TFW Printers Ltd v Interserve Project Services Ltd

Under the JCT Agreement for Minor Building Works (1993 revision), an employer’s obligation to maintain joint-names insurance under clause 6.3B ends on practical completion unless the contract clearly provides otherwise. The obligation does not continue merely because the contractor remains liable for defects or may return to the site. The contractual references to the Works, the payment and certification machinery, and the equivalent insurance provision in clause 6.3A support that construction. After practical completion, the employer alone bears the risk of damage to the completed building and its contents. The court therefore did not decide whether clause 6.3B would bar a claim for damages or negligence.

The employer, the leasehold owner of a building, engaged the contractor under the JCT Agreement for Minor Building Works (1993 revision). Practical completion was certified on 5 February 1999. After heavy rainfall, flooding occurred because a downpipe removed during the works had not been replaced.

The employer claimed damages for breach of contract and negligence. The Central London County Court tried two preliminary issues on the assumption that the pleaded allegations were true: whether the clause 6.3B joint-insurance obligation continued through the 12-month defects liability period, and, if so, whether that clause barred the claim. The judge held that the insurance obligation continued and that the claim was barred. The central issue on appeal was when the clause 6.3B obligation ended.

1. Appeal allowed. The court held that the employer’s obligation under clause 6.3B to insure the existing structures, contents, Works and unfixed materials ceased when practical completion occurred. The second issue, concerning whether the clause barred the employer’s claim, therefore did not arise.
2. The contractual reference to “the Works” meant the work and materials required under the contract to bring the project to its finished state, rather than the completed building as a continuing subject of insurance. The reference to unfixed materials and goods also pointed to the period before practical completion.
3. The payment and certification provisions in clauses 4.2 to 4.4 formed a sequence dealing with progress payments, the penultimate certificate after practical completion, and the final certificate. They did not contemplate fresh variation or reinstatement instructions under clauses 3.5 and 6.3B after practical completion. The court accepted the reasoning in Keating on Building Contracts that post-completion variations should be dealt with by a separate agreement.
4. The equivalent contractor insurance obligation in clause 6.3A also ended at practical completion. Its requirement to restore or replace damaged work and proceed with and complete the Works, together with its payment machinery, confirmed that it operated before completion. No rational contractual feature justified different dates for clauses 6.3A and 6.3B.
5. Commercial considerations supported the same result. On practical completion possession passed to the employer, which thereafter bore the risk of damage to the building and contents. The contractor’s continuing potential liability for defective or negligent work was a different kind of interest and did not justify joint insurance only until the end of the defects liability period. Lords Justice Carnwath and Sedley agreed with Dyson LJ’s reasons.

• Court of Appeal (Civil Division): [2006] EWCA Civ 875 allowed the employer’s appeal from the preliminary-issue decision of His Honour Judge Knight in the Central London County Court.