Skandia Property (UK) Ltd and Another (Plaintiffs/Appellants) v Thames Water Utilities Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WALLER,LORD JUSTICE HENRY |
| Judgment Date | 27 July 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J0727-4 |
| Date | 27 July 1999 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | QBENF 1997/1703/1 |
[1999] EWCA Civ J0727-4
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(MR RECORDER PLAYFORD QC)
Royal Courts of Justice
Strand
London WC2A 2LL
The Master of the Rolls (Lord Woolf)
Lord Justice Henry
Lord Justice Waller
QBENF 1997/1703/1
MR D ALLEN (Instructed by Messrs Ince & Co, London EC3R 5EN) appeared on behalf of the Appellant
MR R AKENHEAD QC (Instructed by Messrs Berrymans Lace Mawer, London, EC2M 5QN) appeared on behalf of the Respondent
Tuesday 27 July 1999
This is an appeal from the judgment of Mr Recorder Playford QC sitting as an Official Referee given on 21st August 1997. The issue before the judge was the amount of compensation to which Vala Properties B.V. (Vala) were entitled from Thames Water Utilities Limited (Thames Water) as a result of the escape of water from a pipe vested in them, which, over a period of 5 weeks from 21st October 1991, flooded the basement of Vala's premises at 2/4 Cockspur Street London SW1. The judge awarded £37,500, and Vala contend that the award should have been in the sum of £297,954.75. The difference between the two figures rests on one issue. Vala say that following the flooding they were advised by experts that the flood had damaged the effectiveness of the waterproofing system present in the building prior to the flood; that a proposed tanking system, the Sika system, "was the only practical solution for repairing the water damage to the building and eliminating the risk of further water damage"; and that it follows that the cost of installing that tanking system is recoverable. Thames Water say that the waterproofing system was not effective prior to the flood; it was not damaged by the flood; and they thus say that the cost of such remedial work as was advised is not something for which they should be liable.
The undisputed facts
The judge sets out the history of 2/4 Cockspur Street in great detail. There is no challenge to those findings until his findings in relation to the damage caused by the flood.
It is asserted in relation to some of the facts, that they were unknown to Vala and their experts (and it is right to say unknown to Thames Water and their experts) at the time that advice was given and decisions taken following the flood.
That history can be summarised as follows.
2/4 Cockspur Street is one of three properties forming a triangle near Trafalgar Square. One of the other three properties is Canada House which fronts onto Trafalgar Square, and the other is Oceanic House, and all three properties have Pall Mall East running along the top or northern flank of the triangle. The site is old. The cellars that suffered the ingress of water were old Georgian cellars.
The main water table may have been lower but in relation to 2/4 Cockspur Street there was a perched water level about 1.2 metres above the level of the basement floor. This was a factor contained in a report of D Y Davies of 24/1/89 and was a factor not known to Vala or its experts in 1992.
The ingress of water had been a problem in the cellars over many years and various steps had been taken to try and prevent the same. That almost certainly included applying a waterproofing render to the inside of the walls. During 1987 through to 1989 Speyhawk plc Group of companies carried out a major refurbishment of the building. They did so through contractors Tellings Ltd and the substantial nature of those works can be gauged from the contract price of over £11.5m. D Y Davies were the architects for the project.
Some work intended to cure the water problem in the cellars was carried out during the first period of the refurbishment; that too may well have included putting on a waterproofing render or replacing such rendering with other rendering, but towards the latter part of 1988 it was clear that the defences were failing. Mr Sutherland, of D Y Davies, was instructed to make a thorough investigation and come up with a permanent solution. The result was the D Y Davies report of 24th January 1989.
The report recorded the sorry state of "all basement areas" in these terms: "water is entering through cracked or damaged waterproof rendering, screeds and untreated floors and walls. Other damp areas may occur in dry areas in the future as a result of the proposed water prevention works". The recommendation as a permanent solution was "pressure grouting the entire retaining wall at basement level and sub-basement levels, the return walls up to the building line, the basement slab so far as was necessary to prevent lateral ingress of water and certain parts of the LEB room in the sub-basement".
Terresearch Ltd were awarded the contract to carry out the necessary work and were prepared to provide a 1 year guarantee. The judge, on page 7 of his judgment, describes the system and makes a comparison with the Sika system installed by Vala after the flood in these terms:—
"Pressure grouting a wall involves drilling a number of holes, generally 25 millimetres in diameter and at 600 millimetre centres, both horizontally and vertically, through the inner skins (and through render, plaster or whatever else may be on the inside of the skin) and injecting waterproof grout under pressure into the cavity between inner and outer skins. Theoretically, if done well it should be effective, but the witness evidence was unanimously to the effect that it is an imprecise science. And it is not hard to see why: since the impermeable barrier is being formed between the outer and inner walls, it cannot be seen and, whether on account of obstructions or human failing or a refusal of the grout to go precisely where it is meant to go, one can never be entirely sure of the complete integrity of the system. Bearing in mind the propensity of water to discover over time any weakness of the barrier set against it, I was not surprised to find Mr Robinson less than enthusiastic about it. The lack of any guarantee offered by Quine and the I year guarantee given by Terresearch may be compared to the 10 year guarantee that would follow the full Sika treatment and the comparison tells its own tale. But, although costing about £130,000, it is cheaper than the full Sika treatment and, granted the progressive approach to a permanent solution that DY Davies pursued, the decision to pressure grout may be seen as reasonable. By a "progressive approach" I mean that DY Davies addressed the problem by starting with the least expensive and disruptive solution that was consistent with a reasonable prospect of success, with the intention, if that was seen not to work, of going on to consider other more difficult and consequently more costly solutions."
The judge then continued:—
"And thus it was that in 1989 Terresearch carried out their pressure grouting. Their work inevitably meant riddling the retaining wall with 25 millimetre holes and thereby destroying the integrity of whatever render was present, not that there was present any effective or systematic render. Had there been a Sika guarantee, which of course there was not, it would have been invalidated. But Mr Sutherland made it clear to me that DY Davies were not relying on anything that had gone before; they regarded the pressure grouting as the permanent defence. The drill holes were filled with grout, so that the surface was flush with the adjacent render, and then the whole was covered with one or two coats of Tamseal slurry. Tamseal slurry is not the same as Tamseal render and is generally used as a thin base for the latter. It has some, albeit limited, water proofing qualities but in this instance it was used by Mr Sutherland as a finish to "sweeten" the work surface, covering Terresearch's holes, the areas of replaced render and such of the original render as remained.
Mr Sutherland made it plain that all the work that was effected to the inside of the wall, as I have described above, was regarded by him as purely decorative. For the purpose of water proofing, he relied on none of it, that is to say none of the render, whether replaced or original, nor the Tamseal. He had made the considered decision to use pressure grouting and he relied on that and that alone."
The finding of the judge is not challenged, but at the forefront of Vala's case is the point that none of the facts were known to Vala or its experts in 1992.
In September 1989 Speyhawk had parted with its interest in the property to Skandia Property Management Ltd (Skandia) a subsidiary of the buildings insurers Skandia Insurance Limited. We have not been shown any of the contractual arrangements under which this transfer took place, but from the judge's judgment (page 9) it appears that there may have been some term under which Speyhawk confirmed the exercise of due diligence in relation to water proofing the basement. In any event it is common ground that by the end of 1990 there was still a damp problem—"probably 6 or 7 damp patches at sub-basement level in the corridor by the LEB room and at basement level especially in vaults 4–6". Through 1991 it seems these patches became more noticeable, and the judge found they had been there for some 18 months before the flood in October 1991. Indeed in June 1991 Mr Bolton on behalf of Vala wrote to Speyhawk asking them for their "proposals for eradicating the serious damp penetration in the basement corridor and in the vaults along the Pall Mall East elevation".
The response of Speyhawk on 24th October 1991 (written as the judge found before news of the flood had...
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