Scottish Court of Session Decisions

At advising on 24th June 1955,—

LORD JUSTICE-CLERK (Thomson).—The defenders contracted to carry out certain work in the pursuers' transformer sub-station at Abernethy. In the course of the work the defenders instructed the removal of a corrugated iron hut. While this was being done, one' of their employees was injured by an electric shock. This employee raised an action against both the pursuers and the defenders. The Sheriff-substitute found the pursuers solely liable, and his interlocutor was affirmed by the First Division. The pursuers now seek to recover from the defenders the sum awarded against them in damages, together with the judicial accounts of the injured man and the defenders and their own business account. The ground of action is one of the clauses of the contract, which is:—

"The contractor shall indemnify the Board against all claims from third parties arising from his operations under the contract …"

The first matter is what is meant by "arising from." The issue is whether the claim made must have been "caused by" the operations of the contractor under the contract or whether it is enough that the claim should be merely consequential on his operations. When the words "caused by" were used in the argument, the underlying idea was the legal conception of the "causa causans" as contrasted with the "causa sine qua non." That conception is one which the law has evolved for practical convenience and for the avoidance of metaphysical speculation. It is a conception which is applied in various practical ways, as the doctrines of remoteness, novus actus interveniens and effective cause testify. But it does not follow that, where laymen use words which are causative in connotation, they are necessarily adopting these legal rules or that the law must impose them on the contracting parties. Accordingly, the argument that "arising from" North of means "caused by" assumes too much. Even if the words "arising from" are truly causative, I see nothing in them to show that they are restricted to what is due directly to the contractor's own operations. But I prefer to read "arising from" in the wider sense of something which is consequential on or flows from the operations of the contractor. Qua contractor he shoulders the responsibility of what happens to third parties as a result of the operations which he is carrying out.

The law has, however, in certain circumstances set a limit to the scope of such a clause of indemnity. A party is to be indemnified against a claim for which he would be legally responsible in virtue of his own negligence only if it is clear that the other party consented to the situation. Our own doctrine of construction contra proferentemis consistent with the views recently expressed both in the Court of Appeal and in the Privy Council. In Alderslade v. Hendon Laundry Lord Greene, M.R., said (at p. 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."

In the subsequent case in the Privy Council, Canada Steamship Lines v. The King [1952] AC 192, the principles stated by Lord Greene are in substance reiterated. The additional contribution to Lord Greene's formulation lies in the amplification of his words "the head of damage may be based on some other ground than that of negligence." Lord Morton of Henryton points out (at p. 208):

"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."

To apply Lord Greene's test, I do not see how it can be said that the clause under consideration rests on negligence and nothing else. While I would have been happier had the record or indeed the argument been more forthcoming in exploring "other grounds," there is enough too be gathered as to the scope of the contract to show that the relationship between the parties might readily give rise to claims by third parties on grounds independent of the Board's negligence. While there is force in the Board's contention that it is hardly conceivable that they would lay themselves open to claims from consumers through loss of supply, I would not be prepared entirely to exclude the possibility of the Board's becoming involved in claims for breach of contract with third parties. Similarly, there are possible claims on the ground of the law of neighbourhood or of nuisance. Interference with fishing rights is a possible case. Moreover, I am prepared to accept that the activities of the defenders might render the Board liable for breach of certain statutory duties. Two answers were made to this suggestion. The first was that breach of statutory duty is merely negligence in another form. That is true in a sense, but it is not the straightforward common law sense in which negligence is understood in this branch of the law. The second answer was that the protection was unnecessary, as the Board would have an action of relief. Again that is true enough, but there is no reason why the Board should not seek to cover themselves directly and avoid the pitfalls of such a form of action.

The Court should not be astute so to construe an exemption clause as to relieve a party of the results of his own negligence. The answer must be found in the contract itself, read, no doubt, against the general background. That general background is not very satisfactorily sketched in, but, as I have already said, there is enough to show that the relationship of the parties was such as to give rise to claims by third parties independently of the Board's negligence. And I think further that the clause, read against the general background, yields possible heads of damage other than that of negligence which cannot be described as either fanciful or remote.

The action will be dismissed.

LORD PATRICK .—In Canada Steamship Lines v. The King Lord Morton of Henryton stated the duty of a Court in approaching the consideration of clauses such as we have here to construe as follows (at p. 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 ground other than that of negligence,’ to quote again Lord Greene in the Aldersladecase. 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."

I accept this statement as authoritative in the law of Scotland. It is our rule also that such clauses are construed contra proferentem.

In the present case there is no express reference to negligence, and I come at once to consider the second of the above propositions, whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens. The argument to the contrary was that the words "claims from third parties arising from his operations under the contract" necessarily implied that such claims were caused, in the legal sense of that term, by the operations of the contractors. I am unable to accept this construction of the words. The term "arising from an act," in its ordinary meaning, signifies no more than "springing from" or "originating in" an act, and has no necessary connotation that the subsequent casualty was caused, in the legal sense, by that act. The originating act may merely call into being obligations on the part of others to take care, and, if such care is not taken, so that a casualty ensues, the law will hold that it is the failure to take that care which caused the casualty. On the other hand the originating act may itself be a breach of an obligation to take care, upon which breach a casualty ensues, in which case the law will hold that the original act was itself the cause of the casualty. The phrase used in this contract seems to me wide enough, in its ordinary meaning, to cover both the cases I have mentioned above, the case where the original act was itself the cause, in the legal sense, of the casualty, and the case where the original act called into being obligations on the part of others to take care, the neglect of which obligations was the cause, in the legal sense, of the subsequent casualty and claim for damages. The words used are therefore wide enough, in their ordinary meaning, to cover claims caused, in the legal sense, by negligence on the part of the servants of the proferens.

There remains the third question: whether the head of damage contemplated in the indemnity clause may be based on some ground other than the negligence of the employers' servants, in other words whether a reasonable content can be found for the indemnity clause if claims caused by the negligence of the employers' servants are excluded from its scope. It was said for the contractors that such a content could be found in possible claims by customers of the Board for breach of a contract to supply, the breach being traceable to some operations of the contractors. The Board answered this by saying that they could never contract to give a supply without protecting themselves in the contract against any such claims, and that it cannot be supposed that they would protect themselves in this contract with the defenders against claims which they would bar under the express terms of their contracts with customers. This appears to me to be a good answer. The suggested ground of liability is too remote to warrant the view that it may have caused the proferens to put forward the indemnity clause for inclusion in the contract. Another class of claim was suggested in which content could be found for the indemnity clause without construing it as covering claims caused by the negligence of the employers' servants. This was the class of claim against the employers which might arise from breach of an absolute obligation imposed on the employers in the interests of safety under the Factory Acts or the Electricity Acts, the breach being ultimately traceable to the operations of the contractors. I do not think there is anything fanciful or remote about this. Such cases can and do arise. It was said on behalf of the employers that they would have, in the events contemplated in this suggestion, a right of relief against the contractors. I think this would not necessarily be so, since the existence of such a right of relief would depend on whether the operations of the contractors constituted a wrong giving rise to a right of relief. Moreover I do not think it is a good answer for the employers to say that they should not, be assumed to have protected themselves per expressum in this contract against events in which the law would have afforded them relief without expression. Nothing is more common in protective clauses of all kinds than to find protection expressly provided for where the law would have afforded protection without expression. Further, I am not satisfied that there are not other types of claims which would form a reasonable content for the indemnity clause without construing it as covering claims caused by the negligence of the employers' servants. I have in mind the possibility of claims arising out of the Board's obligations under the Electricity Acts or the law of neighbourhood, or the law of nuisance. I have come to the opinion that sensible content can be found for this indemnity clause without construing it as covering claims caused by the negligence of the employers' servants, and that it should not be construed as covering such claims. The pursuers' averments are, in my opinion, irrelevant.

LORD MACKINTOSH .—This case raises a short and sharp question of the construction to be given to an indemnity clause occurring in a written contract. The answer to be given to the question I have found to be a nicely balanced problem of some difficulty, and, as it seems to me to be very largely a matter of impression what view of the scope and meaning of the indemnity clause should be accepted, I cannot profess to any great feeling of confidence in the opinion which I am now expressing.

I have, however, formed the opinion that the Lord Ordinary has erred in construing the clause, as he has done, to include within its scope the claim of damages made by Mr Davidson against the pursuers in respect, of the personal injuries received by him in the accident which occurred at Abernethy on 20th November 1950. In my opinion, the Lord Ordinary allowed himself to be unduly influenced by the views expressed in the case of Furness Shipbuilding Co. v. London and North Scotland Eastern Railway Co. —a case where the indemnity clause falling to be construed was expressed in terms very different from and much more explicit than those in which the clause now under construction is couched. I think, contrary to the view of the Lord Ordinary, that the case of Great Western Railway v. Durnford & Son was in certain respects nearer to the present case than the Furness case, but there again the indemnity clause was somewhat differently expressed and I do not disagree with his Lordship's view that the Durnford case does not really assist in the determination of the question now at issue. No case was cited to us where in an indemnity clause the words "claims arising from" as distinct from the words "claims arising in respect of or" claims arising out of or in connexion with" fell to be construed. The words found in the present indemnity clause have therefore to be construed independently of authority and given what is thought to be their fair and natural meaning in the English language.

By the clause now under construction the contractor undertook to indemnify the Board "against all claims from third parties arising from his (i.e. the contractor's) operations under the contract." In my opinion, the words "arising from" in that context have a causal significance and mean "arising because of" operations carried out by the contractor under the contract. Mr Davidson's claim did not arise because of the contractor's operations in moving the hut, but, as has been found by the Court, because of the Board's negligence in allowing conditions to take place which brought about a "flash over" while the hut was being removed. In this connexion I use the words "because of" in the legal sense, that is, as referring to the proximate cause only, the causa causans as distinct from the causa sine qua non. The words "arising from" occurring in this indemnity clause appear' to me to have a meaning very similar to, if not the same as, that which fell to be given to the words "arising out of" in the phrase "arising but of and in the course of the employment" which so frequently came up for construction by the Courts under the now repealed Workmen's Compensation Acts. While it is impossible to reconcile all of the many judicial opinions which have been pronounced on that once very hackneyed topic, certain of the House of Lords decisions seem to me quite unequivocally to indicate (1) that the words "arising out of" required that there should be a causal relation between the employment and the accident, and (2) that in that connexion it was only the proximate and not the remoter causes which fell to be considered. In Dennis v. White & Co. Lord Finlay, L.C., at p. 481, in holding that a workman who was injured by collision while riding a bicycle through a public street on an errand for his master had sustained an accident arising "out of" his employment, said:

"The risk of collision under such circumstances is incidental to the use of a bicycle; it is a risk inherent in the nature of the employment, and it was the cause of the accident. It follows that the accident arose out ofthe employment."

(The italics are mine.) Again in Simpson v. Sinclair Viscount Haldane, in discussing the kind of causation required by the words "arising out of," says (at p. 39):

"I think that the Court is directed to look at what has happened proximately, and not to search for causes or conditions lying behind."

In my opinion, "arising from" in this indemnity clause should be given much the same meaning as was given to "arising out of" in the above cases. On that reading of the clause—which I think to be the proper one to give to it—the indemnity clause, being restricted in its scope to rendering the Board skaithless against third party claims arising because of something done or not done by the contractors in carrying out the contract work, does not cover the present, claim and the Board's present action against the contractors is irrelevant and should be dismissed.

If, however, I am wrong in thinking, as I do, that the language of this indemnity clause is sufficiently clear to exclude from its scope third party claims not caused in the legal sense by something done or not done by the contractors in carrying out the contract work, then I am of opinion that at the best for the Board the indemnity clause must be regarded as being one of ambiguous import. If that be so, then l am of opinion that, looking to the nature of the clause under construction and the purpose it is intended to serve, the clause is one which will fall to be construed contra proferentem, i.e., in this case, against the Board, at any rate in a question as to whether the scope of the clause is wide enough to cover third party claims arising out of the Board's own negligence. As was pointed out in the Privy Council case of Canada Steamship Lines v. The King, where an indemnity clause fails to limit a party's liability in respect of negligence in clear terms the clause will fall to be construed as relating to a liability not based on negligence unless that would deprive the clause of all content. The Lord Ordinary has accepted the view, stated at the bar by the pursuers, that except as regards negligent acts done by them or their servants this indemnity clause could have no operation, but there is neither averment nor admission to that effect in the case and I am far from satisfied that the position in this matter is as the Lord Ordinary has accepted it to be. On the contrary your Lordships have figured several instances where the clause might operate to indemnify the pursuers from liability not based on their own negligence. I agree that these instances—and there may well be others—would serve to give a content to the clause exclusive of its being a protection to the pursuers against their own or their servants' negligence. In any event I think that on the information at present before the Court this indemnity clause must be read as not extending to cover the negligence of the pursuers or their servants, because its terms do not clearly include such negligence and it has not been established that the clause can have no other content. I think therefore that, even if I am not well founded in my primary view that the language of the present indemnity clause by itself excludes third party claims arising out of the pursuers' own negligence, the clause would in view of its nature fall to be construed, in the circumstances as at present known to the Court, as not being intended to indemnify the pursuers against the consequences of their own negligence.

In result therefore I am of opinion that the Lord Ordinary's interlocutor should be recalled, the first plea in law for the defenders sustained, and the action dismissed.