| Date | 20 August 1997 |
|
|
| Judgment | BT -v- James Thomson & Sons 13 December 1996 Court of Session Inner House. 82 BLR 1 |
|
|
| The Issue | Duty of care of sub-contractors in respect of a loss caused by fire. |
|
|
| Implication |
A sub-contractor does not owe a duty of care to an employer in respect of the risk of fire due to their acts or omissions, against the background of the contractual scheme under JCT 80 where an employer takes the obligation to insure for such events. |
printIn the 7th May 1997 edition of Contract Journal I reported the case of The London Borough of Barking -v- Stamford Asphalt Company. The case concerned insurance under a JCT Minor Works form of Contract. Clause 6.3 of this form covers the obligations of the parties to insure the works from damage caused by the specified perils (fire, lightning, explosion, storm, etc.). Under clause 6.3(b), generally used where the work is to existing structures, the employer had been required to take out the necessary insurance and, in the event of a claim, the contractor was to be paid for reinstatement works as if they were a variation to contract. A fire occurred on site due to the negligence of a sub-contractor and the employer claimed against the contractor for direct and consequential losses arising from damage to the building and its contents. The employer was no doubt compelled to do this since, in breach of clause 6.3, he had failed to take out the necessary insurance. Rather surprisingly, the Court held that the specified perils in clause 6.3 were of a kind which resulted only from natural phenomena, i.e. acts of God. That was how fire should be interpreted in that context. Clause 6.3(b) did not oblige the employer to insure against the risk of a fire caused by the contractor's negligence. The Court therefore concluded that these clauses did not exempt the contractor from the consequences of his or his sub-contractor's negligence, and thus the employer was entitled to recover from the contractor damages suffered as a consequence of the fire. These findings were in something of a contrast to a case heard in December 1996 in the Inner House of the Court of Session in Scotland, the equivalent of the Court of Appeal south of the border. The case was between BT and James Thomson and Sons. On this occasion the contract was a JCT Standard Form of Building Contract 1980. Once again, due to acts or omissions of a sub-contractor, a fire was started which caused extensive damage to the roof and interior of the building. The usual clauses in relation to liability and insurance were contained whereby under clause 22C the employer was required to take out and maintain an insurance policy in respect of the existing structures of the building together with their contents for the full cost of reinstatement, repair or replacement of loss or damage due to one or more of the "specified perils". The contractual scheme of things therefore was that the employer would insure against and bear the risk of damage by fire. As these provisions were stepped down into the sub-contract it would therefore be proper for the sub-contractors to proceed on the basis that they did not require to insure the existing structures and their contents against the risk of fire due to any act or omission on their part, and for them to price their tender for the sub-contract works accordingly. It is very easy to see the essential commercial justification for this arrangement. Complicated construction projects involve many parties and there are some risks which can be efficiently insured against by one party. Indeed, whilst it is commercially possible to obtain insurance against fire in the name of the employer which covers the defaults of all the parties and under which the insurers have no right of subrogation, such insurance will continue to be more attractive to the employer than the preservation of his rights in contract and tort against the contractors and sub-contractors. Returning to the case, a fire had occurred due to the default of a sub-contractor. The employer commenced proceedings against the sub-contractor to recover damages suffered as a consequence of the fire. The question before the Court was whether the sub-contractor owed a duty of care towards the employer in respect of such loss. The Court held that this was not the case. The contractual provisions were relevant circumstances in considering the existence of a duty of care and since, under the terms of the contract, the main contractor and sub-contractor was to be held to have no liability in such circumstances, Lord Ross held that it would not be fair, just and reasonable to impose a duty of care on the sub-contractor. It must be pointed out however that in a dissenting judgment, Lord Morrison was strongly of the view that the principles which established the existence of a duty of care in tort should override such contractual considerations. Nevertheless it is clear from this and other related cases that the Minor Works Form of Contract is to be treated as an exception within the JCT family of contracts. Under JCT 80 the expressed obligation to insure is intended to exempt all the other parties from any liability for the insured perils.
CJ-9730
|
|||
|
© Brewer Consulting |
|||
 |
|||