England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM SOUTHAMPTON COUNTY COURT
HIS HONOUR JUDGE RUDD
SO108488

		Royal Courts of Justice Strand, London, WC2A 2LL
		3 December 2004

Lord Justice Pill:

1. This is an appeal against a part of the judgment of His Honour Judge Rudd sitting at Southampton County Court on 7 August 2003. A claim for damages under the Fatal Accidents Act 1976 had been brought by the claimant Mrs Margaret Anne Brown as widow and executrix of the estate of Mr Peter Brown who was fatally injured in an accident at Southampton Docks on 19 November 1998. She had sued Drake International Limited ("the appellants"), the employers of the deceased, and Southampton Container Terminals Limited ("the respondents"), who conducted operations at the container terminal at the docks. The judge found that the appellants supplied labour to the respondents and the actual work in the container terminal was carried out by a mixture of employees of the respondents and the appellants under the overall organisation and control of the respondents.
2. The judge found that both the appellants and the respondents were negligent and were in breach of statutory duty. He apportioned blame equally between them and rejected the allegation of contributory negligence they had both made against the deceased. The judge also held that, by virtue of a contract between them, the appellants should indemnify the respondents in respect of the respondents' liability to the claimant. The judge's finding as between the claimant and the present parties is not now challenged. The appellants challenge the judge's apportionment as between them and the respondents and his finding that the appellants were required to indemnify the respondents for their share of responsibility.

The indemnity clauses

3. Because the question of apportionment arises only if the respondents are not to be indemnified under the contract, I deal with the indemnity issue first. The work was done on Southampton Docks pursuant to a contract between the present parties made in July 1998. In considering its terms, the judge adopted the numbering of clauses in the tender documents rather than the contract and I adopt that numbering. The clauses are identical in the two documents.
4. Clause 22 provides:

"The Contractor shall be responsible for and shall release and indemnify SCT and their servants and agents from and against all liability for personal injury (whether fatal or otherwise), loss of or damage to property and other loss, damage, costs and expenses however caused or incurred which arise out of or in connection with the execution of the Contract."

5. The following clause, clause 23, has the side heading "Insurances" and has four sub-clauses. Sub-clause (i) provides:

"The Contractor shall insure in the joint names of the Contractor and SCT against any damage, loss or injury which may occur to any property or any person by or arising out of the execution of the Works or in the carrying out of the Contract."

Sub-clauses (ii) and (iii) stipulate the extent of the insurance required and the obligation to submit an insurance certificate. Sub-clause (iv) provides:

"SCT shall not be liable for or in respect of any damages or compensation payable at Law in respect or in consequence of any accident or injury to any workman or other person in the employment of the Contractor or any sub-contractor save and except an accident or injury resulting from any act or default of SCT its agents or servants and the Contractor shall indemnify and keep indemnified SCT against all such damages and compensation (save and except as aforesaid) and against all claims, demands, proceedings, costs, charges and expenses whatsoever in respect thereof or in relation thereto and shall insure against such liability."

6. The judge cited Canada Steamship Lines v The King [1952] AC 192 and the three stage test stated by Lord Morton to be applicable when a party to a contract seeks to exclude liability for its own negligence. The judge continued:

"There is no doubt that there can be a valid clause requiring indemnity against the contractor's own negligence if the wording is sufficiently clear. In this case there is a long and detailed contract between two large commercial organisations who almost certainly had the benefit of legal advice on both sides. The law does not require the use of the word "negligence" and the words "however caused" are wide enough to include negligence by necessary implication. That would also include breaches of statutory duty. "

The judge did not refer to clause 23, though it had been cited to him.

7. In Canada Steamship Lines, Lord Morton, considering a clause differently worded from clause 22 stated, at page 208, giving the judgment of the Judicial Committee of the Privy Council:

"Their Lordships think that the duty of a court in approaching the consideration of such clauses may be summarised as follows:-

(1) If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called "the proferens") from the consequence of the negligence of his own servants, effect must be given to that provision. Any doubts which existed whether this was the law in the Province of Quebec were removed by the decision of the Supreme Court of Canada in The Glengoil Steamship Company v Pilkington [1897] 28 S.C.R. (Can.) 146.

(2) If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens. If a doubt arises at this point, it must be resolved against the proferens in accordance with article 1019 of the Civil Code of Lower Canada: "In case of doubt, the contract is interpreted against him who has stipulated and in favour of him who has contracted the obligation."

(3) If the words used are wide enough for the above purpose, the court must then consider whether "the head of damage may be based on some ground other than that of negligence," to quote again Lord Greene in the Alderslade case ([1945] K.B. 189, 192). The "other ground" must not be so fanciful or remote that the proferens cannot be supposed to have desired protection against it; but subject to this qualification, which is no doubt to be implied from Lord Greene's words, the existence of a possible head of damage other than that of negligence is fatal to the proferens even if the words used are prima facie wide enough to cover negligence on the part of his servants."

8. For the appellants, Mr Baldock submits first that the answer to Lord Morton's first question is in the negative because the word "negligence" does not appear in clause 22. The second and third questions should be answered in the affirmative, as the judge indicated he would have answered them, had his conclusion been that the affirmative answer to question one was not "the end of the matter". The consequence of the affirmative answers to questions two and three is, Mr Baldock submits, that clause 22 did not apply because liability could be based, and was found to be based, on breach of statutory duty as well as negligence. The submission is that that because the clause could cover breach of statutory duty as well as negligence, it did not cover either.
9. Mr Baldock submits that even if clause 22 has the effect found by the judge, that effect is nullified by the presence in the contract of clause 23(iv) which provides the respondents with an indemnity but expressly excepts accidents or injury "resulting from any act or default of [the respondents] its agents or servants".
10. For the respondent, Mr Aldous relies on the presence of the words "however caused" in clause 22. That expression brings within the clause both negligence and breach of statutory duty. The indemnity is not nullified by clause 23(iv) because clause 23 is concerned only with insurance and, further, the indemnity it provides is additional to and not in substitution for the indemnity in clause 22. Where there is a series of indemnities, as in this case, dealing with different situations, they are cumulative in effect, it is submitted. One should not be read against another but as supplemental.
11. A relevant concession on behalf of the appellants in this case is an acceptance that the injury to the deceased "arose out of or in connection with the execution of the contract", within the meaning of that expression in clause 22. This is not a case where that is in issue, unlike, for example, Raymond Burke Motors Ltd v The Mersey Docks and Harbour Co. [1986] 1 Lloyds Law Reports 155, where the relevant negligence was found to have nothing to do with the contract. The issues have been confined to a consideration of the meaning of the other words in the clauses.
12. There is a presumption that an indemnity will not readily be granted to a party against the loss caused by its own negligence. In Smith v South Wales Switchgear [1978] 1 WLR 165, Viscount Dilhorne stated, at page 168E:

"While an indemnity clause may be regarded as the obverse of an exempting clause, when considering the meaning of such a clause one must, I think, regard it as even more inherently improbable that one party should agree to discharge the liability of the other party for acts for which he is responsible. In my opinion it is the case that the imposition by the proferens on the other party of liability to indemnify him against the consequences of his own negligence must be imposed by very clear words."

13. In the same case, Lord Keith of Kinkel stated, at page 177H, in relation to a clause which purported to indemnify a party against liability incurred by reason of its own negligence and breach of statutory duty:

"The matter is essentially one of ascertaining the intention of the contracting parties from the language they have used, considered in the light of surrounding circumstances which must be taken to have been within their knowledge".

14. As an indemnity, Clause 23(iv) is wider in its terms than clause 22 in that it is not limited to injury, loss and damage arising out of the execution of work or in the carrying out of the contract. It is narrower in that accidents or injuries resulting from any act or default of the respondents, their agents or servants are excluded. It is more specific by reason of its reference to injury to workmen.
15. Neither the fact that the indemnity in clause 23(iv) appears in a clause headed "Insurances" nor the presence of the added words at the end of the clause "shall insure against such liability" prevent what is clearly stated to be an indemnity being taken at face value in relation to the respondents. I do not accept Mr Aldous' submission that the purpose of the clause is merely to require the appellants to take out employers' liability insurance. The clause cannot be read merely as a statement of the risks against which insurance should be obtained. It would need to have been worded quite differently to have only that limited effect. A general obligation to insure is in any event contained in clause 23(i) and that clause sits comfortably with clause 22.
16. In my judgment, clause 23(iv) takes effect in accordance with its terms. With respect to employees of the appellants, an accident or injury resulting from any act or default of the respondents, their servants or agents is expressly excluded from the indemnity provided. Given the presence in the contract of clause 23(iv) and the presumption that an indemnity will not readily be granted to a party against a loss caused by its own negligence, the respondents cannot in my judgment rely on the indemnity in clause 22 even if the issue upon that clause, considered alone, is resolved in their favour. Having agreed to the presence in the contract of clause 23(iv) the respondents cannot rely on clause 22 in present circumstances.
17. If that is correct, it is not necessary to decide the effect of clause 22 read alone but I do so in deference to submissions made. In my judgment, the presence in that clause of the expression "however caused or incurred" does distinguish the case from the Canada Steamship case and from E E Caledonia Limited v Orbit Valve Co Europe [1994] 1 WLR 1515, also relied on by appellants. In that case, each party agreed to indemnify the other "against any claim, demand, cause of action… or liability… arising by reason of… death of any employee… of the indemnifying party, resulting from/or… connected with the performance of this order". It was held in this court that the clause covered neither negligence nor breach of statutory duty. Steyn LJ stated, at page 1520E, that the provision "falls markedly short of a clear indication that the clause was intended to cover negligence". The clause does not include the word negligence and does not include a comprehensive definition of the cause of the injury such as "however caused". Indeed, it does not include, in relation to the injury, words referring to causation.
18. Such comprehensive expressions have been considered in other cases. In White v Blackmore [1972] 2 QB 651, Roskill LJ stated, at page 677:

"It will be observed that the exclusion is of "all liabilities arising out of accidents causing damage or personal injury (whether fatal or otherwise) howsoever caused." Wider words of exemption are difficult to conceive. Indeed the words "howsoever caused" have become in the last half century and more the classic phrase hereby to exclude liability for negligence."

19. Roskill LJ would have had in mind such cases as Gibaud v Great Eastern Railway Company[1921] 2 QB 427 where Scrutton LJ stated, at page 437:

"…substantially it comes to this, that though, if you merely enumerate losses without dealing with causes, such a clause may not protect you from your own negligence, if you enumerate causes and suggest you are free from all losses however caused, that will protect you from your own negligence."

Among the words giving protection were "any injury, however caused."

20. The Canada Steamship test was applied in South Wales Switchgear where White v Blackmore was cited to the House but was not mentioned in the speeches. Had White v Blackmore been thought to be unsound, it is not likely to have escape condemnation in South Wales Switchgear.
21. I agree with the judge that, applying the three stage test in Canada Steamship in this case, the enquiry does not get beyond stage one. The expression "however caused" gives the clearest indication that negligence and breach of statutory duty are included. The expression should be given its plain meaning.
22. The source of Lord Morton's test is clearly the judgment of Lord Greene MR in Alderslade v Hendon Laundry Ltd [1945] KB 189. Immediately before stating his test, Lord Morton cited a passage from the speech of Lord Greene at page 192:

"Where the head of damage in respect of which limitation of liability is sought to be imposed by such a clause is one which rests on negligence and nothing else, the clause must be construed as extending to that head of damage, because it would otherwise lack subject-matter. Where, on the other hand, the head of damage may be based on some other ground than that of negligence, the general principle is that the clause must be confined in its application to loss occurring through that other cause to the exclusion of loss arising through negligence. The reason is that if a contracting party wishes in such a case to limit his liability in respect of negligence, he must do so in clear terms in the absence of which the clause is construed as relating to a liability not based on negligence."

23. Not cited by Lord Morton but following that passage, Lord Greene stated:

"A common illustration of the principle is to be found in the case of common carriers. A common carrier is frequently described, though perhaps not quite accurately, as an insurer, and his liability in respect of articles entrusted to him is not necessarily based on negligence. Accordingly if a common carrier wishes to limit his liability for lost articles and does not make it quite clear that he is desiring to limit it in respect of his liability for negligence, then the clause will be construed as extending only to his liability on grounds other than negligence. If, on the other hand, a carrier not being a common carrier, makes use of such a clause, then unless it is construed so as to cover the case of negligence there would be no content for it at all seeing that his only obligation is to take reasonable care. That, broadly speaking, is the principle which falls to be applied in this case"

24. Lord Greene cited the decision of Sankey J in Turner v Civil Service Supply Association [1926] 1 QB 50 where, at page 55, the comprehensiveness of the expression "however caused" was affirmed. Its presence distinguished clauses from those where "there were no words referring to causation".
25. Lord Greene's example demonstrates the circumstances in which the second and third stages of Lord Morton's test are intended to operate. Negligence is not expressly covered by a clause and, because causes other than negligence are possible, there is a presumption that negligence was not included. In the present case, as in White v Blackmore, however, negligence is plainly included in the expression "however caused". The court construes the language used by the contracting parties to ascertain their intention and, in my judgment, the expression "however caused" leaves no doubt that both negligence and breach of statutory duty were intended to be included. On that wording, the problem raised in Alderslade and in the second and third stages of Lord Morton's test does not arise. Had the issue turned on Clause 22 alone, I would have found in the respondent's favour.

Apportionment

26. The judge considered the circumstances of the accident in great detail but, for present purposes, they can be summarised briefly. The ship Jarvis Bay was being loaded with containers. The lashers on the ship requested more poles and the deceased responded to a radio message to deliver them. He drove a minibus from his office to the quayside and delivered a number of poles to cranes on the quay. As he walked back towards his vehicle, he was struck by a straddle carrier driven by an employee of the respondents. Drivers of straddle carriers have only limited visibility from their cabs and have things on their minds, when driving their equipment, other than looking out for pedestrians, including looking at their computer screens and looking out for other straddle carriers. They were not, as the judge put it, "looking out for pedestrians".
27. The judge found that the area was one of "extreme danger to pedestrians". Only a limited number of people were authorised to go onto the operating quayside on foot and the deceased was one of them. The judge found that the deceased was distracted by the movement of another vehicle and by a radio call.
28. Against both defendants it was claimed that there had been no risk assessment for the task of pole delivery, or delivery generally, to the cranes and that the place and system of work were unsafe. Against the appellants, it was alleged that they were negligent in failing to deliver enough poles prior to loading and that they put an excessive workload on the deceased because they were short-staffed at the time. Against the respondents, it was also alleged that they were vicariously liable for the failure of the driver of the straddle carrier to keep a proper look out.
29. Having considered the evidence, the judge (paragraph 88) was satisfied that there was "de facto joint control" of the labour force and that the respondents shared with the appellants the duty to provide for the safety of workers in the port, whoever employed them. Both the appellants and the respondents were liable to the claimant and "in view of the close nature of the de facto joint control and supervision, I consider that the liability is also equal".
30. The judge did not in his main judgment go on to make conclusive findings on the allegations against both defendants of breach of statutory duty. By request, he did so in a further judgment dated 23 March 2004. He found that there was a breach of Regulation 7(1) of the Docks Regulations 1988 by the respondents and of Regulation 12(2) by both defendants. In his second judgment, the judge maintained his position that "the real mischief in this case was the system of work which required [the deceased] to be in an otherwise pedestrian free area". It was "reasonably practicable to deliver poles to a ship in such a way as to avoid or minimise exposure to danger". A system of work should have been introduced which removed or reduced potential conflict of straddle carriers and pedestrians delivering poles to the cranes and/or enforce a compulsory stop on movements. After the accident to the deceased, such a system was put in place. Both the appellants and the respondents had a degree of control over the system of work.
31. It is clear from his detailed judgment that the judge had every opportunity to assess the responsibility of the appellants and the respondents for this fatal accident. The system was so defective that the judge did not consider the fact that the deceased allowed himself to the distracted amounted to a blameworthy contribution to the accident. He rejected the allegation of contributory negligence. When considering somewhat technical questions as to which of the defendants, if either, was also liable for breach of statutory duty, the judge again stressed that the real mischief in this case was the unsafe system of work.
32. An appellate court is reluctant to interfere with the trial judge's discretion as to apportionment (National Coal Board v England [1954] AC 403 at 420 per Lord Porter). It does so only in the event of a substantial misjudgment of the factual basis of the apportionment by the judge. (Jennings v Norman Collinson (Contractors) 1970 1All ER 1121). I see no justification for interfering in this case. The judge was entitled to apportion responsibility as he did and, on his findings of fact, I see no basis for criticising his assessment.

Conclusion

33. Thus in my judgment the appellants and respondents share responsibility for the accident equally and the respondents are not indemnified with respect to their share. I would allow the appeal to reflect those findings. The appellants are not required to indemnify the respondents with respect to that moiety of responsibility which the judge held that, subject to the indemnity claimed, they should bear.

Lord Justice Hooper:

34. I agree with the judgment of Pill LJ. I add only this very short point. Whilst I accept that clause 22 as drafted should be construed in the way that Pill LJ has construed it, I have doubts that the draftsman of Clause 22 was intending to require the Contractor to indemnify SCT for SCT's negligence. I give an example. Assume that one of the Contractor's employees was operating a crane and due to the sole negligence of SCT the crane malfunctioned and a dropped container did extensive damage to a vessel being loaded or unloaded. I would find it extraordinary if the draftsman intended the innocent Contractor to be liable under clause 22 to indemnify SCT for what might be very substantial damages (unless it could be said that the liability did not "arise out of or in connection with the execution of the Contract", whatever that may mean).

Lord Slynn of Hadley:

35. I fully agree with the judgment of Pill LJ as to the indemnity issue and see no reason to interfere with the trial judge's apportionment of responsibility.