A defective skyscraper built by Carillion needs £4m of glazing repairs - must the landlord pay?

Since Carillion built the 47-storey Beetham Tower in 2006, it has been the tallest building in Manchester. Mid-morning on 22 June 2014, a problem was spotted – and so began 47 floors of glass problem. One of the chaps doing sealant works on the 15th floor came across a loose shadow box unit. These are units of double-glazed and insulating material, which mate together to give an unbroken deep wall of glass top to bottom to all exterior walls of the building. The shadow box unit gives a sleek and deep appearance to the superstructure, with the glass reflecting the sunlight in which Manchester is frequently bathed.

Carillion’s folk soon identified 153 shadow box units as “having the potential for failure”. The units hang on the building frame and rely too on the bond between structured sealant and polyester coating applied to the frames. You can imagine how this would give cause for concern. In the event Carillion took immediate steps to ensure the safety of all 1,350 glass boxes. Each had screw stitched pressure plates fixed to the frame profiles. It was a short-term expedient pending a full investigation and the fathoming of a permanent solution. Four years went by with nothing fathomed – and then Carillion went bust. What now will be done for the long-term Beetham Tower remedy, and who will pay?

The landlord gave the repairing covenant, huge as it might be, in the comfortable knowledge that he could take the rap then turn his guns on the rest, including the insurers of Carillion

The owner and landlord of the building is Northwest Ground Rents Ltd. Its tenant, Blue Manchester Ltd, is the owner of the 999-year lease. The first 23 floors are occupied by the Hilton hotel, while the floors above contain residential flats. The lease price paid by Blue Manchester was a £60m lump sum, then a mere £20,000 per year. The long lease is, in practical terms, an outright purchase. But the landlord has obligations. Do they stretch to liability for the defect, now that Carillion has moved on?

There is a whopper of a bill coming to someone for this large repair – but the supply chain is broken by Carillion’s disappearance. So the building tenant looked at his lease document and said to the landlord, in effect: “It isn’t your mistake as to the glass windows and cladding, but the price I paid for the lease gained a promise that the landlord would ‘at all times keep in good and substantial repair, and when necessary as part of repair, reinstate, replace and renew where appropriate’… ” As well as that, the lease says “the landlord would keep the retained property and common parts in good and tenantable decorative condition and forthwith to replace all broken glass”. Since it is a 999-year lease and the finger is now pointing at the landlord, there are things to be argued about. They came to court: Blue Manchester Ltd vs North West Ground Rents Ltd. And the argument here isn’t about the application of the principles well-known in this lease, it is about the particular facts of the case.

Stand back and look at commercial reality. Does this repairing promise really intend the landlord be required to undertake extensive remedial works to remedy either inherent or design- and construction-related defects for 999 years? The context invites the expectation that the landlord could reach out to Carillion as its main contractor; and reach too for the collateral warranties from the architect, and perhaps the specialist glass walling subcontractor. In other words, the landlord gave the repairing covenant, huge as it might be, in the comfortable knowledge that it could, if need be, take the rap then turn its guns on the rest, including the insurers of Carillion, the subcontractors, and the architect. But the judge said the context of the lease, interesting as it is, didn’t let the landlord off the hook. So, the lawyers fell back on dissecting the wording in the repairing clause.

“Keep in good and substantial repair and when necessary reinstate.” How far does keeping in good and substantial repair go? It doesn’t say, nor mean, keeping in perfect repair. More likely, said the judge, “the meaning is to keep the premises reasonably fit for occupation for the class of tenant likely to take and occupy them and at about the condition when the lease began”. 

And what does reinstate “when necessary” mean? Seemingly, “necessary” doesn’t add a great deal. A defect requires repair: that’s when it is necessary. We can’t wait until the defect becomes intolerable or a nuisance. It was argued – but the judge wouldn’t wear it – that “when necessary” arose once functionality was impaired. The more important test is whether this is actually a defect. We are not waiting for something to become non- functional. The stitch plates, which were the temporary repair, were not pretty. Nor is it that the shadow box units are not yet reinstated. Can the stitch plates stay? This is an aesthetic consideration, and  sometimes aesthetics can be put aside. But here the stitching is on view and it gets the thumbs-down. The attractive original facade is marred in this case. The “necessary” test is satisfied.

To give Carillion its due – and probably its supply chain too – the company got onto the temporary repair promptly. The landlord isn’t happy now, though. But that’s all, dare I say, just another turn in the Carillion affair. 

Tony Bingham is a barrister and arbitrator at 3 Paper Buildings, Temple