Routine Maintenance or Major Repair? The meaning of ‘design life’ obligations
The TCC recently handed down its judgment in Blackpool Borough Council v Volkerfitzpatrick Limited, which included claims that the upgrade of the Blackpool tram depot failed to meet its design life. The detailed judgment addressed a variety of interesting issues. However, this article will focus on the helpful guidance given by the court in respect of what is meant by ‘design life’ where the term is not defined in the contract.
Blackpool Borough Council appointed Volkerfitzpatrick Limited (VFP) under a form of NEC3 contract with amendments to design and build a new tram depot as part of a major upgrade to the long-running Blackpool tramway system.
VFP’s works were completed in 2011 and brought into operation in 2012. The Council complained that several elements of the new depot suffered from corrosion so soon after installation as to put VFP in breach of its obligations to design the works to achieve the contractually specified design life. The Council claimed for repairs to the corroded elements of approximately £6,700,000. However, the amount awarded to the Council was just over £1,100,000, and a large proportion of this difference came down to the court’s interpretation of the design life requirements applicable to certain parts of the works.
The Works Information contained a general statement that “unless otherwise specified in the Functional Procurement Specification, [the works] have a design life of at least 20 years”.
The contract also contained a ‘Functional Procurement Specification’, which set out various requirements applicable to the works, including a requirement for a 50 year design life for the “building structure”. The contract incorporated a design development log, which further specified a range of design life requirements for various parts of the works.
It was also material to the court’s decision (although not strictly to its analysis of what is meant by ‘design life’) that the conditions of contract incorporated a ‘fitness for purpose’ obligation which required the completed works to comply with any requirement included or referred to in the contract. The court held that the design life obligation would be a ‘fitness for purpose’ obligation, as was the case in the Supreme Court’s decision in MT Hojgaard v E.ON Climate & Renewables UK.
In MT Hojgaard v E.ON the court had interpreted the particular wording of the design life obligation as a strict liability obligation. It was therefore a strict warranty that the design of the works would enable it to have a lifespan equal to the contractual design life, and any failure to achieve this would constitute a breach of contract (regardless of any evidence that the contractor has designed the works using reasonable skill and care).
The meaning of ‘design life’
The Council’s claims centred on whether VFP had met its contractual design life obligations in respect of certain works. In order to assess this, the court had to consider what is meant by the term ‘design life’, as the contract itself contained no definition.
In addressing this question, the court drew upon two British Standards: BS ISO 15686-1:2000 (‘buildings and constructed assets – service life planning’) and BS EN 1990:2002 (‘basis of structural design’). The court summarised the position in these documents as follows:
“BS ISO 15686-1:2000, entitled “buildings and constructed assets - service life planning”, contains a definition of design life as the service life intended by the designer. In turn the service life is defined as the period of time after installation during which a building or its parts meets or exceeds the performance requirements. A performance requirement is defined as a minimum acceptable level of a critical property. There is also a definition of durability as the capability of a building or its parts to perform its required function over a specified period of time under the influence of the agents anticipated in service.”
The court did not consider that this passage answered the question at hand, but nonetheless approved the inter-relation between the connected concepts of “design life”, “service life”, “performance” and “durability”.
The court went on to consider the second standard:
“BS EN 1990:2002, entitled “basis of structural design”, contains at 188.8.131.52 a reference to “design working life”, which means the “assumed period for which a structure or part of it is to be used for its intended purpose with anticipated maintenance but without major repair being necessary”. Maintenance is defined in the same standard as being the “set of activities performed during the working life of the structure in order to enable it to fulfil the requirements for reliability”.”
The court noted the importance of recognising that no asset can be expected to perform throughout its entire design life without any maintenance at all. The key distinction is between “anticipated maintenance” and “major repair” – while some routine maintenance is expected, an asset should not require major repair during its design life.
What exactly constitutes “major repair” was determined to be a matter of “fact and degree in any given case”. In the present case, the court took guidance from a contractual requirement that any required maintenance of the works should not include anything which is ‘non-standard’ or ‘unusually onerous’. The court concluded that these contractual provisions could illustrate the sort of repairs that might be ‘major’ for the purpose of assessing design life.
This finding was relevant to a determination that VFP was in breach of the design life obligation in respect of blistering to the wall cladding panels. It was accepted that the cladding panels may have met the design life obligation if they had been cleaned ‘frequently and intensively’. The court held that such maintenance requirements would not have fallen within the ambit of “anticipated maintenance” for design life purposes, as the court did not think such maintenance would have been either ‘standard’ or ‘non-onerous’.
Contractual design obligations
Going forward, parties to construction contracts with design obligations should note that ‘design life’ may equate to ‘lifetime to first major repair’, even though the judge did not go so far as to approve such a definition in this case.
Arguably, the judgment outlines a means by which one can determine whether undefined design life obligations have been complied with – that is, by asking whether and when major repair has been necessary. However, as lawyers so often say, each case will depend on its own particular facts and contract terms.
News & Insights
Assigning a sub-contract on termination: Which rights is the contractor giving up?
How to avoid undesirable and unintended consequences when assigning sub-contracts ?
Charles Russell Speechlys present at EIS Association Autumn Technical Seminar 2020
Our presentation covered the tax and corporate considerations for companies preparing for a possible exit.
Charles Russell Speechlys advises the owners of Safeonline LLP on its sale to Howden Broking Group Limited
Safeonline LLP has a proprietary insurtech platform, iQ, which will offer the capability to provide cyber insurance capability.
Charles Russell Speechlys launches as Hong Kong firm and welcomes litigator Ray Ng
Charles Russell Speechlys is launching as a Hong Kong law firm today and welcoming experienced litigator Ray Ng to the team.