Co-Operative Retail Services Limited and Others v Taylor Young Partnership and Others

The House of Lords dismissed the appeal. The court held that the JCT-based main contract (in particular clause 22A and clause 20.3) and the corresponding sub-contract provisions, together with the joint names contractors' all risks insurance, displaced the ordinary entitlement to recover compensation for fire damage to the works: the contractor and sub-contractor were obliged to make good the physical damage and to look to the joint names policy for payment rather than being liable in damages to the employer. The Civil Liability (Contribution) Act 1978 (notably section 1 and section 6(1)) therefore did not permit third parties (the architect and consultant) to recover contribution from the contractor or sub-contractor because those parties were not persons from whom the employer was entitled to recover compensation in respect of the same damage.

This appeal concerned loss caused by a fire at premises under construction. CRS (the employer) sued its architects (TYP) and consultants (HLP) for negligence and breach of contract; TYP and HLP in turn sought contribution or indemnity from the main contractor (Wimpey/Carillion) and the electrical sub-contractor (Hall) under the Civil Liability (Contribution) Act 1978.

Background and parties

• CRS commissioned Wimpey as main contractor; Hall was an electrical sub-contractor; TYP and HLP acted as architect and consulting engineers.
• Work was substantially advanced but not practically completed when a fire caused extensive damage.
• Contractors' all risks insurance was effected by a joint names policy in the names of CRS, Wimpey and nominated sub-contractors including Hall.

Procedural posture

• Preliminary issue trial in the Technology and Construction Court (Judge Wilcox) decided that TYP and HLP could not recover contribution; Court of Appeal ([2000] 2 All ER (Comm) 865) affirmed; the appeal to the House of Lords followed.

Relief sought

• TYP and HLP sought an indemnity or contribution from Wimpey and Hall under section 1 of the 1978 Act to the extent CRS proved they were liable to CRS for the fire damage.

Issues framed

1. Whether the contractual scheme (notably clause 22A of the main contract and related sub-contract provisions) expressly provided for the contingency of fire so as to displace ordinary contractual or tortious liability to pay compensation; and
2. if not displaced, whether the existence of the joint names policy and the fact that CRS was indemnified by insurers nonetheless prevented contribution claims under the 1978 Act.

Court’s reasoning

• The court analysed the contract terms (clauses 20.2/20.3, 21, 22, 22A, 22A.4.2–4.5 and clause 25) and concluded that the contract excluded contractor and sub-contractor liability to pay compensation for physical damage to the works caused by specified perils (including fire) up to practical completion and required restoration to be effected and paid for under the joint names insurance.
• Because the employer could not claim compensation from the contractor or sub-contractor for that fire damage, Wimpey and Hall were not "persons liable in respect of the same damage" within sections 1 and 6(1) of the 1978 Act; accordingly TYP and HLP could not recover contribution from them.
• The court also addressed the timing question under section 1(3) and concluded liability is to be judged as at the date when contribution is claimed; the contractual scheme meant there was no present entitlement to recover compensation.

Appeal dismissed. The House of Lords held that the contractual allocation of risk and the joint names contractors' all risks insurance (clause 22A and related clauses) excluded a right by the employer to recover compensation from the contractor or sub-contractor in respect of the fire damage; accordingly Wimpey and Hall were not "persons liable in respect of the same damage" within the Civil Liability (Contribution) Act 1978 and the architects/consultants could not recover contribution.

Trial: Technology and Construction Court (Judge Wilcox), preliminary issue decided against third parties (21 December 1999). Court of Appeal (Peter Gibson, Brooke and Robert Walker LJJ) affirmed (reported at [2000] 2 All ER (Comm) 865). Appeal to the House of Lords dismissed ([2002] UKHL 17).