Court of Appeal decision for Campbell v Conoco (UK) Ltd

United Kingdom
In the recently reported Court of Appeal case of Campbell v Conoco (UK) Ltd & Ors: [2002] EWCA Civ 704, the Court upheld the previous decision of Garland J with respect to the working of a North Sea mutual hold harmless indemnity for injury to people.

The facts

The Claimant, an employee of Salamis SGB Limited ("Salamis"), sustained serious personal injuries while working on the Britannia North Sea Oil platform occupied by Conoco (UK) Ltd. ("Conoco"). Britannia Operator Limited ("Britannia") had entered into a main contract with Amec Process and Energy Limited ("Amec") for the hook-up and commissioning of a platform. Britannia was acting under the contract as agent "for and on behalf of" the co-venturers, which included Conoco. Amec entered into a sub-contract with Salamis for the provision of scaffolding, painting, insulation and fire-proofing services associated with the hook-up and commissioning workscope. In short, Britannia was operator, Amec was contractor and Salamis was sub-contractor. The Claimant's injury was caused when he was struck on the back by the sudden venting of compressed air from a diesel line while he was working below deck carrying out fire-proofing. The escape of compressed air was in no way related to the Claimant's work.

Judgment in favour of the Claimant was originally awarded against Conoco and Britannia, who in turn brought a claim against Amec, who admitted liability under the terms of the indemnity given to Britannia/Conoco in the main contract. Amec in turn brought a second claim against Salamis under the "mirror" indemnity in their sub-contract.

The relevant clause in the sub-contract between Amec and Salamis, which mirrored that in the main contract between Britannia and Amec, was as follows:

"[Salamis] hereby agrees to indemnify and hold harmless [Amec] against all liability for and all claims arising in respect of any injury, death, sickness or ill health caused to or suffered by [Salamis] and any Personnel as a result of or arising out of or in connection with the performance or non-performance of the Contract regardless of the cause or reason therefor and regardless of the negligence or breach of statutory duty of [Amec] and against all costs, charges, expenses, damages and proceedings incurred in connection with such claims or liabilities howsoever arising"

Salamis sought to avoid liability on the basis that the relevant clause did not extend to (1) circumstances where the Claimant's injury had no nexus with the sub-contract work and/or (2) a claim in contract for an indemnity by a claimant which was itself an indemnifier.

Decision at first instance

In the case of Campbell -v- Conoco (UK) Ltd [2001] All ER(D)303(Nov) Garland J ruled that:

1) the wording "injury ... suffered by Personnel ... as a result of or arising out of or in connection with the performance or non-performance of the contract" contained in the indemnity in question was sufficient to include the Claimant's injury although it did not arise from his work; and

2) that the words "all liability for and all claims arising in respect of any injury" were sufficient to include a claim based on a back-to-back indemnity.

Decision of the Court of Appeal

The Court of Appeal upheld this decision.

On the first issue, the words of the indemnity and the connecting links ("as a result of, arising out of or in connection with") covered the facts of the case; the words used were very wide "and the connecting links expressed are themselves of increasing width". The words "in connection with" were widely regarded as being as wide a connecting link as one can commonly come across and do not express a need for causal connection. There was some debate about whether the words "performance or non-performance of the contract" indicated the need for a nexus with the work to be carried out but the Court found that it did not. Of significance was the omission of the words "by the Contractor" which appeared immediately following the equivalent phrase in the reciprocal indemnity from Amec to Salamis. The injury suffered to Mr Campbell was suffered by him "in connection with the performance or non-performance of the contract" notwithstanding that the escape of compressed air causing Mr Campbell's injury was not related to the work being carried out by him. Indeed Lord Justice Rix, following the reasoning in EEC Caledonia v Orbit Valve [1994] 1 WLR 221 (one of the cases arising from Piper Alpha), hinted that the words contained in the indemnity would have been sufficiently wide to cover injury to Mr Campbell whilst asleep in his bunk on the oil platform.

On the second issue, the case of Burns v Shuttlehurst [1999] 2 All ER 27, in which the phrase "all claims arising in respect of any injury" would not include a claim under a contractual indemnity, was distinguished on the ground that it related to the rules for pre-action disclosure and not to "the problem of there being back-to-back indemnities down a chain of contractors and sub-contractors in the commercial context of large-scale engineering in the North Sea." Lord Justice Rix affirmed that the words "all liability for and all claims arising in respect of any injury" were sufficient to include a claim under a contractual indemnity in this case; and the fact that, in this case, the wider words "all liability for..." prefixed "all claims arising in respect of..." indicated that the draftsman had in mind a chain of contractual indemnity liability.

This decision again demonstrates that the scheme of mutual hold harmless indemnities for people will operate as intended but once again has highlighted the need for clear and precise drafting of such indemnities:

  • use of the words "in connection with the contract" seems to give the widest scope of indemnity;

  • use of the words "in connection with the performance or non-performance of the contract by the Contractor" might have indicated the need for a causal nexus with the work;

  • a reference to "liability" and not just "claims" is advisable to cover contractual indemnity liability.

For further information on the case or on the drafting of indemnities in oil and gas contracts, please contact Norman Wisely at norman.wisely@cms-cmck.com or on +44 (0)1224 622002