LDC (Portfolio One) Ltd v (1) George Downing Construction Ltd and Another  EWHC 3356 (TCC)
In LDC (Portfolio One) Ltd v (1) George Downing Construction Ltd and (2) European Sheeting Limited (in Liquidation) the TCC was required to consider a contractual obligation to exercise reasonable skill and care alongside the requirement for compliance with the applicable Building Regulations. The outcome was that the Court held the defendant external wall sub-contractor liable for fire safety defects.
The Background to the Case
A dispute arose following the discovery of fire safety and water ingress issues caused by defective cladding to three high-rise (18m) towers (18m+) comprising a university halls of residence in Manchester. The freeholder initially pursued the main contractor and external wall sub-contractor under the terms of two collateral warranties for the cost of rectifying the defects. The freeholder managed to settle its claim with the contractor and thereafter sought recovery from the sub-contractor, ESL, for the cost of remedial works (c£16.4m) and loss of income (£4.6m). The contractor also sought an indemnity and/or contribution from ESL for the same defects pursuant to its sub-contract.
What Did the Court Decide?
By the time of trial, the sub-contractor was insolvent. Despite the sub-contractor’s failure to attend trail, the TCC was nevertheless obliged to consider the issues which had previously been raised in its Defence to the claims. In finding for the Claimant, the Court rejected ESL’s argument that under the terms of its sub-contract, its design obligations were confined to a requirement to exercise reasonable skill and care. In reconciling this with the terms of ESL’s warranty, which included a strict obligation to comply with statutory requirements, the Court held that ESL’s duty to exercise reasonable skill and care was a minimum requirement which did not derogate from the strict requirement to comply with the applicable Building Regulations.
As such, the court found in favour of the freeholder who was entitled to recover c.£21m from the sub-contractor for the cost of remedial works and loss of income. The contractor was also entitled to an indemnity from the sub-contractor following its failure to honour the terms of its sub-contract which had put the contractor in breach of the main contract. The TCC added that in the absence of an indemnity, it would still have held the sub-contractor liable under the Civil Liability (Contribution) Act 1978.
This case is only the second reported judgment of its type following a full trial post-Grenfell but illustrates further the commitment of the courts to dealing with cladding and fire safety defect claims in as robust way as possible. A duty to exercise reasonable skill and care is likely to be construed as a minimum requirement only, and one which does not derogate from the designer’s strict obligation to comply with Building Regulations.
Many of the issues touched upon in this case featured in the crucial earlier decision in Martlet Homes Ltd v Mulalley & Co Ltd  EWHC 1813 (TCC) – for further information regarding that case, please read our related article here.
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