F+G pays out for failed Manchester tower

Quantity surveyor Faithful+Gould has been told to pay the Bank of Ireland £3.35m, in a High Court dispute over loans to Issa Development's Sarah Tower in Manchester.

Bank of Ireland commenced proceedings against F+G for £9.9m in 2012, alleging the loan was based on information supplied by the consultant which failed to effectively appraise risks, capabilities, and financial strength of contractors.

F+G was appointed as a quantity surveyor on the £25.6m 24-storey Sarah Tower in Dale Street by Issa Developments, owned by Bashar Issa, in 2005. Work stopped in 2008 after contractor BS Construction, also controlled by Issa, fell into administration.

Issa was declared bankrupt in 2009.

Bank of Ireland provided most of the funding for the development and approved a £15m loan facility for Issa Developments.

The claim at the High Court in London related to £3.1m drawn down by Issa on the Bank of Ireland loan facility, as well as further damages and accrued interest.

F+G said it gave Bank of Ireland sufficient warning about the risks before and during the process. In its claim, Bank of Ireland said four of the contractors appointed had liabilities in excess of assets, putting them in an insolvent position. It claimed none of the firms had the experience or capabilities to take on a job of Sarah Tower's scale.

The bank alleged F+G did not point out there was not a formal contract between Issa and contractor BS Construction.

At the launch of the case, F+G said that Bank of Ireland's losses were caused by its "own acts and/or negligence" and the bank "generally failed to heed various warnings and advice given to it by the defendant in relation to the risk associated with financing the development."

The judge's statement indicated that he felt both sides were at fault, as "F+G had a liability to the bank", however Bank of Ireland had shown "contributory negligence".

Details of the ruling came to light as part of judgment on a claim by F+G against CBRE, which F+G said was responsible for some of the losses. Mr Justice Edwards-Stewart ruled that F+G had not proved that CBRE's actions contributed to the losses of the bank, however he did say that errors were included in the project appraisal, with the development over-valued by 20% and the site by 39%.

The Sarah Tower site was acquired by Property Alliance Group in 2010 and a 12-storey Premier Inn was then built.

A spokesman from F+G said: "We are disappointed with the outcome of the case but do not have the legal grounds to appeal the court's decision. We are pleased to see this issue reach a conclusion."

A CBRE spokesman said: "We have always maintained that the claim by Faithful & Gould was misguided and are pleased that the court has also reached this conclusion."

Bank of Ireland was unavailable to comment.

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