Raising the Bar – Court orders payment of £14.7 million in damages after contractor’s failings

Justin Mendelle, Sharpe Pritchard

A contractor has been ordered to pay £14.7 million in damages after toughened glass used to clad an office block in the City of London failed, sending panes of glass tumbling down onto the pavements below.

Here, Justin Mendelle, a Partner and Head of Construction at Sharpe Pritchard, considers the legal implications following the court’s ruling in 125 OBS (NOMINEES 1) v LEND LEASE CONSTRUCTION (EUROPE) LTD & OTHERS [2017] EWHC 25 (TCC)

Background

When panes of glass started to fall from 125 Old Broad Street onto the pavement in the heart of the City of London, it was clear that something had gone wrong with the recent refurbishment of that building. The refurbishment works took place between 2006 and 2008 under a design and build contract. Lend Lease Construction (Europe) Limited was the contractor (the “Defendant”). The objective was to redevelop the former 26 storey stock exchange building to provide high specification office and retail space. A key feature of the building was its glass façade and the specifications for this element of the project were set out in the contract. Practical Completion was certified in July 2008 but between September of the same year and July 2012, 17 panes of glass had shattered and fallen from the building. A canopy was constructed to protect the public from injury. Although nobody was injured by the falling glass, this solution had a limited impact and was not risk free.

As a consequence of the repeated failure of the glass panes, the building had to be completely re-clad. 125 OBS (the “Claimant”) contended that the glass panes did not meet the fitness for purpose requirements of the contract and brought a claim for damages to cover the cost of the re-cladding works. The Defendant argued that its sole obligation under the contract, with which it purportedly complied, was to ‘install glass that had been heat soaked in accordance with the relevant European Standard (but with a holding period of four hours)’. What ensued at trial was a detailed analysis of whether the glass panes had been heat soaked in accordance with the contract.

In summary, the express terms of the contract were as follows:

(i) The glass panes were to be heat soaked to meet the 2005 Standard (a European standard);
(ii) The Claimant was to provide documentation confirming that heat soaking tests had been completed and setting out the number of failures that had occurred during testing; and
(iii) The panes were to have a ‘service life of 30 years’.

Various companies were involved in supplying and manufacturing the glass panes. All of these companies were aware of the obligation for the Defendant to provide evidence that the heat soaked glass had been tested. However, the documentation presented to the court to confirm that the panes had been appropriately heat soaked was not convincing. The court came to the conclusion, describing it as ‘a fact’, that 35-40% of the glass did not undergo heat soaking as required by the contract.

When the remedial works commenced, the panes were removed from the building and placed into storage. A further 4 panes were discovered to be defective meaning that the total of defective panes increased from 17 to 21. The court considered evidence from various glass experts who all agreed that an estimated maximum of 5 to 7 panes on a building of the size of 125 OBS would potentially fail. That 21 panes failed was seen as excessive and pointed towards the fact that the heat soaking process could not have been applied to all of the panes.

The failure to heat soak the panes was a clear breach of contract. Under the contract, the Defendant was required to comply with the Employer’s Requirements and the Contractor’s Proposals. A particular obligation was for the Defendant to use materials of suitable quality and the General Specification went as far as describing the exact requirement of the Claimant for the panes to last no less than 30 years, which they clearly did not. A further point brought before the court was that the Defendant was required to heat soak the panes in accordance with the European Standard ‘subject to an agreed extension of the holding phase from 2 hours to 4 hours.

As with many recent cases from the construction industry, the court considered contract construction. This was in relation to a potential discrepancy between the Employer’s Requirements and the Contractor’s Proposals (the contract did not set out an order or precedence in relation to these documents). The court had to grapple with whether the Defendant was under an additional obligation under the contract to comply with the increased soak time of 4 hours, rather than the 2005 European Standard which imposed a less onerous obligation. Applying the principles on construct construction set out in Arnold v Britton, the court held that a reasonable person with all of the relevant background information about the contract would consider that there was no inconsistency and all of the obligations applied.

Decision

The court found in favour of the Claimant and awarded damages of c. £14.7 million. It was clear to the court that the glass had not been heat soaked. This amounted to a breach of contract and this demonstrated that the Defendant had failed to meet its fitness for purpose obligations under the contract. The fact that the panes were not heat soaked meant that they had no chance of lasting for 30 years. The court actually saw the requirement to heat soak the panes and the requirement to provide windows with a ‘service life of 30 years’ as two separate contractual obligations, neither of which the Defendant fulfilled.

It did not help the Defendant that documentation relating to the heat soaking process was largely unavailable. This omission led the court to its conclusion that approximately 40% of the panes had not been heat soaked. What the court also found was that although the Defendant’s design was not at fault, it was the fact that the panes were not ‘produced, provided and installed’ correctly by the Defendant that led to the defects.

A detailed section of the judgment looked at quantum.

Implications

This case shows that in a design and build contract, even if the contractor’s design is generally fit for purpose, the implementation of that design also has to meet the specific fitness for purposes standards set out in contract i.e. compliance with a specific provision in the contract can override more general contractual provisions. In effect, the courts confirmed that all contractual obligations apply and that in the event of an actual or perceived inconsistency, it is not for the contractor to pick and choose its preferred obligation.

This is a very helpful decision for employers who have particular standards and outputs that they require their contractors to meet.

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This article is for general awareness only and does not constitute legal or professional advice. The law may have changed since this page was first published.