Co-operative Retail Services Ltd v Taylor Young partnership Ltd
| Jurisdiction | UK Non-devolved |
| Judge | LORD BINGHAM OF CORNHILL,LORD MACKAY OF CLASHFERN,LORD STEYN,LORD HOPE OF CRAIGHEAD,LORD RODGER OF EARLSFERRY |
| Judgment Date | 25 April 2002 |
| Neutral Citation | [2002] UKHL 17 |
| Date | 25 April 2002 |
| Court | House of Lords |
And Others
And Others
And Others
[2002] UKHL 17
Lord Bingham of Cornhill
Lord Mackay of Clashfern
Lord Steyn
Lord Hope of Craighead
Lord Rodger of Earlsferry
HOUSE OF LORDS
My Lords,
I agree that this appeal should be dismissed for the reasons given by my noble and learned friend Lord Hope of Craighead, whose summary of the facts, the contract and the legislation I gratefully adopt and whose abbreviations I use. I also agree with the reasons given by my noble and learned friend Lord Rodger of Earlsferry for reaching the same result.
CRS commissioned Wimpey as main contractor to build a large new office block. Hall was the electrical sub-contractor. TYP and HLP were engaged as architects and consulting engineers respectively. Within the extended period for completion of the contract the new building was extensively damaged by fire. For purposes of legal argument at this stage it is assumed (although it has not been proved) that the fire was caused by negligence in breach of their respective contracts on the part of each and all of Wimpey, Hall, TYP and HLP. CRS has claimed damages against TYP and HLP, who have in turn claimed contribution against Wimpey and Hall under section 1(1) of the Civil Liability (Contribution) Act 1978. TYP and HLP would in principle be entitled to such contribution, if any, as is found to be just and equitable under section 2 of the Act, but only if Wimpey and Hall are persons liable to CRS, together with them, in respect of the same damage. In this appeal the issue does not, as in Royal Brompton Hospital National Health Service Trust v Hammond [2002] UKHL 14, relate to the identity of the damage; the issue is whether Wimpey and Hall are "liable" to CRS, because if they are not they cannot be called upon to contribute.
In the ordinary way, and in the absence of any contractual exemption or limitation or statutory immunity, a party who breaches a contract with or commits a tortious act against another is liable to that other. Where there are multiple breaches or tortious acts many parties may be so liable. The 1978 Act provides, in the cases to which it applies, for the sharing of common liabilities. Our code of civil procedure is designed to enable claims, cross-claims and claims against third parties to be resolved justly, consistently, comprehensively and expeditiously.
It is however open to contracting parties (subject to certain statutory constraints not relevant for present purposes) to vary by agreement the ordinary rules which impose legal liability for breaches of contract or tortious acts on those responsible for committing them. The House recently had occasion to consider such a scheme in Caledonian North Sea Limited v British Telecommunications Plc (Scotland) etc [2002] UKHL 4 where the parties, in accordance with the prevailing practice in the offshore oil industry, agreed that liability for death or personal injury should in general be borne by the employer of the victim, whether or not the employer had broken its contract with the victim or committed any tortious act against him. Mark Rowlands Ltd v Berni Inns Ltd [1986] QB 211 considered another such scheme, very different on its facts but somewhat similar in principle. In the present case, it is said, CRS had agreed with Wimpey and Hall that in a contingency such as is assumed to have arisen it should not be entitled to recover compensation from them, with the result that they are not liable in respect of the damage suffered by CRS (section 6(1) of the Act) and TYP and HLP cannot accordingly recover contributions from them (section 1(1) of the Act). Two main questions in my opinion arise:
(1) Is the contingency which, on the assumed facts, has arisen one for which CRS, Wimpey and Hall made express provision in the contracts into which they entered?
(2) If so, is the effect of that provision such as to preclude, on the assumed facts, a claim for compensation by CRS against Wimpey or Hall?
As Lord Hope has convincingly demonstrated, the answer to question (1) is plainly Yes. Fire was one of the specified perils defined in clause 1.3 of the main contract against which Wimpey was obliged by clauses 22A.1 and 22.3.1 to take out and maintain all risks insurance providing cover or protection for (among others) itself and Hall. Clause 22A made detailed provision for investigating, repairing and paying for damage caused by fire to the works included in the main contract and clause 25 provided for time to be extended to allow for delay thereby caused. No doubt because fire is not a rare or unforeseen event, the standard forms of contract used by CRS, Wimpey and Hall made detailed arrangements to govern the consequences if it should unhappily occur.
As Lord Hope has again convincingly demonstrated, the answer to question (2) is also Yes. Under clause 20 of the main contract Wimpey accepted a liability against which (by clause 21) it was obliged to insure. But damage to the new works to be carried out under the main contract was expressly excluded from the scope of clause 20, and clauses 22 and 22A applied to such damage a markedly different contractual regime. If damage were caused to the new main contract works by fire Wimpey was obliged to make it good (clause 22A.4.3) and was to be paid for doing so out of a fund provided by insurers under the joint names policy (clause 22A.4.4) and not otherwise (clause 22A.4.5). The contractual scheme did not protect CRS and Wimpey (or Wimpey's sub-contractors) against the possibility of loss if damage was caused to the new works by fire. Such fire damage would in all probability lead (as in this case it did) to an extension of the contract period, which would be a source of loss to CRS for which it could not recover liquidated damages. The extension would also involve expense for Wimpey and its sub-contactors for which they would not be fully compensated. Thus the contract provided for loss to be shared between CRS, Wimpey and Wimpey's sub-contactors. But it plainly precluded any claim for compensation by CRS against Wimpey or a sub-contractor such as Hall: their duty was to make good, not to compensate.
Under the contract and Wimpey's all risks insurance policy, CRS would be effectively indemnified by the insurers' provision of a fund enabling it to pay Wimpey for repairing the fire damage. The insurers could not then make a subrogated claim against Wimpey because Wimpey was a party co-insured (with CRS) under the policy, and the insurers would be obliged to indemnify Wimpey against any liability which might be established, an obvious absurdity. The rationale of this rule may be a matter of some controversy (although I lean towards the explanation favoured by the Court of Appeal) but the rule itself is not in doubt. Similarly, the insurers could not make a subrogated claim against Hall, because Hall also was a party co-insured (with CRS) under the policy. Thus any claim by CRS against either Wimpey or Hall was effectively barred.
It is of course theoretically possible that a contractor in Wimpey's position might fail in breach of contract to perform its duty to make good under clause 22A.4.3 (although that is not what happened here: Wimpey duly did what it was contractually bound to do). If it did default, the employer would have a claim for damages for breach of contract. But it would be a claim arising from breach of the contractual obligation to make good and not from negligence in causing the fire, and that is not damage for which architects or consulting engineers could themselves be liable.
I agree, for reasons persuasively given by the Court of Appeal, that the liability of a person in respect of damage suffered by another person is to be judged as at the date when contribution is claimed against him.
TYP and HLP complain with some force that the conclusion expressed above may lead to a very inequitable result: the bearing of the entire financial consequences, of a catastrophe by a party which may have had a very minor responsibility for causing it. This is indeed a possible outcome, and may be the case here. But this is the effect of the standard form contract which CRS, Wimpey and Hall made, and it is a standard form of which TYP, HLP and their professional indemnity insurers must to taken to have been aware. It would no doubt have been open to TYP and HLP to seek to be included as co-insured in the joint names insurance, or to have made other arrangements. In reality, the present issue arises between TYP and HLP's indemnity insurers on one side and the joint names insurers on the other. The latter have provided the full indemnity they undertook to give. The real complaint of the former is the failure to take steps to guard against the contingency which has in fact occurred, a contingency which could in my opinion have been foreseen had the right questions been asked at the right time.
My Lords,
I have had the advantage of reading in draft the speeches prepared by my noble and learned friends, Lord Bingham of Cornhill, Lord Hope of Craighead and Lord Rodger of Earlsferry. I agree with them that this appeal should be dismissed for the reasons they give. I also agree with Lord Hope of Craighead in his conclusions on the two further points which were raised in argument, although these conclusions are not necessary for the determination of the present appeal.
My Lords,
For the reasons given by my noble and learned friends Lord Bingham of Cornhill, Lord Hope of Craighead and Lord Rodger of Earlsferry, I would also dismiss the appeal.
My Lords,
On 16 March 1995 a fire occurred at a site in Rochdale where a new head office...
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