HAWLEY V LUMINAR LEISURE LTD & ORS [2006] QBD (Comm Cr) 307
FACTS:-
The First Defendant, Luminar Leisure operated a “Chicago Rock Café” club in Southend on Sea. The Second Defendant, ASE provided security services and under their contract with Luminar, they agreed to take out liability insurance against employer and public liability and to indemnify Luminar against any claims. The contract also stated that all stewards provided by ASE were to be employees of ASE. On the 18th August 2000, there was a melee involving a number of customers who had just left the club. The Claimant, Mr Hawley sustained serious injuries when he was punched on the jaw by one of the door stewards, Mr Warren, an employee of ASE, who was later convicted of grievous bodily harm.
Proceedings were commenced against Luminar and ASE claiming that they were each liable for the acts of Mr Warren. Default judgment was entered against ASE by which time it had been wound up. Luminar denied liability on the grounds that it was not vicariously liable for Mr Warren’s acts.
The Claimant also sought a declaration that the Third Defendant (ASE’s insurers) was liable to pay damages and costs under the Third Parties (Rights against Insurers) Act 1930.
The Third Defendant denied that it was liable to indemnify the Second Defendant under the terms of its policy because the liability arose from an intentional assault and did not fall within the terms of the cover. The public liability clause stated that the insurers would indemnify the insured against legal liability for damage and reasonable costs and expenses arising from “accidental bodily injury to any person…”. “Accidental bodily injury” was subject to further definition in the policy. The word “accidental” was defined as “sudden, unforeseen, fortuitous and identifiable” and bodily injury was defined as “bodily injury, death, illness or disease.”
ASE’s insurers also tried to argue that the default judgment obtained against ASE should be set aside.
It was also alleged that Mr Warren was a temporary employee of Luminar. Luminar argued that it should be able to claim a contribution as against ASE, insofar as ASE had failed to check Mr Warren’s credentials, and had they done this it would have been discovered that Mr Warren was unregistered and dishonest and thus unsuitable.
HELD:-
The matter came before the Court of Appeal. Lady Justice Hallett said that there were five issues raised by this appeal:-
Vicarious liability against Luminary
Reference was made to the leading relevant authority of Mersey Docks and Harbour Boards v Coggins & Griffiths (Liverpool) Ltd. [1947] AC 1. Each case will depend on its own facts, but in assessing the facts, certain considerations will or may be relevant:-
Lady Hallett also referred to Dubai Aluminium Co. Ltd v Salaam and Others [2002] UKHL 48. In another case Via Systems (Tyneside) Ltd v Thermal Transfers (Northern) Ltd [2005] EWCA Civ 1151 the court held that dual vicarious liability was a legal possibility.
She then proceeded to consider the general regulations issued by the local authority in respect of licences for places of public entertainment, together with the contract between Luminar and ASE. The contract mirrored to some degree the local authority regulations. In particular ASE had warranted that each door supervisor provided by it would have been thoroughly checked as suitable and fully trained. ASE would also ensure that its staff wore Luminar uniforms. In addition there was a code of conduct on the use of force by doormen.
There was also evidence from the manageress of the club employed by Luminar. She said in her statement, that she had a great deal of control over the doormen. The head doorman (the employee of ASE) stated that if it became necessary to eject a guest that would be a decision that he or the other members of his team would take and would involve the Luminar management. However in cross examination he said that he and his staff would respond if asked to do so by a member of Luminar’s staff and that if they came across trouble, they would consult with Luminar staff. The trial judge had found that Luminar sought to have and did have detailed control not only over what the door stewards were to do in supply services but how they were to do it. Consequently he found that Luminar must be deemed to be Mr Warren’s temporary employer for the purposes of vicarious liability.
Lady Hallett said that there the Court of Appeal was satisfied that there was sufficient evidence before the trial judge to justify his conclusions. The trial judge had been aware that the burden of shifting responsibility for the tortfeasor’s action was a heavy one but he had found that Luminar, if not the general employer in law acted as if they were in fact and exercised many of the powers of the general employer.
Dual Vicarious Liability
Lady Hallett said that in the Court of Appeal’s view, it would not be appropriate to attribute vicarious liability to both Luminar and ASE. In this case there had effectively been a transfer of control and responsibility from ASE to Luminar. The answer to the question “who was entitled and therefore obliged to control Mr Warren’s act so as to prevent?” was Luminar. Mr Warren had become embedded in Luminar’s organisation. There would be no dual vicarious liability in this case.
Finding of Nil Contribution
Lady Hallett referred to sections 1(1) and 2 of the Civil Liability (Contribution Act) 1978. Section 1(1) provides:-
“……any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise.)
Section 2 provides that the amount of recoverable contribution shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage in question.
Lack of fault of a person (in this case Luminar) vicariously liable for the wrongful act of his employee is not relevant for the purposes of determining contribution proceedings between person and another wrongdoer. ASE’s mistake was failing to check the record of their employee, Mr Warren. However during the two year period that Mr Warren had worked at the club under Luminar, there had been no concerns. There was nothing that ASE could have done on the night of the incident to control Mr Warren’s behaviour. Mr Warren was the person who was to blame for the incident. Consequently ASE’s negligence had had a negligible causation effect and the judge was right to find a nil contribution as against ASE. However that was not the end of the matter, since ASE owed Luminar a full contractual indemnity.
Default Judgment
It had been argued that the trial judge’s refusal to set aside default judgment was inconsistent with the findings of vicarious liability against Luminary only and the finding of a nil contribution against ASE. However the finding of a nil contribution was a matter between ASE and Luminar. It was not intended to have any impact on the default judgment entered against ASE.
In any event, the invitation to the trial judge to set aside default judgment came far too late, and there had been no proper application with supporting evidence. The trial on liability had proceeded on the basis that that there was no dispute as to ASE’s liability. It was not appropriate nor in the interests of justice to permit the insurers to re-open the issue now.
The Insurance Point
The relevant provision stated:-
“……Underwriters will indemnify the assured against legal liability for damages and reasonable costs and expenses arising from accidental bodily injury to any person or for accidental loss of or damage to property occurring during the period of insurance…..”
“Accidental bodily injury” fell to be construed by reference to the definitions in Part A of the Schedule, which included the following:-
“Accidental – sudden, unforeseen, fortuitous and identifiable….
“Bodily injury – bodily injury, death, illness or disease.”
There was no doubt that the Claimant had suffered bodily injury or any doubt that Mr Warren was employed by ASE, the assured in the type of business described in the policy.
The issue here related to the meaning of “accidental” or “fortuitous.” Lady Hallett referred to the case of Charter Reinsurance Co. Ltd. v Fagan and Others [1996] 2 Lloyd’s Re 113 where Stuart-Smith LJ identified three principles of relevance:-
The Court of Appeal accepted that one would not naturally use the phrase “accidental bodily injury to any person” to describe the injury inflicted on the Claimant by Mr Warren. However there were two grounds for doubting that natural construction:-
There were a number of points to be made here:-
Firstly ASE was in the business of providing security guards. The policy was concerned to protect ASE against liability arising from the actions or inactions of their employees. One of the most fundamental concepts underlying the policy was that the insured would be covered for damages which it had to pay owing to its vicarious liability. Therefore one would not expect the insurers to be able to invoke ASE’s vicarious liability for its doormen as a ground for avoiding, as opposed to accepting, liability under the policy.
Secondly the actions of Mr Warren were accidental from the point of view of ASE, in the sense of its board of directors, and the relevant case law showed that it was the state of mind of the insured that was important. It would only be if one could attribute the state of mind of Mr Warren to ASE that one could conclude that the bodily harm inflicted in the present case was not accidental or fortuitous from ASE’s point of view. However the principle of vicarious liability did not involve attributing the state of mind from the employee to the employer. It was merely concerned with extending legal liability from employee to employer.
Counsel for the insurers had tried to argue that if the word “fortuitous” was to be defined by reference to the state of mind of ASE, the word “accidental” added nothing. The Court of Appeal did not agree. If bodily injury were caused by an employee of ASE as a direct and foreseeable result of a decision by the ASE board, for instance a deliberately aggressive policy towards troublemakers, then it could very probably not be characterised as “fortuitous” from the point of view of ASE. Counsel for ASE’s insurers had argued that if this were the construction of the insurance contract, it would have the effect of preventing recovery from the insurers on the grounds of public policy. ASE would not be allowed to claim on the basis of there own tortuous conduct. The Court of Appeal regarded this argument as over sophisticated. On that basis it would be unnecessary to include the word “accidental” in many policies, since it would add nothing to the words “fortuitous.”
Fourthly another part of the policy made it very clear that it covered assault and battery, and this part distinguished between ASE and its employees.
Fifth another extension covered criminal proceedings. The policy suggested that the concept of “accidental bodily injury” could extend to injury, which was intended by the immediate perpetrator if not by the assured. The point was reinforced by the fact that “breach of statutory duty” was excluded from the contract.
Sixth the policy should be construed in favour of the insured. The Court of Appeal would add (although the point did not fall to be decided) that such a construction would also be expected to comply with what would be expected by members of the public attending a club with doormen.
FACTS:-
The First Defendant, Luminar Leisure operated a “Chicago Rock Café” club in Southend on Sea. The Second Defendant, ASE provided security services and under their contract with Luminar, they agreed to take out liability insurance against employer and public liability and to indemnify Luminar against any claims. The contract also stated that all stewards provided by ASE were to be employees of ASE. On the 18th August 2000, there was a melee involving a number of customers who had just left the club. The Claimant, Mr Hawley sustained serious injuries when he was punched on the jaw by one of the door stewards, Mr Warren, an employee of ASE, who was later convicted of grievous bodily harm.
Proceedings were commenced against Luminar and ASE claiming that they were each liable for the acts of Mr Warren. Default judgment was entered against ASE by which time it had been wound up. Luminar denied liability on the grounds that it was not vicariously liable for Mr Warren’s acts.
The Claimant also sought a declaration that the Third Defendant (ASE’s insurers) was liable to pay damages and costs under the Third Parties (Rights against Insurers) Act 1930.
The Third Defendant denied that it was liable to indemnify the Second Defendant under the terms of its policy because the liability arose from an intentional assault and did not fall within the terms of the cover. The public liability clause stated that the insurers would indemnify the insured against legal liability for damage and reasonable costs and expenses arising from “accidental bodily injury to any person…”. “Accidental bodily injury” was subject to further definition in the policy. The word “accidental” was defined as “sudden, unforeseen, fortuitous and identifiable” and bodily injury was defined as “bodily injury, death, illness or disease.”
ASE’s insurers also tried to argue that the default judgment obtained against ASE should be set aside.
It was also alleged that Mr Warren was a temporary employee of Luminar. Luminar argued that it should be able to claim a contribution as against ASE, insofar as ASE had failed to check Mr Warren’s credentials, and had they done this it would have been discovered that Mr Warren was unregistered and dishonest and thus unsuitable.
HELD:-
The matter came before the Court of Appeal. Lady Justice Hallett said that there were five issues raised by this appeal:-
- The finding of vicarious liability against Luminar by the court at first instance.
- The question of dual vicarious liability (Luminar/ASE).
- The ruling at first instance that ASE’s contribution to Luminary was assessed at nil.
- The refusal to set aside the default judgment.
- The finding that Mr Hawley’s injuries constituted “accidental bodily injury” for the purposes of the policy.
Vicarious liability against Luminary
Reference was made to the leading relevant authority of Mersey Docks and Harbour Boards v Coggins & Griffiths (Liverpool) Ltd. [1947] AC 1. Each case will depend on its own facts, but in assessing the facts, certain considerations will or may be relevant:-
- The burden of showing that responsibility does not remain with the general employer is on the general employer and is a heavy one.
- The question is – by whom is the negligent employee engaged? Who pays him? Who has power to dismiss him?
- Who has the immediate direction and control of the relevant work? Who is entitled to tell the employee the way in which he is to do the work upon which he is engaged?
- The inquiry should concentrate on the relevant negligent act, and then ask whose responsibility it was to prevent it.
- A transfer of services can only be effective with the employee’s consent.
- Responsibility should lie with the master in whose act some degree of fault, though remote, may be found.
Lady Hallett also referred to Dubai Aluminium Co. Ltd v Salaam and Others [2002] UKHL 48. In another case Via Systems (Tyneside) Ltd v Thermal Transfers (Northern) Ltd [2005] EWCA Civ 1151 the court held that dual vicarious liability was a legal possibility.
She then proceeded to consider the general regulations issued by the local authority in respect of licences for places of public entertainment, together with the contract between Luminar and ASE. The contract mirrored to some degree the local authority regulations. In particular ASE had warranted that each door supervisor provided by it would have been thoroughly checked as suitable and fully trained. ASE would also ensure that its staff wore Luminar uniforms. In addition there was a code of conduct on the use of force by doormen.
There was also evidence from the manageress of the club employed by Luminar. She said in her statement, that she had a great deal of control over the doormen. The head doorman (the employee of ASE) stated that if it became necessary to eject a guest that would be a decision that he or the other members of his team would take and would involve the Luminar management. However in cross examination he said that he and his staff would respond if asked to do so by a member of Luminar’s staff and that if they came across trouble, they would consult with Luminar staff. The trial judge had found that Luminar sought to have and did have detailed control not only over what the door stewards were to do in supply services but how they were to do it. Consequently he found that Luminar must be deemed to be Mr Warren’s temporary employer for the purposes of vicarious liability.
Lady Hallett said that there the Court of Appeal was satisfied that there was sufficient evidence before the trial judge to justify his conclusions. The trial judge had been aware that the burden of shifting responsibility for the tortfeasor’s action was a heavy one but he had found that Luminar, if not the general employer in law acted as if they were in fact and exercised many of the powers of the general employer.
Dual Vicarious Liability
Lady Hallett said that in the Court of Appeal’s view, it would not be appropriate to attribute vicarious liability to both Luminar and ASE. In this case there had effectively been a transfer of control and responsibility from ASE to Luminar. The answer to the question “who was entitled and therefore obliged to control Mr Warren’s act so as to prevent?” was Luminar. Mr Warren had become embedded in Luminar’s organisation. There would be no dual vicarious liability in this case.
Finding of Nil Contribution
Lady Hallett referred to sections 1(1) and 2 of the Civil Liability (Contribution Act) 1978. Section 1(1) provides:-
“……any person liable in respect of any damage suffered by another person may recover contribution from any other person liable in respect of the same damage (whether jointly with him or otherwise.)
Section 2 provides that the amount of recoverable contribution shall be such as may be found by the court to be just and equitable having regard to the extent of that person’s responsibility for the damage in question.
Lack of fault of a person (in this case Luminar) vicariously liable for the wrongful act of his employee is not relevant for the purposes of determining contribution proceedings between person and another wrongdoer. ASE’s mistake was failing to check the record of their employee, Mr Warren. However during the two year period that Mr Warren had worked at the club under Luminar, there had been no concerns. There was nothing that ASE could have done on the night of the incident to control Mr Warren’s behaviour. Mr Warren was the person who was to blame for the incident. Consequently ASE’s negligence had had a negligible causation effect and the judge was right to find a nil contribution as against ASE. However that was not the end of the matter, since ASE owed Luminar a full contractual indemnity.
Default Judgment
It had been argued that the trial judge’s refusal to set aside default judgment was inconsistent with the findings of vicarious liability against Luminary only and the finding of a nil contribution against ASE. However the finding of a nil contribution was a matter between ASE and Luminar. It was not intended to have any impact on the default judgment entered against ASE.
In any event, the invitation to the trial judge to set aside default judgment came far too late, and there had been no proper application with supporting evidence. The trial on liability had proceeded on the basis that that there was no dispute as to ASE’s liability. It was not appropriate nor in the interests of justice to permit the insurers to re-open the issue now.
The Insurance Point
The relevant provision stated:-
“……Underwriters will indemnify the assured against legal liability for damages and reasonable costs and expenses arising from accidental bodily injury to any person or for accidental loss of or damage to property occurring during the period of insurance…..”
“Accidental bodily injury” fell to be construed by reference to the definitions in Part A of the Schedule, which included the following:-
“Accidental – sudden, unforeseen, fortuitous and identifiable….
“Bodily injury – bodily injury, death, illness or disease.”
There was no doubt that the Claimant had suffered bodily injury or any doubt that Mr Warren was employed by ASE, the assured in the type of business described in the policy.
The issue here related to the meaning of “accidental” or “fortuitous.” Lady Hallett referred to the case of Charter Reinsurance Co. Ltd. v Fagan and Others [1996] 2 Lloyd’s Re 113 where Stuart-Smith LJ identified three principles of relevance:-
- The words of the policy must be given their ordinary meaning and reflect the intention of the parties and the commercial sense of the agreement.
- A literal construction that leads to an absurd result or one otherwise manifestly contrary to the real intention of the parties should be rejected.
- In the case of ambiguity the construction which is more favourable to the insured should be adopted under the contra proferentem rule.
The Court of Appeal accepted that one would not naturally use the phrase “accidental bodily injury to any person” to describe the injury inflicted on the Claimant by Mr Warren. However there were two grounds for doubting that natural construction:-
- From Mr Warren’s point of view, there was nothing accidental about the injury but from the point of view of ASE and the Claimant, there was.
- It was wrong to rely upon the contextual meaning of a word or phrase when construing that word or phrase in a contract. Context was vital.
There were a number of points to be made here:-
Firstly ASE was in the business of providing security guards. The policy was concerned to protect ASE against liability arising from the actions or inactions of their employees. One of the most fundamental concepts underlying the policy was that the insured would be covered for damages which it had to pay owing to its vicarious liability. Therefore one would not expect the insurers to be able to invoke ASE’s vicarious liability for its doormen as a ground for avoiding, as opposed to accepting, liability under the policy.
Secondly the actions of Mr Warren were accidental from the point of view of ASE, in the sense of its board of directors, and the relevant case law showed that it was the state of mind of the insured that was important. It would only be if one could attribute the state of mind of Mr Warren to ASE that one could conclude that the bodily harm inflicted in the present case was not accidental or fortuitous from ASE’s point of view. However the principle of vicarious liability did not involve attributing the state of mind from the employee to the employer. It was merely concerned with extending legal liability from employee to employer.
Counsel for the insurers had tried to argue that if the word “fortuitous” was to be defined by reference to the state of mind of ASE, the word “accidental” added nothing. The Court of Appeal did not agree. If bodily injury were caused by an employee of ASE as a direct and foreseeable result of a decision by the ASE board, for instance a deliberately aggressive policy towards troublemakers, then it could very probably not be characterised as “fortuitous” from the point of view of ASE. Counsel for ASE’s insurers had argued that if this were the construction of the insurance contract, it would have the effect of preventing recovery from the insurers on the grounds of public policy. ASE would not be allowed to claim on the basis of there own tortuous conduct. The Court of Appeal regarded this argument as over sophisticated. On that basis it would be unnecessary to include the word “accidental” in many policies, since it would add nothing to the words “fortuitous.”
Fourthly another part of the policy made it very clear that it covered assault and battery, and this part distinguished between ASE and its employees.
Fifth another extension covered criminal proceedings. The policy suggested that the concept of “accidental bodily injury” could extend to injury, which was intended by the immediate perpetrator if not by the assured. The point was reinforced by the fact that “breach of statutory duty” was excluded from the contract.
Sixth the policy should be construed in favour of the insured. The Court of Appeal would add (although the point did not fall to be decided) that such a construction would also be expected to comply with what would be expected by members of the public attending a club with doormen.