Jessica van der Meer discusses contractual obligations in Design & Build Review Magazine
Legal Case Study: Contractual Obligations
Case: 125 OBS (NOMINEES1) & ANOR v LEND LEASE CONSTRUCTION (EUROPE) LTD & ANOR (2017)
A contractor was ordered to pay £14.7m in damages following a failure of toughened glass used to clad a central London office block. The breakages were caused by the contractor’s breach of its contractual obligations to heat soak all of the glass. Jessica van der Meer of leading civil and commercial barristers chambers 2 Temple Gardens explains the details and significance of the case
Between 2006 and 2008 the First Defendant (D) carried out an extensive redevelopment of the building under a design and build contract for the Claimants (C). The end result was intended to be a highly prestigious building, with a 26-story tower and a lower-level podium building that together would provide premium office and retail space. An integral part of the renovation was that the podium and tower were to be clad with a curtain walling system of storey-height framed glass panes.
Between 2008 and 2012 there were 17 spontaneous failures of glass panes on the building. The failures occurred without prior warning and, in some instances, involved glass falling from the building down towards the street below. Early on when the failures started to occur, scaffolding, which extended right across the road pavement and walkway, was erected around the building to protect people from falling glass.
Between 2012 and 2013 the outer skin of the glass curtain walling was replaced; half of the removed glass was placed in storage where a further four failures occurred.
C subsequently brought a claim for damages from D, which included the cost of re-cladding the building.
The contract was a design and build contract dated 26 January 2006. The contract comprised a collection of documents but contained no term establishing a hierarchy of precedence. It incorporated the terms of the JCT Standard Form of Building Contract with Contractor’s Design 1998 edition, including Amendments 1-5, plus bespoke amendments.
It was common ground that toughened glass was susceptible to spontaneous breakages caused by nickel sulphide inclusions. A process known as “heat soaking” minimised the incidence of such breakages, and the contract expressly provided that the glass panels should be heat soaked in accordance with European Standard EN 14179 2005. C alleged a breach of that obligation and/or breaches of separate contractual obligations to (1) provide glass panels with a service life of 30 years and a design life of at least 30 years; (2) to complete the works in accordance with C’s requirements and the contractor’s proposals; and (3) to use materials that were of good quality and appropriate for their purpose.
The contractor argued that (1) it had complied with its obligation to heat soak the glass and had no other contractual obligations in relation to nickel sulphide-induced breakages; (2) one of the technical clarifications in the panel specification meant that C was responsible for the risk posed to third parties by nickel sulphide-induced breakages after practical completion; (3) by opting for heat soaked glass knowing that there was a residual risk of nickel sulphide-induced breakages, C was responsible for that risk after completion.
The disputed issues
The key findings made by Stuart-Smith J were:
(1) If carried out properly in accordance with the 2005 Standard, heat soaking of toughened glass will reduce the risk of shattering so that it is no more than one breakage per 400t on a statistical basis in very large quantities.
(2) The contract, on its natural and ordinary meaning, imposed several discrete obligations in addition to the obligation to heat soak (set out at para 93 of the judgment).
(3) The glass was not heat soaked in accordance with the 2005 standard. If all of the glass had been heat soaked, up to one breakage could reasonably have been expected. The likelihood of more than five breakages was negligible, and the number of breakages in the instant case was strong prima facie evidence that at least some of the glass had not been heat soaked. Documents provided by the contractor supported a finding that at least 35% had not been heat soaked. That was a serious breach of contract. Moreover, it meant that the glass was neither of good quality nor fit for purpose.
(4) The re-glazing was reasonable and a protective canopy would have been inadequate given the prestigious nature of the building and its location (Old Broad Street). A permanent scheme which addressed the underlying problem was proportionate and necessary, accordingly C was entitled to recover the cost of the re-glazing, agreed at £8.7m.
Finally, C was also entitled to £6m to cover the losses associated with the remedial works (this sum includes sums paid to third parties in settlement of proposed claims for loss caused by the falling glass, the scaffolding and the remedial works).
Why this case is important
Firstly, contractual interpretation and construction were crucial features of this claim. The judgment again applies and underscores the existing principles for the construction and interpretation of commercial contracts. The most helpful summarization of those principles can be found in the recent Supreme Court case of Arnold v Britton  UKSC 36 at -, which was also applied in this week’s Supreme Court decision in MT Hojgaard A/S v E.ON Climate and Renewables UK Robin Rigg East Ltd.
Secondly, this case underscores the importance of the quality of expert evidence, and also specifically, the quality and use of (statistical) analysis by experts to substantiate the claim. The expert you choose, and how you substantiate your claim, are of the utmost importance and requires careful consideration. As Stuart Smith J observed in the judgment (at paras 8 and 9), stark contrasts between experts, and an expert’s inability to be consistent and logical in their own reasoning will be problematic:
“There was a marked contrast between the liability experts called for the Claimants and the Defendants respectively. Mr Colvin was called on behalf of the Claimants. He is one of the leading experts in the world on the manufacture of glass, and is qualified both intellectually and by experience to give expert evidence on the issues that arose in the case. He is a mathematician and as such has great clarity of vision, conviction and expression. Sometimes this clarity of thought puts him outside the general consensus of his profession; but his views always commanded respect by being based on the application of rigorous logic allied to his expertise.
“Mr Josey, who was called by the Defendants, suffers by contrast with Mr Colvin in almost every respect. He does not have Mr Colvin’s accumulated practical and first-hand experience; nor, in my assessment, does he have the intellectual expertise and rigour that Mr Colvin brings to his opinions. None of this would matter particularly, though it would contribute to my conclusion that, in general, I preferred Mr Colvin’s evidence and normally agreed with Mr Colvin’s conclusions when they differed from those of Mr Josey. What matters much more from the perspective of the court is the failure by Mr Josey to follow the implications of what he knew…”
This article was originally published in Design & Build Review Magazine’s December issue and can be accessed here.