Stace & Francis Ltd v Ashby & Anor

An insured’s recovery under an insurance policy is generally independent of damages recoverable from a contractor responsible for the same loss. The contractor is not entitled to credit for an insurance payment or offer merely because the insurer may have a related liability. Where the insurer has paid the insured, the insured may hold any later recovery from the contractor in equity for the insurer. An unaccepted offer, without payment or release, provides no basis for reducing the contractor’s liability. A direct contract between an insurer and builder does not, without necessary implication, make the insurer liable to the insured for the builder’s workmanship.

The insurers engaged Stace & Francis Ltd to carry out subsidence remedial works at the Ashbys’ property. The Ashbys also requested ancillary works. After disputes arose, Stace & Francis claimed payment for the ancillary works, and the Ashbys counterclaimed for defects and incomplete work in the main works.

The Chichester County Court awarded Stace & Francis £1,221.37 against Mrs Ashby and allowed the counterclaim, but deducted £3,925, treated as an amount the insurers had agreed to provide for outstanding remedial works. The central issue on appeal was whether that deduction was legitimate when the sum had not been paid and no binding settlement had been reached.

1. Appeal allowed. The deduction of £3,925 from the damages payable by Stace & Francis was unjustified. The insurers had offered the sum in the context of a proposed settlement which the Ashbys had not accepted. No part of it had been paid.
2. The ordinary principle is that insurance money received by an insured is not deducted from damages recoverable from the wrongdoer or contract-breaker in respect of the same loss. The court treated the proposed payment as an indemnity under the insurance policy, not as a payment which reduced Stace & Francis’s liability.
3. The analysis that the insurers and Stace & Francis were jointly liable under separate contracts was rejected. The arrangement by which the insurers contracted directly with Stace & Francis did not impose on the insurers an obligation to the Ashbys to carry out the works with reasonable skill and care. At most, such an obligation might arise by necessary implication to use reasonable care to see that the work was performed to a reasonable standard, although the necessity for that implication was doubtful because of the direct contract between the Ashbys and Stace & Francis.
4. The court accepted that the Ashbys had a collateral contract with Stace & Francis of the type identified in Charnock v Liverpool Corporation [1968] 1 WLR 1498. The contractual characterisation was not challenged, but it did not justify the deduction.
5. If the insurers had paid the Ashbys in respect of Stace & Francis’s failures, the Ashbys would have held any recovery from Stace & Francis in equity for the insurers. Since there had been no payment and no release of Stace & Francis’s liability, the counterclaim was to be assessed without the deduction. The parties agreed the adjusted judgment in Mrs Ashby’s favour at £4,702.95, subject to notification to Mr Ashby’s trustee in bankruptcy and clarification of the form of judgment.

• Court of Appeal (Civil Division) — allowed the second defendant’s appeal from the Chichester County Court. The order for costs below was varied in relation to the counterclaim, and Stace & Francis was ordered to pay the specified proportion of Mrs Ashby’s costs.
• Chichester County Court — District Judge Davies allowed Stace & Francis’s claim against Mrs Ashby for £1,221.37 and allowed the Ashbys’ counterclaim, but deducted £3,925 for the insurers’ supposed settlement.