Citation:  EWHC 3059 (TCC)
The Court of Appeal holds that a party is sometimes entitled to be indemnified in respect of a loss that was partly caused by its own negligence or default, despite the absence of express wording to this effect in the indemnity.
Karim Ghaly represented HS Environmental (HSE), a mechanical services contractor, in an appeal brought by HSE’s subcontractor, DG Robson (Robson). The appeal was against the decision of Mr Justice Coulson that Robson was required, by reason of its workmanship breaches, to indemnify HSE in respect of damage caused by the flooding of a block of flats. Robson argued that, since HSE had also caused the flood by its design breaches and inspection breaches, it was not entitled to be indemnified – applying the well-known rule of construction in Canada Steamship Lines v The King  A.C. 192 and Walters v Whessoe Ltd  2 All E.R. 816.
The Court of Appeal held that HSE was entitled to be indemnified notwithstanding its own negligence. The Court considered the commercial context of the contract. In the case of a construction contract, failures of this nature on the part of the indemnitee should not ordinarily defeat the operation of an indemnity clause, even if that clause failed expressly to encompass damage caused by the negligence of the indemnitee.
This case is important because it sets out the first English law limitations on the application of the Canada Steamship rule. Consequently, the scope of a contractual indemnity in such cases may be significantly wider than was previously thought to be the case.
The case is also significant because the Court of Appeal refused to overturn Mr Justice Coulson’s finding that that the flood had been caused by two wholly independent breaches, each of which was sufficient to bring about the whole loss. This finding, whilst considered as a possibility in several previous cases, was also novel.
You can read the full judgment by following this link.