United Marine Aggregates Ltd v GM Welding & Engineering Ltd & another [14.05.13]

Court of Appeal confirms contractor not liable for damage caused by hot works as resulting fire not reasonably foreseeable.

The Claimant sued the Defendant for negligence and/or breach of contract following a fire at its large processing plant. The Defendant sought an indemnity from its public liability insurer, who had been joined as a Part 20 Defendant.

The court held that there had been no breach of duty, even though it found that the Defendant’s hot works had caused the fire. It accepted that the fire started when a globule of molten steel produced during the hot works started a smouldering fire which did not become a visible flaming fire until after the fire watch had finished. The Judge decided that this mechanism was not reasonably foreseeable, even though it was foreseeable that a globule of molten steel might be produced during the welding and that it would spread around the work area.

The court also held that the Defendant was not entitled to an indemnity from its insurer as it had breached a hot works warranty. However, because the insurer had failed on two other alleged breach of warranty defences and caused the trial to overrun, its costs were limited to 50 per cent.

Both the Claimant and the Part 20 Defendant appealed these decisions.

Decision

The Court of Appeal confirmed that, in a claim such as this, the loss must be reasonably foreseeable. The Claimant argued that, despite the precautions taken, the Defendant must have been responsible in some way and that the Judge’s findings of fact were wrong. The Court of Appeal reiterated that it is very wary of disturbing a Judge’s findings of fact and found no evidence to overturn his conclusions as to the mechanism by which the fire was caused and its foreseeability.

In relation to the Part 20 Defendant’s appeal, the court held that the Judge had erred in principle in reducing the proportion of recoverable costs. Any concerns the Judge had regarding the level of these costs was a matter that could be dealt with on assessment and the court noted that neither the Claimant nor Defendant had suggested that the costs should be limited. The insurer had not been given any opportunity to make submissions before the deduction was ordered and any delay caused to the first trial was minimal. On this basis, the Part 20 Defendant’s costs were recoverable in full subject to assessment.

Comment

This case is a useful reminder that, although a Defendant may have caused a loss, a court will go further and assess whether it has breached its obligations, including whether the loss was reasonably foreseeable. It is also confirms that the Court of Appeal will be very reluctant to undermine the Judge’s findings of fact, however hard the appellant’s legal representatives try to do so.

The case also highlighted the potential unfairness of penalising the Part 20 Defendant insurer in costs when the Defendant had been awarded all their costs, particularly in circumstances when none of the parties had actually suggested any reduction and any issues over the insurer’s conduct could be dealt with on assessment.