FM Conway Ltd v The Rugby Football Union
| Jurisdiction | England & Wales |
| Judge | Lord Justice Coulson,Lord Justice Baker,Lady Justice Nicola Davies |
| Judgment Date | 19 April 2023 |
| Neutral Citation | [2023] EWCA Civ 418 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2022-001415 |
[2023] EWCA Civ 418
Lord Justice Coulson
Lord Justice Baker
and
Lady Justice Nicola Davies
Case No: CA-2023-001415
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (KBD)
Mr Justice Eyre
Royal Courts of Justice
Strand, London, WC2A 2LL
Karim Ghaly KC, Alexandra Bodnar and Ruth Keating (instructed by Clyde & Co. LLP) for the Appellant
Paul Reed KC and Simon Kerry (instructed by Plexus Law) for the First and Second Respondents
Michael Wheater (instructed by Keoghs) for the Third Respondent
Hearing Dates: 8 & 9 March 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on 19 April 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives
Introduction
Co-insurance in the construction industry is common. But it has historically given rise to some potentially complex issues. This appeal arises out of arguments about the nature, scope and effect of just such a co-insurance policy and reveals at its heart a potential tension. On the one hand, the appellant contractor (“Conway”) is seeking to rely on the co-insurance policy to avoid liability for what is alleged to be its own defective work, which was a type of cover which the first respondent employer (“the RFU”) was not obliged to (and did not) procure pursuant to its building contract with Conway. On the other hand, there can be no argument that the policy covered the loss that eventuated, because if it had not, the second respondent insurer (“RSA”) would not have paid out to the RFU under the policy and would not now be behind the subrogated claim against Conway. So if Conway were a co-insured under that policy, it might seem odd that their cover was different to that of the RFU. Happily, as we shall see, the law provides a complete answer to this conundrum.
The first respondent, the Rugby Football Union (“RFU”) engaged the third respondent, Clark Smith Partnership Limited (“CSP”) to design ductwork to accommodate high voltage power cables being installed as part of a major refurbishment of Twickenham Stadium before the 2015 Rugby World Cup. The RFU engaged Conway to install that ductwork. The relevant works package was A07.1. The RFU allege that there were defects in the design and installation of the ductwork which caused damage to the cables when they were pulled through.
The RFU claim that they suffered loss in the total sum of £4,440,909.45, made up of £3,334,405.26 (“relevant loss”) being the cost of replacing the damaged cables, and £1,106,504.19 as the cost of rectifying the ductwork itself. Pursuant to the terms of the relevant insurance policy (“the Policy”), the second respondent, the RSA, indemnified the RFU in respect of the replacement costs of £3,334,405.26.
It is agreed that Conway were a co-insured under the Policy. They say that they gave the RFU wide authority to enter into the Policy and that it was the intention of both the RFU and Conway that the Policy be as inclusive as possible. As a consequence, it is Conway's case that: a) the RFU cannot claim against it in respect of the losses that were covered by the Policy; and b) RSA could not make a subrogated claim in respect of the sum of £3,334,405.26. Those were the principal issues which came before Eyre J (“the judge”), who decided that, for a number of detailed reasons, Conway could not rely on the Policy as a defence to the claim. His judgment is at [2022] EWHC 956 (TCC). On 13 September 2022, I gave permission to appeal against the order arising out of that judgment.
This judgment is structured in the following way. Having set out the relevant documents and events, I outline the proceedings between the parties, the preliminary issues that were ordered, and the relevant parts of the judge's judgment. I then address the case law and endeavour to summarise the applicable principles in order to see whether, at least at first blush, the judge correctly applied those principles. I then address the five grounds of appeal one by one, together with the point raised by the Respondents' Notices. At the outset, I wish to express my gratitude to all counsel for the excellence of their written and oral submissions.
The Letter of Intent
It appears that, at least in relation to the proposed ductwork at the Twickenham Stadium, there was a certain amount of urgency. Conway tendered for the work on 31 May 2012. There were then a series of meetings, discussions and correspondence relating to the proposed works. On 19 June 2012, the RFU sent Conway a Letter of Intent, saying it was their intention to accept the Conway tender and enter into a contract with Conway for the carrying out of the works, and authorising and instructing them to proceed with certain specified activities “to enable the intended start date on site and completion date to be achieved”.
Relevant parts of the Letter of Intent included the following:
“3. It is intended that the form of the Contract will be based upon the document produced by Forsters LLP incorporating the JCT Standard Building Contract Without Quantities 2011 (DOC ID 3202342_6)…
5. Although the Contract has not yet been entered into, all the terms and conditions of the Contract will apply to any work carried out by you pursuant to the instructions contained in this letter.
6. We have appointed RLF 3PM LLP to act as the contract administrator (“the Contract Administrator”) for the purposes of the Works and to act on our behalf as stated in the Contract. You must liaise with the Contract Administrator and comply with all instructions issued by him in relation to the Works as if the Contract had been entered into…
9. We will pay you in accordance with the terms of the proposed Contract for any activities properly undertaken by you pursuant to the instruction contained in this letter, provided that our total liability under this letter shall not exceed FIVE HUNDRED THOUSAND POUNDS (£500,000.00) plus Value Added Tax. For the avoidance of doubt, we are not bound to enter into any further contract with you and our commitment at this stage is strictly limited as set out in this letter. You must obtain our further authorisation and instruction before committing to any expenditure above the limit stated in this paragraph.
10. Within 7 days of the date of this letter and as a pre-condition of entry to the site of the Works in any event you must provide us with certificates of verification of insurance cover confirming that all insurances which you are (or will be) required to maintain under the terms of the proposed Contract are in place upon the required terms and at the required levels. In particular (to the extent that they have not been provided to us to date) we require evidence of your Contractor's All Risks, Professional Indemnity, Employer's Liability, Public Liability and (if applicable) JCT clause 6.5.1 (or similar) insurances…
21. This letter supersedes any previous instructions, correspondence or other discussions between us in relation to the Works and represents the entire agreement between us in relation to its subject-matter.”
It should be noted that the reference at clause 3 to the building contract was a reference to an existing and available set of documents (with a unique document reference number), not simply a reference to a standard form.
In total, the Letter of Intent ran to 4 pages and 21 paragraphs. It appears that Conway started on site almost immediately after receipt.
The Discussions
Although the Policy and the building contract were in writing, the background to them, and the nature and scope of the insurance cover to be provided, was the subject of a factual dispute between the parties. The judge therefore heard oral evidence on this, and his judgment is the best place to find the relevant material. I summarise the relevant passages of the judgment in the paragraphs below.
I noted during the appeal hearing that there was a dispute in the skeleton arguments about whether these passages were findings of fact or, at least in some instances, merely summaries of the evidence. I agree with Mr Ghaly KC that [91] – [125] of the judgment contain findings of fact made by the judge, and that is how they should be treated. No party seeks to go behind those findings of fact and permission to appeal was granted on that basis.
The section of the judgment headed “The Basis on which the RFU effected the Policy” runs from [91] to [125]. At [91]–[92], the judge identified the issue to which this material went, namely whether there was an agreement between the RFU and Conway that the RFU would obtain comprehensive insurance for Conway (to include the cost of rectifying damage caused by Conway's own defective work) or not.
At [93], the judge introduced Mr Higgs, who worked for RLF3PM LLP, who were providing project management services and who had been involved in the RFU's earlier redevelopment of the South Stand at Twickenham. The judge noted that Mr Higgs said that that work had involved disputes between different contractors and their different insurers, and that Mr Higgs was concerned to avoid similar problems this time round ([93]–[95]). At [95] the judge noted that Mr Higgs “believed that a comprehensive project insurance policy covering all the contractors would be the solution to this problem”. He cited Mr Higgs' evidence that such a policy “would prevent claims arising between contractors and their separate insurance companies”. At [96] the judge said:
“96. Mr Higgs pressed for there to be such an insurance policy for the Project. He believed that it...
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