If you
negligently set fire to someone else’s property, you would normally expect to
be liable for the damage caused. And, if setting fire to property is an
ever-present risk in your type of business, you will probably arrange indemnity
insurance to cover that risk. Any damages which you then have to pay to the
owner of damaged property will, in fact, be paid by your insurers, subject of
course to any policy excess.
This simple
picture is in no way affected by the mere fact that the victim has insured his
own property against damage by fire. All it means is that his loss insurers,
having met the claim under their policy, take over (under the doctrine of
subrogation) their client’s legal rights and can consequently sue you (or your
indemnity insurers) for damages in negligence.
Suppose,
however, that you are a building contractor or subcontractor working in a
client’s property and that the reason why the client has insured that property
against the risk of damage by fire is that the building contract requires
him to do so. Does this, in effect, mean that the client has agreed to bear
all risk of fire, including any fire which results from your negligence? Does such an insurance clause serve to
exclude the contractor’s liability?
The idea
that an insurance provision could indeed have this effect was accepted by the House
of Lords in Scottish Special Housing Association v Wimpey Construction
UK Ltd [1986] 2 All ER 957. A main contractor, who negligently set fire to
a house which he was refurbishing, was there held to be exempted from liability
by clause 20C of the standard JCT 1963 form of building contract, which
expressly provided that fire and certain other specified perils were to be at
the employer’s ‘sole risk’.
This
decision was taken a step further by the Court of Appeal in Norwich City
Council v Harvey [1989] 2 All ER 1180, where the fire was caused,
not by the main contractor (who was again working under JCT 1963), but by a
subcontractor appointed by him. In this situation it could not be said as a
matter of contract law that clause 20C excluded liability (since the
subcontractor was not a party to the main contract, he could hardly take the
benefit of its terms). But the court ruled that, in deciding whether it would
be just and equitable to impose a duty of care in tort upon the
subcontractor, the whole contractual matrix must be taken into account. Since
this showed that the employer was to shoulder the entire risk of fire, the
subcontractor was not liable.
The decision
in Norwich City Council v Harvey has attracted a considerable
amount of criticism in the ensuing period (although it is worth noting that the
equivalent clauses in the JCT 1980 standard form of contract are even more
clearly designed to produce the same result). The courts are normally reluctant
to interpret a contract in a way which excludes a party’s liability for
negligence, except where the wording is quite plain, and subsequent cases, such
as Dorset County Council v Southern Felt Roofing Co Ltd (1989) 48
BLR 99, suggest that it was the reference to the employer’s ‘sole risk’ in JCT
1963 which was crucial to the earlier ruling. The Dorset case concerned
a fire-raising main contractor; a more recent decision suggests that the days
of subcontractor immunity are likewise numbered.
National
Trust v Haden Young Ltd [1990] Building
Law Monthly October, pl concerned the virtual destruction by fire of a
National Trust property in Sussex, owing to negligence and breach of contract
on the part of the defendant subcontractors, who were carrying out plumbing and
lead renewal work. The main contract was let on the JCT Minor Works 1980 form
of contract and the defendants had been selected by the plaintiffs (whose
architect had then instructed the main contractors to appoint them). When sued
for their loss, the defendants raised the above arguments.
Interestingly,
the trial judge accepted that, if the main contract insurance clauses would
protect the main contractor against liability, they would equally protect the
subcontractor; however, this point remained academic, since the judge found the
main contract provisions to be different in vital respects from those in the
previous cases. The minor works form does not place the property at the
employer’s ‘sole risk’; moreover, the contractor’s duty to insure
against property damage does not specifically exclude the existing property of
the employer. Without such pointers, his lordship held that the law should
reinforce the common sense solution — that those who burn down other people’s
property must pay for the consequences.
the law
Pressure is
increasingly being brought to bear upon the Government to revise the policy
guidance set out in Annex B to DOE Circular 16/91 Planning and Compensation
Act 1991: Planning Obligations which is now just over two years old. That
pressure emanates largely from decisions by the High Court and the Court of
Appeal, on the tests for determining whether the content of a planning
obligation is lawful, in the sense of being material to the planning
application in question. There is now a widening gulf between the policy test
for reasonableness and the legal test for validity in the case of planning
obligations.
The most
recent decision which highlights this is that of Mr Nigel Macleod QC, sitting
as a deputy judge of the High Court, in Tesco Stores Ltd v Secretary of
State for the Environment [1993] 2 PLR 108. The developers had applied to
West Oxfordshire DC for planning permission to redevelop land at Witney, known
as the Henry Box site, by the construction of a food retail store. (At an
earlier local plan inquiry, the inspector had informally expressed a preference
for this site as appropriate for a large foodstore, a view which was
subsequently endorsed by the council.)
The developers had made an offer to the council to fund improvements to
the local highway network known as the west end link.
The Tesco
application was called in by the Secretary of State. A public inquiry was held
into this and other applications and appeals relating to two further proposed
food retail stores on two more sites at Witney. The planning inquiry inspector
recommended that planning permission be granted for the Henry Box site and that
appeals in respect of the other two sites be rejected. The Secretary of State
did not accept this recommendation and he refused the application relating to
the Henry Box site. In particular, he stated that the developers’ offer of
funding failed the tests in paras 8 and 9 of Annex B to DOE Circular 16/91.
The
developers then applied to the High Court under section 288 of the Town and
Country Planning Act 1990 to quash the decision of the Secretary of State.
Their principal grounds of challenge were, first, that the Secretary of State
had discounted the local plan inspector’s preference and, second, that he had
also disregarded the developers’ offer of funding the west end link.
The
application was upheld, but only on the second ground. The deputy judge held
that the Secretary of State was well aware of, and had expressly identified,
the local plan inspector’s preference and its acceptance by the council, but he
gave it only limited weight. In essence, therefore, the challenge was to the
weight which the Secretary of State had attached to the point; the court would
not interfere with his power to give whatever weight he pleased to the
arguments and contentions of the parties. However, the deputy judge then went
on to hold that the use and application of the tests set out in paras 8 and 9
of Annex B to DOE Circular 16/91 was not appropriate in a case where an offer
from the proposed developer was under consideration (as opposed to benefits
being required by a local planning authority). He said that, following
the decision of the Court of Appeal in R v Plymouth City Council, ex
parte Plymouth & South Devon Co-operative Society Ltd [1993] 36 EG 135,
such an offer to fund was a material consideration if it had a planning
purpose, it fairly and reasonably related to the proposed development and it
was not Wednesbury unreasonable. The developers’ offer relating to the
link satisfied those requirements. Accordingly, it was a material factor which
the Secretary of State had failed to take into account and his decision
therefore should be quashed.
While the
courts have in recent times emphasised that policy should not be equated with
the law, and that the former is not immutable, this is one area where the two
should ideally coincide. While it is possible to read paras 8 and 9 in such a
way that they refer only to circumstances in which some benefit is actively
sought by the local planning authority, can this have been the actual intention
of the Government? If it was, what is
the test for ascertaining whether the offer by the developer was completely
unsolicited? Until there is revised
guidance developers, and their advisers them, cannot know which set of rules
governs when the question of planning gain or community benefit is introduced
into the negotiations.
