England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE,
COMMERCIAL COURT
HIS HONOUR JUDGE MACKIE QC
[2013] EWHC 1568 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		05/03/2015

See Order at the bottom of this judgment

LORD JUSTICE CHRISTOPHER CLARKE:

1. The parties have been unable to agree the form of the order and have advanced lengthy submissions on that topic and on costs. This is the judgment of the court on these matters.
2. The form of the order will be as set out in the appendix to this judgment. We do not propose to comment on each variation which we have made in respect of the answers suggested to the various questions. Our aim has been to confine the answers to that which we have decided by way of ratio in answer to the relevant question. The Court should not make declarations in respect of its obiter observations.
3. As to costs, the appellants have failed to establish their prime contention, namely that there was no public liability cover. On the way they have established that the judge was wrong to hold that the dowels were not Products. But that does not assist them because it was not the dowels which failed. They have, however, succeeded on the question of whether the crane was a superstructure and whether the foundation works failed to fulfil their intended function.
4. That is of apparent value to them, since the claim in respect of the crane is said to be worth about £ 1.7 million. Given however that the total value of the claims is said to be about £ 23 million, they have, looking at the matter in purely monetary terms, succeeded in respect of only 13.5% of the overall value of the claim to indemnity.
5. But since the limit of indemnity is £ 5 million, this success is, in commercial terms, more apparent than real. In essence Aspen has succeeded in establishing that, on an assumption as to Adana's liability which may be wrong, it will not bear a liability under the insurance in respect of the damage to the crane, the incidence of which is probably academic in the light of the fact that its liability for other matters under the insurance will exhaust the limit of indemnity.
6. Further the costs of dealing with the superstructure part of the claim must have been limited since it is almost entirely a point of construction.
7. In those circumstances we will order that the Respondent should have 85% of its costs of the appeal. The Appellant must, however, pay 100% of the costs associated with the expert evidence in relation to the question of market understanding, on which they failed completely, and the Respondent must pay the costs of their unsuccessful application to stay the appeal, made after Lord Justice Christopher Clarke had given permission.
8. All costs are to be assessed on the standard scale. The approach of Aspen was unusual and could be said to be commercially unwise (looking at the combined interests of Adana and its insurers) and premature. A ruling on the interpretation of "Product" is not, however, without benefit to the winner. Aspen's failure has enabled Adana to establish an entitlement to public liability cover. Further Aspen has succeeded, against opposition, on "superstructure". We do not consider the case sufficiently outside the norm to justify assessment on the indemnity scale.
9. There must be an interim payment of £ 90,000 on account of costs within 14 days.
_________________________ ORDER _________________________

UPON hearing Leading and Junior Counsel for the Appellant and Leading and Junior Counsel for the Respondent on the appeal

IT IS ORDERED AND DECLARED that:

(1) The Court's answers to the questions ordered for determination on the appeal and listed in the Schedule to the Order of Lord Justice Christopher Clarke dated 19 March 2014 are as follows:

Question	Answer
On the proper construction of the Combined Contractors' Liability Insurance Policy in issue and on the assumption that the Appellant has some liability to others in respect of the accident on 6 July 2009 described in paragraph 1 of the judgment herein:
Was there a relevant Product?	Yes. The dowels were Products. The concrete base (the crane base) including the dowels was not a Product.
If there was, did that Product fail to fulfil its intended function?	It is not necessary to answer this question. The Respondent's liability was not caused by its dowels.
Was the crane a superstructure?	Yes.
If it was, did loss of or damage to it arise from the failure of the Respondent's foundation works to perform their intended function?	The works carried out by the Respondent in constructing the crane base and installing the dowel bars and applying bonding material to those dowel bars were foundation works within the meaning of the policy. The intended function of those works, which included the placing and fixing of dowel bars into the piles in holes which the Respondent drilled, was to transfer the tensile load into the piles in such a way that the crane did not topple over. That function failed to be fulfilled. Any liability that may be established against the Respondent in respect of the damage to the crane itself is a liability excluded under the foundation clause by reason of the failure of the Respondent's foundation works to perform their intended function.

(2) This appeal is accordingly allowed, but only to the extent that the answers given above differ from those given by the court below.

(3) Section B of the policy (Public Liability) applied before and continued to apply after the Respondent handed over the crane base.

(4) The Appellant shall pay the Respondent 85% of its costs of the appeal and at first instance, save that (a) the Appellant shall pay the Respondent 100% of its costs of and in relation to the expert evidence on the question of market understanding, and the assessor should err on the side of generosity before disallowing any aspect of such costs; and (b) the Respondent shall pay the Appellant the costs of and occasioned by its application dated 10 April 2014 for a stay of the appeal. All costs are to be assessed on the standard basis if not agreed.

(5) The Appellant shall pay the sum of £ 90,000 by way of an interim payment on account of costs by 4.30pm on 19 March 2015.

(6) Paragraphs 1 to 6 inclusive of the Order of HHJ Mackie QC dated 20 June 2013 are set aside and replaced by this Order.

Dated 5 March 2015