T Wallis Smith Coggins Limited v Port of London Authority

A contractual provision will not be construed as removing a common-law or statutory right or remedy unless it uses clear words. The court must interpret the document as a whole, having regard to its commercial and immediate context and the meaning it would convey to a reasonable person. A clause allocating liabilities on a business transfer must first be construed to determine whether it addresses the particular liability relied upon. General words concerning the transferor’s liabilities do not ordinarily release the transferee from liability arising from its own tortious conduct or exclude a statutory contribution claim.

The claimant, a stevedoring company, sought contribution from the defendant in respect of damages and costs paid to settle an asbestos-related mesothelioma claim brought by a former employee. The claimant’s business had been transferred to the defendant under an agreement dated 9 February 1979.

The defendant relied on clause 5, which required the claimant to bear, pay and discharge liabilities relating to the business before transfer. The preliminary issue was whether, on its proper construction and in light of section 7(3)(b) of the Civil Liability (Contribution) Act 1978, clause 5 completely barred the contribution claim.

1. Preliminary issue. Clause 5 was not a complete defence to, and did not bar, the contribution claim.
2. The proper approach was that stated in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896. The court had to ascertain the meaning conveyed by the document to a reasonable person with the background knowledge reasonably available to the parties. The agreement’s commercial and immediate context was highly relevant. It transferred the assets and goodwill of a business while releasing or assuming specified liabilities of the seller.
3. The natural meaning of the requirement that the claimant bear, pay and discharge liabilities relating to the business before transfer referred to the claimant’s own liabilities. It did not fairly describe, or release the defendant from, liability arising from the defendant’s own tortious conduct.
4. Clear words are required before a contract is construed as taking away a valuable common-law or statutory right or remedy, applying Triple Point Technology Inc v PTT Public Co Ltd [2021] UKSC 29. The right to claim contribution under the Civil Liability (Contribution) Act 1978 was such a right, and clause 5 contained no sufficiently clear words.
5. The defendant’s construction would also operate as an indemnity and could defeat the statutory limitation of contribution to what was just and equitable under section 2(1) of the 1978 Act. That extreme consequence reinforced the need for clear language.
6. Although commercial parties may allocate risk, the prior question was whether clause 5 actually allocated or excluded the defendant’s liability. It did not. Counsel were invited to draw up an order reflecting that determination.