Case Preview: Farstad Supply A/S (Appellant) v Enviroco Limited & Another (Respondents) (Scotland)
05 Friday Mar 2010
The two-day hearing in this case will begin on Tuesday, 9 March 2010 to consider an appeal from a decision of the Inner House of the Scottish Court of Session in relation to a claim arising out of a charterparty agreement between the parties, and the interpretation of s.3(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940 (the “Act”) as it relates to contributory negligence. The appeal will seek to clarify whether the provision as set out in the charterparty agreement relates to an indemnity clause or an exclusion clause.
Farstad, the owners of an oil rig supply vessel had chartered a vessel, the ‘MV Far Service’, to Asco. Enviroco was a contractor appointed to clean the oil tanks in the vessel. While the oil tanks were being cleaned in Peterhead harbour, a fire broke out resulting in a fatality and causing considerable damage. The fire was caused when an Enviroco employee inadvertently caused oil to flow into the engine room near hot machinery.
Farstad sought damages from Enviroco in respect of the damage caused on the basis that Enviroco’s employee had acted negligently while carrying out their cleaning duties. Enviroco sought to add the charterer of the vessel, Asco to the action as a third party on the basis that they were partly responsible for the damage in failing to supervise the operations. Enviroco sought to rely on s.3(2) of the Act which provides, “Where a person has paid any damages or expenses in which he has been found liable in any such action as aforesaid, he shall be entitled to recover from any other person who, if sued, might also have been held liable in respect of the loss or damage on which the action was founded, such contribution, if any as the court may deem just.”
However, in clause 33(5) of the charterparty agreement, it was provided that
“… the Owner shall defend, indemnify and hold harmless the Charterer … from and against any and all claims, demands, liabilities, proceedings and causes of action resulting from loss or damage in relation to the Vessel … irrespective of the cause of loss or damage, including where such loss or damage is caused by [sic], or contributed to, by negligence of the Charterer…”.
The issue for the court was how the operation of clause 33(5) affected the interpretation of s.3(2) of the Act.