1 February 2022 by , and Dispute Resolution Alert

Exemption clauses and liability for damages

Pens are mightier than swords! None more so than the one used to draft exemption clauses, aka “disclaimer clauses”. An exemption clause is a contractual modification to the common law rule as to risk; a “shield” if you will, absolving one party, either wholly or partially from an obligation or liability which would or could arise at common law under a contract. Our courts have also demonstrated a willingness to give effect to exemption clauses.

This is precisely what happened in Schenker South Africa (Pty) Ltd v Fujitsu Services Core (Pty) Ltd (508/2020) [2022] ZASCA 7. In that matter, the parties, Schenker South Africa (Pty) Ltd (Schenker) and Fujitsu Services Core (Pty) Ltd (Fujitsu), concluded a written agreement, the material terms of which were that Fujitsu, an electronic company, would make use of Schenker’s logistic and warehousing services, which they did, without any recorded incidents – until one weekend in June 2012. 

On 23 June 2012, an employee of Schenker arrived at the SAA Cargo warehouse, provided the necessary documents, collected a consignment for Fujitsu and proceeded to steal it.  Fujitsu instituted a delictual action for damages against Schenker. Schenker defended the claim on the basis that its delictual liability for theft was excluded in terms of the contract between the parties. Fujitsu’s counter argument was that, on a proper construction, the agreement did not exclude liability for theft of goods.  And so, like many of the commercial matters that appear before the courts, the resolution of the dispute depended on an interpretation of the applicable provisions of the agreement. In its interpretation, the High Court found that the thief was not acting in terms of the contract when he attended to SAA Cargo on Saturday, 23 June 2012 to steal Fujitsu’s goods and that the theft was an act performed outside of the agreement. Thus, the High Court found in favour of Fujitsu and ordered Schenker to pay Fujitsu US$ 516,877 as damages for theft of goods.

The matter was then brought on appeal to the Supreme Court of Appeal. The issue to be decided on appeal was whether – on a proper construction of the applicable provisions – a delictual claim based on theft was excluded from the contract. In its interpretation, the Supreme Court of Appeal stood by things already decided and followed established legal precedent citing to Endumeni and Durban’s Water Wonderland as its guiding stars. Those judgment’s place importance on the language used in the provision. In Durban’s Water Wonderland, the court held that:

“If the language of a disclaimer or exemption clause is such that it exempts the proferens from liability in express and unambiguous terms, effect must be given to that meaning. If there is ambiguity, the language must be construed against the proferens.”

The first issue that the Supreme Court of Appeal dealt with was whether the thief was executing the agreement when he uplifted the goods from SAA Cargo. Fujitsu argued that the employee was not executing the agreement when he collected the consignment since it is a bit far-fetched that the goods were being ‘handled’ or ‘dealt with’ as specified in the definition of ‘goods’ in the contract, thus the act of theft was not committed during his course of employment. Giving expression to the ordinary meaning conveyed by the verbs “handled” and “dealt with” as they appeared in the definition of the word “goods”, the Supreme Court of Appeal held that he was executing the agreement.

Having determined that the thief was executing the agreement, the Supreme Court of Appeal proceeded to determine whether liability was excluded in terms of clause 17 read with clause 40.1 of the agreement. In relevant part, those clauses recorded the following:

“17. GOODS REQUIRING SPECIAl ARRANGMENTS

Except under special arrangements previously made in writing [Schenker] will not accept or deal with bullion, coin, precious stones, jewellery, valuables, antiques, pictures, human remains, livestock or plants. Should [Fujitsu] nevertheless deliver such goods to [Schenker] or cause [Schenker] to handle or deal with any such goods otherwise than under special arrangements previously made in writing [Schenker] shall incur no liability whatsoever in respect of such goods, and in particular, shall incur no liability in respect of its negligent acts or omissions in respect of such goods. A claim, if any, against [Schenker] in respect of the goods referred to in this clause 17 shall be governed by the provisions of clauses 40 and 41.”

And

“40.LIMITATION OF [SCHENKER’S] LIABILITY

40.1 Subject to the provisions of clause 40.2 and clause 41, [Schenker] shall not be liable for any claim of whatsoever nature (whether in contract or in delict) and whether for damages or otherwise, howsoever arising including but without limiting the generality of the aforesaid -

40.1.1 any negligent act or omission or statement by [Schenker] or its servants, agents and nominees; and/or…

40.2 Notwithstanding anything to the contrary contained in these trading terms and conditions, [Schenker] shall not be liable for any indirect and consequential loss arising from any act or omission or statement by [Schenker], its agents, servants or nominees, whether negligent or otherwise.’”

Regarding the above clauses, Fujitsu submitted that the language used in clause 17 cannot be construed so as to include, within its ambit, intentional acts by employees of Schenker.  The Supreme Court of Appeal rejected Fujitsu’s argument, finding instead that having regard to the agreement as a whole, the phrases ‘of whatsoever nature’ and ‘howsoever arising’ in clause 40.1 should be given their ordinary literal meaning and are sufficiently wide in their ordinary import to draw into the protective scope of the exemption the deliberate and intentional acts of the employees of Schenker.

Regarding clause 17 specifically, the Supreme Court of Appeal held that if the goods were “valuable”, Fujitsu had to make prior special arrangements with Schenker. The commercial rationale behind this was that it would enable Schenker to take steps to mitigate against the risk of theft for instance. It was not disputed that the goods were ‘valuable’ nor was it disputed that Fujitsu did not make any special arrangements. Fujitsu’s failure meant that Schenker had successfully established that its liability was excluded in terms of the agreement which absolved it from liability for the loss suffered by Fujitsu. It followed that Fujitsu’s cause of action was one which fell within the ambit of the disclaimer and ought to have been dismissed. Therefore, the appeal was upheld with costs and the High Court’s order was set aside.

This judgment represents yet another example of the power of the proverbial pens. When the ink dries and agreements are concluded, the words that were written by the drafter’s pens matter. In a dispute, parties must live and die by the words that they chose to record the relationship between themselves.  Thus, as a takeaway, parties should ensure that they pay careful attention to the language they use in their agreements.

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