Gillespie Bros & Co Ltd v Roy Bowles Transport Ltd
Court of Appeal
Citations:  QB 400;  3 WLR 1003;  1 All ER 193;  1 Lloyd’s Rep 10;  RTR 95; (1972) 116 SJ 861;  CLY 407.
Forwarding agents hired a carrier to provide a van and a driver. The parties contracted on the Road Haulage Association’s Conditions of Carriage. Clause 3(4) of these conditions required the forwarding agents to indemnify the claimant ‘against all claims or demands whatsoever by whomsoever made in excess of the liability of the carrier under these conditions.’
A third-party’s property was stolen from the van due to the negligence of the driver. This third-party sued the carrier for the value of the property. The carrier sought to be indemnified against this claim The forwarding agents responded that clause 3(4) did not require them to indemnify the carrier against their own negligence.
At first instance, the court applied the 3-stage test in The Canada Steamship Lines Ltd v King  AC 192. The judge held that:
- Clause 3(4) did not expressly mention negligence;
- The clause’s wording was clearly wide enough to cover negligence; but
- The third-stage of the test was not met. This was because it was possible for the clause to apply to other heads of liability.
The carrier appealed, arguing that the Canada Steamship test should not be applied rigidly to these facts since the wording of the clause was so clear.
The Court of Appeal held in favour of the carrier. The language of clause 3(4), particularly ‘all claims or demands,’ combined with the word ‘whatsoever’ made clear that it was designed to make the forwarding agents indemnify the carrier for all claims without exception. The majority therefore held that the clause expressly included negligence, and the judge was wrong to move beyond the first stage of the Canada Steamship test.
This Case is Authority For…
The court confirmed that the Canada Steamship test is part of English law. Buckley LJ explained that it applies to interpreting both indemnity and exclusion clauses.
Buckley LJ explained that the third stage of the Canada Steamship test reflects the fact that it is inherently unlikely that parties would agree to have one party indemnify the other against their own negligence. This result usually appears unreasonable.
Lord Denning arrived at the same conclusion as the majority, but by a different route. He thought that the Canada Steamship test lays down guidelines for the interpretation of liability-governing clauses, not a strict test. He commented that in some contexts, including negligence within the scope of the clause is not prima facie unreasonable. In these contexts, the court has no reason to strictly apply the test.