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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Capita (Banstead 2011) Ltd & Anor v RFIB Group Ltd  EWHC 2197 (Comm) (04 July 2014)
Cite as:  EWHC 2197 (Comm)
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QUEEN'S BENCH DIVISION
7 Rolls Building, Fetter Lane
London, EC4A 1NL
B e f o r e :
| Capita (Banstead 2011) Ltd
Capita Hartshead Benefit Consultants Ltd
|- and -
|RFIB Group Ltd
Neil Kitchener QC & Laurence Emmett (instructed by Nabarro LLP) for the Defendant
Hearing dates: 24-25 June 2014
Crown Copyright ©
The Hon. Mr Justice Popplewell :
5.8 The Seller [RFIB] undertakes to indemnify and keep indemnified the Buyer [Capita Banstead] on behalf of itself and the Company [CHBC] and the Subsidiaries from any liabilities costs claims demands or expenses which any of them may suffer or incur arising directly or indirectly from ...
5.8.5 any services or products supplied by the Company [CHBC] or any of its Subsidiaries or any advice provided by the Company [CHBC] or any of its Subsidiaries (or any of their employees or agents) prior to the Transfer Date [close of business on 30 April 2004."
THE QEF CLAIM
(1) The introduction of a cap of RPI (with a maximum of 5%) for increases in pension benefits, with effect from 6 April 2000 (announced March 2000).
(2) The introduction of the same cap for revaluation of deferred pensions, with effect from 6 April 2000 (announced January 2001).
(3) A reduction of the annual accrual rate from 1/60th to 1/80th, with effect from 1 July 2001.
(4) A reduction of dependants' pensions on a member's death from ? to ½ with effect from 1 April 2004 (announced March 2004).
(5) An increase in the active members' contribution rate from 5% to 7%, with effect from 1 April 2004 (announced March 2004).
Formal amendments to the rules of the Scheme, signed by the trustees, were required in order to implement the proposed changes, so that the announcements issued to the members of the Scheme were ineffective. CHBC was negligent and in breach of contract in failing to ensure that the amendments were made. In addition, from April 2004 CHBC, acting through Mr Le Cras, appreciated that amendments to the Scheme rules were required, such that in making subsequent representations that the amendments were in place he was guilty of deceit. The error was appreciated by QEF in October 2007 and amendments to the Scheme rules effected on 30 July 2008. Because of the effect of s. 67 of the Pensions Act 1995, these changes could only be made prospectively, save for the increase in contributions from 5% to 7%. Save in the latter respect, as a result of CHBC's wrongdoing the liabilities of the Scheme between 1 April 2000 and 30 July 2008 were substantially greater than would have been the case if the required amendments to the rules of the Scheme had been properly made in a timely fashion. This had in turn increased the cost of funding the Scheme. The amount was estimated at £4.2 million. In addition approximately £88,000 was claimed in respect of costs.
13. On 8 March 2000 Mr Le Cras of RFBC attended a Trustees' Meeting at Leatherhead Court at which:
a. An actuarial report in relation to MFR requirements was considered and it was noted that the Actuary had stated that it would now be possible for the Foundation to maintain the funding rate provided that the future pension increase rate was reduced from a fixed 5% per annum to RPI to a maximum of 5%;
b. Mr Le Cras was instructed to take all necessary steps so as to ensure that such an amendment to the Scheme was effected as from 1 April 2000 and to prepare a suitable announcement for issue for employees informing them of the Scheme change.
14. Thereafter an announcement prepared by Mr Le Cras dated March 2000 was issued to members. In this announcement Mr Le Cras represented that as from 6 April 2000 the Scheme had been changed so that all pension earned from 6 April 2000 would, when it was paid, increase annually by the lower of 5% or the change in the Retail Price Index each year.
15. In fact, although at the material time the Foundation and the Trustees were led to believe by Mr Le Cras that the above change in benefits had been effected by way of the announcement to members dated March 2000, this did not in fact occur. In particular Mr Le Cras:
a. Represented that the above change had been effected when this was in fact not the case;
b. Failed to take any or adequate steps to arrange for the above change to be effected, and in particular to ensure that it was incorporated into the Rules of the Scheme. Clause 16 of the Third Definitive Trust Deed dated July 1999 expressly specified the manner in which amendments to the rules were required to be made, namely in writing under the hands of the Trustees. However, negligently and in breach of duty Mr Le Cras and RFBC proceeded on the basis that amendments could be made simply by way of an announcement to members;
c. Failed to provide any advice to the Foundation and the Trustees that it was necessary to amend the rules of the Scheme in order to give effect to the above change but instead led them to believe that an announcement to members in respect of the proposed change was sufficient;
d. Failed to ensure that a change to the Scheme was effected which covered both pensions in payment and the revaluation of deferred pensions.
16. In January 2001 Mr Le Cras prepared a further announcement to members which represented that:
a. in March 2000 the intention of the Foundation and the Trustees had been that the previously fixed 5% increase rate would be changed to the lower of 5% or the change in the Retail Prices Index and that this alteration would apply both to pensions in payment and the excess over the Guaranteed Minimum Pension for members who left the Scheme prior to retirement;
b. Although the new booklet which had been issued in October 2000 covered the intended situation, the March 2000 announcement (which had been prepared by Mr Le Cras) only referred to pensions in payment;
c. Consequently the change in respect of benefits on leaving the Scheme other than by retirement would be brought into effect from 6 April 2001.
17. In fact, although at the material time the Foundation and the Trustees were misled by Mr Le Cras into believing that the above change in benefits had been effected by way of the announcement of members dated January 2001, this did not in fact occur and paragraphs 15a to 15c are repeated mutatis mutandis. In addition, even if they had been effected, Mr Le Cras negligently failed to ensure that the March 2000 amendments covered both pensions in payment and the revaluation of deferred pensions.
18. On 1 March 2001 Mr Le Cras attended a meeting of certain Trustees at which:
a. The options available in respect of the future design of the Scheme were discussed as the Foundation was unable to meet the additional cost required to maintain the then present benefit structure;
b. After examining the alternatives (including the complete discontinuance of the Scheme) it was decided that a change to money purchase accrual would be deferred but that future service pension accrual should be reduced to 1/80 from 1/60;
c. Mr Le Cras was instructed to effect the above change to the Scheme which he again incorrectly represented could be achieved by way of an announcement to members.
19. The proposed amendment referred to in paragraph 18 above was sanctioned by all trustees at their meeting on 14 March 2001.
20. In fact, although at the material time The Foundation and the Trustees were misled by Mr Le Cras into believing that the above change in benefits had been effected by way of an announcement to members, this did not in fact occur and paragraphs l5a to 15c are repeated mutatis mutandis.
21. At a meeting of the Trustees at Leatherhead Court on 8 October 2003 which was attended by Mr Le Cras it was agreed that the following changes to the Scheme should be implemented as quickly as possible: an increase in member contributions of 1% and a reduction in the spouse's pension benefit from two thirds of a member's pension to one half of the member's pension for service after the date of change. Mr Le Cras was instructed to effect the change and to prepare a suitable Notice to Members (to include figures showing the actual impact of the changes). Subsequently, it was agreed at a meeting of the Trustees on 10 March 2004 (which was attended by Mr Le Cras) that the change should be implemented by RFBC with a 2% increase in member contributions.
22, Thereafter Mr Le Cras prepared an announcement to members which was issued on 18 March 2004 and which incorrectly represented that the following amendments to the Scheme and its practice would take effect from 1 April 2004 in order to ensure the future viability of the Scheme:
a. The rate of employees' contributions would be increased from 5% to 7%;
b. The dependants' pensions would be reduced by two thirds to one half so as to bring it in line with most other schemes;
c. No early retirements from the Scheme would be permitted for the foreseeable future.
23. The change referred to at paragraph 22c above was a change in practice and did not require an amendment to the Rules of the Scheme. By contrast, the changes at paragraphs 22a and 22b above did require such amendment but Mr Le Cras failed to ensure that the changes referred to at paragraphs 22a and 22b above were effectively implemented on or before 1 April 2004 and/or failed to give the Foundation and the Trustees adequate advice in relation to the same.
24. On 6 April 2004 Mr Le Cras instructed Burges Salmon to prepare a deed of amendment in relation to the Scheme to reflect the contribution and benefit changes announced to members in March 2004.
25. On 14 April 2004 Burges Salmon sent a letter to Mr Le Cras advising him, amongst other things, as follows:
"In relation to the effective date for the changes, I should mention at this stage that, in my view, the earliest date these changes can become effective is the date on which the deed of amendment is signed. To give the deed retrospective effect would require the consent of the members under section 67 of the Pensions Act 1995 due to the adverse effect the amendment would have on rights and entitlements accrued in respect of members prior to the date of the amendment..."
26. Thus by 14 April 2004 Mr Le Cras was aware (if he was not so aware before) that (a) intended changes to benefits could not be made by way of announcement to members and (b) the rules could not be amended with retrospective effect so as to adversely affect members' existing rights without raising section 67 issues. Mr Le Cras should have but failed to immediately (on receiving this advice) advise the Trustees of the same and further failed to advise them that the 2000/2001 amendments had not in fact been effected.
27. On 22 April 2004 Mr Le Cras provided Burges Salmon with, amongst other things, copies of the Announcements to Members dated March 2000 and January 2001 together with details of the further changes intended to have been effected in July 2001. He requested that Burges Salmon include such changes in the Deed of Amendment which they were preparing. He further requested that Burges Salmon delete or amend Clause 5 of the then existing draft Deed of Amendment which related to the effective date of the changes.
28. On 10 May 2004 Burges Salmon sent a revised draft deed of amendment to Mr Le Cras for his approval under cover of a letter which stated, amongst other things, as follows:
"...the effective dates for the amendments in the deed are those stipulated in the announcements in accordance with your instructions..,.
...As you know we have expressed reservations about making the amendments retrospective in view of section 67 of the Pensions Act 1995 but you have instructed us to make the amendments retrospective. You have also confirmed that the actuary has said he is prepared to give a certificate. We have drafted the amendments on that basis but express no view as to whether they are legally watertight"
29. Mr Le Cras again failed to forward the above letter to the Foundation and the Trustees and omitted to inform them of the content of the above advice.
30. During June and July 2004 Burges Salmon sent four further drafts of the proposed deed of amendment to Mr Le Cras. On the basis of the documentation provided to the Claimants to date, this correspondence culminated in an email dated 5 July 2004 from Burges Salmon to Mr Le Cras confirming that the changes requested by him had been made and requesting his instructions in relation to two outstanding issues (namely whether there were any Dorincourt members and the potential payment period for childrens' pensions).
31. The Claimants have not to date been provided with any documentation to show that Mr Le Cras responded to the above request for instructions (as he ought to have done). Further the draft Deed was not provided to the Foundation and the Trustees so as to enable the changes to the Scheme to be effected nor were the Foundation and the Trustees provided with any advice in relation to the effect of the failure to execute the Deed. Instead, as set out in paragraphs 32 and 33 below, Mr Le Cras continued to make positive representations to the Foundation, the Trustees and Members that the intended changes had been validly made (when he was expressly aware that this was not the case).
Material Events after 2004
32. At all material times after July 2004 until he left RFBC's employment, Mr Le Cras continued to falsely, alternatively negligently, misrepresent that the changes to the Scheme referred to in paragraph 12 above had been validly made.
33. In particular:
a. The minutes of the Trustees meeting held on 13 April 2005 (which were prepared by RFBC and circulated under cover of a letter from Mr Le Cras dated 6 July 2005) represented at paragraph 7 that "the Scheme had reduced accrual rate from 60ths to 80ths in 2001";
b. During late 2004/2005 Mr Le Cras produced an updated version of the guidance booklet issued to members of the Scheme which purported to state the position in relation to the Scheme as at September 2004. Mr Le Cras prepared the booklet on the basis that each of the changes referred to in paragraph 12 had been validly effected when he in fact knew this was not the case;
c. In October 2005 Mr Le Cras failed to correct the Scheme Actuary's assumption that the changes referred to in paragraph 12 had been effected as set out in the draft actuarial valuation as at 6 April 2005 which was discussed at the 12 October 2005 Trustees' meeting;
d. In a letter to the Foundation dated 5 December 2005 Mr Le Cras reiterated that reductions to benefits had been made in 2001 and 2004 despite being aware that those changes were not effective.
Breaches of duty/negligence/deceit/misrepresentation
34. Acting on, and in reliance upon the advice provided and the representations made by RFBC (and in particular Mr Le Cras), the Foundation and the Trustees did not take any steps to obtain legal or other professional advice in respect of the intended Scheme changes which they reasonably assumed, on the basis of the false, alternatively negligent, representations made by Mr Le Cras had been effectively implemented. It was only in or about October 2007 that the Claimants first became aware that this was in fact not the case when Burges Salmon advised them of this (following Burges Salmon having chased for payment in respect of the work carried out in relation to the draft Deed in 2004 and the Foundation having queried what work the outstanding invoice related to).
35. At this stage the Foundation and the Trustees became aware that Mr Cras [sic] and RFBC had not taken any or any adequate steps to ensure that the changes were validly effected from the intended dates and paragraphs 13 to 33 above are repeated.
36. Mr Le Cras knew that the representations identified in paragraph 33 above were false or did not believe them to be true or was reckless as to whether they were true or not, and accordingly was guilty of the tort of deceit for which RFBC is responsible.
37. Further or in the alternative, RFBC, by Mr Le Cras, was negligent in making the above statements and representations and/or acted in breach of contact and/or negligently in failing to give the Foundation and the Trustees competent advice and/or to manage the Scheme competently.
a. Paragraphs 15, 17, 20, 22, 23, 26, 29, 31, 32 and 33 above are repeated;
b. Failing to ensure that the changes to the Scheme referred to in paragraph 12 above were properly incorporated into the rules of the Scheme and validly effected;
c. Failing to inform and/or advise the Foundation and the Trustees that the changes referred to in paragraph 12 above had not been validly effected or properly incorporated within the rules of the Scheme and/or that section 67 of the Pensions Act 1995 affected the extent to which such amendments could be backdated to the date when they ought to have taken effect;
d. Advising the Foundation and the Trustees that the changes referred to in paragraph 12 had been validly effected when it was aware this was not in fact the case. The Claimants' primary position is that such representations were made in circumstances where Mr Le Cras knew that they were incorrect or where he had no belief in the truth of the same or where he was reckless as to whether they were correct. Alternatively such representations were negligently made;
e. Failing to obtain legal advice in respect of the intended changes to the Scheme's rules prior to April 2004;
f. Failing to advise the Foundation and the Trustees of the legal advice received;
g. Failing to advise the Foundation and the Trustees of RFBC's own prior breach of contract and negligence in light of the advice received from Burges Salmon in April 2004 and/or of their right to take independent advice in relation to the same;
h. Failing to ensure that the draft Deed produced by Burges Salmon was produced and provided for execution by 1 April 2004, and when it was produced failing to ensure that the same was finalised and executed as soon as possible;
i. Failing to advise the Foundation and the Trustees that the Scheme's liabilities were substantially greater than they had understood to [sic] the case in light of the failure by RFBC to validly effect the intended changes.
38. Yet further, by virtue of section 2(1) of the Misrepresentation Act 1967 the Claimants are entitled to and claim damages in respect of the misrepresentations set out above.
Loss and Damage
39. Had the Claimants been properly advised and/or had RFBC acted with reasonable skill and care, the proposed amendments to the Scheme would have been implemented by the dates referred to in paragraph 12 above (save for the proposed amendment referred to at paragraph 12b which should have been implemented by 6 April 2000).
40. As set out above, the purpose of the amendments referred to in paragraph 12 above was to reduce the Scheme's liabilities and the cost of funding such liabilities but this did not occur.
41. In order to seek to mitigate their losses the Claimants have;
a. sought legal advice in relation to the possibility of retrospective amendments in respect of the matters referred to in paragraph 12 being made but, save in relation to the change to the contribution rate, have been advised that there is no realistic prospect of this being achieved. The effect of section 67 of the Pensions Act 1995 is that it is not possible to make amendments which adversely affect any member in respect of his or her accrued rights without obtaining (i) the member's consent or (ii) a certificate from the Scheme Actuary to the effect that the member is not prejudiced by such amendment. The latter does not apply in the present case and the members' consent has been sought but was not forthcoming;
b. put in place a Deed of Amendment on 30 July 2008 effecting all of the changes which should previously have been put in place by RFBC so as to prevent further losses being incurred after that date and recording that the change in the contribution rate was effective from 1 April 2004 onwards.
42. Thus, by reason of the matters aforesaid, the Claimants have suffered loss and damage.
a. Difference in the Scheme's liabilities between 6 April 2000 and 30 July 2008 and cost of funding such liabilities. Expert evidence will be provided in this regard in due course but the loss is presently estimated as being in the region of £4,200,000;
b. Costs incurred in seeking to mitigate the above losses: approximately £88,000.
43. In the premises RFBC is liable to pay damages to the Foundation and the Trustees for its breaches of contract and/or breaches of duty and/or deceit and/or the misrepresentations referred to above.
44. If and to the extent that RFBC seeks to contend that any claim in relation to the 2000/2001 amendments is statute barred, any applicable limitation period had in fact not expired as at the date of the issue of the present claim by reason of the following:
a. RFBC's continuing breaches of contract and/or negligence in relation to the 2000/2001 amendments which continued into 2004 and beyond as set out in paragraphs 21 to 32 above; and/or
b. Section 14A of the Limitation Act 1980 pursuant to which the Claimants did not have the requisite knowledge until in or about October 2007;
c. Section 32 of the Limitation Act 1980 by reason of Mr Le Cras's deliberate concealment of the facts relevant to the present cause of action."
(1) Legal & General, the Scheme's administrators, were responsible for advising on the procedure necessary to effect amendments.
(2) Mr Le Cras was aware at all material times of the need to document changes to the Scheme by means of a rule amendment and that changes to benefits could not be made by way of announcement to members; it was not admitted that he knew that such changes could not be made retrospectively.
(3) The allegations in deceit were denied.
(4) The trustees were contributorily negligent in failing to appreciate the need for a formal rule change.
(5) QEF and the trustees failed to act reasonably to mitigate the loss by executing a formal amendment as soon as the problem was identified in October 2007.
(6) There was a limitation defence in respect of breaches or losses occurring prior to 30 March 2004, being six years prior to commencement of the claim. The three ways of avoiding such limitation averred by paragraph 44 of the Particulars of Claim were disputed.
"If a covenantor undertakes that he will do a definite act and omits to do it within the time allowed for the purpose, he has broken his covenant finally and his continued failure to do the act is nothing but a failure to remedy his past breach and not the commission of any further breach of his covenant. His duty is not considered as persisting and, so to speak, being forever renewed until he actually does that which he promised. On the other hand, if his covenant is to maintain a state or condition of affairs, as, for instance, maintaining a building in repair, keeping the insurance of a life on foot, or affording a particular kind of lateral or vertical support to a tenement, then a further breach arises in every successive moment of time during which the state or condition is not as promised, during which, to pursue the examples, the building is out of repair, the life uninsured, or the particular support unprovided. The distinction may be difficult of application in a given case but it must be regarded as one depending upon the meaning of the covenant."
The scope of the indemnity
"36. The principles of interpretation of documents have been the subject of continuous judicial refinement over many years. The period of modem development may he said to have begun with Lord Wilberforce's speeches in Prenn v Simmonds  1 WLR 1381 and Reardon Smith Ltd v Yngvar Hansen-Tangen (The Diana Prosperity)  1 WLR 989. Particularly important milestones since then have been Lord Hoffmann's summary of general principles in Investors compensation Scheme v West Bromwich Building Society  1 WLR 896 (subsequently qualified by him in Bank of Credit and Commerce International SA v Munawar Ali  UKHL 8,  1 AC 251 Lord Hoffman's speech in Chartbrook Ltd v Persimmon Homes Ltd  UKHL 38,  1 AC 1101 and Lord Clarke's judgment in Rainy Sky SA v Kookmin Bank  UKSC 50,  1 WLR 2900. In the course of oral submissions I was also referred to Re Sigma Finance  UKSC 2,  1 All ER 571 (SC),  EWCA Civ 1303,  BCC 393 (CA), Pink Floyd Music Ltd v EMI Records Ltd  EWCA Civ 1429,  1 WLR 770, BMA Special Opportunity Hub Fund Ltd v African Minerals Finance Ltd  EWCA Civ 416, Lewison, The Interpretation of Contracts (5th ed), and Lord Grabiner QC, The Iterative Process of Contractual Interpretation, (2012) 128 LQR 41. Further authorities were cited in the skeleton arguments. Leaving implied terms to one side, the reported cases present a reasonably coherent jurisprudence although there will always be some cases where the application of the law gives rise to difficulty and understandable disagreement between judges as well as the parties.
37. I do not intend, and it would be unwise of me, to attempt a comprehensive statement of the principles of contractual interpretation to be derived from the case law. For the purposes of the present proceedings, the following points are of particular relevance. Firstly, the overriding objective of the interpretation of a contract is to ascertain the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract (excluding, for policy reasons, prior negotiations and declarations of subjective intent). Secondly, in carrying out that exercise the starting point is always the ordinary, natural and grammatical sense of the language used by the parties in its context because the assumption is that people usually intend the words they use to have their natural and ordinary meaning. The context includes the document and the transaction as a whole. Where it is clear from the context that the parties have adopted a specialist vocabulary, the starting point is the natural and ordinary technical meaning of the specialist terms. Thirdly, in cases where in its context the language used is ambiguous, in the sense that it is capable of bearing more than one meaning, that interpretation is to be preferred which is most consistent with business common sense, that is to say most consistent with the commercial purpose of the transaction. Fourthly, where it is clear both that a mistake has been made in the language used and what a reasonable person would have understood the parties to have meant, the contractual provision must be interpreted in accordance with that meaning. Fifthly, if the words in their context are unambiguous and it cannot be said that something must have gone wrong with the language, then, subject to a successful claim to rectification, the court must apply that unambiguous meaning even though some other language or meaning would be more commercial. The fact that it would produce a poor bargain for one of the parties is not sufficient to adopt another meaning. The objective of interpretation is to interpret the contract and not to re-write it in the light of hindsight and the judge's, let alone one party's, own notion of what would have been a reasonable solution if the parties, as reasonable people, had ever thought about it."
(1) A clear intention must appear from the words used before the Court will reach the conclusion that one party has agreed to exempt the other from the consequences of his own negligence or indemnify him against losses so caused. The underlying rationale is that clear words are needed because it is inherently improbable that one party should agree to assume responsibility for the consequences of the other's negligence: Smith at p. 168D-E; Ailsa Craig at p. 970; HIH at , ; Lictor at .
(2) The Canada Steamship principles are not to be applied mechanistically and ought to be considered as no more than guidelines; the task is always to ascertain what the parties intended in their particular commercial context in accordance with the established principles of construction: Smith at p. 177; Ailsa Craig at p. 970; HIH at , -, ; Lictor at . They nevertheless form a useful guide to the approach where the commercial context makes it improbable that in the absence of clear words one party would have agreed to assume responsibility for the relevant negligence of the other.
(3) These principles apply with even greater force to dishonest wrongdoing, because of the inherent improbability of one party assuming responsibility for the consequences of dishonest wrongdoing by the other. The law, on public policy grounds, does not permit a party to exclude liability for the consequences of his own fraud; and if the consequences of fraudulent or dishonest misrepresentation or deceit by his agent are to be excluded, such intention must be expressed in clear and unmistakeable terms on the face of the contract. General words will not serve. The language must be such as will alert a commercial party to the extraordinary bargain he is invited to make because in the absence of words which expressly refer to dishonesty the common assumption is that the parties will act honestly: HIH at , -, .
"The question is one of construction but is not one which derives much assistance from a detailed analysis of the language of article 10(b). That clause makes no reference to statutory duties or to negligence. The question which I have to consider arises from the rules of construction which I have to apply to that clause and the principles upon which those rules of construction are based.
I consider that the plaintiffs' arguments cannot be accepted. Where there are concurrent causes, each cause is a cause of the consequent event. If the event would have occurred in the absence of a particular fault, that fault is not a cause of the event. Accordingly, it is not correct to say in the present case that the plaintiffs were liable in respect of the death of Mr. Quinn because of the breaches of statutory duty; they were liable because of the breaches of statutory duty and the negligence of their servant. It was the concurrent effect of both those causes that gave rise to the death of Mr. Quinn and without either of those causes that death would not have occurred and the plaintiffs would not have been liable. Therefore the correct question remains whether the plaintiffs have a right to an indemnity from the defendants in respect of a liability of which a cause was the negligence of one of their servants. It is still necessary to ask whether, as a matter of the construction of the clause, it does cover such liability.
For the purposes of considering the first question I have already quoted from judgments which state the principle to be applied. The principle is that in the absence of clear words the parties to a contract are not to be taken to have intended that an exemption or indemnity clause should apply to the consequences of a party's negligence. Applying that principle and adopting a correct understanding of causation, the parties to a contract such as that with which I am concerned should not be taken to have intended that a party whose servant has been negligent should be entitled to an exemption or an indemnity although there has also been, as a concurrent cause of the relevant loss, a breach of a strict statutory duty. The principle still applies."
"I agree with the judge that on the supposition that article 10(b) does not apply to negligence, there is still a question of interpretation to be addressed, namely whether, despite their negligence, the plaintiffs are nevertheless entitled to an indemnity by the defendants. I further agree that the judge answered that question correctly. I would, however, express my reasons for that conclusion somewhat differently.
I start with the question of causation. This aspect must be approached on the basis that the facts set out in the points of claim and in the affidavit of Mr. Christopher Sprague (the plaintiffs' solicitor) are assumed to be correct. That is how the matter came before the judge, and that is how it was placed before us. On those assumed facts we are not concerned with the notions of causa sine qua non or other abstruse theories of causation. The law is concerned with practical affairs and takes a common sense view. On the assumed facts there were two concurrent causes, each of which was in the eye of the law effective to cause the event which led to Mr. Quinn's death. The plaintiffs' negligence was an effective cause of Mr. Quinn's death and the plaintiffs' breaches of statutory duty were also an effective cause of Mr. Quinn's death.
That brings me directly to the issue of construction. It seems to me right to approach the interpretation of article 10(b) not in a technical way but in the way in which the commercial parties to the agreement would probably have approached it. The observations of Lord Diplock in Photo Production Ltd. v. Securicor Transport Ltd.  AC 827, 85lF-G, encourage me to think that such an approach to the construction of article 10(b) is realistic. And the supposition is that article 10(b) does not apply to negligence. Given this premise it seems realistic to view article 10(b), operating as it does by way of reciprocal exceptions and indemnities, as an agreed distribution or allocation of risks. The rationale was that each party would bear the risk in respect of his own property and employees. To the extent that they released each other from liability, they thereby contractually assumed the risk. But article 10(b) should be construed as containing a reservation of each party's right to sue the other in negligence, and a correlative agreement that the indemnities would not avail either if so sued in negligence. Properly construed article 10(b) provides that each party shall bear and assume the risk of his own negligence. If the approach I have adopted is correct, as I believe it is, the consequence is that article 10(b) should be construed as providing that the indemnities are not applicable if the event in question has been caused not only by a party's breach of statutory duty but also by his negligence. The short point is that the plaintiffs have contractually assumed the risk of their own negligence and cannot seek to avoid the consequences of that assumption of risk by seeking to rely on a breach of statutory duty. If it were necessary to do so, I would base my view on a constructional implication in article 10(b): see Gillespie Bros. & Co. Ltd. v. Roy Bowles Transport Ltd.  Q.B. 400, 420F-G, per Buckley L.J. But I consider that the better view is that it arises as a matter of construction pure and simple. Mr. Aikens said that the plaintiffs could have sued only on the breach of statutory duty. But the point is one of substance. The defendants were entitled to raise it by way of defence as they have in fact done. As a matter of analysis I therefore have come to the conclusion that the judge answered the second question correctly.
But I would add that this interpretation also better matches the reasonable expectations of the parties than the somewhat technical approach of the plaintiffs. Given that article 10(b) must be construed as not covering negligence, the judge's interpretation is in my view the more reasonable interpretation. After all, it is inherently improbable even in a bilateral clause such as article 10(b) that a party would be willing to assume a risk of loss caused by the negligence of the other, notably when there is probably an imbalance and inequality in the risks of negligence by the one employee of the defendants and the many employees of the defendants."
RPI cap on pension increases: Before: 48.91% After: 51.09%
RPI cap on deferred pension increases Before: 41.93% After: 58.07%
Reduction of accrual rate to 1/80th Before: 40.01% After: 59.99%
Reduction of pendants' pension Before: 1.90% After: 98.10%
Increase in active members contributions Before: 1.90% After: 98.10%
Title to sue
(1) Capita Holdings Ltd loaned the sum of £3.85 million to Capita Banstead. This loan was recorded in a Deed of Loan dated 7 November 2011.
(2) On 7 November 2011, Capita Holdings transferred the £3.85 million to Plexus, solicitors for Capita Banstead and CHBC, for the purposes of discharging the liability of CHBC under the settlement agreement.
(3) On 8 November 2011 Plexus paid this sum to QEF's solicitors.
(4) Capita Banstead entered into a deed of discharge with CHBC dated 9 November 2011 recording that the payment by Capita Banstead was on behalf of CHBC and that it was in discharge of CHBC's liability under the settlement agreement.
(1) Capita Banstead has suffered a loss by funding the settlement, and is entitled under the terms of clause 5.8.5 to be indemnified "on behalf of itself".
(2) CHBC incurred the liability to QEF in respect of which Capita Banstead is entitled under clause 5.8.5 to claim indemnity on its behalf; it is irrelevant that the liability was discharged by a gratuitous payment by Capita Banstead.
(3) CHBC suffered a loss because Capita Banstead's discharge of its liability to QEF gave rise to a liability on the part of CHBC to Capita Banstead in unjust enrichment.