125 OBS (Nominees1) & Anor v Lend Lease Construction (Europe) Ltd & Anor

A design-and-build contract may impose several cumulative obligations concerning the same materials. Compliance with a specified testing standard does not, without clear inconsistency, displace separate obligations to provide materials of good quality, fit for purpose, and capable of meeting a specified service or design life. A contractual allocation of risk requires clear language, particularly where it would substantially deprive other obligations of effect.

Where a statistical failure rate applies to very large quantities, it should not be applied mechanically to a smaller project quantity. A Poisson distribution may provide relevant evidence, while allowing for variation. Costs of reasonable remedial works, reasonable third-party settlements, and foreseeable financing losses may be recoverable for breach of contract.

The claim arose from the redevelopment of 125 Old Broad Street under a design-and-build contract. The curtain walling incorporated heat-soaked toughened glass intended to reduce spontaneous breakage caused by nickel sulphide inclusions.

At least 21 panes subsequently failed, including panes which fell towards public areas. The claimants replaced the glazing and sought the cost of that work, associated remedial expenditure, settlements with affected third parties, storage costs, and financing losses. The central issues were the contractual obligations concerning the glass, whether the glass had been properly heat soaked, the reasonableness and recoverability of the remedial costs, and remoteness of the financing losses.

1. Construction of the contract. The court applied the principles summarised in Arnold v Britton [2015] UKSC 36. The natural and ordinary meaning of the words, the other contractual provisions, the overall purpose, relevant background, and commercial common sense had to be considered together. The contract contained no hierarchy of precedence.
2. The obligation to heat soak the glass in accordance with the 2005 Standard, as modified by a four-hour holding period, was additional to the obligations imposed by the Employer’s Requirements, the Contractor’s Proposals, and clause 8.1.1. Those obligations required materials to be of good quality and appropriate for their purpose, and required a 30-year service and design life. There was no intrinsic inconsistency between them. The reasoning in MT Hojgaard A/S v E.ON Climate and Renewables UK Robin Rigg East Ltd [2015] EWCA Civ 407 was distinguished because the contractual wording differed materially.
3. The statistical rate of one breakage per 400 tonnes was a reasonable worst-case indicator for very large quantities of properly heat-soaked glass. It was not a hard or absolute figure for a smaller project quantity. A Poisson distribution was appropriate evidence of the likely range of failures. Twenty-one failures in approximately 300 tonnes were powerful prima facie evidence that some glass had not been properly heat soaked.
4. The supply-chain documents did not establish compliance. The evidence supported a finding that approximately 35–40% of the glass had not been heat soaked. This was a serious breach and caused the failure rate, the failure to achieve the specified life, and the failure to provide glass of good quality and appropriate for its purpose.
5. The decision to replace the glazing was reasonable. A canopy would not have reliably prevented glass reaching the street. The replacement costs and other consequential losses were recoverable. Applying the principles adopted in Siemens Building Technology FE Ltd v Supershield Ltd [2009] EWHC 927 (TCC), the third-party settlements were generally reasonable and recoverable. The Landmark item was not proved.
6. The financing losses were not too remote. Applying Hadley v Baxendale (1854) 156 E.R. 145 and considering Transfield Shipping Inc v Mercator Shipping Inc (The Achilleas) [2008] UKHL 48, the losses were a foreseeable and natural consequence of the breaches and fell within the responsibility assumed by the defendants.
7. Judgment was entered for the claimants in the sum of £14,753,195.16. Interest was to be calculated separately.