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Shell U.K. Limited & Ors v Total UK Limited & Anr (2010)


Joining the legal owner to proceedings in respect of damage to property would suffice to enable the beneficial owner to recover, subject to the rules of remoteness and damage, for all the loss which it had suffered and it did not matter that the beneficial owner was not in possession of the property. An oil company who was the beneficial owner of tanks and pipelines destroyed following explosions at the Buncefield oil storage terminal for which another oil company was liable was not, therefore, precluded from claiming damages for economic loss.


In two appeals, certain aspects of the decision of the judge on preliminary issues ((2009) EWHC 540 (Comm)) in proceedings arising out of explosions at the Buncefield oil storage terminal were challenged. The incident had been caused by the negligent overfilling of a fuel storage tank which led to the creation of a large hydrocarbon rich vapour cloud which then ignited. Fuel storage tanks, pipelines and associated equipment were destroyed or seriously damaged, and there was considerable damage to houses and other property outside the site's perimeter fence. Substantial claims for compensation were brought by a large number of claimants against an oil company (T) and a joint venture company (H) owned 60 per cent by T and 40 per cent by another company (C). T brought Part 20 proceedings against C. Directions were given for the trial of certain preliminary issues. One of the claims against T was made by another oil company (S) as the explosion had caused damage to property in which and through which S stored or distributed its oil. Legal title to the tanks and pipelines were in a vehicle company which held them on trust for S and others. T accepted liability for the destruction of anything which was S's property, but disputed liability for the loss of profits that S claimed flowed from the destruction or damage to the tanks and pipelines on the basis that only a legal owner or someone with an immediate right to possession had the right to claim damages for consequent economic loss. The judge dismissed S's claim, having accepted T's contentions that S did not have the necessary legal ownership of the pipeline or right to possession. In the first appeal, S appealed against that decision. The main focus of the hearing before the judge was, however, the dispute between T and C as to the identity of the relevant defendant liable for the negligence and the consequential distribution between the two companies under the Part 20 proceedings. The judge held, inter alia, that T and not H was vicariously liable and that T was not entitled to a contractual indemnity against C or H because the relevant clauses were not intended to indemnify a party in respect of its own negligence. The effect of such an indemnity would have been to produce a sharing of 60 and 40 per cent liability as between T and C respectively. In the second appeal, T accepted the judge's finding on overall liability but appealed against the decision in respect of the indemnity provisions. T contended that the relevant contractual provisions gave rise to a right to an indemnity against H even where it had been negligent, as C had expressly agreed that, in certain eventualities, it would indemnify T as the operator and the manager of the joint venture against its own negligence. S submitted that whilst the right to sue for negligent loss of or damage to property was confined to a person who had the legal ownership of or a possessory title to the relevant property, that did not rule out the owner in equity if that equitable owner had, as S had, joined the legal owner to the proceedings.


(1) On T's appeal, the question was whether T could point to any term of any of the agreements which provided it with an indemnity. The right approach was to consider the language used in the various agreements. Where the parties had drawn up a series of detailed agreements and the draftsmen had expressly dealt with negligence, a significant canon of construction was that which suggested that where it had not been expressly referred to, it would be likely that the decision to excluded negligence was a deliberate one. In the circumstances, the judge had been entitled to find that T was not entitled to an indemnity under any contractual provision. (2) Joining the legal owner to proceedings in respect of damage to property would suffice to enable the beneficial owner to recover, subject to the rules of remoteness and damage, for all the loss which they had suffered, Leigh & Sillivan Ltd v Aliakmon Shipping Co Ltd (The Aliakmon) (1986) AC 785 HL distinguished. A duty of care was owed to a beneficial owner of property just as much as to a legal owner of property by a defendant, such as T, who could reasonably foresee that its negligent actions would damage that property. If, therefore, such property was, in breach of duty, damaged by the defendant, that defendant would be liable not merely for the physical loss of that property but also for the foreseeable consequences of that loss, such as the extra expenditure to which the beneficial owner was put or the loss of profit which he incurred. Provided that the beneficial owner could join the legal owner in the proceedings, it did not matter that the beneficial owner was not himself in possession of the property, Chappell v Somers & Blake (2003) EWHC 1644 (Ch), (2004) Ch 19 applied. S could, accordingly, recover as beneficial owner for its economic losses and that aspect of the judge's decision would be reversed.

First appeal allowed, second appeal dismissed

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04 Mar 2010

Court of Appeal
LJ Waller, LJ Longmore, LJ Richards

‚ÄčLTL 4/3/2010 : [2010] EWCA Civ 180


Practice areas
Commercial Disputes
Professional Negligence