The claim
The proceedings concerned claims brought by the
claimant in relation to 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 residential tower blocks it owned in central
Manchester.
The parties involved
The claimant was LDC (Portfolio One) Limited (“LDC”).
LDC is the freeholder of three residential tower blocks
(“Property”), which it acquired from a company not
involved in the proceedings. The construction of the
Property dates back to 2007. The Property consists
of the three individual blocks located around a central
courtyard and is operated, by LDC, as university halls of
residence in Manchester.
The first defendant was George Downing Construction
Limited (“Downing”). Downing was employed pursuant
to a building contract (“Main Contract”) by a company
not involved in the proceedings.
The second defendant was European Sheeting
Limited (In Liquidation) (“ESL”). ESL was employed,
by Downing, as the specialist sub-contractor for the
external wall systems pursuant to a sub-contract (“Sub-
Contract”).
The contracts
In 2015, LDC obtained the benefit of two collateral
warranties which Downing and ESL had entered into in
respect of their respective obligations under the Main
Contract and Sub-Contract. LDC’s claims were brought
pursuant to those two warranties.
The Main Contract
The Main Contract, entered into in June 2007, took the
form of the JCT Standard Form of Building Contract
with Contractor’s Design 1998 Edition incorporating
Amendments 1 to 5 and further bespoke amendments.
So far as material:

• The Works were required to comply with, inter alia,
  all Statutory Requirements, which included the
  applicable Building Regulations.
• The Employer’s Requirements (“ERs”) required the
  provision, inter alia, of “all cavity barriers to meet the
  requirements of the Building Regulations Approved
  Document B”.
  The Sub-Contract
  The Sub-Contract, dated September 2008, took the form
  of the JCT Standard Form of Sub-contract for Domestic
  Sub-contractors (DOM/2, 1981 Edition, incorporating
  Amendment 1 (1987), Amendments 2, 3, 4, 5 and 6
  (1989) and Amendment 7 (1992) with further bespoke
  amendments. So far as material:
• ESL was deemed to have notice of all provisions in
  the Main Contract save for detailed prices.
• ESL was required to complete the Sub-Contract
  works so that no act, omission or default would
  give rise to a breach by Downing under the Main
  Contract.
• ESL was required to observe, perform and comply
  with all the provisions of the Main Contract.
• As to design, the Sub-Contract was in materially
  similar terms to the Main Contract and required ESL
  to exercise reasonable skill and care.
  Case analysis:
  LDC (Portfolio One) Limited v (1) George Downing
  Construction Limited and (2) European Sheeting Limited
  [2022] EWHC 3356 (TCC)
  stopping;
• the substitution of the SIPs with a new Steel Framing
  System (“SFS”);
• the reinstatement of the existing Cor-ten steel panels;
• the replacement of the composite cladding and
  glazed panels; and
• making good of internal areas affected by water leaks
  or the remedial works themselves.
  Prior to implementing the Permanent Remedial Scheme,
  LDC carried out certain temporary remedial works
  (“Temporary Remedial Works”) which:
• were based on advice given by a firm of civil and
  structural engineers that fixings which secured the
  composite cladding to the buildings could fail due
  to deterioration in the SIPs to which the fixings were
  attached; and
• involved bolting the composite cladding to the inner
  leaf of the buildings which, in turn, re-fixed all the
  SIPs on the composite cladding elevations to ensure
  that they would not detach from the buildings.
  Procedural background
  In October 2022, about two weeks prior to the trial,
  the legal proceedings between LDC and Downing were
  settled on confidential terms. The settlement sum was
  £17.65m (“Settlement Sum”).
  Prior to that, in around May 2022, ESL entered into
  a Creditors’ Voluntary Liquidation, following which it
  played no further part in the proceedings (as part of the
  litigation, it had served an amended defence in June
  2021): ESL did not serve any witness statements or
  expert reports and the proceedings took place in ESL’s
  absence.
  LDC and Downing sought to enter judgment against ESL
  as follows:
• LDC claimed £21.1m against ESL for:
  o the cost of remedial works; and
  o loss of income.
• A Sub-Contract Document included the Architectural
  Specification (“Spec”), which formed part of the ERs
  under the Main Contract: in common with the ERs,
  the Spec required the provision of cavity barriers.
  The external wall systems
  Each block was over 18 metres high with external wall
  systems built as follows:
• Block 1 had Cor-ten steel cladding (North, Each and
  South elevations) and composite cladding (West
  elevation);
• Block 2 had composite cladding (North elevation)
  and glazed panels (East, South and West Elevations);
  and
• Block 3 had composite cladding (all elevations).
  Each external wall system contained a breather
  membrane and Structural Insulated Panels (“SIPs”). The
  SIPs were fixed to the structural concrete frame of each
  block.
  The problems that arose
  Following water ingress issues and subsequent
  investigations, it was discovered that:
• defects to the external wall construction of the
  cladding had led to water ingress and deterioration of
  the SIPs; and
• fire barrier and fire stopping issues existed between:
  o the rear of the SIPs and the contrate slab to all
  elevations; and
  o the rear of the cladding panels and outer face of
  the SIPs on the Cor-ten elevations.
  The remedial schemes
  In mid-2021, LDC implemented a permanent remedial
  scheme (“Permanent Remedial Scheme”) which
  involved:
• the removal of the cladding on all elevations
  (including the glazed panels);
• the removal of the SIPs;
• the installation of proper fire barriers and fire
  (2) Relevant Statutory Obligations
  ESL argued that the Building Regulations provided
  no more than guidance and only required “adequate”
  residence to the spread of fire or the passage of
  moisture.
  The Court held that:
• ESL’s argument could not help ESL where
  photographs showed there had been extensive water
  ingress and that the external wall systems did not
  (according to the expert evidence) include ‘adequate’
  measures to inhibit the spread of fire.
• The experts agreed that the design and construction
  of the external wall systems did not comply with the
  Building Regulations and, in relation to fire safety, the
  agreed non-compliances included:
  o the absence of vertical fire barriers;
  o the omission or poor installation of horizontal fire
  barriers;
  o the omission of fire stopping between the rear of
  the SIP panels and the concrete slab;
  o the use of Rockwool RW45A material for fire
  stopping which was not suitable to provide an
  effective fire barrier; and
  o the omission and/or inadequate installation of fire
  stopping between the SIPs
• ESL had not presented any evidence to support its
  contentions that what was provided was adequate.
• The defects constituted breaches of the collateral
  warranty given by ESL based on breaches of the
  Sub-Contract (by reference to the Main Contract)
  by reason of non-compliances with the Building
  Regulations and the Spec.
  (3) Temporary Remedial Works
  LDC’s claim included the cost of carrying out and
  completing the Temporary Remedial Works. ESL alleged
  that LDC failed to mitigate its loss because:
• LDC delayed in undertaking remedial works, with the
  result that the water ingress issues worsened; and
• Adopting LDC’s case (without making admissions as
  to its own breaches), Downing claimed an indemnity
  and/or contribution from ESL for the Settlement Sum.
  LDC and Downing relied on expert evidence from experts
  in the fields of architecture, fire engineering and quantity
  surveying.
  What did the Court decide?
  (1) Scope of ESL’s obligations
  ESL argued that:
• it was not obliged to comply with the Main Contract;
  and
• by virtue of a term of the Sub-Contract, it would only
  be liable for design matters if it failed to exercise
  the reasonable skill and care to be expected of
  a professional designer (according to ESL, this
  trumped any strict obligation to comply with Building
  Regulations); and
• the Sub-Contract excluded the provision of fire
  breaks because ESL’s tender stated that ESL had
  ‘not allowed’ for them (ESL said this was reiterated in
  the minutes of a pre-selection meeting).
  The Court held that:
• In carrying out the Sub-Contract, ESL was required
  to comply with the applicable Building Regulations:
  o the Main Contract required an obligation
  for the works to comply with “all Statutory
  Requirements” (which included the Building
  Regulations);
  o in the Sub-Contract, the obligation on ESL
  to exercise reasonable skill and care did not
  supersede the obligation to ensure that Downing
  was not placed in breach of its obligations under
  the Main Contract; and
  o there was nothing to suggest that ESL’s skill and
  care obligation should take precedence over
  the strict obligation to comply with the Statutory
  Requirements.
• ESL’s tender was superseded by the Sub-Contract
  and the statement in the minutes did not detract from
  the detailed requirements of the Spec.
  SIPs could not be replaced like-for-like because they
  would not comply with the revised Building Regulations
  2010 (as amended) and Regulation 7(2).
  (5) Quantum
  The quantum experts for each of LDC and Downing
  valued the Temporary Remedial Works at £16.485m
  and the Permanent Remedial Solution £16.430m. They
  ultimately agreed on a figure of £16.457m, which the
  Court accepted.
  The Court also accepted LDC’s full claim for loss of rent
  and the cost of having to decant the University students
  whilst the remedial works took place. In the absence of
  expert evidence from ESL, the claim of £4.694m was fully
  accepted by the Court.
  (6) Downing’s contribution claim against ESL
  The Court held that Downing was entitled to a
  contribution from ESL on the basis that ESL had agreed
  to “indemnify and save harmless [Downing] from”
  Downing’s liability to LDC arising out of ESL’s breaches
  of the Sub-Contract and non-observance of the terms of
  the Main Contract.
  Finally, the Court held that the settlement was objectively
  reasonable, in line with the judgment of Edwards-Stuart
  J in Fluor v Shanghai Zhenhua Heavy Industry Co Ltd
  [2018] EWHC 1 (TCC) at 465.
  Implications for fire safety cases
  The latest TCC judgment is relevant to fire safety cases
  because it deals with a number of arguments that are
  commonly deployed:
  (1) In common with Martlet, the Court rejected the
  proposition that:
• ESL did not have an obligation to comply with
  Building Regulations; and
• that this was trumped by an obligation to
  exercise reasonable care and skill.
  (2) The Court dismissed ESL’s argument that the
  guidance in the Approved Documents to the Building
  Regulations required only ‘adequate’ resistance
  to fire spread and water ingress. Not only did
  ESL’s argument lack supporting expert evidence
  but the Court was persuaded by photographic
• the Temporary Remedial Works were unreasonable
  because the insertion of coach bolts into the
  composite cladding meant that it was impossible to
  re-use the SIPs.
  In relation to the alleged delay, the Court held:
• LDC had taken steps to investigate and address
  the issue of water ingress following receipt of a
  report from a curtain walling specialist. There was a
  period when more could have been done to advance
  investigations and remedial works. However, there
  was no evidence to suggest that delays during that
  period impacted the scope of the remedial works.
• ESL had undertaken various remedial works and
  claimed that the issues had been resolved. However,
  the issues were not resolved and ESL’s failure was a
  significant cause of the deterioration.
  In relation to the nature of the Temporary Remedial
  Works themselves, the Court held that the works carried
  out were not unreasonable:
• taking immediate steps to undertake emergency
  repairs in order to prevent a failure that would have
  been a significant hazard was the right action for
  LDC to have undertaken;
• ESL had failed to suggest an alternative remedial
  solution, such that there was no basis for a
  conclusion that the works were unreasonable; and
• the architectural experts considered that the
  Temporary Remedial Works were reasonable as
  they provided an immediate failsafe solution to an
  unacceptable risk.
  The Court concluded that there was no basis for
  concluding that the Temporary Remedial Works were
  unreasonable or that LDC had otherwise failed to
  mitigate its loss in relation to those works.
  (4) Permanent Remedial Works
  ESL alleged that the Permanent Remedial Scheme was
  one means of rectifying the fire safety defects, but it did
  not advance an alternative remedial solution.
  The Court concluded that LDC acted reasonably in
  implementing the Permanent Remedial Scheme, which
  was based on expert advice. Interestingly, LDC’s fire
  engineering expert’s evidence was accepted that the
• Without the collateral warranties, LDC would
  have lacked the contractual nexus required to
  pursue its claim. However, by reason of the
  Building Safety Act 2022, it is possible that LDC
  might have taken the benefit of the extended
  limitation period under the Defective Premises
  Act 1972.
• The judgment also highlights the importance
  of having a copy of the underlying contract
  documents (in this case, the Main Contract
  and Sub-Contract) to enable the claims to be
  prosecuted effectively.
  (3) The ease with which the contractual terms of a
  superior agreement can be passed down to a sub-
  contract – in this case, from the Main Contract down
  to the Sub-Contract. As the terms in question were
  not unusual, sub-contractors need to be mindful
  of this point and ensure they properly review and
  understand the terms of all of their sub-contracts and
  associated risks.
  (4) Claims that certain items of work were ‘not allowed’
  in the tender/ excluded by some other document
  (in this case, the minutes of a meeting). In time and
  money claims, it is not uncommon for such a stance
  to be taken: in the present case, the item allegedly
  ‘not allowed’ was fire barriers. The TCC dismissed
  the argument on the grounds that the tender was
  superseded by the Sub-Contract (ESL’s argument
  was also contrary to the Spec). The case is however
  insightful as to the Court’s approach.
  For further information, please contact Matthew
  Cocklin, Partner in our Construction team.
  evidence and the expert evidence as to the defects.
  Taken together, this showed that what was built
  included fire and water resistance that was far from
  ‘adequate’.
  (3) The Court dismissed ESL’s arguments that the
  Temporary Remedial Works and the Permanent
  Remedial Scheme were unreasonable:
• Given that the freeholder, LDC, was required
  to act in an emergency situation to address
  a significant hazard, the Court was not open
  to criticising the freeholder’s approach to the
  Temporary Remedial Works.
• In circumstances where the Permanent Remedial
  Scheme was based on expert advice and ESL
  had not put forward any alternative remedial
  solution, the Court determined that the scheme
  was reasonable.
• Insofar as the freeholder had put the Permanent
  Remedial Scheme in place, which complied with
  the post-Grenfell amended Building Regulations
  2010, the Court did not treat this as betterment.
  Other take-away points
  The decision also highlights a number of noteworthy
  points:
  (1) The importance of obtaining input from experts:
• The Court accepted the evidence of the
  independent experts in the fields of architecture,
  fire engineering and quantum. As ESL did not
  provide expert evidence, the Court accepted the
  evidence presented by LDC and Downing.
• The Temporary Remedial Works and Permanent
  Remedial Scheme were based on the advice of
  construction professionals. The Court therefore
  accepted that LDC’s approach to the remedial
  works was reasonable.
  (2) The intrinsic value of a collateral warranty for
  employers, purchasers, tenants and funders. This
  is because the claim brought by LDC was one made
  pursuant to the terms of a collateral warranty:
  Matthew Cocklin
  Partner
  020 7065 1813
  matthew.cocklin@devonshires.co.uk
  www.devonshires.com 020 7628 7576
  Devonshires has taken all reasonable precautions to
  ensure that information contained in this document is
  materially accurate however this document is not intended
  to be legally comprehensive and therefore no action
  should be taken on matters covered in this document
  without taking full legal advice.

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