Royal Courts of Justice
Strand
London WC2A 2LL

30 July 2001

Before:

His Honour Judge Thornton Q.C.

Between:

Bovis Lend Lease Limited (formerly Bovis Construction Limited)

Claimant

-and -

(1) Saillard Fuller & Partners

(2) Watkins Payne & Partners

Defendants

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Dates of Hearing: 7, 11 & 12 June and 12 July 2001

Date of Handing Down of Judgment: 30 July 2001

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Mr Paul Sutherland appeared for the claimant instructed by Hextall Erskine, 28 Leman Street, London, E1 8ER
Mr Nicholas Dugdale appeared for the first defendant instructed Kennedys, Longbow House, 14 - 20 Chiswell Street, London, EC1Y 4TQ
Mr Alex Charlton appeared for the second defendant instructed by Beale and Company, Garrick House, 27 - 32 King Street, Covent Garden, London, WC2E 8JD

INDEX

JUDGMENT

1. Introduction

1. This judgment is concerned with a flood that occurred at a newly constructed office block at Friendly House, 21/24 Chiswell Street, London, EC1 on Monday 7 May 1990, a Bank Holiday. The block had been constructed by Bovis Construction Ltd, who has subsequently changed its name to Bovis Lend Lease Ltd (" Bovis"), under a management contract with Rosehaugh Estates PLC (" Rosehaugh") who then owned the development. Practical completion had been certified as occurring on 6 April 1990. The block consists of a ground floor and 8 further floors of offices, a basement and a roof plant at ninth floor level above the office floors. Within the roof plant area is a lift motor room and a separate plant room which houses boilers, water pumps, the main water storage tank and other associated plant. The flood was caused after the pressurisation unit panel on one of the boilers had erroneously or deliberately been switched from automatic mode to manual mode. This caused the pumps to run continuously and the discharge valves to remain open. Since the building was still empty and the occurrence took place on a Bank Holiday, the resulting discharge of pressurised water occurred for some time and a large quantity of water was discharged from a discharge pipe directly onto the plant room floor. Unfortunately, this pipe did not discharge into a gulley and the discharged water accumulated on the floor of the plant room.

2. There was a hole in the floor that was associated with a group of electrical cables passing through the floor to a staircase located on the floor below. In consequence, a large quantity of water passed through the hole, down the stairs and into the floors below, particularly the fourth floor. The resulting damage and loss of rental income ultimately led to a claim being made against Bovis which was settled some 8 years later, on 3 April 1998, for £350,000 plus costs in the sum of £70,000.

2. The Claim and Relevant Parties

4. The office block was unoccupied when the flood occurred. Bovis, as management contractor, had subcontracted all but a small residue of builders work to a variety of subcontractors that included Crown House Engineering Ltd (" Crown House"), the services subcontractors for the mechanical and electrical plant and Matthew Hall Merrol Ltd ("Matthew Hall"), the sprinkler installation subcontractors for the fire protection plant. Once the flood had occurred, Bovis was instructed under the terms of the management contract to undertake remedial work including the provision of dry lining plaster boarding, redecoration work and the replacement of carpets. Bovis was paid for this work since the defects liability period under the management contract was still running at the time of the flood. Rosehaugh also incurred professional fees and a loss of rental income for a 10-week period.

5. Rosehaugh had acquired a long lease of the site for development purposes in April 1988. The management contract with Bovis, dated 2 September 1988, followed soon afterwards. On 31 March 1989, in the early stages of the development, Rosehaugh sold its interest in the site to a company called Intercede 647 Limited which was a joint venture vehicle for a joint development of the site by Rosehaugh and Shimizu Europe BV. Under the terms of this agreement, Rosehaugh agreed to proceed with and complete the execution of the building works. Rosehaugh's engagements with SFP and WPP were entered into on the same date.

6. During 1989, the London commercial property market went into recession and Rosehaugh's hopes of acquiring one commercial tenant for the development receded. In consequence, Rosehaugh decided to seek lettings for smaller parts of the building and to expand the scope of the management contract to provide for a full fit-out of services. These additional services had originally been left out of the scope of the works for completion by the tenant when such had been found. This expansion of work was achieved by an exchange of letters in October 1989 between Rosehaugh and Bovis which described the fitting-out works it provided for in an attached outline specification. The letters also extended the date for completion until 30 January 1990.

7. The site was insured as to flood damage with General Accident Fire and Life Assurance Corporation PLC ("GA"). Rosehaugh and/or Rosehaugh SC Ltd made a claim under that policy which I was informed was a group policy. It is in dispute in these proceedings which company or companies made the claim. However, liability was accepted and Rosehaugh or Rosehaugh SC Ltd (again the identity of the relevant Rosehaugh company is disputed) received payments totalling £423,000 to cover the claims for reinstatement and loss of rent from GA. Rosehaugh then intimated a claim against Bovis or their total losses in the sum of £423,000. It follows that this claim was a subrogated claim being made for and on behalf of GA. Following the intimation of the claim, Rosehaugh went into administrative receivership and liquidation and, following that liquidation, assigned its rights against Bovis to GA who then issued proceedings against Bovis in its own name claiming the sum that it had already paid out to Rosehaugh. These proceedings were in the name of GA, albeit relying as necessary on the assignment to GA of Rosehaugh's rights against Bovis, and they were finally compromised on 3 April 1998. In that compromise, Bovis agreed to pay GA £350,000 plus costs which were subsequently agreed in the sum of £70,000.

8. Bovis had referred the claim to its own liability insurers, Eagle Star Insurance Company Limited ("Eagle Star") who accepted the claim and then indemnified Bovis the sums paid out by Bovis to GA pursuant to the earlier settlement. That payment by Eagle Star to Bovis led to a third insurance claim being made, this time by Bovis and Eagle Star jointly and severally against the Commercial Union Assurance Company PLC ("CU"). That insurer had issued a joint names insurance policy in the names of, amongst others, Bovis and Rosehaugh pursuant to a term of the management contract which provided for joint names insurance to be obtained. CU rejected this claim and Bovis and Eagle Star started proceedings in the Commercial Court claiming an indemnity or contribution to the settlement on the basis that that settlement was a loss covered by the joint names policy. This action was started in January 1999 and led to a trial by David Steel J who handed down judgment on 29 November 2000.

9. The judge dismissed Bovis and Eagle Star's claim on several grounds which were, in summary, (1) that Bovis could not maintain the claim since it amounted to a claim being made under a second insurance policy once Bovis had already been indemnified in full under another insurance policy ; (2) that Eagle Star could not maintain a claim since it related to a payment made by Eagle Star which it had not needed to make since the wording of the relevant policy excluded cover where the loss was also covered by another policy. Eagle Star was, in consequence a volunteer; (3) that neither party could recover under the first of the two potentially relevant sections of the joint names policy, Section 3, concerned with third party loss since the loss for which the claim was being made was excluded from cover by an exclusion contained within the policy ; and (4) that neither party could recover contribution from CU under the Contribution Act based on the cover provided by the second potentially relevant section of the joint names policy, Section 1, since such liability as CU had to Rosehaugh under the policy was not in respect of the same damage as arose from Bovis' liability to Rosehaugh and was not, in consequence, covered by section 1 of the Contribution Act . This decision of David Steel J is currently the subject of an appeal.

10. Meanwhile, Bovis pursued another avenue of potential recovery for at least part of its loss. It intimated claims against these two defendants in July 1997 claiming contribution under the Contribution Act. The proceedings were issued on 27 March 2000 and, as already indicated, are based on Bovis' twin allegations that the loss being claimed was damage for which Bovis was liable and for which both defendants were also liable had they been sued by Rosehaugh or GA. In view of the assignment of Rosehaugh's claims against Bovis to GA following GA's pay out to Rosehaugh, it is alleged by both defendants, as one limb of their respective defences, that the damage in question was not damage which Rosehaugh had suffered but was damage which GA had suffered and was therefore not damage in relation to which Bovis could recover contribution under the contribution scheme provided for by the Contribution Act. The defendants also allege, as a second limb of their respective defences, that Bovis was never capable of being liable to Rosehaugh given the contractual requirement in the management contract that joint names insurance be obtained. The defendants also dispute that they were never notionally liable to Rosehaugh or that any negligence on either of their parts caused any of the loss being claimed.

3. The Primary Facts

3.1. The Evidence

11. The evidence was confined, with commendable brevity and focus, to the design, execution and inspection of the relevant details of the plant room, namely the service hole in the slab through which the water leaked to the stairwell below, the overall waterproofing scheme for the plant room, the drainage gullies and the arrangement for discharge from the boiler discharge valves.

12. Bovis called 5 witnesses of fact: the Project Manager, Mr Gillespie (who was not additionally examined orally); The Senior Site Manager, Mr Readle; The Assistant Site Manager, Mr Wood and the Mechanical and Electrical Services Engineers, respectively Mr Hpa and Mr Cook. SFP called 1 witness of fact: the Project Architect, Mr Barnard. WPP called 3 witnesses of fact: the Partner responsible for the project, Mr Street; a second partner who had only passing involvement in the project, Mr Crosby (who was not additionally examined orally); a senior design engineer who worked on the project, now a partner, Mr Thrower and the lead mechanical engineer on the project for part of the time, Mr Kett. 5 expert witnesses were called, 2 architects and 3 mechanical engineers. The two groups produced a separate Part 35.12 agreed statements. Each expert provided a report or reports and oral evidence. The experts were as follows. The architectural expert evidence was provided for Bovis by Mr Hubert and for SFP by Mr Crowther. The mechanical and electrical engineering evidence was provided for Bovis by Mr Butler, for SFP by Mr Humphries and for WPP by Mr Feather.

3.2. The Design Process

13. The site for the new building is located on the corner of Chiswell Street and Bunhill Row just outside the City of London boundary in London, E.C.1. SFP was originally appointed by Rosehaugh as Architects for the project in 1986. This engagement was formalised in a written contract dated 31 March 1989, the date that Rosehaugh sold the site and the building then nearing completion to Rosehaugh SC Limited. The scope of this engagement was extended by agreement by a letter from Rosehaugh to SFP dated 30 October 1989 to include the fitting-out works that were also added to Bovis' management contract. SFP arranged for the preparation of an outline specification and outline drawings and these were used by the quantity surveyors that Rosehaugh had appointed for the project, J.R. Coulthard & Partners to prepare a preliminary cost plan. These documents were then used as the basis of the management contract and to obtain tenders for that contract. Following the acceptance of Bovis' tender, the contract was dated 2 September 1988 and the work was to be completed, using a fast-track programme, in a 50-week period originally defined in the contract as being between 3 October 1988 and 2 October 1989 and, following the extension of the management contract to include the fit-out works, to 30 January 1990. In fact, practical completion was achieved on 6 April 1990. Meanwhile, Rosehaugh had appointed WPP as Mechanical and Electrical engineers and, again, this appointment was formalised in a written contract dated 31 March 1989 and, in like manner to the extension to SFP's engagement, was extended by agreement by Rosehaugh's letter dated 30 October 1989.

14. The basis of the management contract was that Bovis would manage, organise, supervise and procure the carrying out of the work in accordance with the outline scheme set out in the contract documents. Bovis had a general obligation to provide, carry out and complete the works in compliance with the specification and the works package documents. The work itself would be broken down into a series of work packages and each work package would be sub-contracted by Bovis to a work package subcontractor. A detailed procedure was set out in the contract for the identification of the work area to form each work package, for the preparation of work package tender documentation by Bovis, for the obtaining of tenders and the entry into of work package subcontracts. These stages were managed by Bovis but SFP was given an approval role before any stage was embarked on. Thus, SFP had an opportunity to approve or seek changes to the contents of each of the tender work packages and the work package subcontracts themselves. Bovis would itself carry out very little of the work needed to design or construct the building. Its roles were essentially management and supervisory in nature as well as to act as the co-ordinator of the many different parties involved in the construction of the building in such a relatively short period of time.

15. SFP was nominated in the management contract as "the Architect" whose functions under that contract included the issuing of architect's instructions, the provision of construction drawings save for those drawings to be provided by works package subcontractors pursuant to their design obligations and approve all designs prepared by those subcontractors. SFP also had to supervise the builders work during construction and prepare snagging and defects lists of such work. It also had to co-ordinate the design and supervisory work of all other consultants. WPP has analogous design and supervisory responsibilities for the mechanical and electrical services. Rosehaugh also appointed structural engineers, quantity surveyors and other professionals to assist in the design and supervision of the work.

16. It followed that the design and its co-ordination and the supervision of the mechanical and electrical work and of all builders and structural was carried out by a team that involved a group that included SFP, WPP, Bovis and the works package subcontractors including Crown House and Matthew Hall. The contents of Crown House's subcontract were provided in evidence but no personnel from Crown House were involved in the trial.

17. The management contract provided a detailed procedure for the issue and approval of drawings, which all who gave evidence at the trial suggested had been followed on this project. The procedure was set out in an updated Drawing Information Control document issued by Bovis to SFP under cover of a letter dated 14 November 1988. Every drawing would go through a number of drafts and could not be used for construction purposes unless the relevant issue was stamped FOR CONSTRUCTION. Drawings issued by SFP emanating from the members of the design team had to be issued under cover of an Architect's Instruction and, when issued onwards to a work package subcontractor, had to be re-issued by Bovis under a Management Contractor's Instruction. The documents making up the contents of each works package subcontract indicated what design work was to be undertaken by that works package subcontractor and such design work, described as the "Design Portion" in the management contract, was shown on drawings and related documents issued by the subcontractor to Bovis who first had to check them and then pass them onwards to all consultants who then also had to check them and add to them any appropriate comments. SFP then had formally to issue these drawings to Bovis who had formally to re-issue them to the works package subcontractor who had either to implement the work as shown on these drawings or undertake any required or necessary revisions to them for further checking and approval.

18. The mechanical, electrical, plumbing and fire protection work was designed in five stages.

1. An outline description of the services to be provided was prepared by WPP and then included by SFP in the outline specification which was incorporated into the management contract.

2. WPP prepared a specification for the electrical services, dated July 1988, and a second for the mechanical and public health services, dated August 1988. These documents and the relevant tender drawings formed the basis of the relevant works package subcontracts.

3. Once the management contract had been entered into, the detailed design process was undertaken involving the production by the works package subcontractor of the necessary schematic, working and installation drawings which were all submitted via Bovis to WPP for approval before being issued for construction by SFP. This design process was undertaken over a lengthy period lasting for most of the period of construction.

4. Two linked services fitting-out specifications were subsequently prepared. Firstly, WPP produced a detailed specification describing the mechanical services fit-out installation which was dated August 1989. This identified the particular requirements associated with the performance, workmanship, quality, equipment and installation required for the mechanical services fit-out. Secondly, this specification was used to define the extension of the scope of the management contract to include the fitting-out work which was defined in an outline specification entitled: "Fit Out Phase - General Specification" which was attached to the documents which extended Bovis' management contract and SFP and WPP's engagements in October 1989. This further specification identified the finishes and mechanical, electrical, lighting and power, public health and fire protection services the extended fitting-out works were to embrace.

5. The additional fitting-out work as defined in the two fitting-out specifications, was designed and detailed in further design work carried out by the works package contractors with approvals and instructions from the consultants and Bovis.

3.3. The Relevant Design and Construction Work

3.3.1. The Plant Room

19. The top floor of the building housed the plant room and lift motor room. The gross area of the principal floors of the building was 840 sq m but the top floor was set back approximately 7m on three sides and 3m on the fourth side to enable some external plant to be locate in the area of the surround outside the plant and lift motor rooms. The plant room was 11.5m x 7.6m with three external walls and a fourth wall which separated it from the lift motor room. The external walls were constructed of metal-faced insulated cladding panels and the internal wall of 100mm concrete blockwork. The floor was designed to consist of a 125mm thick concrete slab topped with a 50mm screed which rests on profiled metal decking. However, at some stage, the slab was increased in thickness to 175mm and the screed omitted. A continuous concrete upstand or bund was placed around the three external sides of the plant room. This was 220mm wide x 430mm high. This bund is, in effect, continued around the fourth internal wall since that wall was constructed from blockwork. The effect is to create an emergency tank-like structure within the floor with a capacity of about 35cu m. The floor was not built to falls. It was, therefore, save for normal building tolerances, flat and, subject to gulleys or other drainage, capable of creating a ponding effect for any water which might be discharged onto it.

20. The plant room housed 2 boilers, a cold water storage tank with a capacity of 18,000 litres, a pressurisation unit for the heating system and several heating pumps located on a concrete plinth. The pressurisation unit was used to control the supply of make-up water to the heating system and to accommodate the expansion and contraction of the water as its temperature varied. It included two expansion vessels with a capacity of 800 litres each. Sprinkler pipes, electrical cabling and other smaller plant room features were also housed within the plant room.

21. The relevant details to be considered are those relating to the method of tanking and waterproofing the floor, drainage from the boiler and away from the floor, the cable and pipe runs, particularly where these pass through the floor slab to the lower floors, other breakages in the floor tanking arrangements for doors and other entrances and the builders work needed in association with these details. The completed construction had, in respect to the features of the building with which I am concerned, to comply with relevant regulations concerned with electrical installations and cables, fire and firestopping of gaps and good design practice for waterproofing areas vulnerable to, or potentially capable of allowing flooding from, water discharges.

22. The particular need to consider and provide for water discharges arose because the 2 boilers and the heating system contained pressurised water and there was also a water storage tank with a relatively large capacity located within the plant room and expansion vessels. The plant room was to be subject to an automatic control system associated with external monitoring and remote manual control over all the main items of pant. However, the heating system was to operate automatically and unattended with only occasional inspections and maintenance visits. In consequence, there remained a small but real risk of significant water discharges into the plant room, and onto the plant room floor. Since this risk was foreseeable, it should have been obvious to all involved in the design of the plant room and its associated plant and installations would need to be designed so as to eliminate all risk of the leakage of significant quantities of water into the lower parts of the building from discharges into the plant room.

3.3.2. The Waterproofing of the Plant Room

23. The overall design of the plant room floor was settled in 1987. The decision was taken to design the floor with a flat concrete slab with supporting steelwork. The floor area where the plant room was to be located was to be cast with two drainage outlets in it to lead away the drainage needed to take away discharge from the equipment and pipework and a further rectangular hole to allow for a 450 x 300 duct to connect with staircase 1. Other holes through the slab needed for ducts, pipework or cabling for the services would be drilled through the slab at a later stage once the detailed requirements for the services had been designed and the precise location for the necessary drilling or cutting through had been settled.

24. The potential water discharges from the plant would be dealt with by placing a bund around the perimeter of the plant room by providing an upstand arrangement around the three external walls and using the internal blockwork wall to close the bund circle. It was suggested by Bovis that the use of the blockwork wall as one side of this bund was unsatisfactory as a detail since blockwork is not fully waterproof but this suggestion was not pursued since any shortcomings in this bund did not contribute to the water damage that occurred.

25. Any localised requirement for bunding around holes or plant would be provided for on an individual basis when the details of the services were designed and finalised. It was also decided that there was no need to create a waterproof tank within the plant room using the bunds and slab as the tank walls and bottom. Since the plant room was to be subject to continuous monitoring and maintenance, it was envisaged that discharges would be kept to a minimum and readily capable of being dealt with by the gulleys and waterproof or water resistant finishes that were envisaged. Any waterproofing of the floor would be kept to something such as a paint finish or membrane which could be added to the slab as a waterproof finish and would be decided upon as work proceeded. In consequence, the floor was designed to be flat since a slope would not be required for drainage purposes and any construction of the slab to falls would involve greater expense.

26. These design decisions were reflected in the tender and contract drawings and details. In particular, paragraph 3.9 of the outline specification of work provided that the general decorations would include a water/oil proof treatment to all bunded areas and an anti-dust finish to the floors of the plant/lift motor rooms and tender drawings provided by WPP provided for the gulley and duct holes. These decisions were taken by SFP in conjunction with Rosehaugh and were communicated to Bovis at a later stage. Mr Barnard of SFP was clear that this was the basis of the design and I accept that evidence. He thought, however, that Bovis had participated in the design meetings which led to the finalisation of this design approach but it is clear that the approach had been settled before the tender documents were finalised. Mr Readle, Bovis' senior site manager, clearly recollected that he had been led to understand in discussions with SFP's representatives that the plant room had not been designed to be watertight which, in context, meant that the design used a flat slab which would be subjected to a waterproof or water resistant finish. I accept that evidence. The extent to which WPP was involved in the decisions relating to the design concept of the plant room floor is not clear from the evidence. WPP's case was that the design of these plant room waterproofing arrangements did not fall within their areas of responsibility. However, whilst the tender designs were being finalised, WPP detailed the requirement for two gulley holes and a duct hole to be cast into the slab and, at the very least, WPP's design engineers would have been aware of the general design concept for plant room waterproofing arrangements.

27. The finish for the floor slab was not considered again until the gulley design work was being carried out by Crown House. On 28 February 1989, Crown House issued a Request for Information to Bovis which asked Bovis to confirm what floor finish in the plant room area was to be provided to enable a suitable gulley to be selected. This request was passed to WPP who replied on 14 March 1989 that they were still awaiting the tank room floor finish details. Following this exchange, Crown House addressed a further request to Bovis on 2 May 1989 which Bovis passed on to SFP who replied that the floor finish was already contained in the decoration schedule, a reference to the specified requirement for waterproof treatment of the floor contained in the preliminary specification.

28. It would appear that at some stage, probably soon after Crown House's second request for information in May 1989, SFP and Bovis discussed what waterproof treatment would be used on the plant room floor. This discussion would have taken place in the light of the advice of the Alan Marshall Partnership, the appointed Structural Engineer for this project, that was given to Crown House in a note dated 9 May 1989 responding to Crown House's request for information about the floor finish. This advice was to the effect that the finish was likely to be a rigid membrane applied direct to the concrete surface. However, the decision that followed this exchange that was taken by SFP and communicated to Bovis was to the effect that the floor was to be waterproof painted. No record of that instruction was adduced in evidence but I deduce that the decision to use waterproofing paint was taken by SFP and communicated to Bovis soon after the advice of Alan Marshall Partnership's note of 9 May 1989 was received and rejected by SFP. Given that Bovis was looking to the design team for a decision as to the type of floor waterproofing required in the plant room, Bovis would not have taken that decision itself without reference to, and an instruction from, SFP.

29. The next discussion about the plant room floor finish occurred when Bovis informed Crown House on 7 November 1989, in relation to Crown House's request for information relevant to the method of fixing the gullies to the slab, that: "the ninth floor plant room floor finish has not changed. It has always been a painted finish." This instruction from Bovis to Crown House, which repeated the instruction Bovis had received earlier in the year, was copied to SFP who did not challenged or query it.

30. At a design team meeting held on 4 December 1989 attended by, amongst others, Mr Barnard, Mr Callard and Mr Hpa, there was a brief discussion about the waterproofing of the plant room floor. A contemporary note on the copy of the minutes adduced in evidence suggests that Mr Barnard had stated that no further action was needed and that the floor had not been treated for water penetration. This must have caused WPP some concern since, on 22 December 1989, Mr Kett wrote to Mr Barnard and stated that WPP: "strongly recommend a waterproof membrane be provided to the floor finish in [the roof plantroom] to prevent penetration into the spaces below." Mr Kett's evidence was that he had become the lead mechanical engineer on the project in October 1989 and became aware of WPP's design intention that water discharges would be taken away by gullies that had been inserted into a membrane-covered floor. This showed to him that there was a need for the floor to be waterproofed and that he wanted the architect to consider achieving this by the use of a membrane or a screed placed over, but adhering to, the concrete slab.

31. There was no direct response from SFP to WPP to this letter but SFP obviously decided to confirm its earlier solution of waterproof paint. On 16 January 1990, the Building Services Management ("BSM") subcontractor raised with Bovis whether the plant room was as clean and dust free as would be expected in an office environment since such was needed for the BSM plant. This led to Bovis seeking an instruction from WPP as to what needed to be done. Mr Kett informed Bovis that the slab needed to be sealed and it appears that he was informed of SFP and Bovis' intention to install a waterproof painted finish whereupon he accepted that the necessary dustproofing to the floor and slab was to be provided.

32. The paint floor finish was applied, as appears from the minutes of a site meeting held on 1 March 1990, during the weekend following that meeting. Subsequently, following the preparation of a snagging list of work by Bovis dated 13 March 1990, some "waterproof remedial" work was carried out. Such remedial work as was carried out would have been carried out sometime in the following three weeks prior to practical completion that occurred on 6 April 1990.

3.3.3. The Gullies

33. The design concept for the gullies needed to drain the plant room floor had been prepared by WPP and was incorporated in the management contract by two references. Firstly, the drawing showing the mechanical services on the roof of the ninth floor (1251-M-103) showed two gulley holes in the area of the plant room with this notation: "100 [mm diameter] C.I. Floor Gulley ... connected to 100 [mm diameter] C.I. soil pipe at H[igh]/L[evel] ninth floor under." The second reference was contained in the Public Health specification which had a standard detail sheet included in it showing a typical method of connecting a floor outlet to a gulley trap and refers to a proprietary fitting made by Wade. That detail also showed a waterproof membrane made of asphalt or felt or a screed being used as the method of waterproofing the concrete slab. The Wade fitting is designed so that, when used in association with a membrane or screed, the grating lie proud with the surface of the membrane-covered floor.

34. Crown House replied on the indication given by the Alan Marshal Partnership given in May 1989 and the design concept provided by WPP in the tender specification and drawing and therefore specified a Wade fitting. It was for this reason that Crown House wrote to Bovis with a request for information on 3 November 1989 which stated that the specified floor gullies required a 15/20 mm thick floor finish if they were to lie flush with the floor. If a painted finish was to be used, the specified gulley would not work. Bovis replied informing Crown House that it should investigate an alternative grating, given the continuing intention to use a painted floor finish. It is a reasonable inference that it was this instruction, coupled with the discussion at the 3 December 1989 site meeting, which prompted Mr Kett to query with SFP the desirability of using a painted waterproof floor finish. However, this query was not responded to by SFP and the decision to use a painted floor finish was maintained. Nothing was evidently done to investigate an alternative gulley and the specified Wade gullies were installed. The result was that, given the absence of either a membrane or a screed, there was a lip of about 10 - 20mm which provides a ledge against which water ponding on the floor can build up. No discharge of water ponding on the floor would occur unless the water was at least 10 mm deep immediately adjacent to the gullies. No-one sought to have this lip eliminated either before installation or during the snagging and defects liability periods or at any time prior to the discharge of water giving rise to this action. The Architects for this development were the first defendant, Saillard Fuller & Partners ("SFP") and the services or mechanical and electrical engineers were the second defendant Watkins Payne & Partners (" WPP"). This claim is brought as a claim for contribution by Bovis against SFP and WPP claiming a contribution towards the overall settlement payment of £420,000. The claims are made under the Contribution Act 1978 on the basis that the payment represents a liability for damage that was incurred by Bovis and that each defendant, if sued, would have been liable for the same damage. It is, in consequence, necessary to decide what was the cause of the damage, whether either defendant had a potential liability for those causes of the damage and, following a complex series of assignments and claims against, and payments by, insurers, whether Bovis has made out the necessary requirements that precondition a contribution claim against the defendants under the Contribution Act.

3.3.4. The Service Holes

35. The service holes in question are the hole left in the slab when it was cast through which a pressurised air duct passes from the ceiling to stairwell 1 immediately below the plant room on its way to the roof and a hole or holes drilled through the concrete slab after it had been formed through which pass a sprinkler pipe and 6 electricity cables. The cables link 6 features of the pressurisation unit associated with the pressurised air in stairwell 1 to an emergency control panel situated in or adjacent to the plant room. The two or three holes in question are located close to each other in a space between boiler no.2 and one of the external walls of the plant room. The space is relatively confined by the boiler and equipment and with pipework passing over the area. However, the holes through which the duct, cables and sprinkler pipe pass and the interface between these features and the floor were capable of being inspected once the mechanical plant and its associated builder's work had been installed.

36. The holes in question were used to route a duct, cables and a pipe from the plant room to the staircase space below that were being used for two items of plant, the supply air pressurising fan located at the top of the service riser in staircase 1 and the sprinkler system. These were dealt with as part of separate sections of the work and in separate work packages as, respectively, part of the mechanical services and the fire protection systems. Electrical services and plumbing services were also dealt with separately as separate work packages. The electrical supply to mechanical services, such as cabling linking the air pressurising fan to the emergency control panel on which the necessary controls were located formed part of the separate electrical services which were, however, combined with the mechanical services work package into a two-in-one work package performed by Crown House.

37. At tender stage, the relevant design concept for the pressurisation unit was shown on three drawings and in the two specifications concerned with mechanical and electrical services. The air pressurisation system was provided for by a hole shown on the drawing depicting the mechanical services in areas including the plant room. This hole was described as being for a louvre and connection to the 450 300 staircase duct dropping to high level on the ninth floor. Associated with that were two drawings depicting the necessary electrical wiring layout for mechanical services at these levels. The first electrical drawing was an electrical wiring schematic drawing showing in general terms the required cabling linking the mechanical services to the relevant control panels. This showed, at tender stage, that three cables connected the control panel in the plant room to the fan located at high level on the floor below. This drawing was amended in April 1989 to add three further cables, making six in all. The second electrical drawing showed the electrical wiring layout for the mechanical services for areas including the plant room. This showed a cable tray running from the position of the relevant control panel to a point near the hole for the pressurisation duct and then dropping down to 300mm above floor level at a point near boiler no. 2 and travelling at that level to a point close to the duct hole where it passed through the floor slab and down towards the motorised pressure fans. This was only representational and it was not clear from the drawing where the tray was to pass through the slab save that it would be close to, but not part of, the hole left in the slab for the duct. In consequence, a hole would have to be drilled as part of the cable installation. The intention for a separate hole from the duct hole was also shown by the proposed size of the duct hole and the appropriate specification requirements for duct holes which only provided for the duct and its necessary protective packing and supports at locations where the duct passed through a floor slab.

38. The fire protection system was shown on a separate drawing prepared by WPP entitled: "showing sprinkler protection and dry riser installation - plant room roof". This showed a sprinkler main spur passing down from the layout of sprinkler pipes in the plant room roof through the slab to the false ceiling at ninth floor level at a point which was not precisely identified but close to the duct hole behind boiler no. 2.

39. The management contract provided the terms on which each works package subcontract should be entered into and what information Bovis was to obtain from these subcontractors. This information included the subcontractors' requirements for the holes required in the works executed by others and such drawings as were needed to enable the subcontract works to be carried out and completed. The specification also provided for the necessary protection of ducts, cables and pipes passing through floor slabs. This protection was required, in part, to enable there to be compliance with fire protection, to protect the building from water penetration and for the protection of electrical cables from water and moisture.

40. It followed that the precise method of giving effect to the intention of passing the cables and sprinkler pipe through the cast floor slab would need to be detailed in drawings prepared by the two works package subcontractors which would need to be passed to, and approved for construction by, the design professionals.

41. Only 2 drawings were produced by Crown House and none by Matthew Hall that were potentially relevant to the passage through the slab of the cables and duct, in Crown House's case, or the sprinkler pipe, in Matthew Hall's case. Both were initially produced on 6 May 1989, after the revision of the electrical schematic drawing increasing the number of cables passing through the slab from three to six in April 1989. After revision to suit WPP's comments, both were issued for construction on 25 July 1989 and it would appear from the date stamp on both that each was approved and issued by SFP to Bovis and by Bovis to Crown House on or soon before 24 August 1989. The first drawing showed the mechanical plant, ducting and pipework for areas including the plant room. All that was shown was a duct hole described as: "600 x 300 staircase duct" and a cross-reference in note 1 which directed: " for further setting out details refer to builders work drawing". This was the second relevant drawing that was produced which described the duct hole as: "600 x 450 opening in floor for staircase duct" with notes which included this as note 1: "all openings in slabs to have 100 wide x 150 deep above finished level, upstands around edge". Neither drawing related to, or embraced, the hole or holes needed for the cables and sprinkler pipe and the slab hole and accompanying note as to the upstand were clearly not referring to those cables or pipe or their associated holes and builders work. The apparent discrepancy on these two drawings between the dimensions of the duct and its associated opening was neither explained in evidence nor would appear relevant to this case. However, it would seem that the duct was in fact 450mm x 300mm is size and the opening 600mm x 450mm.

42. Both SFP and WPP sought to argue at the trial that the note requiring an upstand was relevant to, and governed, any hole drilled through the slab that was needed for the cabling or piping associated with the fans or sprinkler system even if it was not shown on the drawing. However, the drawing and its note clearly only refer to the holes specifically shown on that drawing. Any additional hole might well have had the same upstand requirement associated with it but any such hole and its associated builder's work would have needed an Architect's Instruction and a further or amended drawing to be issued and approved.

43. The duct installation work was carried out in September and early October 1989 and the work had been tested and finished by 4 October. The duct had an overall size of 540mm x 380mm and the hole was of the specified size of 650mm x 450mm. The duct was clad in Vicuclad insulation but, despite the requirement for an upstand curb around it, none was provided despite the presence of a gap between the insulation and the side of the slab. This absence of an upstand was never noted or commented upon during the snagging inspections . The installation of electrical work and sprinkler piping was to be undertaken in October but these activities were delayed by about 3 weeks on the 6 - 9 floors (which would include the runs down from the plant room) due to the late delivery of the fan coil units to one of which the cabling through the floor slab was to be run. Thus, the installation work of the relevant cables and pipes through the slab was delayed to early November 1989. This led to the discovery, initially by Matthew Hall, of the absence of a hole through the slab and the issue, by Bovis, on 23 October 1989, of a Management Contractors Instruction to Anchor Welding to: "cut hole through hollow rib steel in plant room for sprinkler pipework". This instruction was issued to SFP and WPP at the same time. This work would have been both extensive and time consuming since it involved drilling a large hole with a diamond drill. The hole was drilled on 25 November 1989, as can be seen from the minutes of the Progress meeting held on 28 November 1989 attended by, amongst others, Mr Readle and Mr Hpa of Bovis and Mr Callard of WPP. These minutes were circulated to, amongst others, Mr Barnard of SFP and Mr Ketts of WPP . Meanwhile the fan coil units were delivered to site and lifted into position on 19 November 1989 and the installation of the plant room general wiring, which would have included the relevant cabling from the control panel down to the fan associated with pressurisation in staircase 1, was complete by 28 November 1989 . The sprinkler works in the plant room were complete by 2 December 1989 . Thus, the cables and sprinkler pipe were installed almost simultaneously immediately following the drilling of the sprinkler pipe hole on 25 November 1989. Since there is no separate mention of a further hole being drilled at that time for the cables, the obvious inference is that the need for a hole for the cables was only discovered when the cabling was being undertaken and since, by chance, this need was discovered at the time that a sprinkler pipehole was being, or had just been, drilled in the same location as was needed for the cable hole, the opportunity was taken to run the cables through the same hole or a second hole drilled immediately next to the first.

44. No other evidence was adduced as to the circumstances surrounding the drilling of the sprinkler pipe and cabling hole or holes or of the approval of the design team of Bovis' instruction for this hole or holes. The only evidence of the builders work that was carried out was provided by a photograph of the hole taken soon after the flood had occurred on 14 May 1990. This showed that the pipe and cables were passing through the same hole or two holes drilled very close together. The pipe had not been surrounded with concrete and it was not clear what had been placed in the sizeable gap in the slab left between the cables and the surrounding concrete. It was suggested in evidence that rockwool filling with, possibly, a mastic or similar material placed on top, which had been located there and that this filling had then been washed out by the flood.

45. The photograph also showed a protrusion of a further cable out of the concrete adjacent to the cluster of cables but separated by a few millimetres of concrete. This cable had been cropped a few millimetres above floor level. It was not known what this protrusion was or whether the cable in question passed through the slab at all and no reliance was placed on it save that it, and the sides of the cables and pipe, had all been splattered with the same waterproof application as had been painted onto the floor of the plant room in March 1990 immediately before practical completion of the work. This splatter provided confirmation that the cables had been installed before practical completion and that the gaps had been covered in some way sufficient to allow the covering to be painted as part of the exercise of the waterproof painting or touching up of the floor. Further evidence that the installation of the cables and the associated builders work had been completed before practical completion was provided by the fact that the fans and pressurisation in staircase 1 had been tested prior to practical completion. That exercise would have required the cabling to have been installed and gone live before it started.

3.3.5. The Cables

46. The six cables in question were 2c, 3c and 7c PVC insulated sheathed and armoured cables. The specification required the cables to be protected by a duct where they passed through the floor slab which was to be packed with an easily removable non-combustible material and subsequently sealed with a purpose made sealing compound. These requirements were supplemented by Regulation 523-15 of the applicable I.E.E. Wiring Regulations which required that every entry to finished ducts, ducting or trunking should be placed so as to prevent the ingress of water and to be protected against such ingress. These requirements were not met and the cables, bound together as a core of six cables by tape, passed through the slab without a duct, packing, sealing or full protection from the ingress of water.

3.3.6. The Boiler Safety Discharge Valves

47. Each of the two boilers was installed with a safety discharge valve. This valve was designed to relieve excess hydraulic pressure in the heating system if such occurred through fault or malfunction. The valve would have been set so that it would open and allow a discharge through it at a pressure below the heating system's maximum working pressure so as to avoid a risk of a dangerous build-up of pressure within the system. Section 5.03 of the Mechanical and Public Health Specification provided that this safety valve should be installed complete with full base drip pipes to terminate at a floor drain gulley. No drawing was produced showing the safety valves and their associated discharge pipes and it is unlikely that any such drawing or detail was ever produced or needed. The necessary requirement was adequately provided for in the specification. When originally installed, the discharged pipes were installed so as to run downwards to floor level and then, having turned through a right angle, they ran horizontally towards an adjacent gulley, terminating at or close to the gulley in question.

48. On 27 February 1990, Mr John Callard of WPP and Mr Darryl Hpa of Bovis undertook an inspection of the mechanical services. Mr Callard noted that these discharge pipes, as they had been installed, created two potential hazards. Firstly, they would have allowed hot water or steam, if such was being discharged through them, to be discharged in a horizontal plane at or close to floor level. Thus, hot or boiling water could have been sprayed across the plant room with a consequent risk to the health and safety of anyone standing in its vicinity. Secondly, the horizontally runs at low level created a tripping hazard. In consequence, Mr Callard instructed Mr Hpa to add to the list being jointly prepared of the defects and other items requiring attention item 13 which read: "Remove bend on boiler safety valve discharge pipes". This was done and the discharge pipe ran vertically downwards from the discharge valve on the side of each boiler, terminating a few millimetres above the floor. This would have resulted in any water discharged from the valve discharging directly onto the floor at a significant distance from any gulley. However, any such discharge would have been more visible and obvious to any person monitoring or visiting the plant room. There is no evidence that Mr Callard or any other representative of either Bovis or WPP specifically considered whether the re-routing of the discharge pipes away from the gullies so as to leave them discharging directly onto the floor increased the risk of leaks and water damage to the building. Mr Hpa relied on Mr Callard. I find that no such consideration was given by either professional practice but that each should have given consideration to this question. Had they done so, each would have realised the need to check the waterproofing details associated with holes through the slabs and, specifically, would have checked the sprinkler pipe and cable runs through the slab.

49. The conclusion I draw from all the evidence is that Mr Callard assumed that the plant room was to be adequately tanked and waterproofed but did not independently check that this was so. In consequence, he assumed that this apparently minor change of detail would not make the building more susceptible to water damage. Apart from those who implemented the change, no-one else ever became aware of it nor gave any particular thought as to whether it increased the risk of subsequent water damage.

3.4. Snagging Work

50. Snagging work is work carried out, either before or after practical completion, to rectify defects or to complete work that has been left in an incomplete state or is otherwise not in accordance with the contract. As is usual in construction work of the kind carried out under the management contract, a detailed procedure for inspecting the work, drawing up snagging lists of work requiring attention and the execution of that work was put into practice prior to practical completion being certified. The plant room inspections that were undertaken were carried out by Mr Callard and Mr Hpa, so far as the mechanical and electrical work was concerned, and by Mr Barnard and Mr Gillespie, so far as builders work and architectural matters were concerned. Mr Hpa and Mr Barnard gave written and oral evidence about their role in the inspection and Mr Gillespie gave written evidence. Mr Callard, for reasons which were not explained, was not a witness in any capacity. From that evidence, it is clear that Mr Barnard did not participate in the inspections within the plant room but relied instead on Mr Hpa and his SFP colleagues for what should be listed for the inside snagging items.

51. Before snagging inspections started, WPP had written to Bovis on 26 January 1990 and reminded Bovis that a programme of snagging inspections was needed from Bovis who replied to Mr Ketts that Bovis had already agreed with WPP that the mechanical and electrical works would be witnessed and snagged by Mr Callard of WPP on an ongoing basis. Crown House prepared check lists of the items to be inspected. An example of these check lists, for heating and chilled water in the plant room, was adduced in evidence. This listed a long list of questions to be answered by the snagging inspectors from WPP and Bovis such as: "is pipework, fittings and valves installed to specification?" and "Are pipesleeves fitted to spec.?" The list cross-referred to the relevant specification references including paragraph 4.01 which deals with the necessary sleeves and firestopping requirements where pipes pass through floor slabs. Although not adduced, a similar check list for electrical works would have been produced. These lists formed the basis of the inspections carried out by WPP and the snagging inspections undertaken by SFP and Bovis.

52. The first inspection was that carried out by Mr Callard of WPP and Mr Hpa of Bovis on 27 February 1990. It was at this meeting that Mr Callard decided that the boiler safety valve discharge valves should be altered and incorporated this instruction in item 13 of the relevant list. It is clear that this work was undertaken soon afterwards and that there was no discussion with anyone else about the desirability or otherwise of introducing it. On 1 March 1990, Mr Barnard of SFP and Mr Gillespie of Bovis met and compiled a list of outstanding works with a view to prospective practical completion which was imminent. Item 1.2 of the resulting list provided for the waterproof sealant to the floor of the plant room to be applied during the forthcoming weekend. On 5 March 1990, Mr Kett of WPP produced WPP's Services Report no. 17. It was not clear from his evidence the extent to which the Services Reports were produced by him following his own inspection and the extent to which he relied on Mr Callard. He certainly ha d no recollection of inspecting behind boiler no. 2. Report 17 included, as one of the items of outstanding works, an item: "waterproof the roof plantroom". Although WPP's witnesses interpreted this as a reference to the outstanding waterproofing detail, be it an upstand, a membrane, concreting-in or screed, around the cables in addition to the waterproof painting work, I am satisfied that in the context of the inspections that had been undertaken, everyone's lack of knowledge of any problem with the cable detail and the fact that the paintwork remained outstanding, that this reference is only to the outstanding waterproof painting work.

53. This report was followed, in quick succession by final inspection sheets prepared by Mr Gillespie which were sent to the relevant subcontractors on 13 March 1990 and WPP's Services Report 18 dated 21 March 1990. The former referred to: "waterproof/antislip [paint]. Check Darryl if waterproof remedial". The later, based on an inspection that was undertaken on 15 March 1990, reiterated, as being outstanding, the previous Services Report entry: "waterproof the plantroom". Both references were to the waterproof paint which, as I have already found, was applied and then snagged during March or the early days of April.

54. The conclusion to be drawn is that no-one inspected the holes behind the boiler or, if they did, inspected them sufficiently cursorily as not to notice that the cable hole was stopped up with nothing more than rockwool, a mortar topping and waterproof paint with no protective upstand curb, membrane, concrete surround or screeding to provide a watertight seal in the gaps left between the slab and the cables or that the cables were not protected by a duct or seal. Equally, the absence of an upstand around the duct hole and around the sprinkler pipe was not noticed. Had a careful inspection been made of these detail in March 1990, I am satisfied that the absence of these protective details and cable ducting would have been apparent to anyone with any knowledge of good building practice or the relevant IEE requirements. Equally, the absence of an upstand around the duct hole was obvious but went undetected. Had that absence been detected, the inspector would then have been alerted to the possibility of unprotected cables or pipework at the adjacent location.

4. The Flood and Its Cause

55. Practical completion occurred on 6 April 1990 and the flood on 7 May 1990. The mechanical plant was to have been subject to the protection and continuous monitoring of a computer assisted Building Management System but since the suppliers of this system had not perfected the necessary software by the time that practical completion occurred, a temporary system of maintenance and inspection was put in place following practical completion since the building was unoccupied. This system involved a direct contract between Rosehaugh and Crown House whereby Crown House would make two tours of the whole building each week, maintain the plant at monthly, 3 monthly and 6 monthly intervals and provide an emergency call out service.

56. Additionally, during the period between 6 April 1990 and 7 May 1990, the BMS system was being installed by Airstream Control Systems Ltd. This work was being undertaken pursuant to a subcontract with Bovis but it did not form part of Bovis' contractual obligations under the management contract since the work was being performed after practical completion and was not snagging or defects liability work.

57. Finally, at practical completion, the egress velocities and pressure differentials in staircases 2 and 3 measured at 20% below the specified 50 pascals level. WPP instructed that ducting modifications were to be undertaken after practical completion and, on that basis, practical completion was certified as having occurred. There was no evidence adduced at the trial to enable me to determine what additional modifications were carried out or by whom and when this work was undertaken. Indeed, the evidence did not establish when, if at all, the specified pressure differentials in all parts of the system were finally established. The only evidence adduced suggested that pressurisation tests were rerun in October 1990 which, by inference from the absence of any evidence as to the results of these tests, showed that the system satisfied the specification.

58. The flood itself was discovered at about 8.30am on Monday 7 May 1990 by one of the security guards patrolling the premises. The cause of the flood was the incorrect setting of the pressurisation unit panel which had been turned from automatic mode to manual mode. This caused the pumps to run continuously rather than to stop once the preset heating system hydraulic pressure had been reached. The excess pressure within the system caused by this continuous running was then relieved through boiler safety valve no. 2. This discharge must have been running for some time, possibly since the last working day, Friday 4 May 1990, given the volume of water that had escaped onto the floor of the plant room and, once the build-up of water on the floor was sufficient, through the existing hole adjacent to the cables passing through the slab.

59. The identity of the person who reset the pressurisation unit from automatic to manual and whether this was accidental or deliberate was never discovered. The manual setting was only intended for use whilst the system was being tested, otherwise the automatic setting should have been used which was designed to cut out the pressurisation pumps automatically when the desired pressure within the hot water system had been achieved. The suggestion at the time was that either a representative of Crown House, undertaking maintenance and inspection duties, or of Airstream Controls Ltd, undertaking installation work on the CMS or of Bovis whilst supervising defects liability work moved the setting. Another candidate could have been one of the security staff employed by Rosehaugh. However, in the absence of any evidence as to what led to this error or vandalism and who was responsible for it, no finding to the effect that Bovis caused this flood through its subcontractor Airstream Controls Ltd or through some other mean is possible.

60. What is clear is that the flood would not have occurred but for each of the following:

1. If the discharge pipe had been left discharging into a gulley, the discharging water would have harmlessly discharged down the gulley until the erroneous manual setting of the pressurisation unit had been discovered.

2. If the cables passing through the floor slab had been protected by an upstand or concrete firmly embedding the cables into the slab, the build up of water would have collected on the floor and, eventually, have discharged down the two gullies located there.

However, the lack of a membrane, the existence at the interface between the gullies and the floor of a detail that was stepped rather than flat, the lack of fully waterproof upstands around all the walls of the plant room and the lack of an upstand around the air conditioning duct passing through the slab, even if these were details which could be criticised, did not cause or contribute to the flood that occurred. Indeed, given the presence of the hole, a discharge of water directly onto the floor and the extent of the discharge that occurred, the flood would still have happened had each of these details been provided if the cable hole had been left as it was in its unprotected state.

61. The absence of a duct leading the cables through the hole and of an upstand around the duct and the sprinkler pipework were not causative of the flood but, had these matters been discovered before practical completion, the hole around the cables would undoubtedly have been properly plugged since these other discoveries would have led to this problem being discovered at that time. Equally, had a cable duct for the hole through which the cables passed been supplied at the time of installation, the necessary plugging of the hole would have occurred as well since that would have been needed as a means of anchoring the duct.

62. It was suggested by both defendants that the hole could not have been present prior to practical completion and must have been caused or created in the period leading up to the flood. There is no evidence that the hole had been created in this way. It is probable that the hole had been plugged with rockwool which was then either directly painted or to which a thin cap of mortar and paint were added. The location of the hole, its appearance after the flood and the build up of water that must have occurred lead to the inference that such plug as had been created was washed out by the water, thereby creating the passage through to the stairwell below for a large volume of water to discharge over many hours down the stairwell. Furthermore, given that only about 4 weeks had elapsed since practical completion and that the building was unoccupied in that time, there is no evidence and no likelihood that the hole or its surrounding protection had been tampered with or touched by anybody. Thus, nobody opened up the hole and broke the chain of causation between the installation of the cables, the subsequent occurrence of practical completion on 6 April 1990 and the flood that occurred on 7 May 1990.

63. After the flood, the investigations that took place led to a rapid reinstatement of the building. Bovis was instructed by SFP to carry out the flood damage remedial works on 29 May 1990. This work included the filling and making good of the hole in the plant room through which the water passed. The cables were collared using a PVC pipe internally filled with GPG, the pipe was cast in a sleeve using a non shrink epoxy grout and the floor slab was made good in concrete to the same specification as the floor slab concrete and finished off with the same waterproof paint. Moreover, the boiler discharge pipes were adapted so as to run and to discharge into gullies.

64. Rosehaugh made an immediate claim on its building insurance. One of the issues in this case is whether Rosehaugh SC Ltd rather than Rosehaugh was the insured who received payment and indemnification under this policy. The claim was fully investigated by loss adjusters and, eventually, the full amount claimed was paid, apparently to Rosehaugh SC Ltd. The only evidence of payment was contained in a copy of the loss adjuster's report to GA dated 31 October 1990 which recommended making payment of the settlement sum to "the Insured" who was described in the report as "Rosehaugh SC". However, this report also stated:

The Insured is a large property and development company. Their subsidiary company Rosehaugh Estates erected the office block and transferred it to another subsidiary who are now the building owners.

In this passage, the adjustors appear to be referring, when referring to "the Insured", as being the whole group of Rosehaugh companies with the Rosehaugh holding company as the named insurer. In other words, the policy appears to be a block policy. However, it could be seen from documents that were adduced in evidence that the bulk of the sums paid over by GA represented the value of work undertaken by Bovis for Rosehaugh pursuant to SFP's instructions that had been given under the management contract, that Rosehaugh had incurred a liability to pay Bovis these sums under that contract and that Rosehaugh had paid Bovis these sums.

5. The Parties' Design Obligations

5.1. General

65. The principal issue that arises with respect to each engagement and claim is as to the scope of that engagement. Each defendant disputed that it had any relevant responsibility for the relevant features of the design or its approval or for the supervision of the relevant items of work. Further, both defendants argued that the relevant design and detailing work was solely the responsibility of Crown House and Matthew Hall and any co-ordination and checking for completeness that was required was the sole responsibility of Bovis. SFP and WPP's responsibility was confined to checking what had been provided with no further responsibility for co-ordination or for the checking for omissions. Thus, there lies at the heart of these contribution claims a demarcation dispute. This is not surprising since the management contract and the underlying project involved a complex series of professional and contractual inter-relationships. SFP was appointed as the lead professional for the design and supervision of this fast track project. WPP, as services consultant, had professional responsibility for the services but not, save in general terms, for the inter-related building and architectural work. Bovis were the managers and co-ordinators of the work with a contractual responsibility for its execution but were not themselves undertaking any of that work. Crown House and Matthew Hall were responsible for the detailed design of, respectively, the mechanical and electrical services and the fire protection services and for the execution of that work. Finally, the developer and client, Rosehaugh, had a role as members of the design team and whose representatives participated in the design decisions that were being taken.

5.2. SFP's Engagement

66. SFP's engagement with Rosehaugh dated 31 March 1989 embraced a memorandum of agreement with three appendices which described the works and the services to be performed and set out the collateral agreements SFP agreed that it would enter into with the funder and with the tenant or purchaser of the development if called upon to do so. The agreement also required SFP to carry out all the services set out in Part 1 of the standard RIBA Architects Appointment, 1982 edition as might be necessary to complete the project. The agreement required SFP to exercise all skill, care and diligence to be expected of a properly qualified and competent consultant architect. If any specialist professional or subcontractor was appointed, SFP was to be fully responsible for the direction and integration of any design carried out by such specialists in relation to the project and for those purposes to check any design produced by them. SFP was to use its best endeavours to see that the design complied with the client's and any statutory requirements.

67. The project was described as the construction of a multi-storey office block. The contractor and the other consultants were identified by name. The services included pre-construction, construction and other services. Of particular relevance to this contribution claim were the following defined services. SFP was to:

1. use its best endeavours to ensure that the quality of workmanship and materials were in accordance with the building contract. In doing so, constant inspection of the work by resident site staff was required to ensure that the work was in accordance with the conditions of contract. Additionally, defects and snagging lists would be prepared for use in monitoring completion of the works.

2. develop the scheme with the other consultants to scheme design stage and then to develop that design to detail design stage. This was to involve the co-ordination any design work of other consultants, specialist subcontractors or suppliers.

3. provide information to other consultants and specialist subcontractors as necessary to enable them to carry out their respective duties, direct and integrate their design work, using best endeavours to ensure compliance with the specification and client's and statutory requirements.

4. administer the terms of the building contract during operations on site and in relation to the completion of the works and to visit the site as appropriate to inspect generally the progress and quality of the work.

5.3. WPP's Engagement

68. WPP's engagement with Rosehaugh was also dated 31 March 1989 and embraced a memorandum of agreement with three appendices in similar form to the appendices to SFP's engagement. The particular services of relevance to this contribution claim were the following defined services. WPP was to:

1. establish the scope of the engineering services and emphasise the importance of full co-ordination in design. Develop the outline designs and produce sketch drawings showing major ducts and service runs. Submit final scheme designs for each of the engineering services to be included in the works. Collaborate throughout the design stage with other members of the design team to ensure that designs of engineering services are developed in a manner compatible with the structural and architectural concepts and that the co-ordination drawings of engineering services are developed in a manner compatible with structural and architectural services.

2. examine the subcontractors' proposals for the execution of the works and comment to the design team as may be necessary, collaborate with other members of the design team in resolving any problems which may arise from subcontractors' installation drawings and direct and integrate into the scheme the design work of other consultants and specialist subcontractors and co-ordinate and approve in principle all such design work to ensure compliance with the specification and the client's and statutory requirements.

3. make such visits to the site as WPP should consider necessary to satisfy itself as to the performance of any site staff that the works are executed generally according to the design and specifications and otherwise in accordance with good engineering practice.

4. initiate instructions for minor variations to the works and confirm the proposals to the design team.

5. inspect the works on completion and, in conjunction with site staff, record any defects.

5.4. The Extension of the Engagements

69. As has already been stated, these two engagements were extended in October 1989 to provide for the necessary architectural and services input into the fitting-out works for services once Rosehaugh decided to expand Bovis' management contract to provide for such additional matters. In each case, the extension was achieved by a letter from Rosehaugh dated 30 October 1989 which enclosed a specification of fitting-out works. The letter required each consultants to comply with the terms of the original engagement for such additional works. The particular works relevant to these contribution claims were: the provision of fresh air via ductwork in the builder's work shaft adjacent to staircase 1 and an extract air shaft in staircase 1, the provision of 2 gas fired boilers in the roof plant room and the extension of the sprinkler installation system from the connections at each level. The parts of the works relevant to this action were included in the original works but this extension of the engagements confirmed and reinforced both SFP and WPP's obligations with regard to such work.

5.5. Bovis and Crown House's Design Responsibilities

70. Bovis, as part of the detailed list of responsibilities set out in the management contract, had obligations to set out the works and to ensure that the works of all subcontractors were accurately set out. Bovis was also to co-ordinate and expedite all site works, monitor subcontractors' performance and supervise the production of all site work including the production by them of their drawings. So far as drawings were concerned, Bovis was to reproduce sufficient copies of drawings supplied by the professional team, or supplied by subcontractors once approved by the architect. Crown House was to provide everything necessary for the execution and completion of the subcontract works in accordance with the drawings and specifications it had been supplied with. This included all detailed specifications and working drawings which were to be submitted for approval pursuant to a master plan which had listed all drawings to be produced. These drawings included such drawings as were needed to set out and complete the subcontract works.

71. The staircase pressurisation fans and any necessary cabling were supplied as part of the mechanical services package although the specification for the cabling came within the electrical specification. The outline specification contained in the management contract required provision for pressurised units and that the electrical installations should comply with the I.E.E. Regulations. Clause 2.14.02 of the Electrical Services Specification provided that where cables passed through a floor, they should be protected by means of a duct projecting 1 metre above the floor slab. The duct was to be packed by an easily removable non-combustible material and subsequently sealed. Clause 4.01.11 of the Mechanical and Health Services Specification required all pipes passing through a floor to be fitted with loose sleeves and that the space between the pipe and the sleeve should be firestopped with rockwool and sealed with mastic. The I.E.E. Regulations required that all entry to ducts, ducting or trunking should be placed so as to prevent and to protect against the ingress of water and sealed to an appropriate degree of fire resistance.

72. It followed from these requirements that Crown House and Matthew Hall were required to produce drawings showing how and where the cable and pipe runs would pass through the slab and how these requirements for protection would be complied with. Since these requirements required cutting into and through the slab, the proposals would be needed in sufficient time to enable Bovis and the design professionals to check that the necessary structural drilling could be carried out safely and without damaging the reinforcement or structural integrity of the slab.

5.6. Builder's Work and the Interface between SFP and WPP's Engagement

73. The particular items of builder's work with which this case is concerned are the drilling of the hole through the slab, the construction of upstands around the pipes and cables or of any alternative provision of a waterproofing detail such as a concrete surround, waterproof membrane or waterproof painted floor. The case is also concerned with the provision of the necessary ducts, trunking, sleeves, packing, rockwool and mastic protection for the cables and pipe passing through the floor slab. In terms of design responsibility, these details raise duties with regard to deciding in principle what work details to use, providing the technical details of that work, checking that these elements of the work have been provided for and not overlooked and checking the work as it proceeded and once it had been completed to ensure that it was satisfactory and in accordance with the designs, specifications and I.E.E. Regulations.

74. Any of the four parties (architect, services consultant, management contractor and works package subcontractor) might in principle have a responsibility for each of these stages, none of these parties need necessarily be responsible for all of them and more than one party might in principle have a responsibility for a particular stage. The precise allocation of responsibility would depend on the terms of each of the relevant contracts and of the custom and practice of professional people undertaking design, checking and supervision work of this kind.

5.7. Design Details No Longer in Issue

75. Before and during the trial, a number of design features of the waterproofing arrangements had been criticised but which, given the expert evidence as to good design practice and my findings as to the causation of the loss, are no longer material. These details are: the use of the blockwork wall in the plant room to act as a bund; the decision to waterproof the floor by using a flat rather than a sloping concrete floor; the use of waterproof paint rather than a membrane or screed; and the use of gullies and a floor finish that left a lip between the floor and the gulley. The actual waterproofing specified was sufficient, assuming that the floor slab had not lost its integrity. The flood occurred because the overall waterproof design concept involved an integral slab which, as it turned out, was not provided.

6. Liability of SFP

6.1. The Parties' Cases and the Evidence

76. Bovis contended that SFP, as the architect, had the primary responsibility to specify the builders work associated with the mechanical services plant. This included the waterproofing details of the plant room floor. Since SFP decided on a waterproofing scheme whereby: (1) the floor would be flat and not sloping; (2) a bunding arrangement would be used around the walls that might not be completely watertight; (3) a membrane would not be used but there would be reliance instead on waterproof painting; and (4) watertightness would be guaranteed if the holes through the floor slab were watertight, it was incumbent on SFP to specify upstands for all openings and the use of concrete backfilling. Furthermore, SFP should have been alerted to the absence of appropriate detailing for the relevant hole when it received what amounted to a request for an Architect's Instruction for the sprinkler pipe hole to be drilled and should then have instructed an upstand and concreting in. Had that been instructed, the subsequent use of that hole for the cable would not have left the hole unprotected.

77. Furthermore, SFP should have noticed the absence of adequate waterproof protection around the hole even though the necessary measures had not been specified as well as around the adjacent duct which had not been provided with the specified upstand. These errors should have been spotted in any case but should have looked out for during the snagging inspections since the only risk to the waterproofing design strategy of the plant room floor was the service holes through the floor.

78 The architect expert witnesses agreed that the formation, cutting and protecting of holes for pipework and cables was the responsibility of SFP and that SFP was also responsible for the general inspection of those elements of the work for which it had design responsibility. However, Mr Crowther, the expert architect called by SFP, felt that in practice, the details of the builder's work associated with mechanical plant were usually left to the services consultant to check, particularly on a large job. In any case, an upstand was specified on Crown House's builders work drawing for mechanical plant. Moreover, the failure to notice the absence of adequate waterproofing was marginal given the location of the hole behind the boiler and the likelihood that it was covered up with paint and rockwool and, possibly, debris.

79. SFP contended that sufficient detailing of the requirement for an upstand around the cables was provided in Crown House's mechanical services drawing and the contract specification. As for inspections, it contended that it carried out sufficient inspections and any failure to provide a concreted in cable was masked by rockwool.

6.2. Liability of SFP

80. I cannot accept that SFP carried out its supervision functions with reasonable skill and care. SFP had decided on the waterproof strategy of the floor, requiring as it did complete integrity. It was clearly part of SFP's design duties to ensure that all necessary details were specified. In relation to holes through the slab, that included such upstands or concreting in as was required for waterproofing purposes. The essential need for integrity should have been apparent throughout but SFP should have been reminded of the need to check that all necessary details were in place on several occasions: (1) in May 1989 when the waterproof treatment of the floor was being discussed; (2) during the discussions about floor treatment in December 1989; (3) during further similar discussions in March 1990; (4) following WPP's advice in March 1990 that the waterproof paint required to be applied and (5) when undertaking its enhanced role following the extension of its service to the finishing work.

81. SFP should also have been alerted to the need for builders work detailing in relation to the particular hole in question when it received notification from Bovis on 23 October 1989 of Bovis' intention to cut that hole through the floor. SFP should have checked that the necessary detailing was provided and, once the hole had been cut, that the builder's work was in place. It was not sufficient for SFP to rely on the original Crown House drawing since that was a mechanical drawing whereas the hole was being cut for sprinkler pipework and electrical cabling.

82. However, SFP's principal and particular failing was in not inspecting either the duct hole or the cable hole and not noticing the absence of an upstand, which was specified, or appropriate details around the cable, which were not specified. These should particular locations should have been specifically searched out and inspected given their potentially critical vulnerability. Had that been done, any covering up with rockwool would have been discovered and this covering up cannot now be relied on as a justification for SFP to have missed noticing the lack of appropriate watertight detailing around the cables. The evidence in relation to the inspections which were carried out suggests that no inspection of this hole was ever undertaken.

83. I conclude that SFP was in breach of duty in failing to be aware of the need to check specifically that the hole was adequately protected, in failing to be aware of the absence of appropriate builder's work details and, particularly, in failing to notice during snagging inspections that the hole was unprotected or that there were no upstands around either the sprinkler pipe or the duct. These breaches of duty caused the flood damage since, had there been no such breaches, adequate protection would have been provided and the flood damage would not have occurred.

7. Liability of WPP

7.1. The Parties' Cases and the Evidence

84. Bovis contended that WPP had a duty to ensure that builder's work detailing had been specified by others and had then provided during construction. This duty arose because WPP had to ensure so far as reasonably possible that the services were installed in compliance with the I.E.E. Regulations and also were protected from possible water damage. Moreover, WPP had a general duty with regard to the waterproofing scheme as was evidenced by its concern with screed and waterproofing details during the course of the work. WPP had a particular duty to check that the necessary waterproofing details to be provided by others had in fact been finalised and issued. This duty crystallised on two occasions: (1) when WPP received notification on 23 October 1989 that a service hole was to be cut and (2) when WPP decided on the alteration of the discharge pipe detail so that the pipe discharged directly onto the floor and not into a gulley.

85. WPP's case was that it was SFP who was responsible for waterproofing arrangements. So far as inspections were concerned, there was no evidence that the inadequate builder's work detailing around the hole was evident on 15 March 1990 when it made its last inspection.

7.2. Liability of WPP

86. The hole for the cables was drilled in November 1989 and the cables were installed soon afterwards through the hole. WPP should by then have been aware that there was no provision for a hole for the necessary fire sprinkler pipe and cables, it being known from an early stage of the design process that both of these details would have to pass through the floor. WPP, in checking the Crown House and Matthew Hall drawings, should have ascertained that this hole was not provided for. However, even if no-one had ascertained that this hole had not been provided for previously, that absence was, or should have been, obvious when, on 23 October 1989, WPP received a copy of Bovis' notification that it was to drill a hole through the slab. This document was a copy of Bovis' instruction to the appropriate subcontractor to cut a hole through the slab for the sprinkler pipework. On receipt of that document, WPP should have looked to ensure that the details for firestopping and waterproofing were provided for. This investigation would have shown that the hole would also be used for the fan coil unit's cabling and a further check should have been undertaken to ensure that the sleeving required by the I.E.E. Regulations had been provided and that the cables were free from the danger of water ingress and damage.

87. The necessity for checking these details should have been apparent: (1) on receipt of the notification that the hole was to be cut; (2) when WPP raised with SFP the question of waterproofing details in December 1989 and got no adequate response; (3) when the snagging inspections took place; (4) when the absence of waterproofing painting was noticed and (5) when undertaking additional checks on the design of the services once WPP's engagement had been widened. The absence of upstands around the duct and sprinkler pipework was so glaringly obvious that the inevitable conclusion rises that WPP did not inspect these details at all during snagging inspections, notwithstanding their inclusion on the relevant snagging inspection check list. Furthermore, the WPP personnel undertaking the relevant snagging inspection should have looked for the relevant drawing and, on looking for it, would have discovered that there was no drawing showing the hole and its accompanying builders work details. This would have alerted the inspector to make a particular inspection of the hole and that would have revealed the absence of a sleeve, upstand, concreting in and other appropriate waterproofing details. The evidence points irresistibly to the conclusion that no-one from WPP inspected this particular hole or adjacent duct hole although, in general terms, WPP had a duty to check that adequate waterproofing details had been provided for the duct and the pipework and cables.

88. I conclude that WPP was also in breach of duty in failing to be aware of the need to check specifically that the hole was adequately protected, in failing to be aware of the absence of appropriate builders water protection details and, particularly, in failing to notice during snagging inspections that the hole was unprotected or that there were no upstands around either the sprinkler pipe or the duct. These breaches of duty caused the flood damage since, had there been no such breaches, adequate protection would have been provided and the flood damage would not have occurred.

8. The Contribution Act

8.1. The Contribution Act Summarised

89. The purpose of the Contribution Act is set out in the Long Title to the Act which provides that it is an Act: "to make new provision for contribution between persons who are jointly or severally, or both jointly and severally, liable for the same damage and in certain similar cases where two or more persons have paid or may be required to pay compensation for the same damage".

90. The Contribution Act provides in sections 1(1), 1(6) and 6(1) a three-tiered definition of who may claim contribution and from whom contribution may be claimed. The first two of these sections have been the subject of sustained judicial consideration in the recent decision of the Courts of Appeal in Co-operative Retail Services v. Taylor Young Partnership. In that case, Brooke L.J. suggested that it was easier to construe these two sections if they are run together and his elision of them reads as follows:

Subject to the following provisions of this section, any person whose liability in respect of any damage has been or could be established in an action brought against him in England and Wales by or on behalf of the person who suffered the damage may recover damage [contribution] from any other person whose liability in respect of the same damage has been or could be established in an action brought against him in England and Wales by or on behalf of the person who suffered the damage.

Section 6(1) reads:

Interpretation

A person is liable in respect of any damage for the purposes of this Act if the person who suffered it (or anyone representing his estate or dependants) is entitled to recover compensation from him in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise).

91. It is also necessary to set out other sections of the Act. These are as follows:

1(2) A person shall be entitled to recover contribution by virtue of subsection (1) above notwithstanding that he has ceased to be liable in respect of the damage in question since the time when damage occurred, provided that he was so liable immediately before he made or was ordered or agreed to make the payment in respect of which the contribution is sought.

1(3) A person shall be liable to make contribution by virtue of subsection (1) above notwithstanding that he has ceased to be liable in respect of the damage in question since the time when the damage occurred, unless he ceased to be liable by virtue of the expiry of a period of limitation or prescription which extinguished the right on which the claim against him in respect of the damage was based.

1(4) A person who has made or agreed to make any payment in bona fide settlement or compromise of any claim made against him in respect of any damage (including a payment into court which has been accepted) shall be entitled to recover contribution in accordance with this section without regard to whether or not he himself is or ever was liable in respect of the damage, provided, however, that he would have been liable assuming that the factual basis of the claim against him could be established.

2(1) Subject to subsection (3) below, in any proceedings for contribution under section 1 above the amount of the contribution recoverable from any person shall be such as may be found by the court to be just and equitable having regard to the extent of that person's responsibility for the damage in question.

2(2) Subject to subsection (3) below, the court shall have power in any proceedings to exempt any person from liability to make contribution, or to direct that the contribution to be recovered from any person shall be amount to a complete indemnity.

2(3) Where the amount of the damages which have or might have been awarded in respect of the damage in question in any action brought in England and Wales by or on behalf of the person who suffered it against the person from whom contribution is sought was or would have been subject to-

(a) any limit imposed or under any enactment or by any agreement made before the damage occurred;

(b) any reduction by virtue of section 1 of the Law Reform (Contributory Negligence) Act 1945 ...

the person from whom the contribution is sought shall not by virtue of any contribution awarded under section 1 above be required to pay in respect of the damage a greater amount than the amount of those damages as so limited or reduced.

6(2) Reference in this Act to an action brought by or on behalf of the person who suffered any damage include references to an action brought for the benefit of his estate or dependants.

7(3) The right to recover contribution in accordance with section 1 above supersedes any right, other than an express contractual right, to recover contribution (as distinct from indemnity) otherwise than under this Act in corresponding circumstances; but nothing in this Act shall affect-

(a) any express or implied contractual or other right to indemnity;

(b) any express contractual provision regulating or excluding contribution;

which would be enforceable apart from this Act (or render enforceable any agreement for indemnity or contribution which would not be enforceable apart from this Act).

92. In interpreting the Contribution Act and in determining the mischief it was intended to remedy and the public interest it was intended to protect and secure, three factors should be borne in mind. Firstly, the Long Title shows that the Contribution Act was intended to reform the law and to provide general and wide ranging powers to the court to order that compensation payable in respect of damage should be shared amongst any person liable in respect of the same damage. Secondly, the Act was preceded by a Law Commission Report which showed that the Act was intended to remedy the unsatisfactory situation under the preceding law of contribution arising from section 6(1) of the Law Reform (Married Women and Tortfeasors) Act 1935 and the decision of the House of Lords in George Wimpey & Co Ltd v. British Overseas Airways Corporation. The Law Commission Report also recommended that the preceding law was unsatisfactory and lacked clarity, matters which the proposed Bill was intended to remedy. These included the desirability of extending the basis of contribution from joint tortfeasors to anyone who had a liability for the damage in question. It is necessary to treat the Report with circumspection however since, as was made clear in the judgment of Brooke LJ in the Co-operative Retail Services case , the wording of the suggested remedy proposed by the Law Commission in the draft Bill annexed to the Report was not adopted. Different language was in fact used in the Contribution Act. Thirdly, as is made clear by the decision of the Court of Appeal in Friends' Provident Life Office v. Hillier Parker May & Rowden (a firm) (Estates and General plc and others, third parties), the Contribution Act, in defining what and from whom contribution may be sought, uses broad language. As Auld LJ stated: "it is difficult to imagine a broader formulation of an entitlement to contribution. ... The 1978 Act was clearly intended to be given a wide interpretation."

8.2. The Contribution Act Issues

93. Given the definitions contained in the Contribution Act, it is necessary to determine these issues: (1) whether Bovis: "was liable in respect of damage suffered by another person"; (2) whether SFP and WPP are: "any other person liable in respect of the same damage"; and (3) "the amount of the contribution recoverable having regard to the extent of [SFP' ;s and WPP's] responsibility for the damage in question" (see sections 1(1), 1(6), 2(1) and 6(1) of the Contribution Act).

94. These issues, in the context of the factual background to Bovis' claims against these defendants, give rise to difficult questions of the construction of that Act and necessitated my restoring the case for a further fourth day's full argument following the conclusion of the hearing. These difficulties arose because of the procedural history of this case by Rosehaugh. In summary:

1. Rosehaugh PLC had an annual combined contract works and third party liability insurance policy for the premium year starting on 6 April each year with CU for all of Rosehaugh's projects being undertaken during that premium year. The insured were all associated and subsidiary companies of Rosehaugh, the management contractor, all subcontractors and tenants fitting out contractors and Rosehaugh's architects. The cover was for all loss or damage to the insured property, subject to the exceptions set out in the policy.

2. During the course of the work, by a sale contract dated 31 March 1989, Rosehaugh divested itself of its interest in the property to a company which was a joint venture vehicle owned by another Rosehaugh company and a Japanese company. The transferee company changed its name soon afterwards to Rosehaugh SC Ltd.

3. Practical completion was certified as having occurred on 6 April 1990 before the pressurisation system was fully functioning.

4. The damage occurred on 7 May 1990 and was reinstated by Bovis on Rosehaugh's instructions and paid for by Rosehaugh.

5. Rosehaugh immediately made a claim on the property damage section of its buildings insurance policy covering the property and the insurer, GA, paid the claim out in full in about October 1990. This claim did not include a claim for loss of rental income. It remains disputed which Rosehaugh companies were insured under the policy and which company received the payments.

6. Rosehaugh made a claim against Bovis on 6 September 1991 which Bovis did not admit or make payment towards.

7. Rosehaugh went into liquidation and, on 23 August 1994, the liquidator assigned to GA its rights and claims against Bovis under the management contract. GA gave Bovis written notice of this assignment on 31 August 1994.

8. GA started proceedings against Bovis in its own name on 1 September 1994. This claim included a claim for the property damage for which it had indemnified Rosehaugh and an additional claim for £112,764.42 representing Rosehaugh's loss of rental income.

9. Bovis then notified SFP and WPP, on 28 July 1997, that it was claiming an indemnity or contribution from them for the then outstanding claim being brought against Bovis by GA.

10. GA's total claim against Bovis was for a sum of approximately £ 420,000. It was settled and the agreed sum of £350,000 was incorporated in a Tomlin Order dated 3 April 1998. A further agreed sum was paid by Bovis to GA for £70,000 on account of GA's costs soon afterwards. This settlement took no account of Bovis' possible immunity from liability to Rosehaugh as a result of the joint names insurance policy taken out for the project.

11. Bovis claimed indemnification from its liability insurer Eagle Star for its loss represented by the sums for principle and costs that it had paid GA. Eagle Star indemnified Bovis in full.

12. Bovis and Eagle Star then started proceedings against CU under the joint names policy in January 1999. These were the proceedings that David Steel J. dismissed in the Commercial Court on 29 November 2000.

13. Bovis also pursued these contribution proceedings against SFP and WPP in this action started on 27 March 2000, just within the period of two years allowed by the Limitation Act from 3 April 1998 when Bovis' right to claim contribution accrued.

8.3. Bovis' Liability

8.3.1. The Nature of Bovis' Liability

95. It must first be established, in any claim under the Contribution Act, whether or not a party in Bovis' position: "was liable in respect of damage suffered by another person". Given the extended definition of this phrase provided by sections 1(6) and 6(1) of the Act, this involves, on the facts of this case, the following questions to be answered:

1. When is Bovis' liability to be considered?

2. What has to be shown to satisfy the requirement that Bovis was liable?

3. To whom must that liability be shown?

8.3.2. The Date of Bovis' Liability

96. The first question arises from the fact that Bovis settled with GA and such liability as Bovis can claim contribution towards relates to that settlement. Furthermore, once Bovis settled with GA it ceased to be liable even if it had previously been liable. However, section 1(2) of the Contribution Act makes it clear that the settlement is no bar to a contribution claim. Following a settlement, the test is whether or not Bovis was liable in respect of the flood damage immediately before the settlement was agreed on 3 April 1998.

8.3.3. The Fact of Bovis' Liability

97. The second question relates to what has to be shown in order to establish the liability in question. Since Bovis settled with GA, section 1(4) of the Contribution Act comes into play. The defendants accepted that Bovis made the payment in question following a bona fide settlement of a claim made against it by GA. Thus, to paraphrase section 1(4), Bovis is entitled to recover contribution if it can show that the settlement payment was made in respect of damage without regard to whether or not Bovis itself is or ever was liable in respect of that damage, provided that Bovis can show that it would have been liable assuming the factual basis of the claim against it could have been established.

98. The claim and its compromise was both in respect of Bovis' liability to Rosehaugh for the flood damage. The claim, although brought by GA, was an assigned claim and GA would have had to have established at trial, had the claim not been compromised, everything that Rosehaugh would have had to have established had it not assigned the claim to GA but, instead, had proceeded to trial itself.

8.3.4. The Factual Basis of GA's Claim Against Bovis

99. The factual basis of that claim was set out in GA's statement of claim. This pleaded a series of terms of the management contract relating to Bovis' several relevant contractual obligations owed to Rosehaugh that were concerned with carrying out the work, co-ordinating the design work of the various parties undertaking design functions, supervising the work, ensuring that the work was carried out in accordance with the terms of the contract and remedying any breaches of contract or defects in the work during the defects liability period. The breaches pleaded included the provision of a hole with no adequate protection. These breaches were alleged to have led to the water that was discharged onto the floor flowing through the hole and damaging the works when it would otherwise have caused no damage. The loss claimed was the sums alleged to have been paid by Rosehaugh to Bovis for the remedial work, the professional fees incurred and the loss of rental income resulting from the flood. The pleading also recited the assignment of Rosehaugh's cause of action to GA.

100. It follows that the existence of those pleaded contractual obligations, their breach and the consequent loss incurred by Rosehaugh must all be assumed to have occurred. These matters were all factual matters on which GA's claim was based. The critical question is as to whether Bovis would have been liable to Rosehaugh on 3 April 1998 immediately before it settled with GA assuming the existence of those facts.

8.3.5. Bovis had no Notional Liability to Rosehaugh because GA did not Indemnify Rosehaugh for any Established Loss

101. I must now deal with an argument mounted by SFP to the effect that Bovis is now required to prove, but has failed to prove, that Rosehaugh paid for the rectification work, was insured for this loss by GA and was then indemnified for that loss by GA. Section 1(4) of the Contribution Act would appear to obviate the necessity of Bovis now having to establish these facts as opposed to relying on the assumption provided by that section that they have been established. However, in my judgment, Bovis succeeded in establishing these facts for the following reasons.

1. Who Was the insured under the GA policy?

102. The buildings policy was not adduced in evidence. However, two interim and the final loss adjuster's reports were adduced in evidence. These reports defined "the insured" as Rosehaugh SC. However, as is to be seen from the quotation from the first report that I have already set out , the insured was also described as a large property owning and developing company which had developed the site under their subsidiary company Rosehaugh. This description aptly describes a situation in which the insured was the same as the insured in the joint names policy, a copy of which was adduced in evidence. That insured was described as: "Rosehaugh plc and/or associated and/or subsidiary companies". I deduce that the insured under the buildings policy was Rosehaugh PLC and its associated companies, which would have included Rosehaugh SC Ltd, which was the vehicle for a joint venture between Rosehaugh and an outside company, and Rosehaugh which was a subsidiary company of Rosehaugh PLC. Thus, both Rosehaugh and Rosehaugh SC Ltd were insured.

2. Who Made the Claim?

103. It is not clear in which Rosehaugh company the claim was made but, given the wording of the loss adjuster's reports, it is likely that Rosehaugh SC Ltd actually made the claim. However, it is immaterial who made the claim, the critical questions are whether the company who incurred the loss was also indemnified and whether that company was Rosehaugh. Given that Rosehaugh SC Ltd was also an insured under the policy, any claim made in its name was clearly made as principal and, additionally as agent for the Rosehaugh insured company who suffered the loss if that company was different.

3. Who Incurred the Loss?

104. Rosehaugh incurred the loss resulting from the flood damage. The flood damage was remedied by Bovis and its works package subcontractors under the terms of the management contract. The work was instructed by Architects Instructions issued by SFP, the principle one of which was dated 29 May 1990 which described the Employer as Rosehaugh. The work was valued in Interim Certificates issued by SFP to Rosehaugh which named that company as the Employer. These certificates were paid by cheques drawn on Rosehaugh which were sent to Bovis. One such cheque, to meet Interim Certificate No 2, was paid following an internal note of Rosehaugh's issued on 11 July 1990 for payment by 18 July 1990. Thus, Rosehaugh incurred the loss, pursuant to its obligation to rectify the damage for Rosehaugh SC Ltd imposed on it by the terms of the sale contract.

4. Who Was Indemnified?

105. The identity of the recipient of the cheques drawn by GA in settlement of this claim was not clear from the evidence adduced at the trial. However, given the terms of the loss adjuster's advice to GA in its reports, it is likely that that recipient and payee was Rosehaugh SC Ltd. However, the subsequent assignment of rights to GA was made by Rosehaugh and the statement of claim in GA's action against Bovis brought to enable GA to recover the loss incurred as a result of the flood damage pleaded that GA had: "insured and compensated Rosehaugh in respect of the [flood damage]". This claim was then compromised by Bovis and the agreed sum in settlement was incorporated in a Tomlin Order. These matters lead to the conclusion that Rosehaugh, who had already incurred the loss, was the ultimate recipient of the payments made by GA. The initial payments from GA to Rosehaugh SC Ltd would have been to that company as agent for Rosehaugh.

106. In any case, even if Rosehaugh was not in fact indemnified by GA, I have already shown that GA's assigned claim against Bovis was made on the factual basis that Rosehaugh had been fully indemnified by GA so that I must proceed on that basis.

5. Conclusion - Rosehaugh's Indemnification

107. Thus, Rosehaugh was the insured, suffered the loss in question and was indemnified by GA for that loss. Even if Rosehaugh SC Ltd was in fact indemnified by GA, the effect of section 1(4) of the Contribution Act is to require Bovis' contribution claim to be based on the factual assumption that GA fully indemnified Rosehaugh.

8.4. Was Bovis Liable to the Party Suffering Damage?

8.4.1. Introduction

108. The settlement used by Bovis to found this contribution action was the settlement that it reached with GA on 3 April 1998. Sections 1(2) and 1(6) of the Contribution Act make it clear that to recover a contribution towards that settlement, Bovis must now be able to establish that it would have had a liability to the party suffering damage which could have been established in a notional action brought by or on behalf of that party against Bovis immediately before Bovis' liability ceased as a result of that settlement. Rosehaugh was obviously the party that suffered the damage in question. However, Rosehaugh's cause of action against Bovis in relation to that damage had been assigned by Rosehaugh to GA on 23 August 1994. Thereafter, Rosehaugh had no right to sue Bovis on that cause of action so that, on the face of it, Bovis had no liability to Rosehaugh on 3 April 1998. This difficulty was sought to be surmounted in any one of two ways by Bovis:

(1) Given the wide definition of the words: "liable in respect of any damage" in section 6(1) of the Contribution Act, it was argued that Bovis' notional liability that must be established was, following the assignment, Bovis' original liability to Rosehaugh which had been transferred to GA by the assignment.

(2) Alternatively, it was argued that, given the assignment, the words in the Contribution Act requiring the notional action to be one brought: "by or on behalf of the party suffering the damage [ie Rosehaugh]" were satisfied by establishing a liability to GA, despite the strained construction that this entailed.

109. It was also argued, both as a second and as an alternative basis of recovery, that Bovis could rely on a separate notional liability, namely on GA's liability to Rosehaugh. This argument focused on the fact that immediately following the flood damage, GA had a contractual liability to indemnify Rosehaugh, the party who had suffered that damage. Having indemnified Rosehaugh, GA then made a claim against Bovis which it was argued could be characterised as a Contribution Act claim. This claim was settled when Bovis agreed to pay GA a contribution amounting to a full indemnity towards GA's liability to Rosehaugh. It was then argued that Bovis may now bring a further contribution claim against SFP and WPP claiming from these parties a contribution towards Bovis' settlement payment to GA. The basis of this second contribution claim is that Bovis can rely on section 1(4) of the Contribution Act and on the factual basis of the claim made against it by GA and, in consequence, need not show that it was liable to Rosehaugh immediately before that settlement was reached.

110. This alternative basis of Bovis' claim against SFP and WPP must, however, surmount a further difficulty arising from Rosehaugh's assignment of its claims against Bovis to GA before the critical date, namely 31 August 1994 when GA first notified Bovis if its claim against Bovis. As a result, the defendants argued that Bovis could only have been liable to pay contribution to GA under the Contribution Act if GA had been able to rely on section 1(3) of the Contribution Act because, by the date of GA's notification, Bovis had no liability to Rosehaugh. The defendants argued that GA could not have relied on section 1(3) and that, in consequence, Bovis had no notional liability to Rosehaugh in April 1998 when it settled with GA. Thus, GA had no claim against Bovis whose settlement can now form the basis of Bovis' reliance on section 1(4) to claim from these defendants.

8.4.2. The Assignment from Rosehaugh to GA

111. Since Rosehaugh had assigned its cause of action against Bovis to GA before 3 April 1998, Rosehaugh could not have sued Bovis in relation to the flood damage caused by Bovis' breaches of its contract with Rosehaugh on that date. The action brought by GA against Bovis whose settlement grounds this contribution claim was based on an assignment whereby: "Rosehaugh hereby assigns to GA the Claim to hold unto GA absolutely". "The Claim" ; was defined as: "such rights, remedies or claims that Rosehaugh may have against Bovis arising out in relation to or arising out of a written management contract dated 2nd September 1988."

112. This was a legal assignment of Rosehaugh's rights of action against Bovis of which GA had given Bovis written notice. Section 136 of the Law of Property Act 1925 defines the effect of this assignment as follows:

Any absolute assignment by writing under hand of the assignor ... of any debt or other thing in action, of which express notice in writing has been given to the debtor ... or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law ... to pass and transfer from the date of such notice-

(a) the legal right to such a debt or thing in action;

(b) all legal and other remedies for the same; and

(c) the power to give a good discharge for the same without the concurrence of the assignor;...

113. The effect of this assignment was that Rosehaugh, once Bovis had been notified in writing of the assignment, could no longer sue Bovis in its own name for recovery of damages arising out of any breach of the management contract by Bovis. This is clear from the judgment of Lord Esher M.R. in Read v. Brown:

[the words] transfer the legal right to the debt as well as the legal remedies for its recovery. The debt is transferred to the assignee and becomes as though it had been his from the beginning; it is no longer the debt of the assignor at all, who cannot sue for it, the right to sue being taken away from him; the assignee becomes the assignee of a legal debt and is not merely an assignee in equity, and the debt being his, he can sue for it, and sue in his own name.

114. The assignment was entered into by the liquidator of Rosehaugh but I was informed that Rosehaugh's name still remained on the register of companies in April 1998 so that Rosehaugh remained as a legal entity that could have sued in its own name either at the date that Bovis notified each defendant of this contribution claim on 28 July 1997 or when Bovis settled with GA on 3 April 1998.

8.4.3. "By or on Behalf of Rosehaugh"

115. The wording of sections 1(1) and 1(6) of the Contribution Act define who may recover contribution in terms of the notional action that the party suffering damage could bring against any other party liable in respect of that damage. This notional action must be one capable of being brought: "by or on behalf of the person who suffered the damage" on 3 April 1998 immediately before Bovis' settlement with GA.

116. Bovis argued that these words were wide enough to cover a notional action that Bovis could have brought against Rosehaugh in April 1998. This was because the definitions contained in the Contribution Act should be given a wide meaning and because the Act clearly intended them the definition to cover actions brought by some assignees, namely the estate of a deceased sufferer of damage.

117. However, the Contribution Act formula is not apt to cover a situation where the assignor retains no entitlement either to bring an action in relation to damage or to benefit from the proceeds of such an action. Further, the express extension of the Contribution Act formula so that it covers the estate of a deceased, in whom the rights of action relating to damage suffered by the deceased would already have been assigned by the statutory scheme for administering estates, shows that the wording of the Contribution Act was not otherwise apt to refer to an assignor as someone: "by or on behalf of" ; whom an action could have been brought.

118. It follows that Bovis cannot distort the statutory formula so as to cover a notional claim brought by or on behalf of Rosehaugh since, at the critical time, Rosehaugh had already assigned away its rights of action against Bovis and was no longer able to sue Bovis nor to retain any damages paid by Bovis. No claim could have been brought by Rosehaugh or on its behalf against Bovis in April 1998. Thus, Bovis may only maintain these contribution claims if the Contribution Act formula is satisfied by the fact that Bovis was, or could have been, liable to GA on 3 April 1998. In other words, was GA someone who, for the purposes of the Contribution Act: "suffered the [flood] damage"?

8.4.4. Rights of Subrogation

119. As already summarised, there are two separate ways in which it was argued that the relevant liability was a liability owed by Bovis to GA: firstly as the assignee of Rosehaugh and secondly as someone who had a liability to make a contribution to GA following GA's indemnification of Rosehaugh's flood damage loss. In support of each of these potential liabilities, Bovis relied in part on the fact that GA was entitled to a right of subrogation having indemnified Rosehaugh, a right arising from the fact that GA had: " insured and compensated Rosehaugh in respect of the [flood damage]" .

120. GA's right of subrogation may be summarised in this way:

1. An insurance contract is a contract of indemnity whereby the insurer agrees to indemnify the insured in relation to the risk in question. An indemnity is an agreement to keep a party harmless against loss.

2. An insurer cannot avoid liability on the ground that the insured has the right to claim from a third party and, conversely, the third party cannot avoid liability on the ground that the insured has been or will be fully indemnified for the loss.

3. An insurer who has indemnified an insured is entitled to be put into the place of the insured so as to take advantage of all means available to the insured to extinguish or diminish the loss for which an indemnity has been provided. This is the right of subrogation.

4. This right is usually exercised in the name of the insured who is required to account to the insurer for all benefits received from third parties that extinguish or diminish the ultimate loss sustained. Such an action is taken by the insured for the benefit of the insurer.

5. The right of subrogation is assisted by equity in providing such procedural assistance as is reasonably needed to enable the right of subrogation to be enforced.

6. One remedy provided by equity is to compel the insured to exercise its right of recovery from third parties where the insured is reluctant to undertake such an action. This is done by means of specific performance or by allowing the insurer to sue in its own name and to join the insured as a party to the action. Other equities include the provision of a lien on any monies recovered so as to defeat the potentially competing claims on the money recovered of an insured's liquidator or trustee in bankruptcy.

8.4.5. Bovis' Liability to GA - Assignee

121. In deciding whether or not the relevant notional liability to one who has suffered damage can include a liability to the assignee of such a victim, it is permissible to consider the mischief which the Contribution Act 1978 was intended to rectify. This was to widen the situations under which contribution could be recovered from one joint tortfeasor by another. This was explained by Brooke L.J. in his judgment in the Co-operative Retail Services case where he pointed out that the Contribution Act was intended to fill what were seen as unfair gaps and to remedy unfair anomalies in the law relating to contribution. Under the preceding law of contribution contained in the Law Reform (Married Women and Tortfeasors) Act 1935, despite its anomalies and imperfections, one tortfeasor could have recovered contribution from another tortfeasor even if the victim had assigned its rights of action to a third party prior to the liability of the party claiming contribution to the victim having been established or the claim for contribution being advanced . In other words, so long as a tortfeasor was liable to either the victim or to the victim's assignee for the damage, that tortfeasor could claim contribution from another tortfeasor liable for the same damage.

122. The type of assignment taken here by GA is commonly taken by an insurer having indemnified an insured. It reinforces the insurer's right of subrogation since it enables an insured to take proceedings directly against third parties to reduce or eliminate it loss. By way of example, when the Policyholders Protection Board makes a payment to an insured on behalf of an insolvent insurer under the Policyholders Protection Act 1975, it requires the insured to assign to the Board all rights that the insured had under or in connection with the policy to which the payment relates. Another example of an assignment or its equivalent arises with a bankrupt's estate. Clearly, an interpretation of the Contribution Act excluding a party's claim for contribution because the victim has assigned its rights in such circumstances would be unlikely to be an intended result of the legislation nor to be one serving a legitimate or desirable objective.

123. A further consideration is that the court, since the Human Rights Act 1998 has been in force, is required to give effect to a party's Convention rights. This is to be done, whenever possible, by reading and giving effect to primary legislation in a way which is compatible with a party's Convention rights. One such right is the right of access to a court. This right may only be excluded where the exclusion is justified as pursuing a legitimate aim. No such aim is revealed by the Law Commission Report that preceded the Contribution Act in so far as the wording of sections 1 and 6 exclude rights of contribution where the victim has assigned its rights to claim from a party prior to that party seeking contribution from another. Thus, if the statutory formulation: "by or on behalf of the person who suffered the damage" can be interpreted so as to include an assignee, such an interpretation is to be preferred.

124. I conclude that the relevant statutory formulation includes an assignment in the situation that GA was in having taken the assignment in question. GA is to be taken to be "a person who suffered the damage" since it stands in the shoes of Rosehaugh, is to be taken as always having stood in its shoes even at times prior to the assignment. In other words, it is as if GA had always been the person suffering the damage. The assignment had the effect of a statutory relation back. I reach this conclusion for these reasons:

1. Following the assignment, GA stood in the shoes of Rosehaugh for all purposes and as if it had always held the right to sue Bovis. This result of applying section 1(6) of the Contribution Act to the assignment is consistent with section 136(1) of the LPA which provides that the assignment was: "effectual in law to pass and transfer the legal right to such thing in action".

2. The assignment reinforced GA's pre-existing right of subrogation. Had the assignment not take place, the identical action could have been brought by GA against Bovis as was permitted by the assignment save that Rosehaugh's name would have had to have been added as a second defendant to enable the cause of action against Bovis to be perfected.

3. The wording of section 1(6) of the Contribution Act can be read so as to include an assignee of the victim's rights of action against a party causing the damage, even if this is not the most obvious reading of the section. The reading is more consistent with the mischief the Act was seeking to deal with, is more consistent with the preceding Act that also provided for contribution and whose width was not intended to be cut down and is one which conforms with the Court's obligation to read and give effect to the Contribution Act, so far as is possible, in a way that is compatible with Bovis' Convention rights.

8.4.6. Bovis' Liability to GA - Direct

125. The questions that arise in relation to Bovis' claim based on its settlement of GA's contribution claim against it are as follows:

1. Was GA liable in relation to the same damage?

2. Was GA liable to pay compensation in relation to the same damage?

3. Was GA's legal basis of liability within the definition provided by section 6(1) of the Contribution Act?

4. Was GA's claim against Bovis capable of being characterised as a Contribution Act claim?

5. May Bovis Rely on section 1(4) of the Contribution Act?

6. Is Bovis precluded from claiming contribution because it had no liability to Rosehaugh in August 1994 and, if so, may it rely on section 1(3) of the Contribution Act?

1. Was GA liable for the same damage?

126. For GA to have been able to claim contribution from Bovis, its liability to Rosehaugh must have been for the same damage as Bovis was notionally liable for. The question as to whether the relevant liability in each case was for "the same damage" has been considered in a number of authorities. These are: Friends' Provident Life Office v. Hillier Parker May & Rowden; Birse Construction Ltd v. Haiste Ltd; Jameson v. Central Electricity Generating Board; The Royal Brompton Hospital National Health Service Trust v. Hammond and others; Bovis Construction Ltd and another v. Commercial Union Assurance Co PLC; Rahman v. Arearose Ltd and another; and Howkins & Harrison (a firm) v. Tyler and Powell.

127. I will seek to summarise the effect of these authorities:

1. The relevant damage may be the same even if the respective claims for liability are different. Thus, where the damage was overpaid interest, a claim for repayment or restitution against the receiving party was for the same damage as a claim based on negligent certification of that interest by another party on whose certificate the overpayment was based (Friends' Provident).

2. The injury giving rise to a claim for damages for negligence and breach of statutory duty from an employer whilst he was alive was the same damage as that giving rise to a loss of dependency claim by the executors of that workman following his death (Jameson, overruled on a different point in the subsequent appeal to the House of Lords and later doubted in Royal Brompton).

3. The relevant damage is not the same when, on analysis, the damage of the first party is the physical damage originally incurred and that of the second party is the financial loss it incurred in rectifying the first party's physical loss (Birse Construction).

4. Equally, the relevant damage is not the same when, on analysis, the damage of the first party is having to repay overpaid damages recovered for being delayed in constructing a building and that of the second party is the impairment of its ability to recover those overpaid damages from the first party in an arbitration (Royal Brompton Hospital).

5. The advance of money by a lender to a borrower on the basis of a negligent valuation which would not have been advanced had the valuation been adequate is not the same damage as the subsequent failure to repay the advance by the borrowers for which the borrowers were liable (Howkins & Harrison). Equally, the negligent enhancement of injuries by medical professionals is not, so far as that enhancement is concerned, the same damage as those which had been negligently inflicted in the first place (Rahman).

6. A simple test to apply is this: "party A is liable to party C for the same damage as party B is liable to party C for if A paid C a sum of money in satisfaction, or on account, of A's liability to C and that payment operated to reduce or extinguish B's liability to C and, conversely, if B paid C a similar sum and that sum also operated to reduce or extinguish A' s liability to C" (Howkins & Harrison).

128. David Steel J., in the earlier claim by Bovis against CU arising from this flood damage, held that Bovis was not liable to Rosehaugh for the same damage as CU was since:

Bovis was liable for the flood damage to Friendly House: CU was liable under a policy of insurance. It is a misconception to describe those as liabilities "in respect of the same damage". The damage inflicted by the builder was a defective building susceptible to flooding damage and consequential loss of rent. CU has not inflicted that damage: the only damage it could inflict would have been a refusal to pay on the policy (which in any event excluded consequential loss). This is not the same damage: (see the Royal Brompton Hospital case).

129. I do not find it easy to apply these authorities to the facts of this case. My starting point is to consider the nature of GA's and Bovis' respective liabilities to Rosehaugh and the nature of Rosehaugh's damage that it has suffered. I bear in mind that the statutory language refers to the suffering of damage in a passive sense and not to the infliction of damage in an active sense. Thus, the damage being inflicted must be seen from Rosehaugh's perspective. It suffered flood damage. GA was liable to indemnify Rosehaugh for that damage by paying a sum representing Rosehaugh' ;s loss caused by the flood damage. Equally, Bovis was liable to pay damages to Rosehaugh for the loss incurred by Rosehaugh following the flood damage it suffered for which Bovis was liable. On the face of it, therefore, the damage for which each payment was or would have been made was the same.

130. I cannot, therefore, agree with David Steel J's analysis in the earlier Bovis case arising out of this flood since that analysis starts from the standpoint of the insurer and examines whether the insurer inflicted damage whereas section 1(6) starts from the standpoint of the victim and examines whether that party has been paid compensation in respect of its damage. I also cannot agree with David Steel J's two further reasons for excluding the operation of the Contribution Act. Firstly, David Steel J held that it would not be possible to apportion liability because CU, as an insurer, would have had no "responsibility for the damage", being his suggested basis for apportionment under section 2(1) of the Contribution Act. However, section 2(1) requires that the apportionment should be on the basis of what is found to be "just and reasonable". A party's responsibility for the damage is only one of the factors, but not the only factor, that should be taken into account in that exercise of justice and reasonableness, being a factor specified by the Act as one to which the court "should have regard". Secondly, David Steel J. held that if apportionment involving an insurer was permissible, it would override the common law principles relating to contribution between insurers. However, section 7(3) of the Contribution Act expressly provides that a right to recover contribution under the Act supersedes any right to recover contribution otherwise than under the Act.

131. More difficulty is caused by the judgment of the Vice-Chancellor in Howkins & Harrison's case. This was not cited in argument and, having relisted the case once for further argument on the Contribution Act, I did not regard it as proportionate to relist the case for a second time to deal with a case which I only came across following that second argument. If Sir Richard Scott V-C's test is applied strictly, GA could not have recovered contribution from Bovis since its payment to Rosehaugh did not reduce Bovis' potential liability to Rosehaugh albeit that a prior payment by Bovis would have pro tanto reduced GA's subsequent liability to indemnify Rosehaugh. This disparity arises because of the operation of the subrogation principle and of GA's right of subrogation in relation to Rosehaugh's right of action against Bovis.

132. What exercised the Court of Appeal in Howkins & Harrison was the fact that once the lender had recovered full compensation for its advance from the valuer, it could have claimed and recovered the whole sum a second time from the borrowers, if they suddenly came into money, without having to give any credit for the first payment. In such unlikely circumstances, the Court of Appeal thought that the second payment, on its receipt by the lender, would be held on trust for the valuer. It was to avoid this theoretical difficulty that the Vice-Chancellor enunciated his "simple test". In doing so, he accepted that there might be exceptional cases that fell within the Contribution Act although they did not satisfy the test he had enunciated. Furthermore, Sedley L.J. expressed "some theoretical worries" about the test but nonetheless concurred in the result.

133. In this case, there could be no possibility of any double payment if the Contribution Act applied. This is because none of the theoretical situations that could yield such a result are, in fact, possible. Thus:

(1) If Rosehaugh first recovered from GA, it could not itself then recover the same loss from Bovis since any second recovery from Bovis would have to be accounted for to Rosehaugh to diminish GA's loss;

(2) If Rosehaugh first recovered from Bovis, it could not itself then recover the same loss from GA since Bovis' payment to Rosehaugh would pro tanto reduce GA's liability to indemnify Rosehaugh;

(3) If Rosehaugh first recovered from GA and then recovered from Bovis and accounted to GA for that recovery, GA could not then recover again from Bovis in a Contribution Act claim since (a) there would be no loss left towards which it could recover contribution and (b) it could never be just or reasonable to order Bovis to make a second payment (sections 1(1) and 2(1) of the Contribution Act).

134. Underlying the test applied by the Vice-Chancellor was the fact that the case he was concerned with involved different damage in that an advance against a negligent valuation which would not otherwise have been made was clearly not the same damage as the subsequent failure by the borrowers to repay that advance. The damage was suffered at different times (as in the Rahman case) and was different in kind (as in the Birse and Royal Brompton Hospital cases).

135. Thus, if the other requirements of sections 1 and 6 of the Contribution Act are satisfied, I see no reason to disapply the Contribution Act. The notional liability of Bovis to Rosehaugh would be in relation to the same damage as GA's payment to Rosehaugh related to. This is particularly so given that GA would be making a contribution claim against Bovis fortified by the assignment to it of the subrogation claim which would have been made in relation to the same damage for which Rosehaugh had already received an indemnity from GA.

2. Was GA liable to pay compensation in relation to the same damage?

136. This question involves considering whether an indemnity payment by an insurer pursuant to its contractual liability to pay for loss incurred by the damage covered by the insurance is "compensation" within the meaning of section 6(1) of the Contribution Act which defines the relevant liability as being one to pay for the recovery of: "compensation from [GA] in respect of that damage (whatever the legal basis of his liability, whether tort, breach of contract, breach of trust or otherwise)".

137. "Compensation" is as wide a term as could be used in the context of a payment by one party to another. The relevant meaning of " compensation" is made all the wider since, in its Contribution Act context, it covers any payment made: "in relation to" the same damage. Those words bring in payments which although not made "for" the same damage, nevertheless had some relationship to that damage. The word "compensation" is usually used to mean: "pecuniary recompense which a person is entitled to receive in respect of damage or loss which he has suffered, other than as a result of an actionable wrong, litigated in the civil court, committed by the person bound to make that recompense". That definition applies to GA's payment to Rosehaugh. Furthermore, GA's payment was by way of an indemnity payment which may be described as the provision of compensation to the creditor following the failure of a third party to perform its obligations . It follows that GA's payment was one of compensation in relation to the damage suffered by Rosehaugh.

3. Was GA's legal basis of liability within the definition provided by section 6(1) of the Contribution Act?

138. The defendants argued that the definition of what type of notional liability could found a Contribution Act claim, being one based on "tort, breach of contract, breach of trust or otherwise" was not wide enough to cover a debt or a pure contractual obligation to make a payment. "Otherwise" had to be construed eiusdem generis with the other three things in action referred to in section 6(1). However, the definition provided by section 6(1) is to be given a wide interpretation and, in so interpreting " otherwise", the Court of Appeal in the Friend's Provident Life Office case held that it covered a restitutionary liability. As Auld L.J. stated, the statutory formula spans a variety of causes of action, forms of damage in the sense of loss of some sort and remedies, the last of which are gathered under the umbrella of 'compensation'. He added: "It is difficult to imagine a broader formulation of an entitlement to compensation". The Court of Appeal, in the Howkins & Harrison case, did not reach a contrary conclusion since it expressly did not decide whether a liability to pay a debt falls within section 1 of the Contribution Act and, indeed, Sedley L.J. thought that it was arguable that a debt was not any longer a cause of action sui generis but is instead a breach of a contract to pay.

139. I conclude that the payment by GA to Rosehaugh was payment within the definition provided by section 6(1) of the Contribution Act as being a payment for a legal liability capable of being described as either: a "breach of contract" or "otherwise".

4. Was GA's claim against Bovis capable of being characterised as a Contribution Act claim?

140. The defendants argued that GA's claim against Bovis was exclusively one brought under and by virtue of the assignment and was not one brought exclusively, additionally or jointly for a contribution. It is true that GA's pleading relies on the assignment. However, the pleading also pleads that GA had insured and compensated Rosehaugh in respect of the damage suffered by Rosehaugh. It pleads and relies on the assignment which buttressed and supported GA's underlying right of subrogation to Rosehaugh's claim against Bovis. Thus, all the facts needed to support an assignment claim in addition to supporting a claim brought on the same facts to enforce a right to subrogation and a contribution claim were all pleaded. It follows that Bovis is to be taken to have claimed on each basis of claim or cause of action in the alternative.

5. May Bovis Rely on section 1(4) of the Contribution Act?

141. Section 1(4) of the Contribution Act is applicable to allow Bovis a further basis for alleging that it settled a contribution claim made against it by GA since Bovis reached a bona fide settlement of the claim made against it by GA and may now recover contribution from the defendants irrespective of whether it was, or ever would have been liable to pay GA compensation. This is because Bovis would have been liable to GA, as it is put in section 1(4), " assuming the factual basis of the claim against him could be established". That factual basis included the pleaded facts that Rosehaugh had been indemnified by GA under an insurance policy covering flood damage, being the same damage for which Bovis was notionally liable. These are facts that were relied on by GA in its pleaded claim and are also facts which, if assumed, are sufficient to found a contribution liability by Bovis to GA.

6. Is Bovis precluded from claiming contribution because it had no liability to Rosehaugh in August 1994 and, if so, may it rely on section 1(3) of the Contribution Act?

142. Finally, the defendants argued that the critical time for considering whether Bovis had a notional liability to Rosehaugh, which GA would have needed to establish to recover contribution from Bovis, was 3 April 1998. At that date, Bovis clearly had no such liability given Rosehaugh's earlier assignment. Hence, section 1(4) of the Contribution Act does not avail Bovis since, assuming the fact of an assignment to GA of Rosehaugh's claims against Bovis on 23 August 1994, Bovis would have had no liability to Rosehaugh and, hence, no contribution liability to GA that could have been settled on 3 April 1998.

143. That argument is correct as far as it goes. However, it overlooks the possible effect of section 1(3) of the Contribution Act which provides that a person shall be liable to make contribution by virtue of section 1(1) of the Act notwithstanding that he ceased to be liable in respect of the damage in question since the time when the damage occurred. Here, the damage occurred in May 1990, Bovis was liable to Rosehaugh for that damage from May 1990 until 23 August 1994 when, arguably, its liability ceased as a result of Rosehaugh's assignment to GA on that date. Thus, Bovis can still succeed if it can show that GA could have invoked section 1(3) of the Contribution Act so as to recover contribution from Bovis on a date immediately before the settlement on 3 April 1998 despite Bovis' s non-liability to Rosehaugh on that date.

144. This question, too, raises difficulties given the consideration of the meaning and extent of section 1(3) in a number of authorities to which I was referred, particularly: The "Benarty" (No 2); Oxford University Fixed Assets Ltd v. Architects Design Partnership and the Co-operative Retail Services case. I summarise the effects of these cases as follows:

1. Since one of the purposes of the Contribution Act was to rectify the mischief arising from the decision of the House of Lords in George Wimpey & Co Ltd v. British Overseas Airways Corporation which curtailed the ambit of section 6(1)(c) of the pre-existing statute dealing with contribution, section 1(3) is primarily intended to cover a situation where the relevant liability has ceased between the date of damage and the date on which the notional liability must be considered as a result of a limitation bar arising in that period of time (Co-operative Retail Services).

2. Section 1(3) is not designed to impose a new liability on a third party where in substance he was never liable to the claimant (Co-operative Retail Services and Oxford University Fixed Assets Ltd).

3. Section 1(3) can cover a situation where the initial liability cannot any longer be enforced because a stay has been imposed pursuant to a foreign exclusive jurisdiction clause in the relevant contract. The section covers any procedural reason for liability ceasing which has the effect of barring subsequent liability which had previously existed at the time the damage occurred (The "Benarty" (No 2)).

4. Section 1(3) is not apt to cover a situation where, although there was liability at the time of the damage occurring, substantive liability has subsequently ceased because of the imposition of a conclusive evidence clause which has the effect that a breach could never thereafter be established (Oxford University Fixed Assets Ltd).

145. In this case, the assignment of Rosehaugh's action to GA had the effect of removing a liability to Rosehaugh that Bovis previously had. Bovis became liable to an identical extent to GA following the assignment as it had been liable to Rosehaugh previously and the assignment was, at least in part, intended to bolster and support GA's right of subrogation that had previously been enforceable by Rosehaugh against Bovis. Moreover, Bovis had been notified of this same claim by Rosehaugh before the assignment. It follows that the cessation of Bovis' liability to Rosehaugh was of a procedural character, that Bovis had a substantive liability at the time damage was suffered by Rosehaugh and retained the same liability, albeit at the derivative suit of GA, after the assignment. The position of GA was no different following that assignment to the position of a trustee in bankruptcy, an executor of an estate or a liquidator or administrator seeking to enforce a liability owed respectively to the bankrupt, the estate or the insolvent company. It follows that section 1(3) would have been applicable to assist GA in its notional contribution claim against Bovis. If necessary, I would have reached the same result by construing section 1(3) in a way that was compatible with GA's Convention right of access to a court, a right it could have relied on had it brought contribution proceedings against Bovis and had Bovis sought to defeat those proceedings by arguing for a restrictive meaning of section 1(3) so as to limit its effect to limitation defences.

7. Conclusion - GA's Contribution Claim

146. The result of my over-lengthy review of this difficult area of law is that GA was liable to Rosehaugh to pay compensation by way of an indemnity payment in relation to the same damage suffered by Rosehaugh that Bovis was liable to make a payment of compensation or damages for. In consequence, as a result of the operation of sections 1(3) and 1(4) of the Contribution Act, GA was entitled to claim and recover contribution from Bovis for its indemnity payment made to Rosehaugh and its claim against Bovis is to be taken to have been, or to have included, a claim for contribution from Bovis. The settlement reached between Bovis and GA on 3 April 1998 was one on which Bovis was subsequently entitled to found a contribution claim against SFP and WPP. This was because Bovis "was liable to the person suffering the damage [Rosehaugh]" despite having ceased to be so liable by 3 April 1998.

8.5. Was Bovis Liable Given the Terms of the Management Contract and Joint Names Insurance?

8.5.1. Introduction

147. Assuming the factual basis of GA's claim against Bovis, it is arguable that Bovis would have had no liability for that claim in 1998 as a result of the terms of the management contract which required Rosehaugh to take out joint names insurance naming Rosehaugh and Bovis as co-insured for a variety of risks that included the flood damage to the works and as a result of the terms of that joint names insurance policy itself. In consequence, Bovis was arguably not at the time of the settlement with GA "liable in respect of the damage" as provided for by section 1(2) of the Contribution Act nor "liable assuming that the factual basis of the claim against him could be established" as provided for by section 1(4).

8.5.2. A Contractual Joint Names Insurance Requirement and a Joint Names Insurance Policy - Introduction

148. The argument as to joint names insurance involves a detailed consideration of four cases concerned with the effect of joint names insurance policies, the most recent of which was also concerned with the effect of such a policy on a party's ability to claim contribution under the Contribution Act from an insured under such a policy. These cases are: Petrofina (UK) Ltd v. Magnaload Ltd; Rowlands (Mark) Ltd v. Berni Inns Ltd; Surrey Heath Borough Council v. Lovell Construction Ltd and the Co-operative Retail Services case. These cases in turn refer to several further cases where the relevant principles are discussed and applied.

149. It has to be remembered that the relevant consideration here is a notional liability that Bovis had to Rosehaugh either at the date of the damage (when the possible effect of section 1(6) is being considered), or at the date of being notified of GA's contribution claim (when the possible effect of section 1(3) is being considered) or at the date immediately before its settlement with GA (when the possible effect of sections 1(2) and 1(4) is being considered). In each case, it must be established that Rosehaugh could have sued Bovis and recovered a judgment based on Bovis' notional liability to Rosehaugh. Thus, Bovis must show: (1) that Bovis was liable to Rosehaugh as a result of its breaches of contract for the flood damage despite the express and implied terms of the management contract; and (2) that there was no contractual promise by Rosehaugh vis-à-vis Bovis in the management contract or the insurance contract that Rosehaugh would not sue Bovis for the relevant damage and claim damages from Bovis whether for itself or on behalf of GA. Since there are two relevant contracts, the management contract and the insurance contract, both must be considered. Since the management contract expressly refers to the actual insurance contract, my consideration must be of both contracts taken together.

150. It is first helpful to summarise the position as to the potential liability of one co-insured to another in relation to damage covered by the policy where a joint names insurance policy is in place. Such a policy provides cover to several insured jointly, often on a construction project to all those directly involved in that project. If damage occurs, the insurer provides an indemnity for the resulting loss incurred by each and every insured for that loss. The insurance is usually taken out as a result of a requirement of the building or other primary contract that imposes an obligation on one contracting party, in a building contract either the employer or the main contractor, to effect it. Once the insurance is in place, both the primary and the insurance contracts must be considered.

151. Three methods have been used to prevent the absurdity and injustice of a situation in which a co-insured, having been indemnified by the joint names insurer, seeks to claim from its co-insured either on its own behalf or to enable the insurer to be subrogated. The first two methods focus on the insurance contract and involve the court staying any action brought by the co-insured. By the first method, the court stays the action to avoid circuitry of action that would result from the insurer claiming from the co-insured since, otherwise, the co-insured would seek to pass the claim back to the insurer relying on its rights to be indemnified under the joint names insurance. However, where the insurer has settled a claim in full, it ceases to be liable to indemnify any insured in relation to that property and if a co-insured was then sued in furtherance of the insurer's right of subrogation, the insurer could not then be met with a further claim for an indemnity by that co-insured. Hence, in such circumstances, the circuitry of action defence would not be available to the co-insured.

152. For that reason, the courts have developed a second method of controlling the abuse of an action brought on behalf of an insurer against one of its co-insured. By this second method, the court relies on an implied term of the insurance contract, where such a term can be found to exist, to the effect that the insurer promises to all co-insured that it will not exercise rights of subrogation against a co-insured having indemnified another co-insured. The foundation of this term is that co-insurance carries with it the obvious and presumed intention of the parties to the insurance contract that there will be no actions brought amongst themselves to pursue or facilitate rights of subrogation. In principle, an implied term could arise in appropriate circumstances in the building contract whereby the employer promises not to bring a subrogated claim against the main contractor.

153. The third method available to the court focuses on the terms of the primary contract, in this case the management contract, and looks to see whether the effect of those terms is that the parties have agreed not to sue each other for matters covered by the joint names insurance. This was the method used in the Co-operative Retail Services case in which Brooke L.J. explained the method as follows:

To put it simply, [the contractor], like [the employer] had entered into contractual arrangements which meant that if a fire occurred, they should look to the joint insurance policy to provide the fund for the cost of restoring and repairing the fire damage (and for paying any consequential professional fees) and that they would bear any other losses themselves (or cover them by their own separate insurance) rather than indulge in litigation against each other.

154. Brooke L.J. stated that the starting point in an investigation as to the potential liability of one co-insured to another should be the language of the primary contract that initially gave rise to the joint names insurance. He regarded the defence of circuitry of action as being obsolete and not one any longer applicable to modern circumstances. The case is therefore the starting point for any consideration of the effect of joint names insurance on subsequent actions involving the insurer either directly or pursuant to its right of subrogation.

8.5.3. The Co-operative Retail Services Case

155. The Co-operative Retail Services case arose out of a disastrous fire that broke out in the new CRS headquarters building whilst in the course of construction. The fire was allegedly caused by breaches of contract and negligence of the main contractor, at least two subcontractors and the architects and services engineers. The building contract, in the JCT Standard Form (1980 edition), required joint names insurance to be taken out by the employer that named both the main contractor and the subcontractors as co-insured and which covered all risks including fire. The insurers fully indemnified the employer for the cost of reinstatement and professional fees and another insurer, under a consequential loss policy, indemnified the employer for losses caused by the delayed completion of the office block.

156. The insurers then sought to exercise their right of subrogation against the architect and services engineer but not against the main contractor or the subcontractors. The claim was for the whole of the loss paid out. Each professional then sought contribution from the main contractor and two subcontractors under section 1 of the Contribution Act but were met with the plea from each that contribution was not recoverable since none of them were "liable in respect of the same damage" as required by section 1(1) since for none of them could it be said that "liability has been or could be established in an action brought against [each of them] by or on behalf of the person who suffered the damage [namely the employer]" since all were covered by joint names insurance and contracts which precluded an action being brought by the employer either on its own behalf or on behalf of the insurer. If this argument prevailed, the consequence would be that the two professionals could end up liable for the whole loss and unable to recover any contribution from other "guilty" parties. This, despite the fact that the architect's and services engineer's responsibility for that loss, in terms of blameworthiness and causative potency, might well be such that, adopting Contribution Act principles, they would bear only a small proportion of that loss.

157. The single judgment, with which Robert Walker and Peter Gibson L.J.J. agreed, was delivered by Brooke L.J. The judgment analyses the primary contract with some care. That analysis showed that the main contractor was required to take out all risks joint names insurance covering the whole of the works for their full reinstatement value. This insurance should either name all subcontractors or provide for a waiver by the insurer of its rights of subrogation against unnamed subcontractors. Significantly, the indemnity clause providing that the main contractor indemnified the employer for injury and damage caused by its negligence did not cover such losses to the works themselves.

158. Following a fire or other loss, the main contractor was required to undertake reinstatement work once the necessary insurance inspections had been completed. The main contractor would be paid for such reinstatement work out of the insurance recovery through the certification and payment machinery of the main contract, the insurance payments being made in the first instance to the employer. Such insurance payments would constitute the main contractor's only payment for the reinstatement work so that any shortfall in the recovery of the cost of this work from the insurer would be met by the main contractor. The main contractor would be entitled to a full extension of time for the delay caused by the fire and the losses caused by the delay, other than those covered by and paid under the joint names insurance, were to be borne by the party suffering them, subject to any individual additional insurance arrangements that party might care to make. No such arrangements were, however, provided for by the terms of the primary contract.

159. The subcontractors had entered into subcontracts in the DOM/1 (1980 edition) and also into direct warranty agreements with the employer. Under the terms of the subcontracts, the main contractor was to take out all risks insurance naming the employer, main contractor and subcontractors as co-insured. The contract provisions relating to reinstatement, payment and delay were similar to those under the main contract.

160. The conclusion of the Court of Appeal was that:

1. The main contractor and the employer had entered into contractual arrangement which meant that if a fire occurred they should look to the insurance policy to provide the fund for repairing the fire damage and that they would bear other losses themselves rather than indulge in litigation with each other.

2. The cost of repair and associated costs were completely provided for by the contractual scheme and there could be no question of the main contractor being liable to the employer for anything once the contractual scheme had worked itself out even if allegations of negligence could be sustained against it.

3. The main contractor would have a complete defence based on the terms of the primary contract against any claim brought against it by the employer for the losses caused by the fire. Thus, the main contractor was not capable of being a party who was or would be liable if sued by the employer for that damage.

161. Clearly, the guidance provided by the Court of Appeal in the Co-operative Retail Services case as to how to give effect to joint names insurance provisions in the context of a possible claim by or against a main contractor for contribution under the Contribution Act is to be given effect to if possible. However, that case is not free from difficulties and, at the time of the handing down of this judgment in July 2001, is awaiting an appeal hearing in the House of Lords that is currently fixed for hearing in March 2002. The principal difficulties that I see as arising are as follows.

162. The decision of the Court of Appeal is not based on an express or implied term to the effect that the main contractor would not be liable to the employer for the consequences of a fire or other insured risk. Instead, the Court of Appeal considered the totality of the relevant conditions of the primary contract and concluded that their effect was such that the main contractor could not be described as being a party against whom: "liability could be established" for the fire. However, that liability did not equate to a liability for a substantive breach of contract but was, at best, no more than a liability to pay damages in the context of that particular fire.

163. Ordinarily, a party is liable in a contractual context when it has broken a term of the contract. Damage is not a necessary ingredient for liability for a breach of contract but, unless damage is proved to have occurred, the guilty party will only be liable for nominal damages. However, other remedies, such as an injunction, specific performance or a declaration, might still be available for the breach in appropriate circumstances. In this case, the main contractor was alleged to have caused the fire by a number of breaches of contract including breaches of its workmanship obligations and of express or implied terms applicable to the supply of the allegedly defective generator that had ignited. These terms and the main contractor's obligation to comply with them had survived the contractual scheme for insuring against, and reinstating damage caused by, a fire. Had those same breaches caused loss or damage which was not covered by the joint names insurance, those losses would have been recoverable as damages for breach of contract by the employer. It follows that the relevant terms of the primary contract which the court held had left the main contractor with no liability following the fire had either converted a situation in which the employer would have suffered loss into one in which it had suffered no loss or had constituted limitation or exclusion of liability provisions. These terms did not exclude all liability in the sense of excusing contractual performance or of transforming the relevant breaches of contract causing the fire into acts which constituted good performance which were not characterisable as breaches of contract at all.

164. This analysis can be tested by considering some of the situations in which the employer would want to rely on the main contractor's breaches of contract that had caused the fire despite the wording of the contractual scheme put in place by the terms providing for joint names insurance. These situations might included the following: the breaches of contract might be sufficiently serious that the employer would want to rely on them as the basis for its use of the contractual terms allowing it to determine the main contractor's employment; the employer might want to recover loss flowing from injury or damage to third parties or property not forming part of the works where that loss was not fully covered by the contractual joint insurance arrangements; the employer might wish to claim a declaration or equitable relief; the employer might have to establish that these breaches had occurred as part of the process of valuing the Works as a whole, or of valuing recoverable fluctuations or of computing payable and recoverable VAT; or the employer might want to seek recovery of losses that were not provided for by the contractual scheme and which might otherwise be recoverable from the main contractor under the second limb of Hadley v. Baxendale.

165. These possibilities suggest that the relevant contractual provisions did not exclude liability as a whole but rather defined what would otherwise be loss as being expenditure which was not loss at all or that these provisions amounted to a contractual limitation of loss and damage following breaches of contract.

166. It was also not clear what would have happened if the insurer had been insolvent and, as a result, the employer recovered nothing from the insurer. In such a situation, one possible analysis of the contractual scheme would be that it had broken down, thereby leaving the employer to bring proceedings for breach of contract against the main contract which could be based on the maim contractor's breaches of contract that had caused the fire. Thus, again, the main contractor's liability had not been removed, instead the provisions limiting or excluding the recoverable loss otherwise flowing from its breaches of contract had themselves been set aside.

167. Thus, it was open to the court to conclude that the main contractor remained liable to the employer for the damage caused by the fire albeit that that financial liability might well be limited. Any potential recovery of contribution from the main contractor could not exceed, on that analysis, whatever contractual limit had been imposed on the main contractor's liability (see section 2(3) of the Contribution Act). It would have to be determined, however, whether the contractual scheme in question amounted to a limit of liability at all.

168. Thus, the court gave the word "liability" the meaning of: "being liable to pay damages" as opposed to: "having a liability for damage". The court could have considered, but did not, whether the meaning of "liability" in the Contribution Act refers to a substantive liability rather than the more limited interpretation of " liability" that it relied on, namely a liability to pay damages. A wide interpretation might have been considered as being a more appropriate one, given the court's duty under sections 2 and 6 of the Human Rights Act 1998 not to exclude the architect's access to the court to seek a contribution unless such an exclusion was justified. This denial was arguably imposed on the architect by the court's more limited interpretation of that word. Had the court imposed a wider meaning on the word "liability", the contribution action could have proceeded since, on that view, the main contractor would have retained a substantive liability to the employer even if it no longer had a liability to pay substantial damages.

169. It is not therefore not clear why the analysis adopted in earlier cases was not adopted in this case, namely that the insurer was subject to an implied term of the insurance contract and all co-insured in the primary contract that proceedings would not be brought against a co-insured and there would be no exercise of the insurer's rights of subrogation in relation to any loss covered by the joint names insurance. Such a clause would appear to be a necessary adjunct to the contractual scheme in question, including the joint names insurance provisions it contained. Such an analysis would also seem to be a necessary adjunct to the court's finding that the contractual scheme had had the effect that the contracting parties: "had entered into contractual arrangements which meant that if a fire occurred they should look to the joint insurance policy to provide the fund for the cost of restoring and repairing the fire damage and that they would bear other losses themselves rather than indulge in litigation with each other".

170. In other words, the parties and the insurer appear to have agreed that the insurer's rights of subrogation would not be exercised. A right of subrogation is, in reality, a parcel of rights which includes the right of the insurer to receive such damages from the insured as the insured recovers from third parties. The parcel of rights referred to as "rights of subrogation", however, also includes the right given to the insurer to require proceedings to be brought in the insured's name for its benefit. If there was in existence a contractual term whose effect was that the insurer and the parties had agreed not to exercise rights of subrogation, it ought to follow both that the insurer could not require a subrogated action to be started by the insured employer against anyone and also that such an action could not proceed in the name of the insured.

171. Since such an action had in fact been started against the architect, it might be thought that that implied term could be enforced by the court at the instance of the architect in either of two ways:

(1) By a reliance on the modern doctrine of abuse of process. This was recently defined in the decision of the House of Lords in Johnson v. Gore Wood & Co. The relevant abuse of process would be that of the employer in starting and prosecuting the action against the architect on behalf of the insurer and that of the insurer in authorising that subrogated claim being brought by the employer against the architect.

(2) By a reliance on equity. Subrogation is an equitable remedy and, since the insurer had had to rely on that equity to require or authorise the claim brought by the employer, it might be said to be inequitable to allow that claim to proceed against the architect on the insurer's behalf given the existence of the implied term that I have already discussed.

172. If it be right that the subrogated claim could not be brought at all in relation to the fire damage, the insurer would not have been without a remedy. It could have claimed contribution from the architect in its own name under the Contribution Act since it had already paid compensation to the employer for the damage in question. The insurer's contribution claim against the architect would be a claim brought by one who had been liable to pay compensation to the victim of damage against another also liable to pay compensation to that victim for the same damage. Such an action would confine the architect's notional liability to pay compensation, and would limit the possible recovery from the architect, to whatever share of the loss it was fair and reasonable for the architect to bear. This would seem a more reasonable result than that flowing from the Court of Appeal's decision which could result in the architect having a potential liability for the whole of the loss caused by the fire even though its responsibility for the fire might have been marginal.

173. However, despite these potential difficulties, the Court of Appeal held that the joint names contractual scheme in that case had the effect that the main contractor was not liable to the employer within the meaning of the Contribution Act. I must now consider whether, by parity of reasoning, Bovis had no liability to Rosehaugh so as to deprive it of the ability to claim contribution from SFP and WPP.

174. The features of the contractual scheme which led the court to conclude that the main contractor could not have been liable to the employer for the fire damage were that the joint names insurance was obligatory given the terms of the primary contract, that the loss occurred in circumstances covered by the obligation to insure, that there did not appear to be any residual loss resulting from the fire damage that was not provided for by the contractual insurance and reinstatement scheme, that the reinstatement work formed part of the contract but not part of the "Works", that the main contractor's indemnity did not extend to the breaches of contract causing the fire and that, at least in the subcontracts, there was an express term excluding the insurer's rights of subrogation.

8.5.4. The Terms of the Management and Joint Names Insurance Contracts

175. The management contract provided as follows:

Employer's Indemnity

14(2) [Bovis] shall be liable for, and shall indemnify [Rosehaugh] against any liability, loss, claim or proceedings whatsoever arising under any statute or at common law in respect of any damage whatsoever to any property real or personal in so far as such damage arises out of or in the course of or by reason of the carrying out of the works, and provided always and to the extent that the same is due to any negligence, omission or default of [Bovis], his servants or agents or any subcontractor, his servants or agents (whether appointed pursuant to clause 13(4) of this Agreement or otherwise).

 

Insurance of the Work Against Fire, etc.

16(1) The Employer shall, in the joint names inter alia of the Employer and the Contractor, insure and keep insured all work executed and all unfixed materials and goods intended for incorporation in and delivered to and placed on or adjacent to the Works, all unfixed materials and goods before delivery thereof which are intended for inclusion in the Works in the United Kingdom up to the amount of £2,000,000 in any one location, ... against loss or damage by any contingency covered by Section 1 of the Employer's policy number CW 954877901/1 at the date of this Agreement. The Employer shall, in addition and where applicable, insure any part taken into the possession of the Employer under clause 12 of this Agreement [Partial Possession by Employer] against loss or damage by any of the said contingencies. The Employer shall keep such work, materials, goods, plant, buildings and equipment and parts so insured until Practical Completion of the Work and thereafter against loss or damage in the course of any operation carried out by him for the purpose of complying with his obligations under clause 11 of this Agreement [Practical Completion and Defects Liability].

176. The contract also provided that Bovis authorised Rosehaugh to give a good discharge for the insurance monies paid by the insurer and that those monies would be paid to Rosehaugh and that it would restore with due diligence the damaged work. The Prime Cost of the Works was to exclude the costs of the restoration work. By necessary implication, the monies received from the insurer were to be used by Rosehaugh to pay for that restoration work and, where it was executed by Bovis or on its instructions, were then to be paid to Bovis.

177. The joint names insurance provided that the co-insured included Rosehaugh PLC and/or associated and/or subsidiary companies; the management contractor; all other subcontractors and works contractors and the Architects to the Rosehaugh companies in respect of their site activities in connection with the Project. The Project covered were all projects where the estimated contract value at inception did not exceed £25,000,000 and the construction period did not exceed 36 months at inception. All projects were covered until final practical completion plus the defects liability period. The Sum Insured was 150% of the Estimated Contract Value at any one time but not exceeding £37,500,000.

178. The Insuring Clause provided that insurance was provided against loss of or damage to the Insured Property from any cause other than as hereinafter specified (no relevant cause was specified). The policy covered loss of or damage to the permanent works in respect of which a certificate of Practical Completion had been issued unless such loss or damage was occasioned during the Defects Liability Period and arose prior to commencement of such a period. Consequential loss was excepted. Finally, the policy did not inure to the benefit of any other insurer other than as required under the management contract conditions and the insurer was only required to pay claims that were not recoverable from or were in excess of amounts recoverable under any other policy of insurance.

179. Section 3 of the policy, although not directly relevant, covered loss of or damage to material property not insured under Section 1. Clause 15(1) of the management contract provided that the Employer should maintain such Section 3 insurance "without prejudice to the Contractor's liability to indemnify the Employer under clause 14". No such provision linked the indemnity clause and the Employer's obligation to maintain Section 1 of the joint names policy. Moreover, one of the exceptions to Section 3, which did not appear in Section 1, was to the effect that the insurer waived all rights or subrogation or action which it might have or acquire against any of the insured arising out of any liability in respect of which a claim might be made under that Section.

8.5.5. A Consideration of the Contract Terms

180. I will consider the contractual scheme for joint names insurance with particular reference to the features of the scheme in the Co-operative Retail Services case which led to the decision in that case that the main contractor was not liable to the employer. I will consider each of the factors relied on by the court in turn.

1. Joint names insurance was obligatory

181. Rosehaugh was obliged to insure the works in the joint names of Rosehaugh and Bovis against loss and damage from any cause and by any contingency covered by the joint names policy actually specified in the contract being policy CW 954877901/1. However, such insurance was only to be kept up, after practical completion of the works against loss or damage in the course of any operation carried out by "him" for the purpose of complying with "his" ; obligations under the defects liability clause 11 of the agreement. Bovis argued that "him" and "his" referred to Rosehaugh but, in context, these words clearly refer to Bovis since Rosehaugh had no, and Bovis had substantial, obligations under clause 11 of the agreement. Thus, after practical completion, the obligation to insure was confined to Bovis' defects liability obligations and any operations it carried out in pursuance of those obligations.

182. There remains an ambiguity since the specified policy provided that the cover would extend "until final practical completion plus defects liability period per contract conditions". That definition might be said to extend the cover throughout the defects liability period to all contingencies and not only to those operations of Bovis in compliance with its defects liability obligations. If so, the additional defects liability cover was in excess of Rosehaugh's primary contract obligations for arranging joint names cover. However, the qualification "per contract" would appear to mean that the defects liability cover provided by the policy was only as extensive as the cover that Rosehaugh was required to obtain by the terms of the primary management contract and did not, therefore, extend beyond Bovis' clause 11 operations. I do not propose to decide this case on that ground, however, since it was not addressed in argument and, in Bovis v CU , it was not referred to by David Steel J despite its potential significance. This construction of the policy would have provided a further conclusive ground for dismissing GA's contribution claim against CU since, if it be a correct construction, CU would not have been liable to indemnify Rosehaugh under Section 1 of the policy and hence could not been made ordered to pay any contribution to GA.

2. The loss in question occurred in circumstances covered by the obligation to obtain insurance

183. Assuming that the obligatory defects liability cover was limited to Bovis' clause 11 operations, the loss occurred in this case in circumstances not covered by that obligation since it occurred during the defects liability period but not as part of Bovis' clause 11 operations or obligations.

184. My conclusion as to Bovis' potential liability to Rosehaugh might have been different had the damage occurred before practical completion or during the fulfilment by Bovis of its defects liability obligations. However, practical completion had occurred and the work being carried out during the defects liability period was not in fulfilment of Bovis' clause 11 obligations. The defendants, however, disputed both these contentions. I will examine each in turn.

(i) Practical Completion had occurred

185. The certificate of practical completion was dated 6 April 1990 and stated:

Under the terms of the [management] contract, Saillard Fuller Partners [certify that Practical Completion of the Works was achieved on: 6 March 1990 subject to satisfactory completion of all items referred to in the attached Appendix dated 06.04.90.

The appendix referred to all internal services snagging being completed by the end of the week commencing 30 April 1990 in accordance with a document entitled "Method statement programme and progress of remedial work following Practical Completion". This document identified the outstanding remedial work by reference to an attached document entitled "subcontractor status" which stated, for Crown House's mechanical and electrical services work: "Snagging substantially complete." It follows that, even if the certificate provided only for conditional practical completion, the condition was fulfilled since the only respect in which it was suggested that practical completion had not occurred was the pressurisation system which formed part of the mechanical services whose snagging had been substantially complete.

186. There are, thus, two short answers to the defendants' contention. Firstly, practical completion had been certified as having occurred. Under clause 11(1) of the management contract, practical completion occurred when, in the opinion of the architect, this event had taken place at which point: " ;Practical Completion of the Works shall be deemed for all the purposes of this Agreement to have taken place". The courts of England were given non-exclusive jurisdiction to resolve disputes and differences between the parties to that contract. Unless and until a court declared that practical completion had not occurred on 6 April 1990, as certified by the architect, or it can be shown that the certificate of practical completion was void and of no effect, the effect of clause 11 was that practical completion was to be taken to have occurred then. No such declaration has ever been made and no such finding is sought.

187. Secondly, the facts showed that practical completion had in fact occurred on 6 April 1990 even if the pressurisation system was only then working at about 80% of its efficiency or capacity. Such a defect would not have prevented practical completion from occurring since what is meant by practical completion is that the works as a whole are substantially complete and are in a state that allows the building owner to take possession. Such a state had clearly occurred by 6 April 1990.

(ii) No clause 11 obligations were being undertaken

188. The only work being undertaken on the site in the period immediately before the flood was the maintenance work for which Bovis had no contractual responsibility and the installation of the BMS system which was being installed outside the terms of the management contract. Moreover, the reinstatement was also carried out by Bovis and its works subcontractors outside the terms of the management contract.

3. There was no residual loss resulting from the fire damage that was not provided for by the contractual insurance and reinstatement scheme

189. In this case, there was, potentially, significant residual loss not covered by the contractual scheme which could reasonably form the basis of liability by Bovis to Rosehaugh. In summary:

1. Consequential loss was excluded from the insurance cover.

2. There was a small excess and a limit of cover, albeit that that limit was unlikely to be reached except in the event of a catastrophe.

3. There was no obligation placed on Bovis to reinstate nor one limiting its recovery for reinstatement work to the sum recovered from the insurer despite its overall obligation to complete the works. This obligation would not have required it to reinstate since it was only required to remedy defects that "shall appear" in the defects liability period and not to rectify damage occurring in that period. Bovis could have agreed to reinstate but at a cost potentially in excess of what was recoverable under the policy.

4. Rosehaugh would have been free to engage another contractor to undertake the reinstatement. The additional cost of reinstatement, reasonably incurred, arising from engaging a different contractor, would potentially be uninsured loss incurred by Rosehaugh.

5. Bovis had a contractual obligation imposed by the joint names insurance clause to: "at all times take all necessary precautions to prevent loss or damage to the Works". If Bovis was in breach of that requirement and an insured loss occurred in consequence, Bovis could presumably be held liable to Rosehaugh notwithstanding the joint names insurance.

4. The reinstatement work formed part of the contract but not part of the "Works"

190. In this contractual scheme, the reinstatement work did not form part of either the work nor the Works that Bovis was required to perform. Thus, in fact, the work was performed as a variation to the management contract and Bovis was paid through the certification machinery as if the work formed a variation and addition to the Works.

5. The main contractor's indemnity did not extend to the breaches of contract causing the fire

191. The indemnity clause was neither expressly included with, or excluded from, the insurance scheme. This was in marked contrast to the joint names insurance scheme for liability for third party damage required by clause 15 which was required "without prejudice to the Contractor's liability to indemnify the Employer under clause 14 of this Agreement". Notwithstanding that contrast, which is explicable given the different nature of the all loss cover for damage to the works required by clause 16 compared to the clause 15 cover for other property which was limited to third party liability, I am satisfied that Bovis' obligation to indemnify Rosehaugh survived and was co-extensive with the joint names cover. I rely on Surrey Heath BC v. Lovell Construction Ltd where a similarly worded indemnity clause and joint insurance obligation were held to be co-extensive.

6. An express term excluding the insurer's rights of subrogation

192. Unlike Section 3 of the policy which expressly excluded the insurer's rights of subrogation against any insured in respect of a claim made under that section, there was no express exclusion of such rights under Section 1. However, that clause was provided as a necessary adjunct to the provision that rendered each insured, only under Section 3, to be severally insured as if under a separate policy. The insured under Section 1 were, and were to be treated as, co-insured. Since the limit of insurance would usually not be reached by a claim under Section 1, it would be open to Bovis to make a claim on the policy if faced with a subrogated claim by Rosehaugh once Rosehaugh had been indemnified. That situation would, in the circumstances of these contracts, give rise to an implied term that the insurer would not seek contribution by way of subrogation from a co-insured having indemnified another co-insured.

8.5.6. Conclusion - Joint Names Insurance

193. The flood occurred in circumstances in which it was covered by insurance but not where the management contract required insurance. Bovis had no contractual obligation to carry out and complete the reinstatement works in the event of a flood or similar damage covered by the clause 16 insurance. If Bovis did carry out reinstatement work but was not remunerated for that work by the insurer or the money paid by the insurer and if the damage was not caused by its own breach of contract, it would have been entitled to additional payment for the reinstatement work from Rosehaugh. Rosehaugh was not required to maintain the joint names policy after practical completion save in respect of damage in the course of Bovis carrying out its obligations to make good defects and other shrinkages. The indemnity provided by Bovis against loss and damage arising out of or in the course of the carrying out of the works applied to the damage caused by Bovis that was covered by the terms of an insurance policy whose terms complied with Rosehaugh's obligations under Clause 16 to obtain joint names insurance. The contractual arrangements contained an implied term that Rosehaugh and the insurer would not, in so far as Rosehaugh had made recovery under that policy, claim such loss from Bovis. Finally, consequential loss, such as the loss of rental income claimed by Rosehaugh, was not covered at all by Section 1 of the policy. This cover was not required by clause 16 of the management contract. The Section 1 cover was also subject to a limited excess and a limitation, albeit that that limitation was relatively large and would not be exceeded unless a catastrophic incident occurred. Thus, not all possible loss was covered by the terms of the Section 1 cover.

194. It follows that Bovis remained liable to Rosehaugh for the flood damage and its consequences albeit that that liability remained unenforceable save for consequential loss and such loss that was subject to the limited excess applicable to section 1 and for loss not recovered from the insurer for any reason.

8.6. Was Bovis Liable Given the Apparent Transferred Loss from Rosehaugh to Rosehaugh SC Ltd and the Panatown Case?

8.6.1. Introduction

195. Bovis must overcome a final hurdle before it can establish an entitlement to claim contribution. This hurdle arises out of Rosehaugh's sale of the site to Rosehaugh SC Ltd during the course of the construction of the block. Following that sale, it was argued by the defendants that Rosehaugh had no interest in the works and that, in consequence, Bovis would have had no legal liability to pay damages to Rosehaugh based on the cost of repairing those premises following damage occurring after the sale had occurred. Thus, the defendants argued that the assumed facts grounding Bovis' liability to GA would not have given rise to any notional liability for Bovis to either Rosehaugh or GA on this yet further ground.

8.6.2. No Loss to Rosehaugh Following the Sale to Rosehaugh SC Ltd

196. The defendants argued that Rosehaugh had suffered no damage for which it could recover damages at law from Bovis since, by the time the flood damage and its consequent loss had occurred, Rosehaugh had had no interest in the premises since it had sold its interest to Rosehaugh SC. In consequence, Rosehaugh was said to have incurred such loss, if any, as it had suffered as a volunteer and Bovis was not, nor could it have been, liable for such loss.

197. This argument involves a careful consideration of the terms of the management contract. By that contract, entered into at a time when Rosehaugh was a lessee of the land and property pursuant to an underlease of 1932 years [less 5 days] that had been granted on 16 April 1980, Bovis agreed to carry out and complete the building works on that land. By Recital F, it was agreed that Rosehaugh might enter into an agreement with a company or bank for the provision of finance in connection with these works. By clause 13, Rosehaugh agreed that, subject to its entitlement to assign the agreement to the ban, it would not assign any of its obligations under the agreement without Bovis' consent. Following practical completion, however, Rosehaugh was fully entitled to assign any of its rights without consent. For its part, Bovis agreed, by clause 4(5), to execute within 5 days of Rosehaugh's request to do so, an agreement in favour of any purchaser of the works an agreement in the form set out in the sixth schedule to the management contract. The draft agreement contained in that schedule provided a warranty to such a purchaser, to be entered into under seal, that Bovis had exercised reasonable skill and care in the management and construction of the works. What was contemplated, therefore, was a duty of care deed provided by Bovis to the purchaser. Bovis' liability to that purchaser was to be no greater than the liability which would have been recovered by Rosehaugh under the contract and the agreement excluded any liability for delay to the completion of the development.

198. Rosehaugh subsequently agreed to sell its interest in the land and the development to Rosehaugh SC Ltd by the agreement dated 31 March 1989. However, in this agreement, Rosehaugh agreed in Recital B to carry out and complete the construction of the building works. This agreement was supplemented by an agreement in clause 2.2 to undertake the obligation to carry out the building work, by another in clause 5.1, to proceed diligently with and complete the execution of the building works in a good and workmanlike manner and by another, in clause 7.1, to remedy or cause to be remedied as soon as reasonably practicable all defects in the building works. This last obligation was coupled with a requirement imposed on Rosehaugh SC Ltd to permit Rosehaugh to enter into and upon such parts of the site as might be necessary in order to remedy any defects in the building works.

199. Rosehaugh was also required, if Rosehaugh SC Ltd requested, to enforce Rosehaugh SC Ltd's benefit any warranty, guarantee and any other rights and remedies that Rosehaugh might have under any contracts or direct warranties. "Contracts" was defined to include the current arrangements, agreements and contracts of Rosehaugh in relation to the project including but not limited to those with the consultants and Bovis.

200. There was no evidence as to whether or not Rosehaugh expressly requested Bovis to execute a direct warranty in favour of Rosehaugh SC Ltd as provided for in the management contract or as to whether such a warranty was ever executed. Similarly, there was no evidence as to whether or not Rosehaugh SC Ltd made an express request to Rosehaugh to claim under the property insurance policy on its behalf or to make a claim on its behalf from Bovis.

201. Even though there was no evidence that a duty of care deed or warranty was entered into between Bovis and Rosehaugh SC Ltd, it seems to me that I should proceed on the basis that such was entered into or that, at the very least, Rosehaugh's ability to recover damages from Bovis was to be considered on the assumption that such a deed existed. This is because the parties to the management contract clearly intended and foresaw that any sale of the office block would be accompanied by Bovis being instructed to enter into such a deed with the purchaser. It was, therefore, clearly the intention of the parties to the management contract that their mutual rights and obligations should be ascertained on the basis that a duty of care deed relating to the works would be executed between Bovis and any purchaser of the site as soon as such a sale took place. It ought not to matter that Rosehaugh might have failed to give Bovis the necessary instruction or, if it had been given, that Bovis had failed to comply with it.

202. It follows that Bovis' potential liability to Rosehaugh must be determined against this factual and legal background:

1. Rosehaugh was, when it contracted with Bovis, the owner of the site but had, prior to the damage that had occurred, sold the site to Rosehaugh SC Ltd.

2. The damage occurred after practical completion but during the defects liability period and, therefore, after Rosehaugh SC Ltd had taken exclusive possession of the site subject to any licence available to Rosehaugh granted by the sale contract to enable Rosehaugh to fulfil its continuing work obligations to Rosehaugh SC Ltd.

3. Rosehaugh SC Ltd is to be treated as holding a duty of care deed executed in its favour by Bovis which covered breaches of duty by Bovis but was less extensive in the potential liabilities that Bovis might be responsible for than the equivalent liabilities that the management contract provided for.

4. Rosehaugh's sale and assignment of the land and management contract to Rosehaugh SC Ltd was on the basis that Rosehaugh retained extensive contractual duties to Rosehaugh SC Ltd to complete the building works and rectify defects. After practical completion, Rosehaugh was granted a licence to occupy the site in so far as was necessary to comply with these continuing obligations.

5. Rosehaugh was also required under the terms of the sale contract to enforce any contractual rights arising under contracts in relation to the development for and on behalf of Rosehaugh SC Ltd if asked to do so by Rosehaugh SC Ltd. The definition of the contracts subject to this obligation was wide enough to include a contract of insurance providing buildings cover under which Rosehaugh was the insured and which covered damage to the building that was the subject of the works that occurred during the defects liability period. In other words, GA's buildings policy was subject to this obligation.

203. The question as to whether or not Bovis had a continuing liability or potential liability to Rosehaugh following the sale contract is both complex and one involving a detailed consideration of the transferred loss cases: The "Albazero" [1977] A.C. 774, H.L.(E); St Martins Property Corporation Ltd v. Sir Robert McAlpine [1994] 1 A.C. 85, H.L.(E); Darlington Borough Council v. Wiltshier Northern Ltd [1995] 1 W.L.R. 68, C.A.; Alfred McAlpine Construction v. Panatown Ltd (No 2) Unreported, C.A., 13 March 1998 (the second judgment of the Court of Appeal granting leave to appeal to the House of Lords on terms); Alfred McAlpine Construction Ltd v. Panatown Ltd (No 1) [2000] 3 W.L.R. 946, H.L.(E); Alfred McAlpine Construction Ltd v. Panatown Ltd (No 3) [2001] EWCA CIV 485, C.A. The 3 Panatown cases referred to are: (1) the principle case heard in the House of Lords; (2) the earlier second judgment of the Court of Appeal identifying what issues had been excluded from the hearing in the House of Lords by the terms on which it had granted leave to appeal; and (3) the subsequent third hearing in the Court of Appeal refusing a remission of the case to the arbitrator in the light of the decision of the House of Lords. A detailed analysis of these decisions would involve a lengthy citation from several of them. I propose instead to summarise my conclusions as to how they bear on the factual and contractual situation that I have just summarised.

204. In summary:

1. In general, a party can only recover as damages for breach of contract loss that he has suffered that has resulted from that breach. In order to suffer loss represented by the cost of repairing damaged property, a party ordinarily must have some interest in that property recognised by law or be under a contractual obligation to another to remedy it.

2. Where an employer under a building contract has no legal interest in the property being constructed and the contractor has contractual obligations towards the building owner that are more than nominal but not necessarily co-extensive with his obligations towards the employer in relation to the repair or reinstatement of that property, ordinarily the contractor will not owe additional liabilities to the employer.

3. Where the building contract does not prohibit the assignment of its benefits by the employer or the sale of the site by the employer and also does not prohibit the employer from accepting continuing contractual obligations to the assignee or purchaser to repair defects resulting from the contractor's breach of contract, the employer retains an entitlement to recover damages from the contractor notwithstanding a duty of care deed between the contractor and the assignee or new site owner. This is referred to in the Panatown case as a "chain of contracts liability".

4. The employer also retains the right to recover damages from the contractor once he has sold the site to a third party where he retains some legal interest in the property or where the terms under which the sale was conducted require the employer to bring proceedings against the contractor for the benefit of the new owner in relation to breaches of the building contract so long as the terms of the building contract do not prohibit the employer selling the land on such terms.

205. This summary draws, in particular, from the summary of the result of Panatown (No 1) provided by Waller L.J. in Panatown (No 2) (in relation to the chain of contracts); from the judgment of Steyn and Dillon L.J.J. in Darlington (in relation to the ability of Rosehaugh to bring proceedings on behalf of Rosehaugh SC Ltd); and to the general principle that if a party has an interest in land or property less than full ownership, it is entitled to bring proceedings against third parties based on its damaged state (The "Albazero" and the bailment or licence issue which was not argued in the House of Lords in Panatown (No 1) because of the limitation inserted into the grant of leave to appeal to Panatown by the Court of Appeal but which was not overruled or abolished by the speeches in Panatown (No 1)).

8.6.3. Conclusion - No Loss and Panatown

206. It follows that on each of three separate and cumulative ground, Bovis retained a liability to Rosehaugh: Bovis had a continuing contractual duty owed to Rosehaugh to remedy defects, Rosehaugh retained a right to possession of the land or a limited licence after practical completion in order to undertake repairs as necessary and it had an on-going obligation to bring proceedings in its own name against Bovis and GA amongst others for the benefit of Rosehaugh SC Ltd. In relation to this last ground, it would not matter whether or not Rosehaugh SC Ltd had instructed Rosehaugh to bring proceedings against either party since such proceedings as it brought, even without instructions, would be an agent for, and to the account of, Rosehaugh SC Ltd.

8.7. SFP and WPP's Liability

8.7.1. Introduction

207. The governing terms of section 1 of the Contribution Act provide that SFP and WPP must be: "any other person liable in respect of the same damage". This gives rise to these questions:

1. Whether SFP and WPP can argue that they would not have been liable to Rosehaugh (the Panatown point as it applies to each of them).

2. Whether, as a result of the joint names insurance provisions SFP was not, nor could have been, liable to Rosehaugh.

3. Whether Bovis must show that, as at July 1997, Bovis and the two defendants were liable to the same person. If so, was this requirement fulfilled?

8.7.2. Panatown

208. Both SFP and WPP retained a liability to Rosehaugh following its sale of the site to Rosehaugh SC Ltd for similar reasons to the reasons that I have already found ensured that Bovis retained a continuing liability to Rosehaugh . In summary, a continuing liability was retained by each defendant because:

1. Since Bovis had a continuing contractual duty owed to Rosehaugh to remedy defects, both SFP and WPP continued to owe duties to Rosehaugh to supervise those obligations.

2. Rosehaugh retained a right to the possession of the land, or a limited licence, after practical completion in order to undertake repairs as necessary. That gave it a sufficient interest in SFP and WPP's continuing obligations and to recover damages from each for any damage to the building caused by either of these parties' negligence.

3. Rosehaugh had an on-going obligation to bring proceedings in its own name against SFP and WPP amongst others for the benefit of Rosehaugh SC Ltd. In relation to this last ground, it would not matter whether or not Rosehaugh SC Ltd had instructed Rosehaugh to bring proceedings against either party since such proceedings as it brought, even without instructions, would be as agent for, and to the account of, Rosehaugh SC Ltd.

8.7.3. Joint Names Insurance

209. Only SFP can, even in theory, benefit from the terms of the joint names insurance since it, but not WPP, was a co-insured. The terms of Section 3, but not Section 1, provide that the insurer will not exercise its right of subrogation against SFP but that is not relevant to these proceedings since: (1) this limitation does not apply to Section 1 of the policy and (2) these proceedings do not involve an actual or a potential claim brought by or on behalf of the insurer CU. Thus, the joint names insurance is not relevant to the potential liability of either defendant.

8.7.4. Liable to the Same Person

210. Both defendants argued that their potential liability had to be to the same party as Bovis' liability which founds Bovis' contribution claim, namely GA. They argued that since Rosehaugh did not expressly assign its rights against either defendant to GA, the only party to whom these defendants were potentially liable was Rosehaugh.

211. There are two answers to these submissions. Firstly, although the Contribution Act requires the relevant liability of Bovis and the party from whom a contribution claim is sought to be to the party suffering damage, the Act does not expressly require that party to be the same person in both cases. If, for technical reasons associated with the assignment, the party suffering damage is, vis-à-vis Bovis, is a different party to that suffering damage vis-à-vis SFP or WPP, there is nothing in the wording of sections 1(1) and 1(6) of the Contribution Act to preclude a recovery of contribution by one potentially liable party from another.

212. The second answer is more technical. It turns on the express wording of the assignment. This assigns: "such rights and remedies or claims that Rosehaugh may have against Bovis in relation to or arising out of a written management contract". The relevant claims are based on breach of contract and are co-extensive with claims for the identical damage Rosehaugh had against SFP and WPP. These claims were not expressly assigned to GA and, unless assigned by operation of law as part of the express assignment, remained with Rosehaugh. Thus, parties severally liable to Rosehaugh for the same damage had had their several liability separated and, in theory, GA could recover in full from Bovis the identical recovery that Rosehaugh could recover from SFP or WPP. At best, there was put in place a potential "rush to judgment" with the effect that whichever of Rosehaugh and GA first obtained judgment, possibly in a different court or a different action, would scoop the recovery from the relevant defendant.

213. A similar situation arose in Investors Compensation Scheme Ltd v. West Bromwich Building Society. In that case, investors in a building society premium bond scheme linked to loans from the building society used to pay the premium and charged on the investors' houses, made claims against the building society and their solicitors for damages for misrepresentation and breach of duty related to the advice given prior to entering into the relevant transactions and also rescission of linked mortgages. Following a payment of compensation by the ICS to the investors, these investors assigned their claims for damages against their solicitors to the ICS. The question arose as to whether these assignments included or excluded the investors claims for damages against the building society. This argument was met by, amongst other arguments, one to the effect that it would not have been possible to assign the damages claims against the solicitors (which were clearly and expressly assigned) if the co-extensive damages claims against the building society were retained. Thus, by necessary implication, the two sets of damages claims must have been assigned given the express assignment of one such set. Lord Hoffman dealt with this argument in this way:

... any lawyer would think it extremely odd for the ICS to take an assignment of the investor's claim for damages against the solicitors and leave the investor with a claim for the same damages against [the buildings society]. He would be likely to wonder whether this was conceptually possible and, as I shall explain, I think that his doubts would be well founded. The investor and the ICS could not between them recover more than the loss which the investor had actually suffered. As a matter of common sense, one would therefore expect that the ICS either had a right to the damages or it did not. It would seem eccentric to leave this question to be decided (if such a thing were possible) by a race to judgment.

214. The obvious answer in this case is that the assignment of "such remedies or claims against Bovis in relation to" the management contract included by necessary implication the co-extensive claims for the same damage against other parties. This implication is reinforced by section 136(1)(b) of the LPA which makes it clear that any legal assignment carries with it an assignment of all legal and other remedies and the power to give a good discharge for the same. GA could not effectively exercise its powers to sue Bovis for the relevant damage that were given to it by the assignment unless, at the same time, it could sue SFP and WPP since, otherwise, the claim might be stayed as an abuse of process and, in any case, GA could not give a good discharge for the claim.

8.7.5. Conclusion - SFP and WPP's Liability

215. It follows that the relevant question is whether SFP and WPP, if sued by Rosehaugh or GA at the date of their notification of Bovis' contribution claims in July 1996, would have been liable. The answer is:

1. If the appropriate party notionally suing SFP and WPP was Rosehaugh, the defendants were potentially liable in July 1996 since this notional liability would only have arisen had there been no implied or statutory assignment of Rosehaugh's rights against them and Rosehaugh was still a legal entity despite being in liquidation. It made no difference that Bovis' potential liability for the same damage was to another party, GA.

2. If the appropriate party notionally suing SFP and WPP was GA, the defendants were to be treated as being potentially liable in July 1996 to the party that had suffered the damage. This is for similar reasons as are applicable to Bovis' potential liability to GA. The potential liability in each case was for the same damage.

9. The Amount of Contribution

216. I must now assess what proportion of Bovis' liability to pay £350,000 each defendant should pay. This assessment should be undertaken having regard to the extent of SFP's and WPP's responsibility for the damage in question (see sections 1(1), 1(6), 2(1) and 6(1) of the Contribution Act). This exercise must, by the same token, have regard to the extent of Bovis and Crown House's responsibility for that damage and must be whatever is just and reasonable in the circumstances. In relation to each contributing or potentially contributing party, both their culpability for the damage and the causative potency of their actions and omissions for that damage must be taken into account.

217. In my view, the fair and reasonable way of allocating the responsibility for the damage is by way of a notional equal 4-way split between Bovis, Crown House, SFP and WPP. This is because the damage can be seen as having occurred because of a failure of the three design parties to produce or check the watertightness and builder's work details associated with the hole and of Bovis to fully co-ordinate that work, to supervise the work properly whilst it was carried out in a hurry, and to instal electrical cabling properly that was associated with the late deliver of fan coil units and sprinkler pipework. It was also caused by all parties by their faulty supervision and snagging inspection of the work prior to practical completion. It is not possible, if a broad approach is taken to causation and culpability, to do other than allocate responsibility equally.

218. In those circumstances, SFP and WPP are each liable to pay £87,500 to Bovis.

10. Contribution towards Bovis' Liability for Rosehaugh's Costs

219. Bovis also paid £70,000 towards GA's costs. Bovis claim the same proportion of this sum from SFP and WPP as the proportion of the principal sum that I have decided each should pay. The defendants dispute any liability for these costs on the grounds that this sum is not compensation in relation to the same damage as was suffered by Rosehaugh but was different damage. This submission was based on the decision of Judge Humphrey Lloyd QC in J. Sainsbury PLC v. Broadway Malyan. However, Bovis, relies on a decision of my own in Parkman Consulting Engineers (an unlimited company) v. Cumbrian Industrials Limited and another, to claim a proportion of these costs as being part of the damage that was suffered.

220. The Sainsbury case was one where an architect was sued by a commercial client in relation to negligent design. The design related to a fire stopping detail whose absence allegedly resulted in much greater damage to a supermarket during a fire than would otherwise have been caused. The architects settled with that client and then claimed a contribution towards the settlement figure from the consulting engineers. Judge Lloyd held that the consulting engineers were not liable at all to contribute towards the settlement since they had no primary liability towards the commercial client for the absence of the appropriate detail. Judge Lloyd, obiter, then determined what contribution would have been ordered had the consulting engineers in fact been liable for that damage. He first determined that the settlement was an unreasonable one since it took no account of the huge discount that there would have been in the commercial client' s claim had the damages been assessed by a court. That discount would have arisen because the claim was based on the client losing the chance of benefiting from the non-negligent design, a chance assessed by the judge at 35%. It followed that the damage founding the contribution claim was economically based, being the loss of the chance of benefiting from an architectural detail concerned with fire-precautions. Judge Lloyd then held that, in so far as the settlement figure included an element for costs, that element could not be included within the notional contribution claim.

221. Judge Lloyd stated this, in connection with the part of the settlement that he was concerned with which was being used as the reference point for a claim for contribution:

... the costs of having to bring an action to enforce a duty by claiming damages in lieu of performance cannot be regarded as the same damage as that caused by failure to comply with that duty. ... Costs in a case such as this arise from the defendant's decision not to accept liability and not from the original cause of action.

222. I declined to follow this reasoning in the Parkman case. That was a case in which the main contractor had settled with the employer for damage caused by water ingress into a containment it had constructed. The settlement sum was inclusive of costs. A contribution was claimed from two of those involved in the construction and design of the containment and it was argued, in reliance on the J. Sainsbury case, that the sum against which a contribution should be ordered should be reduced by the notional sum included in the global settlement on account of the employer's costs.

223. I declined to make such a reduction, holding that the sum paid by way of settlement, in its entirety, represented damages for the same damage as founded the contributing parties' liability to the employer. I did so because the J. Sainsbury case was very different from the Parkman case. Firstly, the J. Sainsbury decision as to the treatment of costs was obiter since there was no common primary liability for any damage. Secondly, the settlement in the J. Sainsbury case could not be relied on by the party claiming contribution in that case as the basis of its contribution claim, since the court had already held that that settlement was an unreasonable one. In the Parkman case, the settlement was both reasonable and one which was relied on to as a foundation of the contribution claim. In the Sainsbury case, the claiming party was left having to rely on its notional liability to the victim and having to establish how that primary liability would have been quantified at trial. On that basis, the claiming party's costs liability to the victim was a separate liability and was not a loss referable to the damage but, instead, was only referable to the decision to contest the claim.

224. The defendants sought to show that my reasoning was wrong and that I should follow that of Judge Lloyd. Having carefully considered the defendants' arguments, I remain of the view that my approach in the Parkman case was correct and that, even though the sum for principal and costs in that case was an inclusive sum and the sums for principal and costs in this case have been clearly distinguished and are separate, the same approach should prevail in this case. The sum which may be used as the basis of a contribution claim is: "any payment made or agreed to be made in bona fide settlement or compromise of any claim made against him in respect of any damage" (section 1(4) of the Contribution Act). There is no suggestion that Bovis acted unreasonably in initially contesting GA's claim or in incurring a costs liability to GA in the sum of £70,000 or that it acted unreasonably in agreeing to pay costs in that amount. The claim and its defence, and the costs' consequences of making and defending the claim, were all consequences of the notional victim's claim in respect of damage suffered by that notional victim. The claim was for damages based on Bovis' liability for that damage. The costs therefore formed part of that claim and of the compensation recoverable by GA for the flood damage. These conclusions emerge from an application of sections 1(6) and 6(1) of the Contribution Act to this case.

225. I conclude that both SFP and WPP are liable to contribute one quarter of Bovis' costs liability to GA, being a sum of £17,500 in each case.

11. Conclusion

226. My conclusions are:

1. SFP and WPP were both in breach of duty owed to Rosehaugh and that that breach of duty, in each case, caused the flood damage.

2. Bovis is entitled to claim contribution from both SFP and WPP.

3. SFP and WPP must each pay Bovis a total of £105,000 being 25% of Bovis' liability for principal and costs.

227. When I stand back from the technical and legal details of the contribution claim, I can see that this result is fair and reasonable. It results from the overall fact that the flood damage was caused, in equal share, by four parties all of whom were in breach of contract and duty with regard to their respective responsibility for that damage. The use of the Contribution Act has enabled Bovis to lay off half of its payment of all the damages recoverable for his damage, being two quarter shares from two parties who each had a quarter responsibility for that damage. The technicalities arose because of an assignment of the development to a sister company by the developer, its subsequent claim on its property insurance, its liquidation, its assignment of its claims to its insurer, the use of joint names insurance and a further claim on that insurance. Each of these occurrences are commercially commonplace and none of them should, in fairness, lead to failure by Bovis to recover contribution in a situation which the Contribution Act was clearly meant to provide for.

228. Finally, I would like to pay tribute to the high quality of each counsel's written and oral submissions and to express my appreciation for the considerable assistance each provided the court before, during and after the hearing.