House of Lords - British Telecommunications PLC v. James Thomson and Sons (Engineers) Ltd. (Scotland)

House of Lords

Session 1997-98
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Judgments - British Telecommunications PLC v. James Thomson and Sons (Engineers) Ltd. (Scotland)

HOUSE OF LORDS

  Lord Lloyd of Berwick   Lord Mackay of Clashfern   Lord Mustill
Lord Cookeof Thorndon   Lord Hutton

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE

BRITISH TELECOMMUNICATIONS PLC.
(APPELLANTS)

v.

JAMES THOMSON AND SONS (ENGINEERS) LTD.
(RESPONDENTS) (SCOTLAND)

ON 10 DECEMBER 1998

LORD LLOYD OF BERWICK

My Lords,
    I have had the advantage of reading in draft the speech which has been prepared by my noble and learned friend, Lord Mackay of Clashfern. I agree with it, and for the reasons which he has given I too would allow the appeal.

LORD MACKAY OF CLASHFERN

My Lords,
    The pursuer and appellant in this appeal to whom I shall refer as "B.T." raised an action for damages in delict against the defender and respondent to whom I shall refer as "Thomson."
    After a discussion on procedure roll the Lord Ordinary (Lord Rodger of Earlsferry) dismissed the action as irrelevant in law. On a reclaiming motion the Second Division of the Inner House of the Court of Session by a majority (the Lord Justice Clerk, Lord Ross and Lord Cowie, Lord Morison dissenting) affirmed the Lord Ordinary's decision. Against that decision B.T. appeals to your Lordships' House.
    On Sunday, 17 June 1990 servants of Thomson were engaged in the execution of certain steel work in B.T.'s telephone switching station in Glasgow. They were working under the roof of the switching station near large air ventilation pipes lagged with rock wool and encased in bitumenised felt. In circumstances which B.T. avers to import fault both in Thomson and its servants, a fire broke out under that roof. As a result of that fire, and the efforts of the Strathclyde Fire Brigade to extinguish it, B.T. suffered losses. The action in delict is seeking reparation for these losses. For the purposes of the debates before the Lord Ordinary, the Second Division, and this House these averments of fault are to be taken as true. If these were the only facts to be taken into account B.T. has a straightforward action in delict against Thomson.
    But in the circumstances of the present case these are not the only facts to be taken into account. The work on which Thomson was engaged on the date of the fire was part of certain works of refurbishment and repair on the aerial equipment, housing, and roof of B.T.'s switching station in respect of which B.T. had entered into a contract with a construction company, now known as Melville Dundas and Whitsun Ltd., but then known as M.D.W. Ltd., for the execution of those works. I shall refer to this construction company as "the main contractor." The parties are agreed that the conditions of contract ruling between B.T. and the main contractor were those of the Joint Contracts Tribunal for the standard form of building contract, local authorities edition (with quantities) 1980, as amended by (a) amendments 1, 2, 4, 5 and 8 thereof; (b) the provisions contained in the Scottish supplement 1980 (as revised in January 1988) forming appendix no. 1 to the Scottish building contract (with quantities) of January 1988; and (c) the bills of quantities relative to the said works to be executed by the main contractor or its subcontractors. Clause 35 of the conditions enables the architect/supervising officer to reserve to himself the final selection and approval of the subcontractor to the main contractor who shall supply or fix any materials or goods or execute work forming part of the contract and where this option has been exercised the subcontractor so nominated shall be a "nominated subcontractor" for the purposes of the contract. Any subcontractor other than a nominated subcontractor is referred to as a domestic subcontractor. The written consent of the architect/supervising officer is required before the contractor can appoint a domestic subcontractor. By a letter dated 8 January 1990 the main contractor set out its terms of contract with Thomson to carry out the steel work referred to therein. This contained the provision: "your work shall be carried out to the same specification, terms and conditions of contract as those ruling between ourselves and our client. These conditions shall take precedence over any you may have in your offer."
On this basis the subcontract between the main contractor and Thomson proceeded and since there was no nomination of Thomson, Thomson became a domestic subcontractor for the purposes of the provisions in the main contract.
    Thomson submits against this background that whilst it must be assumed for the purposes of the present stage in the proceedings that B.T.'s averments of fact are true, the circumstances in which Thomson came to be working on B.T.'s property were inconsistent with Thomson having a duty of care towards B.T. and its property.
    Thomson rely on a series of decisions in which the existence and terms of contracts under which work was done negative the existence of a duty of care on the party carrying out the work towards the owner of the property damaged as a result of his activities.
    The foundation on which such an argument rests is the consideration that for a duty of care to be imposed while the elements of foreseeability and proximity require to be taken into account, so also must be considerations of fairness, justice and reasonableness. In the most recent authority on this topic in this House, Lord Steyn speaking for the majority of those who took part in the decision of Marc Rich & Co. A.G. v. Bishop Rock Marine Co. Ltd. [1996] 1 A.C. 211, 235, said:
"But since the decision in Dorset Yacht Co. Ltd. v. Home Office [1970] A.C. 1004 it has been settled law that the elements of foreseeability and proximity as well as considerations of fairness, justice and reasonableness are relevant to all cases whatever the nature of the harm sustained by the plaintiff. Saville L.J. explained, at p. 1077: 'whatever the nature of the harm sustained by the plaintiff, it is necessary to consider the matter not only by inquiring about foreseeability but also by considering the nature of the relationship between the parties; and to be satisfied that in all the circumstances it is fair, just and reasonable to impose a duty of care. Of course . . . these three matters overlap with each other and are really facets of the same thing. For example, the relationship between the parties may be such that it is obvious that a lack of care will create a risk of harm and that as a matter of common sense and justice a duty should be imposed. . . . Again in most cases of the direct infliction of physical loss or injury through carelessness, it is self-evident that a civilised system of law should hold that a duty of care has been broken, whereas the infliction of financial harm may well pose a more difficult problem. Thus the three so-called requirements for a duty of care are not to be treated as wholly separate and distinct requirements but rather as convenient and helpful approaches to the pragmatic question whether a duty should be imposed in any given case. In the end whether the law does impose a duty in any particular circumstances depends upon those circumstances . . .' That seems to me a correct summary of the law as it now stands."

    The contention of Thomson is that the contractual framework in which the work was done rendered it unfair, unjust and unreasonable to impose on Thomson a duty of care to B.T. in the circumstances. Put shortly, the submission is that the insurance provisions in the main contract make it clear that damage caused in the way alleged by B.T. in this case was contracted to be covered by an insurance policy which B.T. was bound to take out and that accordingly it would not be fair, just or reasonable to impose a duty on Thomson to avoid such damage.
    In order to examine this argument further it is necessary to set out the relevant terms of the main contract. Before doing so it is important to notice that the contractual provisions in the present case are different from those under consideration in Scottish Special Housing Association v. Wimpey Construction U.K. Ltd. [1986] S.C. (H.L.) 57 and Norwich City Council v. Harvey [1989] 1 W.L.R. 828. Amendment No. 2, above referred to, altered substantially provisions in the earlier contract relating to insurance and therefore while these cases are illustrations of the way in which such a matter as that presently in issue may be handled they cannot provide a direct answer in the differing contractual position of the present case.
    Clause 20.2 provides:
"The contractor shall, subject to clause 20.3 and, where applicable, clause 22C.1 be liable for, and shall indemnify the employer against, any expense, liability, loss, claim or proceedings in respect of any injury or damage whatsoever to any property real or personal in so far as such injury or damage arises out of or in the course of or by reason of the carrying out of the works, and to the extent that the same is due to any negligence, breach of statutory duty, omission or default of the contractor, his servants or agents or of any person employed or engaged upon or in connection with the works or any part thereof, his servants or agents or of any other person who may properly be on the site upon or in connection with the Works or any part thereof, his servants or agents, other than the Employer or any person employed, engaged or authorised by him or by any local authority or statutory undertaker executing work solely in pursuance of its statutory rights or obligations."

Clause 22C.1 as modified by a provision in the bill of quantities provides:
"The employer shall take out and maintain a policy in respect of the existing structures (which shall include from the relevant date any relevant part to which clause 18.1.3 refers) together with the contents thereof owned by him or for which he is responsible, for the full cost of reinstatement, repair or replacement of loss or damage due to one or more of the Specified perils up to and including the date of issue of the certificate of practical completion or up to and including the date of determination of the employment of the contractor under clause 22C 4.3 or clause 27 or clause 28 (whether or not the validity of that determination is contested) whichever is the earlier. The contractor, for himself and for all nominated subcontractors who are, pursuant to clause 22.3.1, recognised as an insured under the policy referred to in clause 22C.1 or clause 22C.3 shall authorise the insurers to pay all monies from such insurance in respect of loss or damage to the employer."

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