Securing judgment in a PFI Oncology Centre dispute

We acted for a PFI Project Co in its claim against its building contractor arising from the design and construction of the Oncology Centre at St James’s Hospital, Leeds – Europe’s largest teaching hospital.

The dispute was highly unusual, in that very few disputes under the Private Finance Initiative (PFI) framework proceed all the way to a High Court trial, and even fewer do so with the building contractor maintaining throughout that its works were not defective.  

The challenge

Detailed surveys had revealed serious safety and electrical engineering defects in the hospital’s plantroom, the central hub for the Oncology Centre’s mechanical and electrical systems. The defects ranged from inadequate fire compartmentation and fire stopping to a failure to protect the power supply that served vital plant and machinery. A fire or a fault could have disabled both the primary and secondary power supplies, which would have affected all the medical equipment and facilities in the Centre.

Project Co alleged that the contractor had breached its obligation to comply with applicable design and safety standards, including the Health Technical Memoranda for hospitals. The contractor denied liability, arguing that the works complied with its fire strategy (signed off by the relevant parties), that Project Co had no intention of carrying out remedial works, and that a more limited remedial scheme was appropriate.

Covid-19 restrictions made this dispute even more complex, preventing experts from conducting on-site inspections. We were able to secure one of the first extensions under Practice Direction 51ZA (which amended the court riles during the Covid-19 pandemic to ensure that the administration of justice is carried out so as not to endanger public health) and developed a novel 3D spatial model to allow the judge to “walk through” a virtual model of the plantroom.

Our approach

We managed the litigation strategy over three years, including:

• coordinating nine expert witness disciplines (including fire, mechanical, electrical, architecture, quantum);
• working under tight court timetables relating to documentary, witness and expert evidence;
• managing practical obstacles of investigating defects in an operational hospital; and
• preparing the case for trial under a shortened timetable, including around-the-clock support during cross-examination and closing.

The outcome

The Court found comprehensively for Project Co, ruling that:

• all defects identified by Project Co were proven;
• the contractor’s “fire strategy” defence was misplaced;
• certificates of completion and Building Control sign-off were no defence; and
• Project Co’s remedial works were necessary, practical and proportionate.

The Court also accepted that it was commercially reasonable for Project Co to await judgment before undertaking major remedial works, and awarded future costs for defects where remediation could only occur when the affected equipment needed to be replaced.

Beyond the specific facts, the judgment provided important guidance on the law relating to damages in defective construction claims, competing proposed remedial schemes, and the interaction of rights against building and maintenance contractors in PFI projects.