Building contract – Insurance policy – Indemnity – Claimant contractor seeking to recover costs of repairs under insurance policy underwritten by defendant – Claimant subsequently seeking to amend claim in reply to defence – Whether reply containing new claim – Whether limitation period expiring before reply served – Whether new claim arising – Claim dismissed
In January 2002, the claimant contractor entered into a trade contract with a developer for the design, procurement, installation and erection of an atrium roof and wall glazing, shopfronts and external curtain walling of a commercial building. Some of the windows were subsequently found to be leaking. In order to remedy the defects, it was necessary to remove works carried out by others, including stone and brickwork cladding and finishing works to internal walls and ceilings. Following the repair of the defective windows, it was necessary to restore the work that had had to be removed.
The claimant sought to recover the costs incurred under an insurance policy taken out by the developer and underwritten by the defendant. The commercial court concluded that the claimant was not entitled to be indemnified under the policy: [2007] EWHC 1411 (Comm); [2007] ICLC 972. The Court of Appeal, by a majority, reversed that decision, holding that the claimant was entitled to an indemnity in respect of the access damage costs but not for the cost of rectifying the defective windows: [2008] EWCA Civ 441; [2009] 1 All ER (Comm) 171. However, the court decided that the claim was limited to the access damage cost in excess of £10,000 per window since each defective window was the relevant occurrence giving rise to entitlement to an indemnity under memorandum 18(3) of the policy.
In February 2009, the claimant amended its claim to relate to 18 stone-clad windows on the north and east elevations of the building. The defendant served an amended defence that was followed by an amended reply from the claimant. This was finally refined to a claim in respect of 26 brick-clad windows on the south and west elevations. The defendant applied to strike out the claim on the ground that it was not maintainable, having been introduced only by way of reply and after the expiry of the limitation period.
Issues arose as to whether: (i) the claimant’s reply contained a new claim; (ii) the limitation period in respect of the claim for 26 windows had expired before the amended reply was served; and (iii) a new claim arose out of substantially the same facts as were in issue on the existing claim.
Held: The claim was dismissed.
(1) The reply contained a new claim since it was not in the same amount as originally claimed and was sought to be justified on a different factual basis. A claim for damages was a new claim, even if it was in the same amount as originally pleaded, if the claimant sought by amendment to justify it on a different factual basis from that originally pleaded: Lloyds Bank plc v Rogers [1999] 3 EGLR 83; [1999] 38 EG 187 followed.
It was essential to know which windows were the subject matter of the claim since a cause of action arose whenever access damage had occurred in respect of any given window exceeding £10,000. Accordingly there was a separate cause of action in respect of the damage relating to each window: Travelers Casualty & Surety Co of Canada v Sun Life Assurance Co of Canada (UK) Ltd [2006] EWHC 2716 (Comm); [2007] Lloyd’s Rep IR 619 considered.
(2) The defendant had an arguable case that the limitation period had expired in or on around January 2009. The cause of action accrued when the insured peril occurred, that is on the happening of the event that caused damage to the property, and not the date on which the loss was manifest or the assured incurred expenditure. The claimant’s amended reply was therefore liable to be struck out under CPR 3.4(2)(c) and the claim could not be entertained unless it arose out of the same or substantially the same facts as were in issue on an existing claim: Welsh Development Agency v Redpath Dorman Long Ltd [1994] 1 WLR 1409 considered.
(3) In the instant case, a claim in respect of the 26 brick-clad windows on the south and west elevations did not arise out of the same or substantially the same facts as a claim in respect of the 18 stone-clad windows on the north and east elevations. There was in both claims a substratum of common facts, such as the building contract, the policy, the defective windows and the need to repair them, but a claim in respect of the 26 windows differed substantially from that of a claim in respect of the 18 windows: Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400 and Aldi Stores Ltd v Holmes Buildings plc [2003] EWCA Civ 1882; [2005] PNLR 9 considered.
In those circumstances, the court had no discretion to allow the new claim, the reply would be struck out and the claim dismissed: NEC Semi-Conductors Ltd v Commissioners of Revenue & Customs [2006] EWCA Civ 25; [2006] STC 606 considered.
If that conclusion was wrong, the court was not persuaded, in the absence of a properly formulated claim before the expiry of the limitation period, that justice called for the claimant to be granted an indulgence by the exercise of the court’s discretion in favour of allowing an amendment to the particulars of claim to plead a case in respect of the 26 windows.
Adrian Williamson QC and Marcos Dracos (instructed by Bryan Cave) appeared for the claimant; Paul Reed and Jeffrey Thomson (instructed by Kennedys) appeared for the defendant.
Eileen O’Grady, barrister
