Lewis (T/A RL Services) v McNicholl Hughes Ltd & Anor

Factual and Procedural Background

The Plaintiff, trading as Company A, issued a Writ of Summons on 29 July 2016 claiming damages for loss and damage sustained due to the negligence and breach of contract by the Defendants, Company B and Individual A, in relation to the hire and subsequent destruction by fire of a forklift truck (hereafter "the machine") at premises located at The City between 8 and 11 November 2013.

The initial hire agreement was made on 4 November 2013 between the Plaintiff and a third party, Company C, for a short-term hire of the machine. The agreement specified conditions including insurance and indemnity obligations. Subsequently, the machine was transferred to the Defendants' control without a new written agreement.

The machine was destroyed by fire on 11 November 2013. The Plaintiff sought to hold the Defendants liable for the loss, contending that an indemnity clause had been incorporated into the parties’ agreement by custom and practice, specifically the Construction Plant Hire Association (CPHA) Model Conditions.

At first instance, the trial judge found in favour of the Plaintiff, ordering the Defendants to pay £35,000 plus costs. The Defendants appealed, challenging the incorporation of the indemnity clause into the contract and disputing factual findings relating to insurance assurances given by the Defendants.

Legal Issues Presented

1. Whether there was a binding hire agreement between the Plaintiff and the Defendants.
2. If such an agreement existed, whether the terms of the CPHA Model Conditions, including an indemnity clause, were incorporated into that agreement by custom and practice.
3. Whether the Defendants were liable to indemnify the Plaintiff for the loss of the machine caused by fire.
4. Whether the trial judge’s factual findings, particularly regarding insurance assurances and credibility of witnesses, were erroneous or perverse.

Arguments of the Parties

Plaintiff's Arguments

• The machine was initially hired to Company C but was transferred to the Defendants with the Plaintiff’s agreement, creating a hire contract between the Plaintiff and the Defendants.
• The terms of the hire agreement included the conditions specified in the original contract with Company C or alternatively the CPHA Model Conditions, which are standard in the industry.
• The Defendants became contractually liable to indemnify the Plaintiff for the loss of the machine, valued at £35,000.
• The Defendants had knowledge of and accepted the standard industry terms, including insurance and indemnity obligations.

Defendants' Arguments

• There was no contract of hire between the Plaintiff and the Defendants; any agreement was only with Company C.
• The Plaintiff could not rely on terms of the contract with Company C, and no novation or assignment had occurred.
• The only term in any fresh agreement with the Defendants was an implied obligation to pay reasonable hire charges.
• If the relationship was one of bailment, the Defendants’ duty was limited to taking reasonable care and did not extend to indemnifying for loss unless caused by their negligence.
• The Defendants disputed that the indemnity clause was incorporated into their agreement and challenged the trial judge’s factual findings as erroneous or perverse.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by affirming the trial judge’s finding that a contract of hire existed between the Plaintiff and the Defendants, a finding not challenged on appeal. The central issue was whether the CPHA Model Conditions, including an indemnity clause, were incorporated into this contract by custom and practice.

The court reviewed the evidence including letters from the Defendants’ loss adjusters, which recognized the CPHA Model Conditions as the industry standard and the basis for insurance indemnities. These letters, prepared by experienced professionals independent of the parties, strongly supported the incorporation of the Model Conditions.

Witness testimony, particularly from the Plaintiff’s representatives and industry participants, confirmed that the terms of hire in the construction plant hire industry commonly include indemnity obligations consistent with the CPHA Model Conditions. The trial judge found the Defendants’ witness, Individual A, not credible, particularly regarding his knowledge of the contract and insurance arrangements.

The court emphasized the high threshold for appellate interference with factual findings, citing authoritative precedents that require an appellate court to find a trial judge plainly wrong or to have made perverse findings before overturning conclusions based on credibility and evidence evaluation.

The Defendants’ contention that the trial judge’s conclusion lacked evidential foundation was rejected. The court held that the trial judge properly exercised her evaluative function in inferring the implication of the CPHA Model Conditions, considering the totality of the evidence and the industry context.

Holding and Implications

The court DISMISSED THE APPEAL and affirmed the order of the trial judge requiring the Defendants to pay the Plaintiff £35,000 plus costs.

The decision confirms that contractual terms may be implied by custom and practice where such terms are notorious, certain, and reasonable within the relevant industry. It reinforces the principle that appellate courts must exercise restraint when reviewing trial judges’ factual findings, particularly regarding witness credibility and the inference of contractual terms.

No new precedent was set beyond the application of established principles of contract law and appellate review. The direct effect is that the Defendants remain liable to indemnify the Plaintiff under the implied terms of the hire agreement incorporating the CPHA Model Conditions.