Scottish Court of Session Decisions

The pursuer avers in this case that on or about 25 October 1993 he sustained a simple accident aboard a floating production storage unit, "The Gryphon A", an off-shore installation, operated by the first defenders and partly owned by them, which was located in the Scottish sector of the North Sea. At a certain point on board that production storage unit on which the pursuer was working as an instrument commissioning technician, he slipped and twisted his left knee because, he avers, there was no secure footing afforded by the floor surface at the point at which he fell. He sues both the first and the second defenders jointly and severally for damages in reparation of his loss, injury and damage. The relationship between the defenders was not a matter of concern at the procedure roll hearing before me, Mr Clark being able professionally to appear for both defenders. For convenience, however, I shall confine myself to the pleadings of the first defenders.

In the course of the action, early in 1998, the defenders served a third party notice upon Hi-tec Engineering Ltd, founding upon an indemnity provision in a contract between the first defenders and the third party in terms of which the pursuer was engaged at the material time aboard the production storage unit. The contract which is dated 14 June 1993 but was effective from 25 May 1993, is headed "Manpower Services Agreement". (See No 14/1 of process.) Essentially the contract provides for the provision by the third party at the request of the first defenders of certain services by named individuals, one of whom was the pursuer according to an amendment dated 2 November 1993 which was effective from 19 October 1993. (See No 14/2 of process.)

When he sustained the accident it appears that the pursuer was in the general employment of a company called Ridgevine Ltd with an address in Middlesborough. That much is clear from a letter dated 15 October 1993 from the third party to that company to which I will refer simply as Ridgevine. (See No 32 of process.) That letter is written by the third party's contracts manager. It is headed "Sub-Contract Agreement". At the end of it the "sub-contractor" is asked to sign an enclosed copy of the Sub-Contract Agreement and to return it to the third party. The copy document in process has the pursuer's "confirmation signature" dated 16 October 1993. So I think I may assume that what has been lodged by the third party is a copy of the so-called Sub-Contract Agreement.

It follows from what I have just set out that what the third party did in terms of the Agreement with the first defenders was to provide the services of an employee, not of their own but of another company. Certain questions arise from this which are reflected in the pleadings and which were the subject of debate before me. First, does the Agreement permit this to be done? Or was such a provision in breach of contract? Does the indemnity provision in the Agreement (clause 10.1) apply in these circumstances? Is the third party personally barred from maintaining that the pursuer was not their employee?

Having considered the whole terms of the Agreement, together with its Exhibits, as I was invited to do although its interpretation is governed by the laws of England, I am of opinion that in performing the contract with the first defenders the third party was not precluded from engaging the employees of other companies. In short, it is not implicit in the terms of the contract that the third party was bound to provide the services only of its own employees. I need hardly add that nowhere is it expressed that the only persons whom it could offer in fulfilment of the obligation to provide manpower services in terms of the Agreement were its own employees. I think that I am right in saying that the word "employee" in relation to the third party is to be found only once in the Agreement and that is in clause 23. The most commonly used word in the Agreement is "personnel" or "individual personnel", and, depending of course upon the context, I find the word "personnel" somewhat neutral and not indicative necessarily of a relationship of employer and employee. What therefore the third party was contracted to provide were manpower services but not necessarily its own. Such personnel as it did provide would nevertheless be bound by the terms of the Agreement since the third party assumed full responsibility for their performance, etc. according to Exhibit A.

Mr Clark drew my attention to clause 9.1 of the Agreement which provides that the third party may not transfer, sub-contract or assign the whole or part of the Agreement without the prior written consent of the first defenders. He pointed to the letter dated 15 October 1993 from the third party to Ridgevine which was headed "Sub-Contract Agreement", and submitted that that was what the third party was seeking to do in this case, in contravention of clause 9.1. I agree, however, with Mr Francis that however the third party sought to describe it, what was done in terms of the letter of 15 October 1993 did not involve the sub-contracting of the Agreement or any part of it. It was, to express it in another way, an agreement between the third party and Ridgevine which was quite separate from the agreement between the third party and the first defenders, whereby Ridgevine made their employee available to perform the services which the third party had undertaken to provide by means of that named individual. The terms of clause 9.1 were therefore in my opinion not breached.

It seems to me that the critical question is whether the indemnity clause applies because it was in reliance upon its terms that the first defenders convened the third party in the process. Clause 10.1 provides:

Does the pursuer fall into any of the categories of persons, "servants, agents, or invitees"? Mr Clark informed me that it came as a considerable surprise to his clients, the first defenders, that the pursuer was not an employee of the third party. Notwithstanding what was averred on Record at page 15, the third party had produced the letter of 15 October 1993 only two days before the procedure roll hearing, and the adjustment to the pleadings on page 15 had only been made very recently. So, as I understood it, the first defenders had not had much opportunity to give close consideration to the third party's pleadings in relation to the true status of the pursuer in relation to the third party and the performance of the agreement with the first defenders. That, I suppose, is something of a plea ad misericordiam: but I understand it. It accounts, I think, for the state of the first defenders' pleadings between pages 35E and 36B which cannot, on any view, be regarded as satisfactory. Given the information which the first defenders now have about the pursuer's contractual involvement, if I can put it in that way, I agree with Mr Francis that these averments are wholly inadequate and lacking in specification. The first defenders must aver the circumstances in which they consider that for the purposes of the Agreement the pursuer was an employee of the third party. He may be such an employee pro hac vice: but I received no submissions with regard to that. Alternatively, if he was not the third party's agent, he may be an invitee of the third party. Mr Francis submitted that he was not, and he referred me to the definition of "invitees" given by Lord Buckmaster in his speech in Fairman v Perpetual Investment Building Society 1923 A.C. 78 page 80, namely, "persons invited to the premises by the owner or occupier for the purposes of business or of material interest". This definition relates, of course, to considerations of occupiers liability long before the Occupiers Liability Acts came into force in both jurisdictions. I am far from satisfied that that is the meaning the word should be given in the context of this Agreement. In this connection I refer to clause 12.5 in which the same word appears. How can the first defenders have a right to search the third party's equipment luggage or their invitees for alcohol or drugs on the first defenders' locations or the first defenders' contractual locations, if that be the true meaning of the word "invitees"? Again, I received no submissions with regard to this, and it would therefore be wrong for me to express a concluded view at this stage.

Perhaps I should now summarise my views. I am clearly of opinion that the Agreement does not preclude the third party from supplying the services of someone who is not generally employed by them. If that is so, the third party was not in breach of contract in providing the services of the pursuer to the first defenders. And no question of personal bar therefore arises. The averments relating to that and the supporting pleas will have to be deleted so that they are not admitted to probation. I am not prepared to do that yet because I want further to be addressed on the application of the indemnity clause in the light of full and proper pleading by the first defenders. I may say that I consider the case of Smith v Air UK Engineering Ltd &c, an unreported decision of Lord Abernethy dated 22 October 1997, as wholly distinguishable from this case. In that case the third party, according to the Lord Ordinary, did all that it could to aver what was the true relationship between the defenders and the second third party but the latter remained silent in the pleadings as to what that relationship was. In that situation the Lord Ordinary was prepared to hold it was either a servant, agent or sub-contractor. In the circumstances, including the second third party's silence, the Lord Ordinary observed that it was hard to see what else that relationship could have been. Here, it seems to me, the first defenders have enough before them to make appropriate averments, and, exceptionally, I am going to allow them an opportunity to consider making them. I shall therefore put the case out on the By Order roll for further discussion.