Smith v South Wales Switchgear Company Ltd

JurisdictionUK Non-devolved
CourtHouse of Lords
JudgeLord Wilberforce,Viscount Dilhorne,Lord Salmon,Lord Fraser,Lord Keith of Kinkel
Judgment Date09 November 1977
Judgment citation (vLex)[1977] UKHL J1109-2
Docket NumberNo. 1
Date09 November 1977

[1977] UKHL J1109-2

House of Lords

Lord Wilberforce

Viscount Dilhorne

Lord Salmon

Lord Fraser of Tullybelton

Lord Keith of Kinkel

Smith (A.P.) and Others
(Respondents)
and
The South Wales Switchgear Company Limited
(Appellants) (Scotland)

After hearing Counsel, as well on Tuesday the 4th as on Wednesday the 5th, days of October last, upon the Petition and Appeal of The South Wales Switchgear The Company Limited, 2C Churchill Way, Bishopbriggs, Lanarkshire, praying, That the matter of the Interlocutors set forth in the Schedule thereto, namely, Interlocutors of the Lord Ordinary in Scotland (Lord Brand) of the 25th of February and of the 3rd of March 1977 and also an Interlocutor of the Lords of Session there of the Second Division of the 21st of December 1976, so far as therein stated to be appealed against, might be reviewed before Her Majesty the Queen, in Her Court of Parliament, and that the said Interlocutors, so far as aforesaid, might be reversed, varied or altered, or that the Petitioners might have such other relief in the premises as to Her Majesty the Queen in Her Court of Parliament, might seem meet; as also upon the case of U.M.B. Chrysler (Scotland) Limited, Linwood, lodged in answer to the said Appeal and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of Her Majesty the Queen assembled, That the said Interlocutors of the 25th day of February 1976, and of the 3rd day of March 1976, and of the 21st day of December 1976 respectively, in part complained of in the said Appeal, be, and the same are hereby Recalled: And it is further Ordered, That the Cause be, and the same is hereby, remitted back to the Court of Session in Scotland with a Direction to proceed in accordance with the Opinions expressed in this House: And it is further Ordered, That the Respondents U.M.B. Chrysler (Scotland) Limited do pay, or cause to be paid to the said Appellants the expenses incurred by them in respect of the Motion for review in the Inner House, and also the expenses incurred by them before the Lord Ordinary since the date of the conclusion of the first Proof in so far as not already dealt with by the Lord Ordinary prior to his Interlocutor of the 3rd day of March 1976; And it is further Ordered, That the Respondents U.M.B. Chrysler (Scotland) Limited do pay, or cause to be paid, to the said Appellants the Costs incurred by them in respect of the said Appeal to this House, the amount of such last-mentioned Costs to be certified by the Clerk of the Parliaments: And it is also further Ordered, That unless the Costs, certified as aforesaid, shall be paid to the party entitled to the same within one calendar month from the date of the certificate thereof, the Cause shall be, and the same is hereby, remitted back to the Court of Session in Scotland, or to the Judge acting as Vacation Judge, to issue such Summary Process or Diligence for the recovery of such Costs as shall be lawful and necessary.

Lord Wilberforce

My Lords,

1

I have had the benefit of reading in advance the opinions of my noble and learned friends Lord Fraser of Tullybelton and Lord Keith of Kinkel.

2

I agree with their conclusions. I would allow the appeal.

Viscount Dilhorne

My Lords,

3

I have had the advantage of reading the speeches of my noble and learned friends Lord Fraser of Tullybelton and Lord Keith of Kinkel and I agree with their conclusions.

4

I agree with them in thinking that the 1970 edition of the General Conditions was the edition to be treated as incorporated in the contract. If the respondents had been asked to send a copy of the conditions and had sent an earlier edition, it would no doubt have been difficult for them successfully to contend that another edition was that to which the Purchase Order referred.

5

The main question for determination in this appeal is as to the construction to be placed on Clause 23( b) of the General Conditions. The view of their Lordships as expressed by Lord Morton of Henryton in Canada Steamship Lines Ltd. v. The King [1952] A.C. 192 as to the approach to be made in construing 'such clauses' was summarised by the formulation of what has been referred to as three tests. In that case there was both an exemption clause and an indemity clause. Although the tests themselves referred only to clauses exempting from liability, the reference by Lord Morton in the preceding sentence to "such clauses" shows that the tests were meant to apply both to exemption and to indemnity clauses.

6

It is, however, to be noted that after formulating these tests, Lord Morton at p. 211 said in relation to the indemnity provision:

"… if the Crown's contention as to this clause is correct, it imposes a very remarkable and burdensome obligation on the company. However widespread may be the destruction caused by the negligence of the Crown's servants in carrying out the Crown's obligations … the whole of the damage must be paid for by the company. In the present case the claims are heavy, and it is obvious that the damage caused by a fire such as this might be even greater. Such a liability for the negligence of others must surely be imposed by very clear words, if it is to be imposed at all."

7

It would seem in the light of these observations that it was the view of Lord Morton that a heavier burden lay on the proferens seeking to establish that the other party to an agreement had agreed to indemnify him against liability for his negligence and that of his servants than when he is merely seeking to establish exemption from liability for his negligence.

8

In Gillespie Bros. & Co. Ltd. v. Roy Bowles Transport Ltd. [1973] I Q.B. 400 Buckley L.J. said at p. 419:

"It is, however, a fundamental consideration in the construction of contracts of this kind that it is inherently improbable that one party to the contract should intend to absolve the other party from the consequences of the latter's own negligence. The intention to do so must therefore be made perfectly clear, for otherwise the court will conclude that the exempted party was only to be free from liability in respect of damage occasioned by causes other than negligence for which he is answerable".

9

While an indemnity clause may be regarded as the obverse of an exempting clause, when considering the meaning of such a clause one must, I think, regard it as even more inherently improbable that one party should agree to discharge the liability of the other party for acts for which he is responsible. In my opinion it is the case that the imposition by the proferens on the other party of liability to indemnify him against the consequences of his own negligence must be imposed by very clear words.

10

It cannot be said, in my opinion, that it has been in the present case.

11

The tests formulated by Lord Morton are applicable to the exempting or indemnity provision itself but in construing such a provision other parts of the contract which throw a light on the meaning to be given to it, are not to be ignored. It would be wrong in this case only to have regard to Clause 23( b) to which the tests apply, and to ignore the other parts of the clause which in my opinion throw a revealing light on the meaning to be given to that provision.

12

In Hollier v. Rambler Motors (A.M.C.) Ltd. [1972] 2 Q.B. 71, Salmon L.J., as he then was, at p. 80 made some observations on the passage in Lord Greene's judgment in Alderslade v. Hendon Laundry Ltd. [1945] 1 K.B. 189 which was cited with approval by Lord Morton in the Canada Steamship case. He pointed out that "in the end you are driven back to construing the clause in question to see what it means". My noble and learned friend Lord Salmon's observations met with the approval of Lord Denning, M.R. in Gillespie Bros. v. Roy Bowles Ltd. ( supra) and while the tests formulated by Lord Morton are a useful aid to construing such clauses, they must not be interpreted as if they were provisions in a statute. At the end of the day one must construe the clause in the light, inter alia, of other provisions of the contract. It might be, though I do not think it is the case, that applying the tests to Clause 23( b) alone might lead to the conclusion that the respondents succeeded while regard to the other provisions of the clause led to a contrary conclusion.

13

When one considers Clause 23( b) by itself in relation to the three tests, I agree with my noble and learned friend Lord Fraser that it did not expressly indemnify the respondents from the consequences of their or their servants' negligence, and so did not satisfy the first test. To satisfy that, there must be a clear and unmistakable reference to such negligence; that is shown by the words "If there is no express reference to negligence" with which the second test begins. In Gillespie Bros. v. Roy Bowles Ltd. ( supra) Buckley L.J. and Orr L.J. thought that the first test was satisfied by a clause whereby one party undertook "to saving harmless and keep" the other party "indemnified against all claims or demands whatsoever …". With that conclusion I must express my dissent.

14

Clause 23( b) begins with very wide words, but their width is restricted to liability for personal injuries or death or injury or damage to property arising out of or in the course of or caused by the execution of the order, that is to say, by the doing of the work the subject of the order. The liability in respect of which the respondents are to be indemnified is thus linked with the doing of the work. This appears to me to point to liability incurred by the respondents for acts or omissions of the appellants and their servants, and not to liability of the respondents for their or their servants' negligence. Whether or not this be right, it cannot be said that the language of Clause 23( b) makes it perfectly clear that...

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