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Brown v Drake International Ltd and Another, Court of Appeal, 3 December 2004

8 December 2004
The issues

Contract – Indemnity Clause – Whether Indemnity Clause Operated To Indemnify Occupier As Against Employer Of Deceased

The facts

The Claimant brought an action under the Fatal Accidents Act 1976 against Drake International, the First Defendant and Southampton Container Terminals, the Second Defendant.

Her husband, Peter Brown had been fatally injured in an accident at Southampton Docks on 19th November 1998. Drake was the employer of Mr Brown and Southampton conducted operations at the Container Terminal at the Docks.

The Judge found that Drake supplied labour to Southampton and that the actual work in the terminal was carried out by a mixture of employees of Drake and Southampton under the overall organisation and control of Southampton. He found that both Defendants were negligent and in breach of statutory duty and apportioned blame equally between them. He rejected the allegations for contributory negligence. He found that by virtue of a contract between them that Drake should indemnify Southampton in respect of their liability to the Claimant. Drake appealed.

At issue were indemnity clauses – clauses 22 and 23 in the contract. Clause 22 provided that Drake would be responsible for and should release and indemnify Southampton from and against all liability for personal injury whether fatal or otherwise including damage, costs and expenses however caused or incurred which arose out of or in connection with the execution of the contract. Clause 23 at sub clause 1 provided that Drake would insure in their joint names and indemnify Southampton against any damage, loss or injury which may occur to any property or person and arising out of the execution of the works or in the carrying out of the contract.

Sub clause 22 (iv) provided that Southampton would not be liable for any damages or compensation payable at law in respect of any accident or injury to any workmen in the employment of Drake save and except an accident or injury resulting from any act or default of Southampton, its servants or agents; and that Drake would indemnify and keep indemnified Southampton against all such damages and compensation including costs.

The decision

The Judge had relied on Canada Steamship Lines v The King a decision of the Privy Council in 1952. He had relied on the three stage test stated by Lord Morton namely;

i) If a clause contained language exempting the person in whose favour it was made from the consequence of its own negligence effect must be given to that provision.
ii) If there was no express reference to negligence, the Court had to consider whether the words used were wide enough in their ordinary meaning to cover negligence. Any doubt would be resolved against the party seeking the indemnity.
iii) If the words were wide enough then the Court had to consider whether the head of damage was based on some ground other than that of negligence. The other ground must not be so fancible or remote that a party could not be supposed to have desired protection against it.

Drake had argued firstly that the word negligence did not appear in Clause 22 and therefore the indemnity would not operate and that secondly that because liability could be based on breach of statutory duty as well as negligence, and that because the clause could cover breach of statutory duty as well as negligence, it did not cover either. They further submitted that in any event the effect of Clause 22 was nullified by the provision of Clause 23 (iv) providing the Respondents with an indemnity but accepting acts or injuries resulting from any act or default of Southampton, its agents or servants.

Southampton relied on the presence of the words however caused in Clause 22 submitting that that expression brought within the clause both negligence and breach of statutory duty.

In the Court’s judgment, Clause 23 (iv) took effect in accordance with its terms. Any accident or injury resulting from any act or default of Southampton was expressly excluded from the indemnity provided. Given the presence of that clause and the presumption that an indemnity would not readily be granted to a party against a loss caused by its own negligence, Southampton could not rely on the indemnity in Clause 22.

Strictly speaking therefore the effect of Clause 22 alone did not require the Court’s judgment. To the extent to which it was relevant the Court found that the expression “however caused or incurred had not been considered in the Canada Steamship case. It had however been suggested in White v Blackmoor and the earlier case of Jibaud v Great Eastern Railway Company (1921) Court of Appeal, that the phrase “any injury however caused would give protection.

The expression however caused gave the clearest indication that negligence and breach of statutory duty were included and the expression should ordinarily be given its plain meaning however.

In this case however this was not relevant since applying the three stage test in Canada Steamship enquiry did not get beyond stage 1. The Court would not otherwise interfere with the apportionment reached.

The Appellants and Respondents therefore shared responsibility for the accident equally and the Respondents were not indemnified with respect to their share.
Appeal allowed in part.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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