Brown v Drake International Ltd & Anor

An indemnity against a party’s own negligence requires very clear language, construed in the context of the whole contract. Comprehensive causal words such as however caused may include negligence and breach of statutory duty. But a specific indemnity for injuries to a contractor’s employees, expressly excluding injury resulting from the employer’s act or default, prevents reliance on a wider clause in the same circumstances. An appellate court should not interfere with a trial judge’s apportionment of responsibility absent a substantial misjudgment of its factual basis. Shared de facto control of an unsafe system may justify equal responsibility.

Mrs Margaret Anne Brown brought a claim under the Fatal Accidents Act 1976 following the death of Peter Brown in an accident at Southampton Docks. She sued Drake International Ltd, which supplied labour, and Southampton Container Terminals Ltd, which conducted the terminal operations.

His Honour Judge Rudd found both defendants negligent and in breach of statutory duty, apportioned responsibility equally, and held that Drake was contractually obliged to indemnify Southampton Container Terminals for its liability. Drake appealed against the apportionment between the defendants and the indemnity finding. The central issues were the construction and interaction of two indemnity clauses and the proper scope of appellate review of the apportionment.

1. Disposition. The appeal was allowed in part. Equal apportionment of responsibility was upheld, but Southampton Container Terminals was not entitled to an indemnity from Drake for its own share of responsibility.

2. Indemnity clauses. An indemnity must be construed in the context of the whole contract. There is a strong presumption that a party is not indemnified against loss caused by its own negligence unless very clear words impose that liability, as recognised in Smith v South Wales Switchgear [1978] 1 WLR 165. Clause 23(iv) was a substantive indemnity, not merely an insurance requirement. It expressly excluded accidents or injuries resulting from any act or default of Southampton Container Terminals, its servants or agents. That specific provision prevented reliance on the wider indemnity in clause 22.

3. Clause 22 considered separately. Although it was unnecessary to decide the effect of clause 22 alone, the court considered the point in deference to the submissions. Applying the three-stage approach in Canada Steamship Lines v The King [1952] AC 192, the words however caused or incurred clearly covered negligence and breach of statutory duty. The enquiry therefore did not proceed beyond the first stage. E E Caledonia Limited v Orbit Valve Co Europe [1994] 1 WLR 1515 was distinguishable because its clause lacked comparable causal wording. White v Blackmore [1972] 2 QB 651, Gibaud v Great Eastern Railway Company [1921] 2 QB 427 and Turner v Civil Service Supply Association [1926] 1 QB 50 supported the significance of comprehensive causal language. Alderslade v Hendon Laundry Ltd [1945] KB 189 explained when the later stages of the test arise.

4. Apportionment. The trial judge was entitled to find de facto joint control of the labour force and system of work, shared responsibility for worker safety, and equal responsibility for the accident. He had found breaches of regulations 7(1) and 12(2) of the Docks Regulations 1988, and identified the unsafe system of work as the real mischief. An appellate court is reluctant to interfere with apportionment and does so only for a substantial misjudgment of its factual basis: National Coal Board v England [1954] AC 403 and Jennings v Norman Collinson (Contractors) 1970 1All ER 1121. No such misjudgment was shown.

5. Hooper LJ agreed with the construction of clause 22 but expressed doubt, by way of a hypothetical example, that its draftsman intended to indemnify Southampton Container Terminals for its own negligence. Slynn LJ fully agreed with Pill LJ’s judgment.

• Court of Appeal (Civil Division) allowed the appeal to the extent that Drake was not required to indemnify Southampton Container Terminals for its own moiety of responsibility: [2004] EWCA Civ 1629.
• Southampton County Court, His Honour Judge Rudd, found both defendants negligent and in breach of statutory duty, apportioned responsibility equally, and ordered Drake to indemnify Southampton Container Terminals. A further judgment was given on 23 March 2004 concerning the statutory breaches.