Projects & Construction Law Update


How fit do your materials need to be?

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

This case involved a dispute about which obligations should take precedence out of general fitness for purpose obligations and more specific quality obligations contained in the technical specifications of a contract. The dispute centred on the spontaneous failure of a number of glass panels on the outside of a prestigious building with both liability and quantum in dispute. The TCC held that the multiple design obligations incorporated in the contract did not operate inconsistently but were separate and additional to each other. The outcome being that the contractor had to comply with all of them and could not minimise its obligations (and ultimately its liability) by trying to limit its compliance to one of the more technical requirements.

Lend Lease ('LL') were employed by the claimants to redevelop a building, but over a four year period following completion of the works, 17 external glass panes failed without warning. It was found that the failures were due to Nickel Sulphide ('NiS') inclusions.

There were a number of documents which made up the 'Contract Documents', with no express order of precedence. A number of different standards were prescribed within the Contract Documents: (i) the Conditions required the materials used to be "of good quality" and "appropriate for their purpose"; (ii) the Employer's Requirements required the glass to have a "service life" of no less than 30 years; and (ii) the Contractor's Proposals required the glass to have a "design life" of 30 years and required the panels to be heat soaked for a prescribed period to reduce the risk of NiS inclusions.

The key issue that emerged was whether LL's obligation in relation to quality was solely to heat soak the glass panels or whether they could still be liable for failures (even if the glass had been soaked) by virtue of the other more general obligations. In deciding the issue, Stuart-Smith J held that there was "no intrinsic inconsistency" between the contractual provisions and thus they were separate and additional obligations. As a result, even if the panels were heat soaked in accordance with the contract (which it was found they were not) LL would still be required to ensure compliance with the additional obligations agreed. The court noted: "The importance of frank inconsistency is that if two clauses dealing with the same area are mutually consistent, good reason will be required before the Court holds that one clause is effective to the exclusion of the other".

Moreover, the fact that there was still a residual risk of failure (albeit a reduced one) following heat soaking, did not justify the reading down of LL's other obligations. Rather, it supported the existence and operation of the general fitness for purpose and service life obligations.

This case provides useful guidance as to how the imposition of multiple quality obligations on a party will be interpreted by the courts. The decision suggests that usually these will operate separately and additionally to one another unless the terms are genuinely inconsistent.

Winds of change? – the potential for counter adjudications following a smash and grab

Imperial Chemical Industries Ltd v Merit Merrell Technology Ltd [2017] EWHC 1763 (TCC)

Questions are being asked again about a party's ability to bring counter-adjudications following a 'smash and grab' scenario and we have the case of Imperial Chemical Industries Ltd v Merit Merrell Technology to thank for it. The case dealt with a number of issues, only two of which we will focus on here. The first related to ICI's right to reclaim overpayments from Merit Merrell...

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