St James's Oncology SPC Ltd v Lendlease Construction (Europe) Limited & Anor

A contractor’s compliance with an amended fire strategy does not answer a claim for breach where the strategy itself fails to comply with contractual technical standards. Where a design derogates from HTM 81, the derogation must be identified and justified by a fire-engineering approach achieving an equal or better standard. Approval or sign-off by the employer, building control or an independent certifier does not relieve the designer of contractual responsibility unless the contract provides otherwise. In assessing remedial damages, the court may award reasonable reinstatement costs where the claimant has a genuine intention to carry out the works. Commercially reasonable delay pending determination of liability does not itself defeat recovery.

The claimant, a private finance project company, sued the design-and-build contractor and its parent guarantor for fire-safety and electrical-engineering defects in the basement electrical plant room of a hospital oncology centre.

The contractor relied principally on a revised fire strategy, contending that departures from technical guidance had been agreed or approved. It also disputed the necessity and proportionality of the claimant’s proposed remedial works, its intention to carry them out, the quantum of loss and the claimant’s entitlement to declaratory indemnity relief.

The central issues were whether the revised fire strategy complied with the contractual standards, whether the identified defects constituted breaches, and what remedial damages were recoverable.

1. Fire strategy and contractual obligations. The contractor had independent obligations to comply with the Trust’s Construction Requirements, Project Co’s Proposals and the contract. Compliance with the revised fire strategy was therefore no defence where that strategy failed to comply with the applicable standards ([110]–[115], [137], [246]–[249]).
2. Derogation from HTM 81. Paragraph 11.3 of Schedule 8 required any departure from HTM 81 to be identified and justified in the Fire Strategy by a fire-engineering approach achieving an equal or better standard. The revised strategy contained no adequate justification and did not demonstrate an equivalent level of fire safety ([123]–[124], [209]–[215], [244]–[245]).
3. Approval by the Trust, Building Control or the independent certifier did not relieve the contractor of design responsibility. The Building Regulations completion certificate was not conclusive evidence of contractual compliance, and the certificate of practical completion did not affect liability for defects ([218]–[232]).
4. The absence of compartmentation and fire stopping, inadequate protection and separation of primary and secondary supplies, lack of suppression, defective riser protection, inadequate cable segregation, and inadequate arrangements for plant replacement constituted contractual breaches. The contractor was not entitled to substitute a unified electrical system for the contractually required split distribution system ([260]–[297], [311]–[312]).
5. The claimant’s proposed Stage 1 and Stage 2 remedial works were necessary, practical and proportionate. A water-mist system alone would not provide the required resilience, segregation or contractual compliance ([315]–[328]).
6. The proper measure was reasonable reinstatement cost. The claimant’s intention to carry out the works was relevant to reasonableness, but it was legitimate to await judgment while liability was denied. Damages were assessed at the trial date ([335]–[355]).
7. The claimant established liability under the parent company guarantee. However, a declaration concerning a contingent future indemnity was refused because there was no sufficiently real or useful present dispute and it would create an uncertain liability ([382]–[392]).