Rolls Royce Motor Cars Ltd built a new manufacturing plant in West Sussex. Tyco Fire & Integrated Solutions (UK) Ltd was contracted to provide fire protection services, including a sprinkler system.

Unfortunately, during construction, one of the mains supply pipes burst and caused a flood, damaging both the construction works and other parts of the plant. It was accepted that this occurred as a result of Tyco’s negligence.

Tyco repaired the new construction works. The key dispute between the parties was weather Tyco was liable to Rolls-Royce in relation to the damage to existing structures. Tyco argued that, because the contract provided for joint names insurance under Rolls-Royce’s employer’s policy, it is relieved of liability for its own negligence. The trial judge agreed with Tyco and entered Judgement against Rolls-Royce in the sum of £433,428.08. Rolls Royce appealed.

Tyco relied upon the decision in Co-operative Retail Services Ltd vs Taylor Young Partnership Ltd [2002] UKHL 17, 1 WLR 1419 and clause 13.5 of the contract. Clause 13.5 provides as follows:

“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 the risks covered by the Employer’s insurance policy referred to in Schedule 2….subject to the terms, conditions, exclusions and excesses (uninsured amounts) of the said policy.”

Rolls Royce did not in fact take out any insurance in the joint names of itself and Tyco, but the issue had to be resolved as if it had. Tyco argued that one joint name cannot recover from another joint named insured in respect of the same loss. On the other hand, Rolls Royce relied on Tyco’s express obligation under the contract to indemnify the Employer against any damage, expense or loss suffered which arises out of any negligence on the part of Tyco (a standard obligation contained in contracts of this type). Therefore, Rolls Royce argued, the provision for joint names insurance did not expressly nor impliedly exclude liability that otherwise fell to Tyco under the contract.

The main issue which arose at trial was whether Tyco was liable to Rolls Royce for damage to existing structures in light of clause 13.5 of the contract.