Shell UK Ltd and others v Total UK Ltd and another

  Judgment This is a judgment of the court, to which all members of the constitution have contributed. Background Facts 1.                  On 11th December 2005, a number of very large explosions and fires occurred at the Buncefield Oil Storage Terminal in Hertfordshire.  The incident was caused by the negligent overfilling of a fuel storage tank located on one of the three main sites that comprise the Terminal.  This led to the creation of a large hydrocarbon rich vapour cloud which then ignited.  The incident caused widespread damage to land in and around the Terminal.  Fuel storage tanks, pipelines and associated equipment at the Terminal were destroyed or seriously damaged.  There was also considerable damage to houses and other property outside the site’s perimeter fence.  Fortunately no one was killed. Substantial claims for compensation were brought by a large number of claimants against Total Downstream UK PLC and Total UK Ltd (“Total”) and Hertfordshire Oil Storage Limited (“HOSL”), the vehicle company owned 60% by Total and 40% by Chevron Ltd (“Chevron”).  Total brought part 20 proceedings against Chevron. 2.                  Directions were given in the Commercial court for the trial of certain preliminary issues. Those came on for hearing before David Steel J in October 2008. Oral evidence was completed over 20 days; final speeches were completed in December 2008 and a judgment of 523 paragraphs was completed and handed down on 20th March 2009. It is right to pay tribute right at the outset to the way in which this litigation has been conducted by all sides and to pay tribute to the judge for a judgment whose length is not due to any wasted words but to the complexity of the many issues he had to resolve. 3.                  The main focus of the hearing before him was on the dispute between Total and Chevron firstly as to the identity of the relevant defendant liable for the negligence and secondly on the consequential distribution between the two companies under the Part 20 proceedings. Total were asserting that the relevant defendant was HOSL and if they had succeeded that would have led to a distribution in accordance with the shareholding of Chevron and Total, i.e. 60% Total and 40% Chevron. Chevron were asserting Total were vicariously liable but Total were asserting that if that was so, they were entitled to be indemnified under one or other provision of the relevant contracts the effect of which would have been to produce the same result i.e. a sharing 60/40. 4.                  The judge held that Total and not HOSL were vicariously liable and there is no appeal from that finding. By their appeal Total seek to reverse the judge as to the applicability of one or other of the indemnity provisions. There is also a cross-appeal by Chevron relating to Total’s role. At one time the parties to the joint venture at Buncefield were Chevron, Elf and Fina. Total bought the businesses of Elf and Fina in 2000 and were treated as joint venturers in their place from that time on. Total also took the place of Fina as managers of the operation and it was in that role the judge found them vicariously liable. Chevron before the judge contended that the formalities required to make Total a participant in place of Elf and Fina had not been completed at the time of the explosion and thus that Total, although Manager, was not a participant within the meaning of the relevant agreements. If right that would have excluded Total from any right to rely on any indemnity as between participants. The judge was in Total’s favour on this point and Chevron appeal against that decision. 5.                  Only one other aspect of the judge’s judgment has been appealed, which relates to a claim being made by Shell as claimant. The explosion caused damage to property in which and through which Shell stored or distributed its oil. Legal title to the tanks and pipelines were in a vehicle company which held the same on trust for Shell and others. Total has accepted liability for the destruction of anything which was the property of Shell, but disputed liability for the loss of profits that Shell claims flowed from the destruction of or damage to the tanks or pipelines. Total relies on what it asserts is “the rule recognised by many authorities” to the effect that only a legal owner or someone with an immediate right to possession has the right to claim damages for economic loss the consequence of damage to property. 6.                  Although the Shell appeal was argued first before us we will deal with it second in this judgment. Does Total have a right to an indemnity? Introduction to indemnity aspect 7.                  In the agreements to which we shall have to turn in detail the nomenclature is not always consistent; sometimes “manager” means “operator”, and sometimes “manager” could be said to be more limited in its scope and refer to the entity running what became known in argument as the “back office”. In this introduction we shall use the term “manager” to mean the entity that ran the back office and “operator” the entity that was responsible for the operation of the terminal without prejudging any of the issues that may arise. 8.                  There are three possible candidates on which Total would seek to rely in the various contracts in place as at the date of the explosion. Issues arise as to which is the appropriate candidate, whether the appropriate clause indemnifies Total against its own negligence, whether the appropriate clause indemnifies Total when acting as operator rather than participant, and whether in the case of one clause it was varied so as to include an indemnity in respect of the indemnified’s own negligence. In order to clarify the matter in argument before us each of the candidates was taken in turn and individual issues argued by reference to each candidate. But it was recognised that it was important to keep in mind an overview of how the contracts interlocked one with the other. 9.                  Total were party to a Management Agreement the counter party of which was HOSL. Total argued this agreement was confined to the supply of the “back office” facilities supplied by them. Total were also the operator of the terminal and responsible for the operational activities. Chevron argued this aspect was also supplied under the Management Agreement or as the judge concluded tacitly added to the Management Agreement. Total’s primary argument was that the operational activities were carried out under the terms of Operating Regulations annexed to an agreement to which the parties were the participants to the Joint Venture. If Chevron were right the only candidate for an indemnity was clause 7.1.2 of the Management Agreement, and Chevron say that that clause by its terms excluded an entitlement to an indemnity where the manager was negligent. If Total’s primary case were right the candidate is 1.2 of section III of the Operating Regulations which Total argue gives them a right to an indemnity against HOSL including a right (they allege) to an indemnity where Total have been negligent. Total in making this primary case rely as an aid to construction on agreements under which they say Chevron expressly agreed, in certain eventualities which as it turned out never occurred, that they would indemnify the operator and the manager against its own negligence. Furthermore Total have a secondary case which is that if clause 7.1.2 applies the clause was in fact varied to remove the exclusion in respect of negligence leaving only wilful default to be excluded. 10.              Total’s final alternative is to assert a right to an indemnity as between participants to the Joint Venture under clause 9.2 of the original Joint Venture Agreement (“JVA”). Chevron assert that that clause was no longer applicable as at the time of the explosion in the light of other contracts made since the original JVA or that it did not entitle Total to an indemnity for its own negligence and/or when acting as operator or manager as opposed to participant. 11.              It is an important aspect of Total’s argument on the construction of 1.2 of the Operating Regulations that at the time of the explosion there were in existence contracts which, although ineffective through the absence of the contingency on which effectiveness depended, included an indemnity for the operator’s negligence. It is their case also that the Management Agreement had been varied to include an indemnity in respect of the manager’s negligence.  Chevron’s argument accepts that there was contemplated at one time the possibility of agreeing that an indemnity might include the negligence of the party to be indemnified, but they argue that, tracing through the history of the way in which agreements were reached and amended, original contracts (under which indemnities did not include indemnities against a party’s own negligence) were never varied. 12.              Much time was spent in the court below and indeed before us arguing about whether the Management Agreement was the agreement under which Total were acting when committing the acts of negligence – the judge holding that it had been tacitly extended to that aspect of Total’s activities, and Mr Sumption QC arguing that, by its express terms, it covered at least some aspects of the operational activities. We doubt whether it is a necessary task to reach a conclusion as to whether the Management Agreement had been tacitly extended or whether the activities of Total as the operator were all being carried out pursuant to the Operating Regulations. We believe that the correct approach is to start from the position that it is for Total to identify the provision which gives them an indemnity as operator in respect of their own negligence. On any view there was in existence a Management Agreement; on any view there existed the Operating Regulations, and on any view there existed the JVA as amended all of which need to be construed standing as they did side by side. The question is whether Total can point to any term of any of the agreements which provides them with an indemnity. We believe both parties accepted it was legitimate to look at all the agreements in place as at the date of the explosion and consider the extent to which any indemnity expressly or by clear implication did or did not cover Total’s negligence for anything it did and the likelihood or otherwise of the position being different as between the area of management and the area of operator. 13.              In construing each of the possible indemnities reliance was also placed on Lord Morton’s guidance in Canada Steamship Lines Ltd v R [1952] AC 192 at 208. The essence of that guidance (which it is common ground applies to indemnities as well as exclusion clauses) is (i) that if negligence is not expressly mentioned the court must consider whether the words are wide enough to cover negligence and if there is doubt, the clause must be construed against “the proferens”; and (ii) if the words are wide enough but there are matters “not fanciful or remote” that would be covered other than negligence, the clause will be limited to those other matters. This guidance is founded on the implausibility of a party agreeing to indemnify another against that other’s own negligence. 14.              We think that care must be taken in applying the above guidance in this case founded as it is on that implausibility, when certainly at one stage indemnifying a party against its own negligence was precisely what was contemplated by parties to contracts relating to Buncefield. 15.              We believe that the right approach is to consider the language used in the various agreements. We say straight away, we are not inclined unless driven to it to contemplate that where detailed agreements are drawn up, one will have been tacitly extended or by implication extended. We suggest that where parties have drawn up a series of detailed agreements and the draftsmen have expressly dealt with negligence, a more significant canon of  construction is that which would suggest that where it has not been expressly referred to that would be likely to be a deliberate decision by the draftsman to exclude negligence. 16.              It is also a well-known canon of construction that where parties have used language which means one thing in a contract to which they were parties, and they use the same language in another, it is likely that it will have the same meaning. Both parties rely on this canon of construction and in one sense it holds the key. Total say that the Operating Regulations in place at the time of the explosion were drafted to be attached to a contract (the Execution Agreement) under which the operator was to be entitled to an indemnity against their own negligence, and clause 1.2 in those regulations thus should be construed so as to provide that indemnity. They say that when the Operating Regulations came to be attached to another contract (the Novation Agreement) they should maintain their meaning.  Chevron argue that Total are wrong about their construction of clause 1.2 as attached to the Execution Agreement although they accept by a different provision it was contemplated the operator was to be indemnified against their own negligence, but they also submit that, since the language of 1.2 of the Operating Regulations was similar to that used over the years and which when used previously did not supply an indemnity to the operator for its own negligence, its meaning remained the same. The terms of the relevant contracts 17.               The first aim must be to identify the terms of the relevant contracts in existence at the time of the explosion. It is not however possible to do that without some historical narrative because before Total became involved at Buncefield there already existed a history of negotiated agreements which identified rights and obligations of parties other than Total, and which both Total and Chevron accept provide a relevant context. Since no distinction is to be drawn between Texaco and Chevron it follows Chevron were consistently a party to all agreements although for many years as Texaco. It is important in construing the agreements which were ultimately in place to consider the proper construction of the inter-locking agreements concluded at particular stages. 18.              There are three stages to be considered and it is helpful to pause at each stage to identify the extent to which under the contracts in existence the operator or manager would have been entitled to an indemnity in respect of its own negligence. The first stage relates to the period when Texaco and Fina were the sole participants 1988 to 1st January 1994; the second stage relates to the period 1st January 1994 to 2000 when Elf joined and the participants were Texaco 40%, Fina 40% and Elf 20%. The final stage during which the explosion occurred related to the period from 2000 from the date when Total bought out Elf and Fina.     The first stage – Avonmouth 19.              The starting point is a Joint Venture Agreement (JVA) made between Petrofina UK Limited (Fina) and Texaco Limited (Texaco) of 18th March 1988. [As already indicated it is unnecessary to distinguish between Texaco and Chevron for the reasons given in note 4 to the judge’s judgment, but we will continue to use the names of the parties as identified on the agreements]. The JVA dealt in the main with a site at Avonmouth; it contemplated all property and assets being held in equal shares by Fina and Texaco as “the participants”. 20.              It provided for Fina to be in charge of the development of the terminal as “constructor” (clause 2.5) and identified the duties of Fina as constructor under clause 2.6. 21.              By clause 2.8 it contemplated the formation of a company, Bristol Oil Storage Ltd (“BOSL”) to undertake “on their behalf the operation and maintenance of the facility as “Operator””. 22.              BOSL’s duties were set out in clause 2.9:- “Texaco and Petrofina shall exercise all voting and other powers of control available to them in relation to the Operator so as to procure (insofar as they are able by the exercise of such rights and powers) that the Operator shall undertake inter alia the following responsibilities in connection with the operation and maintenance of the Facilities:” 23.              Clause 2.9.1(a) and Clause 2.9.1(b) foreshadowed an “Accounting Procedure” and “the Operating Regulations” respectively. Clause 2.10 foreshadowed the provision of “administration and support services” by either Texaco or Fina, i.e. foreshadowed the “Management Agreement” and foreshadowed expenditure being allocated either on a usage basis or on a participating basis. 24.              Clause 3.1 granted each participant an option in relation to Buncefield. 25.              Clause 9.2 of the JVA provided that each of Texaco and Fina would:- “indemnify the other as to one half of any claim by or liability to (including any costs and expenses necessarily incurred in respect of such claim or liability) any party not being a party hereto, arising from the Joint Operations” 26.               As foreshadowed a management agreement dated 29th September 1989 was executed between BOSL and Texaco “relating to the provision of accounting and administrative support services to BOSL” by Texaco. That Management Agreement by clause 4.3 provided to Texaco an indemnity from BOSL “against all debts and liabilities incurred by Texaco in the proper performance of its obligations hereunder”. No one suggested that that indemnity would cover Texaco’s own negligence.  Clause 7.1.2 contained a further indemnity under which “BOSL shall: . . . at all times keep Texaco indemnified and held harmless against all or any actions, proceedings, claims, demands and liabilities whatsoever arising out of the performance of Texaco’s duties and obligations hereunder which may be brought or prosecuted against or incurred by Texaco, but so that the provisions of this clause 7, shall be without prejudice to any claims which the company may have against Texaco, in respect of any negligence or Wilful Misconduct.” Both indemnities we shall see are in the same terms in the Management Agreement concluded in relation to Buncefield on 6th January 1992. 27.              On 29th September 1989 Texaco and Fina executed a “Supplemental Agreement” relating to the Accounting Procedure and Operating Regulations for use by BOSL at Avonmouth. By clause 2.1 of that agreement the parties agreed to use their voting rights and other powers of control so as to procure “that the company (BOSL) shall fully comply with the provisions of the Accounting Procedure and the Operating Regulations.” At Schedule 1 were the Accounting Procedure and at Schedule 2 the Operating Regulations. Under the Accounting Procedure the Operator was Texaco (as was the arrangement for Avonmouth). By 1.2 of the Accounting Procedure it was provided that “the purpose of the accounting procedure is to establish the principles of accounting which shall truly reflect the Operator’s actual cost to the end that the Operator shall…neither gain or lose by reason of the fact that it acts as the Operator…”.  The Participants meant “those parties from time to time having an interest in the Terminal under the terms of the JVA” (the Terminal meaning “Avonmouth”); the company meant BOSL. It contained a formula for the purpose of achieving its objective for the allocation of expenditure, class A being all expenditure except class B and C and allocated on a usage basis as foreshadowed by the JVA 2.10.2; class B being “insurance premiums, general and water rates, maintenance items in excess of £10,000 and the management fee” on a participating interest basis as foreshadowed in 2.10.1 of the JVA. Class C is immaterial for present purposes. 28.               Under the Operating Regulations the participants were the same, the company was BOSL and there was no reference to Operator. The Operating Regulations provided the terms adopted as between the participants in relation to “the Terminal Operations”, defined in the regulations as “the operation and maintenance of the Terminal in accordance with the JVA, these Operating Regulations the Accounting Procedure and applicable law”. Broadly the regulations provided for how the terminal was to be operated and how the products delivered to the terminal by the participants in the joint venture should be handled. It provided in many instances for the company BOSL to do various things although BOSL was not a party to the Regulations. The participants were thus agreeing between themselves that each would procure BOSL to perform. 29.              Under section III of the Operating Regulations under the headings Liabilities and Insurance, were the following provisions:- “1. LIABILITIES 1.1     The Company shall indemnify, hold harmless and defend the Participants from and against any and all liabilities, claims, demands, proceedings, damages, losses, costs, charges and expenses whatsoever arising directly or indirectly out of or as a consequence of the death or illness of or injury to any employee, servant or agent of the Company or any of its sub-contractors or the loss of or damage to the Terminal or to any equipment or property of the Company or its sub-contractors or any of its or their respective employees, servants or agents, whether or not resulting from or contributed to by any negligence or default on the part of the Participants or any of its or their employees, servants or agents. 1.2     Each of the Participants shall likewise indemnify, hold harmless and defend the Company from and against any and all liabilities, claims, demands, proceedings, damages, losses, costs, charges and expenses whatsoever arising directly or indirectly out of or as a consequence of the death or illness of or injury to any employee, servant or agent of such Participant or the loss of or damage to any equipment or property (including, without limitation, the Products stored within the Terminal under these Operating Regulations) of such Participant or any of its employees, servants or agents, whether or not resulting from or contributed to by any negligence or default on the part of the Company or any of its employees, servants or agents.  For the avoidance of doubt each of the Participants shall be separately and fully responsible for the Products delivered from the Terminal for its own account and, as the vendor or distributor of such products, will protect and save harmless the other Participants hereto and the company from any claim, demand or expense for loss, damage or injury arising out of or in any way connected with the quality, use or conditions of any Product delivered (including the delivery and the handling and use of the product after delivery) at the Terminal. 1.3     Save as otherwise expressly provided herein, the Company shall indemnify and hold harmless the Participants from and against any and all claims by third parties in respect of the injury to or death or illness of any person or the damage to or loss or destruction of any property which may arise out of or in the course of or by reason of the Terminal Operations, save and except if and to the extent that the Company is not indemnified in respect of any such personal injury, death or illness or damage to or loss or destruction of property by insurance taken out by the Company pursuant to paragraph 2.1.2. of these Operating Regulations, then each of the Participants shall indemnify and hold harmless the Company from and against any such claims by third parties (and from and against any and all actions, proceedings, liabilities, losses, damages, costs, charges and expenses whatsoever in respect thereof or in relation thereto). . . . 2.1.2 Primary Liability Insurance in respect of the liability of the Company under paragraph 1.3 above, with a limit of not less than one million pounds (£1,000,000) for any one incident or series of incidents arising from one event;” 30.              Thus to summarise the position, at this juncture Texaco was operating Avonmouth. It was also supplying “accounting and administrative support”. It had a direct contract “the management agreement” with BOSL. It had contractual arrangements directly with its Joint Venture partner relating to the Accounting Procedure designed to ensure that as operator it neither lost nor gained as a result of acting as operator. There were also Operating Regulations under which it was agreed that BOSL, not a party to those arrangements, would be procured to do certain things. The reality was that it mattered little whether BOSL was a party to arrangements or not because BOSL was a vehicle in relation to which the participants undertook to procure performance. First stage- Buncefield 31.              Fina exercised the option in relation to Buncefield on 3rd February 1989 and Texaco and Fina established a jointly held vehicle company, Hertfordshire Oil Storage Limited (HOSL), “to operate and maintain on their behalf the facilities owned by them at Buncefield”. They entered into the Supplemental Operating Agreement on 21st May 1990. It provided that clause 2 of the JVA should in relation to Avonmouth apply mutatis mutandis to Buncefield save for certain exceptions not relevant for present purposes. Fina were also constructor at Buncefield and there was foreshadowed the “Accounting Procedure”, “Operating Regulations” and a “Management Agreement” in relation to Buncefield. 32.              As a fact before any agreements were drawn up, Fina acted as operator of Buncefield. The first written contractual recognition of that fact was in a contract made by Fina with British Pipeline Agency Ltd “BPA” on 31st January 1991 “contracting for itself as owner of the Fina Pipeline and as operator for and on behalf of HOSL and the HOSL Participants to have certain Services performed  as more specifically defined  [in the agreement]” . Those services related to operating the terminal in accordance with the “manuals, drawings, procedures and other technical information relating to the HOSL Terminal and the equipment thereon.” provided by Fina [see clause 4]. Thus at this stage and until 1995 Fina sub-contracted its role as operator of the terminal to BPA. The first agreement was replaced by a further agreement entered into between Fina acting as aforesaid and BPA on 29th January 1993. The terms were essentially the same save it changed the scope of the services but nothing turns on that.  33.              On 6th January 1992 Fina entered into a Management Agreement with HOSL to take effect as from 1st June 1990 which, as per its general description on its cover page and as with the management agreement between Texaco and BOSL at Avonmouth, related to “the provision of accounting and administrative support services to [HOSL]”. It contained some terms in addition to those contained in the Avonmouth contract on which Mr Sumption QC for Chevron relied as demonstrating that this agreement covered operating activities, e.g. Clauses 3.2.8 and 3.3. Clause 3.3 in particular was the provision under which Mr Sumption suggested Fina gained the power as operator to subcontract to BPA operational activities. The agreement contained indemnities in precisely the same form as in the Avonmouth agreement and it is these indemnities which Mr Sumption suggested were in force and applicable in the same terms as at the date of the explosion. 34.              On the same day, 6th January 1992, Texaco and Fina entered into a Supplemental Operating Agreement relating to Buncefield in the same terms mutatis mutandis as they had concluded in relation to Avonmouth. It recorded the agreement of Texaco and Fina to procuring the company HOSL to fully comply with the Accounting Procedure and the Operating Regulations. In this instance in the accounting procedure “operator” was defined as Fina but with additional words not there in relation to Texaco at Avonmouth “acting in its capacity as operator and not as participant”. The distinction being drawn has obvious relevance to the issue whether even if an indemnity covered Fina as Participant it also covered Fina as Operator. 35.              Once again the accounting procedure provided that its object was to “establish the principles of accounting . . . to the end that the Operator (Fina) shall . . . neither gain nor lose by reason of the fact that it acts as the Operator.” It contained the same formula as for Avonmouth. 36.              The Operating Regulations contained again the terms under which the terminal was to be used by the Participants for their products and also contained under Section C terms on Liability and Insurance in the same form as in the Avonmouth Contract quoted in full above. It is unnecessary to set them out again. 37.              The above thus was the position at Stage 1 before Elf joined. It is helpful to consider what the position would have been if Fina as operator had, through negligence, caused the same kind of explosion as occurred in 2005 during Stage 1. Would it have been indemnified to the extent of 50% either through HOSL or directly by Chevron? 38.              Fina would have had to look to either the Management Agreement and seek an indemnity from HOSL under clause 7.1.2 or it would have had to argue that 1.3 of section C of the Operating Regulations applied or that 9.2 of the JVA applied. Although for obvious reasons Lord Grabiner in his submissions would put the indemnity under the Management Agreement last as an alternative we prefer to put it first. We will take the candidates in the order Management Agreement, Operating Regulations and then JVA. 7.1.2 of the Management Agreement 39.              It is likely that Lord Grabiner QC, for Total, is right in his argument that this provision did not apply to Fina as operator at all. We are not (whereas the judge was) persuaded by Mr Sumption that the Management Agreement expressly covered Fina as operator of the terminal. We are equally unpersuaded that there is any necessity to tacitly extend the Management Agreement. We do not intend to go into our reasons in any detail because we are not convinced that it makes any difference. But in essence our view of the arrangements was that under the Management Agreement Fina were supplying what were termed “back office” services and as Operator were carrying out the functions that HOSL was bound to carry out under the Operating Regulations. There was no need to extend the Management Agreement to those functions since as between Fina and Texaco it was agreed by the regulations that each would procure HOSL to carry out those obligations, which each knew had in fact been delegated to Fina. Texaco could enforce as against Fina any failure on Fina’s part on the basis it had failed in its obligation to join in procuring HOSL through its delegate Fina to perform. 40.              But if 7.1.2 did apply then it seems to us that on its terms it excluded from any indemnity loss caused by Fina’s own negligence. Lord Grabiner suggested a very strained construction of 7.1.2 to the effect that the language of the first part was wide enough to cover negligence of Fina, albeit no express reference was made to negligence, and that the proviso did not apply since Fina would have no claim against HOSL to be prejudiced. This argument seems to assume what it wants to achieve. The whole question is whether the first part of the clause includes an indemnity in respect of Fina’s own negligence and the proviso provides a very strong indication that it was not intended to do so. Even if that were not so we are not clear why if the words of the first part included an indemnity for negligence the proviso does not provide an answer recognising HOSL’s right to make a claim against Fina in respect of the negligent performance of its contractual obligations. 41.              Thus we do not think clause 7.1.2 would have been an appropriate candidate for Fina.  Clause 1.3 of section C of the Operating Regulations 42.              1.3 has to be read as a whole. It provides to participants an indemnity from HOSL in respect of “all claims by third parties” for personal injury or damage to property made against participants arising “out of or in the course of or by reason of the Terminal Operations” the expectation being that HOSL will be insured. If HOSL is not insured it provides that the participants shall indemnify HOSL as to its percentage interest. It does not refer expressly to the negligence of the participants (the indemnified). This we think is important because negligence of the indemnified is expressly referred to as being within the “knock for knock” indemnities covered by 1.1 (participants’ own negligence within indemnity from HOSL) and 1.2 (HOSL’s own negligence within indemnity from participants).  43.              We are also of the view that 1.3 applies simply to indemnify participants as participants and that it would be a strained construction to apply it to Fina qua operator. 44.              We do not think that any assistance is gained from the fact that under the Accounting Procedure the aim was to ensure that the operator neither gained nor lost by virtue of being operator. That was concerned purely with the economics and again could not be construed to cover what would occur if the operator were negligent without some express reference to that possibility when negligence was expressly dealt with by the draftsman elsewhere.  45.              Thus on two bases we think 1.3 would not provide Fina with an indemnity for its negligence – first because that negligence would have been committed as operator and not participant and secondly because we take the view that where the person to be indemnified was to be indemnified in relation to his own negligence the draftsman in 1.1 and 1.2 had made that clear and that thus 1.3 was deliberately drafted not to cover a participant in relation to its own negligence. 46.              We would also add that it would seem to us unlikely that the parties to the joint venture would produce a Management Agreement in relation to “back office” matters which did not indemnify Fina against its own negligence, but agree in relation to operating activities that as operator Fina’s own negligence should be covered. 47.              So far as the second part of the clause is concerned Lord Grabiner argued before us that it would have provided an independent indemnity to HOSL if it were uninsured and he argued that it would obviously cover HOSL even if it had been negligent. This argument at this stage is important not because HOSL might have been negligent but because when later Fina replaces HOSL in a similarly worded indemnity provision, it provides Lord Grabiner with an argument that also at that stage the second part provides an independent right to an indemnity even if negligent. 48.              Before the judge Mr Sumption argued in this context and in the context of HOSL being entitled to an indemnity under the second part that it did provide an independent right to HOSL to recover an indemnity in respect of claims against HOSL in negligence where there was no insurance in place. That construction in the context of HOSL being the operator had the merits of not leaving third parties without a remedy if HOSL a worthless company was uninsured. It was rejected by the judge even in that context [see paragraphs 372 and 373 of the judgment]. 49.              Mr Sumption before us now accepted the construction preferred by the judge which requires that the clause be read as a whole. The second part is not separate from the first part – it is dealing (as the judge emphasises) with “such” claims i.e. the claims referred to in the first part. We think the judge was right and that the word “such” compels the construction that the second part would give no independent claim to HOSL. It is also right to mention that this construction did not leave third parties without a remedy since as was Lord Grabiner’s argument in the court below, but not his argument before us, the Accounting Procedure clause 8.2 provided an accounting mechanism enabling HOSL to obtain contributions from the participants [see footnote 53 to the judge’s judgment]. 50.              There is perhaps one further (albeit unlikely) possibility that should be dealt with. What if a claim against a participant resulted from HOSL’s negligence? Does the fact that HOSL’s negligence is not referred to in the second part preclude HOSL from recovering from the participants? We do not think this would follow in the particular context since firstly it would be recognised that HOSL actually did nothing and in any event as we would read 1.3 its main objective was to ensure that a participant either obtained through HOSL cover under insurance or a 50% share of any liability from the other participant, if HOSL had no or insufficient insurance. The device of indemnifying HOSL was to bring about that result and thus HOSL was not in truth the beneficiary of an indemnity against its own negligence; the beneficiary was always a participant.  51.              Thus we do not think Fina could at this stage have relied on 1.3 of the Operating Regulations to obtain an indemnity in respect of its own negligence. 9.2 under the JVA 52.               We think the judge was right in his conclusion that once the provisions dealing with how participants should be indemnified in the Operating Regulations came into force, 9.2 was redundant. 1.3 on its proper construction achieved the 50% split for which 9.1 provided. 53.              In any event clause 9.2 was intended to deal with sharing as between participants. It would not cover a liability of Fina in negligence when acting as operator. There would also be a strong argument as at 1988 that it would not indeed apply to sharing a claim brought against a participant in relation to a participant’s own negligence. It is not necessary to explore further either of these points because the position was clarified by the way in which the Operating Regulations dealt with the matter. Stage 2- Elf joins 54.              By an agreement dated 30th December 1993 Elf Oil Company Limited (Elf) purchased 10% of Fina’s interest and 10% of Texaco’s interest in the terminal at Buncefield resulting in a 40-40-20% share. This agreement dealt with Buncefield and Avonmouth quite separately, and distinctly. The share was different (being one third each for Avonmouth), and completion dates were different (1st January 1994 for Buncefield and 1st January 1996 for Avonmouth). The difference in dates meant that there was a longer interim period so far as Avonmouth was concerned and a very short (if realistically any) interim period so far as Buncefield was concerned. That is of marginal relevance in that there was a provision of the Sale and Purchase agreement clause 5.02 which related to Fina’s obligations as manager at Buncefield during that interim period. Clause 5.02 provided:- “In its capacity as manager of the Buncefield Terminal, Fina shall during the Buncefield Interim Period conduct all ordinary business in relation to the Buncefield Terminal in a proper and workmanlike manner and shall conduct operations in accordance with methods and practices customarily used in good and prudent oil storage terminal practice and with that degree of diligence and prudence reasonably and ordinarily exercised by experienced managers engaged in a similar activity under similar circumstances and conditions.” 55.               The Sale and Purchase Agreement contemplated completion on 1st January 1994 and the providing by Elf of certain moneys and the completion documents. Following receipt of the documents Texaco and Fina were obliged to execute the same [see clause 11]. The Buncefield completion documents were (i) a novation of the 1988 JVA (the Novation Agreement) (ii) the Buncefield Land Transfer (iii) the HOSL shares transfer (iv) the Buncefield Execution Agreement and (v) the Avonmouth Execution Agreement. 56.              The reason why there were both a Novation Agreement and a Buncefield Execution Agreement was because a decision remained to be taken by Fina and Texaco as to whether HOSL and/or BOSL were to be liquidated. [See clause 4.01].   That decision had to be taken by 1st June 1994. By Clause 4.02, if the original parties decided to liquidate HOSL they had to give notice under the Execution Agreement making that Agreement the effective agreement between the three parties. By Clause 4.03 if the original parties decided to retain HOSL or failed to notify Elf prior to 1st June 1994 of their decision whether to liquidate HOSL the Original Parties were required to “prepare, on or before 1st December 1994, the Buncefield CSA incorporating the terms of the 1988 JVA and the Management Agreement dated 6th January 1992, and the original parties and Elf shall execute as soon as practicable thereafter the Buncefield CSA”. 57.              Important to Total’s argument is that the Buncefield CSA was defined by the Sale and Purchase Agreement as a consolidating shareholders agreement “substantially in the form of the Buncefield JVA but amended to reflect the existence of an operating company” and the Buncefield JVA was defined “as the joint venture agreement relating to the Buncefield Terminal Execution Agreement.” Total accordingly suggest with some force that the joint venture agreement annexed to the Buncefield Execution Agreement reflected the real agreement between the parties at this juncture. That was the agreement which was to apply if HOSL was liquidated, and to apply but amended to reflect the fact that HOSL remained the operating company if HOSL was not liquidated. 58.              What were the relevant terms of the Buncefield Execution Agreement (the Execution Agreement) and the Buncefield JVA annexed thereto? The Execution Agreement recorded that the parties Texaco, Fina and Elf had agreed a JVA as attached to apply in the event of HOSL being liquidated and required the parties to execute the same once Fina and Texaco confirmed that HOSL was to be liquidated. The parties to the JVA were Fina, Texaco and Elf. By the JVA Clause 4 Fina was “designated manager of the terminal” and by the definition of manager, manager meant “the Party designated to act as such pursuant to clause 4 and acting in that capacity and not as a participant”. Once again a distinction is being drawn as to the capacity in which Fina might be acting. [As we understood it, at the beginning of stage 2, Fina were still subcontracting the operation side to BPA; and that ceased in January 1995 when Fina took on BPA’s employees at the terminal, but nothing we think turns on that]. Clause 5 of the JVA set out the duties of the manager following closely the obligations conferred under the Management Agreement of 6th January 1992 but importantly so far as an indemnity was concerned clause 5.7 provided:- “The Participant shall, each as to its Participating Interest, keep the Manager indemnified and held harmless against any loss, injury or damage arising out of the performance of the Manager’s duties and obligations hereunder except insofar as the said loss, injury or damage shall arise out of the Wilful Misconduct of the Manager provided that the Manager shall not be liable in any event, regardless of Wilful Misconduct, for any consequential loss.”               Thus an indemnity was to cover the Manager’s own negligence. 59.              Annexed to the JVA were an Accounting Procedure and the Operating Regulations. The Accounting Procedure contained at 1.2 a provision relating to “the Manager” Fina not gaining or losing as a result of being manager. The Operating Regulations are simply defined in the definitions of the JVA as “the Operating Regulations annexed hereto as Schedule 2” but otherwise get no mention. But they impose obligations on “the Manager” and on “the participants” in relation to the operation of the terminal – thus “the Manager” under the regime envisaged if HOSL were liquidated described both the entity providing the back office facilities and the operator and was Fina.  Fina was thus, as manager, responsible for safety (see regulation 7). The participants had rights of access to the terminal (see regulation 6). Under Section III and the heading Liability and Insurance appear the following provisions:- “1.1 Each of the Participants shall indemnify, hold harmless and defend each other from and against any and all liabilities, claims, demands, proceedings, damages, losses, costs, charges and expenses whatsoever arising directly or indirectly out of or as a consequence of the death or illness of or injury to any employee, servant or agent of such Participant or the loss of or damage to any equipment or property…of such Participant or any of its employees, servants or agents, whether or not resulting from or contributed to by any negligence or default on the part of the Manager or any of the other Participants or any of their employees, servants or agents… 1.2 Save as otherwise expressly provided herein, the Manager shall indemnify and hold harmless the Participants from and against any and all claims by third parties in respect of the injury to …any person or the damage to or loss or destruction of any property which may arise out of or in the course of or by reason of the Terminal Operations, save and except if and to the extent that the Manager is not indemnified in respect of any such personal injury, death or illness or damage to or loss or destruction of property by insurance taken out by the Manager pursuant to paragraph 2.1.2 of these Operating Regulations, then each of the Participants, to the extent of its Participating Interest, shall indemnify and hold harmless the Manager from and against any such claims by third parties (and from and against any and all actions, proceedings, liabilities, losses, damages, costs, charges and expenses whatsoever in respect thereof or in relation thereto).” 60.              This JVA never became effective, but if it had Total submit (i) that clause 5.7 has no direct application to Fina’s role as operator; that is consistent with their case relating to the inapplicability of the Management Agreement to their activities as operator. But they do suggest the presence of that clause would make it unsurprising if on the proper construction of 1.2 of the regulations Fina was to be indemnified in respect of its own negligence; and (ii) that, they say, is the proper construction of 1.2, that clause working in this way; first they say by reference to the first part of the clause, as manager Fina would be bound to indemnify the participants in relation to claims brought against any one of them (including Fina), but if Fina did not have insurance as contemplated under 1.2 the participants were bound to indemnify Fina (and it is said it should be assumed in testing the construction there was not in place any such insurance). The indemnity covers claims brought against a participant in negligence, and the argument is that since participants are defined to include Fina any claims brought against Fina would come within the first part of the clause, and, if no insurance, would lead to indemnities under the second part from the participants in accordance with their shares. 61.              In the alternative if it were right that the claims were  against Fina as manager and thus not within the first part of the clause, the argument is that under the second part of the clause Fina as manager has an independent claim to be indemnified in so far as it is not covered by insurance. 62.              Mr Sumption, it should be said, would accept that by a more straightforward route Fina would be entitled to be indemnified even in respect of its own negligence. He submits that is the effect of clause 5.7 which he submits would have applied to Fina as manager including its role as operator of the terminal, if the JVA had ever become effective. But he would also submit that Fina were wrong in their construction of 1.2 as attached to the Execution Agreement. 63.              So far as the second part of the clause is concerned, as already indicated in the context of HOSL being the party seeking to enforce an indemnity under the second part, Mr Sumption before the judge argued that the second part did provide an independent right to recover an indemnity in respect of claims against HOSL in negligence where there was no insurance in place. That construction in the context of HOSL being the indemnified had the merits of not leaving third parties without a remedy if HOSL a worthless company was uninsured. As already indicated it was rejected by the judge even in that context [see paragraphs 372 and 373 of the judgment]. If one is considering the second part of the clause as attached to the JVA when Fina are the manager the commercial logic which might have been in favour of an independent right for the manager in relation to claims against it even in negligence, no longer applies. 64.              Before us (again as already indicated) Mr Sumption now accepted the construction preferred by the judge, which requires that the clause be read as a whole and that the second part is not separate from the first part. It is dealing (as the judge emphasises) with “such” claims, i.e. the claims referred to in the first part. We think the judge was right and that the word “such” compels the construction that the second part would give no independent claim if HOSL was manager and a fortiori where Fina is manager in relation to claims brought against it as manager. 65.              So far as the first part of the clause itself is concerned, it is not Fina as participant that has incurred any liability in relation to which Fina as manager should indemnify it as participant. In our view, the clause simply has no application to claims in negligence brought against Fina as manager. 66.              These arguments would seem to us to be an answer to Fina’s suggested construction of 1.2 of these Operating Regulations. It will follow that the argument which Total make in relation to those Operating Regulations which suggests that they did provide an indemnity against Fina’s negligence and thus should not receive a different construction when attached to the Novation Agreement does not in fact get past first base. We must however look finally at the actual provisions in place at the time of the explosion because HOSL was not in fact liquidated. The terms with HOSL still in place 67.              HOSL was not liquidated, and the parties should have produced a CSA which with the incorporation of an operating company produced the same result as that produced by the JVA if effective. But the parties did not do so. To fill the gap for the period while Texaco and Fina made up their minds as to whether to liquidate HOSL, one of the Buncefield completion documents executed by the parties was the Novation Agreement, and this agreement simply stayed in place. This agreement provided by clause 1 as follows:- “1(a) Elf shall, for all purposes, become a party to the Joint Venture Agreement in respect of the Texaco Assigned Interest and the Fina Assigned Interest in the place of Texaco and Fina respectively. (b) Elf undertakes with each of Texaco and Fina to observe, perform, discharge and be bound by all liabilities and obligations of Texaco in respect of the Texaco Assigned Interest and Fina in respect of the Fina Assigned Interest in the place of Texaco and Fina respectively whether actual, contingent or otherwise arising on or after the Effective Date as if Elf had at all times been a party to the Joint Venture Agreement in relation to such respective interests in place of Texaco and Fina.” 68.              The agreement then deleted various clauses of the original JVA e.g. clause 2, except for 2.2.1 but that only in amended form reflecting that it was dealing with Buncefield and the share of the participants at 40-40-20. It contained restrictions on assignment by clause 6 to which we will return below. By clause 2(f) it then provided as follows:- “Schedules 1,2,3,4 and 5 shall be deleted in their entirety and replaced by the Accounting Procedure attached hereto as Schedule 1, the Operating Regulations attached hereto as Schedule 2 and the Product Specification attached hereto as Schedule 3.  Such Accounting Procedure and Operating Regulations to be interpreted as if references to the Manager are to HOSL and references to the Management Committee are to the HOSL Board.” [our underlining] 69.              Finally by clause 3 it provided:- “Subject as expressly provided in this Novation Agreement all other provisions of the Joint Venture Agreement shall remain in full force and effect and binding on the parties thereto, insofar as the same are in force and effect and binding on those parties immediately prior to the Effective Date.” 70.              The Accounting Procedure and the Operating Regulations are then simply those attached to the JVA annexed to the Execution Agreement the terms of which we have quoted above, but “manager” was HOSL [see sentence underlined in clause 2(f) above]. The effect of not liquidating HOSL was also to leave in place the Management Agreement between HOSL and Fina of 6th January 1992 but at the time Elf joined some consideration had been given to whether that should be varied and it is convenient to consider that question at this stage. Variation of the Management Agreement 71.              Total contends that, even if clause 7.1.2 of the Management Agreement as originally drafted did not provide an indemnity for negligence, it was subsequently amended so as to bring negligence within the scope of the indemnity.  The judge rejected the argument.  The section of his judgment dealing with this issue, at paragraphs 382-393, sets out the salient parts of the correspondence and minutes relied on by Total.  It is sufficient for us to summarise what happened and to express our conclusions on the issue. 72.              On 6 August 1992, Miss Ellison of Fina’s legal department wrote to Miss Mahmood of Texaco’s legal department with a proposal that the operator be indemnified for negligence and that any liability for wilful misconduct should exclude any liability for consequential losses.  The proposal was based on the mistaken belief that the matter had been raised at the last HOSL Board meeting and had been left to the lawyers to resolve.  Miss Mahmood indicated her agreement with the proposal.  Miss Ellison then sent her a draft amendment to clause 7.1.2 and a new clause 7.2 to give effect to the proposal.  Miss Mahmood replied on 26 August 1992, expressing her belief that the amendments would be acceptable and stating: “Subject to obtaining my client’s confirmation that they understand and accept the revisions, I shall revert to you as soon as possible so that we can agree brief amending agreements as appropriate”.  By an internal memorandum dated 27 August 1992 to Mr Spittlehouse, Manager of UK Operations at Chevron, Miss Mahmood sought her client’s confirmation.  There is no record of any such confirmation being given.  The correspondence with Miss Ellison came to a halt. 73.              Over a year later, in November 1993, Elf was sent a draft of what was to become the Execution Agreement.  It included a draft of the future clause 5.7 which provided Fina, as Manager, with an indemnity otherwise than for wilful misconduct and with the proviso that Fina was not to be liable in any event for any consequential loss.  At a meeting on 25 November 1993 a representative of Elf questioned the clause (referring in fact to the exclusion of consequential loss).  Miss Ellison, representing Fina, gave the mistaken explanation that this was a common clause in the current joint venture agreements and had been expressly allowed for by Board resolution.  She said that Fina would produce a side letter on the point.  74.              Miss Ellison wrote on the following day to Miss Mahmood referring to the correspondence of the previous year and asking for a copy of Miss Mahmood’s reply to the letter of 6 August 2002.  She said that she would like to be in a position to demonstrate to Elf that “this is a concept already in existence and which we are only formalising in this new JVA”.  Miss Mahmood replied on 30 November 1993, stating: “… I confirm that I replied to your letter of 6th August 1992, confirming my agreement to each of Texaco and Fina being indemnified by BOSL or HOSL (as the case may be) unless the relevant party was guilty of wilful misconduct.  Attached is a copy of my letter dated 25th August 1992 agreeing to your proposed amendment to both Management Agreements.” 75.              The cross-correspondence was produced for Elf’s inspection at a further meeting on 1 December 1993, but the meeting took the matter no further. 76.              As pointed out by the judge (paragraph 391), Miss Mahmood’s letter of 30 November 1993 was no more than a notification of “my agreement”, with no suggestion that “her client” had confirmed its agreement, and there is no basis for Total’s submission that Miss Mahmood was communicating the fact that her client had at some stage given her instructions to agree.  Had such instructions been given, there is every reason to believe that they would have been communicated previously to Fina and that a written amendment to the Management Agreement would have been drawn up.  The absence of any such written amendment is striking.  (We were shown an internal Elf memorandum dated 5 May 1993 summarising the Management Agreement in terms that referred to HOSL’s obligation “to indemnify Fina against all actions other than those caused by Wilful Misconduct”, but there is nothing to show that this was anything other than a misreading by the author of the memorandum.  Had there existed an actual version of the Management Agreement along the lines summarised, it is almost inevitable that a copy of it would have emerged on disclosure.) 77.              There was no witness evidence to support the existence of an amendment.  Total’s witnesses gave no such evidence.  Chevron’s Mr Spittlehouse had no recollection of Miss Mahmood’s memorandum of 27 August 1992 but told the court, in evidence accepted by the judge, that it was not a matter for him and he would have passed it on to Mr Humphries, Chevron’s UK General Manager of Supply and Distribution (who also became the company’s chief negotiator in relation to the accession of Elf).  Mr Humphries, for his part, gave unchallenged evidence as follows (at paragraph 6 of his second witness statement): “If I had been contacted, I think my reaction to the proposal would been at best equivocal and more likely opposed.  I would not have liked the idea of removing this liability from over Fina’s head when we, Texaco, had no control over what went on day to day at the HOSL terminal. The other side of the coin was that I had confidence in the Texaco systems and procedures which governed how the BOSL terminal was operated so that I would have had no great concern regarding Texaco’s potential liability in negligence.  Therefore, even if Brian [Spittlehouse] had approached me about this idea, I think it is more likely that I would have rejected it.” 78.              Finally, the fact that the parties negotiated and agreed an indemnity in the terms of clause 5.7 of the Execution Agreement cannot justify an inference that a corresponding amendment was made to the Management Agreement.   79.              In our judgment, the evidence falls far short of establishing the amendment to the Management Agreement for which Total contends.  Clause 7.1.2 must be applied in its original form.   What indemnity was thus available to Fina if the explosion had occurred during Stage 2? 80.              It follows first that so far as clause 7.2 is concerned Fina would not have an indemnity in respect of any claim against it for the negligent operation of the terminal for the reasons given in paragraph 40 above. 81.              It also follows that in approaching the meaning of 1.2 of the Operating Regulations there is no equivalent of 5.7 of the JVA to assist as the context in which to consider whether 1.2 might indemnify Fina against its own negligence. 82.              Lord Grabiner and indeed on this followed by Mr Butcher QC argued strenuously that the Operating Regulations cannot change their meaning when moved from the context of the JVA to the Novation agreement. So they argue that since under the Operating Regulations attached to the Execution Agreement, Fina would have been indemnified as manager under those regulations the same result must flow from a construction of the Operating Regulations attached to the Novation Agreement. It follows a different route but they argue that although manager must now be read as HOSL the result is that HOSL under 1.2 is obliged to provide an indemnity to Fina under the first part even for Fina’s own negligence and obtain an indemnity under the second part, there being as Total argue no insurance. But this argument has lost its foundation since the Operating Regulations attached to the Execution Agreement would not have provided Fina as manager with an indemnity in respect of its own negligence. 83.              The argument that the draftsman when he intended to indemnify a party against that party’s own negligence expressly so provided is still a compelling argument. 1.1 expressly allows for indemnities in the knock for knock context against the indemnified’s own negligence. 84.              It is in any event a strained construction under the first part of the clause to suggest that HOSL should indemnify Fina (its delegate) as operator. 85.              If the Operating Regulations attached to the Execution Agreement had provided Fina with an indemnity as manager against its own negligence, that factor might have been a basis for seeking to strain the construction of 1.2 of the Operating Regulations actually in place. But without that compulsion and with the fact that the same words had for many years produced the result that Fina would not be indemnified against its own negligence as Operator, Total’s task is impossible. 86.              Indeed as to the second part of the clause seeing how 1.2 when attached to the JVA should be construed in the context of Fina being the manager, actually assists Mr Sumption’s argument and supports the judge’s construction in paragraph 273 of his judgment. 87.              Mr Sumption was, we think, prepared to accept that if the parties had drafted a CSA as was contemplated adopting the JVA attached to the Execution Agreement as far as possible, the arguments might have been very different, but this concession was because he accepted that clause 5.7 might have existed in the context of HOSL not being liquidated. It is not for us to speculate. We can only construe the agreements that were made and in place at the time of this explosion. 88.              There were other issues argued before us such as the question whether HOSL actually had the required insurance contemplated by 1.2 of the Operating Regulations. The judge did not deal with this question because it did not arise on his construction of 1.2. It does not arise on our construction either. Although we would have been prepared to attempt to deal with the point if it had arisen and although it is right to say our inclination was to be in Total’s favour on this aspect, since we were not taken to the detail of the policies on which Chevron relies as being the relevant insurance, we intend to say no more. 89.              We should finally mention 9.2 of the original JVA. Again it seems to us that on a proper construction of 1.2 of the Operating Regulations the parties allowed for the way in which participants were to share in accordance with their proportions. That made 9.2 redundant. There is an added factor that when Elf joined 9.2 would have had to be amended to allow for the fact that Elf now had a one third share in Avonmouth and a 20% share in Buncefield. It is possible as Total have done to draft an amendment to clause 9.2 that might have applied but in relation to other clauses the parties did produce amendments. Therefore despite the clause [clause 3] which provides that all other provisions of the original JVA should otherwise apply to the Joint Venture once Elf joined, that did not in our view apply to 9.2. Stage 3 – Total purchase of Elf and Fina – did it become a participant? 90.              A further reason why, on Chevron’s case, Total (in this context Total UK Limited, or “TUKL”) is not entitled to an indemnity under paragraph 1.2 of section III of the Operating Regulations is that at the time of the incident it was not one of the “Participants” to whom the indemnity applies.  91.              The definition of Participants is contained in clause 2.2.1 of the Joint Venture Agreement as amended by clause 2(b) of the Novation Agreement: “Subject as hereinafter provided, all of the property and other assets acquired or held for use in connection with the operation and maintenance of the Buncefield Terminal in accordance with this Agreement (as supplemented/amended and/or novated) shall be owned and borne by Texaco, Fina and Elf and their permitted assigns and successors (‘the Participants’) in proportion to their undivided participating interests (‘Participating Interests’) as follows ….” 92.              Assignment is governed by clause 6 of the Joint Venture Agreement as substituted by clause 2(d) of the Novation Agreement: “6.1 Restriction 6.1.1.          No assignment or transfer of any interest under this Agreement shall be made by any Participant otherwise than in respect of an undivided interest in all or part of its interest in the Terminal, this Agreement and any other assets held by it at the Terminal including, for the avoidance of doubt, any Independent Use Expansion assets (‘the Interest’). … 6.2    Right 6.2.1      Each of the Participants hereto may assign all or part of its Interest to an Affiliate which has demonstrated to the reasonable satisfaction of the other Participants that it has the financial capability to meet its prospective obligations hereunder provided that the assignor Participant has notified the other Participants that there is no current intention to subsequently dispose of the assignee Affiliate.” 93.              In Mr Sumption’s submission, the effect of those provisions was that in order for TUKL to come within the definition of Participant as a permitted assignee of Fina and Elf it was necessary (1) for TUKL to demonstrate its financial capability to the reasonable satisfaction of Total (in substance, a requirement of consent, to be granted on the defined criteria), (2) for TUKL to acquire all of the interest of Fina and Elf in the Terminal and in the shares of HOSL, (3) for TUKL to assume the burden of the obligations of Fina and Elf under the agreements governing the joint venture, and (4) for Texaco to grant a corresponding release to Fina and Elf from those obligations.  Mr Sumption submitted that these requirements were not in practice fulfilled, nor was there any subsequent agreement to dispense with them. 94.              What happened in practice was, first, that TUKL entered into agreements with Fina and Elf, dated 1 April 2000 and 31 December 2000 respectively, for the sale and purchase of their businesses.  95.              Clause 2 of each agreement provided that “the Vendor as beneficial owner agrees to sell assign and transfer to the Purchaser and the Purchaser agrees to purchase and take an assignment or transfer of the Business as a going concern together with all of the following (together the ‘Assets’) …”.  The Assets included “(b) the benefit subject to the burden of … all other contractual and other rights and obligations of or entered into or undertaken by or on behalf of the Business …”; “(e) the beneficial interest in the real property of the Vendor at Completion … to be held in trust for the Purchaser by the Vendor until the legal estate in each case is transferred at the Purchaser’s request to the Purchaser or a third party specified by the Purchaser”; “(m) the Vendor’s shareholding in … all other consortia and joint ventures in which the Vendor has an interest”; and “(o) all other assets properties and rights owned or used by the Vendor in connection with the Business”. 96.              Clause 4 of each agreement dealt with “Completion”.  Clause 4.2 provided that the Vendor was to deliver to the Purchaser “(a) on Completion all the Assets which are capable of transfer by delivery, (b) on or when required by the Purchaser after Completion such further duly executed conveyances transfers documents and assignments as the Purchaser may reasonably require so as to vest in the Purchaser on Completion the full estate title interest and benefit to in and of the other Assets …”.  Clause 4.3 made provision for cases where the consent or licence of a third party was required:  “4.3  In any case where the consent or licence of any person not a party to this Agreement is required to the transfer or assignment from the Vendor of any of the Assets or where for any other reason the Vendor is unable at Completion to transfer the same to the Purchaser (a)          the Vendor or its nominee or nominees shall (until such consent or licence shall have been obtained or inability remedied or legal estate passed) hold such Assets upon trust for and for the benefit of the Purchaser absolutely (b)         the Vendor shall use all reasonable endeavours (subject to the co-operation of the Purchaser) to procure that such Assets are novated or transferred to and fully vested in the Purchaser as aforesaid at Completion or as soon as is reasonably practicable thereafter and shall act as agent under the direction of the Purchaser in all matters relating thereto for so long as the Vendor is required and authorised so to do by the Purchaser (c)          the Vendor shall account to the Purchaser for all profits receipts and payments received by or made to it in the course of its agency under this sub-clause ….” 97.              Thereafter, in HOSL’s annual directors’ reports from 2001 to the time of the incident, TUKL was referred to as one of the “participating companies”.  Witnesses at trial, including Chevron’s witnesses, confirmed that that was their understanding of the position.  A general assumption that TUKL had become a participating company cannot, however, determine the true position in law.  We note that there is no allegation of estoppel. 98.              By letter dated 2 December 2005, a member of Total’s legal department wrote in the following terms to Texaco: “I act for Total UK Limited, Total Downstream UK PLC [formerly Fina] and Total Milford Haven Refinery Limited [formerly Elf]. Following the mergers of Total, Fina and Elf Groups, it is proposed that Total Downstream UK PLC and Total Milford Haven Refinery Limited (the ‘Transferors’) transfer to Total UK Limited (the ‘Transferee’) their shares held in Hertfordshire Oil Storage Limited (‘HOSL’) and their respective Participating Interest (as defined in the Joint Venture Agreement of 18th March 1988 as amended by Novation Agreement dated 1st January 1994) (The ‘Joint Venture Agreement’) held in relation to Buncefield Terminal and Avonmouth Terminal (hereinafter the ‘Terminals’) and any and all contracts (the ‘Contracts’) entered into by the Transferors with you in relation to or in connection with the Terminals (a list of the Contracts is attached hereto in Schedule 1); Would you therefore please accept this letter as formal notification of the transfer and request for consent to the Transferee assuming all the obligations of the Transferors and to the Transferors being released from all the obligations pursuant to the terms of the said Joint Venture Agreement and Contracts. If you agree with the above transfer could you please confirm this by signing and returning to us the accompanying copy attached hereto.” 99.              The accompanying copy was duly countersigned on behalf of Texaco, expressing agreement with the terms of the letter, and was returned to TUKL. 100.          A deed was drawn up in the course of 2006 between TUKL, Total Downstream UK PLC (Fina), Total Milford Haven Refinery Limited (Elf) and Texaco (or Chevron, as it had become by the time of signature) for the novation of the agreements relating to the Avonmouth Terminal.  The recitals to the deed recorded: “A.  TEXACO has consented to the transfer to TOTAL of the shares held by FINA and ELF in Bristol Oil Storage Limited (‘BOSL’) and to the novation of all and any agreements entered into among TEXACO, FINA and ELF with regard to the operation of Avonmouth terminal (the ‘Terminal’) including, without limitation the agreements set out in Schedule 1 (‘the Contracts’); and B. To the extent that the Contracts relate to the Terminal, FINA and ELF wish to be released and discharged from the Contracts and TEXACO has agreed to release and discharge FINA and ELF upon the terms of TOTAL’s undertaking to perform the Contracts and to be bound by the terms of the Contracts in place of FINA and ELF.” Clause 3 contained provisions relating to the novation in respect of Avonmouth.  Clause 4 provided: “4. For the avoidance of doubt and notwithstanding anything else in this Deed, the Joint Venture Agreement dated 18th March 1988 between TEXACO, FINA and ELF as amended (the ‘Joint Venture Agreement’) shall be novated pursuant to clause 3 only to the extent that such novation relates to the Terminal and not to the Buncefield Terminal and TEXACO, FINA and ELF acknowledge that they will remain bound by the Joint Venture Agreement to the extent that it relates to the Buncefield Terminal.” 101.          The deed was signed on behalf of all the parties but was undated.  There is a dispute between Chevron and Total about its status.  Total contends that it was a conditional agreement which was subsequently withdrawn without coming into effect:  by an email dated 13 August 2008 (when the litigation relating to Buncefield was well under way), notice was given on behalf of the three Total signatories to the deed that “they do not wish to enter into the agreement on the terms set out in the draft Deed . . . , and any and all offers to do so by any one or more of the Total Companies previously communicated to Chevron Limited or any agents acting on its behalf are hereby withdrawn”.  Chevron contends that the parties were simply waiting to insert the date of a related property lease and that the deed amounted to an unconditional agreement from which the Total parties could not withdraw unilaterally.  Chevron therefore relies on clause 3 of the deed as a contractual acknowledgement that a transfer of obligations in relation to Buncefield had not occurred and that the relevant parties were still Fina and Elf.  102.          The judge made no findings in relation to the deed.  He stopped at the letter of 2 December 2005, finding that Texaco’s agreement to that letter “was sufficient, despite the continued absence of a formal conveyance or share transfer, to confirm TUKL’s status as a party to the joint venture” (paragraph 381).  103.          Mr Sumption submitted that the judge was wrong to attribute that effect to the letter of 2 December 2005.  The letter was merely the first step in a process which, in order to be completed, required the parties also to enter into a document, in respect of Buncefield, along the lines of the later Avonmouth deed.  Until then there was no transfer of the relevant rights and obligations, the formalities of clause 6 of the Joint Venture Agreement were not satisfied, and TUKL was not a “permitted assign” of Fina and Elf so as to come within the definition of “Participants”. 104.          Lord Grabiner supported the judge’s approach.  He accepted that the formalities of clause 6 of the Joint Venture Agreement were not satisfied, but he submitted that the letter of 2 December 2005 constituted an agreement between all the relevant parties to the effect that those requirements were waived, that Fina and Elf would no longer be parties to the relevant agreements, and that TUKL would become a party to those agreements in their place.  Chevron’s agreement was sufficient to effect the transfer and release referred to in the third paragraph of the letter and to constitute TUKL as a Participant.  The letter was a self-standing document, not the first step in some process that would only be completed once the transfers were made.  As to the later deed, Lord Grabiner submitted that it could not affect the position.  It did not refer to the letter of 2 December 2005 and clause 4 did not purport to reverse the meaning and effect of that letter. 105.          In the alternative, if the 2 December 2005 letter was not sufficient to transfer the participating interest to TUKL, Lord Grabiner relied on the effect of clause 4.3 of each of the agreements by which TUKL acquired the businesses of Fina and Elf (see paragraph [96] above). The effect of clause 4(3) was that Fina and Elf each held their participating interest on trust for TUKL.  The definition of Participants in clause 2.2.1 of the Joint Venture Agreement included the “permitted assigns and successors” of Fina and Elf, and TUKL was such a person.  Fina and Elf were therefore entitled to sue for and obtain an indemnity for TUKL, holding as trustees whatever they recovered. 106.          Although Lord Grabiner accepted that the formalities of clause 6 of the Joint Venture Agreement were not satisfied, we find it difficult to see what relevant formalities remained once Texaco had agreed to the terms of the letter of 2 December 2005.  The assets assigned pursuant to clause 2 of the sale and purchase agreements included the undivided interest of each of Fina and Elf in the Terminal, the Joint Venture Agreement and other relevant assets, as required by clause 6.1.1 of the Joint Venture Agreement.  By agreeing to the terms of the letter of 2 December 2005, Texaco gave the consent that was in substance required by clause 6.2.2.  Once consent had been given, nothing else was required in order to complete the assignment of the benefit of the contractual rights of Fina and Elf, including their rights under the various agreements constituting the joint venture.  It is true that legal transfers were still required in relation to certain matters, notably the interests of Fina and Elf in the Terminal land and their shares in HOSL, but nothing turns on that: Total was the beneficial owner of all relevant assets pursuant to clause 4.3 of the sale and purchase agreements and, once Texaco’s consent was given, could require the legal transfers to be effected.  The legal reality, as it seems to us, was that the giving of consent was all that was needed to make Total a “permitted assign” and thus a “Participant” within the meaning of clause 2.2.1 of the Joint Venture Agreement.  It did not require a further agreement along the lines of the Avonmouth deed to produce such a result.  This also gives effect to the practical reality of the situation and reflects the understanding of those involved at the time. 107.          It follows that Chevron fails in its argument that TUKL was not a Participant within the meaning of 1.2 of section III of the Operating Regulations.  For the separate reasons already given, however, TUKL is not entitled to an indemnity under that provision or any of the other provisions on which it relies, and its appeal must be dismissed. Chevron’s cross-appeal 108.          The main issue raised by Chevron’s cross-appeal covers the same ground as that already traversed in considering one of the issues under paragraph 1.2 of section III of the Operating Regulations.  It arises in this way.  Chevron suffered property damage and consequential economic loss as a result of the explosion at Buncefield.  It claimed damages for those losses from TUKL.  It accepted that paragraph 1.1 of section III of the Operating Regulations (see paragraph [59] above) precluded such a claim if TUKL was a “Participant” within the meaning of paragraph 1.1, since that paragraph is a knock for knock agreement between the Participants.  As previously stated, the definition of Participants is contained in clause 2.1.1 of the Joint Venture Agreement as amended by clause 2(b) of the Novation Agreement.  The judge’s finding (at paragraph 381) that TUKL was a party to the joint venture amounted to a finding that TUKL was a Participant as defined, which led inevitably to the dismissal, by paragraph 3 of his order, of Chevron’s claim against TUKL.  Chevron’s case is that TUKL was not a Participant and that paragraph 1.1 does not therefore bar Chevron’s claim. 109.          We have already found that TUKL was a Participant as defined (see paragraph 107 above).  It follows that, as the judge held, TUKL is entitled to rely on paragraph 1.1 as a bar to Chevron’s claim, and Chevron’s cross-appeal must be dismissed.    110.          We should mention that Chevron had a further argument on its cross-appeal, to the effect that, if TUKL was entitled to an indemnity under clause 7.1.2 of the Management Agreement, Chevron could rely on TUKL’s breach of its duty of care to Chevron in order to prevent any part of the indemnity being passed on to Chevron.  The argument is not an attractive one:  to find a duty of care on the part of TUKL to protect Chevron against losses under the indemnity would, on the face of it, be wholly inconsistent with the contractual scheme.  We do not need, however, to consider the point any further.  Our finding that TUKL is not entitled to an indemnity under the Management Agreement means that the point does not arise for decision.    The Shell Appeal Background Facts 111.          The destruction and serious damage at Buncefield consequent upon the explosion extended to fuel storage and pipeline facilities that were used by Shell as an integral part of its arrangements for distributing and supplying fuel to customers in South East England.  Shell had a part beneficial interest in these facilities and the land on which they were situated.  It is now conceded by Total that damage to this property was a reasonably foreseeable consequence of their and their supervisor’s negligence. 112.          The legal title to the land and the facilities in which Shell had a beneficial interest was vested in two service companies, United Kingdom Oil Pipelines Limited (“UKOP Ltd”) and West London Pipeline and Storage Limited (“WLPS Ltd”).  UKOP Ltd and WLPS Ltd held all of these assets (the land and the facilities thereon) on trust for Shell, BP, Total and Chevron (“the Participants”) who between then also owned the entire issued share capital in UKOP Ltd and WLPS Ltd. 113.          UKOP Ltd and WLPS Ltd were non-trading vehicle companies.  They had no employees, made no profits, declared no dividends, and held no assets on their balance sheets (apart from £200 of issued share capital).  The directors of UKOP Ltd and WLPS Ltd were appointed by the Participants, and both UKOP Ltd and WLPS Ltd were effectively obliged to act in accordance with decisions or recommendations of two co-ordinating committees that were established by the Participants. 114.          The role of UKOP Ltd and WLPS Ltd was to undertake, through their appointed agents British Pipeline Agency Limited (“BPA”), a company itself owned by Shell and BP, the management, operation and maintenance of the fuel storage and pipeline assets on behalf of the Participants.  The Participants including Shell were charged a notional tariff for storing and/or conveying their fuel in or through the assets.  The notional tariff was set so as to cover BPA’s costs of running and maintaining the assets, and notional amounts for depreciation and return on investment.  There was no profit element for WLPS Ltd or UKOP Ltd. 115.          As a result of the damage done to the assets by the incident, Shell suffered loss or damage to their own fuel in relevant tanks and pipelines owned by UKOP Ltd and WLPS Ltd and that has been compensated by Total.  It also suffered significant losses through its inability to supply aviation fuel and ground fuel to customers, save in reduced volumes or at increased cost.  Shell has brought proceedings in negligence, nuisance and Rylands v Fletcher against Total in order to recover this loss. Background law 116.          Pursuant to two “Participants Agreements” Shell was entitled to the use of the relevant facilities, of which it was a part beneficial owner in common, for the purpose of receipt and delivery of the fuel.  But its claims have failed before David Steel J largely because Shell was unable to overcome the rule that there can be no recovery for negligent infliction of mere economic loss.  The House of Lords considered this aspect of the law over 20 years ago and reiterated English law’s traditional refusal to allow recovery in such circumstances, unless such loss was the foreseeable consequence of physical injury to the claimant or the claimant’s property.  There are exceptions to this principle such as negligent misstatement as set out in Hedley Byrne v Heller [1964] A.C. 465 or general average expenditure as set out in The Greystoke Castle [1947] A.C. 265.  But in Leigh and Sillavan Ltd v Aliakmon Ltd (The Aliakmon) [1986] A.C. 785 Lord Brandon of Oakbrook, setting out the exclusionary rule said (809C):- “… in order to enable a person to claim in negligence for loss caused to him by reason of loss of or damage to property, he must have had either the legal ownership of or a possessory title to the property concerned at the time when the loss or damage occurred, and it is not enough for him to have had only contractual rights in relation to such property which have been adversely affected by the loss of or damage to it.” In that case the claimants were buyers of steel coils shipped on the vessel Aliakmon which became damaged during the voyage but they did not acquire either legal or possessory title until after the goods had been discharged and paid for.  They were therefore unable to recover. Mr Anthony Clarke QC (as he then was) for the claimants felt constrained to accept this principle as the law because only the previous year it had been approved and applied in Candlewood Navigation v Mitsui OSK Lines (The Mineral Transporter) [1986] A.C. 1 by a Privy Council, the composition of whose judicial committee had a certain (and, perhaps, unwelcome) similarity to the composition of the committee with which he was faced in The Aliakmon.  He argued (inter alia) that his clients had the equitable ownership of the goods although they did not have legal title and that that equitable ownership should be enough to enable them to bring an action for damage to the cargo, even if they were not in possession of the goods.  But Lord Brandon rejected that submission because the legal owner had not been joined as party to the action. 117.          Shell’s response to Total’s defence is that i)                    even if it had no possessory title to the damaged tanks and pipelines it had a (shared) equitable ownership of them and that is enough to give it title to claim for its economic loss.  To the extent that it needs to join the legal owners of the pipelines, it has done so because UKOP Ltd and WLPS Ltd are parties to the action; ii)                   it anyway did have a good (shared) possessory title to the pipelines at the time of the damage; iii)                 the rule requiring a legal or possessory title before recovering for economic loss has always been subject to exceptions (see Hedley Byrne and the Greystoke Castle) and justice requires a further exception to be made to fit the facts of this case; iv)                 the rule should anyway be abandoned, although Shell recognised that that is not an option open to this court; v)                  whatever the law of negligence may be, Shell has alternative claims in nuisance and under the rule of Rylands v Fletcher, which cover the same ground; beneficial ownership of land has always been sufficient to sustain a claim in nuisance, of which the rule in Rylands v Fletcher is an aspect. 118.          Before considering the legal arguments it is necessary to say a little more about the relevant parts of the Buncefield site and the contractual arrangements between the parties. Further Facts 119.          Shell had an interest in a part of the Buncefield site which was called the WLPS/UKOP site.  That consisted of a main site south of Cherry Tree Lane and a subsidiary site north of the lane, called the Cherry Tree Farm site.  Petroleum products were imported into the terminal through the UKOP North Pipeline and the UKOP South Pipeline and then stored in tanks on the site or directed via the UKOP pipeline system onwards to other sites on the Buncefield estate such as, in particular, what has been called the HOSL site.  Petroleum products were then exported through the West London Pipeline system or by road tanker to (inter alia) Heathrow and Gatwick. 120.          Both the incoming UKOP pipelines and the outgoing WLPS pipeline were damaged and put out of action by the explosion.  Shell could therefore make fewer deliveries of aviation fuel to Heathrow and Gatwick and also had to make alternative (and more expensive) arrangements for delivery of that fuel.  Those expenses are the main element of Shell’s aviation fuel claim.  Shell also has a ground fuel claim in respect of fuel which was usually loaded into tankers at the HOSL site.  That claim arises because the UKOP pipeline carrying fuel to the HOSL site was damaged in the explosion and could not convey fuel to the HOSL site in the ordinary way. 121.          Before 31st July 1991 Shell, BP, Mobil, Fina and Texaco (together called “the Participants”) were beneficial joint owners and tenants in common of the West London Pipeline System but on that date agreed, by a Deed of Appointment and Acknowledgement, that the system was to be vested in WLPS Ltd on trusts replacing the previous trusts.  Clause 5.1 of the deed provided:- “WLPS [Ltd] hereby declares that … it shall hold the assets in question upon trust absolutely for the Participants as tenants in common in the shares and proportions to which they are entitled under the Participants Agreement or any amendment thereof.” In 2000 Total became a party to this deed and by the date of the explosion the beneficial tenants in common of the pipelines and the tanks on the WLPS site were Shell, BP, Total and Chevron. 122.          On the same day the Participants signed the Participants Agreement referred to in clause 5.1 of the Deed in respect of the WLPS site.  WLPS Ltd was also a party to that agreement and was (by clause 4) appointed, directly or through BPA, to operate and manage the site on behalf of the Participants.  In clause 3 the Participants agreed to establish a joint committee called the West London Co-ordinating Committee whose functions were to decide all matters not expressly required to be decided by the Participants themselves and to make recommendations to WLPS Ltd with regard to the management and operation of what were called the West London Assets.  WLPS Ltd was to comply with all such decisions and recommendations unless their implementation would, in the opinion of WLPS Ltd, conflict with their legal obligations or give rise to any breach of contract binding upon the parties.  WLPS Ltd, as already explained, had no employees of its own and was funded by the Participants. 123.          By clause 6 WLPS Ltd were to set a notional tariff for the storage and conveyance of aviation fuel.  This was intended to be at cost and there were provisions for the Participants to make up any deficiency; but it was not intended that WLPS Ltd should make a profit from the operation.  According to clause 24 the agreement was to continue in force until it was terminated by agreement between the Participants.  WLPS Ltd would have no say in any termination. 124.          Clause 12 provided that conveyance and storage of aviation fuel through the West London Assets was to be subject to Transportation and Storage Conditions (“the T & S Conditions”) published from time to time by WLPS Ltd.  Clause 13.1 provided that the Participants were not to be entitled to use the West London Assets other than as provided for in that sub-clause. 125.          The T & S Conditions published by WLPS Ltd applied to the receipt, storage and transportation of aviation fuel at the WLPS site and could be revised by WLPS Ltd.  Condition 3 laid down requirements about maximum and minimum pressure of fuel on receipt.  There was also a provision for a user to make fuel available at the flow rate necessary to meet the Monthly Movement Programme which was explained further in clause 4.  That clause provided as follows:- “Each User shall notify WLPS by the 14th day of each Month (“Month M”) the details of its required Deliveries for the next Month (“Month M +1”) in the format laid down by WLPS from time to time.  At the same time, such User shall also indicate any major variation it wishes from the details previously given in respect of the Deliveries required from Month M, it being understood that WLPS shall use reasonable endeavours to accommodate such variation but shall not be obliged to do so. WLPS shall use such notifications and its own stock records to formulate a Monthly Movement Programme of Receipts and Deliveries for Month M +1 which will be issued to all Users by the 28th day of the Month M.  This Monthly Movement Programme which may be modified from time to time by agreement between WLPS and a User shall be co-ordinated with the Thames-Mersey Pipeline System movement programme and the term “Monthly Movement Programme” shall herein mean the latest agreed version. WLPS shall determine the time at which it will require a Receipt from a User for entry into either Buncefield Storage or the Pipeline System on the date specified in the Monthly Movement Programme.  Not less than eight hours’ notice of the requirement for such time of Receipt shall be given by WLPS to the User concerned. The User shall make a quantity of Aviation Fuel available from the Thames-Mersey Pipeline System or from the Fina Aviation Storage for delivery to an Entry Point as a receipt in accordance with the Monthly Movement Programme.  The User shall be liable to WLPS for any reasonable expenses incurred by WLPS as a result of any failure by the User to do so.  Subsequent acceptance by WLPS of any such quantity which was not made available as a Receipt at the time notified by WLPS shall be at WLPS’s absolute discretion. In the event of conflicting requirements, WLPS shall use reasonable endeavours to resolve such conflict by agreement with Users but shall have absolute discretion in formulating the Monthly Movement Programme in the best interests of all Users. …… Each User shall furnish WLPS with estimates of projected volumes for planning purposes as and when required by WLPS and in a format laid down by WLPS.” This condition will be of particular importance when it comes to deciding whether Shell had any possessory title to the relevant pipelines. 126.          Similar provisions existed with regard to the UKOP pipelines and the parties accept that the result of this appeal will apply to both sets of pipelines and to both aviation fuel and ground fuel.  The UKOP details need not, therefore, be set out. 127.          Although WLPS Ltd had been appointed to operate and manage the WLPS/UKOP site, the site was actually managed by the company known as BPA, which was referred to in the Participants Agreement and specialised in such matters.  This was a company jointly owned by Shell and BP and it operated the pipelines on the site.  BPA’s main office for this purpose was off-site at Kingsbury but it also provided operational support in the control room on the WLPS/UKOP site.  It was BPA’s employees who, on the ground, admitted fuel into the tanks from the UKOP pipelines and, later transferred fuel into the WLPS pipelines or discharged fuel into tankers in accordance (so far as possible) with the monthly movement programme which each Participant submitted pursuant to clause 4 of the T & S Conditions. Equitable ownership on its own provided legal owner is joined in the action? 128.          For Shell, Mr Laurence Rabinowitz QC accepted that Lord Brandon in The Aliakmon had confined the right to sue for negligent loss of or damage to property to a person who had “the legal ownership of or a possessory title to” the relevant property but he submitted that His Lordship was not intending to rule out the owner in equity at any rate if that equitable owner had (as Shell had) joined the legal owner to the proceedings.  If Lord Brandon had intended to rule out the owner in equity, he would have been wrong to have done so because none of the authorities in relation to economic loss had purported to rule out a claim by the equitable owner save perhaps for The Wear Breeze [1969] 1 QB 219. 129.          Mr Clarke’s first proposition in relation to equitable ownership in The Aliakmon was that the owner in equity was entitled to sue in tort for negligence anyone who by want of care caused his property to be lost or damaged, without joining the legal owner as a party to the action.  Lord Brandon responded that that proposition could not be supported.  He explained this response by saying (812C-E):- “There may be cases where a person who is the equitable owner of certain goods has also a possessory title to them.  In such a case he is entitled, by virtue of his possessory title rather than his equitable ownership, to sue in tort for negligence anyone whose want of care has caused loss of or damage to the goods without joining the legal owner as a party to the action: see for instance Healey v Healey [1915] 1 K,B. 938.  If, however, the person is the equitable owner of the goods and no more, then he must join the legal owner as a party to the action, either as co-plaintiff if he is willing or as co-defendant if he is not.  This has always been the law in the field of equitable ownership of land and I see no reason why it should not also be so in the field of equitable ownership of goods.” In this passage Lord Brandon appears to contemplate that joining the legal owner will suffice to enable the beneficial owner to sue for his loss or, perhaps more accurately, that once both the legal owner and the beneficial owner are parties to the action they can recover, subject to the rules of remoteness of damage, for all the loss which they have suffered. 130.          Lord Grabiner QC for Total submitted that that was too simplistic a view of what Lord Brandon was saying.  First, Lord Brandon would not have used the words “legal ownership” at page 809E if beneficial ownership (albeit together with the legal ownership) was enough.  Secondly the point of requiring the legal owner to be a party to the action was (as was the case in The Aliakmon itself) to enable recovery to be made for physical loss or damage to the goods not to enable a claim for the negligent infliction of economic loss suffered by the beneficial owner which he would never be able to mount in his own name and on his own behalf. 131.          It is fair to say that Lord Brandon’s speech in The Aliakmon does not resolve the question which divides the parties in this case.  Nor were we referred in oral argument to any commentators who have precisely addressed it.  Scrutton on Charterparties (21st ed. (2008) by Stewart Boyd QC and others) page 225 in footnote 424 perhaps comes closest:- “As regards the position of an equitable owner of goods, the House of Lords in [The Aliakmon at p. 812] held that unless the equitable ownership conferred a possessory title (as in Healey v Healey [1915] 1 KB 938) the equitable owner could not sue in the tort of negligence for damage to the goods unless he joined the legal owner as a party to the action.” This does little more than paraphrase Lord Brandon’s words but the editors may perhaps be indicating that the beneficial owner’s loss can indeed be recovered.  What, after all, would be the point of requiring the beneficial owner to join the legal owner in the action if the beneficial owner could then recover only his physical loss, but not his associated economic loss. 132.          In the absence of any directly applicable authority, it is necessary to look in a little more detail at the exclusionary rule and the rationale for it.  The rule is (see Clerk and Lindsell, Torts, (19th ed, 2006) para 8-115) “no duty is owed by a defendant who negligently damages property belonging to a third party, to a claimant who suffers loss because of a dependence upon that property or its owner.” So on the facts of this case Total, who has admittedly damaged the pipelines owned by UKOP Ltd and WLPS Ltd, submits that it owes no duty to Shell who has a contractual right to have its fuel loaded into, carried and discharged from the pipelines.  If Shell was a complete stranger to the transaction that would be understandable but Shell is not a complete stranger.  It is the (co-) beneficial owner of the pipelines and the contract to use the pipeline is only an incident of its beneficial ownership (albeit a necessary incident, since it is a co-owner of the pipelines with others who also wish to use it).  On the face of things, it is legalistic to deny Shell a right to recovery by reference to the exclusionary rule.  It is, after all, Shell who is (along with BP, Total and Chevron) the “real” owner, the “legal” owner being little more than a bare trustee of the pipelines. 133.          The origin of the modern law is Cattle v Stockton Waterworks Company (1875) LR 10 QB 453.  The defendants had laid a water pipe along and under a turnpike road.  There was a leak and water became clogged in the soil in an embankment on top of which the turnpike road had been made.  Mr Knight who owned the land either side of the road employed Mr Cattle to make a tunnel under the road so as to connect the parts of his land divided by the road.  When Mr Cattle was engaged in this work he removed some of the soil and the water, which had been clogged (and effectively dammed) in the soil, escaped into his workings.  Mr Cattle was put to expense and the whole project was delayed; he sued the waterworks company both under the rule in Rylands v Fletcher and in negligence.  The waterworks company said they owed no duty to Mr Cattle who was not the owner of the land but merely doing work on the land pursuant to a contract with the owner.  Blackburn J gave the judgment of the court of Queen’s Bench saying (457-8):- “In the present case the objection is technical and against the merits, and we should be glad to avoid giving it effect.  But if we did so, we should establish an authority for saying that, in such a case as that of Fletcher v Rylands Law Rep. 1 Ex. 265; Law Rep. 3 H.L. 330 the defendant would be liable, not only to an action by the owner of the drowned mine, and by such of his workmen as had their tools or clothes destroyed, but also to an action by every workman and person employed in the mine, who in consequence of its stoppage made less wages than he would otherwise have done.  And many similar cases to which this would apply might be suggested.  It may be said that it is just that all such persons should have compensation for such a loss, and that, if the law does not give them redress, it is imperfect.  Perhaps it may be so.  But, as was pointed out by Coleridge J, in Lumley v Gye 2 E & B, at p. 22 L.J. (QB) at p.479, Courts of justice should not “allow themselves, in the pursuit of perfectly complete remedies for all wrongful acts, to transgress the bounds, which our law, in a wise consciousness as I conceive of its limited powers, has imposed on itself, of redressing only the proximate and direct consequences of wrongful acts”.  In this we quite agree.  No authority in favour of the plaintiff’s right to sue was cited, and, as far as our knowledge goes, there was none that could have been cited.” 134.          It can be seen that the judges were not particularly enamoured of the law that they were laying down but felt it necessary because otherwise many other actions from persons with a mere contractual interest would be well-founded and that would mean the law would find itself redressing more than “the proximate and direct consequence of wrongful acts”.  This argument has come to be known as the “floodgates argument” which was, indeed, also relied on by Lord Brandon in The Aliakmon when refusing to carve out a specific exception to the exclusionary rule in favour of c. and f. (or c.i.f.) purchasers of goods at sea.  But the floodgates argument does not apply with nearly as much force to the suggestion that the beneficial owner of land (or chattels) should be entitled to sue since it is his position as “owner” not as contractor which has been damnified. 135.          The editors of Clerk and Lindsell (para. 8-116) summarise the position by saying 136.          “To allow all claims for such economic loss would lead to unacceptable indeterminacy because of the ripple effects caused by contracts and expectations.  Proximity requires some special relationship between the defendant and the person suffering relational economic loss, one which goes beyond mere contractual or non-contractual dependence on the damaged property.” Beneficial ownership of the damaged property goes well beyond contractual or non-contractual dependence on the damaged property and does indeed constitute a special relationship of the kind required by the learned editors.  It is, in fact, a closer relationship in many ways than that of a bare trustee having no more than the legal title. 137.          Lord Grabiner relied on Obestain Inc v National Mineral Development Corporation (The Sanix Ace) [1987] 1 Lloyds Rep 465 to submit that the legal owner is always entitled to recover the value of lost goods (or the diminution in value of damaged goods), even though he may have suffered no loss (e.g. because he has received the price).  He further submitted that the legal owner would not, however, be permitted to recover consequential loss which he had not suffered and that that is what would be happening if, as a result of the necessary requirement that he be joined before a beneficial owner has title to sue, the beneficial owner was entitled to recover consequential losses which he (the beneficial owner) has suffered.  Mr Christopher Butcher QC supported this submission by referring to HSBC Rail (UK) Ltd v Network Rail Infrastructure Ltd [2006] 1 WLR 643 where the legal owner of railway rolling stock, which was leased to GNER at the time of the Hatfield railway crash, was held unable to recover the value of the rolling stock as damages to their reversionary interest, because the lessees were obliged to repair or replace damaged rolling stock and to continue to pay rent meanwhile.  These authorities do indeed show that a legal owner can usually recover the value of damaged or lost goods, but they do not assist on the question whether a beneficial owner of personal or real property can sue for damages for loss of use.  It is clear that the legal owner can do so provided the loss of use is reasonably foreseeable; it is clear that the beneficial owner can sue if he joins the legal owner.  The fact that the loss of use has accrued to the beneficial owner should make no difference to recoverability once the legal owner has been made a party to the suit. 138.          Nevertheless, Lord Grabiner submitted there was a “principle” that a legal owner who is a trustee cannot sue for loss suffered by a beneficial owner unless he has himself (or the trust estate has itself) also suffered that loss.  That may have been the actual position in The Sanix Ace as a result of the legal assumption that the legal owner always loses the value of the goods to the extent that they are lost or damaged.  But in such cases the true loss will accrue to the beneficial owner and Lord Grabiner could cite no general authority for his “principle”.  It is well established that a trustee can sue in contract and recover damages for the loss suffered by the beneficial owner at any rate if the other party to the contract knew that the first party was a trustee see Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co. Ltd [1988] 2 Lloyds Rep 505; affirmed [1989] Lloyds Rep 568, which Total did know in the present case.  Should the law of tort be any different? 139.          Chappell v Somers & Blake [2004] Ch 19 is an apposite example.  An executrix, who was in a position analogous to a trustee, sued solicitors both in contract and in tort (see para 4) for breach of their duty to her by reason of their delay in administering the estate.  The estate contained two vacant properties which were part of the residue of the estate devised to the Parochial Church Council (“the PCC”) of St Mary’s Church in South Ealing.  The properties remained unlet during the five years during which the solicitors failed to administer the estate but, when a claim for damages for the lost rental was made by the executrix, the solicitors said that the executrix could not sue for that loss since it was not she or the estate which had suffered the loss but the P.C.C.  The solicitors applied to strike out the claim on this ground but Neuberger J (as he then was) refused to do so, on the basis that the executrix could bring the claim for the relevant loss but would have to account to the PCC as residuary legatee for any damages awarded. 140.          To the extent that the claim was in tort it was a good deal weaker than Shell’s claim in the present case because, as Neuberger J pointed out (para 20) the PCC did not even have an equitable interest in the properties during the period of administration.  Moreover he assumed that the PCC (para 22) did not itself have any cause of action against the solicitors.  Nevertheless he held (para 19) that the executrix had a cause of action “as the executrix of the estate, in relation to the instant disputed claim”.  Neuberger J supported his conclusion by reference to a situation of a bare trustee and a beneficiary (para 27):- “27. … An example which was raised during argument was that of a bare trustee who seeks advice from a solicitor as to whether to distribute trust property, where the right advice is that the property should be distributed as soon as possible, because its income would attract a much lower rate of tax in the hands of the beneficiary than in the hands of the trustee, for some reason.  If the solicitor delayed giving this advice for 5 years, it seems to me that it would be the trustee, and not the beneficiary, who would be entitled to sue the solicitor for the extra tax paid during that period.  In such a case, it would be the trustee who was the client of the solicitor, and it would be the trustee who had had to pay the extra tax. 28. The fact that it would be the beneficiary who, in practical terms, lost the tax which was paid, and it was the beneficiary who, but for the negligence of the solicitors, would have legally owned the trust property during the period when the loss was incurred, would not alter the fact that the appropriate claimant would be the trustee.  I believe that it would be the trustee who should claim even in a case where the last instalment of extra tax was payable by the beneficiary after distribution, but it is not necessary to decide the point.  As here, of course, the trustee would have to account to the beneficiary for any damages recovered from the solicitor.” 141.          This shows that there are cases where a trustee can sue for economic loss which, not he, but his beneficiary has suffered provided only that he is a party to the action so that there is no question of double recovery.  If Lord Grabiner were to make good his general proposition that a trustee cannot sue for losses which he (or the trust estate) has not suffered, he would have to say that Chappell is wrongly decided.  Since it was a decision on a strike-out application, one can say that the formal position was that the claimant’s case was arguable but it is fairly clear from Neuberger J’s language that he was, in reality, deciding the case and there is no evidence that there was any subsequent trial. 142.          We do not think Chappell was wrongly decided and would be prepared to hold that a duty of care is owed to a beneficial owner of property (just as much as to a legal owner of property) by a defendant, such as Total, who can reasonably foresee that his negligent actions will damage that property.  If, therefore, such property is, in breach of duty, damaged by the defendant, that defendant will be liable not merely for the physical loss of that property but also for the foreseeable consequences of that loss, such as the extra expenditure to which the beneficial owner is put or the loss of profit which he incurs.  Provided that the beneficial owner can join the legal owner in the proceedings, it does not matter that the beneficial owner is not himself in possession of the property. 143.          We must confess to being somewhat influenced as was Neuberger J (in para 16) by what Lord Goff of Chieveley called “the impulse to do practical justice”, see White v Jones [1995] 2 AC 207, 259-60.  It should not be legally relevant that the co-owners of the relevant pipelines, for reasons that seemed good to them, decided to vest the legal title to the pipelines in their service companies and enjoy the beneficial ownership rather than the formal legal title.  Differing views about the wisdom of the exclusionary rule are widely held but however much one may think that, in general, there should be no duty to mere contracting parties who suffer economic loss as a result of damage to a third party’s property, it would be a triumph of form over substance to deny a remedy to the beneficial owner of that property when the legal owner is a bare trustee for that beneficial owner. 144.          The judge understandably relied on The Aliakmon to dismiss Shell’s claim but, for the reasons given, The Aliakmon does not conclude the argument about equitable ownership once the legal owner has been joined.  Nor did The Wear Breeze consider this specific point.  It leaves the question open for this court to determine and we would reverse the judge on this aspect of this case and hold that Shell can recover for its provable loss or, if formality is necessary, that WLPS Ltd and UKOP Ltd can recover the amount which Shell has lost but will hold the sums so recovered as trustees for Shell. Right to possession 145.          In the light of this conclusion, the question whether Shell as beneficial owners had possession or the right to the immediate possession of the pipelines is, no longer, a live issue.  But on this aspect the judge was right.  He set out the various contractual provisions in considerable detail and said this:- “501 … a)                  WLPS and UKOP were joint venture vehicles set up with the purpose of holding title to real estate interests at Buncefield owned and pooled by the participants. b)                 WLPS and UKOP also were accorded possession of the assets for the purposes of their operation. c)                  WLPS and UKOP retained constructive possession but accorded actual possession of the bulk of the assets to BPA. d)                 Shell and the other participants were merely entitled to make such use of the facilities in respect of their individual capacity requirements as the various co-ordinating committees (presumably acting on a unanimous basis) allowed. e)                  This structure was wholly inconsistent with the right of any individual participant to call for immediate possession of the pipeline systems.” 146.          To the extent that reason (d) needs any amplification, it is to be found in the T & S Conditions incorporated into the Participants Agreement.  There obviously had to be an orderly arrangement as between the Participants for delivery by pipeline into the tanks on the site and conveyance by pipeline from the site.  Condition 4 entitled “Monthly Movement Programme” required each User to furnish WLPS Ltd with estimates of projected volumes as and when required by WLPS Ltd and also provided that each User had to notify WLPS Ltd, by the 14th day of each month the details of its required deliveries for the next month.  From these notifications and its own stock records, WLPS Ltd were then to formulate a Monthly Movement Programme of receipts and deliveries for month M +1 which was to be issued to all Users by 28th day of month M.  Condition 4.5 then provided that in the event of conflicting requirements WLPS Ltd was to use reasonable endeavours to resolve that conflict by agreement but was to have “absolute discretion in formulating the Monthly Movement Programme in the best interest of all Users.” There were similar arrangements in relation to the UKOP pipelines. 147.          In the light of those contractual arrangements it is impossible to think that Shell could have possession of the pipelines.  The correct analysis must be that it was BPA that had actual possession since it was their employees who controlled the taps or the manifolds at the site and thus controlled access to entry to and egress from the pipeline and storage tanks. 148.          Nor can Shell be said to have a right to immediate (or any) possession of the pipelines, because at any one time it might be fuel from another User which was proceeding through the pipelines, pursuant to a contractual arrangement which entitled that other User to the use of the pipelines and bound the remaining Users to respect that use.  Mr Rabinowitz always put his case on the basis that it was sufficient for Shell to be a co-owner of the pipelines for Shell to have sufficient right of possession.  But the fact that its co-owners would also have a right of possession (if it exists) only makes the position more problematic from Shell’s point of view. 149.          Shell relied on clause 4.1 of the Participants Agreement which provided that WLPS Ltd should (directly or through BPA) undertake “on behalf of the Participants the management, operation and maintenance” of the WLPS pipeline.  In the light of this provision Shell submitted that WLPS Ltd managed and operated the pipeline on behalf of Shell and its co-owners and that any principal could call for possession of his beneficially owned property from its agent especially if that agent were also a trustee.  Reference was also made to the annual report of the directors of WLPS Ltd and UKOP Ltd (as incorporated in the financial statements of the companies) where the companies’ principal activity was said to be the management, operation, maintenance and development of the members pipeline system “as agents for its members.” 150.          This submission is, however, too general.  Any complex commercial agency will have contractual terms and, if those contractual terms only permit conditional access to the principal’s property with the agent determining, in the event of dispute, whether such access is to be granted, it is impossible to say that the principal has a right to immediate possession.  In the absence of such right, Shell have insufficient possessory title to maintain an action for negligence and can only maintain the action in their capacity as beneficial owners. Nuisance and Rylands v Fletcher 151.          Since Shell can recover in negligence it is not necessary to say anything about these specific torts, save to say that it would perhaps be surprising if Shell could recover under those heads if it cannot recover in negligence. Conclusion 152.          This appeal will be allowed to the extent of declaring that Shell can recover as beneficial owner for their economic losses but counsel should draw up a formal order.