Contract Terms – Indemnity Clauses – Negligence

In this Court of Appeal case, Macsalvors, a crane owner, appealed against a decision dismissing its claim to be indemnified by Brush, the hirer of its crane, in respect of a claim for personal injury. Brush had hired the crane from Macsalvors. On the first day of hire, the experienced operator fell off the crane, sustaining serious injuries as a result of which he brought a claim against Macsalvors for negligence and breach of statutory duty. Macsalvors brought third party proceedings against Brush claiming an indemnity under the terms of the CPA contract for hire. Clause 8 of that contract provided that, where operators were supplied with the plant, such operators were to be regarded for all purposes as the servants or agents of the hirer who was also responsible for all claims arising in connection with the operation of the plant. Clause 13 provided that the hirer must fully and completely indemnify the owner in respect of all claims by any person whatsoever for injury to person or property caused by, or in connection with, the use of the plant during the period of hire. 

 

At first instance, the judge found that clause 8 was intended to cover those situations where the actions of the operator caused an accident resulting in loss and damage. He concluded that Macsalvors had no valid claim under clause 13 as that clause did not expressly exempt it from its own acts of negligence. 

 

On appeal, it was held that clause 8 effectively passed responsibility for Macsalvors’ negligence to the hirer. It was clear that clause 8 meant to regulate the liability as between the owner and the hirer in respect of claims brought by third parties arising out of the operator’s negligence. However, making the hirer liable for a claim arising out of the owner’s own negligence had not been contemplated. Accordingly, clause 8 did not make the hirer responsible for the operator’s claim against the owner in respect of the owner’s own breach of duty. If a contracting party wanted to limit its liability in respect of negligence, it must do so in clear terms. Clause 13 of the contract did not expressly cover the owner’s own negligent acts. The owner could not, therefore, claim to be indemnified under clause 13 for the injuries sustained by the operator, arising out of the use of the plant during the period of hire when the damage arose out of the owner’s own negligence. 

 

This case confirms earlier authority such as Caledonia Limited v Orbit Valve Plc (1994) and Smith v South Wales Switchgear Limited (1978) that clear words must be used to contract out of a party’s own negligence.