In 125 OBS (Nominees 1) & Anor v. Lend Lease Construction (Europe) Ltd & Anor [2017] EWHC 25 (TCC), the court found the contractor liable for the highly publicised failure of glass panels at a prestigious building in London. The court did not accept the contractor's argument that it had complied with the relevant terms of the contract nor did the evidence support the contractor's claim that the glass had been subjected to the treatment required by the contract.

The decision is a reminder that contracts often contain a number of distinct terms relating to the procurement, supply and/or installation of products – which are often found in different documents. Contractors must check that they and their supply chain can meet all the contractual terms to ensure the products are fit for their intended purpose.

The facts

125 Old Broad Street, London was redeveloped by 125 OBS between 2006 and 2008 into a luxury office block with storey-height curtain walling. Lend Lease was appointed as the main contractor on a design and build basis.

Between 2008 and 2012, there were 17 spontaneous failures of the outer glass layer of the curtain walling (some of which caused large shards of glass to drop to the street below). The spontaneous failures were caused as a result of nickel sulphide inclusions (NSIs) within the glass, which are sometimes formed during the process of creating toughened glass. Glass containing NSIs can be identified by using a process called "heat soaking" and is then discarded.

Eventually, the glass at Old Broad Street was removed and the outer layer of the curtain wall completely replaced. A further four failures of the glass occurred during storage after it was removed from the building.

What was Lend Lease obliged to do under the contract?

The contract included obligations on Lend Lease to:

1. comply with the Employer's Requirements, Contractor's Proposals and a performance specification;
2. use materials of good quality, appropriate for their purpose;
3. ensure that the curtain walling glass has a 30-year design life; and
4. heat soak the glass in accordance with the relevant European Standard (but with an extended soaking time of four hours rather than two).

However, Lend Lease relied on a technical clarification to the contract which stated that 125 OBS accepted the risk of NSI breakage from the end of the defects liability period and the risk to third parties of NSI breakage from practical completion. Lend Lease therefore argued that its only effective obligation under the contract was to heat soak the glass as per the contract. (In doing so, it accepted that any losses relating to a failure to heat soak the glass would be its responsibility.)

Mr Justice Stuart-Smith disagreed. The key issue was whether the obligation to heat soak the glass was in addition to the other contractual obligations or superseded those obligations. Applying the normal rules of contract interpretation, the judge found that the heat soaking provision was not inconsistent with the other provisions. The contractual obligations were clear and should therefore be given their natural meaning. The obligation to heat soak did not take precedence over the other terms and there was no conflict between, for example, the obligations to ensure a 30-year design life, to ensure the glass is appropriate for its purpose and to heat soak the glass.

Accordingly, the court held that Lend Lease had undertaken to comply with all of the distinct obligations listed above, each of which built on one another and individually bound Lend Lease.

Was the glass heat soaked in accordance with the standard required by the contract?

Lend Lease accepted that it was obliged to heat soak the glass in accordance with the relevant European Standard but with an extended soaking time of four hours. Both parties relied on expert evidence to show the extent to which this treatment had in fact been carried out.

It is generally accepted that such heat soaking reduces the rate of NSI breakages in the "passed" glass to around one breakage in 400 tonnes of glass. The development was clad with approximately 300 tonnes of glass, meaning the most likely number of failures was either none or one. However, 21 breakages occurred in total.

Lend Lease adduced expert evidence from Mr Josey, an expert in the field of glass and glazing. His evidence to the court was that, on the basis of documents produced in the case, Lend Lease had complied with its obligations to heat soak the glass.

However, it was apparent (and indeed accepted by Lend Lease) that a number of the records relied upon by Mr Josey had been falsified. The remaining documents relied upon by Lend Lease in the matter and by Mr Josey in providing his evidence gave rise to an inference that, at best, only 60-65 per cent of the glass had been heat soaked. This alone would entirely explain the high rate of breakages that occurred.

Mr Justice Stuart-Smith therefore found that, as a matter of fact, the glass had not been heat soaked as required by the contract. Lend Lease was in breach of contract and liable to pay substantial damages.

What can we learn?

1. Don't bank on a narrow interpretation of obligations

As a matter of contract law, a series of obligations or provisions that are different but not contradictory or unclear will likely amount to distinct obligations that each bind the parties. These types of clauses are more likely to build on one another than narrow the scope of each other. This view is supported by the recent Supreme Court decision in MT Højgaard A/S v. E.On, which was decided after 125 OBS.

Contractors entering into a contract (particularly a design and build contract) which sets out a number of obligations relating to the type of products required must check (before signing up) that they and their suppliers can meet those terms – and price accordingly.

2. Test the opinion of your appointed expert!

Mr Justice Stuart-Smith made some damning comments about Lend Lease's expert, which should be taken as a warning to experts and the lawyers and parties who instruct them. The criticism related to the expert's failure to follow the implications of what he actually knew through to their logical conclusion (i.e. that a substantial proportion of the glass had not been heat soaked).  

Do not accept your expert's opinion at face value – test it! Is it consistent with the documents? How is it likely to be challenged in court? Will it withstand interrogation? It is better to know the weaknesses in advance rather than find out at the trial?