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125 OBS (Nominees1) & Anor v Lend Lease Construction (Europe) Ltd & Anor [2017] EWHC 25 (TCC)

  • United Kingdom
  • Construction and engineering
  • Litigation and dispute management

08-08-2017

The court considered the contractual responsibility of a contractor concerning spontaneous failures of glass panels at a prestigious building in London.  The court held that in absence of an order of priority clause, certain clauses which the defendant claimed to be inconsistent were separate and discreet obligations on the contractor.

In this case, Mr Justice Stuart-Smith considered the contractual responsibility concerning breakages in glass panels at 125 Old Broad Street (“125 OBS”).

Facts

The claimants were incorporated as a special purpose joint venture vehicle and were the owners of 125 OBS.  The defendants comprised of a contractor, its parent, its sub-contractor and sub-sub-contractor.

On 26 January 2006, Lend Lease Construction (Europe) Limited (First Defendant) (“Contractor”) entered into a JCT Standard Form Building Contract With Contractor’s Design 1998 edition with amendments (“Contract”), for the extensive renovation of 125 OBS to Category A office space and retail space.  Following novation of the contract, the claimants were the Employer under the Contract.

The renovation included for a lower-level podium and tower to be clad with a curtain walling system of glass panes.  It was common ground between the parties that toughened glass could be susceptible to breakages owing to nickel sulphate and that a process known as “heat soaking” (or “heat soak testing”) prevented or minimised the risk of such breakages.

The contract imposed several obligations on the contractor including,

  1. for the contractor to carry out and complete the works “in accordance with” the employer’s requirements and the contractor’s proposals
  2. for materials to be used which were “of good quality, appropriate for their purpose, to the reasonable satisfaction of the Employer and in accordance with the Contractor’s Proposals and/or Employer’s Requirements and any performance specification

The employer’s requirements required the “service life” of the glass to be no less than 30 years.  The contractor’s proposals stated that the glass would have a “design life” of 30 years and that the glass would be heat soak toughened to a specific European standard (subject to an agreed extension of the heating time from 2 hours to 4 hours).

Practical completion was certified on 25 July 2008. Between September 2008 and July 2012 there were 17 spontaneous failures of glass such that the glass shattered in situ.  In around 2012-2013 the outer skin of the glass curtain walling was replaced.

The claimants claimed for breach of contract and damages as a result of the failures of the glass.

Decision

The defendants argued that their only effective obligation under the contract was to install glass that had been heat soaked in accordance with the relevant European dtandard (although for 4 hours instead of 2) and that the obligation had been complied with.

Mr Justice Stuart-Smith noted that a question of contractual interpretation (in the event that there was no order of precedence of the clauses) arose in the case as to whether the requirement to heat soak the glass in accordance with the European Standard (but for 4 hours) was in addition to the other obligations or whether it qualified or superseded the other obligations.

Mr Justice Stuart-Smith held that there were no inconsistencies between the obligations to heat soak and the other obligations.  It was decided that the Contract was clear to impose separate and discrete obligations on the Contractor.

Mr Justice Stuart-Smith held that there had been two separate breaches of contract: the entirety of the glass on the curtain walling was not heat soaked and the materials were not appropriate for purpose. Records indicated that only 60-65% of the glass had been heat soaked. As a consequence, the glass did not meet the requirement for a service life of 30 years.

The Claimants were awarded damages of £14,753,195.16 plus interest.

Comment

As noted in the judgment, complex contracts will typically have a number of separate clauses which may cover similar obligations.  This case highlights that in absence of an order of priority, the court will allow for certain similar obligations to be interpreted as separate multiple obligations.

In order to prevent similar disputes arising, care should be taken when drafting contracts with similar obligations which could be interpreted to be inconsistent.  Where there may be such inconsistency an order of priority clause may assist with resolving any such uncertainty.