We have before us reclaiming motions in seven test actions arising out of the explosion on the Piper Alpha platform on 6 July 1988. There are in fact 146 such actions before the court and in all of them the pursuers are Caledonia North Sea Limited who are the successors of the owners of the platform at the time of the disaster. The precise position as to the responsibilities at that time is somewhat complex but, since it has no relevance to the issues in this reclaiming motion, for convenience, I shall simply refer to "the pursuers" without distinguishing among the entities involved. The defenders in the actions are contractors who had employees working on the platform at the time of the disaster. As the instances in the actions show, all but one of them have undergone changes of name over the intervening years. For the sake of simplicity, I refer to them by the names which they had at the time of the disaster. Employees of the contractors were injured and killed in the disaster and the pursuers paid damages either to the victims or to their relatives ("the claimants"). Each of the contractors was engaged to work on the platform in terms of a contract between it and the pursuers; all the contracts contained indemnity clauses in favour of the pursuers. In the present actions, which are founded on those clauses, the pursuers are seeking to be indemnified by the respective contractors for the sums that were paid in damages to the claimants.

A proof before answer was allowed and the hearing lasted a total of 391 days spread over the period from 3 March 1993 until 31 October 1996. The Lord Ordinary issued his opinion on 2 September 1997 and, though not reported, it is being published on the Internet, under the name Elf Caledonia Limited v. London Bridge Engineering Limited and Others. In the result the Lord Ordinary was satisfied that the pursuers had established that the explosion had been caused by a leak of condensate from a blind flange which had been placed on pipework where a pressure safety valve (PSV 504) had been removed for routine maintenance and had not been replaced. He was satisfied also that the flange had not been fitted properly by an employee of Score (U.K.) Ltd., a contractor which had been employed to inspect and maintain valves on the platform. That being so, in the Lord Ordinary’s view the pursuers had established the factual basis upon which they would have been entitled to recover under the indemnities.

In fact, however, except in a few cases, all the damages had been paid to the claimants not by the pursuers themselves but by their insurers acting under contracts of insurance covering the risk in question. Though brought in the name of the company, the present actions were actually raised on behalf of the insurers in order to recover from the contractors the sums which they had spent in indemnifying the pursuers against the claims brought against them. In the exceptional cases, of which the action against Stena Offshore Ltd. is an example, the pursuers had not had full insurance to cover the claims brought against them and they themselves had therefore paid the uninsured element of the claims. The gap in the insurance cover of the pursuers came to be known as the "Oxy Gap" and the cases where this point arises were referred to as "the Oxy Gap cases".

At almost the very end of the proof the defenders advanced an argument that all the test cases, except the case involving Stena Offshore Ltd., were irrelevant. I deal with this argument in Part 1 of the opinion but, put shortly, it was to the effect that the pursuers had been indemnified by the insurers and therefore were not entitled to be indemnified again under the indemnity clauses in the contracts with the defenders. Since the pursuers could not recover in an action based on the indemnity clauses, the insurers could not do so either: there was no surviving right of action to which they could be subrogated. The insurers’ only possible remedy would have been by an action of relief brought in their own name against the various contractors. The same argument applied to the Oxy Gap cases in so far as the pursuers sought to recover any sums paid out by the insurers.

In the event the Lord Ordinary gave effect to the defenders’ argument on relevancy. In the Oxy Gap case against Stena Offshore Ltd. he granted decree only for the amounts which represented the sums paid by the pursuers themselves abated to the Scottish level of damages. In all the other six cases the Lord Ordinary assoilzied the defenders. The pursuers reclaimed on the relevancy point and also on the Lord Ordinary’s decision that he would in any event have restricted the sum to be recovered under the indemnities to an amount which would have represented the value of the claims under Scots law. The pursuers had sought indemnity for the larger sums which they had actually paid to settle the claims because of advice which they had been given that the claimants might have been able to establish jurisdiction against them in Texas. The pursuers also reclaimed on an issue arising out of their tax liability. The defenders cross-appealed on various issues, but principally challenged the Lord Ordinary’s interpretation of the indemnities and his view that the pursuers had established the necessary factual basis to succeed in the actions based on the indemnities.

The first volume of the Lord Ordinary’s opinion contains a very detailed account of the basic facts which form the background to the actions. By a joint minute the parties have agreed that, with some minor corrections and excisions, the Lord Ordinary’s account is accurate. We have arranged for that amended version to be reproduced as an appendix to our opinions and, with due gratitude to the Lord Ordinary, I refer to that appendix for an account of those matters.

The opinion of Lord Coulsfield contains not only an account of many of the relevant background facts but also an extensive narrative of the various arguments which were presented by counsel in the hearing before this court. He has also set out the terms of the various contracts which are the basis of the actions. That immense labour relieves me of any need to recite the arguments or to reproduce all the terms of the contracts.

In this opinion I deal, first, in Part 1 with the pursuers’ reclaiming motions on the point of relevancy ("The Contribution Point") on which the Lord Ordinary ruled against the pursuers. After that, in Part 2 I turn to the cross-appeals on the "Construction of the Indemnities", followed in Part 3 by the pursuers’ reclaiming motions on "Consequential Loss", relating to the Lord Ordinary’s decision to restrict the sum which could be recovered under the indemnities. Further arguments on whether the pursuers can recover for anything other than Scottish damages appear in the defenders’ cross-appeals on "The Scottish Level of Damages" in Part 4 and on the "Governing Law" in Part 5. After that I come on to "The Tax Issue" in Part 6 and to a question relating to "Interest" paid to the pursuers by the Inland Revenue in Part 7. Having had the privilege of considering the opinions of the other members of the court on the factual issues, I agree with their conclusions. In Part 8 ("The Lord Ordinary’s Decision on the Facts") I therefore comment only on a number of specific issues. In Part 9 ("Novus Actus Interveniens") I deal with a legal argument arising out of the Lord Ordinary’s decision that the explosion was caused by a combination of, first, negligence by the late Mr. Terence Sutton in fitting the blind flange to the pipework and, secondly, the subsequent act of the late Mr. Robert Vernon who negligently pressurised pump A and so introduced condensate under pressure into that section of pipework. Finally, in Part 10 ("Summary and Disposal") I summarise the conclusions which I have reached and the matters to be considered at the By Order hearing which counsel asked us to hold before we formulated our interlocutors.

I start with the defenders’ argument on relevancy for which I adopt the title used at the hearing and in the papers, even though it does not really do justice to the range of contentions advanced by counsel.

Although the present litigations were raised and have been fought in the name of the pursuers, counsel for the pursuers accept that their insurers are in fact using the pursuers’ name by virtue of subrogation. In other words, having indemnified the pursuers, the insurers are standing in their shoes and are using their name to bring proceedings to enforce the obligations contained in the indemnity clauses in the various contracts between the pursuers and the defenders. Counsel for the defenders took no point about this until Day 381 of the proof, the very last day of the main body of their submissions in the Outer House, when they launched on the unsuspecting pursuers an entirely novel argument to the effect that the pursuers’ case, in all but the Stena Offshore action, was entirely irrelevant and, in the Stena Offshore action where the pursuers themselves had paid a relatively small portion of the claims brought against them, was relevant only in respect of that portion. In due course the Lord Ordinary gave devastating effect to this argument by granting decree for only the small portion of the pursuers’ claim in the Stena Offshore action and assoilzieing the defenders in all the other actions. The pursuers reclaimed against this decision and we heard exceedingly full submissions on the point. A detailed account of the argument for both parties is to be found in Part 4(a) of Lord Coulsfield’s opinion.

The starting point of the defenders’ argument is that a contract of insurance is a contract of indemnity. Although the details of the insurance arrangements of the pursuers were complex, there is no doubt whatever that, subject to the "Oxy Gap", they had contracts of insurance with insurance companies which covered their losses from having to pay damages to the claimants. The exact nature of those insurance arrangements (for example, whether different insurers covered different levels of loss) was not explored before the Lord Ordinary or before this court. The argument proceeded essentially on the basis that we should treat the pursuers as having a single contract of insurance with their insurers which covered the losses in question. It is common ground that the contracts of insurance are contracts of indemnity. After the disaster occurred, the pursuers contacted the insurers who were subsequently involved in the negotiations leading to the claims of the relatives and the injured men being settled. What actually happened, as I explain more fully in Part 4 below, was that, in the usual way, the insurers took the lead and, when the claims were eventually settled, the payments to the claimants were made by cheques drawn on the account of the insurers, rather than of the pursuers. It follows that, except in the Oxy Gap cases, the pursuers themselves did not actually pay out any money to the claimants.

If one turns to the relationship between the pursuers and the defenders, the basic position is again not in dispute. At the relevant time the pursuers were in contractual relations with the defenders and in the contracts were clauses of indemnity which, leaving aside the various qualifications in those clauses, made the defenders liable to indemnify the pursuers against claims or losses arising out of the death of, or injury to, the defenders’ employees. Indeed, as I have explained, all the actions which form the subject of these proceedings are based on those indemnity clauses.

As Mr. Wolffe said, the defenders’ basic argument was simple. The pursuers had been indemnified by their insurers. The pursuers now sought to be further indemnified by the defenders under the various indemnity clauses in their service contracts. But, having been fully indemnified by their insurers, the pursuers were not entitled to seek any further indemnity from the defenders, since this would mean that they were being more than fully indemnified, contrary to the basic principle of the law of indemnity as enunciated once for all in the classic exposition of Brett L.J. in Castellain v. Preston (1883) 11 Q.B.D. 380 at p. 386. The present actions would accordingly be irrelevant if brought by the pursuers and they must equally be irrelevant when raised by the insurers using the pursuers’ name.

In attacking that argument Mr. Batchelor, Q.C., advanced an equally simple point of view on behalf of the pursuers. He did not call into question the principle that an assured is not entitled to be more than fully indemnified. But, he said, payments made by insurers to indemnify an assured were res inter alios acta so far as any third party was concerned. That was a general principle which applied in any case where an insurer raised proceedings in the name of the assured. It therefore applied in the present cases where the proceedings were based on a right under a contract of indemnity. The actions were accordingly relevant. Although counsel placed both the "simple" argument for the defenders and the pursuers’ attack on it in a wider context relating to the law on contribution and relief, I find it convenient to deal with the "simple" argument first.

Before turning to the defenders’ "simple" argument, however, I should record that counsel for the pursuers submitted that the Lord Ordinary had been wrong to deal with the defenders’ argument at all since it was not focused in a specific plea-in-law nor otherwise foreshadowed in the defenders’ pleadings. Had it been, the pursuers might well have wished to debate the point in procedure roll since, if correct, it was a complete answer to most of the actions and proof in those actions had therefore been unnecessary. It is fair to say that counsel for the pursuers did not advance the argument unduly strenuously and by the time senior counsel came to address us it had been reduced to the status of "a grumble".

It may well be that it would have been preferable for the defenders to focus their argument in a specific plea-in-law. It may well be also that it would have been preferable if the point had been debated in procedure roll. But we do not know when exactly the particular argument occurred to counsel for the defenders - it may, for instance, have come to mind only during the proof and even at a late stage in the proof. The reasons for the lack of a specific plea or for the defenders’ not having taken the point in procedure roll would obviously be factors in any question of expenses.

What the Lord Ordinary had to decide, however, was whether it was open to the defenders to take this fundamental point under their general plea to the relevancy of the pursuers’ case. He decided that it was and I agree with him: the defenders’ argument

is indeed directed to the relevancy of the pursuers’ case as a whole and can therefore be dealt with under such a general plea. Moreover, if an argument can properly be advanced under a general plea to the relevancy, then it can properly be advanced on that basis even if it occurred to counsel only at a very late stage in the proceedings, long after the plea itself was tabled. That having been said, it could have been that the pursuers were prejudiced by the lack of notice of the particular argument - if, for instance, they might have wished to lead evidence to counter some aspect of the argument. But in this case counsel for the pursuers made no motion to the Lord Ordinary to be allowed to lead additional evidence and, before us, they confirmed that they would not have wished to do so. They were also given time to prepare their reply to the defenders’ argument. In that situation I can detect no real prejudice which the pursuers suffered in the conduct of these proceedings from the sudden appearance of the defenders’ fundamental argument. If the Lord Ordinary had rejected the defenders’ argument, its sudden emergence would have made no difference. Since the pursuers were given time to prepare their response and did not wish to lead further evidence, they would apparently have fared no better, and the Lord Ordinary would still have accepted the defenders’ argument, even if it had been signalled from the outset. As the mounds of authorities assembled for the reclaiming motion proclaimed, the once-novel point has certainly been fully researched by now. In those circumstances I am satisfied not only that the Lord Ordinary was correct to consider the defenders’ argument but that it is proper for us to do so too.

In presenting their argument that the payment by the insurers had the effect of extinguishing the contractors’ liability under the indemnity clauses, counsel for the defenders accepted, of course, that payments by an insurer are not generally regarded as having the effect of extinguishing a third party’s liability to the assured. To take only the most obvious example, it has long been settled that a wrongdoer’s liability to pay damages is not affected by the fact that the victim may have been indemnified for his loss under a contract of insurance. See, for instance, Bradburn v. Great Western Railway (1874) L.R. 10 Ex. 1. Counsel argued, however, that a clause or contract of indemnity was different. Under such a contract the person to be indemnified is entitled to be indemnified for his loss but is entitled to nothing more. Therefore, it was said, in a case where the person seeking to be indemnified had already been indemnified by his insurers, he no longer had any loss for which he could be indemnified under the contract or clause of indemnity.

I do not find the supposed distinction compelling. In a case where an owner’s property is damaged by the wrongful act of a third party, the third party’s liability is to pay damages which will compensate the owner for the loss which he has suffered as a result of the third party’s act. The liability arises only where there is loss. In a particular case, of course, the owner may have been insured and so may receive a full indemnity from his insurers. In those circumstances he will no longer be suffering any actual loss as a result of the damage to his property. Nevertheless, as between the owner and the third party, he is regarded as still suffering a loss, at least for the purpose of allowing proceedings to be brought in his name to recover that loss from the third party. Were the law not to treat him as continuing to suffer a loss for these purposes, there would be no loss for which the third party would remain liable to compensate him; he would have no remaining right to damages from the third party and so there would be no right which the insurers could enforce by raising proceedings in his name. In other words subrogation could not operate. Indeed precisely such an argument, that there could be no subrogation because the claim had already been extinguished, was long ago advanced before, and rejected by, the Privy Council in an appeal from Lower Canada, Quebec Fire Insurance v. St. Louis (1851) 7 Moo. P.C. 286.

So, it is critical to the entire approach of the law to many routine claims for damages which are brought before our courts that the pursuer is regarded as continuing to suffer loss even though he has been indemnified for his loss by his insurer. In all these cases any payment by the insurer to the assured - indeed the very existence of a contract of insurance - is said to be res inter alios acta. For that reason, when considering whether an assured’s right to be indemnified is to be treated as remaining in existence, even after the assured has been indemnified by his insurer, I do not find the answer simply in the fact that the indemnifier’s obligation is to indemnify for loss. Equally, a wrongdoer’s liability is to compensate for loss. In both cases, the question is whether, as between the assured and the third party, the law regards the assured as continuing to suffer loss even though he has been indemnified by his insurer. We know that in the case of a wrongdoer the law does indeed treat the assured as continuing to suffer loss in those circumstances and so allows an action to be brought in his name. For my part I can see no real distinction, for present purposes, between that kind of case and the case of an indemnity clause or contract; nor do I perceive any reason in principle why the approach of the law should be different in the two cases.

What counsel for the defenders were really arguing was that the question should be decided by focusing on the contract or clause of indemnity and its characteristics. In my view that is to look at the matter from the wrong end. Subrogation is a remedy which is available to the insurer under the contract of insurance and its purpose is to give effect to that contract as one of indemnity. As will be seen in more detail in Part 1.4 below, subrogation works by giving the insurer who indemnifies the assured the right to raise proceedings in his name and, by the very nature of the circumstances in which it comes into play, the proceedings by the insurer must necessarily be to recover sums which have already been paid to the assured or paid on behalf of the assured. The remedy could not exist unless, in insurance as in other cases of indemnity, our law took the view that payments made by the indemnifier fall to be ignored in proceedings raised by him in the name of the assured against a third party. Those payments are ignored in all cases where subrogation applies, whatever may be the basis of the action which is raised in the name of the assured after he has been indemnified by the insurer.

Examples make this clear. Payments by an insurer are ignored where grain stored in a granary is insured by the owner and, the grain having been destroyed in a fire, the owner is indemnified by the insurer. Even though the owner is no longer suffering any loss, the insurer is entitled to stand in his place and sue the wharfinger for breach of duty, "whether it is a breach of duty, or of custom, which is a local law, or whether it is a duty imposed by the general law, or a duty imposed by the contract of carefully keeping the goods": North British and Mercantile Insurance Company v. London, Liverpool, and Globe Insurance Company (1877) 5 Ch. D. 569 at p. 576 per Jessel M.R.; at pp. 581 - 582 per James L.J.; at pp. 584 - 585 per Mellish L.J.; at p. 587 per Baggallay J.A. The court rejected the argument that a distinction should be drawn between such a case and one where the third party’s liability is based on tort. Similarly, where a cargo owner’s cargo is sacrificed to avoid a common peril and he is indemnified by his insurer for loss, the payments to the owner are ignored and the insurer is subrogated to the owner’s claim for general average to recover the sum which he paid to the owner: Dickenson v. Jardine (1868) L.R. 3 C.P. 639. Equally, where a house is destroyed by fire, the insurer who has indemnified the owner can recover the amount of the indemnity by raising proceedings in the name of the owner against the tenant on a covenant to repair, there being no question of fault on the part of the tenant. Again, the fact that the owner has been paid is ignored: Darrell v. Tibbitts (1880) 5 Q.B.D. 560 at p. 563, per Brett L.J.; at p. 564, per Cotton L.J.; at pp. 566 - 567 per Thesiger L.J.: Andrews v. The Patriotic Assurance Company of Ireland (1886) 18 L.R. Ir. 355 at p. 365 per Palles C.B.

In all these cases the law has chosen to disregard the payments made by the insurer to the assured and to permit the insurer to raise an action in the assured’s name. This is not a standpoint which is compelled by legal logic alone: if nothing but legal logic had been in play, the law could equally well have taken the opposite view. It could have regarded the payments made by the insurer as having the effect of indemnifying the assured and so as extinguishing the loss. But the law has consistently taken the opposite view and, as a matter of substance, this can only be because the policy underlying the law of insurance is that the insurer should not bear the ultimate responsibility for indemnifying the assured in these cases. Instead, the third party who is under an enforceable legal obligation to pay the assured is made to bear the ultimate responsibility. In North British and Mercantile Insurance the liability of the wharfingers to the merchants was described as "the primary liability" as opposed to the liability of the insurance company to indemnify the merchants by virtue of their contract of insurance: 5 Ch. D. at p. 587 per Baggallay J.A.; cf. at p. 578 per Sir George Jessel M.R. and at p. 582 per James L.J. This distinction has been followed in subsequent cases, for example, by Lord Low in Sickness and Accident Assurance Association Ltd. v. General Accident Assurance Corporation Ltd. (1892) 19 R. 977 at p. 980 where he referred to the decision of the House of Lords in Simpson & Co. v. Thomson (1877) 5 R. (H.L.) 40 as exemplifying

On the basis of the authorities the doctrine could perhaps be stated in a more general form to the effect that where the assured has a primary right against a third party which goes to reduce his loss, whether the right be based on a delict or on a contract, an insurer on making good the loss is entitled to be put in his place and to enforce the remedies which he would have had against the third party.

Counsel for the defenders sought to distinguish the present cases from other cases involving a liability on a third party by pointing out that they involve two sets of companies, the insurers and the contractors, both of which undertook, for a consideration, to indemnify the pursuers in the events which occurred. Counsel suggested that, since both had undertaken the obligation to indemnify as a commercial transaction, there was no obvious reason why the contractors rather than the insurers should bear the ultimate liability to indemnify the pursuers. The answer to counsel’s suggestion must be that the pursuers are regarded as having a primary right against the contractors and a secondary right against the insurers. The primary right derived from the agreement under which the contractor in question carried out its role on the platform. The contractor’s indemnity was just one element in the complex of relationships which were put in place to allow the platform to be operated. The insurers were not a part of that complex of relationships but were external to it, owing an obligation to the pursuers by reason of a contract which was concerned only with insuring the pursuers against losses suffered by them as a result of the operation of the platform. More particularly, in the absence of any indication to the contrary, it can be assumed that the pursuers took out and paid for the policy of insurance, partly at least, to protect themselves against any loss which they might suffer as a result of any failure by the contractors to fulfil their contractual obligations to indemnify the pursuers against the claims and losses specified in the respective indemnities. The insurance policy was intended to benefit the pursuers. If the defenders’ argument were correct, by paying for the insurance policy, the pursuers would have benefited not themselves but the defenders, who would be relieved pro tanto of their contractual obligation to indemnify the pursuers against the relevant claims and losses. That is inconsistent with the nature of a contract of insurance. The perception that a contract of insurance is intended to benefit the assured rather than a third party, expounded long ago by Bramwell B. in Bradburn v. Great Western Railway Co., applies as much in the present situation as in any other.

I therefore see no reason in principle why the law should adopt a different approach and exclude the possibility of a subrogated action in the case of a clause of indemnity. Such a clause of indemnity, however absolute its terms, is just an undertaking by the indemnifier to pay to the creditor the amount of the loss which he has suffered. In essence that obligation is no different from the absolute obligation of the wharfinger to make good the loss suffered by the owner of grain stored in his warehouse and destroyed by fire (North British and Mercantile Insurance); or the obligation of a tenant under a lease to repair the landlord’s house if it is destroyed by fire (Darrell v. Tibbitts). In these cases the insurers can raise subrogated proceedings against the wharfinger or tenant and recover the loss, even though the owner has been indemnified. If the law does not impose the ultimate liability to indemnify on the insurers in these cases, there can be no reason of legal policy to make the insurers bear the ultimate liability in a case like the present. They should therefore be entitled to raise proceedings in the pursuers’ name based on the indemnity clauses.

I have reached that view by looking at the issue in the broad context of the law of insurance and subrogation. What is perhaps most surprising about the defenders’ argument is the paucity of authority specifically dealing with it. At the same time, there is nothing in the general authorities on subrogation which would suggest that contracts of indemnity fall into a distinct category, subject to an entirely different rule. On the contrary, the law on the availability of subrogation tends to be stated so broadly as to leave little or no room for an exception of the kind envisaged by the defenders. For instance, one of the classical descriptions of subrogation, by Brett L.J. in Castellain v. Preston, 11 Q.B.D. at pp. 388 - 389, is in these terms:

It is hard to see how Brett L.J. could have stated the principle in broader terms and equally hard to imagine that he did not intend it to be comprehensive. Certainly, I find it impossible to say that he intended to exclude the right of an assured who is the creditor under an indemnity clause or contract, since such a right is undoubtedly one "by the exercise of ... which" any relevant loss of the assured "can be ... diminished." This passage from Brett L.J.’s opinion was quoted with approval by Lord Jauncey in the House of Lords in Esso Petroleum Co. Ltd. v. Hall Russell & Co. Ltd. 1988 S.L.T. 874 at p. 882 D – F; [1989] A.C. 643 at pp. 671 H – 672 C.

Although they combed the British law reports, counsel were unable to turn up any case dealing squarely with the right of insurers to sue in the name of their assured on the basis of an obligation of indemnity. The lack of any reported decision does not persuade me that such an action would be legally impossible; rather, it may tend to suggest that the competency and relevancy of such an action, which must have been potentially open for argument on countless occasions, have long been regarded as established. In that connexion it is of some significance that, in Larrinaga Steamship Co. v. The King [1945] A.C. 246 at pp. 256 and 261, Lord Wright and Lord Porter assumed that marine risks insurers would have been subrogated to the shipowners’ rights under the indemnity from the charterer which forms part of the employment clause in a time charter. Counsel for the defenders pointed out, quite correctly, that their Lordships’ views were obiter. But the striking point for present purposes is, surely, that these giants of commercial law took the point for granted. Counsel’s only other submission was that, however eminent the source, the views were ill-founded. It was not suggested, however, that their Lordships’ views had been criticised by the courts or by the profession in the intervening half-century. This is important when it is recalled that the comments of Lord Wright and Lord Porter were directed not to an ad hoc term but to an indemnity in a standard clause, discussed, for instance, in Scrutton on Charterparties (20th edition, 1996), pp. 366 - 368 and Carver on Carriage by Sea (13th edition, 1982), pp. 484 - 486. I note moreover that in Whistler International Ltd. v. Kawasaki Kisen Kaisha Ltd. [1999] 3 W.L.R. 724 at pp. 739 E – 740 B Potter L.J., with whom the other members of the Court of Appeal concurred, quoted the passage from Lord Wright’s speech without giving any sign that he considered that it contained an anomaly.

The search by counsel for the pursuers for authority on this matter did not stop, however, at the shores of the United Kingdom. They pursued their quest among the many jurisdictions of the United States and there they were rewarded with a number of discoveries. In total they cited seven cases. Rather than examine them all, I select two which counsel for the defenders accepted were directly in point.

The first is a decision of the Supreme Court of Washington, Consolidated Freightways, Inc. v. Moore 38 Wash. 2d 427, 229 P. 2d 882 (1951). Understanding the facts is not made any easier by a slip in the first sentence of the judgment of Mallery J. where the parties are transposed. Contrary to what is said there, the defendant (Moore) leased a truck from the plaintiff (Consolidated) for a return journey from Portland to Seattle. The lease provided that

On the return journey the defendant collided with the vehicle of a third party who recovered a judgment for personal injuries and property damages against the plaintiff and defendant, jointly and severally. The judgment was paid by the plaintiff with money provided for that purpose by its insurers. In terms of an agreement with its insurers, the plaintiff raised an action against the defendant to recover the sum which the insurers had paid, based on the indemnity in the lease agreement. The plaintiff succeeded at first instance and the defendant appealed. The relevant part of the Supreme Court’s decision is in these terms (38 Wash. 2d at pp. 430 - 431; 229 P. 2d at pp. 884 - 885):

The judgment shows that the court regarded the doctrine of subrogation as a tool with which to ensure that the proper person ultimately bears the responsibility for the cost of indemnifying the assured. Given that general approach, the court saw no reason to distinguish between the situation where an insurer was subrogated to an action in tort and the situation where the insurer was subrogated to an action on a contract of indemnity. In each case the remedy was available in order to ensure that the appropriate person bore the ultimate liability.

The second case is North Central Airlines, Inc. v. The City of Aberdeen, South Dakota 370 F. 2d 129 (8th Cir. 1966). The action arose out of an accident in which a lady was injured in a fall in the entrance to the terminal building of Aberdeen Airport in South Dakota. Under a lease from Aberdeen, North Central had the exclusive use of certain parts of the building and shared use of all public space in and around the terminal building. In terms of Article X of the lease

The injured lady sued Aberdeen for damages but lost her action. Aberdeen then sought to recover their costs from North Central under the terms of the indemnity. The court at first instance upheld Aberdeen’s claim for their costs and North Central appealed on various grounds. One of their arguments was that Aberdeen were not entitled to recover attorney fees and expenses since they had been insured for these. The Eighth Circuit of the United States Court of Appeals rejected that argument (370 F. 2d at p. 134):

The court went on to examine a further decision to the same effect. This case confirms the view that the liability of the debtor under an indemnity is not affected by the fact that the creditor may have been paid the sum in question by an insurer. (I observe in passing that, so far as I am aware, it has never been suggested that under our law a successful party who has insurance covering its legal expenses is for that reason debarred from seeking those expenses against his opponent.)

Although, as counsel for the defenders pointed out, in F. H. Vahlsing, Inc., v. Hartford Fire Ins. Co. 108 S.W. (2d) 947 (1937) the situation was slightly different, since the insurers had taken an assignation of the assured’s rights under an indemnity, the decision of the Court of Appeals of Texas does none the less show that, even though the assured had been indemnified by the insurers, the assured’s rights under the indemnity subsisted, at least to the extent of allowing them to be used by the insurers in order to place the ultimate responsibility on the party bound by the indemnity. It therefore supports the pursuers’ argument. Indeed only one of the American cases, Patent Scaffolding Co. v. William Simpson Construction Company 256 Cal. App. 2d 506, 64 Cal. Rptr. 187 (1967), was against the pursuers. Counsel for the defenders recognised, however, that it had been decided in the context of a doctrine of "equitable subrogation" which appears to be substantially different from the legal principles applied in the established case law in this country. In these circumstances I did not find the case of assistance.

The American authorities which I have quoted provide support for the view that, contrary to the submission of the defenders, for the purposes of subrogation an obligation of indemnity owed by a third party is not to be treated differently from other obligations owed by a third party. An insurer who indemnifies an assured should be entitled to bring an action in the assured’s name to enforce an obligation of indemnity owed by a third party to the assured, just as the insurer can bring such an action to enforce a right to damages for breach of contract or for delict. The purpose of the action, as with any other subrogated action brought by an insurer, is to ensure that the third party rather than the insurer bears the ultimate liability to indemnify the assured. The same legal policy which justifies subrogation by an insurer in the case of loss caused by breach of contract or by delict justifies subrogation to enforce an obligation of indemnity.

For these reasons I reject the defenders’ "simple" argument. But counsel for the defenders supplemented that argument with a much wider submission to the effect that the insurers’ rights, if any, against the defenders are not rights to pursue a subrogated action in the name of the pursuers but rights to seek contribution in an action of relief. From the terms of his opinion it appears that the Lord Ordinary was considerably influenced by this aspect of the argument which raises certain very fundamental matters.

Counsel for the defenders put their argument in this way. The insurers had entered into a contract of indemnity with the pursuers; the defenders had entered into contracts with the pursuers and all those contracts contained indemnity clauses. Although the risks covered by the insurance contract were not, of course, identical with the events giving rise to the obligations of indemnity under the contracts for services, in fact in each case the insurers and the defenders had contracted to indemnify the pursuers in the events which had occurred. In that situation the law regarded the insurers and the defenders as co-obligants, each liable in solidum to the common creditor. Where, as here, one of the co-obligants had indemnified the common creditor, the right of the other co-obligant was limited to a right of contribution, enforceable in an action of relief. That right of contribution arose precisely because the payment by one co-obligant discharged the obligation of the other: to prevent the second co-obligant being unjustly enriched in this way, the law allowed the first co-obligant to recover one-half of the sum which he had paid to the common creditor, so that in the end each of the co-obligants would bear a pro rata share of the debt. It was not, therefore, anomalous that the insurers should not be entitled to bring the present proceedings against the defenders; they could not do so because their payment to the pursuers had discharged the defenders’ liability under the indemnity and had thereby given the insurers a new right to sue the defenders for contribution in an action of relief. The insurers might have lost that new right by reason of prescription, but, if so, that was merely because they had analysed their legal position incorrectly and had raised the wrong kind of proceedings. These last matters were peculiar to the facts of this particular case and did not affect the position in principle.

For the pursuers Mr. Batchelor submitted that the defenders’ argument presupposed that the payment by the defenders had indeed extinguished the defenders’ obligation to the pursuers. If, as he had argued, the payment by the insurers was truly res inter alios acta and did not extinguish the defenders’ obligation under the indemnity clauses in their contracts, then on the defenders’ own argument no obligation of contribution could arise between the defenders and the insurers. In any event it was wrong to regard the insurers and defenders as being co-obligants for these purposes. The primary or ultimate obligation to indemnify rested on the defenders and any obligation of the insurers was secondary to that obligation. Accordingly, where the insurers had fully indemnified the pursuers, they were entitled to raise proceedings in the pursuers’ name in order to recover from the defenders the sum which they had paid to the pursuers. In this way the primary or ultimate liability would rest on the defenders. Since the insurers were entitled to recover the whole of their outlay and not simply a contribution of one-half, an action of relief would have been irrelevant.

In dealing with the defenders’ "simple" argument I have held that the contractors should bear the ultimate responsibility for indemnifying the pursuers. In the terms used in North British and Mercantile, the contractors have "the primary liability" to indemnify the pursuers. That being so, the insurers, who have paid on behalf of the pursuers, should be able to recover their expenditure from the contractors. How the law brings that about may be more a matter of machinery than of principle, but it is an important matter, nonetheless. One possible mechanism would be by subrogation, allowing the insurers to stand in the shoes of the pursuers and sue on the indemnity clauses. Another possible mechanism would be by an action of relief. Counsel for both parties assumed that these two mechanisms were necessarily mutually inconsistent. In my view, in Scots law at least, that assumption is misconceived and tends to distort the legal picture, thereby introducing unnecessary complications and untenable distinctions. In addressing this matter I begin by looking more closely at the nature of subrogation in Scots law.

Although the term "subrogation" is rarely encountered nowadays except as a legal term of art, the word itself was at one time used more generally to refer to the substitution of one person for another (Oxford English Dictionary s.v. subrogation, 1). In modern Scots law at least, we usually think of subrogation in relation to the position of an insurer which has indemnified its assured, but it has long been recognised that this is just one particular application of a concept which operates more widely. Speaking of the situation of underwriters who had indemnified a shipowner for the loss of a vessel, Lord Cairns L.C. observed in Simpson & Co. v. Thomson 5 R. (H.L.) at p. 42:

Similarly, in Esso Petroleum Co. Ltd. v. Hall Russell & Co. Ltd. 1988 S.L.T. at p. 882 G – H; [1989] A.C. at p. 672 E – F Lord Jauncey noted that subrogation:

I draw particular attention to Lord Jauncey’s observation that subrogation is to be seen at work in the case of cautionary obligations where the cautioner has paid the creditor.

Lord Chancellor Cairns speaks of indemnifiers "being entitled to succeed to" all the ways and means by which the person indemnified might have protected himself against, or reimbursed himself for, the loss. Sometimes it is said that the indemnifier stands in the shoes of the person whom he has indemnified. Images of the indemnifier being put in the place of, or standing in the shoes of, the person indemnified are consistent with the basic idea that one person is "substituted" for the other. They may also be apt if they conjure up a picture of the indemnifier succeeding to or using the rights of the person indemnified rather than of the person indemnified transferring those rights to the indemnifier, as would happen in the case of assignation as usually understood nowadays in our law. The courts have often made clear that there is a distinction between subrogation and that kind of assignation. Lord President Emslie reaffirmed this in Esso Petroleum 1988 S.L.T. at p. 43 D -E:

The Lord President emphasises that subrogation does not involve the assured divesting himself of his rights in favour of the insurer; rather, the insurer can take advantage of the assured’s rights against third parties. This point is perhaps most dramatically illustrated by the decision of the Court of Appeal that, even after he has been indemnified, though not completely, the assured can raise proceedings against a third party, despite the objections of the insurer: Morley v. Moore [1936] 2 K.B. 359. Similarly, it is because the rights remain the rights of the assured that, when by virtue of subrogation the insurer raises proceedings against any third party, the proceedings run in the name of the assured. Only if the assured actually assigns his rights to the insurer can the insurer raise an action in its own name: Esso Petroleum 1988 S.L.T. at p 878 H; [1989] A.C. at p. 663 F per Lord Goff citing the decision of Roskill J. in Compania Colombiana de Seguros v. Pacific Steam Navigation Co. [1965] 1 Q.B. 101.

Subrogation is therefore properly to be distinguished from assignation as that term is nowadays generally understood and as it is used by Lord Emslie in the passage in Esso Petroleum. At first sight, at least, it may therefore seem surprising that Lord Jauncey should have given, as an example of subrogation, the right of a cautioner who pays the debt to take over the rights of the creditor under his agreement with the principal debtor and with any co-cautioner. After all, the general understanding is that the cautioner

In other words, instead of simply putting the cautioner in a position where he can exercise the creditor’s rights, the law provides that the cautioner has a right to obtain an assignation of those rights from the creditor. Superficially at least, this right of the cautioner to require an assignation does not appear to conform to the idea of subrogation as explained in the other cases. At a more fundamental level, however, Lord Jauncey’s comments reveal that the approach of the law in insurance and cautionry is the same: what has happened is that the law and practice relating to the assignation of rights have changed.

Nowadays we think of the cedent transferring rights to the assignee. That causes us no difficulty since modern legal systems tend to recognise that rights are transferable. At an early stage in its history, however, Scots law regarded contractual rights as being, of their very nature, personal to the creditor and as therefore not capable of being transferred to other people. One device, which was adopted to avoid the resulting practical problems and to give the effects of a transfer, was for the creditor to agree that the other party could take proceedings to enforce the right, using the creditor’s name but keeping any sum which was recovered. In other words the creditor made the other party a procurator in rem suam. See, for example, Stair, Institutions 3.1.3; Bell’s Principles, para. 1459. As Lord President Inglis remarked, a procuratory in rem suam "is just one of the definitions of an assignation": British Linen Bank Co. v. Carruthers and Ferguson (1883) 10 R. 923 at p. 926. Signs of that approach to assignation survive today in the rule that an assignee may sue either in his own name or in the name of the cedent: Fraser v. Duguid (1838) 16 S. 1130.

Even after the law came to accept that rights could be transferred, assignations could still be either direct or indirect. The direct assignation was the form of assignation, familiar to us today, in which the cedent transfers his right to the assignee. The indirect form of assignation, which could still be used after the Transmission of Moveable Property (Scotland) Act 1862, involved the cedent constituting the assignee his lawful cessioner and assignee. The style was:

This clause is sometimes referred to as the "clause of surrogation" or the "clause of assignation and surrogation". See, for instance, W. Ross, Lectures on the History and Practice of the Law of Scotland, relative to Conveyancing and Legal Diligence (first edition, 1792, second edition, 1822), p. 192 and J. Craigie, Scottish Law of Conveyancing Moveable Rights (1894), p. 237.

The verb "to surrogate" is a variant form of the verb "to subrogate" and has the same essential meaning of "to substitute" (Oxford English Dictionary, s.v. surrogate, as a verb, giving a variety of usages). In these indirect assignations the verb was used to refer to the cedent putting the assignee into his place as creditor of the various rights. Whatever may be the precise effects of substitution in the two contexts, the basic idea of "surrogation" or substitution in indirect assignations is similar to the idea of "subrogation" or substitution in our law today. So, although it is correct to say that the idea of subrogation differs from the modern idea of assignation, subrogation was actually one of the techniques which was used to effect an assignation under our older practice. For that reason there is nothing anomalous in describing the right of the cautioner as one of subrogation: subrogation and assignation, as nowadays understood, are just different techniques which the law uses to achieve the purpose of putting one person into the place of another so that he can exercise particular rights.

This analysis is confirmed by Pothier, Coutumes des Duché, Baillliage et Prévôté d’Orléans 20.5.1 where he says that subrogation can come about in different ways, whether by force of law, by virtue of a requirement which is made of the creditor, by agreement with the creditor or by agreement with the debtor. In 20.5.2 he gives the cases of a co-obligant and a surety as examples of the second category where the subrogation comes about by reason of a requirement made of the creditor. When they pay, co-obligants and sureties have the right

Pothier adds that the same rule of charity which obliges us to love our neighbour as ourselves, and therefore to aid him as much as we can without prejudicing ourselves, means that the creditor cannot refuse this subrogation. He goes on (20.5. n. 680) to analyse the position of the party who pays the debt in terms of a procuratory in rem suam:

Reference may also be made to Pothier, Traité des Obligations 2.6.4 and 3.1.6.2.

Pothier’s work had a profound influence on the compilers of the French Code Civil. Scarcely surprising then can be the language of Article 1251 al. 3 dealing generally with the position of a co-obligant who pays the common debtor:

Equally unsurprising is the language of Article 2029 on the position of a surety who pays the common creditor:

Since the Code does not form part of the law of Quebec, however, it was the analysis of Pothier and other older French writers which formed the basis of the reasoning of the Privy Council in Quebec Fire Assurance Company v. St. Louis 7 Moo. P.C. at pp. 316 – 317.

Whatever disputes there may be about its basis and origins in our law, one aspect at least of subrogation, as it applies to insurance, is now settled beyond all doubt: where the insurer is subrogated to the rights of the assured, it must raise any action in the name of the assured. As Lord Goff explained in his speech in Esso Petroleum 1988 S.L.T. at p. 878 F – H; [1989] A.C. at p. 663 E – F, the payment by the insurer indemnifying the assured does not have the effect of transferring the assured’s rights to the insurer and so the insurer cannot simply go ahead and itself raise actions based on those rights. None the less, because the insurer has indemnified the assured, the law gives it the right to insist that the assured should authorise it to use the assured’s name in proceedings against third parties. If need be, the insurer can take proceedings to compel the assured to grant the necessary authority - although in practice the matter is often regulated by a letter of subrogation which the assured signs at the time of payment, authorising the insurer to proceed in his name. See also Lord Goff’s remarks in Lord Napier and Ettrick v. R. F. Kershaw [1993] A.C. 713 at p. 741 C - G. The position is therefore similar to that envisaged by Pothier in the second of his categories of subrogation.

This basic idea of the assured authorising the insurer to raise proceedings in his name fits easily into the overall scheme of Scots law which has always recognised that the creditor in an obligation can constitute another as his procurator in rem suam - entitled to raise proceedings in the creditor’s name, but also entitled to keep for himself any sum which he obtains in those proceedings. The procurator in rem suam may not cut such a figure on our legal scene as once he did but, even after two thousand years, he remains waiting patiently in the wings, ready to act his part whenever, as here, occasion may demand. On that analysis, the insurer which has indemnified the assured is in effect entitled to insist that the assured constitute it as his procurator in rem suam for the purpose of raising proceedings against the third party. It is consistent with this overall approach that the insurer raises the proceedings in the name of the assured but keeps the proceeds in order to recoup its expenditure in indemnifying the assured.

The parallel which Lord Jauncey draws between the position of an insurer and the position of a cautioner is helpful also in considering the defenders’ argument that in this case the insurers should have brought an action of relief against the defenders and that the present proceedings are incompetent.

The liability of a cautioner is accessory to the liability of the principal debtor. Among other things this means that it is the principal debtor who is intended to bear the primary or ultimate liability for the debt. From this essential characteristic of the relationship flows the right of a cautioner, who pays the debt, to relief and indemnification from the principal debtor. See Gloag and Irvine, Law of Rights in Security, pp. 796 - 797:

The obligation of relief and indemnification arises de iure - out of the fact that the law regards the principal debtor as having been unjustly enriched by the cautioner paying the debt which he owed to the creditor. In the same way, an obligation of relief based on unjust enrichment arises among co-cautioners and other co-obligants in a joint and several obligation, but the obligation is one of contribution of the co-obligant’s pro rata share. The availability of this right of relief was disputed among Civil Law scholars for centuries – since in paying the creditor the cautioner had merely been performing his contractual obligation and any resulting enrichment of the co-obligant was therefore, so ran the argument, not unjust. Cf. Pothier, Traité des Obligations 2.2.7.4. But the law seems to have been settled in Scotland since the time of Stair. See Stair, Institutions 1.8.9 and Stirling v. Forrester (1821) 3 Bligh 575 at p. 596 per Lord Eldon L.C. Although the basis of the obligation of relief is similar in each case (unjust enrichment), the extent of that obligation differs in the two situations, the principal debtor being obliged to relieve the cautioner entirely, a co-cautioner being obliged to relieve him only pro rata. The difference in the extent of the obligation of relief depends on the much broader question of how the law views the relationship between the parties in question. Where, as in the case of the principal debtor and cautioner, the law considers that one party should ultimately bear the whole burden of the debt to the creditor, then that party must relieve the other to the full extent. Where on the other hand, as in the case of co-cautioners, the law considers that the burden of paying the debt should be shared, then a party who pays the whole debt will be entitled to relief in the form of a pro rata contribution from the others.

Counsel for the defenders argued that in all cases where there was a right to contribution, it must work in both directions - in other words, if one obligant has a right of relief against the other, that second obligant must have a similar right against the first. That will indeed be so where the nature of the relationship is such that each is to bear a pro rata share of the burden of the debt and the right is, accordingly, properly described as a right to contribution. It will not, however, be the case where, as with a cautioner and principal debtor, one of the obligants has the primary or ultimate obligation to the creditor and the other has a secondary obligation. In that situation, while the cautioner who pays the debt is entitled not merely to a contribution but to total relief from the principal debtor, the principal debtor has no corresponding right to any contribution or relief from the cautioner - for the simple reason that the principal debtor is the person who is to bear the final responsibility of paying the debt to the creditor.

It follows that, even if we approach the matter in the present case on the footing that, as the defenders argue, the insurers and the defenders are under parallel obligations to indemnify the pursuers, that does not in itself tell us anything about the extent of the rights of relief which arise if the insurers indemnify the pursuers. The extent of those rights of relief depends on the nature of the overall relationship among the parties.

If the insurers and the defenders were properly to be regarded as co-obligants on an equal footing in a joint and several obligation to indemnify the pursuers, the insurers would indeed have a right to relief to the extent of a contribution of their pro rata share from the defenders. That is the position which the law has adopted in respect of double insurance where two insurers are liable to indemnify the assured in the events which have happened. Reflecting the commercial reality and the practical understanding of insurers, the law treats the matter as if there were really only one insurance and the insurers are seen as co-obligants, each liable to bear a one-half share of the liability. Accordingly, if one of two insurers indemnifies the assured, it is entitled to recover a contribution of one-half from the other in an action of relief. See, for instance, Sickness and Accident Assurance Association Ltd. v. General Accident Assurance Corporation Ltd. 19 R. at p. 980 per Lord Low.

On the other hand if, as I have held, both the insurers and the defenders in the present cases are under an obligation to indemnify the pursuers but, as between the defenders and the insurers, the defenders should bear the ultimate liability, then the insurers have a right to total relief from the defenders. It follows that the defenders have no corresponding right of relief against the insurers. In other words, the insurers are like the cautioner who can bring an action of relief to recover the whole of his expenditure from the principal debtor but is not subject to any obligation of relief towards the principal debtor.

In Glasgow Provident Investment Society v. Westminster Fire Office (1887) 14 R. 947 at p. 992 Lord Young, dissenting, drew a similar distinction between the situation where a party is entitled to total relief and the situation where he is entitled to a contribution only. The kind of distinction which Lord Young drew is valid, even though his dissenting opinion was not ultimately to prevail: Westminster Fire Office v. Glasgow Provident Investment Society (1888) 15 R. (H.L.) 89. I should add that I do not consider that Kitto J. intended to say anything inconsistent with this analysis in Albion Insurance Co. Ltd. v. Government Insurance Office of New South Wales (1969) 121 C.L.R. 342 at p. 352. If he did, then I should respectfully disagree with his view.

In summary: an insurer which pays an assured should in principle be entitled by virtue of subrogation to bring proceedings in the name of the assured to recover its expenditure in indemnifying the assured; similarly, an insurer which pays an assured should in principle be entitled to a right of relief against another indemnifier to recover its expenditure in indemnifying the assured, where, as here, the law holds that the other indemnifier should bear the primary or ultimate responsibility for indemnifying the assured.

The defenders argued, however, that, if the insurers’ right against the defenders was properly to be analysed as one of relief, the present action was necessarily irrelevant, since the insurers should have brought an action of relief in their own names against the defenders, rather than a subrogated action in the name of the pursuers. I reject that argument.

As the passage which I have quoted from Gloag and Irvine on Rights in Security, pp. 796 - 797 makes clear, a cautioner who pays has a right of total relief from the principal debtor as well as a right of relief in the form of a pro rata contribution from his co-cautioners, if any. It is well settled that, for the purposes of working out these rights against the principal debtor and the co-cautioners, the cautioner has the beneficium cedendarum actionum which entitles him to demand from the creditor in exchange for payment "an assignation of the debt, any security held for it, and any diligence done upon it, so as to enable him to enforce his right of relief against the principal debtor, or against co-cautioners": W. M. Gloag and R. C. Henderson, The Law of Scotland (10th edition, 1995), para. 20.15. Bell, Principles, para. 255 states in part:

The last sentence is vouched by a tract of authority stretching back beyond the time of Stair.

The position as set out in these texts is that, where the cautioner has a right of total relief against the principal debtor and is therefore entitled to recover the full amount of the debt which he paid to the creditor, he can seek to recover the sum due to him by virtue of his right of relief by taking an assignation of the creditor’s rights against the principal debtor and proceeding on the basis of the principal creditor’s rights. Indeed, given that an assignee can sue in the name of his cedent, there is no reason why he should not raise any necessary proceedings in the name of the creditor - and this is indeed what Bell seems to envisage in the last sentence of the passage which I have quoted. In the same way Bell, Principles, para. 268 notes that, so far as the position of co-cautioners is concerned, at one time it was held that the beneficium cedendarum actionum was unnecessary in our law and "that an assignation could not be demanded. But it is now settled that an assignation may be demanded" (emphasis as in the original).

It is recognised, for instance by Lord President Emslie and Lord Jauncey in Esso Petroleum, that the same principles of the law of indemnity underlie both the law of cautionry and the law of insurance. The principles which have been worked out in cautionry may therefore afford guidance on this aspect of the law of insurance. Consistently with those principles, an insurer may raise proceedings in the name of the assured when the assured has authorised it to do so and, as a procurator in rem suam, the insurer is in the same position as an assignee under the old form of assignation. More particularly, the insurer may raise such proceedings where the assured has a primary right against a third party under a contract of indemnity and the purpose of the proceedings is for the insurer to recover the sum which it paid to the assured and in respect of which it is entitled to total relief from the third party. A subrogated action against a third party is a recognised and perfectly proper way of working out a right of relief against that third party. Moreover, the defenders, who have all along been well aware that the present test actions - with the partial exception of the Stena Offshore action - have been brought by the insurers to recover sums expended by them, have never suggested that, as defenders, they have thereby been prejudiced, e.g. by not being in a position to obtain a discharge from the insurers. Had they raised any such difficulty, the matter could have been resolved, for instance, by allowing the insurers to be sisted as pursuers. Cf. Fraser v. Dunbar (1839) 1 D. 882. For this reason, I would reject the defenders’ argument that the present actions by the insurers, even though raised in the name of the pursuers and with their consent, would be irrelevant if the correct analysis were that the insurers had a right of total relief against the defenders. Equally, even on the defenders’ assumption - which I reject - that the insurers were entitled to relief only to the extent of a pro rata contribution, it appears to me that the present actions would be competent on the basis that the insurers had a claim of relief against the defenders and were authorised to raise the proceedings in the name of the pursuers. The actions would be relevant, however, only to the extent of the pro rata contribution due from the defenders.

I emphasise that the approach which I have outlined would not apply, of course, to cases of double insurance. As Lord Low stressed in Sickness and Accident Assurance 19 R. at p. 980, double insurance has been treated in a somewhat special manner by the law. The various policies taken out by the assured are treated as truly one insurance and an assured who has been indemnified by one of the insurers cannot recover any more from another insurer. Lord Low’s approach was adopted by Barwick C.J. in Albion Insurance 121 C.L.R. at p. 347. Having explained the particular analysis which applies in cases of double insurance, Lord Low goes on to distinguish the situation in double insurance from the situation where an assured has a primary right against a third party. In double insurance the assured has no such primary right against any third party and so there is no right which an insurer can use to enforce its right to a pro rata contribution from any other insurer. In cases of double insurance, therefore, the insurer’s only way to enforce its right to the appropriate contribution is by means of an action of relief. See also the decision of the High Court of Australia in Sydney Turf Club v. Crowley (1972) 126 C.L.R. 420.

Counsel for the defenders attached considerable importance to one particular argument: that a right of relief or contribution between the insurers and the defenders was necessarily inconsistent with a subrogated claim by the insurers, since a subrogated claim presupposed the continuing existence of a right of action by the pursuers against the defenders, whereas a right of relief presupposed that the right of action by the pursuers had been extinguished. Indeed the right of relief, it was said, would arise only because the defenders had been enriched by the pursuers’ right of action being extinguished when they were indemnified by the insurers. Counsel referred to a passage from the speech of Lord Goff in Esso Petroleum 1988 S.L.T. at p. 878 B - E; [1989] A.C. at pp. 662 G – 663 B. To a considerable extent counsel for the pursuers seemed to accept and to endorse that line of argument, although they sought to turn it back against the defenders: because the insurers had a subrogated claim against the defenders, there could be no question of a right of relief between the insurers and the defenders.

However logical such an argument may be, it does not represent the law. The life of the Civil Law, no less than of the Common Law, "has not been logic: it has been experience." Countless generations of experience in many lands have taught that it is useful for sureties (Scotice cautioners) and co-obligants who have a right of relief to be able to enforce it by using the rights of the creditors whom they have paid. Hence the law has given them the right both to obtain assignations of the creditors’ rights against the principal debtors or co-obligants and to exercise the rights thus acquired. Those assignations would be at best pointless, if the payments to the creditors had the effect of extinguishing the creditors’ rights altogether. So the law proceeds on the basis that the sureties or cautioners and co-obligants can exercise the creditors’ rights and, to that extent at least, those rights survive the payment to the creditors.

Mr. Wolffe described this aspect of the law as "a conundrum", but it is a conundrum which has been exercising lawyers across Europe and beyond since the beneficium cedendarum actionum first made its appearance in the law of ancient Rome. In D.46.1.36, Paul 14 ad Plautium, Paul overcomes essentially the same objection as the defenders’ by arguing that, when a surety pays a debt, the payment to the creditor is not made in order to pay off the debt owed by the principal debtor but "in a certain way" to buy it. This ingenious, if somewhat tortured, reasoning is significant precisely because it shows that, when Paul was writing in the early third century A.D., the law was already settled and he had no option but to try to rationalise it - a comparatively early example of legal pragmatism, perhaps. About a millennium-and-a-half later, Pothier, Coutumes des Duché, Baillliage et Prévôté d’Orléans 20.5 n. 67 follows Paul’s line of reasoning:

It is noteworthy that Pothier sees the fiction that the payment has been made to buy the debt as being designed purely for the benefit of the party who has paid the creditor – as between the creditor and the debtor, the payment has the effect of extinguishing the debt. Building on that tradition, the Dalloz commentary on Articles 1252 and 2029 of the French Code Civil summarises the position in this way:

Similarly, under the German Bürgerliches Gesetzbuch the creditor’s rights against the principal debtor (Article 774) and co-sureties (Article 426 II) survive and pass to the surety who has paid the debt. Under Article 426 II the same applies generally where one co-obligant pays the common debtor. For Scots law Bell, Principles, para. 558, dealing not only with cautioners but with co-obligants, formulated the same ancient paradox perhaps as elegantly as may be:

The observations of Lord Goff in Esso Petroleum are not inconsistent with what is said by Bell. Lord Goff was concerned with the situation where crofters had suffered damage due to an oil spill for which Hall Russell were said to be responsible. The crofters would have had a right to sue Hall Russell in delict. In fact, however, Esso indemnified the crofters for their loss - as they were required to do by an agreement among tanker owners, though not under any agreement with the crofters. Esso then sought to bring an action in their own name against Hall Russell, to recover the sums which Esso had paid to the crofters. The House of Lords rejected that claim as irrelevant. Lord Goff explained the position in this way (1988 S.L.T. at p. 878 A – F; [1989] A.C. at pp. 662 F – 663 D):

There is a certain difficulty in drawing guidance from the passage for present purposes, since Lord Goff was proceeding on the basis of the concession that the law of Scotland was the same as the law of England and so, understandably, he used the terminology of English law. The actual matter which he had to decide was whether Esso could bring an action in their own name to enforce the crofters’ claims in delict against Hall Russell on the basis of subrogation. Lord Goff held that they could not, since an action brought by an indemnifier on the basis of subrogation would have to be raised in the name of the party indemnified. That issue does not, of course, arise in the present case.

The actual situation considered by Lord Goff differed in two respects from the situations contemplated by Bell. In the first place, Lord Goff was considering the effect of the payment by Esso to the crofters on Hall Russell’s liability to them in delict. Bell, on the other hand, was considering the effect, on the principal debtor’s contractual liability, of a payment to the creditor by a surety or a co-obligant. Secondly, Esso were under no contractual liability to make the payment to the crofters. By contrast, in the cases considered by Bell, the surety or co-obligant pays the creditor because he is obliged to do so in terms of his contract with the creditor. Although Lord Goff did not spell this out, the fact that Esso were under no obligation to the crofters or to Hall Russell to make the payment was undoubtedly of significance for his approach. In English law terms, Esso were "volunteers" and payment by a volunteer does not discharge the debt unless and until the debtor adopts the payment. See Lord Goff and G. Jones, The Law of Restitution (fifth edition, 1998), pp. 127-128; P. Birks and J. Beatson "Unrequested Payment of Another’s Debt" in J. Beatson, The Use and Abuse of Unjust Enrichment (1991), p. 177, including p. 201 n. 6 in the Postscript; and G. Virgo, The Principles of the Law of Restitution (1999), pp. 236 - 238. It is not altogether clear whether the same rule applies in Scots law to payments made by someone who is under no obligation to make them. See, for instance "Obligations" in Stair Memorial Encyclopaedia Vol. 15 (1996), para. 97 (N.R. Whitty). But there is no need to explore the matter since, in so far as Lord Goff is contemplating that type of case, his comments are not directed at the kind of situation with which we are concerned.

Lord Goff’s remark that, because the payments to the crofters did not discharge Hall Russell’s liability to them, he could not see how Esso could have a direct claim against Hall Russell in respect of their payment to them, was the passage on which counsel relied for saying that the possibility of subrogation is inconsistent with the existence of a right of relief. For the reasons already given, however, the situation in respect of which Lord Goff made that comment is distinguishable from the situation upon which Bell was commenting and which arises in the present case. Bell does not deal with the case of a payment made to the creditor in a delictal obligation, but, at least in the context of payments by a surety or a co-obligant, he contemplates that the payment "will take away" the creditor’s right against the principal debtor, with the result that the surety or co-obligant obtains a right of relief against the principal debtor. At the same time, he holds that the payment "will not extinguish" the debt of the principal debtor which is therefore available to the surety or co-obligant to whom it is assigned in order to operate his relief.

The present case is analogous to the cases contemplated by Bell since the insurers indemnified the pursuers by virtue of their obligation under their contract with them. For these purposes we may consider the matter on the basis suggested by counsel for the defenders: the insurers and the defenders are looked upon as contractual co-obligants, one of whom has paid the common creditor but is entitled to relief from the other. On Bell’s approach, the payment may have taken away the pursuers’ own right as creditors to sue the defenders on the indemnity clauses, but it has not extinguished the liability of the defenders under the indemnities for the purposes of an action brought by the insurers in the name of the pursuers and with their authority. That action is a means by which the insurers can enforce their right to relief against the defenders.

On the basis of the authorities which I have discussed, in Scots law at least, there is no inconsistency in holding that an insurer which indemnifies the assured has in theory two methods of recovering its expenditure from another indemnifier who is meant to bear the ultimate liability for indemnifying the assured. The insurer can rely on its right of total relief from the indemnifier and raise an action of relief in its own name. Alternatively, it can seek in substance to work out its right of relief by bringing proceedings in the name of the assured against the indemnifier on the basis of the contract or clause of indemnity. That is what the insurers have done in this case and nothing in the authorities which I have examined suggests that the action is other than competent and relevant.

For these reasons I am satisfied that the Lord Ordinary - who, of course, heard a much more limited argument on the point than we did - was wrong to sustain the defenders’ general pleas to the relevancy.

The pursuers’ case against the defenders depends on the indemnity provisions in the various contracts. Issues relating to the construction of the indemnities lie at the heart of the case. An account of the arguments to which we listened is to be found in Part 3(a) of Lord Coulsfield’s opinion. When dealing with them in this part of the opinion I shall, for the most part, adopt the terminology of the indemnities except that, in order to simplify matters, I shall refer to the Company and the others entitled to benefit from the indemnities collectively as "the operators". It was common ground that, in interpreting the indemnities, the court required to take account of the statutory régime which applies to work in the North Sea. Less happily, counsel were not agreed on precisely what conclusions we should draw from the existence of that system.

2.1 The Statutory Régime in the North Sea

The foundation statute is the Mineral Workings (Offshore Installations) Act 1971 ("the 1971 Act"). Section 6 of the Act gives the Secretary of State power to make regulations for the safety, health and welfare of persons on offshore installations. By virtue of Section 11(1) and (2) any breach of a duty imposed by any provision of the 1971 Act or by any provision of regulations made under the Act which expressly applies the provisions of Section 11 is to be actionable so far, and only so far, as it causes personal injury as defined in subsection (7).

For present purposes the important regulations are to be found in The Offshore Installations (Operational Safety, Health and Welfare) Regulations 1976 (No. 1019)("the 1976 Regulations"). Regulation 32(1) imposes a far-reaching duty on various persons:

Regulation 32(2) and (3) go on to provide inter alia:

Regulation 33 provides that the provisions of Section 11 of the 1971 Act are to apply to the duties imposed on any person by the Regulations. It follows that breaches of the Regulations give rise to civil liability for personal injury caused by the breach. Although Regulation 34(4) gives a defence to a person who is prosecuted for a breach of the Regulations, if he can show that he exercised all due diligence to prevent the commission of the offence and that the relevant contravention was committed without his consent, connivance or wilful default, those defences are not available to a defender in civil proceedings.

The effect of these Regulations was not in dispute. If an employee of the operators did anything which was likely to endanger the safety or health of himself or other persons, then he himself would be in breach of Regulation 32(3), and the operators would be in breach of Regulation 32(1). No contractor would be liable. If, on the other hand, an employee of a contractor did anything which was likely to endanger the safety or health of himself or other persons, then he himself would again be in breach of Regulation 32(3), and the operators would be in breach of Regulation 32(1), but in addition the contractor who employed him would be in breach of Regulation 32(2).

Each of the test cases involves a different contractor and a different contract. Part 2(b) of Lord Coulsfield’s opinion gives a full account of the contracts. For present purposes I note that all the contracts contain indemnities, of course, but the terms of the indemnities are not identical. In broad terms the contracts fall into two groups: those where the indemnities are to be found in a clause comprising a single paragraph and those where the indemnity clause is divided into two paragraphs, the first containing a provision in rather general terms and the second containing more specific provisions. The London Bridge, Northern Industrial Marine and Stena Offshore contracts fall into the first group, as does the British Telecom contract - even though its terms are rather different from those found in the other contracts. The second group comprises the Eastman Christensen, Kelvin Catering and Wood Group contracts. Again there are certain differences in their wording. I find it convenient to begin with the first group and, like counsel, I use the London Bridge contract as the example.

In the London Bridge contract the Contractor’s indemnities are to be found in Article 17 which provides inter alia:

In this contract where the specific indemnities are not preceded by any general provision, the defenders argued, on the basis of the terms of indemnity (c) itself, that the indemnity was intended to apply only where the injury to, or death of, the Contractor’s employee had been due to the negligence or breach of statutory duty of the Contractor. Indemnity (c) makes no express mention of the Contractor’s negligence or breach of statutory duty, of course, but counsel argued that one could legitimately infer that this was what the parties had intended from the use of the phrase "irrespective of any contributory negligence ... of the party to be indemnified". The use of the word "contributory" immediately prompted the question "Contributory to what?" and the appropriate answer was "contributory to the negligence or breach of statutory duty of the Contractor" since the Article was concerned with regulating the relationship between the operators and the Contractor. Counsel for the defenders acknowledged that, in theory at least, the answer to the question "Contributory to what?" might be "contributory to any contractor’s negligence or breach of statutory duty", but they submitted that such a construction ignored the commercial realities. It would make no sense for the Contractor to stipulate that it should not be liable if the injury or damage was due to the negligence of the operators alone, but accept liability if, in addition to the operators, some other contractor had been negligent, even to the very smallest extent. Moreover, in interpreting the phrase "sole negligence", one had to read it in the context of the contract to which there were only two parties: so it should be interpreted as referring to the situation where the loss, injury or damage had been caused exclusively by the negligence or wilful misconduct of the operators and not to any extent by the negligence or breach of statutory duty of the Contractor. It therefore referred to the sole negligence of the party to be indemnified as opposed to negligence by the operators concurring with negligence or breach of statutory duty by the other party to the contract, viz. the Contractor.

The defenders’ argument depends on implying words into the clause which would define the injury, death or damage to property as having been "caused by the negligence or breach of statutory duty of the Contractor". The basis for implying these words is said to be the reference to "contributory negligence" in the phrase "irrespective of any contributory negligence ... of the party to be indemnified". To any lawyer, at least, the words "contributory negligence" immediately call to mind the negligence of, say, a pursuer who has suffered injury in an accident which has occurred partly as the result of the negligence of the defender and partly as a result of her own negligence and whose damages may be reduced in terms of the Law Reform (Contributory Negligence) Act 1945 to reflect the extent of her negligence. In that context, of course, especially in a simple case involving only one defender, the appropriate way to unpack the meaning of "contributory" is to say that the negligence of the pursuer has played its part, along with negligence or other fault on the part of the defender, in causing the injury to the pursuer. It is natural in that situation to see "contributory" as pointing to some corresponding negligence or fault on the part of the defender. It is plain, however, that this is not the meaning of "contributory negligence" in the indemnity, since the words are used to describe not negligence on the part of the employee who has been injured or killed, or of the owner of the damaged property, but negligence on the part of the operators who are seeking the indemnity. The question therefore is whether, when used in that way, the phrase carries with it the implication for which counsel for the defenders contended.

Counsel for the pursuers submitted that in this clause "contributory" was used simply to show that the negligence of the operators had caused the death, injury or damage for which indemnity was being sought. Undoubtedly, the clause does envisage a situation where the operators’ negligence has played a part in causing the death, injury or damage, but it seems to me that in construing the words "contributory negligence" a court requires to bear in mind the other words, "the sole negligence ... of the party which would otherwise be indemnified". There is a contrast between the two: where there has been "contributory negligence" on the part of the operators, they may still recover under the indemnity, but where the death, injury or damage was caused by "the sole negligence" of the operators, they cannot recover. In that overall context the phrase "irrespective of any contributory negligence ... of the party to be indemnified" means that the Contractor is to indemnify the operators even if the operators’ negligence has contributed, along with some other negligence or fault, to the happening of the death, injury or damage. The phrase describes a situation where the operators have been negligent and others have also been negligent or otherwise at fault. By contrast, the indemnity is not to be available to the operators where the death, injury or damage has been due exclusively to negligence or wilful misconduct on the part of the operators. Strictly speaking, as Lord Coulsfield pointed out in the course of the debate, on this approach the word "contributory" is de trop since the later reference to "the sole negligence" of the operators would necessarily imply that the earlier reference was to the negligence of the operators and someone else.

If that is the way in which the phrase "contributory negligence" is used in this clause, the question comes to be whether the use of that phrase justifies the implication that the indemnity is to apply only where the Contractor has been negligent or in breach of statutory duty. That interpretation does indeed appear to me to be open to the objection which was pointed out by counsel for the pursuers: on the defenders’ approach it is superfluous to provide that the indemnity will not apply where the death, injury or damage is caused by "the sole negligence" of the operators, since, if the death, injury or damage is caused exclusively by the negligence of the operators, ipso facto it cannot have arisen out of the negligence or breach of statutory duty of the Contractor - so the indemnity would not apply even if the reference to sole negligence were omitted. By contrast the words can be given content, if the clause is interpreted as meaning that the indemnity applies, irrespective of whether the Contractor was in any way at fault or not. On that approach the references to "negligence" make it clear that the operators can recover even though their negligence was a cause of the event, providing that it was not the sole cause. That argument is one to which I attach some weight, though the fact that, even on the pursuers’ interpretation, the clause contains a superfluous element suggests that it is not an argument which in itself could be conclusive.

The defenders’ interpretation depends on implying elements into the clause which are not spelled out. In itself the mere fact that the interpretation depends on an element of implication is not a fatal criticism, since all counsel agreed that some of the elements in the clause are expressed in a shorthand form. Inevitably therefore, when construing the clause, the reader has to expand somewhat on the words which the draftsman has used. To that extent, it is necessary to spell out elements which are implied by the language of the clause. The real difference between the parties is not as to whether some elements need to be implied but as to the nature of any such elements.

It is obvious that the qualification which the defenders say is implied into the clause is extremely significant and would greatly cut down the scope of the indemnity. It would, in my view, be somewhat surprising if the parties had left such a vital qualification to be imported by mere implication. It would be all the more surprising, I believe, if that implication were to rest on words which are intended, not to narrow the basis of the Contractor’s liability, but to make it clear that the indemnity extends to certain cases where the operators have been negligent - thus extending the scope of the indemnity beyond the range which it would have in the absence of some such words.

In advancing their argument that the indemnity should be read as being subject to a qualification of this kind, the defenders relied on what they said was the approach to the interpretation of indemnities which has been established by authorities applying in Scots law as well as in English law. The cases to which we were referred are well known. Much of the discussion in them concerns the question of whether an indemnity is to be interpreted as applying where the person to be indemnified has been negligent. That particular problem does not arise in the present cases since in all of them the indemnity is expressly said to apply even where there has been "contributory negligence" on the part of the operators. But the defenders relied on the cases for the indications which they were said to contain as to the general approach which courts should take to the construction of indemnities.

In view of the complications which readily enter into any consideration of such clauses, it is as well to remember that in Smith v. U.M.B. Chrysler 1978 S.C. (H.L.) 1 at p. 16 Lord Keith of Kinkel said that the task of a court which has to construe an indemnity clause

Put in that way, the task of the court is no different from its task in construing any contractual provision. As Lord Keith goes on to explain, however, the advice of the Privy Council in Canada Steamship Lines Ltd. v. The King [1952] A.C. 192 contains "certain guidelines of assistance" in construing exemption and indemnity clauses. The application of these guidelines is not, however, an end in itself; they are applied by the courts because they are thought to be of practical assistance in discovering what the parties actually intended the clause to mean. For that reason Lord Keith is at pains to stress (1978 S.C. (H.L.) at pp. 16 - 17) that the guidelines

Lord Keith sees the rules of construction applying to exemption and indemnity clauses as being nothing more than particular applications of the general principle that one must give due effect to the express language of an agreement and that a contract is construed against the person who relies on it. Indeed, when the three rules in Canada Steamship are examined, they can be seen to meet the description given by Lord Keith: the first relies on giving effect to the express language of the contract; the second depends again on examining the language used by the parties to see whether it is capable of covering liability arising out of the negligence of the party relying on the indemnity; while the third proceeds on the basis that, where the language used is capable of more than one interpretation, the court should interpret it against the party who seeks to rely on it.

It is the contra proferentem rule which is of interest in this case. It appears that the rule is applied in a strict fashion in the case of indemnity clauses because the courts have taken the view that it is prima facie unlikely that one party will agree to indemnify another for losses which are due to that party’s negligence. That being so, an indemnity clause will not be construed as applying to that situation unless the language is sufficiently clear. So, in Gillespie Bros. & Co. Ltd. v. Roy Bowles Transport Ltd. [1973] Q.B. 400 at p. 419 Buckley L.J. said that it is

Picking up that theme in Smith, Viscount Dilhorne remarked (1978 S.C. (H.L.) at p. 7) that

In much the same way in the same case Lord Keith remarks (1978 S.C. (H.L.) at p. 17) that while the particular applications of the general rules of construction

It is apparent that both Viscount Dilhorne and Lord Keith perceived that the argument for applying the relevant rules of strict construction was even more cogent in the case of an indemnity clause than in the case of an exemption clause since the indemnity clause goes further than an exemption clause and actually involves the other party taking on the first party’s liability. A party is even less likely to take on the other party’s liability for negligence than he is to exempt the other party from liability for negligence. Even so, I very much doubt whether, as counsel for the defenders suggested, their Lordships intended to go further and to deduce from this that a still stricter form of the relevant rules of construction is to be applied in the case of indemnity clauses than in the case of exemption clauses. There is no indication in subsequent guidance from the House of Lords that this was what was intended. In Ailsa Craig Fishing Co. Ltd. v. Malvern Fishing Co. Ltd. 1982 S.C. (H.L.) 14 at p. 61 Lord Fraser contrasted the "specially exacting standards which are applied to exclusion and indemnity clauses" with the standard to be applied to limitation clauses - thus apparently making no distinction between indemnity and exemption clauses. Similarly in Bovis Construction (Scotland) Ltd. v. Whatlings Construction Ltd. 1995 S.C. (H.L.) 19 at p. 23 Lord Jauncey, citing Ailsa Craig, indicated that limitation clauses were not to be construed with the same strictness as "an exclusion or indemnity clause".

Counsel for the defenders accepted, of course, that the particular issue of construction which arose in Canada Steamships and Smith does not arise here, but they submitted that the general approach was relevant. Although the Contractor had undertaken to indemnify the operators where they were negligent (but not solely negligent), that was such an unusual liability for the Contractor to undertake that, where more than one interpretation was possible, we should interpret the clause in such a way as to restrict the scope of that liability. In particular, we should interpret the indemnity so as to restrict it to situations where the Contractor had been negligent or acted in breach of statutory duty.

For my part I am satisfied on the basis of the cases which I have mentioned that our task is to interpret the language of the indemnity in the circumstances known to the parties, but that where that language is ambiguous it should be interpreted against the operators who rely on the indemnity. I would also accept that we should measure the extent of the indemnity by what we can deduce from "very clear words" (Canada Steamships per Lord Morton [1952] A.C. at p. 211 applied by Viscount Dilhorne in Smith 1978 S.C. (H.L.) at p. 7). On the other hand I find in the speeches which I have examined no warrant for saying that a court should more readily imply into a clause of indemnity additional words restricting the scope of the indemnity.

Although we are concerned in particular with the interpretation of Article 17.1 (c), when considering whether it is appropriate to imply the words suggested by the defenders, the court must have regard to the terms of the Article as a whole. If the various clauses are examined, perhaps the first point which strikes a reader is that clause (d) contains an express limitation ("arising ... out of the acts or omissions of the Contractor or its sub-contractors, suppliers or their respective employees or agents") of very much the kind which the defenders ask the court to hold is implied in (c). Hoping to turn this to their advantage, counsel for the defenders in effect argued that the express limitation in (d) indicated the scope which the parties had intended that the indemnity under (c) should have. In my view, however, the fact that the limitation is found expressly stated in (d) would make any court hesitate before implying a similar limitation into (c). The obvious objection is that in interpreting any of the clauses in the Article the court must have regard to the terms of the Article as a whole and, where one finds that the parties have inserted a limitation in one part and not in another, the court should readily assume that the difference between the two provisions is deliberate. The court should not seek to assimilate them by implying words which the parties have not used - not, at least, unless the provision would make no sense without the words.

In essence counsel for the defenders submitted that the Article would not make commercial sense unless the indemnity were restricted to the situation where the Contractor was negligent or in breach of statutory duty. In gauging the strength of that argument, I find it helpful to examine the other clauses in Article 17.1. The Article itself provides for an identical indemnity, stated in the opening words of the Article, to be given by the Contractor in respect of any claim, demand, cause of action, loss, expense or liability arising by reason of a number of matters which are then set out in the various clauses (a) to (e) of the Article. Those clauses are all different and all define different circumstances in which the Contractor is to indemnify the operator, as can be seen even from a cursory examination of the various heads of indemnity.

Under (a) the Contractor is to indemnify the operators, say, for any loss of the operators which arises by reason of some government or other authority claiming that the Contractor has failed to comply with a particular regulation or with a governmental or judicial order. During the hearing before us, it was suggested that this might, for instance, cover the case where the operators suffered loss due to delay arising from the Contractor requiring to redo work which was said to have been done in contravention of a relevant regulation or order from a Department of Energy inspector. The indemnity would apply even if there had been no actual failure by the Contractor, but the relevant inspector asserted that there had been a failure. It follows, of course, that the indemnity would cover a situation in which there had been no fault of any kind on the part of the Contractor.

Under (b) the Contractor is to indemnify the operators for loss etc. arising out of actual or asserted infringement or improper appropriation or use by the company, the participants or Contractor of intellectual property of various kinds "originating with the Contractor, its employees, agents, vendors or sub-contractors and furnished or communicated to the Company by the Contractor or used by the Contractor in connection with performance of the Work", where the company had not specified the particular intellectual property. Various contingencies are covered, including the situation where, say, some third party brings proceedings against the operators, alleging that they have infringed copyright, and the allegation arises out of the use of a design furnished to the company by the Contractor in connexion with the performance of the work. Here the basis for the Contractor giving the indemnity is that it has furnished the design. Nothing is said about fault of any kind on the part of the Contractor. Again it is clear that there need have been none, since the operators are entitled to be indemnified inter alia against any costs due to litigation over an "asserted infringement" - which may turn out to have been no infringement at all.

Clause (c) can be left on one side for the moment. Clause (d) does, of course, refer to the acts or omissions of the Contractor or of its sub-contractors or suppliers and their respective employees or agents. That is hardly surprising, since, unless there were some such connexion between the Contractor and the injury, death or property damage to a third party, there would be no perceivable basis upon which the operators could sensibly require the Contractor to indemnify them.

Clause (e) concerns pollution of any kind which emanates in various ways from equipment, apparatus, machinery, facilities or other property of the Contractor or its sub-contractors, suppliers, employees or agents. Again there is no reference to negligence or breach of statutory duty by the Contractor, but, since the clause refers to the "contributory negligence" of the operators, counsel for the defenders argued that in this case also one should imply a limitation to the situation where the emanation was due to negligence or breach of statutory duty on the part of the Contractor. It is difficult to see why any such limitation should be implied. It is no more surprising that the Contractor should agree to indemnify the operators for claims arising out of pollution emanating from the Contractor’s equipment than that it should agree to indemnify the operators for claims arising out of infringement of copyright due to the operators’ use of a design furnished by the Contractor. In the one case the "connecting factor" is the furnishing of the design by the Contractor, while in the other it is