Rush to judgment: Southern Insulation vs How Engineering

The August hiatus of the courts inevitably causes problems for construction firms caught in the middle of disputes that they’d like to get out of the way sooner rather than later. But pushing for an early resolution will not necessarily pay dividends.

In Southern Insulation (Medway) Limited vs How Engineering Services Limited & How Group Limited 20 August 2010), Southern Insulation, a sub-subcontractor, brought two interlocking appeals challenging the decisions of the Technology and Construction Court (TCC) not to grant a summary judgment, or to strike out, two negligence claims that had been brought against it.

Both actions concerned pipework and they alleged that Southern Insulation was negligent in cladding water pipes, resulting in their corroding. They then had to be replaced at a cost of about £3.5m.

In the first claim, Linklaters Business Services, the manager and tenant of the building affected by the faulty pipework, sued the head contractor under a warranty and its holding company under a guarantee for the cost of the replacement work.

As is usually the way with such claims, the head contractor and the holding company then brought a claim against the subcontractor and its parent company, claiming an indemnity under a subcontract and a contribution under the Civil Liability (Contribution) Act 1978. Both the head contractor and the subcontractor then sought contributions from the
sub-subcontractor, Southern Insulation, in separate actions.

Southern Insulation applied for both actions to be granted either a summary judgment or to be struck out by the TCC. The company was essentially attempting to establish that the claims against it could not succeed as it did not owe any duty of care to either Linklaters or the subcontractor for the kind of loss claimed.

Although both applications failed, but the judge’s decision to grant permission to appeal suggests that the issues involved were not so straightforward.

This case stands as a warning that while a gung-ho attitude can lead to a positive result for a party brave enough to act quickly, this will not always
be the case

Because the Court of Appeal heard Southern Insulation’s appeal in a vacation court, any judgment would have to be reserved for in-depth consideration. Indeed, the issues at the heart of the case were such that it might require the attention of the Supreme Court. The judge stated that any chance of delivering the judgment before the trial started was slim, and both parties involved conceded that the potential magnitude of the issues at stake was considerable.

Although it would be a misfortune for Southern Insulation to lose the chance of succeeding in either action without a trial, the appeal judge explained that there was at least an equal possibility that proceeding with these appeals (at a considerable cost to all involved) would simply defer the trial of the two main actions. Thus it was decided that Southern Insulation’s appeals should be disposed of: the first action by dismissal and the second by adjournment.

This case stands as a warning that while a gung-ho attitude and swift action can lead to a positive result for the party brave enough to act quickly in some circumstances, this will not always be the case. Construction firms struggling to keep their heads above water and facing further hardships in the form of public sector cuts will naturally focus on keeping litigation costs to a minimum, yet applying for an outright dismissal is unlikely to do the job.

Construction businesses involved in complex, multiparty disputes must obtain extensive legal advice and take a long-term view on their chances. Lodging an appeal to get a case dismissed can be a case of simply throwing bad money after good.

Rupert Webber is a solicitor in the professional risk and construction team at law firm Weightmans