When it comes to interpreting the provisions of the JCT contract, the Court of Appeal has an uneven record. In the most recent case, however, the court found that a JCT contract actually meant what the industry intended it to mean.
The provisions of JCT80 and JCT98 ensure that there is an insurance policy that covers the cost of rebuilding the works if they are damaged during construction – for example, by fire. The joint names policy covers the employer and the contractor, but does not cover the design team. This simple and arguably well-known fact recently gave rise to a legal wrangle that was taken to the Court of Appeal.
In Co-op Retail Services vs Taylor Young Partnership and others (4 July 2000), the court held that the JCT contract provided a code to ensure fire damage should be reinstated and the consequences of delay apportioned without the client, contractor or subcontractors having to argue about who was liable. But the design team was not included in the arrangements, and could be sued by the client for the whole loss even if it was only partly their fault.
The dispute arose, more or less, from the ashes of a new headquarters for Co-op Retail Services in Rochdale. The building had been designed by architect Taylor Young Partnership and the services by engineer Hoare Lea & Partners. A fire occurred in the run-up to practical completion, during the commissioning of the standby generator. The generator’s steel flue passed up through the centre of the building and out through the wooden roof, where the fire started.
The joint names insurer paid up, under the policy taken out pursuant to clause 22A, for the rebuilding costs and professional fees. The project was delayed while the works were reinstated and, under the terms of the contract, the contractor was awarded an extension of time but was not entitled to compensation for losses or expenses.
A JCT contract between employer and contractor released the contractor from liability to the employer for rebuilding costs. This did not extend to the designers
Once building was complete, Co-op claimed its insured losses from the two designers, alleging design shortcomings. The designers blamed the contractor that co-ordinated the works and the subcontractor that designed and installed the generator. The designers joined them to the action, relying on the Civil Liability (Contribution) Act 1978, which gives a right to contribution from those liable for the same damage.
The contractors objected to the claim on the grounds that the contract and, in particular, the joint names insurance operated so as to absolve them from liability to Co-op for fire damage and consequential delay. If the contractors were not liable to Co-op, the design team had no right to a contribution under the act.
The designers said the insurance arrangements were irrelevant. They argued that it was unfair for them to be saddled with all the liability for the fire when, assuming they were liable at all, they may have been only slightly to blame.
The court asked itself what the JCT contract provided. The answer, it said, was quite simple. The contractor, its subcontractor and the employer had entered into contractual arrangements, which meant that if a fire occurred, they should look to the joint insurance policy to provide the fund for the cost of restoring the fire damage, and that they would bear other losses themselves rather than indulge in litigation with one another. The contractor was not liable to the employer for fire damage or consequential delay, therefore the designers could not claim a contribution. The Contribution Act only created rights within limited circumstances. If it was unfair, the court said, it was not for the court to make it less so by inventing liability where there wasn’t any.
Andrew Bartlett QC and Kim Franklin are barristers and chartered arbitrators at Crown Office Chambers. They can be contacted on 020-7797 8100 or at firstname.lastname@example.org.