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125 OBS (Nominees 1) v Lend Lease Construction (Europe) Limited [2017]

December 2017 - Issue 100

Who is liable for the remedial works following the failure of glass panels on the former London Stock Exchange building? This was the question raised by that parties in 125 OBS (Nominees 1) v Lend Lease Construction (Europe) Limited [2017].

A design and build contract comprised of both standard and bespoke amendments existed between the parties. The contract consisted of JCT conditions, Employer’s requirements and Contractor Proposals and Technical Clarifications, but no clause specified a hierarchy of precedence.

Following practical completion of the 26 storey building, 17 glass panels had failed, resulting in scaffold tunnels being placed around the building to catch any falling glass. The employer subsequently claimed for breach of contract.

What was the breach of contract claim?

The various provisions of the contract which were claimed to have been breached were:

The building owner argued that each of the various provisions were separate distinctive obligations on the Contractor which had to be all satisfied rather than any particular provision taking precedence over another.

The Contractor argued that it had complied with the requirements to heat soak the glass panels and that the employer was responsible for risk and breakages to the panels following legal completion.

The Court held:

The court confirmed that if proper heat soaking is carried out, it can reduce the risk of nickel sulphide-induced breakages to around one breakage per 400 tonnes of glass.

Following the ruling of MT Hojgaard the court took the natural and ordinary meaning of the contract. It held that the various obligations were in addition to the requirement to heat soak the glass panels and that there was no inconsistency between the requirement to heat soak and various provisions regarding the service and design life and the quality of the materials.

Due to the large number of broken glass panels, it was confirmed that heat soaking of all the glass had not taken place. Supported by documents provided by the contractor, it was deemed negligible and a serious breach of contract that at least 35% of the panels had not been heat soaked. Confirmation that the panels had not been heat soaked also deemed the panels as not of “good quality” and not “appropriate for their purpose”, a further breach of contract.

What damages were awarded?

The building owner had re-glazed the property and it was agreed they could recover the cost of £8.7 million. Additionally, damages of over £6 million were granted to cover additional costs such scaffolding and loss caused by the falling glass.

This decision shows that provided separate provisions are not inconsistent and contradictory to one another, and that there is no express hierarchy, the court will require good reason to make one clause take precedence over another provision.

If you would like assistance in drafting your contract terms, please contact Rebecca Palmer on rpalmer@prettys.co.uk or 01473 298274.

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