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England and Wales High Court (Technology and Construction Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Yarm Road Ltd & Anor v Hewden Tower Cranes Ltd [2002] EWHC 2265 (TCC) (4 November 2002)
URL: http://www.bailii.org/ew/cases/EWHC/TCC/2002/2265.html
Cite as: [2002] EWHC 2265 (TCC)
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QUEENS BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
St Dunstans House | ||
B e f o r e :
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| (1) YARM ROAD LIMITED (2) CLEVELAND BRIDGE UK LIMITED | Claimants | |
| - and - | ||
| HEWDEN TOWER CRANES LIMITED | Defendant |
____________________
Roger Stewart Q.C. and Mark Cannon (instructed by Mayer, Brown, Rowe & Maw for the Defendant)
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Crown Copyright ©
- This action arises out of the collapse on 21 May 2000 of a tower crane at the site of the new HSBC headquarters building ("the Building") at Canary Wharf in Docklands. The crane in question, which has been referred to for the purposes of this action, and will be called in this judgment, "TC3", was a Wolff WK320BF Luffing Jib Electric Powered Tower Crane manufactured by a German company called MAN Wolffkran. It was one of five tower cranes hired by the First Claimant, at that time called Kvaerner Cleveland Bridge Ltd. ("KCB"), from the Defendant, Hewden Tower Cranes Ltd. ("Hewden"), for the purposes of carrying out the work of construction of the entire substructure and superstructure of the Building, which KCB had agreed with a company called Canary Wharf Contractors (DS2) Ltd, ("the Employer") to undertake.
- The collapse of TC3 occurred during the course of an exercise called "climbing" the crane. "Climbing" is an operation during which the height of the crane is increased by adding new sections to the tower. In recent years in the United Kingdom it has been a relatively uncommon operation, as I understand it, as it is only really necessary if a very tall building – what used to be called a skyscraper – is under construction. Although tower cranes are customarily used in the construction of lower rise buildings, generally the crane is erected to the full height ultimately desired when first taken to site. This is not possible with a tower crane used in the construction of a very tall building because as the building rises the crane requires support from the structure under construction as the height of the crane increases.
- In this action the company formerly called KCB and now called Yarm Road Ltd. ("Yarm") and the Second Claimant, Cleveland Bridge UK Ltd. ("Cleveland") claim against Hewden damages put at slightly under £8 million in respect of the alleged consequences of the collapse of TC3. The sums claimed are said to be due under clause 13(c)(ii) of the Model Conditions for the Hiring of Plant (with effect from September 1979) agreed between the Construction Plant-hire Association and the Federation of Civil Engineering Contractors ("the CPA Conditions") which it is common ground were incorporated into the contract under which KCB hired TC3 and the other four tower cranes from Hewden, to which contract I shall refer in this judgment as "the Contract". Alternatively, so it is contended, under clause 11 of the Standard Terms and Conditions of Purchase of KCB ("the KCB Terms"), which again it is common ground were incorporated into the Contract, Hewden agreed to indemnify KCB against any loss or damage, including any claim made by any third party and any associated costs, arising out of the performance of or failure to perform KCB's order numbered 42/P004987/1348 ("the Order") which it is also common ground was incorporated into the Contract. The third way in which the claims of Yarm and Cleveland are put in the Particulars of Claim is that, so it is contended, it was an implied term of the Contract that Hewden would carry out its works under the Contract with reasonable skill and care and/or in a competent and workmanlike manner, and the collapse of TC3 was caused by a breach of that implied term.
- Cleveland is a party to this action because by an agreement ("the Sale Agreement") dated 30 May 2000 made between KCB and Cleveland KCB agreed to sell and Cleveland agreed to purchase certain of the shares and assets of what was described on the front sheet of the Sale Agreement as "the Kvaerner Cleveland Bridge Business". So far as is material to the present action Clause 9 of the Sale Agreement included the following:-
- It is common ground that no notice of the assignment by KCB to Cleveland of the benefit of the Contract was given to Hewden prior to the commencement of this action.
- In the Defence and Counterclaim it is contended that on proper construction of the CPA Conditions the relevant condition is not clause 13, but clause 8, and under that condition, so it is said, the risk of incidents such as the collapse of TC3 during "climbing" was placed upon KCB. It is said that clause 11 of the KCB Terms is of no effect as a matter of construction because it conflicts with what are said to be the operative provisions of the CPA Conditions. As to the implied term contended for on behalf of Yarm and Cleveland, it is pleaded in paragraph 10 of the Defence and Counterclaim that:-
- At paragraphs 6.4 and 11.5 of the Defence and Counterclaim it is, in effect, asserted that the benefit of the Contract was not assignable without the consent of Hewden, which it is common ground was neither sought nor obtained. At paragraph 19.1 of the Defence and Counterclaim it is pleaded that:-
- The final point which I should notice which is taken in the Defence and Counterclaim, at paragraph 19.6, is this:-
- In the light of the points which I have summarised above which emerged from the statements of case of the parties to this action, H.H. Judge Richard Havery Q.C. ordered at a case management conference held on 19 July 2002 that the following preliminary issues be tried:-
- It was common ground between the parties that the Contract was contained in or incorporated the following documents:-
- The Order was on the standard form of order used by KCB in 1999. It was dated 24 August 1999. It listed the documents incorporated in the Contract following the words "DST2 Canary Wharf Hire of Craneage in accordance with the following". About TC3 it said only "TC3 hire duration 55 weeks". At the foot of the first page of the standard printed form appeared the words, "Standard Terms and Conditions of Purchase printed overleaf apply where they do not conflict with any specific written agreement herein".
- The KCB Terms were printed on the reverse of the Order and were relatively short, running to 21 clauses. Those relevant for present purposes were:-
- Those of the provisions of the CPA Conditions which are material to the preliminary issues which I have to determine were:-
- By the "Scope of Works" document, which included a brief specification of TC3, it was provided that:-
- The "Evaluation Breakdown" document included a cash allowance for the cost of "climbs" for TC3.
- The KCB Health & Safety document included:-
- There was no provision of the Contract that either KCB or Hewden should arrange insurance cover in respect of any of the liabilities which either of them might shoulder under the terms of the Contract. The only express reference was in Clause 6 of the KCB Terms, which is of no relevance to any of the preliminary issues.
- However, provision was made concerning insurance in the agreement ("the Trade Contract") dated 29 June 1999 made between (1) the Employer (2) KCB and (3) Canary Wharf Ltd. by which KCB agreed to undertake the erection of the substructure and superstructure of the Building, which works were called in the Trade Contract, and are hereafter called in this judgment, "the Works". By Clause 17 of the terms and conditions incorporated into the Trade Contract as Section 2 it was provided that:-
- The insurance in fact arranged was a policy numbered IC99ABNW ("the Policy"). A number of underwriters subscribed to the Policy. Those named as "the Insured" in respect of Sections 1, 2 and 4 of the Policy included:-
- Section 1 of the Policy provided all risks cover to
- Section 2 of the Policy provided cover in respect of Third Party Liability, up to £5 million any one occurrence, while Section 4 provided cover in respect of financial loss, subject to a limit of £5 million. The scope of the cover in relation to Section 4 was:-
- So far as is material to the preliminary issues the facts as to the collapse of TC3 on 21 May 2000 are quite straightforward. TC3 had arrived on site and been brought into service at about the beginning of September 1999. Prior to 21 May 2000 the height of TC3 had been increased by "climbing" on three occasions, namely on 20 February 2000, 26 March 2000 and 12 April 2000. Subject to the clarification to which I refer later in this paragraph, I accept as accurate the following evidence set out in a witness statement of Mr. Mark Rumbles, who at the material time was employed by KCB as Site Supervisor of the site in question:-
- No one who actually saw the collapse was called to give evidence before me. The evidence of Mr. Rumbles which I have set out in the preceding paragraph was supported by evidence from Mr. Alastair Gill and Mr. Raj Soni, at the material time KCB's Assistant Project Director at the site, in witness statements put before me, and, so far as Mr. Soni was concerned, in his cross-examination. It was not contradicted by any evidence called on behalf of Hewden, and was not really in dispute. In fact no evidence was, in the event, called on behalf of Hewden on any issue.
- Mr. Soni, in cross-examination, agreed that, when initially delivered to the site, TC3 was erected to its full free-standing height. He said that his understanding was that approval was needed from the Employer's engineer to attach any crane to the structure of the Building. He also said that on the occasion of each operation of "climbing" his understanding was that TC3 was increased in height to the greatest height possible with the available support from the Building. Mr. Soni told me that on each occasion of "climbing" Hewden would give him the forces which would be imposed on the ties connecting the crane to the Building and KCB would then design appropriate ties to contain those forces. He said his only involvement with the operation of "climbing" was in making sure that the structure under construction could take the relevant loads. The location at which ties could be attached to the crane was information provided by Hewden, although a limited flexibility as to exactly where the attachment should be made was retained by KCB. This only amounted to an ability to vary the location by perhaps 100 or 200 millimetres. Mr. Soni's oral evidence was that the collar used in a "climbing" operation would be fitted by Hewden employees, but that the ties would be fitted jointly by Hewden employees and KCB employees. That coincided with the oral evidence of Mr. Rumbles. Mr. Soni said that during the "climbing" operation a KCB supervisor would be on site to ensure that Hewden complied with its own method statement. However, he could not recall any occasion on which a KCB supervisor had stopped a "climbing" operation and he said that such a supervisor would not be qualified to assess whether the actual "climbing" operation was being undertaken safely. I accept the evidence which I have summarised in this paragraph. It was not in dispute.
- From the evidence to which I have referred, what seems to me to be important is that the actual operation of "climbing" was undertaken, and known and expected by everyone to be undertaken, exclusively by Hewden's men using their own expertise and in accordance with a procedure which they devised. The facts that KCB chose the time for the operation to be carried out, to suit the requirements of its own operations, could, no doubt, have chosen the height to which it wanted the crane increased, again to suit the requirements of their own operations, and undertook preparatory works to stabilise the crane in accordance with requirements notified to it by Hewden, do not, in my judgment, affect the facts that Hewden alone undertook the operation of "climbing" the crane and used its own skill and expertise to do so.
- This is a short point. The CPA Conditions do not expressly mention "climbing" at all. "Climbing" is manifestly not the initial erection of a tower crane on site. Mr. Adrian Williamson Q.C., who appeared on behalf of the Claimants before me, submitted that, given the scheme of the CPA Conditions, "climbing" a tower crane, meaning by that just the operation of increasing the height of the crane by inserting more mast sections and not any associated operations, must either fall within clause 13(c)(ii) of those conditions or within clause 8. He submitted that it could not fall within clause 8 as it was plainly not "the operation of the plant by the said drivers or operators", those words being apt to describe the use of a crane by means of the actions of a driver or operator upon the controls of the crane for the purposes of the hirer. By default, therefore, "climbing" a tower crane, in the sense in which he used the term for the purposes of Issue 1, must fall within clause 13(c)(ii). Mr. Williamson also submitted, more generally, that as a matter of the ordinary use of the English language, as to which he drew to my attention dictionary definitions of the word "erection", not all of which were particularly helpful in the present context, the operation of "climbing" a tower crane, in the sense in which he used the term for the purposes of Issue 1, was properly to be regarded as "erection" of it, albeit not erection from scratch. In the context of Issue 2 I shall have to consider further exactly what constitutes "climbing" and whether "climbing" as properly understood is "erection". However, for the purposes of Issue 1 the question is whether "climbing" in the sense in which Mr. Williamson used the term for the purposes of this Issue, is "erection" for the purposes of the CPA Conditions.
- Mr. Roger Stewart Q.C., who appeared with Mr. Mark Cannon on behalf of Hewden, submitted that for the purposes of clause 13(c)(ii) of the CPA Conditions "erection" meant erection from scratch to such condition as to be usable for the purposes of the hirer at the time of first erection. Mr. Stewart submitted that the distinction drawn in clause 13(c)(ii) was between the initial assembly of an item of plant, where initial assembly was required, which was "erection", and any subsequent modification to the plant as initially assembled, which was not. He submitted that it was not necessarily the case that the operation of "climbing" must fall either within clause 8 or within clause 13(c)(ii). It was enough for his purposes that it did not fall within clause 13(c)(ii), for it was only in respect of incidents which did fall within clause 13(c) that Hewden was liable under the Contract. In their written skeleton argument Mr. Stewart and Mr.Cannon drew attention in the context of Issue 1 to the provisions of clauses 5, 8, 9 and 13 of the CPA Conditions and analysed the effect of those clauses for which they contended. Their written skeleton went on:-
- There is force in the submission that a word used more than once in a given contract or in a particular set of standard conditions may be expected to have the same meaning wherever it appears in the contract or set of conditions in question. It is implicit in the submissions of Mr. Stewart and Mr. Cannon that it is plain that where the word "erection" appears in clause 5 of the CPA Conditions it is referring, and referring only, to the first assembly of any plant to a condition in which it is capable of beneficial use by the hirer. If that analysis were correct, it would provide support for the submission made in relation to Issue 1. However, in my judgment it is not correct. Exactly the same question as to the meaning of the word "erection" arises in the context of clause 5 of the CPA Conditions as arises in the context of clause 13(c)(ii). The problem, where, in respect of a particular hire, it is anticipated that a "climbing" operation or "climbing" operations, in the sense in which the term "climbing" was used by Mr. Williamson for the purposes of Issue 1, will be undertaken, is whether either for the purposes of clause 5 or for the purposes of clause 13 that operation or those operations are to be treated as "erection", so that the risks associated with what is done – for clause 5 purposes, whether the "climbing" has been properly carried out, and for clause 13 purposes who shoulders responsibility for mishaps in the course of the operation – lie with the owner of the crane or are treated as incidents of the hire. If clause 5 had the meaning for which Mr. Stewart contended, however incompetently a "climbing" operation were carried out the crane in its resultant condition would be deemed to be in good order, in accordance with the terms of the relevant contract, and to the hirer's satisfaction. Mr. Williamson submitted that that could not be right, but he submitted that where it was known and intended that a crane would undergo "climbing" operations during the period of hire its "erection" was not complete until the final operation had been satisfactorily accomplished. He submitted that the relevant plant which was being hired was the entire TC3 as it would ultimately be in use on the site, although the crane in that condition would be provided by means of an initial erection and subsequent increases in height by "climbing". If Mr. Williamson's submission were right it would mean that the hirer would retain the ability to reject the crane throughout a possibly lengthy period of hire and use simply because the final anticipated "climbing" operation had not taken place.
- It seems to me that the operation of "climbing" a tower crane, in the sense in which that term was used by Mr. Williamson for the purposes of Issue 1, is "erection of any plant" for the purposes of clause 13(c)(ii) of the CPA Conditions. While it is an operation subsequent to the initial erection of the crane, in my judgment the expression "where such plant requires to be completely erected on the site" in clause 13(c)(ii) simply means "where plant, to be complete and usable, needs to be erected on site". In other words, the distinction drawn by clause 13(c)(ii) is not between initial erection and any subsequent alteration of the structure of the plant, such as by increasing the height of a tower crane, but between operations which amount to putting up the plant, whether initially or by modification subsequently, and operations which do not. It seems to me that that is also what the word "erection" connotes in clause 5, so that there also the critical question is whether any particular operation is a putting up of the plant into the condition in which it is required after such assembly, or not. Thus construed clause 5 would have the sensible business effect that each time the structure of an item of plant is altered by the owner the hirer has a fresh opportunity to consider whether he is satisfied with the result of the modification to the plant as a whole. Mr. Stewart suggested that a possible construction of clause 5 was that on the occasion of a modification of an item of plant the hirer had an opportunity to reject any new parts added, but not any part of the plant as previously assembled. I reject that submission. If it were right it would mean that the hirer had no right to reject the modified plant in what is in fact most likely to be the situation in which he would want to, namely if the new parts, satisfactory in themselves, had not been properly connected to the old parts, satisfactory in themselves. That strikes me as a nonsensical result.
- The answer to Issue 1 is therefore affirmative.
- Mr. Williamson submitted that the answer to this issue was affirmative simply as a matter of fact. He contended that in the light of the evidence of Mr. Rumbles, which I have indicated I accept, what happened was that, after a stage in which preparatory works were undertaken by KCB employees either alone or in collaboration with Hewden employees, there came a time when KCB handed TC3 over to Hewden for it to undertake the "climbing" operation using the "climbing" frame with a view to TC3 being handed back to KCB for it to use for its own purposes once the height of TC3 had been raised. Mr. Williamson submitted that that stage had not been reached at the time of the collapse on 21 May 2000 and that at that time Hewden employees were undertaking the "climbing" of TC3 using its own employees and its own equipment in an operation over which it alone had control.
- Mr. Stewart submitted that the factual analysis for which Mr. Williamson contended was unduly narrow and that the "climbing" operation must include at least the taking of steps to secure TC3 to the structure of the Building so as to enable the height of it to be increased. He contended that, if that was the proper view of what the operation entailed, as KCB employees were involved it was manifest that the operation was not under "the exclusive control" of Hewden. My attention was drawn, in fact by Mr. Williamson, to a method statement relating to the "climbing" of TC3 and another crane prepared by Hewden. That described the "Sequence of Work" thus:-
- Mr. Stewart refined and developed his submission by calling attention to the role in the "climbing" operation of the driver of TC3. On the evidence, he said, rightly, the driver used the crane to lift items such as the ties to be fitted between the Building and the crane, the sections by means of which the height of TC3 was to be increased and the "climbing" frame. He also balanced the crane. By clause 8 of the CPA Conditions, submitted Mr. Stewart, the driver supplied by Hewden with TC3 was to "be under the direction and control of the Hirer", that is to say, KCB. While clause 8 went on, "Such drivers or operators shall for all purposes in connection with their employment in the working of the plant be regarded as the servants or agents of the Hirer (but without prejudice to any of the provisions of Clause 13).", the words in brackets did not qualify the first sentence of clause 8, so even when involved in the "climbing" operation the driver was to be taken to be acting under the direction and control of KCB. It followed, submitted Mr. Stewart, that the "climbing" operation was not under "the exclusive control" of Hewden because of the deemed control of KCB over the driver of TC3 whilst he was engaged in that operation.
- Warming to his theme, Mr. Stewart submitted that, although not in terms part of the plant hired by KCB, in reality the "climbing" frame was part of such plant because it was always envisaged that the height of TC3 would be increased by "climbing". He also relied upon the definition of the word "Plant" for the purposes of the CPA Conditions as covering "all classes of plant, machinery, equipment and accessories therefor which the Owner agrees to hire to the Hirer". He submitted that the "climbing" frame was at least an "accessory". Moreover, the evidence of Mr. Soni was that the "climbing" frame was, after delivery of TC3 to the site, permanently attached to the crane, at least when not required to perform a "climbing" operation on another crane. If the "climbing" frame was part of the plant hired to KCB, contended Mr. Stewart, it came with operatives who were members of what Mr. Rumbles called in his witness statement "the Hewden Erection Team". Those people, submitted Mr. Stewart thus themselves fell within clause 8 of the CPA Conditions, as being "operator[s] …supplied by the Owner with the plant", and thus during the "climbing" operation were under the direction and control of KCB.
- As a separate point Mr. Stewart submitted that KCB did in fact exercise control over the "climbing" operation because, at the instigation of the Employer's engineer, as happened, or on its own initiative, it could reject a method statement put forward by Hewden. Furthermore, as a result of the incorporation into the Contract of the KCB Health & Safety document, KCB had power to intervene to give instructions and to stop work on health and safety grounds.
- Mr. Williamson submitted that in fact Issue 2 did not involve the need to consider what constituted the totality of the "climbing" operation or whether that constituted "erection" for the purposes of clause 13(c)(ii) of the CPA Conditions. It was thus irrelevant, he said, whether the construction and fitting of ties was part of "erection". It seems to me that strictly Mr. Williamson is correct, but that to take such a narrow view of the question for my decision would simply leave over to be considered on another occasion the issues of what the "climbing" operation consisted and whether that was "erection" within the meaning of clause 13(c)(ii).
- Mr. Williamson contended, in effect, that the "erection" part of a "climbing" operation was that described in Hewden's "climbing" method statement, and that works such as fixing ties were not part of "erection", but preparatory to "erection", even if necessary to be undertaken to enable "erection" to proceed.
- In relation to Mr. Stewart's submissions as to the proper construction of clause 8 of the CPA Conditions, Mr. Williamson contended, first, that the first sentence of the clause did not deem a driver or operator to be under the direction or control of the Hirer, rather it provided that he was. That, submitted Mr. Williamson, did not make the driver or operator actually under the direction or control of the Hirer at all times and in all places and thus prevent him being under someone else's control in fact, such as during a "climbing" operation. He submitted that it just referred to the ordinary construction operations on site.
- Mr. Williamson submitted that the "climbing" frame was not part of the items hired by KCB and thus could not form "plant" within the meaning of the CPA Conditions. Consequently, the operators of the "climbing" frame could not be persons to whom clause 8 of the CPA Conditions applied.
- So far as the question of "exclusive control" was concerned, the submission of Mr. Williamson was that what this meant was exclusive control over the immediate operation in question in the sense that while it was under way it was under the control of the owner of the plant being erected. He contended that the question of ultimate control over the site or operations generally was irrelevant. He further submitted that the reservation on the part of KCB of the ability to intervene in the interests of health and safety or of a right to consider and approve method statements did not mean that, during a "climbing" operation, the operation was not under the "exclusive control" of Hewden if KCB did not in fact exercise whatever rights it had reserved.
- In my judgment the word "erection" as used in the CPA Conditions has the meaning of "putting up" that which, until it is put up, is in a disassembled condition. The action of putting up a disassembled item of plant, such as a tower crane, is to be distinguished, it seems to me, from the taking of steps to ensure that, once what is to be put up has been put up, it stays up. Consequently, in my judgment, the preparation of a concrete base which is necessary to provide a firm foundation for a tower crane is not itself part of the "erection" of the crane, but works preparatory to the "erection" of the crane intended to ensure that the "erection" of the crane, once undertaken, is successful. Similarly, it seems to me that the installation of ties between the existing part of a tower crane and an adjacent structure to stabilise the crane in advance of it receiving the insertion of further mast sections and with a view to avoiding the insertion of those sections destabilising the crane is not part of the "erection" of the heightened crane, while the addition of the mast sections to increase the height of the crane is "erection" of the taller crane. This analysis seems to correspond with that of Hewden itself, which, as I have pointed out, distinguished in preparing its method statements between the operation of inserting ties and the operation of "climbing". It also makes commercial sense in the context of the CPA Conditions, for the intention of clause 13(c)(ii) must have been that the owner should bear the risk of any operation undertaken by its own staff using its own equipment on its own plant in accordance with its own judgment as to what to do and how. It would, as Mr. Williamson submitted, be nonsensical so to analyse an "erection" operation as to include preparatory works which in fact had nothing to do with the risk which eventuated in order to produce the consequence that the owner, during whose works the relevant incident occurred, escaped liability.
- In looking at clause 8 of the CPA Conditions, and in particular at the first sentence, one must, I think, first consider what concept is expressed in the words "such person shall be under the direction and control of the Hirer". It seemed to be implicit in the submission of Mr. Stewart that those words were a statement of irrefutable fact, that is to say, that at all times and in all places during the period of the hire, the driver or operator was actually working under the direction and control of the hirer. With great respect to Mr. Stewart, who developed his submissions with great skill and persuasiveness, I do not think that the words which I have quoted have the meaning for which I think he was contending. Rather, in my judgment, the effect of the words in question is simply that during the period of the hire the hirer should be entitled to give instructions to the driver or operator, and the driver or operator should be obliged to comply with any instructions given. The words in fact tell one nothing about whether, at any given time, the driver or operator was actually working under the direction or control of the hirer.
- Further, it seems to me that it is necessary in construing clause 8 of the CPA Conditions to construe the clause as a whole. Mr. Stewart took the clause sentence by sentence, as he had to for the purposes of his submission, which depended upon the supposed contrast between the provision made in the first sentence for drivers or operators supplied with plant to be under the direction and control of the Hirer, and that about such drivers and operators being treated as employees of the hirer, to which alone the qualification in brackets applied, in the second sentence. In fact, in my judgment, the statement that employees of the owner supplied with plant should be under the direction and control of the hirer and the statement that such employees should be regarded as the servants or agents of the Hirer are essentially two different ways of expressing the same concept. That concept is that, during the time that they were working for a hirer in conjunction with plant hired out by their actual employer, they should be treated as employees of the hirer and subject to his instructions, if he chose to give any. If a proviso, namely the words in brackets in relation to the provisions of clause 13, was appropriate in respect of one expression of the concept, it is difficult to see why it should not also be appropriate in respect of the other. Not to do so, that is to say to accede to Mr. Stewart's submission as to the proper construction of clause 8, produces the bizarre consequence that the proviso is more or less deprived of any worthwhile effect, as it is difficult to see any situation in which it would be important for the purposes of clause 13 that a person in fact employed by the owner and acting under the direction and control of the hirer should not be treated as an employee of the hirer. Mr. Stewart's attempt to identify a situation in which it might matter, namely one falling within clause 13(c)(v), only served to emphasise the problems with the submission, as it seemed to me. The words in the relevant bracket are, after all, "without prejudice to any of the provisions of Clause 13" and not simply to one of those provisions.
- I therefore reject the submission of Mr. Stewart as to the proper construction of clause 8 of the CPA Conditions and hold that that clause does not impede whatever is otherwise the proper operation of clause 13.
- I also reject the submission that the members of the Hewden Erection Team should for any purpose be treated as acting under the direction or control of KCB. I find that the "climbing" frame was not in fact part of any plant hired by KCB from Hewden. It was not separately identified as being hired and KCB in fact had no use for it. It was certainly not required for the carrying out of any part of the Works as such. I therefore accept the submission of Mr. Williamson in answer to that of Mr. Stewart on this point.
- Once one has eliminated the ingenious and elaborate arguments based on clause 8 of the CPA Conditions it is necessary to return to the basic question whether, when TC3 was being "climbed" on 21 May 2000 that operation was under the "exclusive control" of Hewden. For the avoidance of doubt, and notwithstanding the submission that I should address Issue 2 in terms of the language of the issue and not concern myself with the different question whether the "erection" involved in "climbing" included the fixing of ties as well as "climbing" in the sense in which Mr. Williamson used that term for the purposes of Issue 1, I do deal with Issue 2 on the basis of my finding that "erection" did not include fixing ties. In my judgment one can only sensibly address the question whether Hewden had "exclusive control" of the operation if one first considers to what it is that the expression "exclusive control" in clause 13(c)(ii) of the CPA Conditions refers; that is to say, of what is it that one has to have "exclusive control" for the case to fall within the clause. Is it the actual operation of "erection" being undertaken in the circumstances then prevailing? Or does "exclusive control" import that in no circumstances, whether they actually occur or not, is it possible for anyone to interfere with the operation? In my judgment it is obvious that the former meaning is correct. In the real world no one is ever in absolute control of anything, in the sense that nothing can possibly interfere with what one is doing. Leaving out of account acts of God, any number of things might have happened during the "climbing" operation on 21 May 2000 which could have affected it. The Employer might have declared itself unable to continue with the Works and suspended them all. KCB might have decided that it no longer wished to continue its involvement with the project and withdrawn from the site. A national emergency might have arisen which meant that work in the area of Canary Wharf was not considered an acceptable risk on the day in question. In any of these situations instructions could have been given to Hewden to cease the "climbing" operation. If Mr. Stewart's submission were well founded, the ability to give instructions affecting the continuance of the "climbing" operation in any of the situations which I have postulated would mean that Hewden did not have "exclusive control" of that operation while it was being carried out. That would be a surprising result. In my judgment what is involved in answering the question whether Hewden had "exclusive control" of the "climbing" operation on 21 May 2000 is a simple factual enquiry: did Hewden in fact determine how the "climbing" operation should be undertaken? The answer on the undisputed facts is affirmative.
- The answer to Issue 2 is thus Yes.
- As I have indicated, Mr. Stewart sought to rely upon clause 8 of the CPA Conditions in support of his argument that the answer to Issue 2 was negative. I have already set out his argument, which was the same in relation to Issue 2 as in relation to Issue 3, and have commented on it. In the light of those comments the answer to Issue 3 is negative.
- As I have already remarked, the reference to clause 13(ii)(b) of the CPA Conditions seems to be in error. The correct reference is to clause 13(b) of those conditions. Mr. Williamson and Mr. Stewart agreed that the answer to Issue 4 was determined by the answers to the preceding issues. In the light of my findings in relation to those issues the answer to Issue 4 is negative.
- The case in relation to Clause 11 of the KCB Terms set out in the Defence and Counterclaim at paragraph 7 was:-
- In their written skeleton argument Mr. Stewart and Mr. Cannon adopted a less extreme position in relation to Clause 11 of the KCB Terms. What they submitted was this:-
- In Yien Yieh Commercial Bank Ltd. v. Kwai Chung Cold Storage Co. Ltd. [1989] 2 HKLR 639, in a passage to which Mr. Cannon drew my attention, Lord Goff of Chieveley said:-
- In his closing submissions Mr. Williamson accepted the principle enunciated by Lord Goff in the passage which I have cited in the preceding paragraph. He also accepted that, in the light of the terms of the Downtime Agreement, the detail of which is not material, some modification to the unfettered operation of Clause 11 of the KCB Terms had to be recognised. He was troubled by the suggestion that somehow the performance required of Hewden under the Contract was determined by the CPA Conditions. He submitted, as I think rightly, that the performance required was set out in the "Scope of Works" document incorporated into the Contract. However, he did accept that, if possible, Clause 11 of the KCB Terms should be read in such a way as to be consistent both with the Downtime Agreement and with the CPA Conditions.
- Ultimately, therefore, it seemed to be common ground between the parties that Clause 11 of the KCB Terms was a term of the Contract, but that it should be construed as meaning:-
- The answer to Issue 5 is, therefore, affirmative, but that does not mean that the term prevails over the terms of the CPA Conditions. It does not.
- Paragraph 16 of the Particulars of Claim is in these terms:-
- Mr. Williamson submitted that the activities described in paragraph 16 of the Particulars of Claim did constitute Hewden's "performance or failure to perform the Purchase Order" because the activities in question were part of the activities described in the "Scope of Work" document incorporated into the Contract. Mr. Stewart and Mr. Cannon did not really dispute that, but submitted, at paragraph 34 of their written skeleton argument, that:-
- The implied term pleaded at paragraph 11 of the Particulars of Claim was:-
- In paragraph 10 of the Defence and Counterclaim it was pleaded that:-
- In the course of the argument before me Mr. Cannon accepted that by Supply of Goods and Services Act 1982 s.13 it is provided that:-
- In their written skeleton argument Mr. Stewart and Mr. Cannon made these submissions in relation to Issue 7:-
- Mr. Williamson did indeed submit to me that I had not only to decide the answer to Issue 7 as formulated but also to address the implications of the answer. In his written opening at paragraph 52 he identified the real question as being the extent to which Hewden may have excluded liability for breach of the implied term for which he contended by virtue of the CPA Conditions. He then addressed that question at some length, but without reference to authority other than by the incorporation by reference of a paragraph of Mr. Kim Lewison Q.C.'s book "The Interpretation of Contracts".
- It seems to me that the term implied by Supply of Goods and Services Act 1982 s.13 was a term of the Contract. I do not consider that there is any meaningful distinction between that term and the term pleaded in paragraph 11 of the Particulars of Claim, but, if and insofar as there is some subtle distinction which I have missed, my finding is that it is the term implied by statute which was a term of the Contract. That term, being one implied by statute, is not one, it seems to me, which is susceptible to the objection based on decisions such as Miller v. Emcer Products Ltd. and Lynch v. Thorne, that to imply it would be inconsistent with some express term of the relevant contract. Statute has provided that the term should be implied. It can be excluded in certain circumstances, but there is no plea as yet in the Defence and Counterclaim that that happened in the present case. If not excluded, then the term implied by statute is a term of the Contract like the other terms, and any question of conflict between the term and express terms has to be resolved as a matter of construction, as if the term implied by statute had itself been an express term.
- I was not really addressed as to how one might seek to reconcile the term implied into the Contract by virtue of Supply of Goods and Services Act 1982 s.13 or what the consequences of the reconciliation might be. Without the assistance of submissions on those matters and without being reminded of the considerable volume of potentially relevant authority in this area of the law to a greater extent than I was, I do not think it appropriate to accept the invitation of Mr. Williamson to go beyond simply answering Issue 7 as posed.
- The answer to Issue 7 is that the term set out in Supply of Goods and Services Act 1982 s.13 was a term of the Contract.
- Although no doubt when the question of preliminary issues was being considered in this case it seemed sensible to pose the questions encompassed by Issue 8, it became apparent during the course of the argument that there was only really one short point which was susceptible of being determined at this stage, and that the other implications of Issue 8 could only usefully be addressed against the background of findings of fact as to what losses had been sustained following the collapse of TC3 on 21 May 2000 and by whom.
- The short point is the question of construction of the Assignment Clause. The case of KCB and Cleveland is that by the Sale Agreement KCB assigned to Cleveland, amongst other things, the benefit of the Contract, including its claims against Hewden in relation to the collapse of TC3, because the Contract was a "Current Contract" as defined in clause 1.1 of the Sale Agreement and it was "capable of assignment without the consent of other parties" for the purposes of Clause 9.1.1 of the Sale Agreement. Mr. Stewart and Mr. Cannon countered at paragraph 43 of their written skeleton argument:-
- The answer to the short point, in my judgment, is that the assignment by KCB of the benefit of the Contract to Cleveland under the Sale Agreement was effective as an equitable assignment. The argument to the contrary on behalf of Hewden involves elevating an express grant of permission for a particular assignment into an implied prohibition of any other assignment. It is a wildly improbable result which defies commercial logic. There is no conceivable reason why, by implication, KCB should wish to deprive itself of its otherwise unfettered right to assign the benefit of the Contract. The obvious reason for including the Assignment Clause in the Contract was to avoid any doubt or argument about the matter, in particular in the light of clause 15 of the CPA Conditions, in the event that KCB wished to assign the benefit of the Contract to Canary Wharf Contractors Ltd. An alternative, perhaps more human, but equally likely, explanation, is that when the time came to place the Order the relevant KCB employee could not recall in detail whether there was any provision about assignment in any of the voluminous documentation proposed to be incorporated into the Contract, and so just wanted to put the position beyond contradiction in respect of the particular possible assignment.
- The consequence of the assignment to Cleveland being valid as an equitable assignment is that both KCB as assignor and Cleveland as assignee as a matter of procedure need to be parties to this action. The rationale is that while the action is for the benefit of the assignee, and so it will be to Cleveland that any damages awarded in this action will be adjudged to be due, the assignor has to be a party so as to be bound by the outcome. The technically correct answer to Issue 8.1 therefore is both KCB and Cleveland.
- Why the question of the validity of the assignment may be important, and what has given rise to the other parts of Issue 8, is the coincidence of the dates of the collapse of TC3 on 21 May 2000 and the date of the Sale Agreement, 30 May 2000. What Hewden wants to say is that the only proper claims on any view against it under the Contract are those of KCB for losses which KCB itself sustained. It then wants to argue that, given the terms of the Sale Agreement, all, or at any rate most, of the losses claimed in this action were suffered not by KCB but by Cleveland, and are thus irrecoverable. Mr. Williamson did not dispute that the only losses which were recoverable were those suffered by KCB, but it emerged that there was a vigorous difference between the parties as to how payment of sums in fact by Cleveland in discharge of the liabilities of KCB should be viewed. I was also made privy to a number of other questions which could arise when the facts as to alleged losses were investigated. These prompted Mr. Williamson to submit that I "should not go there." On this occasion I gratefully accede to his invitation.
- It was in the event common ground between the parties that, at least in respect of some elements of the cover, the answer to this issue is affirmative. I think that that is plainly correct.
- At the hearing before me it was common ground that the first reference to CBUK in the formulation of this issue should in fact be a reference to Hewden. Only on that basis is this a sensible issue to address at this stage, and I do address it on the basis that the required factual foundation is that KCB and Hewden were co-insured.
- In Co-operative Retail Services Ltd. v. Taylor Young Partnership Ltd. ("the CRS Case") [2002] 1 WLR 1419 at page 1423 in paragraph 7 of his speech, Lord Bingham of Cornhill was concerned with a rule of insurance law about which he made the following comments:-
- The rule to which Lord Bingham referred is a rule that insurers who have provided cover to more than one party in respect of the same risk are not able, having paid out one insured, then to proceed against another insured in exercise of rights of subrogation to claims which the first insured would otherwise have had against the other insured to seek to make a recovery in respect of the payment made to settle the claim of the first insured. The explanation favoured by the Court of Appeal in the CRS Case for the rule in question was a term implied into the policy of insurance. When the matter of the existence of the rule first arose for decision in this country the explanation put forward for the rule was circuity of action – see The Yasin [1979] 2 Lloyd's Rep 45 per Lloyd J at pages 54 – 55; Petrofina (U.K.) Ltd. v. Magnaload Ltd. [1984] QB 127 per Lloyd J at pages 139 – 140. The latter case was concerned with two main issues. The first was whether each of the parties involved in a building project had a sufficient insurable interest in the whole of the works to be able to obtain contractor's all risk cover in respect of them. The second issue in that case, in which the relevant cover had been obtained by the main contractor, Foster Wheeler, for the benefit of itself, the employer under the main contract (which was the claimant in the action) and various sub-contractors, including the defendant, was whether the insurers, having settled the claim of the claimant, could exercise rights of subrogation so as to sue a sub-contractor which was one of those insured under the relevant policy. The learned judge found that there was a sufficient insurable interest and that rights of subrogation could not be exercised. However, at the conclusion of his judgment, at page 141 of the report, he said this:-
- The comments of Lloyd J which I have quoted in the preceding paragraph were brought to the attention of Mr. Recorder Jackson Q.C., as he then was, in Hopewell Project Management Ltd. v. Ewbank Preece Ltd. [1998] 1 Lloyd's Rep 448. The principal issue in that case was whether the defendants, a corporate manifestation of what had been a professional firm of engineers, fell within the definition of those insured for the purposes of a contractor's all risks insurance policy. The conclusion was that they did not. However, at page 458 in the report Mr. Recorder Jackson Q.C. proceeded to consider an alternative argument of Counsel based upon the observations of Lloyd J at the conclusion of his judgment in Petrofina (U.K.) Ltd. v. Magnaload Ltd. He said:-
- The principal issue in the CRS Case was the effect of contractual provisions as to the allocation of risk of fire, in particular whether parties had agreed that, in place of other potential liabilities, an insurance would be obtained for the benefit of all, such that no claim was possible by one against another by whose negligence the fire had actually been caused. The leading speech was that of Lord Hope of Craighead. In his speech is a section entitled, "The effect of the joint names policy". At paragraph 63 in that section Lord Hope said:-
- Mr. Stewart accepted that the observations of Lloyd J in Petrofina (U.K.) Ltd. v. Magnaload Ltd. which I have quoted were obiter, as also were the comments of Mr. Recorder Jackson Q.C in Hopewell Project Management Ltd. v. Ewbank Preece Ltd., which I have also set out. However, he submitted that the alternative solution which commended itself to Mr. Recorder Jackson Q.C. of implying a contract between parties who are co-insured under a contractor's all risks policy that they would not make claims against each other in respect of damage to the contract works had now been approved at the highest level, albeit still obiter, and encouraged by such approval, I should find that a contract should be implied between KCB and Hewden that neither should sue the other for damage which was the subject of the co-insurance.
- Mr. Williamson submitted that in effect that for which Mr. Stewart was contending had been decided against his submission by the Court of Appeal in a decision binding upon me, Surrey Heath Borough Council v. Lovell Construction Ltd. (1990) 48 BLR 108. The main issue in the case was whether an indemnity contained in a standard form building contract, which also contained provision for the contractor to insure, could be relied upon by the employer under the contract or whether the parties had agreed that in respect of the particular damage which had given rise to the action the employer would look only to the insurance. The only substantive judgment was that of Dillon LJ. At page 120 of the report Dillon LJ referred to the submissions of Counsel, Miss Janet Turner:-
- In his oral submissions Mr. Stewart made clear that he was only contending for the implied contract which he asserted on the particular facts of this case. Consequently, as he was not merely repeating the submission of Miss Turner which failed in Surrey Heath Borough Council v. Lovell Construction Ltd., the decision in that case did not have the knock-out effect for which Mr. Williamson contended.
- I confess to having some difficulty in seeing that, in the passage of Lord Hope's speech upon which Mr. Stewart relied as indicating Lord Hope's approval of Mr. Recorder Jackson Q.C.'s suggestion that a contract should be implied between co-insured under a contractor's all risks insurance that none would sue any of the others in respect of damage covered by the policy, that was in fact what Lord Hope was doing. In the relevant section of his speech what Lord Hope was concerned with was not the relationship of co-insured as between themselves, but the relationship between the insurer of co-insured and those who were insured. The issue which he was addressing was what was the conceptual justification for the undoubted rule that an insurer of co-insured could not exercise a right of subrogation in the name of one co-insured against another co-insured in respect of damage to which the insurance responded. In the particular context, in referring to the passage from the judgment of Mr. Recorder Jackson Q.C. which he did, which was not itself concerned with the issue which Lord Hope was addressing, but with the question of the relationship of co-insured as between themselves, he can, it seems to me, only have been seeking to emphasise that the solution to the question with which he was concerned was an implied term, in a similar manner to the suggested solution to the problem which Mr. Recorder Jackson Q.C. was considering being an implied agreement.
- Whatever may be the correct understanding of the reference to the judgment of Mr. Recorder Jackson Q.C. in the speech of Lord Hope in the CRS Case, there seem to me to be two insuperable obstacles to implying as between KCB and Hewden the sort of agreement for which Mr. Stewart contended. In the first place, it seemed that it was contended that the effect of the agreement asserted, if I found it to be implied, would be to displace the provisions of the CPA Conditions as to allocation of risk in favour of an analysis that all risks the subject of insurance should be treated as exclusively covered by insurance. That would involve implying an agreement which was inconsistent with the express agreement of the parties which incorporated the provisions as to allocation of risk, including indemnities, in the CPA Conditions, and, indeed, in clause 11 of the KCB Terms to the extent that they were, as a practical matter, relevant. When I drew this problem to his attention Mr. Stewart did not have a ready answer to it. Further reflection upon it has not suggested to me any plausible answer.
- The other obvious problem with Mr. Stewart's submission was that the evidence put before me, such as it was, suggested that at the time the Contract was made, Hewden knew little more than that it was intended that some sort of project insurance should be arranged. Hewden had no details of the intended insurer, the intended cover, the contemplated terms of the insurance, any excesses or really any information at all. Hewden did not know whether the insurance had been arranged, or, if not, by whom it was to be arranged. The question of whether Hewden should make some contribution to the premium, if it was to be insured, had not been addressed. How it could be said that some agreement along the lines of that for which Mr. Stewart contended represented the actual, but unexpressed, agreement of the parties or satisfied the officious bystander test I completely fail to see.
- In the result I unhesitatingly answer Issue 10 in the affirmative.
- The answers to the preliminary issues are:-
H.H. Judge Richard Seymour Q. C. :
Introduction
"9.1 Subject as provided in this clause 9, the following provisions shall apply in relation to the Current Contracts:
9.1.1 the Seller hereby assigns (for itself and as duly authorised agent of each of Seller's Group Company party to any Current Contract) to the Manager [meaning Cleveland] all of its (and each of their) rights, benefits and assets under the Current Contracts which are capable of assignment without the consent of other parties;
9.1.2 with effect from receipt of a written instruction from the Seller, the Manager shall manage and be responsible for ensuring the performance of the obligations, commitments, duties and responsibilities (past, present and future) of any Seller's Group Company related to the Managed Business;…
9.7 The Manager shall indemnify each Seller's Group Company and shall reimburse and hold each Seller's Group Company indemnified on demand fully and at all times from and against any and all claims, actions, proceedings, demands, liabilities, and all reasonable costs and expenses properly incurred …which arise under, result from or otherwise relate directly or indirectly to:
9.7.1 any of the Current Contracts…."
The expression "Current Contracts" was defined for the purposes of the Sale Agreement, in Clause 1.1, as meaning:-
"all contracts or engagements to which any Seller's Group Company is a party as at the Completion Date and which are reflected in the Management Accounts in the Agreed Form or in any other accounting record related to any of the Businesses, including the contracts and engagements listed in Part 3 of Schedule 4;"
The list in Part 3 of Schedule 4 to the Sale Agreement did include the project at Canary Wharf to which I have referred. The Contract was not itself specifically mentioned, but it was common ground before me that the definition of the expression "Current Contracts" in Clause 1.1 of the Sale Agreement was sufficiently wide to encompass it. By Clause 3.1 of the Sale Agreement KCB sold to Cleveland amongst other things:-
"the benefit subject to the burden of the Current Contracts ….in each case on the terms of clause 9;"
"Only to the extent that no express provision was made in the hire contract [that is, the Contract] either as to responsibility for the acts of drivers or operators of plant or as to allocation of risk, it was an implied term of the hire contract that Hewdens would carry out its work in a good and workmanlike manner."
It is denied in any event that the collapse of TC3 was attributable to any breach on the part of Hewden of any implied term such as that upon which Yarm and Cleveland seek to rely.
"No admissions are made as to the alleged losses. YRL [that is, Yarm] is put to strict proof that it and not CBUK [that is, Cleveland] has suffered the alleged losses. It is denied that:
19.1.1 CBUK can claim damages against Hewden in respect of losses which CBUK has suffered.
19.1.2 YRL can claim damages against Hewden in respect of losses which CBUK has suffered.
19.1.3 CBUK can claim damages in its own name against Hewdens in respect of losses which YRL has suffered."
What seems to be being contended is that as a result of the making of the Sale Agreement Yarm has disabled itself from recovering any sum from Hewden, if a sum would otherwise be recoverable, if and insofar as it was actually Cleveland which sustained the relevant loss, while Cleveland has not acquired a right good as against Hewden to recover any sum. Given the fortuitous conjunction of the date of the collapse of TC3 and the date of the Sale Agreement it could be that little or nothing was recoverable from Hewden, if this point were sound, even if Hewden's other lines of defence failed.
"To the extent that YRL and Hewdens are insured under the Project Policy in respect of the alleged losses, YRL is not entitled to claim against Hewdens as a co-insured under the Project Policy."
The Preliminary Issues
"1. When tower crane TC3 was being climbed on 21st May 2000 did that operation fall within the meaning of "erection of any plant" in clause 13(c)(ii) of the CPA Model Conditions as defined in paragraph 8 of the Particulars of Claim?
2. When tower crane TC3 was being climbed on 21st May 2000 was that operation under the exclusive control of Hewdens or its agent?
3. Were the individuals who undertook the climbing of tower crane TC3 on 21st May 2000 under the direction and control of YRL and/or deemed to be the servants and agents of YRL by clause 8 of the CPA Model Conditions?
4. Are Hewdens entitled to be indemnified by YRL and/or CBUK in relation to the collapse of tower crane TC3 on 21st May 2000:
4.1 pursuant to clause 8 of the CPA Model Conditions, and/or
4.2 pursuant to clause 13(ii)(b) of the CPA Model Condtions
to the extent and on the terms provided in those clauses?
5. Was clause 11 of YRL's standard terms and conditions a term of the contract between YRL and Hewdens?
6. If the answer to Question 5 is "Yes", did the activities of Hewdens referred to at paragraph 16 of the Particulars of Claim [that is, climbing TC3] constitute Hewdens' performance of or failure to perform the Purchase Order?
7. Was there an implied term of the contract between YRL and Hewdens as alleged in paragraph 11 of the Particulars of Claim?
8. As a result of the written agreement dated 30th May 2000 between YRL and CBUK:
8.1 Who is the proper party to claim damages against Hewdens for breach of contract between YRL and Hewdens?
8.2 If the answer to Issue 8.1 is that YRL is the proper party to claim damages against Hewdens, can YRL recover damages for loss and damage suffered by CBUK?
8.3 If the answer to Issue 8.1 is that CBUK is the proper party to claim damages against Hewdens, can CBUK recover damages for loss and damage suffered by itself?
8.4 If the answer to Issue 8.1 is that CBUK is the proper party to claim damages against Hewdens, can CBUK recover damages for loss and damage suffered by YRL?
9. Were YRL and Hewdens co-insured under the Project Construction All Risks Third Party Liability and Consequential Loss Insurance Policy IC99ABNW ("the Project Policy")?
10. If the answer to Issue 9 is that YRL and CBUK were co-insured under the Project Policy, then are YRL and/or CBUK able to recover damages against Hewdens for loss and damage against which YRL was insured under the Project Policy?"
It has fallen to me to try these preliminary issues. It is obvious from the nature of the issues as set out above that they give rise largely to questions of construction of the Contract. However, potentially issues 1, 2 and 3 give rise to questions of fact, and for that reason H.H. Judge Havery Q.C. gave permission for evidence of fact in relation to the preliminary issues. In fact rather limited evidence of fact was put before me and the relevant facts as to what was being undertaken and how at the time of the collapse of TC3 on 21 May 2000 were not really in dispute. I shall set out the relevant facts later in this judgment, but it is convenient to move next to the provisions of the Contract which are relevant to the preliminary issues.
The Contract
i) the Order;
ii) the KCB Terms;
iii) the CPA Conditions;
iv) a document called "Scope of Works";
v) a document called "Evaluation Breakdown";
vi) a document called "Payment Terms";
vii) Section 16.0 "Logistics, Security and Environment" of a procedures manual ("the Manual") prepared by or on behalf of the Employer;
viii) the Employer's Preliminaries Specification Document number 420/SP003 revision 01;
ix) Section 6.0 "Meetings" of the Manual;
x) Section 17.0 "Health and Safety" of the Manual;
xi) Canary Wharf Downtime Agreement 33/MLDC doc/PEP/JL 12/11/98 ("the Downtime Agreement");
xii) KCB's document entitled "Health & Safety Information for Contractors, Subcontractors etc.", ("the KCB Health & Safety document");
xiii) an assignment clause ("the Assignment Clause") which was in these terms:-
"Notwithstanding any other provisions of this Purchase Order the Supplier hereby grants to the Purchaser the right to assign this Purchase Order to Canary Wharf Contractors Ltd."
In fact few of the documents which I have listed are relevant to the preliminary issues which I have to determine, and to those few I now turn.
"6. INSURANCE
The Supplier shall at all times insure the goods to the full replacement value until delivery to and acceptance by the Purchaser. The Purchaser may request sight of the relevant insurance policies.
10. SUB-LETTING
The Supplier shall not sub-let any part of this supply without first receiving the written consent of the Purchaser.
11.INDEMNITY
The Supplier shall indemnify the Purchaser against any loss or damage including any claim made by any third party and any associated costs arising out of the performance or failure to perform this Purchase Order.
16. PLANT HIRE
Unless otherwise agreed by the Purchaser in writing The Model Conditions for the Hiring of Plant agreed between the Federation of Civil Engineering Contractors and the Construction Plant-hire Association will apply to this Purchase Order in respect of all plant hired for use in the United Kingdom."
"1. DEFINITIONS …
(v) "Plant" covers all classes of plant, machinery, equipment and accessories therefor which the Owner agrees to hire to the Hirer.
5. DELIVERY IN GOOD ORDER AND MAINTENANCE: INSPECTION REPORTS
(a) Unless notification in writing to the contrary is received by the Owner from the Hirer in the case of plant supplied with an operator within four working days, in the case of plant supplied without an operator within three working days, of the plant being delivered to the site, the plant shall be deemed to be in good order, save for either an inherent fault or a fault not ascertainable by reasonable examination, in accordance with the terms of the Contract and to the Hirer's satisfaction, provided that where plant requires to be erected on site, the periods above stated shall be calculated from date of completed erection of plant. The Hirer shall be responsible for its safekeeping, use in a workmanlike manner within the Manufacturer's rated capacity and return on the completion of the hire in equal good order (fair wear and tear excepted).
8. HANDLING OF PLANT
When a driver or operator is supplied by the Owner with the plant, the Owner shall supply a person who is competent in operating the plant and such person shall be under the direction and control of the Hirer. Such drivers or operators shall for all purposes in connection with their employment in the working of the plant be regarded as the servants or agents of the Hirer (but without prejudice to any of the provisions of clause 13) who alone shall be responsible for all claims arising in connection with the operation of the plant by the said drivers or operators. The Hirer shall not allow any other person to operate such plant without the Owner's previous consent to be confirmed in writing.
9. BREAKDOWN, REPAIRS AND ADJUSTMENT …
(d) The Hirer shall be responsible for all expense involved arising from any breakdown and all loss or damage incurred by the Owner due to the Hirer's negligence, misdirection or misuse of the plant, whether by the Hirer or his servants, and for the payment of hire at the appropriate idle time rate during the period the plant is necessarily idle due to such breakdown or damage. The Owner will be responsible for the cost of repairs to the plant involved in breakdowns from all other causes and will bear the cost of providing spare parts.
13. HIRER'S RESPONSIBILITY FOR LOSS AND DAMAGE
(a) For the avoidance of doubt it is hereby declared and agreed that nothing in this Clause affects the operation of Clauses 5, 8 and 9 of this Agreement.
(b) During the continuance of the hire period the Hirer shall subject to the provisions referred to in sub paragraph (a) make good to the Owner all loss of or damage to the plant from whatever cause the same may arise, fair wear and tear excepted, and except as provided in Clause 9 herein, and shall also fully and completely indemnify the Owner in respect of all claims by any person whatsoever for injury to person or property caused by or in connection with or arising out of the use of the plant and in respect of all costs and charges in connection therewith whether arising under statute or common law. In the event of loss or damage to the plant, hire charges shall be continued at idle time rates until settlement has been effected.
(c) Notwithstanding the above the Owner shall accept liability for damage, loss or injury due to or arising
(i) prior to delivery of any plant to the site of the Hirer where the plant is in transit by transport of the Owner or as otherwise arranged by the Owner,
(ii) during the erection of any plant, where such plant requires to be completely erected on the site, always provided that such erection is under the exclusive control of the Owner or his Agent,
(iii) during the dismantling of any plant, where plant requires to be dismantled after use prior to removal from site, always provided that such dismantling is under the exclusive control of the Owner or his Agent,
(iv) after the plant has been removed from the site and is in transit on to the Owner by transport of the Owner or as otherwise arranged by the Owner,
(v) where plant is travelling to or from a site under its own power with a driver supplied by the Owner.
15. RE-HIRING, ETC.
The plant or any part thereof shall not be re-hired, sub-let, or lent to any third party without the written permission of the Owner.
23. COMMENCEMENT AND TERMINATION OF HIRE
(a) The hire period shall commence from the time when the plant leaves the Owner's depot or place where last employed and shall continue until received back at the Owner's named depot or equal…."
The CPA Conditions contained no clause 13(ii)(b). The reference to a clause so numbered in the formulation of the preliminary issues appears to be a mistake. The correct reference seems to be to clause 13(b).
"Erect on site to pre-prepared foundations including provision of anchor assemblies, Tower cranes as specified, hire on an inclusive weekly rate, provide driver for each crane including relief driver to ensure continuous availability on the basis of 55 hr week, carry out climbing operations in accordance with site requirements. Dismantle cranes on completion of hire and remove from site."
"4.1 The Contractor will ensure that any plant, vehicles, equipment, machinery, apparatus and materials brought onto or used on the Company's site is safe, without risk to health and maintained in a safe condition. All appropriate tests and examinations of such plant, equipment etc. must be carried out and the respective certificates and reports be maintained in accordance with the relevant statutory requirements. Copies of such documentation must be kept available on site for inspection by the relevant Company personnel.
4.2 The Company retain the right to stop any operation, activity or erection of plant/equipment etc. if it is considered that there is a risk to the safety or health of any person. The Company will not accept responsibility for any increased cost or delay arising out of such action.
4.3 The Contractor and all personnel under his control will obey any written or verbal instructions given by an authorised Company representative or Company Safety Adviser in respect of health and safety.
4.4 The Contractor shall comply with each requirement or prohibition contained within health and safety documentation supplied by the Company to the Contractor in connection with his contract or subcontract."
Insurance
"The parties shall comply with the provisions of Section 4 relating to insurances."
Section 4 of the Trade Contract included a Clause 1 entitled "Employer Furnished Insurance" which included:-
"1.1 Without in any way limiting the Trade Contractor's [that is to say, KCB's] obligations under the Trade Contract, the Employer will maintain or procure the maintenance of insurance, covering:-…
(b) Construction Insurance: The Employer will insure the Works until the issue of a Practical Completion Certificate in accordance with clause 15(i)(b) of the Trade Contract in accordance with the terms of Section I of the construction all risks policy, except that where practical completion of a part of the Works occurs the Employer shall insure that part until the issue of a Certificate of Practical Completion of that part under the Buildings Insurance policy.
The Employer reserves the right at any time on giving not less than ten days' notice to require the Trade Contractor and its sub-contractors to obtain on its own behalf coverages equivalent to those set forth in this paragraph (b) above with limits acceptable to the Employer and with a first class insurance company to be approved by the Employer. The premiums for such insurance shall be subject to the approval of the Employer and subject to such approval shall be reimbursed to the Trade Contractor by the Employer.
(c) Public Liability Insurance: with a limit of £20,000,000 for any one occurrence, will insure against:- …
(b) accidental loss of or damage to material property (other than the Project of material property belonging to or held in trust by or in custody or control of the insured parties or any servant or agent of the insured parties);…
Section II property damage coverage shall be subject to such exclusions, excesses, terms and conditions as are specified in the policy in relation thereto.
Such Policy will only respond to claims in excess of the financial limit of the Trade Contractor's policy referred to in paragraph 2.2(a) below [a minimum of £1 million].
1.2 The insured parties under the policies referred to in paragraphs 1.1(b) and (c) will include, subject to the exclusions, excesses, terms and conditions of the policy, the Employer, the Owner, the Employer's Representative, the Trade Contractor and all sub-contractors of any tier and suppliers engaged on work at Canary Wharf with the Employer's authority.
1.3 A copy of the Employer's policy will be available for inspection."
"(3) Canary Wharf Contractors Limited and/or Canary Wharf Contractors (DS2) Limited and/or the Trade Contractors and/or the Purchaser's Contractors and/or all other contractors and their respective subcontractors of whatsoever tier."
"Works, Temporary Works, services, materials, plant, machinery, spares, Temporary Buildings and all other property or equipment of whatsoever nature or description (but excluding Construction Equipment as defined in the Policy wording other than Construction Equipment owned, leased or hired by a Group Company of Canary Wharf Limited) the property of the Insured or for which they may be responsible at the Site of the Project or elsewhere in the Territorial Limits including whilst in transit in connection with the Project."
"Subject otherwise only to the Conditions of this Policy and to the exclusions limitations and Special Conditions of this Section of the Policy the Insurers will indemnify the Insured in respect of their legal liability for damages and claimants costs in respect of any claim for financial loss first made against the Insured during the period of insurance, even if not accompanied by loss of or damage to material property sustained by a customer or user of any goods, including works and temporary works supplied or completed by the Insured if such loss is a result of the defective or harmful condition of such goods or their failure to perform the function for which they were supplied or completed by the Insured.
Provided always that the liability of Insurers in respect of all claims made against the Insured during any period of insurance including costs and expenses incurred with Insurers consent in the defence of the Insured shall not exceed the limit of indemnity stated in the Schedule.
For the purpose of this Section Financial Loss means a pecuniary loss cost or expense incurred other than by the Insured or any employee of the Insured
(a) in connection with a product
(b) as a result of work carried out by the Insured."
The Facts
"5. …Each of the climbing operations referred to above were carried out by a specialist team of Erectors from Hewdens, lead [sic] by Mike Whittard. The team consisted of 6 people all of whom had attended site before and who were familiar with all the tower cranes on site, which had to be climbed, including TC3.
6. The timing for climbing of the frame was generally organised between Raj Soni and either Pat Yates or Sid Appleyard at Hewdens, and was based upon the progress of the works. The procedure for hand over of the tower crane, so as to enable climbing operations to commence was always the same. Essentially I would be asked by Raj Soni to prepare for installation of all the associated temporary works, which would include diagonal and horizontal bracing in the area designated by Hewdens and would await the arrival of their specialist Erection Team who would come to site on the Friday before the weekend during which the climbing operation was to be executed.
7. Upon arrival Hewdens' Erection Team would work with YRL's operatives to install the collar around the frame to which YRL's operatives could then attach the horizontal telescopic ties. These were then adjusted after Hewdens had balanced the crane. Hewdens would instruct our operatives to tac weld the tie. Once Hewdens were satisfied with the verticality of the crane YRL's operatives would complete the welding of the ties. On completion of the welding an O.I.S. Inspector would carry out an MPI test on the weld and only at that point, assuming that the weld had been approved would I or one of my operatives advise Hewdens that our work was complete. YRL would then hand over the tower crane to Hewdens' exclusive control for them to commence climbing.
8. During climbing the tower cranes were not in use and Hewdens' driver would only take instructions from the Erection Supervisor. The crane would only be handed back once the climbing operation had been completed and the crane had been load tested and signed off by Hewdens' Erection Supervisor, Mike Whittard. I would generally be notified of this fact by Mike Whittard himself or through Bill Allison, Hewdens' Crane Co-ordinator. Only then would YRL be able to re-commence use of the tower crane.
9. As to the incident in question, I was advised by Raj Soni on Friday 12 May 2000 that both TC2 and TC3 were to be climbed on Saturday 20 May 2000 with handover of the cranes to Hewdens' Erection Team being scheduled for Friday 19 May 2000 at 2pm.
10. With regard to these instructions I arranged for temporary steelwork to be installed at the 17th floor level and for diagonal bracing to be installed from level 14 to level 20. This work was completed on Thursday 18 May 2000 and Hewdens' Erection Team arrived on site at approximately 8 am on Friday 19 May 2000.
11. Upon their arrival Hewdens' Erection Team unloaded 3 mast sections, one coil of hoist rope and the collars, which were to be attached to the frames of TC2 and TC3. The mast climbing frame for TC3 was lifted onto the mast along with the collar to which the horizontal telescopic ties were to be attached. Work on the ties commenced at approximately 1 pm, whereupon the crane was balanced by the Hewdens' team and I was instructed to commence welding. Whilst finishing off the welding the Hewdens' Erection Team then moved over to start preparatory work on TC2 at approximately 3.50 pm. They continued work up until 8 pm when the site closed to respect the Sabbath. Prior to this on TC3 the O.I.S. Inspector had carried out an MPI test on the welding work on TC3 at approximately 6.15 pm, confirming that the welds had been completed satisfactorily and this fact was notified to Hewdens' Erection Team, then working on TC2. Work re-commenced on Saturday 20 May at 8 am. YRL had completed the welding work on TC3 and moved onto TC2 to repeat the process of welding the horizontal telescopic ties. This work was finished and duly tested by the O.I.S. Inspector at approximately 10.15 am and I duly notified this fact to Hewdens' Erection Team…
13. When I came into work on Sunday 21 May I enquired of one of the Hewdens' Erection Team if they still had any problems with the climbing process, as there were still three sections on the ground which needed to be erected. TC2 had by that stage been fully climbed but still had to be tested before being handed back to YRL. In fact because of high winds work on TC3 had been stopped by Hewdens during most of the morning and it was not until 12 pm hours that TC2 was tested and ready to go back to work. Once TC2 had been handed over work on TC3 re-commenced at approximately 1 pm. At that time Hewdens only had some 3 sections of mast still to install so I assumed that they would easily complete climbing by 4 pm and I left site at 2 pm."
In cross-examination Mr. Rumbles explained that in fact it was employees of Hewden who fitted the collar preparatory to the "climbing" operation being undertaken, and the co-operation between Hewden employees and KCB employees was in relation to fixing ties. As to the latter, Mr. Rumbles told me that Hewden employees fixed the ties to the crane, while KCB employees fixed them to the structure of the Building. This is the clarification to which I referred earlier in this paragraph.
Issue 1: When tower crane TC3 was being climbed on 21st May 2000 did that operation fall within the meaning of "erection of any plant" in clause 13(c)(ii) of the CPA Model Conditions as defined in paragraph 8 of the Particulars of Claim?
"9. The general scheme and intent of clause 13 is clear, particularly when read with clauses 5, 8 and 9. The hirer, and not the owner, is to be responsible for loss and damage occurring during the period of hire subject to a number of exceptions:
9.1 latent defects in the plant (clause 5(a);
9.2 provision by the owner of an incompetent driver or operator (clause (8);
9.3 breakdown for causes other than the hirer's negligence, misdirection or misuse of the plant (clause 9, but subject to clause 5(a) as to patent defects);
9.4 transport, erection and dismantling of the plant where it is controlled by the owner (clause 13 (c)).
10. Climbing has to be fitted in to these provisions. It is not erection for the purposes of the CPA Model Conditions and the Hire Contract:
10.1 Erection is distinguished, rightly, from climbing in the contractual description of the scope of the works…
10.2 In the context of clause 5 of the CPA Model Conditions "erection" does not include climbing: otherwise time would not begin to run until after the last climb.
10.3 Climbing is a very different process from erection.
11. As explained in paragraph 6.02 of Lewison, The Interpretation of Contracts (2nd ed.) there is a presumption (but no more) that words or expressions which appear twice in the same contract should be given the same meaning. When considering the use of "erection" in clause 13(c)(ii), the use of the same word in clause 5 is particularly relevant. The CPA Model Conditions are a single document, containing a number of inter-related provisions clearly designed to produce certainty. Clauses 5 and 13 are related and it would be very odd if the draftsman had intended the same word to bear different meanings. "
Issue 2: When tower crane TC3 was being climbed on 21st May 2000 was that operation under the exclusive control of Hewdens or its agent?
"(1) 07.30am – Supervisor to check the weather forecast with HTC office, or at the weekend by telephoning 0891 500401. If weathre [sic] forecast ok, commence climbing 6 no. TV20 mast sections into the crane, as per the enclosed manufacturer's instructions. We estimate that this operation will take eight hours, if there is no wind.
(2) After the climb has finished, lower the climbing frame down to the tie collar as shown in the manufacturer's instructions then re-test the tower crane with the use of test weights, again we estimate that this operation will take two hours."
That method statement did not deal with the question of insertion of ties, which was the subject of a separate method statement. However, a KCB document under cover of which the Hewden "climbing" method statement was circulated did include this:-
"As the structure is built it is necessary for the height of these cranes to be raised to allow further work to proceed.
To enable this to be accomplished it is necessary to tie the crane mast to the building, lift the top of the crane and insert additional mast sections using the cranes [sic] own external self climb equipment.
The initial operation requires a collar to be fitted around the mast of the crane at a pre-determined height. Three legs are attached at one end of the collar and the other end to the building.
The loads impose [sic] upon the building, having been previously been supplied by the crane manufacturers and approved by the client.
A climbing cage complete with hydraulic unit is then fitted around the mast above the tie.
The crane is then taken "out of service", the hydraulic device tested and providing the wind is below 20 mph the climb commences."
Mr. Stewart relied upon that rather broader description of relevant operations than what appeared in the Hewden method statement in support of his submission.
Issue 3: Were the individuals who undertook the climbing of tower crane TC3 on 21st May 2000 under the direction and control of YRL and/or deemed to be the servants and agents of YRL by clause 8 of the CPA Model Conditions?
Issue 4: Are Hewdens entitled to be indemnified by YRL and/or CBUK in relation to the collapse of tower crane TC3 on 21st May 2000:
4.1 pursuant to clause 8 of the CPA Model Conditions; and/or
4.2 pursuant to clause 13(ii)(b) of the CPA Model Conditions
to the extent and on the terms provided by those clauses?
Issue 5: Was clause 11 of YRL's standard terms and conditions a term of the contract between YRL and Hewdens?
"As for paragraphs 7 and 8 of the Particulars of Claim:
7.1 It is admitted that clause 11 of YRL's standard terms and conditions was in the terms alleged
7.2 That clause conflicts with the parties' specific written agreement by clause 16 of YRL's standard terms and conditions that the CPA Model Conditions should apply to the hire contract and in particular with clauses 5(b) [sic – it seems that clause 5(a) was meant], 8 and 13(b) of the Model Conditions. In the circumstances it is denied that clause 11 of YRL's standard terms and conditions was a term of the hire contract."
"30. Another way of putting this is to construe clause 11 and the CPA Model Conditions together (and Hewden accept the statement of principle in paragraph 8.13 of Lewison set out in paragraph 42 of the Claimant's Opening) so that clause 11 reads:
"The Supplier shall indemnify the Purchaser against any loss or damage including any claim made by a third party and any associated costs arising out of the performance or failure to perform this Purchase Order" to the extent that the parties have not agreed otherwise.
Or
"The Supplier shall indemnify the Purchaser against any loss and damage including any claim made by a third party and any associated costs arising out of the performance or failure to perform this Purchase Order", the extent of the Supplier's performance for this purpose being as provided by the extent of his responsibility under the CPA Model Conditions.
This approach is consistent with the decision in Howe v. Botwood cited in paragraph 6.02 of Lewison and the approach to possible inconsistencies set out in paragraph 8.13 of the same work.
31. On this basis there is no conflict. Conflict does arise if clause 11 is taken to mean that, notwithstanding the provisions of the CPA, Hewdens are to indemnify YRL arising out of any aspect of the performance or failure to perform Hewden's obligations under the Hire Contract. That would include, for example, erection not under the exclusive control of Hewdens.
32. If the Court has to choose between the CPA Conditions and clause 11, then the former should prevail. They are incorporated by clause 16 of YRL's standard terms and conditions… Clause 16 applies specifically to plant hire, whereas clause 11 is of more general application. The intention, objectively construed, was that if the contract was one for hire of plant, then the respective liabilities of the parties were to be determined in accordance with the CPA Model Conditions. Any other construction would, in effect, involve the deletion of clause 16 of the standard terms and conditions. The CPA Model Conditions are standard terms which would be expected to apply to the hire of plant. A businessman would be perplexed by the suggestion that YRL and Hewdens had not agreed that they would apply.
33. Therefore the answer to Issue 5 is a qualified "Yes". The qualification is that on its true construction clause 11 does not reverse the effect of the CPA Model Conditions set out above. It is, in effect, to be read subject to the specific regime which the parties agreed by clause 16 would regulate their responsibilities and liabilities in relation to plant hire."
"Their Lordships wish to stress that to reject one clause in a contract as inconsistent with another involves a rewriting of the contract which can only be justified in circumstances where the two clauses are in truth inconsistent. In point of fact, this is likely to occur only where there has been some defect of draftsmanship. The usual case is where a standard form is taken and then adapted for a special need, as is frequently done in, for example, the case of standard forms of charterparty adapted by brokers for particular contracts. From time to time, it is discovered that the typed additions cannot live with the printed form, in which event the typed additions will be held to prevail as more likely to represent the intentions of the parties. But where the document has been drafted as a coherent whole, repugnancy is extremely unlikely to occur. The contract has, after all, to be read as a whole; and the overwhelming probability is that, on examination, an apparent inconsistency will be resolved by the ordinary processes of construction."
The case mentioned by Mr. Stewart and Mr. Cannon in their submissions, Howe v. Botwood [1913] 2 KB 387, was an example of how that could be done in practice.
"The Supplier shall indemnify the Purchaser against any loss or damage including any claim made by any third party and any associated costs arising out of the performance or failure to perform this Purchase Order to the extent that the parties have not agreed otherwise."
In my judgment what the parties ultimately agreed as the position in relation to Issue 5 is the correct position in law. It is quite plain on the face of the KCB Terms, it seems to me, that those terms are intended for use in a wide variety of situations, including not only the purchase of goods, but also the acquisition of services and the hiring of plant. The KCB Terms recognise the hiring of plant as a special situation in which it is appropriate to incorporate the industry standard CPA Conditions. Those conditions make detailed provision for the allocation of risk between the owner of plant and the hirer in some fairly closely circumscribed situations. It is, in my judgment, obvious that in incorporating both clause 11 and clause 16 in the KCB Terms the draftsman intended that, where an order was placed for hire of plant on the KCB Terms, the provisions of general application should yield to the detailed provision made by the CPA Conditions. There is a temptation, to which Mr. Cannon succumbed in drafting the Defence and Counterclaim in this action, to say that it is clear that in the case of hire of plant the intention of the draftsman of the KCB Terms was that clause 11 should have no operation at all and liabilities of the parties should be ascertained solely by reference to the CPA Conditions. However, the solution which is technically correct is that identified by Lord Goff and as to which the parties before me are now agreed.
Issue 6: If the answer to Question 5 is "Yes", did the activities of Hewdens referred to at paragraph 16 of the Particulars of Claim constitute Hewdens' "performance of or failure to perform the Purchase Order?
"On 21 May 2000, pursuant to the Hiring Contract, six Hewdens employees attended the Canary Wharf site to climb crane TC3 by inserting an additional section of mast thereto."
"The risk of the relevant activity was borne by YRL, not Hewdens."
The parties before me thus seem to be using the expression "performance" in different senses. It seems to me that, for the purposes of clause 11 of the KCB Terms what "performance" refers to is that which has been agreed to be done, not any allocation of risk as between the parties. If that is so, the answer to this issue is obviously affirmative, as I find. The question of allocation of risk I have considered earlier in this judgment and shall return to in the context of the issues relating to the relevance of insurance.
Issue 7: Was there an implied term of the contract between YRL and Hewdens as alleged in paragraph 11 of the Particulars of Claim?
"Hewdens should carry out such scope of works with reasonable skill and care and/or in a competent and workmanlike manner."
There was no plea as to why such a term should be implied. In his written opening, at paragraph 52, Mr. Williamson contended only that the term in question was "usual".
"Only to the extent that no express provision was made in the hire contract either as to responsibility for the acts of drivers or operators of plant or as to allocation of risk, it was an implied term of the hire contract that Hewdens would carry out its work in a good and workmanlike manner. Save as aforesaid, paragraph 11 of the Particulars of Claim is denied."
"In a contract for the supply of a service where the supplier is acting in the course of a business, there is an implied term that the supplier will carry out the service with reasonable care and skill."
Mr. Cannon also accepted that it was clear from the definition of the expression "contract for the supply of a service" in Supply of Goods and Services Act 1982 s.12, in particular s.12(3), that it included a contract for the hire of goods. However, he submitted that the term implied by statute could be excluded in certain circumstances. He also submitted, in reliance upon decisions such as Miller v. Emcer Products Ltd. [1956] Ch 304 and Lynch v. Thorne [1956] 1 WLR 303, that a term could not be implied into a contract if it was inconsistent with an express term.
"35. There is very little scope for an implied term in the Hire Contract. As explained above the CPA Model Conditions determine which of the owner and the hirer is to be liable for loss and damage. That liability is not qualified by any term that work be done with reasonable skill and care or in a competent or workmanlike manner. For example, if erection takes place under the exclusive control of the owner, then the owner is liable for loss, damage and injury arising during erection, whether the result of lack of reasonable skill and care by those carrying out the erection or not: see clause 13(c). In the same way, the hirer's liability under clause 13(b) does not depend upon a finding that his operatives failed to act in a workmanlike manner (although his liability under clause 9 is not strict). Clauses 5, 8 and 9 also assign responsibility and define the basis of liability.
36. Hewdens' position is therefore that the implied term for which the Claimants contend is limited to any area in respect of which no express provision was made in the Hire Contract (including the CPA Model Conditions) as to the responsibility for the acts of operatives or the allocation of risk.
37. In paragraphs 52 to 58 of their Opening the Claimants appear to go beyond the scope of this Issue and to raise issues as to the scope of the provisions in the CPA Model Conditions and in particular as to whether those provisions effectively exclude liability for negligence. Hewdens' position is that any such issue – not yet pleaded – does not arise for decision at this stage. However, Hewdens do not accept the Claimants' analysis of the applicable principles or of the relevant clauses of the CPA Model Conditions.
38. As for reliance upon paragraph 11.14 of Lewison, which in turn sets out the well known passage from the advice of Lord Morton in Canada Steamship Lines Ltd. v. R. this has to be read in the light of a large body of authority, considered by the Court of Appeal in Morris v. Breaveglen Ltd. and summarised by Leggatt LJ (with whom the other members of the Court agreed) as follows:
"From that consideration of the authorities the main assistance to be derived for present purposes is an affirmation of the basic proposition that in every such case the question whether an indemnity will run or not depends on the construction of the words used, read in the context of the contract as a whole. Lord Morton's tests guide the approach to be adopted in ascertaining the presumed intention of the parties, if not otherwise apparent from the contract. But that is not necessary where appropriate steps have been taken to allocate risk. Where a sensible construction of the clause in question leads to the conclusion that the proferens is indemnified against his own negligence, neither the House of Lords nor this court following them have shown any inhibition in accepting that result without seeking to resile from it by recourse to Lord Morton's tests. I do not think it helpful, as the judge did, to regard the authorities as divided into two lines, because there may at the outset be no obvious demarcation between exemption and indemnity clauses on the one hand and clauses relating to the allocation of risk on the other. It is only upon analysis that it becomes possible to identify a particular clause as being in one or the other category. To seek to put a clause into one of two "lines" by identifying it as concerned with indemnity or with allocation of risk confuses cause and effect: it is only by construction of the words used that it is possible to decide what result the parties have achieved."
39. Briefly, the analysis by the Claimants of clause 8 of the CPA Model Conditions in paragraph 54 of their Opening is wrong: a driver could be competent (so that Hewdens complied with their obligation), but act negligently on a particular occasion (in which eventuality YRL would be vicariously liable).
40.Paragraph 58 of the Claimants' Opening asks a different question from that posed by Issue 7. The answer to Issue 7 is therefore qualified in the terms pleaded in paragraph 10 of the Defence and Counterclaim."
Issue 8: As a result of the written agreement dated 30th May 2000 between YRL and CBUK
8.1 Who is the proper party to claim damages against Hewdens for breach of contract between YRL and Hewdens?
8.2 If the answer to Issue 8.1 is that YRL is the proper party to claim damages against Hewdens, can YRL recover damages for loss and damage suffered by CBUK?
8.3 If the answer to Issue 8.1 is that CBUK is the proper party to claim damages against Hewdens, can CBUK recover damages for loss and damage suffered by itself?
8.4 If the answer to Issue 8.1 is that CBUK is the proper party to claim damages against Hewdens, can CBUK recover damages for loss and damage suffered by YRL?
"There was a specific assignment clause in the Hire Contract… It granted express permission to YRL to assign the Hire Contract to Canary Wharf Contractors Ltd. ("CWCL"). This provision only makes sense if the parties' intention was that the Hire Contract should not otherwise be assignable by YRL (there is an express prohibition against sub-letting by Hewdens: see clause 10 of YRL's standard terms and conditions…)."
Issue 9: Were YRL and Hewdens co-insured under the Project Construction All Risk Third Party Liability and Consequential Loss Insurance Policy IC99ABNW ("the Project Policy")?
Issue 10: If the answer to Issue 9 is that YRL and CBUK were co-insured under the Project Policy, then are YRL and/or CBUK able to recover damages against Hewdens for loss and damage against which YRL was insured under the Project Policy?
"The insurers could not then make a subrogated claim against Wimpey because Wimpey was a party co-insured (with CRS) under the policy, and the insurers would be obliged to indemnify Wimpey against any liability which might be established, an obvious absurdity. The rationale of this rule may be a matter of some controversy (although I lean towards the explanation favoured by the Court of Appeal) but the rule itself is not in doubt."
The rule with which Lord Bingham was concerned lies at the heart of Issue 10.
"Mr. Hamilton [Counsel] had an alternative argument, should he be wrong on everything else. He submitted that having regard to Foster Wheeler's obligation under clause 32 of the main contract to take out insurance in the joint names of all parties, including the sub-contractors, and having regard in particular to the endorsement under which the policy was specifically extended to include the erection operation and subsequent dismantlement of the Hydrajack system, a contract is to be implied between the plaintiffs and the defendants that the plaintiffs would not hold the defendants liable in the event of loss or damage to the contract works resulting from the defendants' negligence. There is much to be said for that argument but having already decided in favour of the defendants on the main ground, I need say no more about it."
The particular features which appear to have made the argument seem attractive to Lloyd J were the contractual obligation of the main contractor to insure for the benefit, amongst others, of sub-contractors, and the specific reference in an endorsement to the particular equipment of the sub-contractor in the course of the dismantling of which the event giving rise to the claim occurred. The observations of Lloyd J which I have quoted were, of course, obiter.
"Assume, however, that I am wrong on the insurance point and that the defendants should be viewed as co-insured with the plaintiffs and the various contractors and sub-contractors on site. On that hypothesis, it would be necessary to consider the point which Mr. Justice Lloyd left open in Petrofina v. Magnaload. In my view it would be nonsensical if those parties who were jointly insured under the CAR policy could make claims against one another in respect of damage to the contract works. Such a result could not possibly have been intended by those parties. I have little doubt that they would have said so to an officious bystander. If, therefore, I were wrong on the co-insurance point, I would have held that there was an implied term as pleaded in par. 22(16) of the re-amended defence."
"There is considerable scope for debate as to the true basis for the rule which was applied by Lloyd J in the Petrofina case that the insurers can never sue one co-insured in the name of another. The authorities on this question were reviewed in some detail by Brooke LJ [in the Court of Appeal in that case]"
Lord Hope then commented on some of the cases reviewed by Brooke LJ and set out in summary some of the observations made by Brooke LJ in the course of his review. After those comments Lord Hope said at paragraph 65 of his speech:-
"Although your Lordships do not need to resolve the issue in this case, it seems to me that there is much force in the point that the rules about circuity of action do not provide the explanation. I would prefer to say that the true basis of the rule is to be found in the contract between the parties. In Hopewell Project Management Ltd. v. Ewbank Preece Ltd. [1998] 1 Lloyd's Rep 448, 458 Mr. Recorder Jackson Q.C. said that in his view it would be nonsensical if those parties who were jointly insured under a contractors' all risks policy could make claims against one another in respect of damage to the contract works, that such a result could not possibly have been intended by those parties and that had it been necessary for him to do so he would have held that there was an implied term to that effect. I would be content to accept that as a satisfactory basis for the rule on which, had it been necessary for them to do so, Wimpey and Hall would have been entitled to resist the claim."
Lord Mackay of Clashfern expressed his agreement with those words of Lord Hope.
"To counter this, Miss Turner for the first defendants has put forward submissions which are directed to establishing that there is an overriding principle, derived from insurance law, that where a policy of insurance is effected for the benefit of two persons jointly, neither can sue the other in respect of any matter within the policy even if there is apparently a collateral contractual term between them entitling the one to sue. To my mind she puts her submissions too widely."
Dillon LJ then rehearsed the submissions of Miss Turner and referred to two decisions, Petrofina (U.K.) Ltd. v. Magnaload Ltd. and Mark Rowlands Ltd. v. Berni Inns Ltd. [1986] QB 211. Thereafter he said:-
"The effect of the contractual agreement must always be a matter of construction. People are free to contract as they like. It may be the true construction that a provision for insurance is to be taken as satisfying or curtailing a contractual obligation, or it may be the true construction that a contractual obligation is to be backed by insurance with the result that the contractual obligation stands or is enforceable even if for some reason the insurance fails or proves inadequate."
Conclusions
i) Issue 1: Yes.
ii) Issue 2: Yes.
iii) Issue 3: No.
iv) Issue 4: No.
v) Issue 5: Yes, but subject to a provision that the indemnity was subject to what the parties had otherwise agreed.
vi) Issue 6:Yes.
vii) Issue 7: The term implied by Supply of Goods and Services Act 1982 s. 13 was a term of the Contract.
viii) Issue 8.1: Both the Claimants.
ix) Issues 8.2 to 8.4 inclusive: Not answered at this stage.
x) Issue 9: Yes.
xi) Issue 10: Yes.