[2024] UKUT 356 (LC)

As we saw on our inspection, Hand Axe Yard is an office and residential development completed in 2018.  It is situated about 200 metres south-east of Kings Cross railway station with entrances from Gray’s Inn Road and St Chad’s Street. The residential element contains three-storey townhouses and apartment blocks of up to six storeys. The Property is the only commercial element in the scheme and occupies the ground and basement levels at the southern end of the development. Access to all parts of the scheme is by an elongated central courtyard.

In order to create the basement accommodation, the developer excavated below ground level. At the eastern side of the site where the development abuts the Birkenhead Estate the basement perimeter was formed using sheet piling of interlocking steel sections. Viewed from above sheet piling has a corrugated appearance. The following plan shows the general layout of the basement but not the precise extent of the hereditament.

Internally the Property comprises modern office accommodation including raised floors and air conditioning, meeting rooms and breakout space, kitchens and tea points, IT rooms and storage. Apart from the disabled facilities, the toilets and showers are in the basement. Internally the walls are plastered, and the ceiling is the underside of the floor slab for the floor above. The mechanical and electrical servicing is attached to the slab and is visible and accessible. The Property amounts to 765.8 m² of floorspace split between 302.8 m² on the ground floor and 463.0 m² at basement level.

The appellant was granted an occupational underlease of the Property on 8 December 2017 and after fitting out works were completed took up occupation in October 2018. Mr Sugrue of the appellant’s management team explained that significant drainage and water ingress issues had been experienced between the grant of the lease and the commencement of fitting out. These included ponded water on the concrete floor in the basement, which appeared to be coming through the joint between the floor and the basement walls. As part of the developer’s snagging works a water proofing resin was injected into this joint in March 2018 and the area was allowed to dry out. The problem appeared to have been solved by the time fitting out began.

In early February 2020 further water ingress became apparent. Mr Sugrue observed moisture build up in various parts of the lower ground floor, including a meeting room and the southern part of the offices. Mould was also affecting the lift lobby in the basement of the adjoining residential area of the development.

An inspection on 24 February 2020 revealed water ingress through the structural wall, as well as drainage smells and a fly infestation. Mr Sugrue recorded that the basement sump pump was not working, mould was apparent in corridors and on doors, fungus was growing on skirting boards, water was penetrating through the ceiling above the gym, and the foul drainage was cross venting through the mechanical ventilation system.

To identify the causes of the various problems the appellant engaged Mr Simon Levy FRICS, a chartered building surveyor, who visited the Property on 26 February and provided a written report. He found substantial water ponding in the void below the raised floor in the basement. He estimated that the water was between 25 and 40 mm deep. Moisture readings taken in meeting room 3 revealed high levels of moisture in the perimeter concrete walls. Mr Levy confirmed the presence of damp and mould on the plaster finishes.

Mr Levy advised that contrary to normal good building practice there was no ‘kicker’ at the base of the main walls surrounding the basement. A kicker is an upstand built into the floor slab to which the walls are attached. In this case there was simply a corner joint at the junction between the concrete floor and vertical wall. Mr Levy suggested that a construction joint of this type has a greater susceptibility to seepage than a ‘kicker’ arrangement. He noted that the water in the floor void was odourless so was unlikely to have resulted from a sewage overflow or similar and that the sump pumping system which assisted in ground water drainage and had been inoperable for some time was back in operation. He concluded that the ponded water and resultant damage to plasterwork were caused by seepage through the structure of the building with which the sump pumping system appeared unable to keep pace. He suggested that the mould presented a hazard to respiratory health and the ponding water could create electrical safety issues.

Mr Levy recommended that the raised floor in the basement be lifted to expose the entirety of the perimeter walls. It would also be necessary to pump out any standing water and to dry the floor. Some form of patching or tanking could be appropriate, but he did not propose a specific remedial scheme.

The Property had remained in the appellant’s beneficial occupation from the completion of fitting out in October 2018 until the problems became acute at the beginning of 2020. After receiving Mr Levy’s report the appellant concluded that there was a risk to the safety and welfare of its employees. A decision to close the office was taken on the morning of 23 March and notified to all staff later the same day. By 27 March it had been vacated. Mr Sugrue explained that although this closure coincided with the work from home instructions issued by the Government on the evening of 23 March at the start of the Covid-19 pandemic, that was simply a coincidence, and the office would have had to close in any event because of its insanitary condition.

On 30 March 2020 the appellant made an insurance claim under a latent damage policy. In it the presence of water on the floor slab was described and it was reported that “the water penetration has caused rising damp which has damaged the plasterboard throughout the lower ground floor”. The work which was thought to be necessary was said to be to repair the structural wall where it was allowing water penetration and to remedy the damage to the internal partition walls.

A much later report by a health and safety consultancy produced for the appellant in February 2021, a year after the problems were first reported but before they had been remedied, confirmed that at that time the Property remained in an unsuitable condition for the appellant’s workforce to work in.

The appellant then commissioned Pringeur James, consulting engineers who had been involved in the design of the development, to inspect the Property. They produced a short report on 19 May 2020 which included a plan showing details of the basement construction and photographs taken during the construction phase of the project. The report provided some background detail relating to the scheme of construction and suggested that the sheet piled wall adjacent to the Birkenhead Estate should have been removed after the installation of the basement reinforced concrete box but was still present. Plywood shutters in front of the sheet piled wall also remained in place and this arrangement left a significant void between the concrete wall and the sheet piles which effectively formed a ‘sump’ where ground water could collect.

At the base of the concrete wall adjacent to the Birkenhead Estate locations were observed where remedial pressure grouting had taken place. These retrospective steps suggested to Mr Pringeur James that waterproofing measures had failed. The pressure grouting appeared not to have been completed and water flow was occurring through the wall construction joint line. The report concluded that the presence of the ‘sump’ and the water in it may be the reason for the water ingress.

A more detailed report was provided for the claimant by Ove Arup and Partners Ltd on 6 November 2020. The author of the report was John Read MEng, CEng, MICE, MIStructE, an Associate Director with 33 years’ experience in the design, construction inspection and appraisal of buildings who inspected the Property on 5 September 2020 and had sight of plans and specifications for the construction phase of the development as well as the previous reports.

Mr Read noted several manholes and a pumping chamber below the raised floor in the basement and recorded that the pump/control unit serving the chamber had failed in December 2019 causing back flow into the basement. He noticed a lack of an adequate seal on the pumping chamber cover and attributed the fly infestation to this deficiency.

At the time of his visit Mr Read saw no obvious signs of any ongoing/significant water penetration through the wall which would lead to continuing dampness in the underfloor void. He did, however, find evidence of past leaks and of remedial grouting. He found no evidence of ongoing seepage (weeping or beading water) although he did discern some surface dampness but not in clearly defined damp patches which would be indicative of significant ongoing leaks. He came to the same conclusion as Mr Pringeur James that the leaks were closely associated with wet weather, when ‘perched’ water (essentially a ‘pocket’ of water situated above ground water level) external to the wall adjacent to the sheet piling had found its way into the basement. In particular this was apparent in the area near the neighbouring residential basement. The water table had been detected at a depth of 14.5 metres, well below the area where the leakage was occurring, and Mr Read concluded that the problem was not related to the performance of the drainage system but was a consequence of a defect in the waterproofing of the basement wall.

After reviewing the plans of the wall sections, Mr Read commented on a narrowing of the basement wall thickness at exactly the location at which the leaks appeared to be occurring above the floor level behind the plasterboard lining. Such a narrowing would have an impact on the waterproofing design, and he noted that no waterproofing membrane was shown on the plans available to him although they may have been shown on the waterproofing specialist’s details. He saw no evidence that a membrane had been used on the outside of the wall, and it appeared to him that the sole waterproofing measure employed had been an additive to the concrete. He recommended monitoring any seepage, especially following heavy rainfall.

The developer was given a copy of Mr Read’s report and in January 2021 Rascor, specialist waterproofing contractors, were asked to provide proposals for remedial works to deal with the leak. Following an inspection, Rascor described the main source of the groundwater ingress as “a failed waterstop on the construction joint between the basement floor slab and the liner wall at the kicker over a distance of approximately 25 linear metres”. They proposed injecting the leaking joint with a hydrophilic waterproofing resin and then overbanding the joint with a flexible polymer cementitious waterproof coating up the basement wall to a height of a metre and extending over the floor slab to a distance of 350mm. The raised floor pedestals (to which the floor surface attaches) within the 350mm coating zone would be treated with a polyurethane waterproof coating.

These works were completed in April 2021 and took three to four weeks. Their cost is unknown and they are assumed to have been undertaken at the expense of the developer or one of its contactors.