England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
LEEDS DISTRICT REGISTRY
(HIS HONOUR JUDGE GRENFELL)

		Royal Courts of Justice Strand, London, WC2A 2LL
		9th September 2008

Lord Justice Tuckey:

1. This is a renewed application for permission to appeal by the defendants, Dhanjal Investments Limited, from a judgment given by HHJ Grenfell in Leeds after a trial of preliminary issues, in which he held that the defendant was liable to indemnify the claimant, Cosmos Holidays, under the terms of their contract dated 29 October 1999.
2. Cosmos are tour operators. The defendant is a Kenyan hotelier, which owns and operates the Travellers Beach Club Hotel in Mombasa and the Travellers' safari camp located in an elephant sanctuary. Under the contract between the parties which covered the year 2000, the hotel was to hold 40 rooms for Cosmos and provide its clients with other amenities, including an overnight stay at the camp.
3. The claim arises out of an incident on 4 May 2000 when nine Cosmos clients were staying at the camp, which was attacked by a gang of armed men. The clients had their property stolen and suffered other losses, for which they sued Cosmos, making claims both in contract and tort alleging that the camp had not been properly protected despite a similar attack three weeks earlier. Cosmos settled these claims and in these proceedings sought recovery of the settlement sums and associated costs from the defendant under the terms of the indemnity clause; alternatively for breach of other terms of the contract.
4. The contract, containing an exclusive English law and jurisdiction clause, consisted of a front sheet signed by both parties which was subject to the "Terms and Conditions overleaf" and "additional clauses/special offers" which by reference to an annexe to the contract included a special offer of a free night at the camp for all guests staying a minimum of 14 days. Clause 2 of the Terms and Conditions was headed "Safety Of Clients". And 2(a) provided that:

"Throughout the period of the contract the Hotelier warrants and guarantees as follows:-

a) that the design, installation, structure and contents of the Hotel and its furnishings and the services and goods supplied at the Hotel comply with all applicable national and local laws, decrees regulations and codes of recommended practice, (including those promulgated by trade associations of which the Hotelier is a member) relating to hygiene, fire and general safety of those using the Hotel or any of its amenities. The hotelier shall indemnify and keep indemnified Cosmos against all losses, liabilities, claims or expenses for or in respect of injury (including death), loss or damage to persons or property which may arise from any cause whatsoever out of or in connection with the supply of services to Cosmos (excluding the negligence or default of Cosmos, its servants or agents but including any failure on the Hotelier's part to comply with the laws, decrees, regulations and codes of recommended practice referred to above)."

The indemnity, relied on by Cosmos, is contained in the second sentence of this clause.

5. The short point of construction the judge had to decide was whether the indemnity was confined to claims arising from what happened at the hotel as the defendant claimed, or whether as Cosmos contended it also extended to what happened at the camp. If it did, the defendant contended that it was a particularly onerous term which could not be relied on because it had not been brought sufficiently to its attention. The defendant also contended that Cosmos's settlement with its clients in which it agreed to pay 60% of their claims was unreasonable.
6. On the construction issue, after referring to Lord Hoffmann's speech in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, the judge said at paragraph 47:

"Applying these principles to the contract in this case I am satisfied that the words 'the supply of services to Cosmos' is not restricted to the hotel. There is no particular reason to restrict it in spite of the several instances within the various paragraphs of clause 2 that plainly do apply only to the hotel, such as, in particular, the safety of the premises. In any event, if that were wrong, it would follow that there was an ambiguity which could only be clarified by reference to the other contract documents, each page of which, as I find, was signed…on behalf of [the defendant]. Those contract documents, in my judgment, make it clear that the supply of services to Cosmos included an all-inclusive excursion to [the camp]."

7. Mr Evan Ashfield, for the defendant, says the judge was wrong. The first sentence of clause 2(a) obviously only relates to the hotel. So do clauses 2(b) to 2(e), which deal with the requirement to insure, subcontracting and continuing compliance with standards of safety. In context, therefore, he says the second sentence of clause 2(a), which itself refers back to the first sentence, must be similarly restricted. In other words it only applies to things that happen in the hotel and not to things that happen elsewhere, including the camp.
8. I think these points are sufficiently arguable. If the second sentence of clause 2(a) had stood alone, the judge's conclusion would I think have been correct. But it appeared as part of another clause, the first part of which related only to the hotel, and the indemnity itself referred back to that first part. Furthermore it was followed by other clauses, including an obligation to insure, which again only related to the safety of clients in the hotel. It is not obvious that the parties should have intended the indemnity to extend to things which happened outside the hotel in a set of conditions which were obviously Cosmos's standard terms and conditions. So I would grant permission to appeal on the construction issue.
9. As part of the argument upon that issue it will be open for the appellant/defendant to argue that the indemnity is onerous but I think nothing of this as a freestanding point to justify the argument mounted before the judge to the effect that it was so onerous a condition that it should have been brought more to the attention of the defendant than it was. These were commercial parties and should be taken to be aware of the terms of their contract.
10. Cosmos settled its clients' claims at a mediation on the basis of advice it had received from experts and counsel. Having considered this material, the judge concluded that the settlement was reasonable. Mr Ashfield argues that it was not: Cosmos had fought the proceedings hard and not called evidence from anyone who made the decision to settle and why.
11. But this is the sort of issue which is very much a matter of impression for the trial judge. Conversely, it is not the sort of issue with which this court will readily engage. The judge's decision was clearly open to him on the evidence, because among other things counsel had advised that there were real difficulties in Cosmos's case. Its prospects of success were "around even". The suggestion is made by Mr Ashfield that having spent so much money the only reasonable course for Cosmos to pursue was to take their chances at trial, but I do not accept this. Settlement is to be encouraged: the court should not be astute to characterise with the benefit of hindsight a settlement as unreasonable where there were many claimants with quite large claims. This has to be clearly proved. In this case there were ample grounds to justify the judge's decision and I would not grant permission on this ground.
12. So on the single ground -- the issue of construction -- I would grant permission to appeal but refuse it on the other two grounds for the reasons I have given.

Lord Justice Longmore:

13. I agree.

Order: Application granted on construction issue; refused on other two grounds.