Barclays Bank Plc v Fairclough Building Ltd [1994] EWCA Civ 3 (06 May 1994)

Facts

Barclays Bank Plc (the Bank) employed Fairclough Building Ltd (Fairclough) under a contract to clean and repair the asbestos roofs of two housing estates. Fairclough sub-contracted the work to another specialist firm. The work was performed defectively, leading to significant asbestos contamination of the properties. The Bank was forced to evacuate residents and engage a different contractor to carry out extensive decontamination works at a cost of nearly £4 million. The Bank sued Fairclough for breach of contract to recover these costs. Fairclough admitted it had breached its contractual obligations but contended that the Bank’s damages should be reduced for contributory negligence under the Law Reform (Contributory Negligence) Act 1945. The basis for this contention was that the Bank, through its supervising architect, had failed to adequately supervise Fairclough’s work. The trial judge accepted this argument, found the Bank 40% contributorily negligent, and reduced the damages accordingly. The Bank appealed this finding.

Issues

The central legal issue before the Court of Appeal was whether the defence of contributory negligence, as provided for in the Law Reform (Contributory Negligence) Act 1945, is available as a defence to a claim for damages arising from a breach of a strict contractual obligation. The court had to determine if the Act’s scope, primarily designed for tortious claims, could be extended to a breach of contract where the defendant’s contractual duty was not one of taking reasonable care but an absolute duty to achieve a particular result.

Judgment

The Court of Appeal, in a leading judgment by Beldam LJ, unanimously allowed the appeal. The court held that the 1945 Act does not apply to claims for breaches of strict contractual duties.

Reasoning of the Court

Beldam LJ embarked on a detailed analysis of the 1945 Act, particularly the definitions of ‘fault’ in sections 1(1) and 4. Section 1(1) states:

Where any person suffers damage as the result partly of his own fault and partly of the fault of any other person or persons, a claim in respect of that damage shall not be defeated by reason of the fault of the person suffering the damage, but the damages recoverable in respect thereof shall be reduced…

The court reasoned that the Act’s purpose was to abrogate the harsh common law rule in tort where a claimant’s own negligence, however slight, was a complete defence to their claim. It was not intended to alter fundamental principles of contract law.

The court distinguished between different categories of contractual duty, drawing upon the classification in Forsikringsaktieselskapet Vesta v Butcher [1989] AC 852. It concluded that contributory negligence could only be a defence where the defendant’s liability in contract is the same as their liability in the tort of negligence, i.e., where there is a concurrent duty of care in tort and contract.

Crucially, Fairclough’s obligation to carry out the cleaning ‘in a workmanlike and proper manner’ was interpreted as a strict contractual obligation to achieve a specific result (a decontaminated, safe building), not merely a duty to exercise reasonable care and skill in doing so. Since the claim was for a breach of this strict duty, it fell outside the scope of the 1945 Act. Beldam LJ stated decisively:

In my judgment, the judge was wrong to hold that the 1945 Act applied to the plaintiff’s claim for breach of contract in the present case. Mr. Dyson’s primary submission for the bank was that on its true construction the 1945 Act has no application to a claim for damages for breach of a term of a contract which imposes a strict liability. In my view that submission is correct.

The court reasoned that allowing apportionment in such cases would fundamentally undermine the principle of freedom of contract, where one party gives a strict promise to achieve a result. If such a promise is broken, the promisor is liable for the consequences, irrespective of any alleged failure by the other party to supervise the performance. Beldam LJ concluded:

To apply the 1945 Act to a case such as the present would… make an inroad into the principle that the parties are free to make their own bargains and that it is the function of the court to enforce them… A party who has stipulated for a particular result is entitled to have that result, and if he does not get it, to be compensated for its non-production. He should not have the compensation for its non-production reduced because he did not see to it that the party obliged to produce the result performed his obligation.

Implications

This decision provides a clear and authoritative statement on the limited application of contributory negligence in contract law. It establishes that where a party contracts for a specific outcome or result (a strict duty), the defence of contributory negligence is not available to the party in breach. The breaching party cannot reduce its liability by arguing that the innocent party failed to supervise or mitigate the risk of breach. This reinforces the sanctity of contractual bargains and the principle of pacta sunt servanda (agreements must be kept). The case is a cornerstone authority for distinguishing between contractual duties of care (where tortious principles like contributory negligence may apply) and strict contractual obligations (where they do not).

Verdict: The appeal was allowed. The finding of contributory negligence and the consequential 40% reduction in damages were set aside. Barclays Bank Plc was held to be entitled to judgment for the full amount of the agreed damages.

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