Employer engaging contractor to carry out works – Employer failing to insure in joint names of themselves and contractor as required by contract – Fire causing damage – Contractor liable – Employer claiming cost of damage caused – Whether breach of contract prevented employer enforcing liability – Whether employer’s failure to insure had caused contractor substantial loss corresponding to damage to caused by fire – High Court holding employer was entitled to enforce liability – Appeal dismissed
The plaintiff employer instructed the defendant contractor to do certain building work to the plaintiff’s school in accordance with the standard form of agreement of the Joint Contracts Tribunal for minor building works, 1988 revision. By condition 6 of the agreement the contractor was liable for any damage caused by, inter alia, its negligence, and the contractor was made responsible for, and required to insure against, such liability (6.2). It also provided for insurance in the joint names of the employer and the contractor against, inter alia, fire to be undertaken either by the contractor (6.3a) or the employer (6.3b). If the insurance was undertaken by the employer it had also to include in the cover the building and its contents. As required by condition 6.2, the contractor insured its liability with the third party for negligent damage to the building and contents. The employer in breach of condition 6.3b did not effect the joint insurance of the building contents and works.
In the course of the works there was a fire. It was assumed for the purpose of the determination of the issue that the defendant’s subcontractor had negligently caused the fire. The employer claimed against the contractor under condition 6.2 for direct and consequential loss from damage to the building and its contents. The employer claimed 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 claimed, by way of set-off and counterclaim, and supported by the third party, that the employer’s failure to insure had caused it a substantial loss for which condition 6.3b would have provided cover. The judge held that the breach of condition 6.3b did not prevent the employer from enforcing the liability imposed by condition 6.2. The defendant and the third party appealed.
Held The appeal was dismissed.
1. Conditions 6.2 and 6.3b were concerned with entirely different types of damage. Condition 6.2 governed liability for damage culpably caused by the contractor whereas condition 6.3b required insurance for certain damage not culpably caused. Neither condition referred to or qualified the other. Therefore if the employer had effected insurance under condition 6.3b it could properly and, consistently with condition 6.2, have excluded from cover any loss or damage caused by the contractor’s negligence.
2. It could not sensibly have been the intention of the draftsman or of the parties when entering into the agreement that the condition 6.3b insurance taken out by the employer 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.
Guy Anthony (instructed by Finers) appeared for the plaintiff; Paul Darling (instructed by Vizards) appeared for the defendant; Jeremy Stuart-Smith (instructed by Berrymans) appeared for the third party.
