E E Caledonia Ltd v Orbit Valve Plc

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE STEYN,LORD JUSTICE BELDAM,LORD JUSTICE NEILL
Judgment Date18 May 1994
Judgment citation (vLex)[1994] EWCA Civ J0518-7
Date18 May 1994
Docket NumberQBCMI 93/1026/B

[1994] EWCA Civ J0518-7

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

(Mr. Justice Hobhouse)

Before: Lord Justice Neill Lord Justice Beldam Lord Justice Steyn

QBCMI 93/1026/B

E E Caledonia Limited (Formerly Occidental Petroleum (Caledonia) Limited)
Plaintiff/Appellant
and
Orbit Valve PLC
Defendant/Respondent

MR. R AIKENS QC and MR. A POPPLEWELL (Instructed by Messrs Ince & Co., London City) appeared on behalf of the Appellant

MR. I HUNTER QC (Instructed by Messrs Elbourne Mitchell, London EC3N 2LB) appeared on behalf of the Respondent

1

( )

2

Wednesday, 18 May 1994

LORD JUSTICE STEYN
3

Introduction

4

In July 1988 an offshore installation known as Piper Alpha was situated in the North Sea about 110 miles north- east of Aberdeen. On the evening of 6 July 1988 an explosion occurred on the production deck of the platform which set in train a series of further explosions and a disastrous fire. The platform was destroyed. At the time there were 226 persons on board the platform. 165 persons died. It was the greatest disaster in the history of offshore operations.

5

One of those who lost his life was Mr Terence Quinn. He was an employee of the Defendants. On the 7th June 1988 the Defendants, an engineering firm, had entered into a written agreement with the Plaintiffs, the joint owners and operators of the platform. Under the agreement the Defendants agreed to provide the services of a service engineer to carry out the overhaul of 13 valves in the gas condensation module on the platform. The Defendants had manufactured and supplied those valves. Mr Quinn was the service engineer to whom the work of overhauling the valves was entrusted. He started the work on 1st July 1988, and it was contemplated that the work would be completed within 10 days. At about 1800 hours on 6th July 1988 Mr Quinn finished work for the day and went off duty. He left the gas condensation module and went to the accommodation module. At 2200 hours the explosions and fire started. Mr Quinn died from inhalation of smoke and gas. Mr Quinn was in no way responsible for the fire or in breach of any statutory or common law duty.

6

The dependants of Mr Quinn claimed damages in tort against the Plaintiffs. The claim was formulated in terms of breach of the common law duty of care and breach of statutory duties. The claims were settled at what was described as the "mid —Atlantic" level of £642,627–78.

7

On the facts, which the Judge was asked to assume to be correct, the liability of the Plaintiffs to the dependants of Mr Quinn arose as a result of two concurrent causes. First, it arose as a result of the negligence of Mr Robert Vernon, the Plaintiff's Lead Production Operator, who was responsible for a leakage of condensate at the site of a Pressure Safety Valve which was not leak tight. Secondly, it arose by reason of various breaches of statutory duty, namely duties under the Offshore Installations (Operational Safety, Health, and Welfare) Regulations 1976 ( S.I.1976 No 1019), which were made under section 6 of the Mineral Workings (Off Shore Installations) Act 1971. By section 11(2) of the 1971 Act there is no civil liability for breach of statutory duty under the Act or the Regulations except for personal injury. For reasons which will emerge later in this judgment it is not necessary to consider the nature of the breaches of statutory duty.

8

The Plaintiffs claimed reimbursement from the Defendants under an indemnity clause in the agreement of 7th June 1988. The question was whether, on the proper construction of the agreement, the Plaintiffs were entitled to an indemnity. On facts assumed to be correct the matter came before Hobhouse J (now Lord Justice Hobhouse). On his construction of the agreement the Judge dismissed the claim. By their appeal the Plaintiffs challenge those parts of the judgment where the Judge concluded that the Plaintiffs had no right to a contractual indemnity.

9

The Agreement

10

It is now necessary to describe the material provisions of the Order. The parties used a standard form document of the Plaintiffs, which may only be used for relatively small orders, viz below a figure of £25,000. The Order constituted an agreement for the provision by the Defendants to the Plaintiffs of one service engineer for a period of about 10 days to overhaul the valves. The Defendants remuneration was to be between £4250 (the estimate) or £5280 (the maximum). The agreement was a small (but important) facet in the huge operation of an offshore platform, involving many personnel of the Plaintiffs and other contractors and many functions. Most of the terms of the agreement cast no light on the problem before us. Only those provisions which are conceivably relevant need be mentioned. The only material typed provision is clause 5 which provides that the service engineer when arriving on board should submit a copy of the Defendants' Certificate of Public and Employers' Liability Insurance. That provision is mirrored by Article 11 in the printed articles, which reads as follows:

"The Contractor undertakes to procure and maintain the following insurance cover in respect of the WORK

(a)Employers liability and workers compensation insurance to comply with the statutory requirements.

(b)General Public Liability insurance (including automobile if applicable) in respect of the persons and property of third parties with cover in an amount of not less than £500,000 for each incident arising out of the performance of the WORK.

The Contractor is asked to furnish the Company with written Conditions of insurance required herein."

11

Article 4 of the typed clauses is also relevant. It provides as follows:

"The Contractor shall be an independent Contractor and neither the Contractor nor any of his employees, agents or servants shall be the employees agents or servants of the Company."

12

Article 6 provides that the Company, other contractors and subcontractors may be working at the site during the performance of the agreement of 7 June 1988.

13

That brings me to the critical indemnity provisions which are contained in Article 10. It reads as follows:

"(a) Non Compliance with Laws

The Contractor shall comply, and cause its employees to comply with all laws, ordinances, rules, regulations and orders directly or indirectly applicable to the WORK, including but not limited to the labour employed on the WORK, the safety and security of the WORK, and the preservation and public health and safety. The Contractor shall indemnify and hold harmless the Company and its affiliates against all liability arising from non-compliance with any such provisions.

(b)Company's and Contractor's Employees and Property

Each party hereto shall indemnify, defend and hold harmless the other, provided that the other party has acted in good faith, from and against any claim, demand cause of action, loss, expense or liability (including the cost of litigation) arising by reason of any injury to or death of an employee, or damage, loss or destruction of any property, of the indemnifying party, resulting from or in any way connected with the performance of this Order.

(c)Third party Employees and Property

The Contractor shall indemnify, defend and hold harmless the Company, provided that the Company has acted in good faith, from and against any claim, demand, cause of action, loss, expense or liability (including the cost of litigation) arising by reason of any injury, death, property damage, loss or destruction (other than such as is the subject of a Company indemnity to Contractor under Article 10 (b) above) resulting from or in any way connected with the performance of this Order, except that the Contractors indemnity pursuant to this Article 10 (c) shall apply only up to an amount of £500,000 per occurrence."

14

Article 12 provides as follows:

"Notwithstanding any other provision of this Order, in no event shall either the Contractor or the Company be liable to the other for any indirect or consequential losses suffered, including but not limited to, loss of use, loss of profits, loss of production or business interruption."

15

These are the provisions of the agreement which are conceivably relevant to the problems before us.

16

It is necessary, however, to refer to the choice of law clause. Article 17 reads as follows:

"This Order shall be governed by, construed and interpreted (according) to either English or Scots law, the choice to depend on the country with which the Contractor is most closely connected, unless the Contractor is connected with neither, in which case the governing law shall be English law. The parties agree to submission to the jurisdiction of the Courts of the legal system governing this Order."

17

The parties agreed that English law governs the Order.

18

The Issues

19

The Plaintiffs brought their claim for an indemnity under Article 10 (b) of the agreement. The claim under that provision gave rise to three questions of construction:

(1)Does the clause provide the Plaintiffs with an indemnity where the liability in respect of which indemnity is sought arose by reason of the negligence of the Plaintiffs or their employees?

(2)If the answer to (1) is "no", does the clause provide the Plaintiffs with an indemnity where the liability in respect of which an indemnity is sought was incurred by reason of the breach of statutory duty by the Plaintiffs or their employees as well as their negligence?

(3)Assuming that the answer to (1) and/or (2) was "yes", did the death of Mr Quinn "result from" or was it "in any way connected with" the performance of the agreement?

20

The Judge...

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