Brown v Drake International - The Indemnity Maze
Brown v Drake International - The Indemnity Maze
Brown v Drake International & Southampton Container Terminals
Facts
The Deceased was an employee of the First Defendant (“DIL”). He was fatally injured while working at premises operated by the Second Defendant (“SCT”). The work being done was pursuant to a contract between DIL and SCT.
Clause 22 of the contract provided that DIL should indemnify SCT against all liability for personal injury, fatal or otherwise, “however caused”.
Clause 23(i) provided that DIL should insure in the joint names of DIL and SCT against any damage or injury to any person arising out of the carrying out of the contract.
Clause 23(iv) provided that SCT should not be liable in respect of any damages payable in respect of any accident of injury to any workman or other person in the employment of the contractor or sub-contractor, “save and except an accident or injury resulting from any act or default of SCT its agents or servants.”
County Court decision
It was held that both Defendants were negligent and in breach of statutory duty. Blame was apportioned equally between them. It was also held that, by virtue of the contract between them, DIL should indemnify SCT in respect of SCT’s liability to the Claimant.
The judge cited Canada Steamship Lines v The King [1952] AC 192 and applied the three-stage set out by Lord Morton. He held that there can be a valid clause requiring indemnity against the contractor’s own negligence if it is sufficiently clear. Both parties were large companies who had had the benefit of legal advice. The law did not require the use of the word ‘negligence’, and the words ‘however caused’ were wide enough to include negligence and breach of statutory duty. He did not refer to Clause 23.
Court of Appeal decision
DIL appealed against the judge’s apportionment of liability, and his finding that they were required to indemnify SCT.
Pill LJ held that Clause 23(iv) took effect in accordance with its terms. It was not, as submitted on behalf of SCT, concerned only with insurance and in addition to the indemnity in Clause 22. It would have to have been worded quite differently to have only that limited effect. Therefore, in the circumstances of the case SCT could not rely upon Clause 22.
Although it was not necessary to decide the appeal, Pill LJ did then go on to consider the effect of Clause 22 in the context of the Canada Steamship test. He held that the phrase “however caused” was sufficiently wide and leaves no doubt that both negligence and breach of statutory duty were intended to be included. Were it not for the presence of Clause 23(iv), he would have found in SCT’s favour.
Hooper LJ agreed with the above construction of Clause 22. However, he would have found it extraordinary that the draftsman intended to require DIL to indemnify SCT for what might be substantial damages caused by SCT’s negligence.
On the question of apportionment, Pill LJ saw no basis to criticise the judge’s apportionment of responsibility on his findings of fact.
Commentary
The Court of Appeal re-affirmed that Canada Steamship is the case to be applied where a party seeks to indemnify itself against its own negligence.
This was a case which was essentially decided on its particular facts, namely on the construction of Clause 23(iv). However, Pill LJ’s obiter comments on the construction of Clause 22 are perhaps more interesting. It was held that the phrase “howsoever caused” surmounted the first hurdle of the Canada Steamship rules, which requires the consequence of a party’s own negligence to be “expressly exempted.”
This does appear to represent a different approach to that applied in EE Caledonia Limited v Orbit Valve Co Europe [1994] 1 WLR 1515,where it was held that “any claim . . . or liability . . . arising by reason of . . . death of any employee . . . of the indemnifying party, resulting from or . . . connected with the performance of this order” did not expressly exempt negligence. See also Shell Chemicals UK Ltd v P&O Roadtanks Ltd [1995] 1 Lloyd’s Rep 297, 301, where “loss whatsoever or howsoever occasioned” did not count as an express reference for the purposes of Canada Steamship.
EE Caledonia was distinguished. Pill LJ referred to the case of White v Blackmore [1972] 2 QB 651 (a case on the Occupiers Liability Act 1957), where “howsoever caused” was described as “the classic phrase hereby to exclude liability for negligence”. This case had been cited to the House of Lords in Smith v South Wales Switchgear [1978] 1 WLR 165 and, although it was not mentioned in the speeches, Pill LJ made the assumption that it would not have escaped condemnation had it been thought to be unsound.
Once the first stage is passed, the second and third stages of the Canada Steamship test do not arise. Therefore it appears that using the phrase “however caused” is sufficient to make an indemnity clause effective.