Tyco Fire & Integrated Solutions (UK) Ltd (formerly Wormald Ansul (UK) Ltd v Rolls-Royce Motor Cars Ltd (formerly Hireus Ltd)

Construction contract – Insurance obligations – Liability for negligence – Construction of manufacturing plant – Respondent engaged to install sprinkler system – Flooding causing damage to plant and contents – Whether provision requiring appellant employer to take out joint-names insurance applying to respondent – Whether excluding respondent’s liability for negligence – Appeal allowedThe respondent was one of the contractors engaged by the appellant in connection with the construction of a new manufacturing plant; it provided fire protection services, including a sprinkler system. Following construction of the plant, one of the mains supply pipes burst, causing flood damage to the works carried out by the respondent and to other parts of the plant. The respondent repaired the sprinkler system but a question remained as to liability for: (i) other damage to the plant; (ii) stored goods and stock; and (iii) clean-up costs. In proceedings brought by the appellant, an issue arose as to whether, assuming that the flood had been caused by the respondent’s negligence in carrying out the works, it was none the less under no liability to the appellant by reason of the terms of its contract, which made provision for joint-names insurance under the appellant’s employer policy.The respondent relied upon clause 13.5 of the contract, which stated: “The Employer shall maintain, in the joint names of the Employer, the Construction Manager and others including, but not limited to, contractors, insurance of existing structures” against specified perils, which included the bursting or overflowing of water pipes. It submitted that one joint-named insured could not recover from another in respect of the same loss. The appellant relied upon other clauses to show that it could recover from the respondent. Those included: (i) clause 2.3, by which the respondent undertook to indemnify the appellant against “any damage, expense or loss whatsoever… to the extent that the same arises out of or in connection with any breach of this contract or any negligence or breach of statutory duty on the part of the Contractor”; and (ii) clause 18, which provided that the appellant’s rights and liabilities under the contract were “in addition to any other rights and remedies it may have against the Contractor including… any remedies in negligence”.An adjudicator directed the respondent to pay to the appellant £393,562 plus interest. The respondent brought a claim to recover that sum. Allowing the claim in the court below, the judge accepted the respondent’s interpretation of the contract and held that it was not liable to the appellant. The appellant appealed.Held: The appeal was allowed. The opening phrase of clause 13.5 did not apply to the respondent. It was not intended to give to the respondent, or any individual contractor, separate liability insurance in respect of the existing structures outside the area of its own works. It was intended only to state that the employer’s policy, insuring its own property on the site, embraced a series of joint-names policies that protected “others” including, but not limited to, contractors. The express language of the contract did not emphasise the existence of a special regime in respect of the existing structures that excluded the appellant’s obligations elsewhere in the contract, such as those in clauses 2.3 and 18: Co-operative Retail Services Ltd v Taylor Young Partnership Ltd [2002] UKHL 17; [2002] 1 WLR 1419 and Scottish & Newcastle plc v GD Construction (St Albans) Ltd [2003] EWCA Civ 16; [2003] Lloyd’s Rep IR 809 distinguished. Further, in the absence of plain language indicating the contrary, an obligation to insure in joint names extended to the specified perils only so far as loss by such perils had not been caused by negligence: Barking and Dagenham London Borough Council v Stamford Asphalt Co Ltd (1997) 82 BLR 25 applied. If an employer was not contractually obliged to maintain insurance for its contractors against their own negligence, the fact that its insurance might contain protection against negligently caused loss, and that such loss would be included in a standard form of joint-names insurance, should not redound against it.Anthony Edwards-Stuart QC and Digby Jess (instructed by Weightmans LLP, of Manchester) appeared for the appellant; David Thomas QC and Krista Lee (instructed by Shadbolt & Co LLP, of Reigate) appeared for the respondent.Sally Dobson, barrister