A recent TCC decision has provided updated guidance on the interpretation of design life obligations in construction contracts. In doing so, the court also considered the precedence of contractual documents.
The dispute arose following the upgrading of the tram system in Blackpool. The employer was the local Borough Council (the Council) and the work was undertaken by Volker Fitzpatrick Limited (VF) under a design and build modified NEC3 contract. The rejuvenated network was to be serviced by a flagship new tram depot located on the seafront, near Blackpool Airport. This work was completed in 2011.
After several years use, the Council found that steel components in the depot's roof were corroding. This led to the raising of an action against VF, with a claim for damages of over £6 million.
Previous authority in this area stems from the 2017 UKSC case E.ON v MT Hojgaard. Here, the court held that where a contract stipulates a requirement to design/build a structure with a defined 'design life', this would be enforceable.
In Blackpool, the TCC found that, "It cannot realistically be thought that a structure should be intended to be maintenance free for the whole of its design life, whereas it can reasonably be assumed that it ought not to need major repairs over that period.”
Precedence of Documents
In reaching this conclusion the court also considered the precedence of documents. This arose from the fact that the parties were at odds over what they had agreed the design life for the depot was to be. The 'Works Information' document (prepared by the Council) stated a general design life of 20 years, unless otherwise indicated by a second document (also prepared by the Council), the 'Functional Performance Specification' (the FPS). The FPS stipulated a 50-year design life for the "building structure", however this phrase was undefined.
A third document, the 'design log', prepared by the design sub-contractor and included within the final suite of contract documents, differentiated between the building's "external shell" (25-year design life) and the "structural frame" (50 years).
The Council first sought to argue in favour of a broad interpretation of "building structure" to include the roof. This failed. They then attempted to rely on a precedence clause so the third document could be disregarded as it was inconsistent with the Works Information document and the FPS. The TCC found this to be unnecessary. The lack of clarity stemmed from the Works Information and the FPS, only when these were read together with the design log was the meaning of the terminology clear. The roof, therefore, was not part of the "building structure" and should have a design life of 25 years only.
Conclusions and Implications
The case gives useful guidance for how a court will approach the issue of design life.
The court's handling of the precedence issue shows that careful drafting and oversight of all documents to be incorporated into a contract is essential to ensure there is consistency across the suite of contractual documents.