Blackpool Borough Council v Volkerfitzpatrick  EWHC 1523 (TCC)
In 2009, Blackpool Borough Council (Principal), as principal, contracted with Volkerfitzpatrick Ltd (Contractor), as head contractor, to design and build a tram depot at Starr Gate, Blackpool in the UK. As is frequently also the case in New Zealand, the depot building was in close proximity to the sea air and was exposed to harsh environmental conditions.
The Depot was completed in 2011 and brought into operation in 2012. Since its completion, the Depot suffered from premature corrosion. The Principal claimed that significant parts of the building did not meet their intended design life of 50 years and were not suitable for the harsh coastal marine environment. It claimed £6.7m from the Contractor for the remedial works of the affected parts of the building, which was largely galvanized steel cold formed components; and the Contractor in turn sought to pass on any liability it may have to consultants (as third parties to the litigation) involved in the project.
The main issue in dispute was whether the parts of the defective construction work fell within the term “building structure”, which had a minimum “design life” obligation of 50 years as specified in the “Functional Procurement Specification”, as opposed to the default minimum design life obligation of 20 years as outlined in section 2.3.5 of the “Works Information”. Both of these were contract documents.
Meaning of “design life”
As there was no definition of “design life” in the contract, the Court referred to other industry standards for guidance, and in particular 184.108.40.206 of BS EN 1990:2002 ‘Design Working Life’, which provided that it is an “assumed period for which a structure or part of it is to be used for its intended purpose with anticipated maintenance but without major repair being necessary. The Court considered it plausible that a structure ought not to need major repairs during its design life but implausible for the structure to be maintenance-free during its design life. A distinction is therefore required to be drawn between anticipated maintenance and major repair, which is a question of degree and fact in each case.
The Judge accepted the Contractor’s position that item 1.9 of the consulting engineer’s design log provided the clearest guidance for the minimum design life allocated to the different structures of the building. The purpose of the design log was to “clarify technical design assumptions and intent” and was provided to accompany the tender and the Contractor’s ‘Works Information’ in the beginning. For this reason, and given that the parties had effectively treated the design log as a contractual document by their conduct, the Court was satisfied it should be given contractual effect.
Contractual “design life” requirements
The consulting engineer had provided in the design log that the structural frame and rail support structures should have a minimum design life of 50 years and the components that form the external shell should have a minimum design life of 25 years. Further, these were strict obligations given the specific environmental condition that the depot was located in.
There was also no express definition of what was meant by either the structural frame or the external shell, nevertheless, the Court looked at the role of each component to deduce their contractual design life. The judge concluded that simply because it is not clear, it cannot be said to fall within the default 20 years design life as stated in the Works Information. He also looked at the specifics of each component such as minimum galvanized coating thickness and the extent to which the component needs to withstand the harsh environment to deduce whether they formed part of the structural frame or the external shell. As a result, the Court was able to rule that the cold formed components should have a design life of 25 years rather than 50 years.
Compliance with “design life” requirements
The Court then determined whether each applicable component had met its contractual design life requirement. This was assessed by weighing up expert evidence on the extent of corrosion of the components with the Principal’s alleged failure to maintain them where maintenance was necessary.
Overall, the Contractor admitted that components other than the cold-formed components did not meet its design life requirements. The Principal had carried out standard maintenance, as was specified in the contract. By adhering to the standard specified in the contract, the Principal’s maintenance practice did not have a significant contribution to the resulting corrosion of the components. In reaching this conclusion, given the particular location of the tram depot, the Court held that it was the Contractor’s obligation to agree on non-standard or unduly onerous maintenance requirements with the Principal. As the Contractor failed to comply with this obligation, it was held that the Principal should be placed in the position it would have been in had the Contractor complied.
Despite claiming only £6.7m in remedial costs, the Principal was only awarded £1.1m.
The Court did not award any damages for the cold-formed components as they required limited replacement or repairs and were not inadequate for their 25 year design life. This meant damages were limited to the remedial costs necessary for those components that did not meet the required design life (comprising the roof components, wall cladding panels, roof overhang soffit panels, wave form cladding panels, tram doors and certain other items). The Court relied on experts’ evidence to determine the extent of remedy required for the components to conclude on a total remedial cost of £1.1m for the defective components.
The decision illustrates the value of taking the time (and seeking advice) to ensure contractual terms are sufficiently clear and that all necessary documents form part of a construction contract. It also emphasizes the importance of design life requirements in construction where the site is exposed to harsh sea environments, which is frequently the case in New Zealand, as it was in Blackpool.