Kajima (UK) Engineering Ltd v Underwriter Insurance Company Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 25 January 2008 |
| Neutral Citation | [2008] EWHC 83 (TCC) |
| Docket Number | Case No: HT 07 09 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 25 January 2008 |
[2008] EWHC 83 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts Of Justice
Strand, London, Wc2a 2ll
Mr Justice Akenhead
Case No: HT 07 09
Adrian Williamson QC (instructed by Stephenson Harwood) for the Claimant
Stuart Catchpole QC and Rachel Ansell (instructed by Davies Arnold Cooper) for the Defendant
Hearing dates: 26, 27, 28 November, 4 December 2007
Introduction
Kajima (UK) Engineering Limited ('Kajima') was a main contractor employed by the Joseph Rowntree Foundation ('JRF') to design and build a block of flats at 45, North Street, Leeds. The building contract was dated 1 October 1999. The development was known as “Caspar II”. It involved the relatively novel application of the installation on five stories of a stacked pre-constructed pod and flat pack construction. The work was essentially carried out between September 1999 and June 2000 with a continuing involvement of Kajima over the following five years. “Caspar” was an acronym for “City-Centre Apartments for Single people at Affordable Rents”.
The Underwriter Insurance Company Limited ('TUIC') was an insurer who provided professional indemnity insurance to Kajima for the period 20 May 2000 and 19 May 200The policy was a 'claims made' policy which also had provision for cover in respect of circumstances 'which might reasonably be expected to produce a claim' notified during a period of insurance.
By a written notification dated 22 February 2001, Kajima notified TUIC that the 'Accommodation Pods' were 'settling and moving excessively causing adjoining roofing and balconies and walkways to distort under differential settlement'. There was reference to other possible damage and risk and to the fact that 'an investigation was presently underway to identify/confirm cause & potential effects/risk'. Such investigation as there was over the months that followed immediately determined that the problem was an anticipated one and that it had stabilised. Some work was done. In March 2002, Kajima effectively confirmed this but asked that the insurance file should remain open for twelve months to see if the settlement remained static.
On 19 May 2002, the Period of Insurance expired and TUIC thereafter ceased underwriting and has since been in a state of solvent run-off. Kajima secured insurance from other underwriters.
In the years which followed, JRF initially and then also Kajima carried out a number of investigations and indeed extensive remedial work at Caspar II. These revealed a number of increasingly serious and extensive problems some of which were in the physical area of the matters notified but others of which were not and some of which were not of the same type as or, arguably, directly associated with, what had been specifically notified by Kajima to TUIC in February 2001.
This process culminated in an investigation in the late summer of 2005 by Ove Arup & Partners (“Arup”), retained by Kajima, which concluded that the flats were at risk of collapse due, inter alia, from wind loadings. The tenants were evacuated. Ultimately in 2006 a settlement was reached between JRF and Kajima whereby Kajima bought the flats from JRF because it was thought that repair was uneconomic. Kajima has sold the property on.
Essentially, the issue between the parties revolves around whether, and if so to what extent, the defects and damage which emerged in the period after the notification and the expiry of the TUIC insurance cover were effectively the subject matter of what was notified in February 2001.
The Construction
It is necessary for an understanding of the case to appreciate what the construction was. The development was, on plan, semi-circular in shape and was to some extent on a slope. It was up to five stories high and was to comprise flats to be let. The front of the block, as it was called, was the outer convex area and the rear was the inner concave area. There were 3 main staircases supported off steelwork. The plans show 45 flats, although the pleadings suggest that there were 46.
On the front, there were walkway balconies from the staircases to the front doors of various flats whilst, at the rear, there were private balconies for each of the flats, with entry from within each of the flats.
Each flat on each floor comprised two basic elements, pods and flat packs. Each pod was not dissimilar to a substantial container and was pre-fabricated in factory conditions off site. The pods were to be on the front of the building and comprised the front door, hallway and three rooms, including the bathroom and kitchen. The flat packs were mostly of wooden construction with the pieces, walls, floors and ceilings and the like made in the factory; they were to be delivered to site and were to be assembled and put together on site.
Underlying foundations were constructed and the pods placed (by crane) on and fixed to them. Pods on the floors above were stacked on the lower pods. On each floor, there was a floor 'cassette' which in plan covered the whole area of each flat and onto which the pods and the flat packs were placed. The flat pack for each flat was erected on site adjacent to the pod and (mostly) sitting rooms and a bedroom were provided for in the flat pack areas. Again, the flat packs for the floors above were erected on the lower ones. In effect, each pod and flat pack area was also fixed laterally not only to each other but also to adjacent pods and flat pack areas and to those above and below. The roof was attached to the top and sloped from the front to the rear.
The walkways at the front were originally planned to be suspended by steel or other bars off the roof structure, it being anticipated that, if the whole structure settled, the walkways would settle with the rest of the structure. That was changed for various reasons believed to be good ones so that these walkways were supported by steelwork which had its own separate foundations. There remained as an architectural feature 'machaloy' bars at various points from the roof area down to the ground floor; these were some 50 mm diameter steel alloy bars which were attached to the walkways on the front of the building. The walkways were to be slightly sloped so that any rainwater would be flowing away from the living areas.
The services, gas, electricity, sewerage and water, were distributed both vertically and horizontally throughout the building, with various risers accommodating incoming and outgoing services in or between flats.
The policy
The professional indemnity insurance policy schedule provided that the limited indemnity was £5 million for each and every claim with costs and expenses in addition. The period of Insurance was 20 May 2000 to 19 May 2002 inclusive. Clause 1 of the policy required as follows:
“The Underwriters will indemnify the Insured:
In respect of claims made against the Insured and notified to the Underwriters during the Period of Insurance against civil liability:
(a) arising out of the Professional Activities undertaken by or on behalf of Insured…”
'Professional Activities' were defined as:
“Project Management and/or performance by the Insured of any professional:-
design or specification.
supervision of construction/ installation.
feasibility study.
technical information calculation.
surveying.
Undertaken only by or under the direction and direct control of properly qualified architect or engineer or surveyor or quantity surveyor.
Professional Activities DOES NOT include the supervision by the Insured of its own or its sub-contractor's work where such supervision is undertaken in its capacity as Building or Engineering Contractor”.
Condition 1 of the Policy is, in essence, what the case is about:
“The Insured shall give written notice to the Underwriters as soon as possible after becoming aware of circumstances which might reasonably be expected to produce a claim or on receiving information of a claim for which there may be liability under this insurance. Any claim arising from such circumstances shall be deemed to have been made in the Period of Insurance in which such notice has been given”.
Thus, although the insurance policy is a 'claims made' policy relating to claims which are made in any given period of insurance, it is open to the Insured in an appropriate case to notify the Underwriters of “circumstances” which might produce a claim. Where such circumstances are notified within the Period of Insurance, even if a claim is then made outside that Period, all things being equal, the Insurers will be responsible to indemnify against it.
The history
Kajima employed a number of consultants and sub-contractors. So far as is material, Alan Conisbee & Associates ('Conisbee') were consulting structural engineers. Levitt Bernstein were architects. Volumetric Ltd was a sub-contractor which manufactured and installed the pods.
On 15 th June 2000, practical completion of Caspar II was certified. Thus, the project entered into the defects liability period during which Kajima could be expected, contractually, to put right defects and deficiencies for which they were responsible over a 12 month period. As might be expected, there were some such matters (which have nothing to do with this case) which were attended to by Kajima during this period.
On 27 September 2000, JRF pointed out to Kajima that there was ponding of water on the walkways. In a letter dated 27 September 2000 the following was stated:
“I must record my concern over the ponding of water on the walkways. When I visited the site last week, after heavy rain, there were extensive and deep pools standing on a number of walkways making them hazardous for residents and...
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