Farstad Supply AS v. Enviroco Limited & Asco UK Limited [2008] CSOH 63

Reparation - Procedure Roll:- On 7 July 2002 an oil rig supply vessel belonging to the pursuers was damaged by fire whilst it was berthed in Peterhead. In this action the pursuers sued the defenders for damages claiming that the fire resulted from the negligence of their employees when they removed residue from the vessel's oil tank and disconnected pipes causing base oil flowed back from the pipes and ignite on coming into contact with a hot engine after the vessel's main engines had been started up. The defenders sought relief from a third party, in terms of section 3(2) of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1940, averring that the third party failed in its duty as charterer and base operator to direct and supervise the operations carried out on the vessel while the vessel was in port. In a charterparty dated 4 February 1994 the pursuers indemnified the third party. At debate counsel for the pursuer submitted that the defenders could not recover a contribution from the third party under section 3(2) of the 1940 Act and by virtue of the indemnity the pursuers could not recover damages from the third party. The issue at debate was whether the contractual obligations into which the pursuers entered into with the third party, prior to the damage to the vessel, prevented the defenders from obtaining a contribution from the third party under section 3(2) of the 1940 Act. Here the court considered the statutory interpretation of section 3(2) of the 1940 Act together with the construction of the clause in the charterparty, in particular, the words "defend, indemnify and hold harmless" and, ultimately, whether the defenders were entitled to a contribution from the third party under section 3(2) of the 1940 Act.