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England and Wales Court of Appeal (Civil Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> The English Electric Company Ltd v Alstom UK [2016] EWCA Civ 1314 (23 December 2016) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2016/1314.html Cite as: [2016] EWCA Civ 1314 |
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ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT
HIS HONOUR JUDGE MACKIE QC (Sitting in the London Mercantile Court)
Strand, London, WC2A 2LL |
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B e f o r e :
THE RIGHT HONOURABLE LORD JUSTICE BEATSON
and
THE RIGHT HONOURABLE LORD JUSTICE SALES
____________________
THE ENGLISH ELECTRIC COMPANY LIMITED |
Respondent/Claimant |
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- and - |
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ALSTOM UK (a private unlimited company) |
Appellant/ Defendant |
____________________
Mr David Lewis QC & Mr Thomas Corby (instructed by Clyde & Co LLP) for the Respondent
Hearing dates: 7th December 2016
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Crown Copyright ©
Lord Justice Longmore:
Introduction
Factual background
"THE ENGLISH ELECTRIC COMPANY LIMITED
Resolutions of the General Purposes Committee dated Wednesday 31st March 1971.
Associated Electrical Industries Limited – Turbine Generator Business
1. The Committee ratified the purchase as at 1st April 1970 subject to certain reservations as to trading and rights of the Turbine Generator business and goodwill carried on by Associated Electrical Industries Limited on the following terms:-
Plant machinery and other fixed
Assets, including the right to use
Letters Patent, trade marks and
registered designs at present used
in the said business, but excluding
land and buildings, at the net
written down book value as at
31st March 1970. 2,604,457
Inventory at book value at 31st
March 1970 6,150,728
Inter-company indebtedness 746,172
9,501,357
….
The Company assumed responsibility for the overdraft of Associated Electrical Industries Limited in respect of this business as at 31st March 1970 amounting to £476,797 and Associated Electrical Industries Limited transferred to the Company the balance of its cash in hand relating to this business as at 31st March 1970 amounting to £20,700. The resultant balance due by the company to Associated Electrical Industries Limited of £4,013,096 is for settlement in cash.
The Company agreed to collect the outstanding debts in respect of this business as at 1st April 1970 amounting to £15,905,950 on behalf of Associated Electrical Industries Limited and to settle that company's outstanding trade indebtedness in respect of this business amounting to £10,126,223 on that date on behalf of Associated Electrical Industries Limited and to account to that company accordingly.
The Company subject to certain reservations taking the benefit of all outstanding and uncompleted contracts in respect of the above mentioned business agreed to assume the responsibilities therefor as at 1st April 1970 and to indemnify Associated Electrical Industries Limited against any claims arising on completed and uncompleted contracts as at 1st April 1970.
2. IT WAS RESOLVED
THAT English Electrical-AEI Turbine Generators Limited be appointed the purchasing agent for the Company in connection with its Turbine Generator business with effect from 1st April 1971.
3. It was agreed to market the products and services of the Company's Turbine Generator business through its subsidiary English Electric-AEI Turbine Generators Limited with effect from 1st April 1971 on such terms and conditions as English Electric-AEI Turbine Generators Limited sells to its customers. In consequence of this decision English Electric – AEI Turbine Generators Limited will take over for completion all contracts for the sale of Turbine Generator products and services outstanding at 1st April 1971 on the terms and conditions attached thereto and will collect and pay over to the Company the debts outstanding in respect thereof."
This internal EEC document is then signed by 3 of its then directors including Lord Nelson of Stafford.
The judgment
"In general usage the expression ["all outstanding and uncompleted contracts" in the first part of the clause] does not automatically conjure up a company's relationship with a workforce. On the other hand the employees all have contracts creating rights and liabilities upon the company. The expression adopted is very wide and excludes no category of contract."
He accordingly held that EEC was liable to AEI in respect of Mrs Oliver's claim and he rejected a further submission that the indemnity could not apply to claims in which it had been alleged or accepted that Mr Oliver's death was caused by his employer's negligence.
Grounds of Appeal
1) the learned judge erred in concluding that the defendant was not entitled to contend that the full terms of the 1970 agreement were not in evidence and before the court;2) the learned judge erred in concluding that the full terms of the 1970 agreement were in evidence and before the court;
3) the learned judge erred in concluding that the 1971 Resolution "put [the 1970 agreement] into writing";
4) the learned judge erred in concluding therefore that the EEC Committee Resolution was to be characterised and construed as a contractual document agreed between the contracting parties; and
5) the learned judge erred in concluding that, as a matter of construction, the 1970 agreement and/or the 1971 Resolution provided for an agreement by the respondent to indemnify AEI in respect of AEI's liability to Mr Oliver (and/or his estate) for asbestos exposure.
Submissions on the construction of indemnity
1) the agreement of 31st December 1959 made when AEI had acquired the BTH turbine business at Rugby specifically excluded contracts for personal service although it did contain a clause requiring BTH (referred to as AEI's subsidiary) to use its best endeavours to procure that all its employees would agree to transfer their contracts of service to AEI as from the date of sale;2) the factual matrix of the 1970 agreement with EEC was no different from the factual matrix of the 1959 agreement with BTH since both were internal re-organisations within a group;
3) since the 1959 agreement had specifically excluded contracts of service from its provisions, the indemnity provision in the 1970 agreement could not have been intended to extend to contracts of service;
4) there was no evidence that in 1970 any of AEI's then labour force was transferred to EEC; the effect of the third of the resolutions in the 1971 resolution was that contracts for sales and servicing were to be completed by another company and EEC did not, therefore, need AEI's workforce to be transferred;
5) there was in 1970 considerable overcapacity in the electricity industry, which needed rationalisation and redundancies; for this reason also it was most unlikely that there would be any need for any transfer of employment contracts; against that background the indemnity provision of the 1970 agreement could not have been intended to apply to claims arising from AEI's contracts of employment with its workforce;
6) the whole tenor of the 1970 agreement related to the turbine generator business and taking the benefit (and assuming the burden) of outstanding and uncompleted contracts in respect of that business and its customers; when therefore EEC agreed to indemnify AEI "against any claims arising on completed and uncompleted contracts" the indemnity only related to the business contracts not contracts of service with AEI's employees;
7) the phraseology of "completed and uncompleted contracts" was not apt to describe contracts of service which may be "terminated" or "unrenewed"; one did not describe them as being "completed" let alone "uncompleted";
8) the judge allowed himself to be led astray by commercial considerations when Arnold v Britton [2015] UKSC 36: [2015] AC 1619 made it clear that such considerations could not be allowed to subvert the meaning of the words; and
9) since no one now knows (or can tell) what reservations were being referred to in the fourth paragraph of the resolution, they could easily have referred to employment contracts or something else relevant to the enquiry.
Factual background
"First … the reliance placed in some cases on commercial common sense and surrounding circumstances … should not be invoked to undervalue the importance of the language of the provision which is to be construed …
The third point I should mention is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from that natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made."
The wording
"against any claim arising on completed and uncompleted contracts as at 1st April 1970."
It only recognises two categories of contracts, "completed" and "uncompleted". The natural and ordinary meaning of this phrase is "all contracts to which the transferor is or has been a party". It is only because it can be said (a) that the phrase "completed and uncompleted" takes its colour from the earlier phrase in the same clause "outstanding and uncompleted contracts" and (b) that that phrase must refer to outstanding and uncompleted contracts with customers, that an argument that the relevant phrase must refer only to contracts with customers begins to take shape. Of course the phrase does refer to and include contracts with customers but there is no reason why it should not also refer to contracts of employment. In my judgment it does so refer and the parties must have intended it to so refer. Otherwise rights and responsibilities would not have been fully transferred but part of such rights and responsibilities would stay with the transferor and the rest be transferred to the transferee – an untidy and unlikely result as between companies in the same group.
"Subject to certain reservations"
"subject to certain reservations as to trading and rights of the Turbine Generator business and goodwill carried on by AEI."
These are reservations as to trading and rights of the business and goodwill and can have no reference, therefore, to contracts of employment. The reservations are likely, moreover, to be those of the transferor (or grantor) of the business and there would be no reason or sense in the transferor wishing to make reservations (against its own interest) in relation to any contracts of employment. In any event the reservations appear to relate to "outstanding and uncompleted contracts" in the words of the first half of the fourth paragraph; on no view was Mr Oliver's contract outstanding or uncompleted. I am therefore satisfied that there cannot have been anything of relevance to the current dispute in any reservations that there were in the 1970 agreement.
Conclusion
Lord Justice Beatson:
Lord Justice Sales: