Monarch Airlines Ltd v London Luton Airport Ltd
Citations:  1 Lloyd’s Rep 403;  CLC 698;  CLY 222.
The claimant was an airline suing Luton Airport in negligence and occupier’s liability for damage to one of their craft. Clause 10 of the parties’ contract stated:
‘Neither the Airport Company nor its respective servants or agents shall be liable for loss or damage to the aircraft…occurring while the aircraft is on the Airport or is in the course of landing or taking off at the Airport…arising or resulting directly or indirectly from any act, omission, neglect or default on the part of the Airport Company or its servants or agents unless done with intent to cause damage or recklessly and with knowledge that damage would probably result.’
The parties sought a preliminary ruling on whether, on its true construction, this clause excluded liability for negligence and breach of statutory duty. The claimant asserted that, applying the 3-stage test in The Canada Steamship Lines Ltd v King  AC 192, the clause did not cover negligence.
The defendant responded that the Canada Steamship test should not apply to this kind of exclusion clause. Alternatively, they argued that the clause was void for unreasonableness under s.2(2) of the Unfair Contract Terms Act 1977.
- Did Clause 10 exclude the claimant’s claims?
- Was Clause 10 void for unfairness under the Unfair Contract Terms Act 1977?
The High Court held in favour of the defendant. While the clause did not expressly refer to ‘negligence’, ‘neglect or default’ were synonymous. As such, under the Canada Steamship approach the clause excluded liability for negligence. Even if this were not the case, the language of the clause was wide enough to include negligence and there was no other non-fanciful cause of action which the parties anticipated that it might apply to. Even the breach of statutory duty the parties may have anticipated was negligence-based (occupier’s liability).
The Court also held that Clause 10 satisfied the test of reasonableness under UCTA. Factors which influenced this conclusion included:
- The meaning of the clause was clear;
- The clause was widely accepted in the industry;
- There had not been any notable objection to the clause by other players in the industry or by the defendant;
- The defendant had sufficient insurance options available to it.
As such, the claim could only succeed if the clause had not been incorporated into the parties’ contract or the defendant could show intent and actual knowledge.
This Case is Authority For…
The High Court explained that the Canada Steamship test is not to be applied rigidly in every case. It is not a substitute for the real test of interpretation – what the parties objectively intended the clause to mean. However, it provides useful guidance.
The third stage of the Canada Steamship test asks the court to consider whether there are any other non-fanciful causes of action the clause might apply to. The court indicated that breach of statutory duty is not to be treated as a relevant other cause of action if the statute’s standard of liability is negligence-based (as opposed to strict liability or something else).