England and Wales Court of Appeal (Civil Division) Decisions

IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIS HONOUR JUDGE BROMILOW
TAUNTON COUNTY COURT
5TA01405

		Royal Courts of Justice Strand, London, WC2A 2LL
		15th December 2009

Lord Justice Ward:

1. The respondent, Brush Transformers Ltd, whom I shall call "the Hirer", was carrying out work at an electricity sub-station in Newton Abbott and, as it had regularly done in the past when the need arose, it hired a large mobile crane from MacSalvors (Plant Hire) Ltd, whom I shall call "the Owner". The crane was supplied with an experienced operator, Mr Thomas Jose. He gave this graphic account of what happened to him on 10th July 2002, the first day of the hire:

"I was on hire to WPD at Newton Abbott sub-station driving a Grove GMK 4075 80 tonne capacity crane No. Reg. no. WK02 UEG. I climbed onto the tool box at the rear of the superstructure cab to check the hoist rope and adjust the mirror, and to clean some footprints off the top of the box. When I had finished, I stepped backwards off the tool box thinking I had left the crane slewed in line with the chassis and that the deck would be below me. Unfortunately, this was not the case and I stepped back into nothing and I fell to the ground thereby sustaining my injuries."

2. He brought a claim against the Owner for damages for personal injuries, loss and damage caused by their negligence and/or breach of statutory duty. Liability was agreed with the claimant accepting that he had been 25% contributorily negligent. The claim was then compromised by the Owner agreeing to pay Mr Jose damages in the sum of £50,000.
3. The Owner brought third party proceedings (to my mind a much more intelligible phrase than Part 20 proceedings) claiming against the Hirer to be indemnified by virtue of the Model Conditions of the CPA agreement for the hiring of plant made between the Owner and the Hirer. The material clauses of that agreement are the following:

"8. HANDLING OF PLANT

When a driver or operator or any person is supplied by the Owner with the plant, the Owner shall supply a person competent in operating the plant or for such purpose for which the person is supplied and such person shall be under the direction and control of the Hirer. Such drivers or operators or persons shall for all purposes in connection with their employment in the working of the plant be regarded as the servants or agents of the Hirer (but without prejudice to any of the provisions of Clause 13) who also shall be responsible for all claims arising in connection with the operation of the plant by the said drivers/operators/persons. The Hirer shall not allow any other person to operate such plant without the Owner's previous consent to be confirmed in writing.

…

13. HIRER'S RESPONSIBILITY FOR DAMAGE AND LOSS

(a) For the avoidance of doubt it is hereby declared and agreed that nothing in this Clause affects the operation of clauses 4, 5, 8 and 9 of this Agreement.

(b) During the continuance of the hire period the Hirer shall subject to the provisions referred to in sub-paragraph (a) make good to the Owner all loss of or damage to the plant from whatever cause the same may arise, fair wear and tear excepted, and except as provided in Clause 9 herein shall also fully and completely indemnify the Owner in respect of all claims by any person whatsoever for injury to person or property caused by or in connection with or arising out of the storage, transit, transport, unloading, loading or use of the plant during the continuance of the hire period, and in respect of all costs and charges in connection therewith whether arising under statute or common law. In event of loss of or damage to the plant, hire charges shall be continued at idle time rates as defined in Clause 25 until settlement has been effected.

(c) Notwithstanding the above the Hirer shall not be responsible for loss, damage or injury due to or arising:

(i) prior to delivery of any plant to the site (or where the site is not immediately adjacent to a highway maintainable at the public expense, prior to its leaving such highway) where the plant is in transit by transport of the Owner or as otherwise arranged by the Owner,

(ii) during the erection and/or dismantling of any plant where such plant requires to be completely erected/dismantled on site, always provided that such erection/dismantling is under the exclusive control of the Owner or his Agent,

(iii) after the plant has been removed from the site and is in transit on a highway maintainable at the public expense (or where the site is not immediately adjacent to a highway maintainable at the public expense after it has joined such highway) to the Owner by transport of the Owner or as otherwise arranged by the Owner,

(iv) where plant is travelling to or from a site on a highway maintainable at the public expense (or, where the site is not immediately adjacent to a highway maintainable at the public expense prior to its leaving or after its joining such highway) under its own powers with a driver supplied by the Owner."

4. These proceedings between the Owner and the Hirer were heard by His Honour Judge Bromilow in the Taunton County Court on 20th May 2008 and he handed down his written judgment on 4th July 2008. The judge had to consider issues raised on the pleadings, the first of which questioned whether the Owner had supplied a person competent in operating the crane. He had no difficulty in concluding that Mr Jose was indeed competent even though he plainly carried out an unwise method of descent on the occasion in question. He rejected the Hirer's second contention that the sole cause of the accident was the negligence of Mr Jose. He concluded that the Owner was in breach of regulation 6 of the Construction (Health, Safety and Welfare) Regulations 1996 and that the Owner was therefore entirely right to concede Mr Jose's claim for damages. In his opinion, Clause 8 was intended to cover the situation where the actions of the operator caused an accident and there was some consequential loss and damage. The wording of Clause 13 did not assist the Owner because "if contractors … wish to exempt themselves from their own acts of negligence then they must set this out in express and specific terms", but that had not been done. He held that he was bound by E Scott (Plant Hire) Ltd v British Waterways Board, Court of Appeal, 20 December 1982 unreported, and the similarities between that case and this were "obvious".
5. So he dismissed the Owner's claim against the Hirer and the Owner now appeals with permission granted by Goldring L.J.

Discussion: Clause 8

6. Mr Andrew Davis, for the appellant, submits that the words of Clause 8 are wide and unlimited in their reach and scope: he emphasises that the operators shall "for all purposes" be regarded as the servants of the Hirer and that the Hirer shall be responsible "for all claims" arising in connection with the operation of the plant – his emphasis being added. The only limitation is that the claim must arise in connection with the operation of the plant. Checking the hoist rope and adjusting the mirror at the back of the cab were activities arising in connection with the operation of the crane and so he submits "all claims" include a claim by the driver.
7. I cannot accept that argument. Were I to construe the clause without regard to any previous authority, I would look to the context for the background against which the words are to take their meaning. This is a clause concerned with "handling of plant". It envisages claims arising out of the negligent handling. What is in the parties' contemplation is negligent handling which causes injury or loss to a third party. Although he may be about the business of the Hirer, the driver remains the servant of the Owner and the Hirer would not be vicariously liable for his actions. Since the driver is beyond the Owner's actual control, the Owner not unnaturally wishes to pass responsibility for the driver's negligence to the Hirer. This is achieved by Clause 8. Provided that a competent driver is supplied, then the parties agree to treat him as the servant of the Hirer and, as between them, the Hirer will be responsible for all claims arising out of his operation of the plant. In the context of this Clause the meaning and purpose is clear: it is to regulate the liability as between Owner and Hirer in respect of claims brought by third parties arising out of the negligence of the driver. What was not being contemplated was making the Hirer liable for a claim arising out of the Owner's own negligence.
8. That view is amply borne out by the authorities. Arthur White (Contractors) Ltd v Tarmac Civil Engineering Ltd on appeal from Spalding v Tarmac Civil Engineering Ltd [1967] 1 W.L.R. 1508 concerned a claim by a worker who was injured when the boom of a crane collapsed onto him. The crane had been hired by Tarmac under a contract of hire in the standard form of the Confederation of Plant Hirers in identical terms to Clause 8 before us save only that there it was the Hirer "who alone shall be responsible for all claims" whereas the words here are the Hirer "who also shall be responsible". It is common ground the change makes no difference to the Clause overall. Lord Morris of Borth-y-Gest considered at p.1516 that:

"… the wording of clause 8 shows that it was the clear intention of the parties that as between themselves Best [the driver] was 'for all purposes' in connection with his employment in the working of the plant to be regarded as the servant or agent of Tarmac. As between the parties Best was deemed to be the servant or agent of Tarmac. It would follow that, if Best was negligent, that as between the parties it would be the deemed master of Best who would be vicariously liable. In my view, the very purpose and intention of the parties in agreeing to clause 8 was, as between themselves, to make the hirer liable for the driver's negligence."

Because of the view he formed in regard to clause 8, he did not find it necessary to consider the meaning or effect of clause 13.

Lord Pearce said this at p. 1520:

"We are invited to regard clause 8 as being an exemption clause limiting the owner's general liability for Best and therefore to be read narrowly against them within the principles set out in Alderslade v Hendon Laundry Ltd. Those principles may well apply to clause 13 which is a general indemnity clause, and may, for the reasons put forward in argument, not suffice in the present case to help the owners if they are unable by virtue of clause 8 to put the liability on the hirers. But in my view the appellants do not need to rely on clause 13, and it is not necessary to consider the effect of it. Clause 8, however, is not an exception or indemnity clause. It is a clause by which the parties seek to define contractually as between themselves the vicarious responsibility for the acts of Best.

In all contracts where a general servant of the owner of machinery is hired out with it, a problem arises as to which of the parties is to be responsible for his negligence. As between himself and the public the general master cannot divest himself of responsibility for the servant, respondeat superior. But the parties to the hiring contract may determine liability inter se (Mersey Docks and Harbour Board v Coggins and Griffiths (Liverpool) Ltd). Clause 8 sets out to perform this function. It must be read in the light of the contract as a whole and in this clause 13 may be considered. I find nothing in the contract to indicate an intention to exclude from the hirer's liability under clause 8 those occasions when Best was or should have been adjusting the brakes."

Lord Upjohn said at p. 1526:

"It has been argued that, on what has been called in argument and in the courts below the Alderslade principle (a reference to the judgment of Lord Greene M.R. in Alderslade v Hendon Laundry Ltd) a clause of exception or exemption against loss by one contracting party is presumed not to apply to a case where the loss is occasioned by the negligence of that party unless the clause expressly covers that event or there is no other liability to which the clause could reasonably refer.

If (contrary to my view) the brake failure was due to the neglect of his true employers, Whites, as the Court of Appeal decided, yet all the members of the Court of Appeal decided that the Alderslade principle should not be applied to a clause in such terms as clause 8. I agree with them. I do not understand how that principle can possibly be applied to a clause such as that. The parties have agreed that the servant of Whites shall for relevant purposes between them be treated as the servant of Tarmac. That agreement must be followed through to all its logical results. How can such a presumption possibly be introduced into such an agreement; it would do complete violence to its terms; it simply does not fit. In any event if contrary to my opinion it could be introduced, I do not see how it could be reasonably applied for one of the most obvious claims the parties must have had in mind was a claim for damages caused by Best's negligence in actually driving or maintaining the excavator, and I have found it hard to think of any other failure by Best except negligence for which his employers would be liable.

Finally we heard argument upon the impact of clause 13 upon which Whites relied in the alternative. This is no doubt a true indemnity clause, but as Whites do not have to rely on it I prefer to express no opinion upon its true ambit except to say that in a case where the owner cannot rely on clause 8 and the negligence of the owner arises otherwise than through the negligence of the supplied driver, it may be, I put it no higher, that the Alderslade principle applies to clause 13."

9. Thompson v T. Lohan (Plant Hire) Ltd [1987] 1 W.L.R. 649 also concerned clause 8 in the form it was in Arthur White. There the plaintiff's husband had been killed as the result of the driver's negligence in operating an excavator which had been hired by the second defendants for work at their quarry. Fox L.J. held at p. 655:

"The purpose of clause 8 was that, as between Lohan and the third party, Mr Hill should be regarded as the servant of the third party, who would be liable for his negligence accordingly. In my view, therefore, clause 8 is effective, at common law, as between the parties according to its tenor."

10. I am, therefore, quite satisfied that clause 8, properly construed, does not make the Hirer responsible for the claim against the Owner in respect of the Owner's own breach of duty.

Clause 13

11. By this clause the Hirer must "fully and completely indemnify the Owner in respect of all claims by any person whatsoever for injury to personal property caused by or in connection with or arising out of the … use of the plant during the continuance of the hire period..." Mr Davis argues that this is a claim for the injuries suffered by Mr Jose in connection with his use of the plant during the period of hire. Giving the words their ordinary meaning, this claim is covered.
12. The issue which arises under Clause 13 is the one about which Lord Pearce and Lord Upjohn speculated in Arthur White, namely whether the so-called principles in Alderslade apply to Clause 13 so as to exclude any loss occasioned by the negligence of the Owner.
13. The principles stated by Lord Greene M.R. in Alderslade v Hendon Laundry Ltd [1945] K.B. 189, 192 were these:

"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."

14. These principles were summarised by Lord Morton of Henryton in Canada Steamship Lines Ltd v The King [1952] AC 192, 208:

"(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. …

(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 …

(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 other ground than that of negligence,' to quote again Lord Greene in the Alderslade case. 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."

15. Mr Davis submits these rules do not apply to Clause 13 because that clause is an allocation of risk clause transferring risks, not an indemnity. He relies on Hewden Tower Cranes Ltd v Yarm Road Ltd [2003] EWCA Civ 1127 where Sir Martin Nourse agreed with the submissions put to him that Clause 13 of the CPA agreement was an allocation of risk clause which, by sub-clause (b), established a general rule that the hirer shall indemnify the owner against all claims arising out of the use of the plant during the hired period. Sub-clause (c) is an exception to that. Pill L.J. was also of the view that Clause 13 was an allocation of risk clause adding:

"The guiding principle and purpose of the clause appears to me to be that the general responsibility of the hirer is displaced in circumstances where the operation concerned is the responsibility of the owner."

16. Ranged against those views are the opinions expressed in Arthur White by Lord Pearce that the Alderslade principles "may well apply to clause 13 which is a general indemnity clause" and Lord Upjohn who concluded that clause 13 "is no doubt a true indemnity clause" and "it may be, I put it no higher, that the Alderslade principle applies to clause 13." Those are weighty opinions.
17. Then there is E. Scott (Plant Hire) Ltd v British Waterways Board, an unreported decision in the Court of Appeal dated 20th December 1982. In that case an excavator was hired on the terms of the CPA agreement. Whilst the owner's servant was driving it on a loader vehicle on the motorway, the excavator struck the underside of a bridge as a result of which it sustained considerable damage. The owners sought to recover their damages from the hirer and the issue before the court was whether Clause 13 imposed an obligation on the hirer to indemnify the owners against this damage which had been sustained as the result of the owner's own negligence, not the negligence of its driver. The issue for the court was whether Clause 13, on its true construction, obliged the hirer to indemnify the owner from damage caused by the owner's own negligence. Oliver L.J. held:

"In my judgment it is no longer possible, in the light of Smith v South Wales Switchgear, [1978] 1 All ER 18, [1978] 1 WLR 165, to treat the undoubtedly wide words 'any damage whatsoever' or 'however arising' as a periphrasis of 'damage arising from negligence of the proferens' and as either satisfying or by-passing the tests propounded by Lord Morton [in Canada Steamship Lines] in relation to exclusion and indemnity clauses, for it has now been made clear by authority which binds this court that unless the clause concerned uses the word 'negligence' or some equivalent in unmistakable and unequivocal terms, its effect falls to be tested … by tests 2 and 3. For myself, although I might not, as I have said, have arrived at this conclusion had the matter been res integra, I feel no particular regret, for this question can only arise in a case where the party seeking to impose on the other this unusual liability lacks either the courage or the foresight to say in express terms what he means. If a particular clause is considered commercially undesirable because the reader may think that it means what it says, the judicial conscience need not, I think, be unduly troubled by limiting the ambit of a clause which, by choice, fails to say what it means. As Mr O'Brien submits, it would have been perfectly easy, and would have been totally fair to the recipient of the C.P.A. form, to frame clause 13 in a way which drew attention in terms to the owner's intention that it should cover his own and his servants' acts of negligence. It does not, in my judgment, do so, and although widely expressed, it does not pass Lord Morton's test 3 for the reasons which I have given."

It had failed test 3 because:

"… when one applies test 3 one finds a whole host of possible liabilities which the parties are likely to have had in contemplation and which do not involve any negligence on the part of the plaintiffs or their servants. The most likely case of damage by negligence of the plaintiff's own servants is that of negligent operation of the plant by its driver. But that is already covered by clause 8, because he is deemed to be the hirer's servant. Other potential mishaps are, for instance, damage caused by collision of vehicles of third parties or sub-contractors, flood or storm damage on site, theft or malicious damage, collision on the highway while the vehicle is still on hire, and so forth. None of these is merely fanciful. In the case of hired equipment they are real risks and indeed are just the sort of risks against which the owner would wish to cover himself. What he wants is an indemnity against damage without the necessity of enquiring whether it arose as a result of the fault of the hirer or … some third party. Thus construed, the clause is both reasonable and intelligible and there is certainly no compulsive context for reading it as covering what is perhaps the most unexpected eventuality, that is, negligence of the owner or one of its servants not already covered by clause 8."

Slade L.J. expressed his conclusions as follows:

"Reverting to the facts of the present case, clause 13 obliges the hirer during the continuance of the hire period to make good to the owner 'all loss or damage to the plant from whatever cause the same may arise', with two stated exceptions which do not apply in the present case. Indisputably these quoted words are wide enough in their ordinary meaning to cover negligence on the part of the hirer or his servants. But, since clause 13 does not contain the word 'negligence' or any synonym thereof, this is not a case where Lord Morton's test 1 is satisfied. The proper approach to the matter is by applying his tests 2 and 3. For the reasons given by my Lord, Lord Justice Oliver, the resulting conclusion can only be that clause 13 on its true construction does not entitle the plaintiffs to the indemnity which they now claim. As he has pointed out, there are a number of possible heads of loss other than negligence on the part of the plaintiffs' servants which clause 13 is entirely apt to cover, and which are by no means fanciful or remote; damage to the plant through the activities of third parties is one obvious example. The existence of these other possible heads is, in my opinion, fatal to the plaintiff's case even though they have in my view succeeded in contractually binding the defendants to clause 13 and even though the wide general words of clause 13 are at very first sight wide enough to cover the plaintiffs' negligence.

I reach this conclusion without great regret. I can well understand that the plaintiffs, and many other members of the Contractors Plant Association who use the C.P.A. conditions, would like to be in a position to invoke clause 13 in appropriate circumstances for the purpose of exempting themselves from loss caused by their own personal negligence and that of their servants, and even that of claiming an indemnity in respect of such loss. But it does not seem to me either inequitable or contrary to public policy to require contractors who intend to demand such very extensive protection for themselves from their customers to bring their intentions to the notice of prospective hirers in the most specific terms – far clearer than those employed in the present case. They may be shy of taking this course, but to repeat the words of Lord Justice Salmon in Hollier v Rambler Motors Ltd [1972] 2 QB 71 at p. 78 …

'I do not think that the defendants should be allowed to shelter behind language which might lull the customer into a false sense of security by letting him think – unless perhaps he happens to be a lawyer – that he would have redress against the man with whom he was dealing for any damage which he, the customer, might suffer by the negligence of that person'."

18. That case is authority directly on the point. Like the judge I regard it as binding on him and on us. With great respect to Sir Martin Nourse and Pill L.J., their characterisation of Clause 13 as an allocation of risk clause cannot prevail against the authority of Scott Plant Hire. The issue in Hewden Tower Cranes was more directly concerned with whether the claim fell within clause 13(c). None of the subtleties of the application of the Alderslade principles were before the court. Their characterisation of Clause 13 as an allocation of risk clause did not form part of the ratio and I do not regard myself as bound by it. I am bound to follow Scott Plant Hire. That is determinative of the outcome in this case. The Owner cannot claim to be indemnified under Clause 13 for the injuries to its driver arising out of the use of the plant during the continuance of the hire period when that damage arose due to its own negligence.
19. Mr Davis vainly endeavours to argue that the judge did not find negligence but only found a breach of statutory duty. I reject that argument. The claim of Mr Jose was based both in negligence and breach of statutory duty and that claim was compromised. The judge's finding that the Owner was in breach of regulation 6(1) of the Construction (Health, Safety and Welfare) Regulations of 1996 which requires that suitable and sufficient steps shall be taken to prevent, so far as is reasonably practicable, any person falling, inevitably leads to the conclusion that the failure to take those steps was negligent. It makes no commercial sense whatever to submit that the Owner may fail because he did not expressly allude to "negligence" but he can still succeed because "breach of statutory duty" is something completely different and does not merit express mention. The two concepts go hand in hand. Neither was unmistakably and unequivocally excluded. The Owner cannot seek an indemnity for its own negligence or its own breach of statutory duty.

Conclusion

20. I am quite satisfied that the Owner has no valid claim either under clause 8 or under clause 13. The judge was right so to find for the reasons he gave. I would dismiss the appeal.

Lady Justice Smith:

21. I agree.

Lord Justice Rimer:

22. I also agree.