Tyco Fire & Integrated Solutions (UK) Ltd v Rolls-Royce Motor Cars Ltd

A provision for joint-names insurance must be construed in the context of the contract as a whole. It does not, merely by requiring insurance of property in joint names, displace a contractor’s express liability for negligence.

Clear language is required to show that a contractor is insured against liability for damage outside its own works. A reference to insurance of existing structures in the names of “others including … contractors” did not extend protection to the named package contractor. The contractor therefore remained liable under the express indemnity and liability clauses.

Tyco supplied a sprinkler system under a package contract for the construction of Rolls-Royce’s manufacturing plant. A mains pipe burst, allegedly through Tyco’s negligence, damaging parts of the development outside Tyco’s works. Rolls-Royce had taken early occupation of the affected area.

An adjudicator, acting under Part II of the Housing Grants, Construction and Regeneration Act 1996, directed Tyco to pay damages. Tyco then sought repayment, relying on clause 13.5 of the contract, which required insurance of existing structures in joint names. HH Judge Gilliland QC held that the insurance regime displaced Tyco’s liability. Rolls-Royce appealed.

The central issue was whether clause 13.5 relieved Tyco of contractual and tortious liability for negligently caused damage to existing structures outside its works.

Decision

1. The Court of Appeal unanimously allowed the appeal. Rix LJ gave the reasons, with which Keene LJ and the Master of the Rolls agreed.

2. On its true construction, clause 13.5 did not make Tyco a co-insured in respect of damage to existing structures outside Tyco’s own works. The phrase “others including, but not limited to, contractors” did not identify the defined “Contractor”. The clause also said nothing about limiting a contractor’s liability for existing structures, unlike its detailed provisions governing repair of the works.

3. That construction accorded with the contract as a whole. Clauses 2.3 and 18 preserved Tyco’s indemnity and liability for negligence. Nothing in clause 13.5 clearly created an exception from those obligations. The provision for insurance of a contractor’s works did not provide a basis for insurance against that contractor’s liability for separate parts of the employer’s property.

4. The court considered that the analysis in London Borough of Barking and Dagenham v Stamford Asphalt Co Ltd [1997] 82 BLR 25 remained binding absent clear contrary wording. A joint-insurance obligation for specified perils did not, in that contractual setting, extend to loss caused by the contractor’s negligence. The materially clearer contracts in Co-operative Retail Services Ltd v Taylor Young Partnership Ltd [2002] UKHL 17 and Scottish and Newcastle plc v GD Construction (St Albans) Ltd [2003] EWCA Civ 16 were distinguishable.

5. Obiter, Rix LJ rejected a free-standing rule of law that joint-names insurance invariably prevents one co-insured suing another. The true basis of any such restriction is the parties’ underlying contract. A possible implied term arising from co-insurance cannot override express contractual language preserving liability. The claim for repayment therefore failed.

1. Court of Appeal (Civil Division) Allowed Rolls-Royce’s appeal and reversed the conclusion that clause 13.5 excluded Tyco’s liability.

2. High Court of Justice, Queen’s Bench Division, Technology and Construction Court HH Judge Gilliland QC held that clause 13.5 established a special insurance regime for specified perils and entered judgment for Tyco, including repayment of sums paid pursuant to adjudication.