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Scottish Widow Services Ltd. v Harmon/ CRM Facades, Building Design Partnership and W.S.A. Inc. 23 March 2010

26 Mar 10 Two separate actions were brought to enforce a series of collateral warranties given in connection with the construction of a new head office for the Scottish Widows Fund and Life Assurance Society

Two separate actions were brought to enforce a series of collateral warranties given in connection with the construction of a new head office for the Scottish Widows Fund and Life Assurance Society. In 1996 a company known as Edinburgh Construction Services Ltd. (ECSL) entered into a management contract with Laing Management (Scotland) Ltd. (LMS) in terms of which LMS was to act as management contractor on behalf of ECSL in the Project. Under that contract, ECSL was the employer. The management contract was the Scottish Management Contract Phased Completion Edition (March 1988) incorporating the conditions of the Standard Form of Management Contract 1987 as amended by a schedule of amendments agreed between ECSL and LMS. Harmon/CFEM Facades (UK) Ltd., the first defenders in the Harmon action, and Kershaw Mechanical Services Ltd., the first defenders in the Kershaw action, were works package contractors engaged by LMS in connection with the project. Harmon was now in liquidation. BDP, the second defenders in both actions, were the architects, who were engaged by ECSL to provide architectural services. WSA were Harmon’s parent company, and had entered into a parent company guarantee in respect of Harmon’s contractual obligations under a collateral warranty granted by them.

Although they were the employer under the contract, ECSL had no interest as either proprietor or tenant in the site or the development. Collateral warranties were provided by Harmon, BDP and Kershaw in favour of various parties who either had an interest in the site or were likely to have as either proprietor or tenant.

The project consisted of three five-storey rectangular blocks and one curved block, with aluminium framed curtain walling and windows. Harmon’s works package was for the glazing element, including the curtain walling and glazing. Kershaw’s package was for the design and construction of the standing seam roof.

Harmon made a collateral warranty in favour of Scottish Widows and Scottish Widows (Port Hamilton) Ltd. (Port Hamilton). Kershaw, appointed by LMS for the design and construction of the seam roof, provided a warranty to Scottish Widows in similar terms to Harmon’s. The Edinburgh Development Group Ltd. (EDG) which had taken a lease of the land on which the office was to be built, assigned part of its rights to Port Hamilton. During the winter of 1997/98, the roofs of Blocks D and E were damaged during a storm, which had caused uplift and distortion of the gutters. There was further damage after storms and high winds in 2001 and 2002. An inspection had revealed that the standing seam roves and eaves were defective.

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A few months later, Harmon went into receivership and ceased work. Practical completion was achieved on 23 March 1998. EDG granted a further part assignment of their rights under the head lease to Port Hamilton. Port Hamilton granted Scottish Widows a sublease, and the tenants’ rights under the sublease were assigned by Scottish Widows to the pursuers, Scottish Widows Services Ltd.

In 2003, Scottish Widows and Port Hamilton transferred various rights under the warranties and parent company guarantee to the pursuers. It was in relation to these rights that the pursuers now brought the actions alleging breaches of warranty by Harmon and BDP, arguing that Scottish Widows and Port Hamilton had suffered losses as a result. The pursuers’ alternative ground was that they themselves suffered loss as subtenants of the Society’s head office by virtue of the assignation by the Society dated 8 July 1999. The pursuers argued that under the sublease granted to them by Port Hamilton, they were obliged to maintain and keep the site and buildings in good and substantial repair at their own cost, and, if necessary, renew and replace the buildings. They alleged that Harmon’s work had been defective, and did not meet the workmanship standards required. Further Harmon had also breached the requirement t exercise reasonable skill and care in the design of their works.

Against BDP, the pursuers alleged that they had failed to perform their duties in respect of performance specifications and tender documents for the cladding works, and that BDP should have engaged someone with specialist knowledge in order to comply with the warranty that they would use reasonable skill and care. In addition, the pursuers submitted that BDP had been under an obligation to make regular site visits and test the curtain walling, and, had they done so, the defects in Harmon’s work would have been apparent.

The pursuers also claimed that as Harmon was in breach of clause 3 of the collateral warranty, WSA was in breach of the parent company guarantee. The pursuers sued Kershaw as LMS’ assignee.

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