In the first case, Co-operative Retail Services Ltd vs Taylor Young Partnership Ltd and Others, the defendants were architects and engineers. The works were badly damaged by fire and the defendants were sued for negligence by the developer. The defendants deny negligence but sought a contribution from the contractor and subcontractor on the grounds that they also caused the fire.
However, the contractor and the subcontractor were co-insureds with the developer under a joint-names policy taken out to cover losses including fire damage. One co-insured cannot be sued by another for losses for which they are both covered under the same insurance policy. Also, under the terms of the JCT and DOM/1 contracts that applied, the developer was not entitled to claim damages for consequential delay. The Court of Appeal held that the contractor and subcontractor could not therefore be liable to the developer for any loss. It followed that the professionals could not claim contribution from them, even though the fire may have been partly their fault, because they were not liable to the developer.
The House of Lords dismissed the professionals' appeal. The relevant clauses in the JCT contract excluded any liability on the part of the contractor to the developer for losses covered by the joint-names policy. These contract clauses were reproduced in the subcontract, so that the subcontractor could not be held liable to the developer under a warranty given to the developer. Since neither the contractor nor the subcontractor could be held liable for the damage that occurred, the professionals could not make a claim against them for contribution.
The second case, Royal Brompton Hospital National Health Service Trust vs Watkins Gray International (UK), concerned major building works to the hospital. The contract overran by 43 weeks for which the architects certified an extension of time. Consequently, the employer had to pay more than £2.3m to the contractor. The employer referred the matter to arbitration and sought to recover this sum and a similar sum by way of liquidated damages, on the basis that the extension of time should not have been granted.
One co-insured cannot be sued by another for losses for which they are both covered under the same insurance policy
The employer settled the arbitration with the contractor for a much lower sum. It then sued the architects, alleging that their negligent certification had led to the employer being at a disadvantage in seeking to recover its money by way of arbitration. The architects claimed contribution from the contractor.
The Court of Appeal held that the architects could not claim contribution, because their and the contractor's assumed liability to the employer was not liability in respect of the same damage. The contractor was liable potentially for damages for delay. The architects was liable potentially for the weakening or impairment of the employer's prospects of success in the arbitration.
The House of Lords dismissed the architects' appeal. They also stated that two earlier cases, (Friends' Provident Life Office vs Hillier Parker May & Rowden and Hurstwood Developments Ltd vs Motor & General & Andersley & Co Insurance Services Ltd) in which a wide interpretation of "same" damage was adopted, were wrongly decided and indicated that the judgment in Bovis Lend Lease Limited vs Saillard Fuller & Partners on this point was not correct.
Rachel Barnes is a partner in solicitor Beale & Company, www.beale-law.com.