Southern Insulation (Medway) Ltd v How Engineering Services Ltd & Ors

Factual and Procedural Background

These interlocutory appeals arise from two related actions concerning the cladding of chilled water pipes at One Silk Street, premises managed and tenanted by Linklaters Business Services ("Linklaters") since November 1996. Southern Insulation (Medway) Ltd ("Southern") is alleged to have been negligent as a specialist sub-sub-contractor in cladding the pipes, resulting in corrosion and replacement costs of approximately £3.5 million.

In the first action ("the Linklaters action"), Linklaters sued the head contractors and their holding company (collectively "the McAlpine companies") for replacement costs. The McAlpine companies brought claims against sub-contractors How Engineering Services Ltd and its parent company (collectively "the How companies") for indemnity and contribution. The How companies then sought contribution from Southern under the Civil Liability (Contribution) Act 1978 ("the 1978 Act"), alleging Southern breached a duty of care in tort to Linklaters. Southern applied for summary judgment or striking out of the claims by the How companies on the basis that their claims could not succeed as a matter of law.

In the second action ("the How action"), How Engineering claimed against Southern in tort for any sums it might have to pay in respect of the replacement costs, alleging Southern owed it a duty of care to protect it from financial loss arising from collateral warranties and guarantees concluded without Southern's knowledge after Southern sub-sub-contracted the cladding work to How Engineering. Southern similarly applied for summary judgment or striking out of this claim.

Both applications sought preliminary rulings that Southern owed no duty of care in tort to Linklaters or How, and thus the claims for contribution or damages could not succeed. Both applications failed, but permission to appeal was granted by the trial judge, Akenhead J, indicating the issues were legally complex. The appeals were expedited due to the imminent trial scheduled for October.

Legal Issues Presented

1. Whether Southern owed a duty of care in tort to Linklaters in respect of the cladding work, such that it could be liable for the resultant damage and subject to contribution claims under the Civil Liability (Contribution) Act 1978.
2. Whether Southern owed a duty of care in tort to How Engineering, collateral to their contract, to protect How from financial loss arising under warranties and guarantees concluded without Southern's knowledge.
3. Whether summary judgment or striking out was appropriate on the basis that Southern owed no such duties of care in tort.

Arguments of the Parties

Appellant's Arguments (Southern)

• In the Linklaters action, Southern contended that the issue was not fact-dependent since the relevant facts were comprehensively admitted, and the court should decide the legal issue of duty of care without deferring to trial.
• In the How action, Southern submitted that the correct legal position was that it did not owe a duty of care in tort to How Engineering, opposing the trial judge's conclusion to the contrary.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court recognized the complexity and magnitude of the legal issues concerning the existence of duties of care in tort owed by Southern to Linklaters and How Engineering. In the Linklaters action, the trial judge found too many factual uncertainties to grant summary judgment or strike out the claims, after surveying relevant law that highlighted significant legal questions. In the How action, the trial judge held that Southern owed a duty of care in tort to How, a finding now res judicata at first instance. The appellate court acknowledged the potential need for Supreme Court intervention given the issues’ complexity.

The court also considered the practical implications of proceeding with the appeals, noting the imminent trial and the possibility that appeals might only delay resolution at considerable cost without resolving disputed factual issues. Counsel for the parties agreed to dispose of the appeals accordingly.

Holding and Implications

The court DISMISSED the appeal in the Linklaters action and ADJOURNED the appeal in the How action with liberty to restore it later if appropriate. The costs of each appeal were reserved to the trial judge.

This decision means that Southern will not avoid trial on these claims at this stage, and the legal questions regarding duties of care remain unresolved pending trial or possible future appeals. No new precedent was established by this decision.