#6621 - Supersheild V. Siemens Technology Ltd. - Commercial Remedies BCL

Supersheild v. Siemens Technology Ltd.

Facts

On 9 October 2001 a nut and bolt connection on a float valve failed and water from a storage tank overflowed into the basement of a new office building for Slaughter and May in the City of London. The water caused a flood which led to extensive damage to the electrical equipment in the basement.

The water storage tank for the sprinkler system was located in the basement of the premises. It stored water which, in the event of the operation of sprinkler system in the building, would be pumped through the pipework serving the sprinklers. When the level of the water in one part of the tank dropped, a float valve would operate to refill the water tank. This float valve was an industrial version of the ball valve typically found in domestic water supply tanks. The float device is connected to a lever arm which operates the valve lever which turns the water on and off. The lever arm was attached at one end to the float and at the other end to the valve lever. The connection to the float was by two nuts and bolts some centimetres apart. It was one of these connections which failed in the following circumstances, causing water to overflow.

When a sprinkler pump operates it causes water to be drawn from and returned to the tank. In doing so, the float causes the valve to operate. In this case when one of two float valves operated in this way a nut and bolt connection failed and the bolt fell out. This meant that the valve was in the open position letting water into the tank. Without any fixed connection to the float at the end of the lever arm, the valve did not shut down when the tank reached the required level but continued to fill up.

The water from the tank overflowed into a bunded area which contained a 600 mm high wall designed to retain any overflowing water. There were drains in the tank room floor within the bunded area but these became blocked or partially blocked by packaging, insulating or other material on the tank room floor.

Water then overflowed the bund, passed over the door threshold to outside the tank room. The water reached electrical equipment in the basement which then suffered substantial damage.

Argument of the Defendants

Mr Cannon submitted that this was a wrong approach. It was not a matter of imputing knowledge of the existence of the drains in order to reduce what was otherwise recoverable under the first limb of Hadley v Baxendale. Rather, it was a fact that the tank room was designed and constructed with drains, and the usual or natural course of any water which overflowed from the sprinkler tank would have been to run away via the drains into a sewer. The blockage of all the drains was a most unfortunate and unlikely occurrence, which prevented the water from running away as it would have done in the normal course of things.

Holding

Affirming assumption of risk

The law on remoteness of damage in relation to claims for breach of contract is grounded on the policy that the loss recoverable by the victim should be limited to loss from which the party in breach may reasonably be taken to have assumed a responsibility to protect the victim. It follows that the question of remoteness cannot be isolated from consideration of the purpose of the contract and the scope of the contractual obligation.

Inclusionary application of assumption of risk

Hadley v Baxendale remains a standard rule but it has been rationalised on the basis that it reflects the expectation to be imputed to the parties in the ordinary case, i.e. that a contract breaker should ordinarily be liable to the other party for damage resulting from his breach if, but only if, at the time of making the contract a reasonable person in his shoes would have had damage of that kind in mind as not unlikely to result from a breach. However, South Australia and Transfield Shipping are authority that there may be cases where the court, on examining the contract and the commercial background, decides that the standard approach would not reflect the expectation or intention reasonably to be imputed to the parties. In those two instances the effect was exclusionary; the contract breaker was held not to be liable for loss which resulted from its breach although some loss of the kind was not unlikely. But logically the same principle may have an inclusionary effect. If, on the proper analysis of the contract against its commercial...