Esso Petroleum Company Ltd v Hall Russell & Company Ltd (Esso Bernicia)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Keith of Kinkel,Lord Brandon of Oakbrook,Lord Templeman,Lord Goff of Chieveley,Lord Jauncey of Tullichettle |
| Judgment Date | 06 October 1988 |
| Judgment citation (vLex) | [1988] UKHL J1006-1 |
| Date | 06 October 1988 |
| Court | House of Lords |
[1988] UKHL J1006-1
Lord Keith of Kinkel
Lord Brandon of Oakbrook
Lord Templeman
Lord Goff of Chieveley
Lord Jauncey of Tullichettle
House of Lords
My Lords,
I have had the opportunity of considering in draft the speech prepared by my noble and learned friend Lord Jauncey of Tullichettle. I agree with it and for the reasons he gives would allow Esso's appeal only to the extent which he proposes and dismiss Hall Russell's appeal and cross-appeal.
My Lords,
I have had the advantage of reading in draft the speech prepared by my noble and learned friend, Lord Jauncey of Tullichettle. I agree with it and for the reasons which he gives I would allow Esso's appeal so far as it related to the declaratory conclusion but no further and dismiss Hall Russell's appeal and cross-appeal.
My Lords,
For the reasons given by my noble and learned friends Lord Jauncey of Tullichettle and Lord Goff of Chieveley I would allow Esso's appeal so far as it is related to th declaratory conclusion but no further and dismiss Hall Russell's appeal and cross-appeal.
My Lords,
The course which the proceedings have taken, and the relevant facts, are set out in the speech of my noble and learned friend, Lord Jauncey of Tullichettle; his account I gratefully accept.
The first issue in these appeals is whether the averments of Esso Petroleum Co. Ltd. ("Esso") in support of the second conclusion are irrelevant to the loss claimed. The Lord Ordinary held that they were irrelevant, and excluded them from probation. Before the First Division it was common ground between the parties that, on the Lord Ordinary's approach, he should also have excluded from probation the averments in support of Esso's third conclusion. Both conclusions were designed to lay the ground for the recovery by Esso from Hall Russell & Co. Ltd. of sums paid out by Esso in satisfaction of claims in respect of oil pollution damage (or the removal of the threat of such damage) which Esso claimed it was bound to pay under the Tanker Owners Voluntary Agreement concerning Liability for Oil Pollution ("TOVALOP"). The First Division affirmed the judgment of the Lord Ordinary which excluded the averments in support of the second conclusion, and they further excluded from probation the averments in support of the third conclusion. Against that decision, Esso now appeals to your Lordships' House.
These conclusions relate to two substantial sums paid by Esso in respect of oil pollution damage (or expenditure incurred in preventing or removing oil pollution damage). The first sum, amounting so far to £480,935.06 (there being a further sum of £46,343 still in dispute) was paid largely through the Shetland Islands Council, either in direct reinbursement of costs incurred by the council, or to the council as representing other bodies or persons in the Islands, in particular crofters. The second sum, amounting in all to £3,466,160.55 (including interest) plus expenses in the sum of £160,000, was paid by Esso to B.P. Petroleum Development Ltd. ("B.P.") pursuant to an arbitration award dated 15 October 1985. All these sums have been paid under TOVALOP.
Before the First Division, Esso advanced its claim against Hall Russell in respect of these sums on three grounds: (1) that by virtue of express provisions of TOVALOP, Esso was subrogated to the rights of the parties indemnified by them against Hall Russell; (2) that in any event Esso was entitled to a right of recourse,whether or not called subrogation, against Hall Russell; and (3) that the sums paid by Esso fell to be considered as losses incurred by Esso caused by the alleged negligence of Hall Russell. All these submissions were rejected by the First Division. The last two of these submissions have been renewed before your Lordships; the first is no longer pursued.
In order to consider these submissions, it is necessary first to consider the legal effect of TOVALOP. I need only refer to the salient features of that agreement, which was before your Lordships in its amended form dated 1 June 1978.
First, the parties to the agreement are expressed to be tanker owners and bareboat charterers. Consistently with that statement, it is provided that the parties, "in consideration of their mutual promises, have agreed with one another and do hereby agree as follows"; there then follow eleven clauses under the last of which it is provided that the agreement shall be governed by the laws of England. From this, it is plain that the agreement is essentially an agreement as between the tanker owners and bareboat charterers (described as participating owners) who are parties to it. Under clause IV:
"(A) Subject to the terms and conditions of this agreement, the participating owner of a tanker involved in an incident agrees to assume liability for pollution damage caused by oil which has escaped or which has been discharged from the tanker, and the cost of threat removal measures taken as a result of the incident."
The expressions "pollution damage," "oil," and "threat removal measures" are all defined in clause I, which is concerned with definition. Certain exceptions to the agreed liability under clause IV(A) are set out in clause IV(B). It is further provided, in clause VIII(D):
"Persons making claims hereunder may, in the event of a dispute with a participating owner concerning same, commence arbitration proceedings … within two years of the date of the incident, and these proceedings shall be the exclusive means for enforcing a participating owner's liability hereunder. Each participating owner by becoming a party to this agreement, and so long as he remains bound hereby, shall be deemed irrevocably to have offered to any such person to submit all such disputes to arbitration . …"
It was pursuant to such arbitration proceedings that B.P. obtained the award against Esso to which I have already referred. Clause VIII further provides, in paragraph (E):
"Unless otherwise agreed in writing, any payment to a person by or on behalf of a participating owner shall be in full settlement of all said person's claims against the participating owner, the tanker involved, its charterer, their officers, agents, employees and underwriters, which arise out of the incident."
By clause III(B) it is provided that
"a party may withdraw from this Agreement on any day by giving at least six months prior written notice of withdrawal to the Federation … ."
No provision is made in the agreement that a participating owner, on making a payment to a claimant, shall be entitled to require, as a condition of making such payment, an assignation of the claimant's rights of action against any third party who may be liable to the claimant in respect of any relevant loss or damage suffered by him, or indeed authority from such a claimant to proceed against any such third party in the name of the claimant.
There can, in my opinion, be no doubt that TOVALOP constitutes an agreement binding inter se upon those participating owners who are, at the relevant time, parties to it. For Esso, Mr. Cameron Q.C. submitted that the agreement created rights enforceable by third parties expressed to be entitled to claim under it, both under English law (the governing law of the agreement) and under Scots law. Like the Lord President, I do not find it necessary to decide this point; for, in my opinion, Esso's submissions under this head must in any event fail, substantially for the reasons given by the Lord President.
I take the example of the crofters' claims, since these were the claims concentrated upon in argument — although B.P.'s claim, the subject of the arbitration award, is in fact very much more substantial. The primary submission of Mr. Cameron was that Esso was entitled to be subrogated to the crofters' claims in tort against Hall Russell, and further that Esso was entitled to pursue such claims against Hall Russell in its own name. In my opinion, this submission is not well founded.
In considering this submission, I proceed on the basis (which appears to have been common ground throughout the case) that there is for present purposes no material distinction between Scots law and English law. Now, let it be assumed that the effect of Esso's payment to the crofters was to indemnify the crofters in respect of loss or damage suffered by them by reason of the wrongdoing of Hall Russell. If such a payment was made under a contract of indemnity between Esso and the crofters, there can be no doubt that Esso would upon payment be subrogated to the crofters' claims against Hall Russell. This would enable Esso to proceed against Hall Russell in the names of the crofters; but it would not enable Esso to proceed, without more, to enforce the crofters' claims by an action in its own name against Hall Russell.
The reason for this is plain. It is that Esso's payment to the crofters does not have the effect of discharging Hall Russell's liability to them. That being so, I do not see how Esso can have a direct claim against Hall Russell in respect of its payment. I put on one side Esso's claim against Hall Russell in negligence: that I will consider in a moment. There can of course be no direct claim by Esso against Hall Russell in restitution, if only because Esso has not by its payment discharged the liability of Hall Russell, and so has not enriched Hall Russell; if anybody has been enriched, it is the...
To continue reading
Request your trial
-
Alliance Bank JSC v Aquanta Corporation
...debtor as a party to the proceedings. Examples of such a case are Smith v Mainwaring [1986] 2 Lloyd's Law Rep 244 and Esso Petroleum Co Ltd v Hall Russell & Co Ltd [1989] 1 AC 643, where, in each case, the claim failed for lack of such joinder. In an Extinguished Rights claim, the subrogate......
- Braverus Maritime Inc. v Port Kembla Coal Terminal Ltd
-
Caledonia North Sea Ltd v London Bridge Engineering Ltd
...272; Dickenson v Jardine (1868) LR 3 CP 639; Simpson & Co v Thomson (1877) 5 R (HL) 40 and Esso Petroleum Co Ltd v Hall Russell & Co Ltd [1989] AC 643 may be referred to as 60 The American cases cited came from different levels of court and were spread over 200 years. I mention Atlantic Mut......
-
St Paul Travelers Insurance Company Ltd v Dargan
...subrogated claim, joining Ballast as second defendant if the liquidators remained unwilling to agree to the proceedings: Esso Petroleum Co Ltd v Hall Russell & Co Ltd [1989] AC 643 at 663; (2) St. Paul does not have a sufficient interest in any claim by Ballast against MMD to enable it to a......
-
Table of cases
...534 Esso Petroleum Co Ltd v Hall, Russell & Co Ltd and Shetland Islands Council, The Esso Bernicia (1988), [1989] AC 643, [1989] 1 All ER 37, [1988] 3 WLR 730 (HL) ..................... 293 Esso Petroleum Co Ltd v Mardon, [1976] QB 801, [1976] 2 All ER 5, [1976] 2 WLR 583 (CA) ...................
-
Awards Measured by Benefit: Restitution
...theft of intellectual property, features very prominently in the law of restitution. 53 Esso Petroleum Co Ltd v Hall, Russell & Co Ltd , [1989] AC 643 (HL); see also Goff & Jones, above note 8 at 375. 54 See Skibinski v Community Living BC , 2012 BCCA 17 at para 57, leave to appeal to SCC r......
-
UNJUST ENRICHMENT, PROPRIETARY SUBROGATION AND UNSATISFACTORY EXPLANATIONS
...v Preston(1883) 11 QB D 380; Lord Napier and Ettrick v Hunter[1993] AC 713; Esso Petroleum Ltd v Hall, Russell & Co Ltd, The Esso Bernicia[1989] AC 643. 2Banque Financière de la Cité v Parc (Battersea) Ltd[1999] 1 AC 221 at 231, per Lord Hoffmann. 3Bank of Cyprus UK Ltd v Menelaou[2015] UKS......
-
Rights of relief, subrogation and unjustified enrichment in Scots law
...1979 SC 286 at 291; 1981 SLT 286 at 288; OH, per Lord Dunpark. This seems correct despite the dictum in Esso Petroleum v Hall Russell 1988 SLT 874 at 882, HL, per Lord Jauncey stating that subrogation undoubtedly extends to cautionary obligations such as guarantees given to a creditor on be......