Article

Indemnity clauses

The recent Court of Appeal decision in Wiltshire County Council -v- (1)Crest Estates Limited (2)Crest Nicholson Residential Limited (3)Langtree Property Co [2005] EWCA Civ 1087 means that when developers consider Section 38 or Section 106 Agreements, the wording of the indemnity covenants sought by the Highway Authority/Local Planning Authority requires attention. The indemnity usually seeks to cover liability “arising out of or in connection with or incidental to” the works referred to in the
relevant Agreement. One would normally expect that to mean liability arising from the construction of the road, as that is what is covered by a Section 38 Agreement. However in the Wiltshire County Council case, the Local Authority tried to claim that the indemnity extended to liability arising from the
subsequent use of the road. Crest entered into tripartite negotiations with the Local Authority and
the Highway Authority which resulted in Crest agreeing to construct roads forming part of the Chippenham bypass. As a result, claims were received by the Highway Authority for payment of
compensation under the Land Compensation Act 1973 for damage to neighbouring property resulting from the use of the road to which the Agreements referred. Although the Court of Appeal found in favour of Crest in this case, their judgment made it clear that the wording of such an indemnity could easily, as a matter of ordinary language, be interpreted either way. Since this decision, we have received at least one Section 38 Agreement which explicitly seeks to extend the indemnity to cover claims under the Land Compensation Act 1973.

For further enquiries please contact Nick Horton (view full profile) on 01892 701313 or email nhorton@ts-p.co.uk.

You will require the Adobe Acrobat Reader to read PDF files, this is free to download if you do not already have it. Get Adobe Reader