LDC (Portfolio One) Ltd v (1) George Downing Construction Ltd and (2) European Sheeting Ltd
Citation:  EWHC 3356 (TCC)
A cladding specialist Sub-Contractor responsible for the external wall construction of three high-rise buildings was held liable for i) defects in the composite cladding elevations which led to water ingress; and ii) fire barrier and fire stopping defects.
Summary of Facts
The case concerned re-cladding and associated remedial works to address fire safety and water ingress issues in relation to the external wall construction of three high rise tower blocks operated by the Claimant (LDC), as halls of residence in Manchester. The blocks were constructed in 2007 and 2008. The First Defendant (Downing) was the main contractor, and the Second Defendant (ESL) was a specialist subcontractor responsible for the external wall construction, including the cladding and rainscreen works. At the time of the hearing, ESL had entered Creditor’s Voluntary Liquidation and was not represented.
In October 2021, LDC and Downing reached a settlement for the sum of £17,650,000 in full and final satisfaction of LDC’s claims against Downing. At the trial, LDC sought judgment against ESL in the sum of £21,152,198.87 for the cost of remedial works and loss of income; Downing claimed against ESL for an indemnity and/or contribution in relation to the settlement in the sum of £17,650,000 together with reasonable legal costs.
LDC’s case was that there were i) several defects in the external wall construction of the composite cladding elevations which led to water ingress and deterioration of the Structural Insulated Panels (SIPs); and ii) fire barrier and fire stopping issues on all elevations.
Held – Veronique Buehrlen KC
The Scope of ESL’s obligations under the Sub-contract – On a proper construction of the Sub-Contract between Downing and ESL, ESL was subject to a strict obligation to comply with Building Regulations (Martlet Homes Ltd v Mulalley & Co Ltd  EWHC 1813 (TCC) cited), which it had breached. Further, the Main Contract was subject to a strict obligation in respect of the Building Regulations and the commercial intention was clearly to make the Main Contract and Sub-Contract “back-to-back”. The obligation to exercise reasonable care could not be relied upon by ESL to supersede its obligation to ensure that Downing is not placed in breach of its obligations under the Main Contract (MT Hojgaard AS v E.ON Climate and Renewables UK  UKSC 59 cited). There was therefore no need to consider the alternative case that a breach of the Building Regulations might be strong evidence of a breach on the part of ESL of its obligations in respect of workmanship, the choice of materials and the exercise of reasonable care and skill (paras 46-47).
Further, statements recorded in minutes of a meeting 16 months prior to the Sub-Contract being entered into did not detract from the detailed requirements of the Architectural Specification, which required the design of the cladding to meet the requirements of the Building Regulations.
The water ingress Issues – ESL was in breach of its obligations under the Sub-Contract Conditions both in terms of breach of the Building Regulations and failure to exercise reasonable skill and care insofar as i) it produced a design and/or installed composite cladding external walls which did not meet the relevant requirements of the Building Regulations; and/or ii) it produced a design and/or installed composite cladding which did not meet the requirements of the Architectural Specification (para 68-69).
The Fire Safety Defects – ESL’s design and/or installation of the cladding was in breach of the fire safety requirements of the Building Regulations and the terms of the Architectural Specification and/or was a failure to exercise reasonable skill and care, and these issues required remedial works (para 74).
The Remedial Works
The deterioration in the SIPs caused by ongoing water ingress issues were not the result of a failure on the part of LDC to remedy the issues in the period 2012 to 2018. In that period, ESL had been given ample opportunity to address the issues but failed to do so (para 100). Any delay on the part of LDC in undertaking the required remedial works was at best limited to the period May 2017 to June 2018 and was not causative of the scope of the required remedial works (para 101).
Temporary Remedial Works – There was no basis for concluding that temporary remedial works, undertaken by a third-party contractor on behalf of LDC, were unreasonable, or that there was otherwise a failure to mitigate loss in relation to those works (para 103).
Replacement of the Composite Cladding – There was no evidence to support ESL’s allegation that the replacement of composite cladding by LDC was unreasonable or that it was not required as a result of the defects in the original design and installation.
The substitution of the SIPs with an SFS system – LDC had acted reasonably in following advice from its professional team to the effect that the substitution of the SIPs with an Steel Framing System (SFS) system was necessary, and a reasonable solution, given the need to achieve the fire resistance performance required under the updated Building Regulations (paras 111-112).
Replacement of the glazed panel elevations – Due to difficulties associated with salvaging, cleaning, and reinstating existing glazed panel elevations, LDC acted reasonably in implementing the Permanent Remedial Scheme for which it claimed (para 115).
The Settlement Contribution Claim – ESL’s defence to Downing’s indemnity claim in relation to the settlement sum was dismissed on the basis that responsibility for the design of the fire breaks was and remained with ESL throughout.
The settlement reached between LDC and Downing was “within the range of settlements which reasonable people in the position of the settling party might have made” (per Ramsay J in Siemens Building Technologies FE Limited v Supershield Ltd  EWHC 927 (TCC) at [80(5)-(6)]).