Causation test where there are two concurrent independent causes and indemnity agreement where indemnitee is negligent
The first instance decision in this case was reported in Weekly Update 39/13. A contractor sought to claim under an indemnity agreement with its sub-contractor following a flood at the property. The flood had occurred because the surge arrestor had not operated properly. That in turn was caused by two separate failures: a valve had been closed when it should have been opened, but even if it had have been open, the flood would still have happened because of a fault with a different valve (i.e. either one of those wholly independent events on its own would have prevented the arrestor from working). The Court of Appeal held as follows:
- The contractor could recover against the sub-contractor even though the contractor was itself at fault (for failing to detect the sub-contractor’s defects). In Canada Steamship Lines v The King , the Privy Council held that an idemnitee could not usually recover under an indemnity agreement (in the absence of express wording) where it had itself been negligent. However, the Court of Appeal held that the Canada Steamship principle is a rule of construction and not a rule of law and is based on the presumed intention of the parties and the commercial context of the particular contract being considered: “In the case of a construction contract a failure by the indemnitee to spot defects perpetrated by its contractor or sub-contractor should not ordinarily defeat the operation of an indemnity clause, even if that clause fails expressly to encompass damage caused by the negligence of the indemnitee”.
- The Court of Appeal also did not overturn the decision at first instance that the “but for” test for causation was not appropriate here (since that test would have resulted in neither cause having been found to have given rise to the loss on the facts). Instead, the judge had been correct to find that there had been “two equally efficacious causes of the flooding”. At first instance, the judge had also drawn a distinction between cases where there are two concurrent independent causes (as was the case here) and those where there are two co-operating clauses (i.e. two causes give rise to a loss but each, on its own, would not have done so).