Supershield v Siemens Building Technologies FE (Court of Appeal — 20 January 2010)
Water from a storage tank overflowed into the basement of Slaughter & May's office, after the connection on a float valve failed. The tank was placed within a bund, which incorporated drainage to remove any overflowing water. The drains became blocked, water overflowed the bund and caused damage to electrical equipment. To make matters worse the building management system was not being monitored at the time and no one noticed the warning signals.
Claims by those up the contractual chain, including the contractor, the occupiers and the freeholder, were settled by Siemens Building Technologies FE (at just under 50%), who in turn sought an indemnity under its own sub-contract with Supershield. At trial Judge Ramsey held that, as a matter of contractual construction, the defective works fell within Supershield's responsibility and, rejecting Supershield's defence that the defective work was not the effective cause of the flood and/or the loss too remote, held that the settlement terms with those up the contractual chain were reasonable. Supershield appealed.
The Court of Appeal upheld Judge Ramsey's decision that the effective cause of the flood was the failure of the ball valve connection — the blockage of the drains did not take away the causative potency of the overflow to cause damage but rather failed to reduce it. The Court of Appeal further rejected Supershield's submission that the loss was too remote to be recoverable under standard contractual principles. Siemens had assumed a contractual responsibility to install the sprinkler system in such a way that prevented an escape of water — it was always possible that secondary protective measures (such as the drains) may also fail. Even though the flood may have been unlikely it was within Siemens' duty to protect against it and the settlement reached by Siemens of the in-bound claims was reasonable.
Even where there are secondary protective measures designed to reduce damage caused by flood, those measures will not necessarily dilute the potency of the orginal effective case. Furthermore, in order to encourage parties to agree reasonable settlements, the Court of Appeal makes it plain that it would only consider overtuning a first instance judge's decision in the unlikely case of a judge erring in principle or wheer such decision was "incapable of justification on any reasonable view".
Warren King, BLM London
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