Seele Austria GmbH & Company v Tokio Marine Europe Insurance Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Coulson,MR JUSTICE CHRISTOPHER CLARKE |
| Judgment Date | 06 August 2009 |
| Neutral Citation | [2009] EWHC 2066 (TCC),[2009] EWHC 255 (TCC) |
| Docket Number | Case No: HT-08-331,Case No: 2006 FOLIO NO 543 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 06 August 2009 |
Before: Mr Justice Christopher Clarke
Case No: 2006 FOLIO NO 543
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Adrian Williamson QC & Marcos Dracos (instructed by Bryan Cave) for the Claimant
Paul Reed & Jeffrey Thomson (instructed by Kennedys) for the Defendant
Hearing dates: 27th & 28th July 2009
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
MR JUSTICE CHRISTOPHER CLARKE:
This is a further, perhaps final, chapter in what Coulson J described as the long and rather unfortunate history of these proceedings.
Seele Austria GmbH & Co KG (“Seele”) has brought a claim arising out of the construction of a new building known as St Martin's Court, 3 Paternoster Square, London EC4. On 16 th January 2002 Seele entered into a trade contract with BLS St Martin's Ltd (“the employer”) for the design, procurement, installation and erection of the Atrium roof glazing, Atrium Wall glazing, shop fronts and external curtain walling of the building. Pursuant to that contract Seele began to install punched hole windows into levels 2 to 4 of 3 Paternoster Square.
In September 2002 some of the windows were discovered to be leaking. In order to remedy the defects it was necessary to dismantle and remove works carried out by others, including Irvine & Whitlock, the cladding sub-contractors. What had to be dismantled included stone and brickwork cladding and finishing works to internal walls and ceilings. When the defective windows had been repaired it was necessary to restore that which had been dismantled and taken away.
The policy
Seele's claim is made pursuant to Memorandum 18(3) of a Combined Contract Works and Third Party Liability Insurance Policy dated 12 November 1999 No 5048 700099 (“the Policy”) which was underwritten by the defendants.
The Insurance had three sections (1) Contract Works; (2) Increased Cost of Construction of Outstanding Work (following loss or damage covered by Section 1): and (3) Third Party Liability. The policy was said to be effected on behalf of a number of interests including:
“in respect of Section 1 only
(3) All other Contractors and/or Sub-Contractors and/or Work/Trade Contractors of whatsoever tier and/or Suppliers engaged for the purpose of The Project (as to the extent stated in Memorandum 15).”
The Operative Clause of the policy provided that
“…The Insurer hereby agrees to indemnify the Insured …in respect of
any occurrence of loss damage or liability during the period of insurance …”
The insuring clause in section 1 read:
“The Insurer(s) will indemnify the Insured against loss of or damage to the Insured Property from any cause other than as hereinafter excepted”
Memorandum 18(3) provided an indemnity:
“…in respect of intentional damage necessarily caused to the Insured Property (a) to enable the replacement repair or rectification of Insured Property (a) which is in a defective condition subject to the Insureds Retained Liability being the first £10,000 of the cost of each and every occurrence or series of occurrences arising out of any one event..“.
Property (a) was the entire Works. Exception 4 in Section 1 provided that the Insurer (s) would not be liable for “penalties under contract for delay or non-completion or consequential loss not specifically provided for herein”.
Seele contends that the costs associated with gaining access to remedy the defects in the punched hole windows (the “access damage costs”) were in respect of:
“intentional damage necessarily caused to the Insured Property (including the punched hole windows) to enable the replacement repair or rectification of Insured Property (i.e. the punched hole windows)”.
Costs in this category were, it claims, deducted by Bovis Land Lease Ltd (“Bovis”), the Project Manager, from payments which would otherwise have been due to Seele. On 12 th May 2003 Bovis sent Seele a schedule setting out its claim for “Delay Effect Cost” and “Contra Change Cost”. Seele relied on this schedule (“the delay costs schedule”) as showing (when some apportionment had taken place) the access damage costs to be allocated to the relevant windows.
The case began in the Commercial Court. After a three day trial in June 2007 of 13 issues ordered to be tried by Steel J, Field J concluded that Seele was not entitled to be indemnified under the Policy. Seele was granted permission to appeal by Lord Justice Rix on 25 September 2007, Field J having previously refused permission. The substantive appeal was heard by the Vice President of the Court of Appeal, Lord Justice Moore-Bick and Lord Justice Richards. Judgment was handed down on 7 May 2008. A majority of the Court held that Seele was entitled to an indemnity under the policy in respect of the access damage costs. But it was not entitled to the cost of rectification of any of the defective windows.
The Court of Appeal also held that Seele's claim was limited to a claim for the access damage cost in excess of £10,000 per window since each defective window was the relevant occurrence. Issue 13 ordered by Steel J was:
“Whether or not workmanship deficiencies to each window are to be treated as one occurrence or one event for the purposes of memorandum 18 (3).”
Field J had understood that Seele had conceded that the deficiencies in each window constituted a separate occurrence so that the retained liability was
£10,000 per window. Quite how that understanding arose is unclear. The Court of Appeal thought that the most likely explanation was that Seele had suggested that Issue 13 should be answered “Yes” in the mistaken belief that the issue was asking whether the defects were to be aggregated. I consider this further in paragraphs 65 and 66 below.
Moore-B ick LJ considered various possible candidates for “event”. In the course of his judgment he said:
“56 …..I do not think that the installation of defective windows can be regarded as an event for these purposes either, however. If they had all suffered from a common defect in design or manufacture which lay at the root of the problem, it might have been possible to argue, despite the number of separate units involved, that the installation of windows with a common defect was an event for these purposes, but as I understand the judge's findings, that is not really the case. It is true that there were defects in the design or manufacture of the termination bars, but it is not at all clear that that of itself was sufficient to cause each of the seals to fail. Rather, the impression one obtains from the findings in paragraph 5 of the judgment below is that poor workmanship was really to blame. It seems fairly clear that similar shortcomings in workmanship affected all the windows and I am prepared to assume for present purposes that in each case the same mistakes were made. However, there is no evidence that those mistakes were attributable to a single event, such as giving a workman wrong instructions which they then conscientiously followed so as to produce a series of similar defects. Again, had that been the case, it might have been possible to argue that giving faulty instructions was a unifying event, but the judge's findings pointed to the conclusion that the defects were simply the result of poor workmanship repeated over and over again.
57. That leaves the implementation of the programme of work to make good the defects in the windows. The fact that all the access damage formed part of a single programme of remedial works no doubt represents a unifying factor of a kind, but I do not think that either the decision to carry out the programme of remedial work or the implementation of that programme amounts to an event of the kind contemplated by the clause. The remedial work provided the context in which the damage was caused, but was not itself the underlying cause of it. That lay in the defects which gave rise to the need for it. In these circumstances I do not think that it is possible to identify a single event that can be regarded as the underlying cause of all the access damage required to enable the defective sealing membranes to be renewed.”
The appeal was allowed to the extent indicated and costs were reserved to the quantum trial. Issue 13 was answered:
“The workmanship deficiencies to each window represent a separate occurrence; there was a series of occurrences, but they did not arise out of one event.”
The pleadings
The Claim Form was issued in June 2006 some 3.5 years after the access damage had occurred. The claim in the original Particulars of Claim was as follows:
“The total cost thereby incurred by the Claimant in respect of the remedial works was £1,237,709.48 which (in summary) was made up as follow, namely:
14.1.
The cost of dismantling and/or reinstating works by others
£638,860.11
14.2.
The cost of supervising dismantling/reinstatement of work by others
£84,808.63
14.3.
The cost of installing replacement windows
£427,987.00
14.4.
Materials
£40,081.84
14.5.
Additional tests
£13,604.14
14.6.
Supervision of the Claimant's own remedial works
£32,367.76
£1,237,709.48
Two features of this pleading are important. Firstly, over £500,000 of the costs claimed were irrecoverable because they constituted the cost of remedial works in respect of the defective windows. Secondly, no mention was made in the pleadings of the Retained Liability or in what manner it was said that the amounts claimed exceeded that liability.
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