Thomas Cook Tour Operations Ltd & Anor v Louis Hotels S.A

This is an application by the claimants (two companies in the Thomas Cook travel group) for summary judgment in their claim against the defendant. Before me at the hearing on 13 June 2013 were four witness statements from the claimants’ solicitor, Mr Rhys Griffiths and one witness statement from the defendant’s solicitor, Ms Maria Pittordis. Where necessary, I gave permission for Mr Griffiths’ witness statements to be filed out of time. Counsel for the claimants, Mr Simon Browne-Wilkinson, and for the defendant, Mr Grahame Aldous QC, had filed Skeleton Arguments and I heard oral submissions from them.

In October 2006, Mr Shepherd, his partner Ms Beatson and their two children, Christianne and Robert, were staying in room 112 at the Louis Corcyra Beach Hotel, Corfu. They had booked their holiday through the second claimant. On 26 October 2006, Christianne and Robert died from carbon monoxide poisoning whilst asleep in room 112. Carbon monoxide had escaped from the gas boiler that served the water heating unit in room 112. Claims for damages were subsequently made against a number of parties, including the owner of the hotel, Grecamer SA (whose assets and liabilities have since been transferred to the defendant, the name by which I shall henceforth refer to Grecamer) in respect of the children’s deaths, and for personal injuries, loss and damage sustained by their parents. Those claims were settled by the defendant.

The claimants claim damages in respect of the financial loss and expenses which they allege were incurred by them as a result of the tragedy. As a result of the incident, two employees of the Thomas Cook travel group were charged with (and subsequently acquitted of) criminal offences in Greece and there was a police investigation into the accident in the UK. An inquest into the children’s deaths is to be resumed later this year. The claimants have incurred the costs of legal and other advice in the course of those proceedings. In addition, they had to pay compensation and/or make refunds to customers affected by the incident. They also claim to have incurred expenses and loss of profit as a result of cancellations of other bookings. The claimants also had to deal with the inevitable media interest in the tragedy and incurred the cost of paying experts to assist with that. They allege that they also suffered loss of revenue as a result of the fact that their employees had to spend a considerable proportion of their working time dealing with the aftermath of the tragedy.

The claimants’ claim against the defendant is based first on the alleged breach by the defendant of a contract dated 31 May 2005 (“the holiday contract”) which was made between the second claimant and the defendant for the provision by the defendant to the second claimant’s customers of rooms and other services during the 2006 summer holiday season. In addition to breach of contract, the claimants allege tortious breaches of duty on the part of the defendant. Up to October 2007, it is claimed that financial losses and expenses amounting to £1,101,991.23 were incurred by the second claimant. In October 2007, it is alleged that the first claimant succeeded to the second claimant’s rights and liabilities under the holiday contract; thereafter the first claimant’s loss and damage is said to amount to £4,252,109.75.

In its Defence, the defendant denied breach of contract and breach of duty and alleged that the carbon monoxide leak was caused by the fault of the independent contractors which it employed to carry out boiler maintenance at the hotel. It denied any liability for the damages claimed.

CPR 24.2 provides that the court may give summary judgment against a defendant on the whole of a claim or on a particular issue if it considers that the defendant has no real prospect of successfully defending the claim or issue and that there is no other compelling reason why the case or issue should be disposed of at a trial.

In this case, the claimants seek summary judgment only in relation to the alleged breach of contract. They submit that, if I were to grant summary judgment in their favour on the breach of contract, determination of the tortious breaches of duty should await the outcome of the issues of causation and assessment of damages.

Room 112 was provided to the second claimant by the defendant for the use of its customers pursuant to the holiday contract. Clause 1 of the holiday contract provided:

“The Owner agrees to provide to the Tour Operator, or otherwise as directed by the Tour Operator, the exclusive use of the rooms, facilities, meals and other services (“the Arrangements”) … specified in this Contract.”

The claimants rely on breaches of Clauses 14 and 36 of the holiday contract. Clause 14 provided:

“The Owner undertakes that all Arrangements at the Tourist Establishment and any other services and facilities are, firstly, safe and to a proper standard to avoid any, or any risk of, injury to health and, secondly, comply fully with national, local and trade regulations and/or codes of practice relating to hygiene, fire, safety, child protection and other general standards (including EC Directives).”

Clause 36 stated:

“The Owner agrees to indemnify the Tour Operator for the full amount of all damages, expenses, losses, compensation, fines, costs (including legal costs) and/or any sum of whatever nature which, for any reason, the Tour Operator incurs or becomes responsible for as a result directly or indirectly of any breach of any nature whatsoever of the Contract by the Owner and/or any act(s) and/or omissions(s) of the Owner. For the avoidance of doubt, the Owner is responsible for the performance of this Contract regardless of whether any act, omission or default is by its staff (whether employed or not by the Owner), agents, suppliers and/or sub-contractors.”

The claimants’ case is that it is plain that the “Arrangements” provided by the defendant for the use of the Shepherd family were not safe. As a result the defendant was in breach of Clause 14 and was therefore liable to indemnify the claimants under the provisions of Clause 36. This it has refused to do.

The defendant argues that the water heating system did not come within the “Arrangements” specified in the holiday contract and the defendant is therefore not in breach of Clause 14. Furthermore, it is said that, even if there was a breach of Clause 14, the second claimant was negligent for failing to carry out a proper inspection of the hotel and/or the water heating system and, in those circumstances, the defendant cannot be held liable to indemnify the claimants pursuant to Clause 36.

Before dealing with those rival contentions, it is necessary to refer to two preliminary matters. The first of these is the question of whether an English court has jurisdiction to determine the claimants’ claim.

On receipt of the claimants’ claim, the defendant’s solicitors wrote to the claimants’ solicitors informing them that the defendant had filed an Acknowledgment of Service contending that the English court had no jurisdiction to deal with the claim and stating the defendant’s intention to make an application under CPR Part 11 contesting jurisdiction.

Subsequently, however, the defendant’s solicitors wrote a further letter, telling the claimants’ solicitors that the defendant did not propose to make an application under CPR11 after all. The letter continued:

“This is because, on advice, our client considers that it has a good argument that this case falls within the exclusive jurisdiction of the Greek courts, as being principally concerned with a tenancy of immovable property within the autonomous meaning of “tenancy” in Article 22(1) of the Brussels I Regulation. This is because the proceedings clearly involve the use of the immovable property, namely our client’s hotel rooms ...

The consequence of this point is that participation in the proceedings would not confer jurisdiction on the English courts so as to override the exception in Article 24 of the Regulation, and the purported acceptance of jurisdiction by the English courts in the face of exclusive Greek jurisdiction would, by reason of Article 35, prevent the recognition in Greece, Cyprus or elsewhere within the EU and EFTA states of any English judgment which your clients might obtain.

We therefore wish to make it clear at this stage that by entering an appearance and not disputing the jurisdiction our client is not accepting that the English court has jurisdiction and reserves all its rights in that regard.”

The letter went on to invite the claimants to withdraw the English action and commence proceedings in Greece instead. The claimants did not act on that invitation. The defendant’s position is that it does not wish to challenge the English court’s jurisdiction to hear the claim. Instead, it wishes to reserve its arguments on jurisdiction in order to put them before a Greek court if its defence to the claim fails.

The claimants contend that the position adopted by the defendant is impermissible and amounts in reality to an abuse of process. They argue that it would be disproportionate and wrong in principle for the parties to incur the substantial costs of litigating defended proceedings in England, whilst the defendant is permitted to reserve its right to argue that any judgment against it at the end of those proceedings is unenforceable by reason of a lack of jurisdiction. The claimants submit that the question of jurisdiction should be decided at the outset of the proceedings.

For the defendant, Mr Aldous submits that there is no issue on jurisdiction on the pleadings (the defendant having raised no such issue) and therefore there is nothing for the Court to determine. He argues that, in any event, the question of jurisdiction is potentially a complex one which might take a considerable time to decide. He points out that, if the defendant’s defence of the claim were to be successful, there would be no need to determine the issue of jurisdiction. He argues that the proportionate approach would be for the question of jurisdiction to be determined at a later stage in the proceedings if it proves necessary.

I invited Mr Aldous to make submissions on jurisdiction in the event that I was to conclude that the issue should be determined at this stage. This he declined to do, saying that he had no instructions from the defendant to make any such submissions.

The arrangements relating to jurisdiction as between Member States of the EU are set out in Council Regulation (EC) No 44/2001 (“the Regulation”). Article 2 of the Regulation sets out the default position:

“Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.”

The defendant is a Greek entity so that, subject to the other provisions of the Convention, it should be sued in Greece.

However, Article 23 of the Regulation provides that, if the parties have agreed that a court of a Member State shall have jurisdiction to settle any disputes which have arisen or may arise in connection with a particular legal relationship, that court shall have jurisdiction. The second claimant and the defendant entered into such an agreement. Clause 51 of the holiday contract between the second claimant and the defendant provided:

“This contract shall be governed by the laws of England and the parties submit to the non-exclusive jurisdiction of English Courts”.

That agreement has the effect of changing the default position and, without more, would give non-exclusive jurisdiction to the English courts.

However, Article 22 of the Regulation identifies five categories of case where the courts of particular states shall have exclusive jurisdiction regardless of domicile and regardless of agreements as to non-exclusive jurisdiction. Four of the five categories relate to proceedings concerning, respectively, the constitution and validity of companies; the validity of entries in public registers; the validity of patents and trade marks; and the enforcement of judgments. None of those categories is relevant to this claim.

The fifth category was relied on in the defendant’s solicitors’ letter explaining the defendant’s position on the jurisdiction issue. This category of case relates to proceedings:

“… which have as their object rights in rem in immovable property or tenancies of immovable property”.

In such proceedings, the courts of the Member State in which the relevant property is situated has exclusive rights of jurisdiction. If the claimants’ claim fell within this fifth category, the rights of the Greek courts would override the non-exclusive jurisdiction of the English courts agreed by the parties.

In their letter, the defendant’s solicitors asserted that the proceedings fell within the exclusive jurisdiction of the Greek courts, as being principally concerned with a tenancy of immovable property within the autonomous meaning of “tenancy” in Article 22(1). In the absence of any submissions on the point, I must infer that it is on the basis of this assertion that the defendant would say that the English court has no jurisdiction to deal with the claimants’ claim.

It seems to me that I must determine the issue of jurisdiction at this stage. It would be wholly wrong for these proceedings to proceed on the basis that the English courts have jurisdiction, only for the defendant to argue to the contrary before another court at a later stage. Such a course might well involve the unnecessary expenditure of costs and a waste of court resources which would be contrary to the overriding objective set out in CPR1. I cannot ignore the fact that the question of jurisdiction has been raised merely because, as a matter of tactics, the defendant has chosen not to argue the point before the English court.

Article 25 of the Regulation makes clear where the duty of a judge lies in such circumstances. It provides:

“Where a court of a Member State is seized of a claim which is principally concerned with a matter over which the courts of another Member State have exclusive jurisdiction by virtue of Article 22, it shall declare of its own motion that it has no jurisdiction.”

The effect of Article 25 is that, if it be right that Article 22 gives the Greek courts exclusive jurisdiction over the claimants’ claim, I must declare that I have no jurisdiction to hear it.

Contrary to Mr Aldous’ submissions, I consider that the issue of jurisdiction is straightforward. The claimants’ claim alleges breach of a commercial contract whereby the defendant agreed to provide to the second claimant the exclusive use of rooms, facilities, meals and other services as provided in the holiday contract. That contract did not have “as its object” a tenancy of immovable property. I was referred to a leading textbook (Footnote: ¹), in which the authors conclude that proceedings only fall within the relevant category of Article 22 if they are:

“…disputes where the court is called upon (a) to resolve disputes as to title to land in a Member State, or to adjudicate the relative enforceability of claims of title to land (b) by the application of rules of local land law.”

The authors’ conclusion is consistent with the general scheme of Article 22 which is to confer exclusive jurisdiction on the courts of a Member State in a case where the subject matter is likely to involve the examination of law, practice and/or procedures which are local to that Member State.

Applying the principles set out in the extract quoted, the issues between the parties to this claim do not include any dispute as to title to land or involve any claim of title to land. Nor do those issues involve the application of any local rules of land law. Nor, applying the other limb of the relevant category of Article 22, do they concern rights in rem in immovable property. Rather, they are concerned with the construction of a commercial contract for the provision of rooms and other services and alleged breaches of that contract.

Accordingly, I have no hesitation in concluding that Article 22 does not deprive this court of jurisdiction. I find that, pursuant to Article 23, Clause 51 of the contract confers jurisdiction on the English courts and I make the declarations sought by the claimants, namely that:

(a)

These proceedings do not have as their object rights in rem in immovable property or tenancies of immovable property; and

(b)

This Court has jurisdiction over these proceedings pursuant to Article 23 of the Council Regulation (EC) No. 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters.

Even if the defendant had elected to make submissions on the issue, I am satisfied that my decision would have been the same.

The second preliminary matter with which I must deal is the defendant’s contention that the claimants’ application for summary judgment should be dismissed because they have failed to comply with the relevant Practice Direction, 24 PD 2(3), which states that, in relation to an application for summary judgment :

“The application notice or the evidence contained or referred to in it or served with it must –

…

(b)

state that it is made because the applicant believes that on the evidence the [defendant] has no real prospect of … successfully defending the claim or issue to which the application relates,

and … state that the applicant knows of no other reason why the disposal of the claim or issue should await trial.”

The claimants’ application notice asserted that the order for summary judgment was sought “because the Defendant has no real prospect of successfully defending the claim and there is no other compelling reason why the case should be disposed of at trial”. The application notice did not bear a statement of truth. It was signed by Mr Griffiths, the claimants’ solicitor. In his first witness statement in support of the application, Mr Griffiths repeated the assertion (at paragraphs 2.1.5 and 8.1).

In his Skeleton Argument, Mr Aldous submitted that Mr Griffith’ assertions did not fulfil the requirements of 24PD(2)(3)(b) since they did not state that the claimants, rather than their solicitor, held the relevant belief. Mr Aldous relied on the case of Barclays Bank plc v Piper (unreported) Transcript 23 May 1995. In that case, the claimant’s solicitor had failed to identify, in his affidavit in support of the claimant’s application for summary judgment, the representative of the claimant from whom he had obtained the factual information contained in his affidavits. He had also failed to assert that the facts pleaded in the Statement of Claim were true and to depose to a belief that there was no defence to the claimant’s claims. In a second affidavit, he again failed to identify the source from which he had received specific information which was highly material to the application. The judge at first instance had declined to dismiss the claimant’s application for summary judgment on the basis of these failures. The Court of Appeal reversed the judge’s decision. In doing so, they emphasised the importance of the technical requirements of the rules governing an application for summary judgment which are intended to ensure that the defendant and the court hearing the application are able properly to assess the strength of the claimant’s case. In Barclays Bank, they needed to know whether the information or belief as to the material matters on which the claimant’s case was based had been derived directly or indirectly from persons who could be expected to have the necessary knowledge of the relevant information or of the documents in which that information was contained.

In addition, Mr Aldous relied upon the remarks of Jackson LJ in Fred Perry (Holdings) Ltd v Brands Plaza Trading [2012] EWCA 932 about the importance of compliance with procedural requirements and the effect of the revised version of the overriding objective which came into operation on 1 April 2013.

Following receipt of the defendant’s Skeleton Argument, Mr Griffiths filed a further witness statement in which he stated:

“…for the avoidance of doubt, I can confirm that the Claimants believe that on the evidence the Defendant has no real prospect of succeeding on the claim or issue to which the application for summary judgment relates and the Claimants know of no other reason why the disposal of the claim or issue should await trial.”

At the hearing, Mr Aldous contended that Mr Griffiths’ further statement still failed to comply with 24 PD since (a) Mr Griffiths was able to state the knowledge and belief of the claimants’ representatives only to the best of his own knowledge, information and belief and (b) he still had not identified the source(s) from which his information had come. Mr Aldous observed that it did not appear that any representative of either of the claimants was prepared to state his or her personal belief that the defendant had no real prospect of successfully defending the claim.

For the claimants, Mr Browne-Wilkinson contended that the defendant’s point had no merit. He pointed out that paragraph (2)(3)(b) of 24PD does not contain any specific requirement that the source of the claimants’ belief should be identified. He argued that, in those circumstances, it was sufficient for the claimants’ solicitor to confirm his clients’ belief which Mr Griffiths had now done. Mr Browne-Wilkinson argued that, if the court did not take that view, the claimants should be given the opportunity to cure the defect. To dismiss the application, as the defendant urged, would be a disproportionate reaction to a technical error and would result in a waste of costs and court resources since it would be open to the claimants immediately to make a further application for summary judgment.

The position in this case is very different from that in Barclays Bank. In that case, there was a failure to identify the sources of information the claimant’s solicitor had given about the contents of various documents which were highly material to the claimant’s application. Without knowing where the relevant information came from, the defendant and the court may well have found it very difficult to assess the real strength of the claimant’s case. It was because of the failure to identify the source of that information that the Court of Appeal dismissed the claimant’s application for summary judgment. There is no suggestion in the present case of any failure to identify the source of evidence which would be relevant to the assessment of the strength of the claimants’ claim.

The original defect in this case was a technical one. The claimants are part of a well known group of companies and have plainly instructed their solicitors to proceed with this application. It is difficult to envisage circumstances in which they would do that whilst not believing that the requirements as to the strength of their case were met. Nevertheless, it was plainly necessary for the defect to be corrected. I consider that, in his subsequent witness statement, Mr Griffiths did that. It seems to me sufficient that he stated that the claimants hold the belief and knowledge to which he refers. The fact that he had to qualify that by referring to his own knowledge, information or belief does not seem to me to affect the position. Furthermore, I do not consider that it was necessary for him to go further and identify the representative(s) of the claimants who told him that he/she/they hold(s) the relevant belief/knowledge. The provisions of 24PD(2)(3) do not impose any such requirement.

In the event that I am wrong about that, I consider that it would be appropriate to use my powers under CPR3.10 to permit the claimants to remedy the defect. Such a step would cause no prejudice to the defendant since, if the claimants’ application were to be dismissed by reason of a breach of the requirements of PD24(2)(3), it would be open to them to make a further application immediately. That would involve a significant waste of costs and court resources, as well as delay. To dismiss the claimants’ application on the basis of a technical procedural breach which can readily be remedied would not in my view be a proportionate response.

With those considerations in mind, at the conclusion of the hearing on 13 June 2103, I directed the claimants to file a further witness statement dealing with their belief as to the absence of any prospect of successfully defending the case. I now have a witness statement from Mrs Shirley Bradley, who is a director of Thomas Cook Group Management Services Limited (which is in turn a corporate director of both claimants) and, as UK Company Secretary and Legal Adviser for the Thomas Cook Group PLC, is authorised to act on the claimants’ behalf. I am satisfied that the witness statement complies with the requirements of 24PD(2)(3) and that Mrs Bradley has the relevant personal knowledge. I therefore reject the defendant’s submission that the claimants’ application should be dismissed.

I pass on to consider the allegations of breach of contract made by the claimants.

On behalf of the claimants, Mr Browne-Wilkinson submits that, although the defendant did not explicitly admit in its Defence that the children died from carbon monoxide poisoning, causation was established by the autopsy reports. That contention was not challenged by Mr Aldous.

The claimants contend that Clause 14 imposed an absolute obligation on the defendant to provide “Arrangements” (including a room and a water heating system) which were safe and to a proper standard to avoid any, or any risk of, injury to health, whereas in fact both the room in which the two children died and the water heating system which served it were plainly unsafe and not of the required standard.

In support of this contention, Mr Browne-Wilkinson refers to the defendant’s Defence, in which the defendant admitted, inter alia, that, due to an internal water leak and consequent corrosion and/or flame chilling, carbon monoxide was produced by the boiler serving room 112. The defendant also admitted that the boiler was installed without a flue. This was contrary to the manufacturer’s instructions that the flue should never be removed from the boiler and their warning that, should the flue not function correctly, carbon monoxide might blow back into a room, presenting a grave danger to any occupants thereof. The defendant further admitted that the fume protection device had been removed from the boiler (or “short-circuited” as it is described elsewhere) and that carbon monoxide was able to pass through the air conditioning pipework into room 112. Mr Browne-Wilkinson argues that these admissions, together with the causative link between the presence of carbon monoxide and the children’s deaths, clearly established that Room 112 was not safe or to a proper standard. Instead, it could properly be described as a ‘death trap’.

Furthermore, the claimants say that the second limb of Clause 14 imposed an absolute obligation to comply fully with national, local and trade regulations and/or codes of practice relating, inter alia, to safety. The precise respects in which it is alleged that the condition of the boiler and/or heating unit breached the relevant safety provision, i.e. Decision 31856 (“the Technical Regulation”), are fully particularised in paragraph 36 of the Particulars of Claim. Mr Browne-Wilkinson relies in particular on the failure to fit a secondary flue to the boiler and the removal or short-circuiting of the fume protection device.

The defendant did not seek to suggest that the boiler and/or water heating system was/were not defective in the manner alleged by the claimants. However, its Defence denied that it or any of its employees were to blame for the technical defects that caused the deaths. In her witness statement, the defendant’s solicitor, Ms Pittordis, stated that it was the independent contractors who were responsible for maintaining the boilers who had been at fault.

The defendant’s arguments focus on the question of whether the gas boiler or the water heating system formed part of the “Arrangements” which the defendant was contracted to provide. At Clause 1 of the holiday contract, the “Arrangements” were defined as “rooms, facilities and other services … shown overleaf”. Those “other services” were listed as:

“Cooking Type: None. Heating: None. Water Heating: Electric. Cleaning Frequency: 6 times weekly. Towel Change Frequency: 3 times weekly. Linen Change Frequency: 3 times weekly… ”.

(The reference to the water heating being “Electric” was a mistake since it was in fact powered by the gas boiler.)

Mr Aldous submits that it is arguable that the provision of the gas boiler and the water heating system was not part of the “services” or “Arrangements” and did not therefore form part of the holiday contract. He submits that, since the water heating system was referred to in the list of “services” (albeit it did not form part of those services), it could not be included within the “room” which was also provided under the holiday contract. He complains that the claimants’ case in their Particulars of Claim was focussed on the defendant’s provision of a water heating system powered by gas (rather than by electricity), not on the safety of the room that had been provided. He contends that it is arguable that there was no breach of the first limb of Clause 14. He further submits that it is arguable that there was no evidence of any breach by the defendant of the relevant safety regulations, codes of practice and/or standards.

I accept that Mr Aldous is correct in saying that, for the purpose of this application, the claimants put their case on breach of the first limb of Clause 14 rather differently from the way the case is pleaded in their Particulars of Claim. However, it seems to me beyond doubt that the room provided by the defendant was not safe by reason of the leaking of carbon monoxide into it. The provision of a safe room was an absolute obligation under Clause 14 of the holiday contract. The fact that it might have been a third party whose act or omission caused the carbon monoxide leak does not affect the fact that the defendant was in breach of its absolute obligations under the first limb of Clause 14. That being the case, it is unnecessary to debate whether the water heating unit formed part of the “Arrangements” under the holiday contract. If I had been called to decide that point, I would have concluded that the heating unit was part of the “Arrangements” within the meaning of the holiday contract and that, by reason of the malfunction of the boiler that powered it, it was unsafe, in breach of the absolute obligation owed by the defendant pursuant to Clause 14.

I am satisfied also on the material I have before me, that the arrangements did not comply with the relevant safety regulations, in particular the Technical Regulation referred to at paragraph 44 of this judgment.

In short, I do not consider that the defendant has any real prospect of successfully arguing that it was not in breach of Clause 14 of the holiday contract.

The claimant contends that there has been a clear breach by the defendant of its obligation to indemnify the second claimant under Clause 36. That obligation was to indemnify the second claimant for “the full amount ... which the Tour Operator incurs ... as a result directly or indirectly of any breach of any nature whatsoever of this Contract…”. Clause 36 stated that the defendant was to be responsible for the performance of the contract regardless of whether the fault lay with its staff, agents, suppliers and/or sub-contractors. Thus the fact that the defendant alleges that its contractors were to blame would not prevent it from being in breach of Clause 36.

For the defendant, Mr Aldous contends that there is also evidence of negligence on the part of the second claimant in that, although it purported to carry out an inspection of the hotel, it did not do so properly. In her witness statement, Ms Pittordis stated:

“On the other hand the Defendant does believe, and will seek to establish at trial, that [the second claimant] and its personnel were at fault in that they purported to carry out inspections in order to reassure its clients including the Shepherd family, but that they failed to do so properly.”

Mr Aldous submits that it is plainly arguable that, in the absence of clear words to the contrary, the defendant should not be taken as having intended to agree to indemnify the second claimant against the consequences of its own negligence or fault. He relies on Canada Steamship Lines v The King [1952] AC 192, a decision of the Privy Council.

In Canada Steamship Lines, the Crown leased a freight shed to the appellant company. Clause 7 of the lease was an exclusion clause which provided that “the lessee shall not have any claim … against the lessor for … damage … to … goods … being … in the said shed” and, by Clause 8, the Crown undertook to keep the shed in repair. Clause 17 was in wide terms and provided:

“… the lessee shall at all times indemnify … the lessor from and against all claims … by whomsoever made … in any manner based upon, occasioned by or attributable to the execution of these presents, or any action taken or things done … by virtue hereof, or the exercise in any manner of rights arising hereunder. ”

Owing to the negligence of the Crown’s servants whilst using an oxy-acetylene torch to effect certain repairs to the shed, a fire broke out which destroyed the shed and all its contents. The appellant and others lost goods in the fire and brought proceedings for damages against the Crown.

The Crown pleaded that the appellant’s claim was barred by Clause 7 of the lease and, in third party proceedings, relied on Clause 17 as giving a right of indemnity from the appellant against itself and the other claimants. The Privy Council held that the Crown had failed in Clause 7 to limit its liability in respect of negligence in clear terms. As a result, Clause 7 was to be construed as relating to a liability not based on negligence and the Crown was not protected by Clause 7 against the claims for loss. Furthermore, it was held that Clause 17 did not cover negligent acts of the Crown’s servants. One of the reasons for this was stated to be that the meaning and effect of Clause 17 were far from clear and such a liability must be imposed by clear words. The Crown was therefore unable to claim indemnity under Clause 17. The Privy Council stated that, if it had been intended that Clauses 7 and 17 should protect the Crown against the consequences of the negligence of their own servants, there would have been no difficulty in inserting an express reference to negligence of the Crown’s servants.

Mr Browne-Wilkinson argues first that the defendant has adduced no evidence in support of its allegation that the second claimant was negligent, despite having had the opportunity to do so. The only material before the court is an averment in the Defence that the second claimant was in breach of its duty to ensure that a proper and diligent inspection of the hotel was carried out, together with the sentence in Ms Pittordis’ witness statement to which I have already referred. He contends that the court cannot conclude from that material that the defendant has a real prospect of successfully establishing that it is not in breach of Clause 36.

Mr Browne-Wilkinson further submits that the circumstances of Canada Steamship Lines were very different from those of the present case. In Canada Steamship Lines, there was no dispute that Crown’s servants had acted in breach of the duties owed by the Crown to the appellant and the other lessees of the Crown and that the relevant damage had been caused by their breach of duty. In the present case, any duty to inspect that might have been breached by the second claimant would have been owed, not to the defendant, but to the second claimant’s customers. In those circumstances, breach of that duty would not affect the second claimant’s contractual rights against the defendant. In support of that proposition, Mr Browne-Wilkinson relies on Sims v Foster Wheeler Ltd et al [1966] 1 WLR 769 and Spalding v Tarmac Civil Engineering Limited [1967] 1 WLR 1508. He submits that, since Canada Steamship Lines was concerned with the construction of an indemnity said to have been given in respect of the indemnified’s own negligence, rather than (as in the present case) in respect of the breach of contract of the indemnifier, it has no application.

There is no evidence before me which would lead me to the conclusion that the defendant has a real prospect of establishing negligence on the part of the second claimant. Even if there were, I find it impossible to see how such negligence could have been causative of the carbon monoxide leak and the dangerous condition of Room 112. Thus there can be no question of the second claimant seeking “indemnity against the consequences of its own negligence or fault”, as Mr Aldous argues. Any duty owed by the second claimant would in any event have been owed to its customers, not to the defendant, and would not have affected the second claimant’s contractual rights against the defendant. I do not consider that Canada Steamship Lines has any application to the present case.

Clause 36 of the holiday contract sets out the parties’ agreement as to the circumstances in which the defendant agreed to indemnify the second claimant. Those circumstances are quite clear. There are no words in Clause 36 suggesting that if the relevant losses have been incurred partly as a result of negligence on the part of the defendant and partly as a result of the negligence of the second claimant, there is no obligation on the part of the defendant to indemnify. If the parties had intended to provide for such a limitation it could have been very simply stated. In the circumstances I do not consider that the defendant has any real prospect of successfully arguing that it was not in breach of Clause 36.

The claimants’ case is that, by a contract entitled “Sale of Business Agreement of Thomas Cook Tour Operations Limited” dated 31 October 2007 (the SBA), the benefit and burden of all contracts entered into by the second claimant (paragraphs 2(1)(e) and 8(1)), together with the benefit of the claims of the second claimant (paragraph 2(1)(j)) were assigned by the second claimant to the first claimant.

The defendant’s first contention is that the issue of whether there was an assignment by the second claimant of its rights under the holiday contract is not straightforward and should be determined at a trial. Mr Aldous submits that it is significant that no such assignment was explicitly pleaded in the Particulars of Claim. He argues that the precise effect of the SBA is not clear and would require careful examination in order to determine whether there had been an assignment.

At paragraph 16 of its Defence, the defendant suggested that the costs and expenses recoverable pursuant to Clause 36 are restricted to those incurred by the “Tour Operator” (i.e. the second claimant) and do not include costs and expenses incurred by any other company in the second claimant’s stead.

The claimants argue that the relevant provisions of the SBA were pleaded in the Particulars of Claim and that it is clear that those provisions had the effect of transferring certain rights and liabilities (including the rights attaching to “contracts”, as defined in the SBA) from the second claimant to the first claimant. They point out that Clause 46 of the holiday contract explicitly provided that the “Tour Operator” had the right to assign the contract at any time, so that it must have been intended that the term “Tour Operator” should include any party to whom the contract might be assigned.

At paragraph 1(1), the SBA defined “contracts” as:

“… all contracts and engagements ... entered into or orders made before Completion by or on behalf of the Seller with third parties in connection with the Business which remain (in whole or in part) to be performed at Completion ...”.

At paragraph 5 of its Defence, the defendant averred that the holiday contract was not a contract capable of being assigned under the SBA since paragraph 1(1) referred only to contracts which still remained to be performed (whether wholly or partially) at the time of the completion date in October 2007. Mr Aldous submits that it is arguable that, at the time of the completion date, the holiday contract, which related to the provision of facilities and services for the 2006 summer holiday season, had been performed in full and was not capable of being assigned. He submits that, in that event, the first claimant would not be entitled to rely on any rights conferred by the holiday contract. Instead, any losses arising from a breach of the holiday contract would be confined to those incurred by the second claimant. This is a matter which should, he says, be determined at trial.

For the claimants, Mr Browne-Wilkinson submits that, at the time when completion of the transfer under the SBA took place, in October 2007, the defendant’s predecessor-in-title, Grecamer, was still under a duty to indemnify the second claimant under Clause 36 of the holiday contract. Thus, part of the holiday contract had not been performed and was capable of being assigned under the SBA.

The defendant refers to Clause 46 of the holiday contract which provides that the second claimant had the right to assign the contract in whole or in part at any time by giving notice in writing to the defendant. The defendant’s case is that, if there was an assignment, the second claimant failed to give notice of it in writing as required. By a letter dated 24 January 2008, Thomas Cook Group PLC informed the defendant that:

“To meet the demands of the European corporate accounting and reflect recent changes to the legal entity…”

all invoices should henceforth be billed to the first claimant, rather than the second claimant. Mr Aldous argues that the letter did not constitute a valid notice of assignment of the holiday contract.

Mr Browne-Wilkinson submits that the reference in the letter of 28 January 2008 to “recent changes to the legal entity” could mean only that there had been a transfer of rights from one entity to another. Thus, the letter constituted valid notice of assignment.

Mr Browne-Wilkinson further submits that, in the event that I find that the notice of assignment might not have been valid, the claimants can still establish that there had been an effective equitable assignment. In support of this proposition, he refers to a passage in a well known textbook (Footnote: ²) which states that an assignment can be perfectly valid in equity without notice of the assignment having been given. However, in an action where reliance is placed on an equitable assignment, the assignor must be a party to the action. That requirement is fulfilled in this case. Mr Aldous submits that it is arguable that no equitable assignment arose.

Although the word “assignment” does not appear in the Particulars of Claim, it is clear that the effect of the SBA was to transfer to the first claimant any of the second claimant’s rights and liabilities still existing under the holiday contract at the time of completion of the transfer to the first claimant. The fact that the holiday contract was capable of being assigned (as it plainly was) means that it must have been intended that, in the event of assignment, an entity other than the second claimant would succeed to the rights and liabilities of the “Tour Operator” referred to in the holiday contract.

I am satisfied also that, at the time of the completion of the transfer, the defendant’s predecessor-in-title had a continuing obligation under Clause 36 of the holiday contract to indemnify the second claimant in respect of the consequences of its breach of Clause 14. To that extent, the holiday contract remained partially unperformed and was capable of being assigned to the first claimant.

Where I part company from the claimants’ submissions is in relation to the letter of 28 January 2008. I consider that it is arguable that, as the defendant contends, the letter did not constitute valid notice of assignment. It did not refer to the holiday contract and, although there is reference to changes to legal entity, no detail of those changes is given. The letter is primarily concerned with administrative details. However, the fact that the defendant has a real prospect of successfully arguing that valid notice was not served does not avail it. I am satisfied that, even if the letter of 24 January 2008 did not constitute valid notice to assign, there was an effective equitable assignment.

In her witness statement, Ms Pittordis questioned whether the SBA remains a valid and enforceable agreement between the claimants without amendment or variation. In his Skeleton Argument, Mr Aldous suggested that the question whether the SBA had been amended in any material respect since the claimants entered into it was something which would need to be addressed at trial. In response, Mr Griffiths filed a further witness statement stating that he had taken instructions from Mrs Bradley who had confirmed that the SBA had not been varied or amended and remains valid and enforceable as between the parties.

I am satisfied that Mr Griffith’ evidence establishes that there is nothing in this point.

The holiday contract was signed on behalf of Thomas Cook and stated that the contract was subject to the approval of the Thomas Cook Board (“the Board”). At paragraph 14 of its Defence, the defendant made no admission as to whether the Board had in fact approved the holiday contract. Mr Griffiths made a third witness statement in which he explained the process for obtaining Board approval. He had obtained his information from Mr Michael Hallisey, who was formerly Company Secretary and Group Legal Counsel for the second claimant. The system was that the Board would be provided with copies of the draft brochure advertising holidays for the forthcoming holiday season and would then decide whether or not to approve the brochure for publication. Approval of the brochure constituted in effect approval of the contracts made with the owners of the hotels advertised in the brochure. It was open to the Board to veto specific hotels in which case the contracts with those hotels would not be approved and the brochure would require amendment before being re-submitted for the Board’s approval. Approval for publication of the brochure (including the offer of holidays at the Louis Corcyra Beach Hotel) for the 2006 summer holiday season would have been given in June/July 2005.

Mr Aldous submits that the information provided by Mr Griffiths is inadequate. He criticises Mr Griffiths for not producing the relevant Minute recording the Board’s approval. He argues that there remains uncertainty as to whether the Board approved the holiday contract and therefore whether there was ever an effective contract. He contends that this is another matter which should be investigated at the trial of this action.

I do not consider that there is anything in this point. The process of approval has been explained. The fact that holidays at the Louis Corcyra Beach Hotel were advertised in the second claimant’s brochure for the 2006 summer holiday season and were sold to customers demonstrates that the Board must have approved the contract for that hotel.

Attached to Mr Griffiths’ first witness statement made in support of the application for summary judgment is a schedule of the losses, costs and expenses claimed by the claimants. The schedule consists of a list of the sums paid to various third parties, including solicitors, health and safety experts, media advisers and customers of the second claimant. The total sum claimed by way of payments to third parties is £5,263,272.

Mr Aldous complains about what he contends is the uncertainty of the financial claims being advanced by the claimants and submits that the information provided by them is inadequate. He argues that it will be necessary for the court to ascertain who (as between the two claimants and also as between the claimants and other companies forming part of the Thomas Cook travel group) actually paid the costs, fees and expenses claimed, to whom they made payments and for what purpose. He questions whether there was any causative link between the payments made and the defendant’s alleged breach of contract. He submits that issues of causation and quantum are inseparable from the issues of liability and should be determined at the same time. He suggests that a trial of all issues would be the most efficient and speedy way of proceeding.

Clearly, there are issues of causation and quantum that need to be investigated and will, if no agreement is reached, have to be determined at a trial. There is, however, no need to delay determination of the issue of liability for breach of contract provided that the criteria for summary judgment are met. Determination of the issue of breach of contract at this early stage would save costs and would enable the parties to focus on the real issues in the case, namely causation and quantum. I am satisfied that the determination of the issue of breach of contract would be no bar to the fair determination of those issues.

I do not consider that there is any real substance in the defendant’s arguments on breach of contract and I am satisfied that it has no real prospect of successfully defending the allegations of breaches of Clauses 14 and 36 of the holiday contract. I make no findings in relation to the allegations of tortious breach of duty. It has not been suggested by the defendant that there is any other compelling reason (other than those already discussed) why the allegations should be disposed of at a trial. The claimants are therefore entitled to summary judgment on the allegations of breach of contract and to an order that the sums due to the claimants (including any future liabilities which might arise under the contract) should be assessed.

The claimants seek an interim payment in the sum of £3,473,759.51, that being two thirds of the liquidated costs, fees and expenses claimed.

The claimants having secured summary judgment, the necessary condition for the grant of an interim payment in CPR25.7(1) (b) is satisfied. Under Clause 36, the defendant is liable to pay “the full amount of all damages, expenses, losses, compensation, fines, costs (including legal costs) and/or any sum of whatever nature” which the claimants incur or become responsible for as a result directly or indirectly of the defendant’s breach. I am satisfied that the claimants will obtain judgment for a substantial sum and are therefore entitled to an interim payment. As I have said, however, the issues of causation and quantum require investigation and it is not possible at present to be confident that the sum eventually awarded will be as high as that which is claimed by way of interim payment. In the circumstances, I consider it appropriate to adopt a more cautious approach. I therefore make an interim payment in the sum of £1 million.