Southern Insulation (Medway) Ltd v How Engineering Services Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Akenhead |
| Judgment Date | 23 July 2010 |
| Neutral Citation | [2010] EWHC 1878 (TCC),[2010] EWHC 1145 (TCC) |
| Docket Number | Case No: HT-09399,Case No: HT-10-80 |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Date | 23 July 2010 |
[2010] EWHC 1145 (TCC)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Before: The Honourable Mr Justice Akenhead
Case No: HT-09399
Richard Wilmot Smith QC and Karim Ghaly (instructed by Clyde & Co) for the Fifth Party
David Turner QC and Clare Dixon (instructed by Kennedys Law LLP) for the Third and Fourth Parties
Hearing dates: 7 May 2010
Mr Justice Akenhead:
Introduction
The Fifth Party, an insulation sub-sub-contractor, seeks to strike out contribution proceedings brought against it by the Third and Fourth Parties on the basis that it, the Fifth Party, owed to the eventual lessees of premises a duty of care in tort in relation to insulation to the chilled water pipework and associated fittings which is said to have been carelessly installed so that the pipework and fittings became corroded. The application raises interesting issues as to whether a duty of care can be owed in the circumstances, if so what is the scope of that duty and as to the impact of the House of Lords decision in Murphy v Brentwood District Council [1991] 1 AC 398. The question of “complex structures” has featured in the argument.
The Facts and the Pleadings
I have taken the facts from the pleadings but I am not making final findings of fact for the purpose of the litigation overall.
The Claimant, which is a company associated with the well-known solicitors Linklaters LLP, is and has since September 1996 been the lessee and occupier of professional premises at 1 Silk Street, London EC2 (“the premises”). The developer was DS Property Developments Ltd which employed the First Defendant, Sir Robert McAlpine Ltd (“the Main Contractor”) pursuant to a building contract under seal dated 12 August 1996. Other Works involve the stripping back of the then existing buildings to the frame and foundations, extensions, re-cladding and refitting work including the installation of new mechanical and electrical services. The Works included the provision of an air conditioning system which was distributed through the building, vertically, by means of insulated pipework. By an agreement executed under seal dated 13 November 1995 between Linklaters, the Main Contractor and the Second Defendant, Sir Robert McAlpine (Holdings) Ltd (“Holdings”), the Main Contractor warranted to Linklaters the due performance of its obligations under the building contract and Holdings guaranteed to Linklaters the due performance of the Main Contractor's obligations.
In about October 1995, the Main Contractor employed How Engineering Services Ltd (“HES”), the Third Party, a specialist mechanical and electrical engineering subcontractor, to carry out the mechanical and electrical engineering services work for the project. The sub contract is said to have contained a number of warranties and indemnities provided by HES. The Third Party provided a further Warranty guaranteed by the Fourth Party (“HGL”) to Linklaters.
It is asserted by HES and Southern that there was a contract entered into between HES and Southern Insulation (Medway) Ltd (“Southern”) in November 1995 pursuant to which Southern agreed to supply and install thermal insulation for the relevant pipework.
Practical Completion of the Works was certified on 20 September 199As part of its fit out works, Linklaters assumed the responsibility for providing horizontal pipework on each floor and connecting it to the vertical air conditioning pipework installed by the Main Contractor.
The chilled water pipework provided vertically by the Main Contractor and by the Third Party was made of steel; because it was to be maintained at a lower temperature than the surrounding atmosphere, it was important that steps were taken to ensure that water vapour in the air would not condense on to the steel pipework and thus cause rust or corrosion of the steel. The steel was to be thoroughly coated with an anti-corrosion paint and then covered with insulation comprised of prefabricated moulded lengths stuck to the pipework and with the joints in the insulation sealed; a foil-faced laminate was then to cover the insulation with the joints sealed appropriately. Particular arrangements had to be provided at the points where the vertical pipework was supported by brackets or other supports fixed to the structure of the building.
It is asserted by Linklaters in their proceedings issued in October 2009 against the Main Contractor and Holdings that in about July 2006 a leak was identified in a vertical chilled water pipe. Following a survey of the pipework in late July 2006, it is pleaded by Linklaters that, following the removal of the pipework, condensation was found running down the insulation, said to be consistent with or the result of ineffective thermal insulation and vapour seal. Extensive rust or corrosion was said to be found. Linklaters' pleaded case against the Main Contractor and Holdings is that the Main Contractor failed to apply the thermal insulation and vapour barrier for the chilled water pipework properly or otherwise in accordance with the building contract. In addition to allegations about the pipework, complaint is made about the installation of various “buffer vessels”. In consequence of the breaches alleged against the Main Contractor, Linklaters say that they have removed and replaced the vertical pipework within the chilled water system. The total claim excluding interest is for some £3.5 million.
The Main Contractor and Holdings by Part 20 proceedings seek indemnities or contributions from HES and HGL on the basis that, if they are liable to Linklaters, then HES and HGL are liable on various different contractual bases but on the essential factual basis that HES failed to provide an adequate vapour barrier or insulation.
HES and HGL assert against Southern that they are entitled to a contribution on the basis that:
“12. It was or should have been foreseeable to [Southern] that if the Southern Contract works were not properly performed then damage to [Linklaters'] property (including the chiller pipework itself) was likely to ensue.
13. Accordingly, [Southern] owed Linklaters a duty of care at common law to exercise reasonable skill and care in and about the performance of the Southern Contract works. This duty included a requirement that [Southern]:
(a) select and supply goods and materials for the Southern Contract works which it could reasonably believe to be of good quality and reasonably fit for the purpose for which they were to be used;
(b) exercise the level of care reasonably to be expected of a competent specialist contractor in and about the installation of the insulation.
14. If, which is denied, [HES and HGL] are liable under the [Civil Liability (Contribution) Act 1978] to provide an indemnity and/or contribution to [the Main Contractor and Holdings] in respect of [their] liability to [Linklaters], then:
(a) The damage suffered by [Linklaters] in respect of which such liability on the part of [HES and HGL] under the Act will have arisen was caused by negligence on the part of [Southern] in such of the respects as:
(i) are alleged by [the Main Contractor and Holdings] against [HES and HGL]…and
(ii) shall have been established by [the Main Contractor and Holdings] as against [HES and HGL] at trial;
(b) [Southern]:
(i) would be if sued also be liable to [Linklaters] in respect of the same damage; and
(ii) would be and is liable to provide an indemnity or contribution to [HES and HGL] (in respect of damages, interest and costs) pursuant to the Act in respect of any like liability on their part to [the Main Contractor and Holdings].”
Southern's Application
Southern has issued an application against HES and HGL for summary judgement on the grounds that HES and HGL have no reasonable prospect of success as against Southern, alternatively for the striking out of HES' and HGL's claim against it on the basis that it discloses no reasonable grounds for bringing the claim. The essential argument relied upon by Southern relates to whether or not a duty of care arises in relation to careless workmanship on its part (if any) in circumstances that the pipework, which the insulation was covering, was subject to corrosion and rusting. It is asserted that as the loss said to have been suffered by Linklaters was purely economic loss no duty of care exists or extends to cover such loss.
Southern considers that its arguments are so strong and readily determinable at this stage that it would be appropriate and sensible for the issues of principle relating to whether or not any effective duty of care was owed by it to Linklaters to be dealt with on a summary application. Although it initially argued that Linklaters did not have any effective proprietorial link with the premises in question, it was accepted by its Counsel in argument that there was at least a triable issue on that aspect of the matter and that was not pursued in the oral argument before the Court.
HES and HGL argue against Southern's position. They say that the authorities clearly establish a duty of care in a case such as this when, they say, there was damage and it was not to work or materials or elements of the building actually provided by Southern. Corrosion or rusting is, they argue, physical damage and, in the same way as damage caused to a building by fire or flooding caused by a negligently installed boiler or water system, this will give rise to an effective cause of action in tort.
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