The Western Australian Court of Appeal played an interesting innings this week in its decision in La Rosa v Nudrill Pty Ltd.  It concerned the perennial issue of exclusion clauses, and particularly when an exclusion clause included on the back of an invoice, which is not directly drawn to the other party’s attention, offers useful protection from liability for damages.

What happened?

Mr La Rosa ran a transport business, a longstanding client of which was Nudrill. In 2001 (yes, more than a decade before this decision was delivered!) Nudrill hired Mr La Rosa to transport a drill rig, on the back of his semitrailer, from Perth to Kalgoorlie. All went well until just before the end of the journey, when the drill tipped off the back of the trailer as Mr La Rosa drove through a roundabout.  These types of drills aren’t cheap and Nudrill successfully sued Mr La Rosa for damages. It said Mr La Rosa’s negligent driving caused the drill rig to fall from the truck.

The exclusion clause

Mr La Rosa appealed. He wanted the court to find that even if he had been negligent, or in breach of his contract to transport the rig, the agreement between him and Nudrill was governed by an exclusion clause pursuant to which Nudrill had agreed that Mr La Rosa would not be liable for damage arising from negligence or breach of contract.  Not surprisingly, the court wanted to know where to find this exclusion clause. Mr La Rosa’s answer – on the back of all of his past invoices to Nudrill, each of which stated:

“All goods are handled, lifted or carried at owner's risk. The Contractor [Mr La Rosa] shall not be liable for any loss or damage of property and/or goods of the Client [Nudrill] whether such damage was caused by any act, default or negligence on the part of the Contractor, and/or his servants.”

Now the above clause, all things being equal, would generally do the trick – it expressly excluded liability for damage arising from the causes of action which Nudrill had pleaded. But the matter was not as simple as that.  The clause was only ever included on the obverse of Mr La Rosa’s invoices, the front of which made reference to terms and conditions being on the back. 

Further and crucially, the invoices were only ever provided to Nudrill (and presumably all of Mr La Rosa’s other customers) after Mr La Rosa had completed each job. That is, at the time of booking a job, which is normally where the terms (or substantially all of the terms) of the contract would be assented to and agreed, there was only ever a phone call in which the price, goods to be delivered and time for delivery were discussed. No reference was made to the existence of other terms either during the call, or notified in writing thereafter but prior to the completion of Mr La Rosa’s performance.  This could have occurred, for instance, by Mr La Rosa sending Nudrill a confirmation of, or a quote for, the job that either included or made reference to the existence of other terms. Also of importance was that the evidence before the court did not suggest that anyone at Nudrill had ever read the terms or even had cause to do so.

A past course of dealings

All of the above led the court to wonder, and imposed an obligation upon Mr La Rosa to demonstrate, just how the exclusion clause could be said to legally bind the parties.

Mr La Rosa answered the conundrum by saying that the exclusion clause bound Nudrill because for the past decade Nudrill had been a frequent customer, and after each delivery Nudrill had been provided with an invoice each of which had faithfully included the exclusion clause. Nudrill had then continued to use Mr La Rosa’s services for future work.  In other words, according to Mr La Rosa, on a basis akin to inductive reasoning, Nudrill ought to be taken to have accepted that the terms of future deliveries would include the exclusion clause in the terms specified on the invoices that had been given to it after each past job.

This created a further issue - was it material that the term which Mr La Rosa sought to include in the contract was never formally incorporated into a past contract prior to the fulfilment of Mr La Rosa’s obligations?  That is, if the exclusion clause was only ever provided to Nudrill once a contract was completed (save for Nudrill’s payment of the contract price), did this stop it from becoming a clause for future contracts based on a past course of dealings?

The decision

The court said that the timing of notification of a clause was not necessarily the determinative factor, and nor was whether the exclusion clause could be shown to have been a past clause of any particular contract.  Rather, Mr La Rosa needed to demonstrate that the exclusion clause had come to be accepted and treated as contractual by the conduct of the parties – whatever that conduct may be in a particular case. This could be demonstrated by a series of past notifications of the clause, or the existence of other terms and conditions which Nudrill was invited to inspect.  This could also be the case even if Nudrill’s attention was only drawn to the existence of the clause after the contract was substantially agreed (as occurs in some ‘ticket cases’). For instance, by providing notification of other clauses by the provision of an invoice, or a written acknowledgment of the contract, shortly after the substantive terms had been agreed.

The difficulty for Mr La Rosa was not strictly the fact that he only provided the invoice after the contract was completed (however this did his case no favours). Rather, it was because the circumstances in which the invoices were provided to Nudrill would only have conveyed to it that there was a demand or request for payment for work done, and this was not the type of document in which contractual terms would be provided given that the work was completed.

In short, there was nothing to objectively show that Nudrill, in receiving the invoices, accepted (or ought to be deemed to have accepted) the terms contained in them. No doubt the situation would have been different had the terms, or at least their existence, been drawn to the attention of Nudrill prior to the job being complete.

Some lessons

The sorrowful story of Mr La Rosa provides some useful reminders and lessons:

  • Given the fundamental nature of exclusion clauses in many commercial contracts, particularly ‘repeat’ contracts, some effort and thought needs to go into ensuring that such terms are properly included.  This can most easily be done at the time of contracting, or shortly thereafter, by making reference to terms and conditions, or by sending a document to the other party that contains or refers to the terms and conditions;
  • The terms and conditions need to be available (specific advice will be needed for individual circumstances and particular legislation may need consideration);
  • If it is anticipated that comfort will be sought from past dealings, it is important to obtain assurance that the operation of the exclusion clause can be established by this means.  This may involve a review of work practices; and
  • As always, and even though this was not an issue in La Rosa v Nudrill, a careful review of the terms of an exclusion clause, read against the particular risks that a party regards itself as facing, will not go astray.