Barry Hembling on how to start assessing liability for buildings with flammable cladding in the wake of the Grenfell disaster
After the human tragedy of Grenfell Tower, interested parties are starting to assess their potential liability for buildings with flammable cladding. But it can be hard to know where to start.
Over 200 Aluminium Composite Material (ACM – not to be confused with Asbestos Containing Materials) panel samples from high-rise blocks in 54 local authorities have currently failed combustibility tests. Further tests are being undertaken to establish how six ACM panel types behave in a fire in combination with different insulation types. There is also increasing concern about non-ACM panels with a near identical construction to those used on Grenfell Tower and mounting pressure for non-ACM panels now to be prioritised for testing. While some panels may not be dangerous by themselves, it is important that the correct type has been used and/or only used on buildings up to six storeys.
With hospitals, universities and schools having at-risk panels and owners and managers in the hotel, office, commercial and leisure sectors, among others, realising that buildings within their portfolios may be at risk, we could be facing a repair bill that exceeds the £12 billion current estimate.
While it will be some time before we fully understand how the fire started or why it took hold in the way it did, there are questions that interested parties can start considering now, in advance of further Government guidance and the conclusions from the inquiry.
Has there been a breach of the Building Regulations?
The Building Regulations (Paragraph 12.7 of Approved Document B) require that in a building over 18 metres above ground level any insulation product or filler material (excluding gaskets, sealants etc.) used in external wall construction should be of limited combustibility or Class A2.
Class A2 is the standard against which the Government have been testing cladding. However, elsewhere the Building Regulations suggest a lower safety score of Class 0 (Euroclass B) for all external surfaces for tall buildings. Evidence following the fire indicates that some in the construction industry have been applying the Building Regulations to Class 0 (Euroclass B) standard for years. This is an issue that the inquiry must thoroughly investigate.
In the meantime, the Government clarified on 22 June that the non-combustibility requirement does not just apply to thermal insulation within the wall construction, but extends to any element of the cladding system, including the core. If the Building Regulations are found to be ambiguous or contradictory, changes can be expected.
How, and why, were buildings inspected and signed off by building control?
Many buildings requiring remedial works would have been subject to third party inspection and approval and so questions are now rightly being asked about the adequacy of the building inspection process.
Building inspectors are expected to master the minutiae of the Building Regulations to ensure that, when completed, a building complies with the letter of the applicable Building Regulations.
While it is possible that the Building Regulations have simply been ignored, it is more probable that they have either been misinterpreted, or misunderstood, or that the Government’s fire safety tests are being carried out to a higher standard than thought applicable. These are all issues that the inquiry must grapple with and answer.
How, and why, were buildings inspected and certified under the construction contract?
Separate from the building control process is the issue of whether any defective buildings were inspected during construction.
This function is usually performed by a clerk of works but as they are not always appointed, parties will want to understand who carried out or assumed any inspection function.
The issue of certificates issued under the construction contract will also become relevant. Final certificates can act as a conclusive evidential bar to claims both in contract and tort regarding inadequate design and workmanship.[1]
The status of such certificates will require careful review. To act as a bar, relevant timescales for challenge must have expired and the certificate must cover all works carried out. A partial certificate may only act as a bar to claims for that part of the works that it covers. Partial certificates were considered in a recent judgment concerning liability for defective cladding where the court found that a certificate had been issued only for the apartment phase and not for the hotel.[2] Certificates on relevant buildings will become subject to close scrutiny. Where certificates have been issued for defective buildings or issued for only part and not all of the works, the actions of the certifier may well be questioned.
Has the relevant limitation period expired?
Many buildings requiring remedial works would have been constructed years ago. Limitation periods are therefore likely to become prominent in any discussion regarding liability. The expiry of a limitation period acts as a defence to subsequent claims.[3]
The standard contractual limitation periods are six years for agreements under hand and 12 years for those executed as deeds. Complex arguments arise in respect of economic loss which may be many years after completion. The limitation period for negligence is three years from the first knowledge of the cause of action subject to an overriding 15 year long-stop from the act of negligence giving rise to the damage.
Agreements should also be reviewed to determine whether the parties agreed to displace the standard limitation periods. In Inframatrix v Dean Construction[4] the contractor was engaged to carry out roofing and cladding works at a new factory. The contract provided that no action could be brought after a one-year period from when the contractor last performed services. As time ran from when the snagging works were completed, the claim commenced after expiry of that period was time barred.
In another defective cladding case, the court made clear that contractual limitation periods will not bind third party claims. Accordingly, the limitation period in a collateral warranty between a tenant and a contractor did not prevent a consultant engineer from bringing contribution proceedings against the contractor in response to a claim they had received from the tenant.[5]
Will remedial costs be covered by insurance?
The terms of relevant insurance policies will become subject to thorough review to assess the extent of available cover and any limits on liability.
Disagreements can be expected about whether the policy covers only the costs of replacing the defective item or extends to costs incurred in carrying out those repairs. In a case concerning the costs of replacing defective windows, the Court of Appeal[6] preferred a wider interpretation and held that the all-risks insurance policy in this case covered access costs to enable replacement works to be carried out even though no accidental damage had occurred.
Has there been a breach of health and safety legislation?
Both employers and the self-employed have duties under section 3 of the Health and Safety at Work Act 1974 to conduct their undertaking in such a way to ensure the public are not exposed to health and safety risks. An undertaking means work carried out in the course of business. A key test will be whether the duty-holder can exercise control over both the conditions of work and where the activity takes place. If any criminal prosecutions are brought, they may well be based around a section 3 breach.
It may not be possible to definitively answer all the questions referred to above at this stage but by starting to collate information on these issues and investigate these areas, interested parties will be better informed to clarify the extent of liability in due course.
In the meantime, we await the results and further guidance from the latest round of testing.
Barry Hembling (bhembling@fladgate.com) is a partner in the construction and engineering team at Fladgate
[1] Matthew Hall Ortech Limited v Tarmac Roadstone Limited [1997] EWHC Technology 352 in relation to the Institution of Chemical Engineers Model Form of Condition of Contract (the “Red Book”) and Crown Estates Commissioners v John Mowlem & Co Ltd [1994] 70 B.L.R. 1, CA in relation to the JCT Standard Building Contract 1980
[2] Amec Foster Wheeler Group Ltd (Formerly Amec Group Ltd) v (1) Morgan Sindall Professional Services Ltd (2) Morgan Sindall Group Plc [2016] EWHC 902 (TCC)
[3] Co-Operative Group Ltd (Claimant) v Birse Developments Ltd (In Liquidation) (Defendant) & (1) Stuarts Industrial Flooring Ltd (In Administration) (2) Jubb & Partners (A Firm) (3) Geofirma Soils Engineering Ltd (Third Parties) [2014] EWHC 530 (TCC)
[4] Inframatrix Investments Ltd v Dean Construction Ltd [2012] EWCA Civ 64
[5] Bloomberg LP (Claimant) v (1) Sandberg (A Firm) (2) Sandberg LLP (3) Buro Happold Ltd (Defendants) Malling Pre-Cast Ltd (Third Party) [2015] EWHC 2858 (TCC)
[6] Seele Austria GmbH & Co KG v Tokio Marine Europe Insurance Ltd [2008] EWCA Civ 441
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