Greenwich Millennium Village Ltd v Essex Services Group Plc

The appellant sub-sub-sub-contractor had been responsible for the labour element of construction work on two blocks of flats and, on the facts, was found to be responsible for the flooding by reason of its defective workmanship. It was unsuccessful in its appeal against a decision that it was liable to indemnify the respondent sub-sub-contractor, a party higher up the contractual chain responsible for the design and installation of mechanical works, who it alleged had been negligent in failing to spot the defects.

Whilst the Court of Appeal recognised that an indemnity is generally construed narrowly, it held that this principle was based on the parties’ presumed intention in the commercial context. In the court’s opinion it did not matter that the respondent sub-sub-contractor should have detected the defects on inspection, as it could not be presumed that the parties intended to confine the contractual indemnity clause to workmanship breaches that were invisible upon reasonable inspection. Further, the sub-contractor’s negligence would not have prevented damages from passing down the chain through an alternative claim for breach of contract.