Lamport & Holt Lines v Coubro & Scrutton (M&I) Ltd (The Raphael)
Court of Appeal
Citations:  2 Lloyd’s Rep 42;  CLY 422.
The claimants were ship-owners. They employed the defendant to do stowage work on board the ‘Raphael’ to make the vessel sea-ready. The defendant negligently dropped a derrick onto a hatch cover, causing significant damage. The claimant sued for breach of contract. The defendant sought to rely on an exclusion clause in their standard conditions of business.
This clause stated that the defendant would not be liable for ‘any damage loss injury costs or expenses suffered [by the claimant] which may arise from or be in any way connected with any act or omission of any person or corporation employed by us or by any sub-contractors or engaged in any capacity in connection herewith…you shall indemnify us against all loss damages claims and expenses whatsoever incurred by us in relation to or arising out of the performance of our obligations.’
The claimant argued that the exclusion clause, properly construed, did not cover cases of negligence.
- Did the exclusion clause cover negligence?
The Court of Appeal considered the words used in the clause (particularly ‘any act or omission’) as wide enough to cover negligence. There was no other non-fanciful or non-remote cause of action which the clause might apply to. As such, the clause excluded liability for negligence.
This Case is Authority For…
The Court of Appeal used the three-stage test for interpreting exclusion clauses explained in the Privy Council decision in The Canada Steamship Lines Ltd v King  AC 192:
- Does the clause expressly refer to negligence? If so, it covers negligence.
- If not, is the clause’s language wide enough to include negligence by implication? The court must consider the ordinary and natural meaning of the words, and will resolve any ambiguity against the party seeking to enforce the clause. If not, the clause does not include negligence.
- If the answer to (2) is yes, might the breaching party might be liable for something other than negligence? The court should consider whether another type of liability exists. If such liability exists and is not so fanciful or remote that it is unlikely that the breaching party wanted protection against it at the time of contracting, the clause is construed as only covering non-negligence liability.
May LJ stressed, however, that the three-stage ‘test’ is ‘only intended to be guidelines, not words in a statute, and at the end of the day the duty of the court is just to construe the relevant clause’. Ultimately, this turns on the objective intentions of the parties. He also warned against an ‘overly legalistic’ approach to determining whether a cause of action is fanciful or remote. The court should focus on what the actual parties were likely (or ought) to have had in mind at the time of contracting.
Donaldson LJ explained that the reason for the law’s reluctance to readily interpret clauses as including negligence reflects the fact that ‘human nature [is]on balance inclined to optimism than pessimism’. There is therefore an assumption that when parties draft these clauses, they usually have non-negligent breaches in mind rather than negligent ones.