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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> James Longley & Company Ltd v Forest Giles Ltd [2001] EWCA Civ 1242 (18 July 2001) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2001/1242.html Cite as: [2001] EWCA Civ 1242, [2002] Lloyd's Rep IR 421, 85 Con LR 124 |
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
(His Honour Judge Lloyd QC)
Strand London WC2 Wednesday, 18th July 2001 |
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B e f o r e :
LORD JUSTICE LATHAM
LORD MUSTILL
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JAMES LONGLEY AND COMPANY LIMITED | ||
- v - | ||
FOREST GILES LIMITED | Defendant |
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of Smith Bernal Reporting Limited
190 Fleet Street, London EC4A 2AG
Telephone No: 0171-421 4040
Fax No: 0171-831 8838
Official Shorthand Writers to the Court)
MR. M. VALLANCE Q.C. (instructed by Messrs Hill Dickinson, London, EC3) appeared on behalf of the Respondent/Defendant.
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Crown Copyright ©
"2. Relevant terms of the development agreement included:
'6.7.14 at Practical Completion [Research Park shall use its best endeavours to ensure] the site is left in full repair and in good and clean condition cleared of all unused building materials plant and equipment used in the works and temporary structure.
22. Research Park shall pay or allow Borax the sum of £40,000 per week or part thereof for any delay in Practical Completion (as extended (if at all) in accordance with Clause 6.4 of the Agreement').
3. The claimant ('James Longley') was a main contractor employed by Research Park to construct the buildings.
4. The main contract between James Longley and Research Park was entered into on or about the 22nd March 1993 and was substantially in the standard JCT form of building contract 1980 private edition with quantities incorporating amendments 1, 2 and 4 to 11 ('the main contract'). The main contract included the usual indemnity provisions of clause 20 JCT 80.
5. The date for completion of the main contract works, as extended by the architect pursuant to section 24 of the main contract, was the 17th June 1994.
6. The target date for completion under the development agreement was extended to the 13th June 1994, with a revised handover date of the 4th July 1994.
7. The Respondent ('Forest Giles') was a sub contractor specialising in, amongst other things, the laying of vinyl floors.
8. By a sub-contract in writing made on or about the 28th July 1993, James Longley appointed Forest Giles to supply and deliver materials and to carry out vinyl flooring as part of the main contract works, as more particularly described in the sub-contract and the specification attached thereto.
9. ...
10. Forest Giles took out a policy of insurance... to cover it against, amongst other things, its potential public liability arising out of the sub-contract works. The period of insurance was from 7th July 1992 to 18th October 1994....
11. The specified flooring finish for the floors of the laboratory areas on the ground and first floors of the building was Altro Designer 25 heavy duty safety flooring, which is a type of vinyl sheet flooring.
12. Forest Giles laid the vinyl sheet on a thin layer of latex screeding, over a 200mm thick Lytag screed vapour barrier and a 200mm concrete floor plank.
13. Forest Giles laid the screeding to the ground floor of the building between the 6th and the 24th September 1993.
14. Forest Giles laid the screeding to the first floor of the building between the 3rd and the 25th October 1993.
15. On or before the 17th June 1994, the architect observed a wrinkled and/or rippled effect over the heavy-duty vinyl flooring laid by Forest Giles. Thereafter, sections of the flooring were cut, revealing that the adhesive used by Forest Giles had not adequately cured, because of excessive moisture contained within the Lytag screed....
16. As a result of the bubbling effect substantial remedial works were required to be carried out by or on behalf of James Longley, which works, amongst other matters, involved:
16.1 The removal of the original vinyl sheet flooring laid by Forest Giles;
16.2 Cleaning off the levelling screed laid by Forest Giles;
16.3 Removing the Lytag screed surface laid by Forest Giles.
16.4 Reapplying the levelling screed and the vinyl sheet flooring.
17. The cost of these remedial works was £68,394.88 which was incurred by James Longley.
18. The remedial works were completed on the 19th August 1994.
19. By reason of the remedial works, the handover date under the development agreement of the 4th July 1994 could not be achieved.
20. Pursuant to clause 22 of the development agreement, Research Park potentially became liable to Borax in respect of liquidated damages at the rate of £40,000 per week for at least seven weeks, making a total of £280,000;alternatively Research Park potentially became liable to pay damages to Borax for breach of clause 6.7.14 of the development agreement.
21. In or about November 1994, Research Park settled the claim with Borax for the total sum of £317,644. Of the sum of £317,644 Research Park informed James Longley that £260,000 related to 'compensation payment made to Borax.'The balance was in respect of legal and other professional fees, interest, security costs for extended protection of the building and extended building insurance cover.
22. On the 23rd November 1994, Research Park commenced arbitration proceedings against James Longley, claiming a total of £520,000 for the recovery of its losses which had arisen by reason of the bubbling effect, which pleaded losses included the following:
22.1 The sum of £260,000 claimed as actual damages paid by Research Park to Borax.
22.2 Liquidated damages from the 17th June to the 12th September 1994 at a total of £40,000.
23. On the 17th June 1994, the architect under the main contract issued a certificate of practical completion.
24. On the 15th November 1996, the arbitrator in the Research Park/James Longley arbitration published a consent award, pursuant to which James Longley was obliged to pay the total sum of £160,000 to Research Park, which sum was subsequently paid.
25. Prior to the Consent Award James Longley had been advised by its solicitors, Winward Fearon, that:-
25.1 Research Park had no liability to Borax for liquidated damages.
25.2 James Longley had no liability to pay liquidated damages to Research Park.
25.3 There was a potential liability of James Longley to pay general damages to Research Park.
26. James Longley has paid the sum of £160,000 to Research Park..."
"Did all or any of the remedial works described in paragraph 11 of the points of claim in the subcontract arbitration, and paragraph 17 [that should be 16] of the Statement of Agreed Facts, arise from 'damage to property' for the purposes of section 3(b) of the insurance policy?
2.1 Did the loss and damage or liability of £160,000 described in paragraphs 18 and 19 of the points of claim in the subcontract arbitration and paragraphs 24 and 26 of the statement of agreed facts arise from 'damage to property' for the purposes of paragraph 3(b) of the insurance policy?"
"The insured has by a proposal which is the basis of and forms part of this contract and carrying on the Business described in the schedule applied to The New Zealand Insurance plc (hereinafter called the Company) for this Insurance and has paid or agreed to pay the premium for the period of insurance or any subsequent period.
The Company will, subject to the terms of this Policy, indemnify the Insured as defined in any Section to which the policy applies."
"All sums for which the Insured shall be liable at law for damages in respect of
a) Bodily injury to any person
b) Damage to property
c) Obstruction loss of amenities trespass or nuisance
occurring during the period of Insurance and arising in connection with the Business."
"Damage Damage shall include loss.
Product Product supplied shall mean any product (including containers and packaging) sold supplied constructed erected repaired serviced tested or processed altered treated or installed by the Insured in the course of the Business in or from the United Kingdom the Channel Islands or the Isle of Man.
WorksThe Works shall include property which forms part of or is to be incorporated in the temporary or permanent works to be executed by the Insured.
PrincipalPrincipal shall mean any Company Firm Partnership Public Authority or Individual with whom the Insured enters into a contract or agreement."
"The company shall not be liable in respect of. . . .
Insured's Property3. Liability in respect of Damage to property belonging to the Insured.
Defective Products4. Damage to the defective part of any Product Supplied or Contract Works or the costs or expenses incurred in repairing replacing recalling or making any refund in respect of the defective part of any Product Supplied or Contract Works other than
a) Damage caused during repair or servicing work carried out under a separate contract
b) Damage caused to any Product Supplied by a Product Supplied under a separate contract.
Contractual Liability7. Liability assumed under agreement unless such liability would have attached in the absence of such agreement."
"Notwithstanding Exception 7 to section 3 the Company will indemnify under Sections 2 and 3 of this Policy in respect of liability for Bodily Injury and Damage to property as defined herein
a) the Insured in respect of any liability assumed under agreement or contract with any Principal
b) the Principal in like manner to the Insured in respect of the liability of the Principal
arising out of the performance by the Insured of such contract or agreement
Provided that
...
c) the indemnity shall not apply to liability in respect of liquidated damages..."
"The more common and wider meaning of loss is any loss, damage or deprivation suffered by the insured as a consequence of an event insured against and which leaves him financially poorer than he was before."
"That is the sense in the case of indemnity insurance on which the insured must prove loss to found a claim. However, in the context of insurance covering 'all risks of loss or damage to the subject matter insured', it has been confirmed that it applies only to physical loss or damage."
"The concept is that the insured has suffered loss arising from loss of or physical damage to the property insured, and is entitled to indemnity in respect of that loss. It is possible, I think, to regard the cost of rectifying a defect which caused the physical damage as cost incurred 'in respect of physical damage', although the defect is not itself physical damage and although therefore the indemnity would not extend to the cost of rectifying that defect save for its connection with the physical damage. The nature of the connection which is required by the words 'in respect of' is not, in my view, clear without the assistance of the context.
It is possible also, I think, to regard the cost of rectifying a defect which caused the physical damage, as cost not incurred 'in respect of physical damage', even if it is clear that rectification of the defect is necessary for effective repair of the physical damage."
"There is an obvious distinction between physical damage to the works and a defective condition of part of the works which has suffered no separate damage."