125 OBS (Nominees 1) v Lend Lease Construction (Europe) Limited [2017] EWHC 25 (TCC)
When glass panels fall from multi-storey buildings, quite understandably, the press and television take an interest. It is not an everyday occurrence when glass panels forming part of the refurbishment of what was formerly the home of the London Stock Exchange fail. When an outer glass pane located on the 18th floor of the building broke and fell to the ground at lunchtime, falling onto the reception canopy of the building and into the public road, it was reported by the Daily Mail as “Miracle escape for City workers as giant plate glass window falls from 17th (sic) floor into busy street”.
What does not make headlines in the popular press is “Judge in Technology and Construction Court decides on liability between 125 OBS (Nominees 1) v Lend Lease Construction (Europe) Limited and awards over £14m in damages“.
Background
In this case, a total of 17 glass panels failed between September 2008 and July 2012, during which time scaffolding shrouded the prestigious Category A office building. The owners of the building were, understandably, extremely concerned. Eventually, all of the outer glass panels of the building were replaced. Once removed, half of the panels were stored and during storage a further 4 panels failed. Unsurprisingly, litigation ensued to determine who should pay for the remedial works.
It is well known that toughened glass is susceptible to spontaneous failure caused by nickel sulphide inclusions within the glass, and that was found to be the root cause of the problem.
The contract
The underlying contract between the parties was a JCT Standard Form of Building Contract with Contractor’s Design 1998 edition with both standard and bespoke amendments. The contract comprised of the JCT Conditions, Employer’s Requirements, Contractor’s Proposals and Technical Clarifications. The Technical Clarifications were exchanged during the tender process.
As frequently happens when assembling construction contracts, relevant provisions appear within the amended JCT Conditions, the Employer’s Requirements, the Contractor’s Proposals and the Technical Clarifications. Here the relevant provisions were in:
JCT Conditions – a general obligation that materials should be “of good quality” and “appropriate for their purpose”.
Employer’s Requirements – General Specification - the “service life” (being the actual period of time during which no excessive expenditure is required on operation, maintenance of repair of a component or construction) of the glass used in the curtain walling was to be no less than 30 years.
Contractor’s Proposals – Curtain Walling Specification – the outer panes of glass will have a “design life” of at least 30 years and the heat-soaked toughened glass was to meet the British Standard (BSEN 14179) save that the heating time was extended from 2hrs to 4hrs.
Crucially, the contract also included a hierarchy in which its various components were to be read, so setting fertile ground for an argument as to which took precedent.
The dispute
The building owner (“Employer”) argued that each of the provisions was a separate distinctive obligation on the Contractor and the Contractor had to satisfy them all.
Lend Lease Construction (Europe) Limited ("Contractor"), on the other hand, argued that:
- the Technical Clarification amounted to an Employer’s Instruction which obliged them to use heat-soaked toughened glass for the outer panes
- the Specification anticipated that there would be failures due to nickel sulphide inclusions
- the contract did not contain any other requirement in respect of the rate of failure
- the operation, repair and maintenance costs were not “excessive” because the failures (and therefore any associated costs) were therefore anticipated and permissible
- the Employer selected the heat-soaked toughened outer glass panes in the knowledge that they had been adequately warned that there would be a risk of nickel sulphide failure, and took responsibility for the risk
Essentially, the Contactor argued that any loss attributable to the failure to heat-soak the glass in accordance with the contract would be their responsibility, but they denied there was any such failure.
The court had to decide whether the Contractor‘s obligation to heat-soak the toughened glass was additional to their other obligations under the contract, or whether it qualified or superseded the other obligations. If the decision was that the heat-soaking obligation qualified or superseded the other obligations (and presuming they adhered to the contract during manufacturing) then they were not liable.
The Court’s decision
The court found that the obligation for the materials to be “of good quality” and “appropriate for their purpose” in addition to the “service life” and “design life” requirements were not inconsistent and were separate and additional obligations to the heat-soaking obligation. Most importantly, there was no inconsistency between the obligations.
In arriving at its decision, the court reviewed the meaning of “appropriate for their purpose” in this context, finding that it was to provide an outer skin of the building with a “service life” of 30 years. The Court found that although the design itself met the required “design life”, the glass as produced, provided and installed did not. The court found that, based on the available records, 35-40% of the glass was not heat-soaked which was a breach of extreme seriousness.
The decision of the court is helpful in how obligations within a contract will be interpreted in the absence of an express hierarchy. Fortunately for the Employer, the obligations were not inconsistent and they did not modify or exclude the apparent meaning of another provision or provisions. Good reason will be required before the court holds that one clause is effective to the exclusion of the other.
When arriving at its decision the court referred to the Court of Appeal decision in MT Højgaard A/S v E.ON Climate and Renewables UK Robin Rigg East Limited [2015] EWCA Civ 407. The issue was whether the contractor in that case had warranted that off-shore turbines would last for 20 years or whether the contractor’s obligation was merely to design in accordance with a specified standard that was expected, but not guaranteed, to produce a life of 20 years. The decision of the Court of Appeal was that there was an inconsistency. This decision was appealed at the Supreme Court. On 3 August 2017 the Supreme Court confirmed that MT Højgaard (MTH) had to foot the bill for the €26.25m repair costs.
Published: September 2017
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