London Borough of Barking & Dagenham v Stamford Asphalt Company Ltd
| Jurisdiction | England & Wales |
| Judge | McCowan,Millett,Auld L JJ |
| Judgment Date | 20 March 1997 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 March 1997 |
Court of Appeal (Civil Division)
McCowan, Millett and Auld L JJ
Paul Darling (instructed by Barlow Lyde & Gilbert) for the plaintiff.
Jeremy Stuart-Smith (instructed by Berrymans) for the first third party.
Guy Anthony (instructed by Finers) for the defendant.
The following cases were referred to in the judgment of Auld LJ:
Archdale (James) & Co Ltd v Comservices LtdWLR [1954] 1 WLR 459.
Dorset County Council v Southern Felt Roofing Co LtdUNK (1989) 48 BLR 96.
Hepburn v A Tomlinson (Hauliers) LtdELR [1966] AC 451.
National Oilwell (UK) Ltd v Davy Offshore LtdUNK [1993] 2 Ll Rep 582.
National Trust v Haden Young LtdUNK (1994) 41 Con LR 112.
Petrofina (UK) Ltd v Magnaload LtdELR [1984] QB 121.
Rowlands (Mark) Ltd v Berni Inns LtdELR [1986] QB 211.
Scottish Special Housing Association v Wimpey Construction UK LtdWLR [1986] 1 WLR 995.
Stock v InglisELR (1884) 12 QBD 564.
Insurance — building Contract — contractor Insured Against Loss Caused By Its Default — employer To Insure Against Specified Perils Including Fire — employer Failed To Insure — damage Caused By Fire Caused By Contractor's Negligence — whether Contractor's Liability Of Be Reduced By Cover Which Employer Failed To Effect.
This was an appeal by the defendant, “the contractor”, and the first third party, “the contractor's condition 6.2 insurer”, against the ruling of a deputy official referee on a preliminary issue concerning the construction of a building works contract between the plaintiff, the employer, and the contractor.
The employer instructed the contractor to do certain building work to the employer's school in accordance with the standard form of agreement of the joint contracts tribunal for minor building works, October 1988 revision. In the course of the works there was a fire, It was assumed for the purpose of determination of the preliminary issue that the contractor's subcontractor negligently caused the fire and that it caused direct and consequential loss to the employer by damaging the building and its contents, for all of which the employer claimed damages.
Condition 6 of the agreement made the contractor responsible for, and required it to insure against, loss caused by its default, including negligence (6.2). It also provided for insurance in the joint names of the employer and the contractor against certain specified perils, including fire, to the works, the insurance to be Undertaken either by the contractor (6.3A) or the employer (6.3B). If the latter, the employer had also to include in the cover the building and its contents. The parties, opted for the latter. The contractor, as required by condition 6.2, insured its liability under that provision for negligent damage to the building and contents. The employer, in breach of condition 6.3B, did not effect the joint insurance cover of the building, contents and works required by it.
The employer claimed against the contractor under condition 6.2 for direct and consequential loss from damage to the building and its contents. In doing so it maintained that its failure to insure as required by condition 6.3B, although a breach of contract, had nothing to do with the contractor's liability under condition 6.2. The contractor maintained, by way of set-off and counterclaim, supported by its condition 6.2 insurer, that the employer's failure to insure had caused it a substantial loss corresponding to the damage to the building, contents and works for which condition 6.3B would Have provided cover. It argued that the failure had deprived it of the protection that such insurance would have provided against much of the employer's claim against it under condition 6.2. More particularly, the contractor argued that: (1) if such insurance Had been effected the condition 6.3B insurers Would have had no right of subrogation to sue it, the contractor, because they would have been covering the very risk; and (2) if, for any reason, the employer would have sought to sue the contractor direct, the latter would have had the benefit of the joint insurance cover.
The deputy official referee held that condition 6.2 expressly and clearly imposed liability on the contractor for fire caused by its negligence and that condition 6.3B, which was concerned with insurance, not liability, did not prevent the employer from enforcing such liability. He held that the agreement could not be construed so as to impose liability under condition 6.2 on the contractor for his negligent damage to the building and contents, and require it to insure against such risk, whilst at the same time effectively exempting it from such liability in respect of the condition 6.3B perils by means of the joint insurance to be effected by the employer under that condition. He held that before the contractor could claim under a condition 6.3B insurance it would have to “demonstrate both an insurable interest and that the policy was intended to benefit him”.
Held, dismissing the appeal:
1 The primary task was to construe the contract on its own terms rather than to speculate on the effect on it of some notional contract of insurance which the employer might have effected under condition 6.3B. Although it was clear that condition 6.2 was concerned primarily with liability and condition 6.3B with insurance, the critical question was whether the two overlapped by condition 6.3B requiring the employer to insure, in the specified instances, against damage for which the contractor was liable under condition 6.2. There was no overlap. Neither condition referred to or qualified the other. The two provisions were concerned with entirely different types of damage. Condition 6.2 governed liability for damage culpably caused by the contractor. Condition 6.3B and its alternative 6.3 A required insurance for certain damage not culpably caused by it. (National Trust v Haden YoungUNK(1994) 41 Con LR 112 (CA), not followed.)
2 More generally, it could not sensibly have been the intention of the draftsman of the standard conditions, or of the parties when entering into the agreement, that the employer's condition 6.3B insurance would enure for the benefit of the contractor so as to enable him to escape liability for his own negligence imposed by condition 6.2 (and at common law). The arguments to the contrary, based on the contractor's supposed insurable interest in the building and contents for that purpose, were artificial and circular.
Auld LJ: This is an appeal by the defendant, “the contractor”, and the first third party, “the contractor's condition 6.2 insurer”, against the ruling of Mr Recorder Playford QC, sitting as a deputy official referee, on a preliminary issue concerning the construction of a building works contract between the plaintiff, “the employer”, and the contractor.
The employer instructed the contractor to do certain building work to its, the employer's, school in accordance with the standard form of agreement of the joint contracts tribunal for minor building works, October 1988 revision. In the course of the works there was a fire. It was assumed for the purpose of determination of the preliminary issue that the contractor's sub-contractor negligently caused the fire and that it caused direct and consequential loss to the employer by damaging the building and its contents, for all of which the employer claims damages. The fire also damaged the contract works, but the employer does not and, as will appear, cannot claim for that; his remedy is simply to require the contractor to carry out and complete the works as provided by the agreement.
Condition 6 of the agreement made the contractor responsible for, and required it to insure against, loss caused by its default, including negligence (6.2). It...
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