. These norms of regulatory governance are not reflected in the Bill.

Effective regulation of construction: investment and State involvement

As part of my PhD I have researched systems of construction regulation in other countries. The consistent feature of effective and robust regimes is that they are proposed resourced, independent of the regulated industry, with sufficient profile and credibility in the sector to influence compliance.

My research suggests that part of the reason for the widespread defects in our housing stock is that, at least in recent years, there has not been a credible threat of enforcement of the Building Regulations. There are powers of enforcement in this Bill, but building control authorities also have extensive formal enforcement powers that are seldom used.
In my view the evidence of the number of defects in Irish houses and apartments points towards a widespread and systematic disregard of the Building Regulations. Why would people comply when it is cheaper not to comply and there is little chance of being caught, and little chance that you will be prosecuted or even have to pay to fix the defects if you are caught?
I have previously told this Committee of my concern that the system of mandatory inspection and certification set up in 2014 would be seen to be doing the ‘heavy lifting of regulation’, and that the public system would suffer unless it was resourced and supported. Investment in building control and in the Building Control Management Project is very small by comparison with the value of the construction sector. I believe that if regulation of builders is entrusted to the private sector that the public system will be undermined and that we will miss the opportunity to develop a robust system using the Building Control Management System as a key tool.

There are successful examples worldwide of the private actors having a role in construction regulation, and it can work well. Our context is different. We have extensive evidence of breaches of Building Regulations, poor legal remedies, expensive and complex procedures for dispute resolution, and lack of mandatory defects insurance.

My research and analysis of the particular experience of Ireland in recent years suggests that the State should be investing in strengthening and supporting the regulatory system, instead of outsourcing a key pillar of that system to a private representative body for the construction industry.

Reference

Donnelly, C. ‘Delegation of Governmental Power to Private Parties: A Comparative Perspective’, Oxford University Press, 2007.

I found myself this week attending the installation of a gas fire in the home of a family member.  Trust me on this – a gas fire with a remote control is a wondrous thing.  My own one is fully enclosed in a glass box, which eases my guilty green conscience.

The installer informed me that an inspector from the Register of Gas Installers of Ireland might call while he was there, to inspect his work.   He explained that he had to submit a list of all of his installation jobs to RGI and that an inspector could call and carry out a spot check at any of them.

The Inspector called a half-hour later. He inspected:

• the installed unit
• the ventilation to the room in which the fire was installed
• the number of carbon monoxide detectors in the house
• the pressure in the main gas line outside the house
• the housing for the gas supply
• the operation of the gas cooker
• the operation of the flue, by carrying out a smoke test to ensure that smoke was going straight up the chimney correctly.

He was intrigued by my interest in this process but very helpful!   There were not enough carbon monoxide detectors in the house, so he asked the installer to install another one in the room where the fire had been installed, which was done immediately.

I asked what would happen if the installer wasn’t happy with the level of ventilation to the room, and he explained that the installer can issue a notice to the homeowner specifying steps to be taken, or if there is a dangerous situation, would isolate the gas appliance so that it could not be used until the problem was dealt with.

He told me that there around 10 RGI inspectors that operate around the country, covering a number of counties; his next stop was Dundalk, and he expected to carry out six inspections that day.

I took a copy of his inspection report template:

The installer, meanwhile, explained the registration,  qualification and insurance requirements for gas installations, and that he paid an annual fee of €170 for registration.  He said that he had training and education requirements that had to be complied with each year to maintain his registration.

He pointed out that there have been numerous problems with solid fuel stoves, including domestic fires, and that there was no similar registration and regulation system for fitters of stoves, even though they also present risks in terms of ventilation, carbon monoxide exposure, etc.

I was left with a declaration of conformance like this for the new installation:

If you’re a following of my research into building control inspections and enforcement, you’ll know why this of interest to me:

• registration and regulation of installers, including qualification and educational requirements;
• gaps in the regulatory regime: gas installers are regulated, but solid fuel stove installers are not, even though they are subject to various requirements pursuant to Part J of the Building Regulations;
• inspectors operating across counties;
• template inspection reports;
• credible likelihood of inspection;
• follow-up on non-compliances (in this case, the installation of a carbon monoxide detector.  I was also advised to put a carbon monoxide detector in the hallway of the property, to ensure that it could be heard in the bedrooms of the house).

All in all, a very useful way to spend the morning!

 

 

 

 

I was very struck, when I visited Toronto last autumn for a conference, about the quality of the local development application notices.

The ones I saw were poster-sized, with a significant amount of information about the proposed development, including a digital image of what the development would look like once complete, and a QR code that  could be used to access the relevant application documents online.

Here is an example.   It provides information on the proposed development, the name and telephone number of the official dealing with the application, and information about how to access more information online (with a QR code) and in person.

In Ireland, we are still apparently wedded to the idea that a planning notice can give limited information about the proposed development, in a way that really does not invite participation by someone who wants to know more about it, or who may be affected by it.  Here is an example of an Irish notice.  There’s no name of an official to speak to, no idea of what the development will look like, but – perhaps worst of all – the notice suggests that the only way to find out more is to go to the planning office in person.

There is an extensive online file in respect of this application, but you wouldn’t know if from looking at this notice.  The regulations in relation to site notices ( S.I. 685/2006, Planning and Development Regulations 2006) are specific – the notice should be in the form set out in Schedule 3 to the Regulations.

A search against the address on the planning authority’s website gives extensive information, without anyone having to go to the planning office.  It also facilitates an interested person to seek advice about the proposed development without having to pay someone to attend at the planning office and look at the plans.    The online search also gives the name of the case officer, which is very helpful, and isn’t on the site notice (as it would be in Toronto).    

The documents tab says ‘0’ but in fact contains a map of the site, the proposed plans, etc.

Isn’t it time the site notice Regulations were amended to direct people to the online applications?

I was recently invited to address the Oireachtas Housing Committee on the subject of ‘Building Regulations and consumer protection’.  My written submission to the Committee is here: DNiF Submission (updated) 04.04.2017

I also drew the Committee’s attention to the July 2016 Report of the All Party Parliamentary Group into the Quality of New Housing in England, and included as an appendix to my submission the Executive Summary and Recommendations of Inquiry into the Quality of New Houses in England.

The transcript of the meeting is available here, and the televised recording of the meeting is here.

The main message that I sought to convey is that regulation of builders should be a given, that remedies are needed even where there is a defects policy in place, and that an accessible, cost-effective redress mechanism is an essential part of housing quality.

The Committee expects to publish a report in the coming months and I will post and comment on that at that time.

 

 

There was an abundance of exciting things at the RICS Cobra Conference in Toronto last week, so I thought I’d share some of them here.     The theme of innovation and technology permeated the entire proceedings, along with a consistent strand of building performance and sustainability.

The conference opened with a keynote from Dr. Rick Huibregts of Cisco about innovative technologies, urging the construction industry to follow suit and embrace digital transformation.  Their Toronto Innovation Center site is worth a a visit:

I spent much of the day in the legal stream: Janey Milligan presented on UK Construction Contract Payment legislation.  Since coming home I have found Janey’s excellent blog here.  Paul Tracey who lectures on construction law at the University of Salford gave a fascinating paper on the influence of culture on the evaluation and negotiation of time and money claims in construction projects in Dubai; Paul lectures on the Construction Law and Practice LLM/MSc at Salford and you can follow him @PGTracey.

I gave a paper comparing Irish and Canadian state responses to building failures and asking whether common law or statute could provide a remedy to the State for doing so.  I was very happy to be awarded best legal paper for it at the conference dinner, not least as the prize came with a year’s subscription to the International Journal of Law in the Built Environment, from the nice people at Emerald Insight.

Wednesday brought a mixture of papers from other streams; I really enjoyed the paper from Professor Chris Eves and Dr. Andrea Blake presenting their research on whether aircraft noise affects the value of houses in flight paths in Australia; surprisingly, it does not.   I was very interested in the paper from Nico Scholten from the  Dutch Expertcenter Regulations in Building (ERB) foundation who presented a paper on proposed changes to Dutch building control law, highlighting a number of issues with which we also grapple in Ireland: quality control, consumer protection, and public/private building control.

Wednesday’s keynote from was Dr. Patrick Saavedra – a whistle stop tour of how York University uses BIM for campus planning, development and management.  The stand-out of the presentation was the use of BIM in the design and construction of the Bergeron Centre for Engineering Excellence at the University.

I was delighted to connect with Frits Meijer and Henk Visscher of Delft University of Technology  as I had come across their work in mapping building control across the EU.  Their paper paper on lessons that the Netherlands could learn from its neighbours on building control, setting out the increased privatisation of Dutch building control in draft legislation. The paper includes a useful review of features of building control systems in various EU countries, such as mandatory insurance requirements and systems of building permits.

A highlight of the legal stream for me was Carrie Da Silva’s paper on Negligent Valuation: Its development in the UK and the role of Professional Standards, which explored the leading caselaw on negligent valuations, and asked the very pertinent question of the relationship between professional standards and the law of negligence; can you comply with a professional standard, and still be negligent? (yes). Can you disregard a professional standard, and not be negligent? (possibly).   Carrie has very helpfully collated the leading negligent valuation cases into a casebook which you can find here

The Cost and Value Management stream on the second day included a very striking and well-delivered paper on Knowledge application in the supply network of infrastructure programme management from Hedley Smyth and Meri Duryan of UCL, which picked up quite a few ideas that I’d come across when preparing project management lectures for the Kings College MSc a few years back.  The Bartlett Centre at UCL does very interesting work which you can find out about here

The final day of the conference included a fascinating tour of the BIM lab at George Brown College, including a demonstration of augmented reality software using a tablet, to demonstrate how BIM models can inform repair and maintenance of buildings.   Our final stop was at the magnificent Aga Khan museum outside the city, with a guided tour and description of the design and construction process for the building.

And finally home – stopping on the way to the airport to take in an exhibition about the Beatles’ last shows in Toronto, in 1966.

Next year’s COBRA will take place in London, hosted by UCL.  I’d really urge researchers in construction and real estate to consider submitting a paper; it is a great chance to meet with an international group of people involved in the latest innovation and research in construction.   Expressions of interest by 4 November.

 

The Housing and Homelessness Committee was set up in April 2016 to consider submissions in relation to how to solve the housing crisis; there is further information here, including links to televised Committee sessions:

http://www.oireachtas.ie/parliament/oireachtasbusiness/committees_list/housing-homelessness/

My submission to the Committee, complete with a list of rather ambitious recommendations, is here:

DNiF submission to Oireachtas Housing Committee 10 May 2016 (1)-3

And our friends at the BRegs Blog will be publishing submissions that they receive, so keep an eye out there as well:

The issue of liability for negligent and inspection and certification of new houses has been widely debated since the introduction of the Building Control (Amendment) Regulations, 2014.  The potential liability for certifiers gave rise to a good deal of concern before the Regulations were introduced, and for good reason.  There is a substantial risk that a negligent certifier will be held liable for the cost of putting right defects to a house in the event of negligent inspection or certification.   This is the issue that was before O’Malley J in the High Court in the February 2016 decision in McGee v Alcorn.

The plaintiffs, Mr. and Mrs. McGee, bought a house in 2008 for €430,000.  Alcorn was the building contractor, and Friel was the architect technician who issued certificates confirming that he had inspected the construction of the house, that the foundations and ground conditions were satisfactory and suitable, and that the house complied with the Building Regulations.

The foundations, in fact, had been built so badly that the house began to crack and tilt.  The engineer retained by the McGees to inspect the damage to their house described the workmanship as ‘pathetically bad’; the court described the house as having been built on a  ‘bizarrely defective’ foundation; two of the house’s windows were not built on any foundation, and the house was built on ‘made-up’ ground, not suitable for building.

Alcorn, at the time of the judgment, had left the country and had a judgment in default marked against him.  This left Friel carrying the liability for the entire loss.

The case is of interest to construction professionals and their advisers for a number of reasons.

Firstly, the court had no difficulty in finding that the technician owed a duty of care to the purchasers of the house, although there was no contract between them.    For this purpose the court adopted the traditional test of negligence, finding that there was proximity between the McGees and Friel, that the loss to the McGees was reasonably foreseeable, and that it was fair, just and reasonable to impose a duty of care to purchasers

‘on persons such as engineers and architects who provide certificates of this nature to builders.  Most people buying a modern house, and most of the lenders to whom they will go for mortgages, will require such certificates and will rely upon them.  Self-certification by a builder does not seem a realistic alternative.  It is simply untenable to suggest that the person who holds himself out as professionally qualified to assess, and in a position to certify, the quality of the house and the workmanship of its construction, should not thereby be required to take care in giving such certification’.

The defendant’s counsel had argued that the cost of repairing the house was ‘economic loss’, which is not recoverable under the law of negligence, except in limited circumstances.      The court, however, found that those circumstances existed, as the case, although argued as a claim in negligence, effectively amounted to a claim in negligent misstatement, for which economic loss is recoverable.

The court awarded €129,000 in damages for repair of the house; €38,525 for reinstatement of finishes and redecoration; €75,000 for the reduction in value to the house caused by the permanent ’tilt’; €11,000 for replacement of chimneys, and €25,000 in respect of distress and inconvenience during the works, which was exacerbated by the fact that the plaintiffs and their three young children continued to live in it during the construction works.

A striking feature of this case is that it related to a rural ‘once-off’ house, singled out for exemption for building control by SI 365/2015 and widely welcomed by politicians, particularly in rural areas.  (http://paulconnaughton.ie/2015/07/29/easing-of-building-regulations-welcome/) I criticised this exemption in my letter to the Irish Times here.

 

The request made by the Irish Supreme Court for a preliminary ruling in this case is now before the European Court of Justice for consideration (Case 613/14). For each case that comes before the ECJ, an opinion is given by an Advocate General on the questions raised. The Advocate General’s opinion is not always followed by the ECJ, but is often persuasive not only in the instant case but also in subsequent cases.

The nub of the questions put to the ECJ by the Supreme Court was as follows:

1. Does the European Court of Justice have jurisdiction to interpret the text of a harmonised national standard (IS 13242:2002) which was itself based on a standard of the European Committee for Standardisation (CEN) (EN 13242:2002)?

2. Is the Irish Supreme Court obliged not to apply implied terms of merchantability and fitness for purpose or quality on the grounds that those terms, or their application, created standards or imposed technical specifications or requirements that had not been notified to the EU Commission under the Technical Standards Directive 98/34?

3. Is the Irish Supreme Court obliged to presume that a product produced in accordance with the relevant standard is of merchantable quality and fit for its purpose, and if so, may such a presumption be rebutted only by tests carried out in accordance with the standard at the time of supply of the product?

These are crucial points for Irish Asphalt: the aggregates supplied to JEC were tested for pyrite after they had been used in the construction of the building. If IA could demonstrate that the aggregates should have been presumed to comply with Standard IS 13242:2002, and that a product is only in breach of the standard if it is tested at the time of production or supply, then this would dislodge the judgment against IA by the High and Supreme Courts.   The principle of supremacy of European law requires a national court to apply European law in preference to national law where there is a conflict.

The opinion was delivered by Advocate General Campos Sanchez – Bordona 28 January 2016.

The Advocate General recited the key provisions of the Construction Products Directive 89/106, the Technical Standards Directives 83/189 as amended by Directive 98/34, and the Irish Sale of Goods Act 1893 as amended by the Sale of Goods and Supply of Services Act 1980.

On the first question relating to the jurisdiction of the ECJ to interpret the harmonised standard, the Advocate General considered that, as the ECJ clearly has jurisdiction to interpret the Construction Products Directive, it must then have jurisdiction to interpret a harmonised standard adopted pursuant to that Directive.

On the second question, the Advocate General accepted the view of the Irish Supreme Court, to the effect that a product could be tested “during the products economically reasonable working life”, and that the directive did not require that proof of conformity with the technical standard could only be established by a test carried out at the time of the products manufacture. This is an important point for JEC; if compliance with the standard could only be established by tests carried out at the time of manufacture, then all of the testing of the aggregates for the purposes of the litigation would be ruled out of consideration.

On the third question, the Advocate General was of the opinion that a presumption of fitness for use of construction products was of no effect when the merchantable quality of construction products is assessed, for the purposes of application of a national law governing the sale of goods.

Another important point for JEC is that if Irish Asphalt could demonstrate that s. 14 ( 2) of the 1893 Act should not be applied, then it would only have to comply with the technical standard, and not with the requirement of merchantable quality under the Act.

Arguably the most important aspect of the opinion relates to the question of whether the provisions of Irish law implying terms of merchantable quality of fitness for purpose must be disapplied, as they have not been notified to the Commission in accordance with Directive 98/34. The Advocate General was quite clear that a provision of national law such as s. 14(2), which can be excluded by agreement between the parties, could not constitute a technical regulation within the meaning of the definition of Directive 98/34.

If the ECJ follows the Advocate General’s opinion, then the Supreme Court will be in a position to confirm its judgement on liability expressed in its decision of December 2014. In it, the Supreme Court upheld the finding of Charlton J in the High Court decision of May 2011, and award damages for IA’s breach of contract.

It will be the end of an exceptionally long and costly road for both parties.  I will post an update when the ECJ issues its ruling.

A building contract is a contract for services for the purposes of the Sale of Goods and Supply of Services Act 1980, of which section 39 (3) provides as follows:

‘Subject to section 40, in every contract for the supply of a service where the supplier is acting in the course of a business, the following terms are implied –

• that the supplier has the necessary skill to render the service,
• that he will supply the service will due skill, care and diligence,
• that, where materials are used, they will be sound and reasonably fit for the purpose for which they are required, and
• that, where goods are supplied under the contract, they will be of merchantable quality within the meaning of section 14 (3) of the Act of 1893 (inserted by section 10 of this Act).

Noreside Construction v. Irish Asphalt^[1] concerned a contract for the sale of aggregates for use in the building of houses and apartments in Finglas, Dublin, that was entered into in 2003. Some five years after the sale of the aggregates, the defendant Irish Asphalt notified Noreside that aggregates from its Bay Lane quarry contained pyrite, and should not be used in building.

By 2008, a number of residential and commercial developments in Dublin and in surrounding counties had suffered significant damage due to excessive pyrite content in the aggregate used in their construction.   The effect of reactive pyrite in hardcore used as infill is that floor slabs and walls of the building can heave upwards, leading to cracking and extensive remedial works.

Noreside sought an indemnity from Irish Asphalt in respect of damage to the development in Finglas where aggregate from the Bay Lane quarry had been used, and where significant damage had occurred to the houses due to pyrite heave.   Irish Asphalt sought to rely on a limitation on liability in its standard terms and conditions; Noreside, however, claimed that it had purchased the aggregate on its own standard terms.   Considerable evidence was put before the court as to the exchange of correspondence between the parties, in order to establish what terms had been incorporated into their contract.

The court ultimately concluded that neither party’s standard terms and conditions of supply had been incorporated, and that the contract had in fact been formed when two senior employees of Noreside and Irish Asphalt had agreed, orally, for the supply of aggregate, and when a purchase order was sent by the plaintiff to the defendant. There were limited express terms in the order, no warranties and no limitation on liability.

The court held that the delivery dockets accompanying the aggregates did not create new contracts on each delivery, and were intended to record the volume delivered, and that the operatives in charge of those deliveries had no authority to vary the original contract.

The effect of the finding was that the defendant’s limitation on liability was not part of the contract; the Court accepted the plaintiff’s contention that the implied term of merchantable quality from s. 14 (2) of the Sale of Goods Act 1893 did apply, on the basis that there was no evidence to support the exclusion of that term.

Irish Asphalt appealed to the Supreme Court; the Court dismissed the appeal in late 2014. The appeal turned on Irish Asphalt’s claim that the trial judge had been wrong in finding that there was only one contract formed between the parties, and that the delivery dockets did not have the effect of varying the terms of the contract.

Instead, Irish Asphalt claimed that the contract entered into was a ‘master’ contract, but that separate contracts were entered into with each delivery of aggregates, which themselves were subject to terms and conditions referred to (but not included in) the delivery dockets accompanying each delivery of aggregates.  It then claimed that its terms and conditions, although not specified in the delivery dockets, were incorporated by reasonable notice, or a course of dealing between the parties.

The Supreme Court was prepared to accept that a separate contract was entered into with each delivery of aggregates; however, the court did not accept that the defendant’s terms and conditions were incorporated into each of those contracts.

One of the crucial points in the court’s analysis is that the inclusion of a reference to terms and conditions being ‘available on request’ was not sufficient to incorporate those terms and conditions into the contract between the parties.  This was the case notwithstanding the fact that the plaintiff’s site foreman or other representative would have signed the docket upon each delivery of aggregates.

This was a fundamental issue for the defendants; their terms and conditions contained a limitation on their liability, while the original contract agreed with the plaintiff for the supply of aggregates did not.

Noreside Construction v Irish Asphalt, [2011] IEHC 364 (High Court)

Noreside Construction v Irish Asphalt [2014] IESC 68 (Supreme Court)