Citation: [2022] EWHC 2372 (TCC)
Summary of the facts
A case concerning a PFI project in respect of local authority sheltered housing dwellings for elderly residents of North Tyneside. The project involved the demolition and replacement of certain buildings ("the New Build Dwellings") and the refurbishment of the others ("the Refurbishment Dwellings"). The dispute related to the Refurbishment Dwellings. The Defendant was a construction company that entered a Construction Sub-Contract with the Claimant.
The Claimant asserted that defects had emerged in the roofs of the Refurbishment Dwellings and that the Defendant was liable for the rectification of these defects. The Claimant's case was that the Defendant's obligation in respect of the timber roof structures of the Refurbishment Dwellings was to return them, at the time of the relevant Certificate of Availability, with a design life of 60 years. The Defendant accepted that it had such obligations in relation to the New Build Dwellings, but not the Refurbishment Dwellings. The difference was between interpretations of the agreement: i) the Claimant’s case was that the Defendant had to ensure that the Refurbishment Dwellings had a certain life expectancy; ii) the Defendant’s case was that the focus was on the physical condition of the dwellings at the time of the Certificates of Availability.
The Claimant sought declarations as to the proper interpretation of the material terms of the Construction Sub-Contract.
Held – Eyre J
The interpretation for which the Defendant contended was held to be substantially correct. The life expectancy obligations applied to the New Build Dwellings, and those elements of the Refurbishment Dwellings that involved elements of new building. The Defendant was not obliged to replace elements of the Refurbishment Dwellings which were otherwise in sound condition and where such replacement was not envisaged in the Contractor's Proposals so as to ensure that those elements had a design life of a particular duration.
The structure of the arrangement was highly relevant to the consideration of the obligations which each of the parties had: the Defendant was involved through its demolition and reconstruction of some dwellings and the refurbishment of others; when those works had been completed the Defendant's involvement came to an end; the Claimant was then answerable to the Council in respect of the condition and residual life of the dwellings as at the end of the Project.
Inter alia, it was significant that:
(i) the Availability Standard was expressed with reference to the condition of the elements at the time of the assessment and did not specify a period for which that condition must persist (paras 82-83).
(ii) sections of the contract that referred to “design life” expressly linked the design life requirements to the new build elements (para 85).
(iii) the agreement expressly contemplated that some materials and components would need maintenance and replacement but, by implication, others would not (para 87).
(iv) the Claimant's interpretation would mean that the Defendant was having to undertake significant refurbishment works well in advance of the date they would otherwise be due. That would be an unusual and wasteful arrangement, and one would have expected it to be set out in clear terms. Further, the replacement of sound structures before the end of their natural life was not contemplated in the Sub-Contractors Proposals, which provided important context for the contract (paras 88-89).
The declarations sought by the Claimant were not granted (paras 111-119); however, the following declaration for the defendant was granted (para 120): "The Defendant did not warrant, through the performance of the Refurbishment Works, that the Claimant would or would be able to achieve the Handback Standard under the Project Agreement."
Adam Constable KC represented the Defendant (instructed by Clyde & Co LLP).