When a contractor and an employer are in dispute over something which has been done by a subcontractor, it is quite common for the contractor to try to ‘keep the peace’ by settling the claim with the employer and to then seek recompense from the subcontractor.
In a recent case, a defect in the sprinkler system in an office block caused damage which led to a claim for over £5 million against the contractor who had the contract for installation of the system. The sprinklers were installed by a subcontractor. The contractor settled the claim for £2.72 million and claimed that sum from the subcontractor.
The subcontractor disputed the claim, arguing that there were good defences against it and that the settlement reached was unreasonable.
The court rejected the subcontractor’s argument, holding that the defect was the fault of the subcontractor and the contractor had reached a reasonable settlement with the claimant and was therefore entitled to seek restitution from the subcontractor.
Subcontractors who are on notice that their work could give rise to a ‘second-hand’ liability may wish to consider at an early stage their strategy with regard to the proceedings, especially if they have a good defence against any claim and/or they think the contractor will be a weak negotiator.
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Partner Note
Siemens Building Technologies FE Ltd. v Supershield Ltd. [2009] EWHC 927 (TCC).