Straddling the fence - contractual interpretation in the abstract
03 October 2022
Life expectancy obligations in a construction project applied only to the newbuilds, not the refurbished properties under that project, according to the High Court. This case was not one where a breach was being alleged, rather the court was asked to grant declarations on a sub-contractor’s obligations. While it did grant certain declarations, in the absence of a claim for damages or alleged breaches, the court also underlined the importance of exercising a degree of caution when determining what the terms of a contract meant.
Solutions 4 North Tyneside was a special purpose vehicle contracted to deliver a project under a private finance initiative deal with North Tyneside Borough Council. The project entailed the demolition and replacement of 10 buildings containing flats to house elderly people, and the refurbishment of a further 16 buildings. The construction company was Galliford Try.
The dispute related to issues with the roofs of refurbished homes. On the one hand, Solutions 4 North Tyneside contended that, under the construction sub-contract, timber roof structures should have a design life of 60 years from the date of the certificate of availability. This, it said, was because what was required by the “output specification” in the project agreement, which had been incorporated into the construction sub-contract. Therefore, argued Solutions 4 North Tyneside, Galliford Try was liable for defects that emerged in the roofs of the refurbished homes. On the other hand, Galliford Try argued that its obligation was to ensure that the refurbished houses met the stated requirements at the date a certificate of availability was issued, and that there was no obligation as to the future life expectancy of the properties.
Neither party claimed damages. No particular breaches were alleged. Rather, the parties only sought declarations.
The court highlighted that deciding what the terms of a contract mean in abstract runs the risk of making a contract different from that which the parties agreed. Consequently, it refrained from granting several declarations. Notwithstanding this restraint, the court concluded that Galliford Try’s interpretation of its scope of works was “substantially correct”. The court distinguished between bringing an existing building up to a sound standard and putting it into a condition such that it would not need further significant refurbishment as it ages during the lifetime of the project. Therefore, whilst Galliford Try was obliged to ensure a design life of a particular duration for the buildings which had been demolished and replaced, it was not required to do so for the refurbished buildings. Ultimately, the court held that such an arrangement would have been “unusual” and “wasteful”, and that if it were the parties’ intention, one would have expected to see it set out in clear terms.