TFW Printers Ltd (“TFW”) engaged Interserve Project Services Ltd to carry out certain building works. The building contract was the JCT Agreement for Minor Works. The works included the replacement of a pressed steel valley gutter to part of one of the roofs of the building.
In carrying out these works the downpipe situated at the western end of the gutter had been removed by Interserve but had not been replaced. Following practical completion of the works but prior to the expiry of the defects liability period part of the building was flooded because of the lack of such downpipe.
TFW alleged that the flood was caused by Interserve’s beach of contract and/or negligence and sought to recover its consequent losses.
The issue was whether TFW’s contractual obligation to insure in the parties’ joint names against the loss or damage that had now been sustained ceased upon practical completion or whether it continued until the expiry of the defects liability period.
Interserve argued that the relevant obligation, contained at clause 6.3B of the building contract, placed an obligation on TFW to insure against the loss and damage in the joint names of Interserve and TFW and that this obligation to insure continued until the expiry of the defects liability period. Accordingly, Interserve claimed that TFW’s claim for recovery of its losses against Interserve was barred.
The court expressed regret that the standard form did not make express provision in relation to the duration of the joint insurance. In the absence of such express provision, the court held that it was necessary to examine the principles of construction in order to determine what the parties must have intended.
As a matter of construction the court held that the obligation to insure in joint names ceased upon practical completion of the works.
The court noted that TFW’s contractual obligation was to insure against loss or damage to “the existing structures (together with the contents owned by him or for which he is responsible) and to the works and all unfixed materials and goods delivered to, placed on or adjacent to the works and intended therefore…”. In this respect the phrase “works” referred to the work and materials required by the contract to bring the project to its finished state, it was not a description of that finished state.
The court further noted that an examination of the other provisions of the contract showed that it could not have been intended that the architect was authorised to issue instructions after practical completion of the work. However, the issue of an instruction by the architect was the only mechanism by which the making good of the loss or damage could be effected under clause 6.3B.
Finally, the court’s view was that there were no practical or commercial reasons why the parties should continue to have the benefit of joint insurance after practical completion. Once Interserve had achieved practical completion, possession of the site passed to the TFW. As building owner in possession, TFW bore the risk of damage to the building and contents. Interserve no longer had an interest in the works, because they have been completed.
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The decision reversed the first instance decision that the obligation to maintain insurance pursuant to clause 6.3B of the contract ceased upon the expiry of the defects liability period and essentially paved the way for a claim to be made against Interserve in respect of the losses suffered by TFW.
In order to prevent such issues arising, employers and contractors are advised to clarify the position through express wording when using this standard form of contract.