Lonrho Ltd and Others v Shell Petroleum Company Ltd and Others (First Appeal)

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Diplock,Lord Edmund-Davies,Lord Keith of Kinkel,Lord Scarman,Lord Bridge of Harwich
Judgment Date22 May 1980
Judgment citation (vLex)[1980] UKHL J0522-1

[1980] UKHL J0522-1

House of Lords

Lord Diplock

Lord Edmund-Davies

Lord Keith of Kinkel

Lord Scarman

Lord Bridge of Harwich

Lonrho Limited and Others
(Appellants)
and
Shell Petroleum Company Limited and Others
(Respondents)
Lord Diplock

My Lords,

1

This appeal arises out of a consultative case stated under section 21 (1)(a) of the Arbitration Act 1950 by the umpire (Lord Cross of Chelsea) and the arbitrators (The Honourable Sir Henry Fisher and Dr. Jorge Mota) in an arbitration between the appellants (to which I shall refer together as "Lonrho") and the respondents (to which I shall refer together as "Shell and B.P."). Lonrho were the claimants in the arbitration. The facts which they alleged and upon which they relied as the foundation of their claim to recover damages in excess of £100m against Shell and B.P. are disputed by the latter who also contend that even if the facts alleged in Lonrho's Points of Claim, which runs to 93 pages, were true, they would not disclose any cause of action in law against Shell and B.P. If those facts that were in issue had to be decided in the arbitration the cost in time and money would have been immense; the parties accordingly agreed as a first step in the reference to invite the umpire and the arbitrators, who for this purpose sat together, to answer nine questions of law on the assumption that all the allegations of fact in the Points of Claim were true. If all of them were answered in the negative Lonrho's claim in the arbitration would be doomed to fail.

2

Lonrho's claim arose out of the construction and operation of an oil refinery near Umtali in Southern Rhodesia by a company ("the Refinery Company") of which Shell and B.P., and other major oil companies (to which I will refer collectively as "the Participant Companies"), held all the shares, and the construction and operation by Lonrho of a pipeline connecting the refinery with an ocean terminal near the port of Beira in Mozambique. The construction and operation of the refinery and the pipeline were the subject of a number of complicated interconnected contracts and concessions entered into in 1962 between various parties which included the Governments of Mozambique and of what was then the Federation of Rhodesia, the Refinery Company, the Participating Companies and Lonrho. The refinery on completion would be the only producer of petroleum products situated in the Federation of Rhodesia and the commercial expectation of all the parties to these agreements and concessions was that the refinery would obtain its requirements of crude oil for refining from supplies shipped by sea to the ocean terminal of the pipeline by Participating Companies or other companies forming part of their respective "groups", and thence transported through the pipeline to Umtali. The terms upon which this was to be done were contained in an agreement of 30th October 1962, made between Lonrho and the Participating Companies, which in these proceedings has been referred to as "the Shippers' Agreement".

3

The refinery and pipeline were completed and came into operation in January 1965; thereafter all proceeded according to expectations until on 11th November 1965 the Government of Southern Rhodesia unilaterally declared independence ("U.D.I."). Five days later the United Kingdom parliament passed the Southern Rhodesia Act 1965, and pursuant to that Act on 17th December 1965 the Southern Rhodesia (Petroleum) Order 1965 was made, in terms which I shall have to set out later, prohibiting Shell and B.P. as companies incorporated in the United Kingdom, from supplying any crude oil or petroleum products to Southern Rhodesia. This was replaced in 1968 by a more comprehensive Order which made no significant change so far as crude oil and petroleum products were concerned. I will refer to the 1965 and 1968 Orders together as "the Sanctions Orders".

4

From the beginning of December 1965 no further oil was shipped to the ocean terminal of the pipeline at Beira by Shell and B.P. or, for that matter, by any other of the Participating Companies. The pipeline remained unused throughout the period of U.D.I. and consequently Lonrho received no fees under the Shippers' Agreement for transporting oil and no return on its investment in the pipeline.

5

For the purpose of disposing of this appeal the alleged conduct of Shell and B.P. on which Lonrho rely as constituting their cause of action can be stated in a couple of sentences: (1) before the making of the Sanctions Order of 1965 Shell and B.P., by assuring the illegal regime that an adequate supply of petroleum products would reach Southern Rhodesia even if sanctions were imposed by other nations, influenced the regime to declare and to continue to give effect to U.D.I.; and (2) after the Sanctions Order had been made, Shell and B.P. themselves and through associated companies which they controlled, supplied petroleum products to Southern Rhodesia and thereby prolonged the period for which the pipeline was prevented from operating, owing to U.D.I. and the sanctions imposed by the United Kingdom and other nations in consequence of it. Those, in a nutshell, are the facts which must be assumed to be true for the purposes of answering the questions of law that come before your Lordships on the consultative case.

6

Not all of the original nine questions which the umpire and arbitrators were invited by the parties to answer found their way into the case stated for the opinion of the High Court. Of those that did questions 1 and 2 were directed to determining whether upon the true construction of the Shippers' Agreement which was governed by English law the conduct alleged would constitute a breach by Shell and B.P. of any of its express or implied terms. The Shippers' Agreement was tailor-made by expert legal draftsmen in 1962 to meet the peculiar circumstances of the case, which are unlikely ever to occur again. To ascertain its meaning calls for the application to the actual language used by the draftsmen of well-known canons of construction as to which there can be no real dispute. It is of great importance to the parties but of no wider legal interest whatever. Your Lordships have had the benefit of reading no less than five meticulous analyses of the language of the agreement and of the surrounding circumstances which accompanied its making, one by Lord Cross of Chelsea, the umpire, one by Parker J. by whom the stated case was first heard in the Commercial Court, and one each by the Master of the Rolls, Lord Justice Eveleigh and Lord Justice Fox in the Court of Appeal. They are unanimous, and without repeating any of them or adding yet a sixth analysis in words of my own choosing, I am content to say that I agree with them and for the reasons that they give I too would hold that the matters pleaded in Lonrho's Points of Claim disclose no cause of action for breach of contract.

7

The next two questions for your Lordships, numbered 5 (a) and 5 (b) are directed to determining whether, notwithstanding that no breach of contract was involved, delivery to Southern Rhodesia by Shell and B.P. of petroleum products contrary to the Sanctions Orders gives to Lonrho a right of action in tort against them, assuming that Lonrho did suffer loss in consequence of what they did. The claim is put in the alternative; either as an innominate tort, committed by Shell and by B.P. severally, of causing foreseeable loss by an unlawful act; or as a joint tort of conspiring together to do an unlawful act which caused damage to Lonrho.

8

The phrasing of these questions is as follows:

"5. Even if there were breaches by the Respondents of the 1965 and 1968 Orders" [sc. the Sanctions Orders]

  • (a) Whether breaches of those Orders would give rise to a right of action in the Claimants for damage alleged to have been caused by those breaches and

  • (b) Whether the Claimants have a cause of action for damage alleged to have been caused by such breaches by virtue only of the allegation that there was an agreement to effect them."

9

My Lords, it is well settled by authority of this House in Cutler v. Wandsworth Stadium Ltd. [1949] A.C. 398 that the question whether legislation which makes the doing or omitting to do a particular act a criminal offence renders the person guilty of such offence liable also in a civil action for damages at the suit of any person who thereby suffers loss or damage, is a question of construction of the legislation.

10

So first it is necessary to set out the relevant provisions of the Southern Rhodesia Act 1965 and of the Sanctions Order.

11

The Act.

"1. It is hereby declared that Southern Rhodesia continues to be part of Her Majesty's dominions, and that the Government and Parliament of the United Kingdom have responsibility and jurisdiction as heretofore for and in respect of it.

2.–(1) Her Majesty may by Order in Council make such provision in relation to Southern Rhodesia, or persons or things in any way belonging to or connected with Southern Rhodesia, as appears to Her to be necessary or expedient in consequence of any unconstitutional action taken therein.

(2) Without prejudice to the generality of subsection (1) of this section an Order in Council thereunder may make such provision—

……

(c) for imposing prohibitions, restrictions or obligations in respect of transactions relating to Southern Rhodesia or any such persons or things,

as appears to Her Majesty to be necessary or expedient as aforesaid; and any provision made by or under such an Order may apply to things done or omitted outside as well as within the United Kingdom or other country or territory to which the Order extends.

12

The Sanctions Order

" Restriction on supply of petroleum to Southern Rhodesia

1.–(1) Except under the authority of a licence granted by the Minister, no person shall—

  • (a) supply or deliver or agree to supply or deliver to or to the order...

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