Contractor liable for cladding defects

Facts of the case

As a result of the fire at Grenfell Tower on 14 June 2017, the claimant (a social housing provider) began to investigate the materials used on a number of its buildings in Gosport, Hampshire, which were all over 18 metres and so deemed ‘high risk’.  These buildings had been refurbished between 2005 and 2008 under a JCT 1998 Standard Form of Building Contract with Contractor’s Design by the defendant, a well-known privately owned building contractor based in Essex, with a particular niche in the residential social housing sector.
It was identified that StoTherm Classic external wall insulation (EWI) had been retrofitted to the existing concrete buildings.  This contained an inner layer of expanded polystyrene (‘Specification Breach’) and there were installation defects, including in the fire barriers (‘Installation Breach’).
The claimant sought £8m from the defendant to remove and replace the EWI and the costs of a waking watch as a precautionary measure in the interim period.  The defendant conceded that there had been some defective installation, but not to the extent to justify full replacement works or the waking watch; it believed limited repair works would be sufficient. It argued that underlying all of this was the claimant’s realisation that the EWI did not meet the heightened fire safety standards imposed post-Grenfell.  The claimant disagreed, arguing that the EWI as specified did not meet applicable fire safety standards at the date of the contract – not simply post-Grenfell.

The decision

The Court found in favour of the claimant on both the Specification Breach and the Installation Breach.  Dealing with these in turn:

— Specification Breach
The Court found that the contract contained a strict compliance with laws obligation (e.g. Building Regulations 2000) and the Employer’s Requirements stated that the works were to be designed and constructed in accordance with industry codes of practice and standards (e.g. British Board of Agrément (BBA) certificates and Building Research Establishment (BRE) reports).

The Building Regulations 2000 required that “the external walls of the building shall adequately resist the spread of fire over the walls and from one building to another, having regard to the height, use and position of the building”. The question was what constituted proper evidence to meet this requirement.  The defendant relied heavily on a 1995 BBA Certificate for the EWI, in force at the time of the works, which contained statements with respect to properties in relation to fire and general conformance with functional requirements under the Building Regulations 2000 due to the inclusion of fire barriers.  However, the Court found that in the absence of further testing, “the 1995 BBA Certificate cannot be read as if it was a guarantee” and was insufficient to demonstrate compliance.

The Court also found that BRE 135 (2003) contained a recommendation and/or advice that the default position for a system such as the EWI, given it had combustible elements, was that it should not be specified for use in high-rise residential buildings unless it met the Annex A performance standard, to be assessed through the tests to be undertaken in accordance with BS 8414-1 (a test method for non-loadbearing external cladding systems applied to the face of a building).  There was no evidence the EWI had passed (or indeed failed) a BS 8414-1 test, nor that it satisfied all the general and system-specific principles set out within BRE 135 (2003).

The Court accepted the claimant’s argument that the mere fact other professionals were acting or advising in the same way at the time is not sufficient and does not operate as a get out of jail free card, on a proper application of the Bolam principle*.

All in all, the Court found that that the EWI did not comply with the Building Regulations 2000 and as such, the defendant was in breach of contract.  The claimant was therefore entitled to recover the costs of the replacement scheme, including the costs of the waking watch which were recoverable as a reasonable step taken in mitigating the potential greater loss that would have followed if the buildings needed to be evacuated.

–Installation Breach

The Court also found in favour of the claimant in respect of the installation defects.  However, had the claimant only succeeded on this part, the Court found it could only have recovered the costs incurred referrable to repair those defects (and associated reduced waking watch costs), and not the more extensive replacement scheme and waking watch ultimately implemented.

Opinion
It should be noted (as the Court itself pointed out) that the decision turned on its specific facts, strict contractual provisions and particular industry standards, so its applicability to other products and other contracts remains to be seen.  Nevertheless, the case is if great interest to the industry, and will no doubt shape the views of potential claimants, defendants and their insurers as to the likelihood of a claim succeeding and the amount that may be recoverable.  Parties currently negotiating contracts may also wish to bear the court’s interpretation in mind when considering contractor’s obligations moving forward.

If you are in a similar predicament or would like some advice generally about your legal position, please get in touch.

* The principle established in Bolam v Friern Hospital Management Committee [1957] 2 All ER 118 is that a professional is not necessarily negligent if they acted in a way regarded as proper by a responsible body of opinion in their profession, even if other members would have taken a different view