The English Electric Company Ltd (Respondent/Claimant) v Alstom UK (a Private Unlimited Company)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Beatson,Lord Justice Sales |
| Judgment Date | 07 December 2016 |
| Neutral Citation | [2016] EWCA Civ 1314 |
| Court | Court of Appeal (Civil Division) |
| Date | 07 December 2016 |
| Docket Number | Case No: A3/2015/1840 |
[2016] EWCA Civ 1314
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT
HIS HONOUR JUDGE MACKIE QC (Sitting in the London Mercantile Court)
Royal Courts of Justice
Strand, London, WC2A 2LL
The Right Honourable Lord Justice Longmore
The Right Honourable Lord Justice Beatson
The Right Honourable Lord Justice Sales
Case No: A3/2015/1840
Mr James Drake QC & Mr Stuart Benzie (instructed by Pinsent Masons LLP) for the Appellant
Mr David Lewis QC & Mr Thomas Corby (instructed by Clyde & Co LLP) for the Respondent
Hearing dates: 7 th December 2016
Approved Judgment
Introduction
The context in which this appeal arises is the sad case of Mr Rodney Oliver who was employed as an engineering student apprentice between 1956 and 1961 in the course of which he was required to handle turbine generator equipment and fittings contaminated with asbestos. Over 40 years later, in August 2003 he was diagnosed with mesothelioma as a result of his exposure to that asbestos. He died two years later on 8 th August 2005. On 4 th August 2008 his widow made a claim against his 1961 employers Associated Electrical Industries Ltd ("AEI") and in due course obtained judgment for a basic sum of £250,000. The dry question of law for HHJ Mackie QC sitting in the London Mercantile Court in his last case and now, with the permission of Lewison LJ, for us is whether that liability can be passed down a contractual chain of agreements for the sale and purchase of AEI's turbine generator business.
Factual background
Mr Oliver's first employer from 1956–1960 was British Thompson Houston Ltd ("BTH") at Mill Road, Rugby. On 1 st January 1960 BTH changed its name to AEI (Rugby) Limited having on the previous day transferred its turbine generator business to its holding company AEI pursuant to a contract dated 31 st December 1959. Mr Oliver's apprenticeship was also transferred to AEI.
After Mr Oliver's apprenticeship with AEI came to an end in 1961, the General Electric Company Ltd ("GEC") acquired AEI in 1967. In 1968 GEC merged with the claimant The English Electric Co Ltd ("EEC").
On 1 st April 1970 AEI, as part of an internal reorganisation, sold its turbine business to EEC ("the 1970 agreement"). The only surviving evidence of this sale was recorded in a resolution of EEC's general purposes committee on 31 st March 1971 ("the 1971 resolution"). This document includes an indemnity provision which lies at the heart of this appeal because EEC claims it was by reason of this indemnity that it has become liable to AEI to indemnify it in respect of Mrs Oliver's claim.
On 21 st March 1989 EEC sold the turbine business to GEC Power Systems Ltd, which was the predecessor in title to the defendant and appellant Alstom UK ("Alstom"). This agreement also included an indemnity provision, but Alstom accepts that, if EEC is liable to indemnify AEI, then Alstom is liable to indemnify EEC in respect of Mrs Oliver's claim pursuant to the indemnity provision in that (1989) agreement.
Before these proceedings were instituted, EEC and Alstom had sensibly agreed they would each pay half of Mrs Oliver's claim without prejudice to the question of which of them was to be ultimately liable.
Since much will depend on the true interpretation of the 1971 resolution, it is sensible to set it out here:-
" THE ENGLISH ELECTRIC COMPANY LIMITED
Resolutions of the General Purposes Committee dated Wednesday 31 st March 1971.
Associated Electrical Industries Limited – Turbine Generator Business
1. The Committee ratified the purchase as at 1 st April 1970 subject to certain reservations as to trading and rights of the Turbine Generator business and goodwill carried on by Associated Electrical Industries Limited on the following terms:-
Plant machinery and other fixed Assets, including the right to use Letters Patent, trade marks and registered designs at present used in the said business, but excluding land and buildings, at the net written down book value as at
31 st March 1970.
2,604,457
Inventory at book value at 31 st March 1970
6,150,728
Inter-company indebtedness
746,172
9,501,357
….
The Company assumed responsibility for the overdraft of Associated Electrical Industries Limited in respect of this business as at 31 st March 1970 amounting to £476,797 and Associated Electrical Industries Limited transferred to the Company the balance of its cash in hand relating to this business as at 31 st March 1970 amounting to £20,700. The resultant balance due by the company to Associated Electrical Industries Limited of £4,013,096 is for settlement in cash.
The Company agreed to collect the outstanding debts in respect of this business as at 1 st April 1970 amounting to £15,905,950 on behalf of Associated Electrical Industries Limited and to settle that company's outstanding trade indebtedness in respect of this business amounting to £10,126,223 on that date on behalf of Associated Electrical Industries Limited and to account to that company accordingly.
The Company subject to certain reservations taking the benefit of all outstanding and uncompleted contracts in respect of the above mentioned business agreed to assume the responsibilities therefor as at 1 st April 1970 and to indemnify Associated Electrical Industries Limited against any claims arising on completed and uncompleted contracts as at 1 st April 1970.
2. IT WAS RESOLVED
THAT English Electrical-AEI Turbine Generators Limited be appointed the purchasing agent for the Company in connection with its Turbine Generator business with effect from 1 st April 1971.
3. It was agreed to market the products and services of the Company's Turbine Generator business through its subsidiary English Electric-AEI Turbine Generators Limited with effect from 1 st April 1971 on such terms and conditions as English Electric-AEI Turbine Generators Limited sells to its customers. In consequence of this decision English Electric – AEI Turbine Generators Limited will take over for completion all contracts for the sale of Turbine Generator products and services outstanding at 1 st April 1971 on the terms and conditions attached thereto and will collect and pay over to the Company the debts outstanding in respect thereof."
This internal EEC document is then signed by 3 of its then directors including Lord Nelson of Stafford.
The judgment
The judge first addressed two of Alstom's arguments that are not now pursued: time bar and failure to show that Mr Oliver had worked in the turbine business. He decided both these points in favour of EEC and I need say no more about them.
He then turned to a third contention made by Alstom that the terms of the indemnity in the 1970 agreement had never been spelled out or approved and that the indemnity did not cover claims for historical injuries arising under contracts of employment but only applied to what Alstom called "trading contracts".
The judge held that it was not open to Alstom to say that the evidence about the indemnity was incomplete because its pleading had admitted and averred that the terms of the indemnity were as set out in the fourth paragraph of the first section of the 1971 resolution. This admission had never been withdrawn and the contention of Alstom was not therefore open to it. To the extent that reliance was placed on the words "certain reservations", whatever reservations there were, were reservations as to trading and rights of the turbine generator business not as to any other "completed or uncompleted" contracts.
The judge then moved on to the question whether the indemnity covered employment contracts. He considered that the correct starting point was that the indemnity was part of "an informal and internal reorganisation within a group". Against that background it was unlikely to be the intention of the parties to exclude any particular types of contract from the indemnity. He said (para 86):-
"In general usage the expression ["all outstanding and uncompleted contracts" in the first part of the clause] does not automatically conjure up a company's relationship with a workforce. On the other hand the employees all have contracts creating rights and liabilities upon the company. The expression adopted is very wide and excludes no category of contract."
He accordingly held that EEC was liable to AEI in respect of Mrs Oliver's claim and he rejected a further submission that the indemnity could not apply to claims in which it had been alleged or accepted that Mr Oliver's death was caused by his employer's negligence.
Grounds of Appeal
There were five grounds of appeal:-
1) the learned judge erred in concluding that the defendant was not entitled to contend that the full terms of the 1970 agreement were not in evidence and before the court;
2) the learned judge erred in concluding that the full terms of the 1970 agreement...
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