Gerling General Insurance Co & Ors v Canary Wharf Group Plc

On Sunday 21^st May 2000 a Wolff 320 BF luffing jib tower crane, known as TC3, which was being used on a construction site called DS2 (Footnote: ¹ ) at Canary Wharf, was in its final stage of erection by a method called self-climbing or self-jacking. Under this method the head of the crane is raised by means of a hydraulic ram so as to create a gap between the head of the crane and the mast. A new section of the mast is then raised by the crane to the required level and inserted into the gap. The head is then lowered onto the new section and the two parts are pinned together with permanent pins. The process is repeated until the crane has reached the required height for working.

At about 4.05 pm on that day, during the last jacking operation of the day when the 27^th section was being added to the mast, the head of the crane i.e. the cab, counterweight and jib, together with a short mast head section, collapsed causing the death of the driver and two of the five riggers who were on it. The crane, which had been on the west side of the HSBC building fell onto (a) DS2, (b) a small part of the adjoining site DS1 (Footnote: ² ) , and (c) completed structures in Canada Square to the south. The building to be constructed on DS 1 was to be a much smaller building than that on DS2.

In July, August and September 2000 two Wolff 160 cranes on DS1, which had been due to use the same self-climbing method, were raised by a two crane method by which the two cranes were used to raise each other. The result was that the two cranes – TC7 and TC8 – which would otherwise have been available to progress the Project were diverted into raising each other. These cranes were needed in order to construct the concrete core for the new building on DS1.

The question at issue in these proceedings is whether the Defendant – Canary Wharf Group Plc - is entitled to recover from its insurers, the Claimants, in respect of loss said to have been suffered as a result. That loss is said to have been suffered in the first instance by a trade contractor known as Bierrum, which is an insured party under the policy. Bierrum submitted a claim to Canary Wharf on 4^th December 2000 and Canary Wharf informed Crawford’s, the Loss Adjusters acting for the Insurers, of it on 3^rd January 2001.

The Policy, which is dated 1^st February 2000, is described as a Project Insurance Package covering Construction/Erection “All Risks”, Additional Costs of Construction and Public Liability. The Project is defined as “The Buildings HQ1, HQ2, HQ3, HG4, HG5, DS1, DS5 and WF9 including new build, fitting out, infrastructure and all associated and ancillary works”. Neither DS2 nor TC3 was insured property. The Insured Parties are Canary Wharf Group Plc, Canary Wharf Ltd and/or Canary Wharf Contractors Ltd (“CWCL”) and/or associated and subsidiary companies and trade contractors and/or contractors and/or sub-contractors.

The Policy has four sections. Section I of the Policy provides as follows:

“ CONSTRUCTION/ERECTION ALL RISKS

Whereas the Insured carrying out The Project described in the Schedule has paid or agreed to pay the premium as consideration The Insurers will indemnify The Insured at their option by payment, reinstatement or repair in respect of all risks of loss or damage of whatsoever nature not hereinafter excluded to:-

The Insured Property

(a)

The whole of the Works, whether permanent or temporary including materials and other goods incorporated or for incorporation therein

(b)

Constructional Plant, tools, equipment and spares, temporary buildings, caravans or buildings of a similar nature together with contents and clothing, tools and personal effects of employees of The Insured (if required at terms to be agreed)

used or intended for use in connection with The Project all being the property of The Insured or for which The Insured is responsible or has instructions to insure anywhere within the Situation including transit by road rail inland waterways and Ro-Ro ferries.

The liability of The Insurers in respect of each and every loss shall be limited to the amounts stated in The Schedule and as otherwise stated in the Extensions to this Section.”

The Insurers have made payments under section 1 of the Policy in respect of the costs of rectifying the damage caused to DS1 as a result of the collapse of TC3.

Section 1 is subject to seven specified exceptions and to 24 extensions. Extension 16 provides:

“Insurers will indemnify any additional cost of working necessarily and reasonably incurred by the Insured in order to prevent or minimise the interruption of or interference with or delay to the carrying out of the Works in consequence of actual or imminent loss or damage;

Section 2 of the Policy provides:

“ ADDITIONAL COST OF CONSTRUCTION UNBUILT PORTION

The Insurers will indemnify The Insured:

a)

in the event of a delay in completion of The Project or any part thereof due to loss or damage to the permanent or temporary Works for which liability has been admitted under Section 1 of this Policy (or would have been admitted but for the application of The Deductible), against the additional amount by which the cost of the permanent or temporary Works, uncommenced at the date of the loss or damage shall exceed the cost which would have been incurred but for the loss or damage.

b)

Against additional expenditure necessarily and reasonably incurred for the sole purpose of expediting completion of The Project but not exceeding the additional amount that would have been payable under a) above had such expenditure not been incurred.”

A claim was originally made under this section by Canary Wharf in respect of the losses now in issue but that way of putting the claim is no longer pursued. Insurers have settled claims under Section 2 in respect of additional costs of construction incurred by Byrne Brothers, one of the trade contractors covered by the policy.

The Policy has thirteen Special Conditions which are said to be applicable to all sections of the policy unless otherwise stated. Special Condition 8 provides:

“The Policy extends to include the Insured’s liability for costs necessarily incurred as a result of emergency action taken in order to prevent or minimise loss of or damage to the property insured provided that where such costs are not approved by Insurers the liability of the Insurers in respect of such costs shall not exceed the amount of saving of the Insurer achieved by such expenditure. Provided always that Insurers shall not be liable for costs and expenses incurred to prevent future occurrences or happenings of a similar nature.”

There are also eleven General Policy Exceptions. These include the following:

“ [3] Notification

In the event of any occurrence which may give rise to a claim under this Policy The Insured shall as soon as reasonably practicable give notice to The Insurers and supply full particulars thereof in writing…”

[6] Reasonable Precautions

The Insured shall at all times take all reasonable precautions to prevent any occurrence which may form the subject of a claim under this Policy. In the event of an occurrence giving rise or which might give rise to a claim, under this Policy, the Insured shall, at his own expense take such immediate actions as is necessary to minimise any loss and prevent repetition other than for the provision of Special Condition 8.

[8] Due Observance

The due observance and fulfilment of the conditions of this Policy so far as they relate to anything to be done or complied with by The Insured shall be conditions precedent to any liability of The Insurers to make any payment under this Policy”.

The parties agree that I should proceed on the basis of the following assumptions, the accuracy of some or all of which may have to be established in due course:

The parties agreed that the principal questions to be answered on the basis of those assumptions, and such further facts as I may find, are these:

The tower of the crane is constructed in sections. Surmounting the tower is a masthead which underlies the slew ring supporting the cab, the jib of the crane and the counterweights. It is the slew ring which allows the jib to rotate. When the crane is assembled by the self jacking methods it is “climbed” by means of a climbing frame. This is a square steel lattice section which fits around the tower of the crane. The frame includes external walkways for the erection team to use during climbing. Grooved rollers are fitted to the inside corners of the climbing frame. The outside corners of the tower fit in the grooves in the rollers and the climbing frame can thus run up and down the tower. A hydraulic cylinder is fitted to the south side of the climbing frame. A piston rod protrudes down from the hydraulic cylinder and is attached to a horizontal cross band, known as a yoke, which has two arms protruding downwards from each side. Two locating spigots project down from the underside of each arm and engage with holes in catch hooks welded to the south side of each tower section. Once the yoke is engaged in the catch hooks in a tower section extension of the hydraulic cylinder will cause the climbing frame to move up the tower. The stroke of the hydraulic cylinder is 5.4 metres so that the frame can be moved up the tower one tower section at a time. When the climbing frame is at the top of the tower the pins securing the crane to the tower have to be removed so that when the climbing frame is raised (the frame has to be attached to the underside of the slewing module by steel pins) the crane is lifted off the top of the tower. When this has been done a new section of the tower, which has been lifted into position by the crane itself, can then be inserted into what is now the space between the top of the tower and the crane assembly.

The manufacturers of the crane were Mann Wolfkran GmbH, a German company. The suppliers of the crane were Hewden Tower Cranes Ltd (“Hewdens”). The crane was provided pursuant to a sub-contract with Kvaerner Cleveland Bridge (“KCB”) (Footnote: ⁵ ) , the trade contractor responsible for the substructure and superstructure works on DS2, which was engaged by CWCL.

On Monday 22^nd May all work on DS2 (and most other construction work on Canary Wharf) stopped. A review meeting took place between senior management of CWCL, KCB, and Hewdens to review the circumstances of the accident and the emergency safety action to be taken. On the same morning inspectors from the Health and Safety Executive (“HSE”) arrived in order to review documentation relating to site procedures, equipment and safety, and to inspect the crash site. HSE arrived with a larger team the next day for a further site inspection. The HSE representatives indicated that they wanted to witness a full jumping sequence with a similar type of crane, and arrangements were made for this to take place, as it did, with a similar, but not identical, climbing assembly, on 31^st May at Hewdens Castleford site in Yorkshire. For obvious reasons the HSE was concerned as to the safety (or otherwise) of the self jacking process. HSE began an investigation into the cause of the collapse but the report of that investigation has not been made public at the time of the hearing.

A Canary Wharf Group Accident Investigation Report of 21^st May indicated that the cause of the accident was then unknown but that it would appear that Hewdens had failed to assess all the known risks and formally communicate them to their employees, KCB and CWCL. The Report recommended that there should be no further crane erection unless, inter alia, satisfactory risk assessments “which accurately reflect the hazards stated in the manufacturer’s (Wolff) erection manuals are submitted to CWCL”.

Thereafter a number of meetings took place between those concerned with the accident, its consequences for future working, and the insurance claims that might result. One concern was as to whether HSE would allow a crane to be jumped i.e. self climbed. At a “Crane Accident Insurance Meeting” of 5^th June 2000 KCB stated that currently no cranes could be jumped without HSE authorisation.

On 14^th June 2000 HSE issued a Press Release, a copy of which they faxed to Mr Frank, announcing that they had served (as they had) an Improvement Notice on Hewdens ordering it to ensure that all its Wollfkran external climbing equipment available for use in Great Britain be examined by a competent person by Friday 6^th July as required by Regulation 9 of the Lifting Operations and Lifting Equipment Regulations 1998 (“LOLER 98”) (This examination in fact took place). The notice stated that HSE was approaching other companies to check that external climbing equipment being used for tower cranes satisfied the LOLER 98 requirement of thorough inspection and would take equivalent enforcement action if appropriate; and that this would be backed up by a formal review of climbing. It, also, indicated that HSE’s attention had been focused on the structure of the climbing equipment and the system of work for climbing tower cranes with this equipment. The investigation was expected to take some considerable time and a report would be published when the full facts were known.

An improvement notice under section 21 of the Health and Safety at Work Act 1974, which requires the recipient to remedy a contravention of a relevant statutory provision is to be distinguished from a prohibition notice under section 22 of the same Act which prohibits the carrying out of specified activities involving a risk of serious personal injury, although the practical effect of the two types of notice may not greatly differ . No prohibition notice was ever issued but the fact that HSE might do so was in the minds of those who were concerned with what was to happen in respect of DS 2 and DS 1, such that in some of the reports of meetings and correspondence self-jacking of cranes on DS1 or DS2 is regarded as dependant on HSE’s permission or non objection. In practice it was unlikely that Canary Wharf would go ahead with a method of raising cranes unless HSE did not object to it.

A little later a number of those concerned appear to have thought – wrongly – that HSE had in fact issued a prohibition notice. Thus, at a DS1 Insurance claim meeting on 30^th June 2000 attended by representatives of CWCL and Crawford’s, it was reported that Hewdens had had a prohibition notice served on them preventing the climbing of any of their cranes. This may have been a mischaracterisation of the improvement notice, or simply an inaccurate way of recording that HSE did not want the cranes to be climbed until changes had been made in the method of operation, which, in practice, prohibited such climbing until HSE approved the proposed method or withdrew their objection.

In relation to DS1 the contractual arrangement was for a company called Canary Wharf Contractors (DS1) Ltd to contract with Hewdens direct. In the third week in June CWCL and Hewdens were discussing the cranes – TC7 & TC 8 – that were to be used for DS1. At this stage they contemplated going ahead with the jumping process, unless HSE objected. At a DS1 Crane/Hoist meeting on 21^st June it was recorded that Hewdens would confirm on Monday 26^th June, after meeting with HSE, whether cranes TC7 and TC8 could be jumped.

On 28th June 2000 a Mr Williams of HSE sent a fax to Hewdens in which he said that a good deal more work was needed before HSE could be confident about the reasons for the collapse of the tower crane at Canada Square on 21 May and confirmed “our view that, in the absence of any firm explanation for the collapse and proposals for preventing any such collapse in future it would be most inadvisable to restart climbing operations using Wolff external climbing gear”. He ended the fax by saying “If .. your own experts can suggest a plausible explanation and you have proposals for preventing such an accident in future we would be happy to consider them”. In effect HSE stopped short of issuing a prohibition notice, but strongly indicated the inadvisability of self climbing without an explanation of why the crane had collapsed and proposals to prevent that happening in future.

Early in July Mr Frank decided that cranes would not be self climbed on DS 1 but that two cranes would lift each other, thus taking two cranes out of productive use whenever the height of one of them was raised. The reason for that decision as expressed in his witness statement was as follows:

“In the absence of any explanation as to the cause of the collapse, I decided that I could not allow the cranes on DS1 to continue to be raised using the ‘self-jacking’ method. This decision was not borne out of an HSE edict, but rather the fact that I thought it was the proper step to take in the circumstances. I could not allow the cranes on DS1 to continue to be raised using the ‘self-jacking’ method until the cause of the collapse of TC3 was known – safety is the paramount consideration. I knew the HSE shared my reservations about continuing with the self-climbing method and that they had repeated these reservations to Hewdens representatives at their meeting on 26 June 2000. I also knew they had the power to issue edicts that could have caused even greater delay to the works on DS1.

I believe my decision to change the method of climbing averted the need for the HSE to take any further formal action. I was aware that the new method would delay the works to DS1 – but safety had to come first.”

However in the course of his evidence Mr Frank made clear that it was not the fact that he did not know what exactly caused TC3 to collapse that of itself made him to decide against self climbing. Indeed self climbing on DS2 began in August when that exact cause was still unknown. It was the fact that he lacked enough information to make self climbing safe whatever the exact cause was. Decisions on these questions are – as he put it – matters of risk and reward. Using two cranes to climb each other was a simple and tried means of proceeding quickly without any significant risk of collapse. On DS2 that option was not available because, beyond a certain height, self-jacking had to be used – hence the need to establish a method of doing so that would satisfy HSE. This was done by a detailed analysis of the particular crane that was to be used which identified the strain on different elements of the structure. Steps were taken to minimise that strain e.g. by reducing the wind speed during which the crane was to be operated, and modifying the verticality of the crane by adjusting the ties, and to minimise the general risk e.g. by giving the crew much better instructions, and using a crew with much greater experience. Given time and application a similar exercise could have been done in respect of DS1, albeit that the cranes for use there and the building structure itself were different.

So it was that, according to the assumptions, there were three crane outages when TC 7 was used to climb TC8 and vice versa: (a) between 5^th and 7^th July ; (b) between 18^th and 28^th August; and (c) between 15^th and 24^th September.

On 2^nd July Hewdens wrote to CWCL saying that they had carried out a thorough overhaul of all matters in relation to safety. In mid July they sent HSE a letter with proposals for a “re-start to external climbing operations on MAN Wolffkran tower cranes”. The letter indicated that they qualified “all the above requests as proposals by stating that we will not deviate from your guidelines in regard to future actions embracing external climbing operations of Wolff tower cranes”.

On 20^th July HSE wrote to Hewdens in relation to DS2 recording that the previous week Hewdens had confirmed that they did not intend, at present, to resume the use of external climbing equipment. They also recorded that Hewdens had said, as was the case, that it would not be possible to adjust the height of TC 2 again without deploying the external climbing equipment already installed on the crane which might need to be used in about 6 weeks time. The writer reiterated the advice contained in the letter of 28^th June since no clear explanation had emerged for the accident of 21^st May. On 26^th July HSE wrote to Hewdens, with a copy to Mr Frank, informing them, in relation to DS2, that the revised risk assessment and tower crane method statements put forward by Hewdens did not properly address the points that had been raised.

By 26^th August, however, HSE had said that although they did not recommend that, in respect of DS2, two cranes (TC9 and TC2) should be jacked using a climbing frame, they had no objection to that course. In the event these two cranes were so climbed during the first half of September.

On 4^th December 2000 Bierrum put forward to CWCL a contractual claim for loss, then said to amount to £ 586,848, as a result of delay in respect of the construction of the core arising from the non availability of the Hewdens Wolff cranes for the construction of the works when they were being used to lift each other. The crane outages relied on were for periods similar to those that are the subject of the assumed facts.

On 11^th January 2001 a meeting took place between representatives of Canary Wharf’s brokers and Crawford’s in relation to, inter alia, the Bierrum claim. At this stage the brokers contemplated that the claim would lie under section 2 of the policy. Crawford’s later told the brokers that insurers did not feel that a claim lay under the policy. On 19^th March Crawford’s wrote to Canary Wharf explaining that insurers did not accept the claim, the basis for their declinature being that the proximate cause of the delay was “a HSE directive” about working methods and not the loss or damage which was the subject of the claim. On 22^nd March 2001 Canary Wharf sent to Crawford’s an updated statement of costs in respect of the crane collapse of 21^st May 200 and said:

“We have included costs in respect of Bierrum, which have been submitted on the basis that as a result of the incident the method of climbing the cranes had to be changed”.

Further correspondence ensued on whether the claim fell within section 2.

In the event a claim under section 2 was abandoned and by letter of 24^th June 2002 Canary Wharf put forward to Crawford’s a claim on three bases. First reliance was placed on Extension 16 to Section 1. The claim was, and is, that the loss and expenses incurred as a result of the change to the crane erection procedure were “additional cost[s] of working” that were “necessarily and reasonably incurred by the Insured in order to prevent or minimise the interruption of or interference with or delay to the carrying out of the Works” which would have been incurred if there had been a reoccurrence of the crane collapse from DC2, which reoccurrence was, in the absence of any clear indication as to the cause of the collapse, reasonably regarded as imminent. The loss which would have occurred was loss which would have been admitted under the Policy. Secondly, it was said that the change in erection procedure was taken “in consequence of actual …loss or damage” to TC3 and to the Building on DS2 and that such loss or damage was “to any other property in the vicinity of the Project site of any Works”. and “at any other working location”. Thirdly, Canary Wharf contended that the change in tower crane methodology was made in accordance with the Insured’s obligation to mitigate the effects of the collapse onto the Building on DS1 and recoverable under provision B to Extension 16.

Gerling responded rejecting the claim on 7^th November 2002 on the basis, in short, that, as to the first grounds, the collapse of the DS1 crane was not imminent; as to the second, the delay was caused by a change in working practices and was not in consequence of the damage to DS2; and as to the third the costs were not incurred in mitigation of the actual damage to DS1.

The precise mechanism by which TC3 collapsed is not clear and, by the time of the hearing, no HSE Final Report had been published, even though HSE had in December 2004 announced that it would be published shortly. In its final report to the Coroner in October 2003 HSE said:

“HSE believes that the overturn of the crane was probably initiated by exceptionally high loads acting in a Northerly direction on the upper front guide wheels causing the upper North East guide wheel bracket to deform and twist off its mounting plate. However HSE cannot demonstrate conclusively why the combination of forces arose when it did and other possible explanations for the incident cannot be ruled out”.

However, in the light of the considerable degree of agreement between the experts instructed by the parties, as recorded in their Joint Statement of 22^nd March 2005, the admission by the Defendants of paragraphs 13.1 – 13.6 of the Claimants’ Reply and Defence to Counterclaim, in which the Claimants plead the cause of the accident, and the acceptance (or absence of challenge) by Mr Vivian Ramsey, Q.C., on behalf of the Defendants of paragraphs B 1 and B 2 of Mr Oram’s Report of 25^th February 2005, the cause of the collapse, in broad terms, is no longer in dispute.

The collapse of the crane was due to one or more of the bad practices adopted by the Hewdens’ management that are listed and evidenced in Mr Oram’s report. These included the following:

Mr Ramsey, on behalf of Canary Wharf, submits that the assumed costs represent additional costs of working:

Whether or not loss or damage was imminent must, he submits, be determined prospectively on the basis of the information that was known to Canary Wharf at the time that the relevant decision was made. When in early July the decision was made that TC8 and TC9 should climb each other, the cause of the collapse of TC3 onto DS2 and DS1 was unknown. If TC8 and TC9 had been self climbed without alteration to the working practices applicable to TC3, there was a real likelihood that they too would have collapsed, causing extensive loss and damage to DC1, liability for which would fall upon, and have to be admitted by, the Insurers. It was both necessary and reasonable to incur the additional cost of having TC8 and TC9 climb each other in order to prevent the consequence to the Works of such loss and damage. If the question is not to be looked at prospectively the additional indemnity conferred by Extension 16 would be illusory, since, if imminence is only looked at retrospectively, no insured would act, unless he could be sure that, after he had done so, the loss would be said to have been imminent. In any event, in the light of what is now known as to the cause of the collapse the loss and damage was imminent, even when looked at retrospectively.

“Imminent” must be interpreted having regard to the object of the Extension which is to minimise the potential exposure of the Insurers. In this respect Mr Ramsey drew attention to two decisions of the Court of Appeal on the question as to whether there was such an “imminent danger to health and safety” as was, under the law as it was then understood to be, the precondition for the accrual of a cause of action in negligence claims against local authorities who had approved plans for building works..

Thus in Batty v Metropolitan Property Realisations [1978] 7 BLR 1, 15-16, Megaw LJ, referred to the dictum of Lord Wilberforce in Anns v Merton London Borough Council that a cause of action against a local authority that had passed building plans arose when the state of the building was such that there is “a present or imminent danger to the health or safety of persons occupying it”, saying:

“Was there not here imminent danger to health or safety of persons occupying this house, at the time when the action was brought? Indeed, Mrs Batty, one of the plaintiffs, has been awarded damages for the consequences to her health and peace of mind of the foreseen disaster. Why should this not be treated as a case of imminent danger to the safety and health of people occupying the house? No one knows, or can say with any certainty – not even the greatest expert – whether the foundations of the house will move and the house perhaps suddenly tumble tomorrow, or in a year’s time, or in three years’ time, or in ten years’ time. The law, in my judgment, is not so foolish as to say that a cause of action against the builder does not arise in those circumstances because there is no imminent danger.”

In Ketteman & Ors v Hansel Properties [1985] 27 BLR 1, 21-22 Lawton LJ said:

“An absurd situation, said Mr Auld, would arise if the occupier of a building which was structurally unsound due to a local authority’s negligence and which was likely to become a danger to health or safety unless remedial action were taken had to wait until it was about to collapse before his right of action against the local authority was accrued. Mr Owen submitted that the occupier did have to wait until there was a present or imminent danger to health or safety because that is what Lord Wilberforce had said, viz ([1978] AC 728 at p. 760B-C):

“It (the cause of action) can only arise when the state of the building is such that there is a present or imminent danger to the health or safety of persons occupying it.”

Lord Diplock and Lord Simon of Glaisdale said that they agreed with his speech. Having regard to the absurdity to which Mr Auld invited our attention, it seems to me that Lord Wilberforce’s use of the word ‘imminent’ should be understood to mean a danger which was likely to arise soon – and how long soon was in any case would depend upon the facts and would be a matter of degree. The trial judge did not consider the factor of the likelihood of danger arising soon. He should have done. Having regard to the nature and extent of the cracks and the likelihood that the damage would be progressive, I would adjudge that there was an imminent danger to the safety of the occupiers of all five houses.”

In the present context, Mr Ramsey submitted, loss or damage is “imminent” if the facts available at the relevant time would indicate to a reasonable man that such loss or damage is likely to occur soon, that is at some time during the course of an operation that is about to commence. That was the case here when the construction of the core on DS1 was about to start, in the course of which TC7 and TC8 would need to increase their height several times, and when, in the absence of a change of method, there was a real risk of another collapse.

Moreover, submits Mr Ramsey, Extension 16 (1) should be interpreted so as to include within the concept of “imminent loss or damage” a reasonable belief that loss or damage was imminent, and that, as appeared from his evidence, Mr Frank of Canary Wharf reasonably held such a belief.

As to whether, had such loss or damage occurred, liability would have been admitted under the policy, Mr Ramsey submits, that the insurers would have to have admitted liability and would not have been able to claim that there had been a breach of general policy exception 6 under which the Insured is bound to take all reasonable precautions to prevent any occurrence which may form the subject matter of a claim under the Policy. That condition is not to be construed as an exception in respect of loss or damage caused by operator error. The Insured i.e. Canary Wharf and their sub-contractors complied with their obligation to take all reasonable precautions by engaging Hewdens as a specialist contractor which was required to comply with all applicable health and safety legislation. In any event the likelihood is that Insurers would have accepted liability and sought to recover their outlay from those responsible for the collapse.

The additional cost of working was also incurred to prevent delay in consequence of actual damage to “any other Property in the vicinity of the Project site of any Works” and/or “at any other working location” i.e. DS2 and the completed structures in Canada Square and/or “to constructional Plant and equipment not insured under this Policy but for which liability would otherwise have been admitted” i.e. TC3, the collapsed crane on DS2. That damage, so it is said, is the dominant cause (“In consequence of”) of the need to incur additional costs of working in order to prevent or minimise delay to the Works.

Mr Marcus Taverner, QC, on behalf of the Insurers, submits that, in order for loss or damage to be imminent it must be virtually certain to occur soon. The classic example is the wall that is about to collapse onto insured property. But if, prior to the construction of the wall, it is realised that there is a risk that, if constructed as designed, it may collapse, and the design is changed in order to avoid that risk, then that is not something done to prevent the imminent collapse of the wall but to prevent the collapse of the wall becoming imminent. Were it otherwise the Policy would provide indemnity against defective design or method of construction. In the present case the collapse of TC8 and TC9 could not at the relevant time, namely the beginning of July when the decision not to self-climb TC8 and TC9 was made, be said to be imminent. At that time TC8 and TC9 had not begun to be constructed. In order for them to collapse they would have to be constructed badly (either in the sense that the design of the construction or the method of implementing it was defective or both): cp the cases of Batty and Ketterman where the construction had already taken place at the time when the loss was said to be imminent. In the present case, once TC3 had collapsed, TC7 and TC8 were never going to be constructed in the same negligent way. Whether or not the loss and damage alleged was imminent in July must be decided on the evidence that the court has now heard whether or not it related to facts known at the time. A belief that loss was imminent when in fact it was not was insufficient.

Further, if, contrary to that submission, there was imminent loss or damage, such loss or damage would only have occurred if, after the collapse of TC3, Canary Wharf had not taken steps to identify the cause of the collapse and/or to ensure that there were satisfactory risk assessments and sufficient precautions taken to make sure that the collapse did not happen again. Failure to do so would have been a non fulfilment of the obligation under General Policy Exception 6 to take all reasonable precautions to prevent any occurrence which might form the subject matter of a claim under the Policy. Since the due observance of that condition is, by Exception 8, a condition precedent to liability Insurers would not have been under any liability, or bound to admit that they were, if the condition was not complied with. Such a conclusion did not nullify the effect of Extension 16 as claimed. It would still apply e.g. in a case where one wall has fallen down and injured the Works and another is poised to do so.

So far as the claim based on actual damage to DS2 or the structures in Canada Square or TC3 is concerned, the additional working was not done in order to minimise the delay in consequence of that damage. The fact that the cost would not have been incurred, had the damage not taken place, was not sufficient.

Mr Taverner further submitted that Canary Wharf had not complied with general policy exception in that they had not given Insurers notice as soon as reasonably practicable of any occurrence which might give rise to a claim. That occurrence was, he submitted, the imminence of damage to DS1.

Lastly Mr Taverner submitted that, even if he was wrong on the above, the costs referred to in Assumed Fact No 5 were not recoverable under Extension 16 because they constituted the costs of delay and disruption (which, if at all, were to be recovered under section 2) and were not costs incurred in order to prevent interruption/interference or delay in the carrying out of the works.

The Policy must, like all commercial contracts, be interpreted with regard to its nature and purpose and so as to give effect to what the parties to it would reasonably have understood to be the obligations arising from it (Footnote: ⁷ ) . The Policy is an insurance against risk of loss or damage to property, namely the Works and Constructional Plant used or intended to be used in connection with the Project, i.e., amongst other things, the Buildings described in the Policy including DS1. The Project was intended to progress and develop from day to day - from the clearing of the site until final completion. In the course of that development it could at any stage be damaged. When this occurred there might be urgent action that was required to be taken to prevent damage and loss, and also, a need to take steps to prevent the same damage occurring in the future. In that context the Policy provides, in my view, a clear gradation of provision.

If at any stage the Works are damaged, the Insurers will, under Section 1, indemnify the Insured by payment, reinstatement or repair. Under Extension 16 the Insurers will indemnify the Insured against any additional cost of working necessarily and reasonably incurred in order to prevent or minimise delay to the carrying out of the Works in consequence of that actual damage. If completion of the Project is delayed because of the damage, Insurers will, under Section 2, pay for the additional costs attributable to that delay and, also, make good any additional expenditure incurred (solely) in order to expedite completion of the Project.

If the Insured is faced by an emergency i.e. a circumstance in which it has to take immediate, or close to immediate, action to prevent the property insured suffering damage (or loss), the insurers will, under Special Condition 8, pay any costs of doing so that they have previously approved, or, if they have not done so, any such costs, provided that they do not exceed the amount saved by the expenditure sought to be recovered. If there is an emergency it does not matter whether the loss sought to be minimised is loss from something that has not yet happened (e.g. the collapse of a wall) or further loss as a result of what has already happened (e.g. water rushing through a wall that has been breached). But, save in respect of the costs of emergency action, Insurers are not liable for costs incurred in preventing further occurrences of a similar nature: see the last sentence of Special Condition 8.

If damage to the insured property is imminent the Insurers are bound to provide indemnity in respect of any additional cost of working necessarily and reasonably incurred in order to prevent or minimise the delay to the carrying out of the works in consequence of that imminent damage: Extension 16 to Section 1. Whilst the location of this Extension in the policy - as an extension to Section 1 – might suggest that it was intended primarily to apply if damage covered by the policy had already occurred (e.g. if a wall has fallen down and a change of working is adopted in order to avoid the consequences if the adjoining wall does so as well), the extension is not so limited.

But it is for the Insured to take reasonable precautions to prevent any occurrence which may form the subject of a claim under the Policy. In particular, if something occurs which gives rise to a claim, it is for it to take, at its own expense, such immediate action as is necessary to minimise any loss and prevent repetition – save to the extent that the first sentence of Special Condition 8 applies.

In the present case TC3 collapsed on 21^st May 2000. That was an occurrence which gave rise to a claim under the Policy. Emergency action was taken the next day; but no one suggests that the additional costs of working as a result of the crane outages in July were the result of emergency action taken at the end of May. They plainly were not.

I accept that the question of whether damage is imminent is, at any rate in the first instance, to be considered prospectively, and objectively, that is to say by considering whether on the facts available at the relevant time a reasonable man would regard the damage in question as sufficiently likely to happen sufficiently soon that it should be described as imminent. Whether that will be so is a question of fact and degree. The question has, also, to be considered in the light of the structure and provisions of the Policy to which I have referred.

In the present case, once TC3 had collapsed in the way that it did, there was a strong possibility that any other self-climbing operation would suffer the same fate, if the same working practices were adopted. But, after 21^st May 2000, it was Canary Wharf’s duty to take such immediate action as was necessary to prevent a re-occurrence. Whatever might have been the position before the collapse (when Canary Wharf might well be able to say that they had taken reasonable precautions to prevent occurrences of this kind by employing KCB who employed an apparently competent crane contractor) once the catastrophe had occurred, matters could not simply be left to Hewdens or KCB; nor were they. No self climbing took place until either, in the case of DS2, a method of working acceptable to HSE was devised, or, in the case of DS1, Canary Wharf reverted to two crane climbing. The decision as to the latter was made by Canary Wharf, in the person of Mr Frank, at about the beginning of July.

I find it impossible to characterise the action of Canary Wharf in deciding to use the two tower method in July as action to prevent delay in the carrying out of the Works in consequence of imminent damage to DS1. Firstly, the circumstances lacked sufficient immediacy for imminence. The parties were in agreement that the position must be looked at as at the moment when the decision to incur the additional cost of climbing was made. I decline, however, to characterise as “imminent” damage which was only liable to occur if the cranes TC8 and TC9 were climbed, over a period of several months, by the same defective method previously employed when at the time of the decision they had not even begun to be constructed and were never going to be constructed in the same negligent way. Secondly, it seems to me that what was done is properly characterised as the taking of the precautions required of Canary Wharf by General Condition 6 in order, as Mr Taverner put it, to prevent the collapse of any crane becoming imminent. Thirdly, it seems to me that, if the position were otherwise, the Insured would, as he submitted, be recovering an indemnity in respect of defective design or method of construction. Many deficiencies of design or construction are capable of causing damage to the works if not remedied. The Policy does not contemplate that, once such a potential has been identified, the cost of making good the deficiency can be recovered from insurers on the footing that, unremedied, the deficiency is likely, or even virtually certain, to lead to damage.

That conclusion renders it unnecessary to decide whether, if on the facts available at the relevant time, damage would appear to the reasonable observer a virtual certainty (and therefore, prima facie “imminent”), nevertheless the damage falls to be treated as not being “imminent” within the meaning of the policy if, as a result of facts subsequently discovered, it is apparent that the relevant damage would not or was unlikely to occur. I incline to the view that the answer to that question is in the negative, because the fair interpretation of the provision, having regard to its purpose or minimising Insurers’ exposure, is that the Insured should recover in respect of any additional cost of working which, at the time that the Insured incurred it, was necessary to avert a peril which, on the then indications, was imminent. In any event I do not think that the question arises on the facts. If TC7 and TC8 had been constructed in the same manner as TC3, it seems to me that the likelihood of their collapse during the course of such construction was sufficiently grave to make that collapse imminent at some stage – probably towards the end of the construction. I do not think that, in this context, the collapse had to be virtually certain in order to be classified as imminent. A serious risk, amounting to a real likelihood, is sufficient. But for the reasons that I have stated, I do not accept that that circumstance of itself indicates that such collapse was imminent at any material time and conclude that the additional cost of working was incurred in fulfilment of the Insured’s duty under General Condition 6.

I, also, accept that if, contrary to my finding, damage was imminent, it would not have been damage for which liability would have been admitted under the policy because it would have been the result of the Insured’s non fulfilment of General Policy Exception 6, the due observance of which is, by Exception 8, a condition precedent to liability.

That conclusion is sufficient to determine the case against Canary Wharf. No claim can be founded on inclusion B of Extension 16 (“mitigating the effects of such loss or damage”) since the damage in question has, itself, to be imminent. Nor can any claim under Extension 16 based on actual damage to DS2 or the structures in Canada Square or TC3 succeed. The additional working was not carried out in order to minimise delay in consequence of that damage. So far as TC3 is concerned I have no reason to think that the Insurers would have admitted liability for it under the policy so as to bring the facts within Extension 16 (v).

I do not accept that Canary Wharf is disentitled to recover for want of notification. The collapse of TC3 was, in my judgment, the occurrence giving rise to a claim under the policy of which the Insured was bound to give, and gave, timeous notice to the Insurers. The occurrence means the initial incident giving rise to claims under the policy. General Exception 3 does not, in my view, require further notification of the imminence of damage consequent on the original occurrence, or any other individual head of claim. At least it does not do so in sufficiently clear terms to entitle insurers to rely on this point.

If I had otherwise been in Canary Wharf’s favour I would not have dismissed their claim on the basis that the costs referred to in Assumed Fact No 5 constituted costs of delay and not costs incurred in order to prevent delay. The additional costs of two crane climbing are attributable to the delay in using two cranes rather than one; but they are also costs incurred to prevent the delay to the carrying out of the Works that would have resulted from the allegedly imminent damage that would have arisen if self climbing led to the collapse of the cranes on DS1.

I believe that I have now sufficiently addressed the issues that require to be decided and I will hear Counsel on the form of the appropriate order.