Judgments - Co-Operative Retail Services Limited and Others (Respondents) v. Taylor Young Partnership and Others (Appellants)

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    60. For these reasons I would have held, had it been necessary to do so, that it cannot be established that Wimpey and Hall are "liable" to CRS in respect of the fire damage. The fire damage was covered by the joint names policy required by clause 22A.1 of the main contract and it has been made good, without additional expense to CRS, under those arrangements.

The effect of the joint names policy

    61. Mr Blackburn made it clear that he accepted that the law would not allow an action between two or more persons who were insured under the same policy against the same risk: see Petrofina (UK) Ltd v Magnaload Ltd [1984] QB 127 where, applying the decision of the Supreme Court of Canada in Commonwealth Construction Co Ltd v Imperial Oil Ltd (1977) 69 DLR (3d) 558, Lloyd J held that the insurers had no right of subrogation in the name of one co-insured against another co-insured under the same policy. But he submitted that, if his argument on the first issue was sound, TYP and HLP were not prevented by this principle from claiming contribution from Wimpey and Hall under section 1(1) of the Act.

    62. The answer for Wimpey and Hall was that the fact of their co-insurance with CRS provided them with a defence to the claim. To allow it would be inconsistent with the intentions of the parties, as it would have the effect of depriving them of the benefit of the insurance which had been effected in their names. Mr Bartlett said that where there is valid cover under a joint insurance no insured can say as against another that he has suffered a loss for which the other is liable. He pointed out that the joint insurance required by clause 22A was a property insurance, not a liability insurance. The fact that the policy did not provide either Wimpey or Hall with liability cover against a claim by CRS would mean that they would be deprived of the benefit of the insurance if they were to be found liable.

    63. 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. He referred to two cases in which Colman J had carried out a more detailed study of the reasons why sub-contractors who are named as co-assured on an insurance policy are entitled to resist a claim brought against them by insurers under rights of subrogation in the name of another person named as a co-assured in that policy: Stone Vickers Ltd v Appledore Ferguson Shipbuilders Ltd [1991] 2 Lloyd's Rep 288; National Oilwell (UK) Ltd v Davy Offshore Ltd [1993] 2 Lloyd's Rep 582.

    64. In The Yasin [1979] 2 Lloyd's Rep 45, 55 Lloyd J gave the following explanation for the rule:

    "In my judgment, the reason why an insurer cannot normally exercise a right of subrogation against a co-assured rests not on any fundamental principle relating to insurance, but on ordinary rules about circuity."

In the Petrofina case at p 140B he said that, having reconsidered the point, he was still inclined to think that the reason for the rule was circuity. Brooke LJ said however, at p 884, para 69 of his judgment that this appeared to him to confuse rather than simplify the issues which the court had to decide. At p 885, para 72 he referred with approval to Colman J's view that the plea of circuity is an inappropriate plea if the insurer has provided a full indemnity to one co-assured, because it will have discharged its liability under the policy in respect of the losses in question and a second co-assured cannot look to the first co-assured to pay him those losses a second time. He said that in his judgment it would be much safer to jettison the language of circuity of action and to address instead the question asked by Dillon LJ in the Surrey Heath case: what does the contract provide? He summarised his conclusion, at p 885, para 73 in the words which I have already quoted in para 43 above.

    65. 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 QC 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.


    66. As Mr Blackburn very properly conceded, an answer in favour of Wimpey and Hall on the first issue is sufficient for the disposal of this appeal. For the reasons which I have given, and for those given by my noble and learned friends Lord Bingham of Cornhill and Lord Rodger of Earlsferry with which I agree, I would hold that the Court of Appeal reached the right conclusion on the first issue. I would dismiss the appeal.


My Lords,

    67. I have had the privilege of reading in draft the speeches of my noble and learned friends Lord Bingham of Cornhill and Lord Hope of Craighead and, for the reasons which they gives, I too would dismiss the appeal.

    68. Indeed the position can be stated shortly. Mr Blackburn QC accepted that, if he was wrong in his submission as to the effect of clause 22A.4.3 of the main contract, then the whole appeal must fail. Clause 22A.4.3 provides:

    "After any inspection required by the insurers in respect of a claim under the Joint Names Policy referred to in clause 22A.1 or clause 22A.2 or clause 22A.3 has been completed the Contractor with due diligence shall restore such work damaged, replace or repair any such Site Materials which have been lost or damaged, remove and dispose of any debris and proceed with the carrying out and completion of the Works."

That was Wimpey's crucial obligation after the works had been damaged by fire; that was what they were liable to do in respect of the damaged work. Mr Blackburn contended that this liability of Wimpey - and no other - meant that the appellants were entitled to recover contribution from them. Significantly perhaps, there is not a hint of this approach in the third party notice which the appellants served on Wimpey. In that notice the appellants refer to various matters, such as failures in respect of the insulation of a flue, which were said to have caused or contributed to the start of the fire.

    69. Under section 1(1) of the Civil Liability (Contribution) Act 1978 a person who is liable in respect of damage can recover contribution from any other person who is liable in respect of the same damage. It follows that the appellants can recover contribution from Wimpey in respect of the fire damage to the works only if Wimpey were "liable in respect of" the fire damage. Section 6(1) provides that a person is liable in respect of any damage if the person who suffered it "is entitled to recover compensation from him in respect of that damage." So the appellants can recover a contribution from Wimpey only if CRS were "entitled to recover compensation from [them] in respect of" the fire damage to the works.

    70. On no conceivable construction of section 6(1) can it be said that a person who is liable to restore damaged work is a person from whom the employer is "entitled to recover compensation" in respect of the fire damage to the works. It follows that, for the purposes of section 1(1), Wimpey are not a person who is liable in respect of the fire damage to the works and the appellants cannot recover contribution from them.

    71. Wimpey carried out their obligation to restore the damaged work, but their position would have been no different, for these purposes, if they had failed to perform it. The fact that a party becomes liable to pay damages for failing to perform a primary obligation under a contract cannot alter the nature of that primary obligation. If Wimpey had failed to restore the damaged work, CRS would indeed have been entitled to recover damages from them, but the damages would have been for breach of their obligation to restore the damaged work, not for breach of their duties under the contract giving rise to the fire damage to the works. By contrast, CRS are seeking damages from the appellants on the ground that, by reason of their negligence or breach of contract, they were responsible for the fire. That being so, for the reasons explained by Lord Steyn in Royal Brompton Hospital National Health Service Trust v Hammond [2002] UKHL 00, even on this hypothetical scenario, Wimpey would not have been liable in respect of the same damage as the appellants and the appellants could not have recovered contribution from them.


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