Office Depot International (UK) Ltd v UBS Asset Management (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | Mrs Justice O'Farrell |
| Judgment Date | 15 June 2018 |
| Neutral Citation | [2018] EWHC 1494 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2017-000068 |
| Date | 15 June 2018 |
[2018] EWHC 1494 (TCC)
Mrs Justice O'Farrell
Case No: HT-2017-000068
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Royal Courts of Justice Strand, London, WC2A 2LL
Mark Wonnacott QC & Harriet Holmes (instructed by Geldards LLP) for the Claimant
Stephen Jourdan QC & Adam Rosenthal (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the First and Fourth Defendants
Alexander Hickey QC & Thomas Crangle (instructed by Pinsent Masons LLP) for the Second Defendant
Jessica Stephens (instructed by Fieldfisher LLP) for the Third Defendant
Hearing dates: 21 st March 2018, 22 nd March 2018
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The matters before this court are contested applications to amend and strike out pleadings. They raise the issue whether, and in what circumstances, the court should exercise any discretion to grant declaratory relief determining the performance required to satisfy a party's obligations under a commercial agreement.
Background
These proceedings concern the design, construction and maintenance of a warehouse at Plot 1000, Ashton Commerce Park, Ashton Moss, Ashton-Under-Lyne, Manchester.
On 8 April 2004 the claimant (‘OD’) entered into an agreement for lease with the first defendant (‘UBS Asset’) in respect of the warehouse that was to be constructed.
By contract dated 23 April 2004, Amec Developments Limited engaged the second defendant (‘Amec’) to carry out the design and construction of the warehouse.
On 28 May 2004 UBS Asset and Amec Developments Limited entered into a sales agreement under which UBS Asset agreed to take a long lease of the warehouse with a term of 999 years on completion of the works.
By sub-contract dated 29 June 2004, Amec engaged the third defendant (‘FK’) as a subcontractor to carry out the detailed design, supply and installation of roofing and cladding works in respect of the warehouse.
On 11 August 2004 Amec executed a deed of collateral warranty for the benefit of OD, including a warranty that it had complied with its obligations under the design and build contract in carrying out the works.
The warranties given by Amec were subject to a proviso that:
“2.7.1 in the event of any breach of this deed … [Amec] shall be liable for the reasonable costs of repair, renewal and/or reinstatement of any part or parts of the Works to the extent that [OD] incurs or is liable (whether directly or by way of financial contribution) for such costs, but [Amec] shall not be liable for other losses incurred by [OD] …
2.7.2 [Amec] shall owe no greater obligations to [OD] than he owes to the Employer under the Contract.
2.7.3 [Amec] shall be entitled in any action or proceedings by [OD] to rely on any limitation in the Contract and to raise the equivalent rights in defence of liability as he would have against the Employer thereunder.”
Sectional completion of that part of the works that included the warehouse roof was achieved on 10 January 2005.
Practical completion of the warehouse was achieved on 22 March 2005.
On 1 April 2005 FK executed a deed of collateral warranty for the benefit of OD, including a warranty that it had complied with its obligations under the roofing subcontract. The warranties given by FK were similar, but not identical, to the warranties given by Amec and did not contain the proviso set out above.
On 19 April 2005 UBS Asset granted a lease of the warehouse to OD for a term of 20 years, commencing 22 March 2005. The lease contains a tenant's repairing covenant at clause 3.4:
“to keep the premises in good and substantial repair, maintained and in clean condition…”
In May 2010 UBS Asset made a claim against Amec alleging defects in the design and construction of the warehouse, including defects in the roof cladding and structural steel frame. That claim was settled by Amec by the payment of £2.8 million to UBS Asset. The settlement agreement dated 2 November 2011 included the following provision at clause 5:
“UBS hereby indemnifies AMEC against any costs, liabilities or losses incurred as a result of any action brought by UBS seeking recovery against any other party in relation to the Dispute. AMEC hereby indemnifies UBS against any costs, liabilities or losses incurred as a result of any action brought by AMEC seeking recovery against any other party in relation to the Dispute.”
Amec passed on the claim to FK and obtained an arbitration award in its favour. On 1 September 2013 Amec and FK entered into a settlement agreement, pursuant to which FK settled its liability to Amec by payment of the sum of £4 million (including costs).
On 2 March 2016 the lease was assigned by UBS Asset to the fourth defendant (‘UBS Triton’).
The roof has suffered from water ingress for some years.
The parties entered into discussions to try and agree a scheme of remedial works that would be carried out by FK and paid for by UBS Asset or UBS Triton. However, they were unable to agree the terms on which such works would be undertaken, any warranties to be provided in respect of the work and the impact of such works on the repairing covenant in the lease. There are no current proposals or agreement as to the scope of any remedial works, the costs of such works or liability for the same.
Proceedings
On 16 March 2017 OD commenced proceedings against the defendants, seeking:
i) against UBS Asset (and now UBS Triton), declaratory relief as to the works, if any, that OD is required to carry out to put the roof into a lease compliant state; and
ii) against Amec and FK, a declaration that those works are required as a result of design and/or construction defects which are covered by the collateral warranties; further, an indemnity in respect of the cost of such works or damages.
On 13 December 2017, applications by UBS Asset, UBS Triton and FK to strike out the claim and/or for summary judgment came before the court. Those applications were adjourned to give OD an opportunity to amend its pleading. This is the adjourned hearing of those and other applications.
The applications before the court are:
i) an application by OD to amend its particulars of claim, opposed by all defendants;
ii) applications by UBS Asset and UBS Triton to strike out the claim and/or for summary judgment;
iii) applications by FK to strike out the claim and/or for summary judgment;
iv) an application by UBS Asset and UBS Triton to amend their defence; and
v) an application by OD for permission to rely on its replies.
Amended pleading
The proposed amended Particulars of Claim (“the APOC”) pleads the case against the defendants as follows:
i) UBS Asset was the landlord until 2 March 2016. Since 2 March 2016 UBS Triton has been the landlord [paragraph 3].
ii) In the past UBS Asset alleged that the warehouse was defective and in disrepair, and that OD was liable to remedy the defects in the roof pursuant to the repairing covenant in the lease [paragraph 6].
iii) The roof has leaked from the start of the lease [paragraph 8].
iv) UBS Triton has stated that it believes that the appropriate remedial works required to remedy the defects in the roof and put it into a lease compliant condition are treatment of the end laps with Kemperol. However, UBS Triton has expressly reserved the right to contend later that the works have not produced that result, and that OD must do whatever work might then be necessary in order to put the roof into that condition [paragraph 11A].
v) OD has the benefit of collateral warranties from Amec and FK in respect of the costs of remedying the consequences of defective design and construction [paragraph 12].
vi) At paragraph 14 of the proposed APOC, it is pleaded that OD's position is:
“(1) That it does not admit that any works are required to the roof under its repairing covenant, and it requires the First and Fourth Defendants to prove those works that are required by reference to the individual defects if they wish to oppose the making of negative declarations binding on them that particular remedial works are not required.
(2) But, to the extent that works are required, that is a consequence of original design and or construction defects, the defects being those which the First Defendant identified and complained about in the draft Particulars of Claim in its threatened action against the Second and Third Defendants that is to say:
(a) Differential movement of the roof panels caused by thermal expansion and contraction …
(b) The roof suffers from excessive deflection under load …
(c) British Standard BS5427 requires (in the absence of detailed analysis) a minimum nominal pitch for through-fixed roof sheeting … of 5.5 0 to allow for a pitch deflection of at least of 4 0. At the Warehouse, the nominal slope is 5 0 …
(d) Many of the existing rooflights have cracked as a result of stress caused by excessive thermal movement …
(e) The side laps of the roof sheets have been laid facing south into the prevailing wind, increasing the risk of water penetration…
(3) And that the existence of those design and construction defects are breaches of the various collateral warranties given to the Claimant by the Second and Third Defendants, and they must indemnify the Claimant against the cost of doing all the works which the court might declare the Claimant is required to do …”
The relief claimed in the prayer is:
“(1)...
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