Property Aware 5
We frequently receive instructions following claims arising as a result of damage to underground utilities. Often these claims will relate to damage to electricity cables, broadband / fibre optic cables, pipes and water mains.
What initially presents itself as a straightforward dispute can quickly progress to a complex litigation involving several parties, with each party looking to pass on liability down the contractual chain and / or negligence to the party ultimately responsible. With an increase in parties often comes an inevitable increase in costs. As such and if possible, it is often preferable to resolve these claims at a very early stage prior to proceedings being issued.
Pre-litigation: what can be done?
We would expect a proposed claimant who has sustained damage to its property to follow the Pre-Action Protocol for Construction and Engineering Disputes prior to issuing proceedings. In order to comply with the Protocol, the claimant must provide the defendant with a detailed letter of claim confirming the circumstances of the damage, the alleged cause of action against the defendant and details of the remedy sought.
The Protocol provides that a proposed defendant must acknowledge receipt of the letter of claim within 14 days and must respond to the claimant’s allegations within 28 days. The time for responding can be extended up to three months by agreement between the parties, if necessary.
The pre-action process is intended for the parties to provide sufficient information about the nature of each other’s case in order to be in a position where they may be able to settle cases early, fairly and inexpensively without recourse to litigation. As such, this is the ideal opportunity for a defendant to investigate the claim fully and respond as early as possible.
Investigations and liability
Following receipt of a letter of claim, thorough investigations ought to include provision of photographs, details of any / all equipment used and method statements, copies of risk assessments, details of any / all subcontractors appointed, copies of any / all contractual documentation and details of any witnesses.
The investigations must consider the allegations made by the claimant and whether the defendant is able to refute the same. For example, it may be that the claimant alleges a breach of contract but investigations reveal that the claimant did not contract directly with the defendant.
It may be the case that investigations reveal that whilst there was a contract in place between the parties, the defendant engaged the services of a subcontractor and it is the subcontractor who carried out the excavation works.
In this scenario, it is likely to be the defendant’s intention to redirect the claim to a third party subcontractor.
Again this is the ideal early opportunity for the defendant to involve the subcontractor or any other parties in the claim by the defendant sending out its own compliant letters of claim.
An analysis of the terms of a contract must be undertaken to consider any specific and express clauses relied upon by the claimant. It is often the case in these types of claims that claimants will raise two-fold arguments in contract:
1) A breach of the implied term of s.13 of the Supply of Goods and Services Act 1982 which requires the works to be carried out with reasonable care and skill; and / or
2) Reliance upon an express contractual indemnity between the parties. In contracts of this nature it is common to see indemnity clauses such as the one below:
“The Subcontractor shall at all times indemnify the Contractor against all liabilities to other persons (including the servants and agents of the Contractor or Subcontractor) for bodily injury, damage to property or other loss which may arise out of or in consequence of the execution, completion or maintenance of the Subcontract Works and against all costs, charges and expenses that may be occasioned by the Contractor as a result of the claims of such persons…”
The wording of these clauses does differ between contracts and requires fact specific legal interpretation. As such, we always recommend that legal advice be sought where an indemnity clause is relied upon.
If the claim is also brought in negligence, it is likely that the claimant will allege that the defendant has breached its duty of care to carry out its works with the care expected of a reasonably competent contractor.
In a claim where a failure to exercise reasonable skill and care and / or a failure to carry out works with the care expected of a reasonably competent contractor is alleged, investigations may establish that the defendant took all reasonable precautions to avoid damage and the damage was therefore unforeseeable. In these circumstances, a defendant may be able to argue that it cannot be deemed liable for the damage caused.
So what are ‘reasonable precautions’ and how are these assessed?
To determine the reasonableness of the steps taken by a defendant, it is useful to refer to Health & Safety Executive Guidance HSG 47, which is entitled ‘Avoiding Danger from Underground Services’. This Guidance sets out best practice guidance on the general precautions to be taken by ground workers to prevent damage to underground services.
HSG 47 sets out that a safe system of work has four basic elements:
1 Planning the work;
2 Referring to plans of buried services;
3 Use of cable and pipe-locating devices; and
4 Locating services by using safe digging practices.
HSG 47 provides a useful flow diagram of a safe system of work.
If a defendant cannot demonstrate that it has considered and followed the best practice guidelines in HSG 47, it may be difficult to establish that the defendant has carried out its works with reasonable care and skill and / or has taken reasonable steps to avoid damaging property and has not breached its common law / contractual / statutory duty of care and the defendant may therefore be liable.
It is common for defendants to complain that a damaged pipe / cable was not installed at a sufficient depth and had it been so, damage would have been avoided.
The National Joint Utilities Group (‘NJUG’) has produced guidance as to the Positioning and Colour Coding of Underground Utilities apparatus which provides recommended depths for the installation of underground utilities. Whilst potentially useful, it should be noted that these guidelines describe utility industry practice and have no legal or statutory authority.
Therefore a utility company may rely upon location specific environmental or geographical factors to justify why a pipe / cable was not installed at the recommended depth. For example, whilst NJUG Guidance recommends that a water pipe be installed at a depth of between 750mm - 950mm, in one case it was installed at a much shallower depth in a cast iron road bridge due to the fact that insufficient depth was available within the bridge foundations to install the pipe any deeper.
If following these early investigations it becomes apparent that the defendant is likely to face some liability for the claim, this is the ideal time to advance settlement discussions with the claimant to avoid the inevitable increase in costs that comes with potentially multi-party litigation.
Prior to making any offers to settle these claims, it is important to consider the claimant’s evidence in support of quantum and whether the repairs that were allegedly carried out are reasonable in nature and extent, and were necessarily required as a result of the damage caused.
• Pre-action investigations and early evidence gathering are key - obtain details / copies of photographs, details of any / all equipment used and method statements, copies of risk assessments, details of any / all subcontractors appointed, copies of any / all contractual documentation and details of any witnesses.
• Consider the specific allegations made by the claimant and whether there is evidence to refute these - seek legal advice in relation to any issues of contractual interpretation, such as indemnity clauses.
• Consider that a number of subcontractors may be involved and seek an indemnity for their costs which can mean that costs can quickly exceed the value of the claim.
• Careful consideration, investigation and identification of all issues at an early stage can avoid settlement of unjustified claims and / or result in potentially significant savings.
T: 01204 678900