In our previous Logistics Bulletin, we looked at exclusion clauses and specifically the contra proferentem rule1. The contra proferentem rule was invoked in a decision by a Hong Kong court2 in relation to a point we touched on in our previous Bulletin, namely that the best way to ensure the clause excludes liability for negligence is by expressly using the word “negligence” in the clause, or a word which is synonymous with “negligence”.

The case

This case related to a consignment of Sony goods, which were carried by combined transport from Shanghai to Tilburg via the port of Rotterdam. A Blue Anchor Line express cargo bill of lading was issued in respect of the consignment, with the terms of the contract of carriage set out on the reverse3 (ECB). Following a series of events, one of the containers forming part of the consignment was delivered to a fraudster who disappeared with the goods. The court had to consider a number of issues, one of which was whether the US$2 per kilo limitation of liability contained in clause 18.3 of the ECB applied to limit the defendants’ liability for the loss suffered as a result of the theft of the goods.

The claimant, relying on the contra proferentem rule, contended that the absence in clause 18.3 of express reference to negligence or similar wording, meant that the clause could not to be taken to extend to liability for negligence.

There was also mention of clause 23.2 of the ECB, which disentitles the carrier from relying on the limit under clause 18.3 where there was (i) an intent on the part of the carrier to cause damage or (ii) recklessness with knowledge that damage would probably result on the part of the carrier. The question was whether the wording of clause 23.2 could be extended to cover the defendants’ negligence, in which case the limitation in clause 18.3 would not apply.

The outcome

There was also mention of clause 23.2 of the ECB, which disentitles the carrier from relying on the limit under clause 18.3 where there was (i) an intent on the part of the carrier to cause damage or (ii) recklessness with knowledge that damage would probably result on the part of the carrier. The question was whether the wording of clause 23.2 could be extended to cover the defendants’ negligence, in which case the limitation in clause 18.3 would not apply.

In reaching this decision, the court also looked at clause 18.4 of the ECB which allows for a higher value of the goods to be declared (with the consent of the carrier and subject to payment of higher freight rates), in which case higher compensation may be claimed. The judge considered that clause 18.4 was “in effect a freight plus insurance option” and that extending the meaning of clause 23.2 to include negligence would render clause 18.4 redundant, as why would consignors pay higher freight rates if they could rely on clause 23.2 to claim a higher compensation.

Conclusion

Whilst this case is subject to the law of Hong Kong, it is a useful reminder of the importance of clear drafting and also a helpful illustration of how the contra proferentem rule is applied by the courts. The key point here was that the wording of clause 23.2 was in the court’s view very clear, in that it only referred to the two mental states mentioned above (intent and recklessness with knowledge). It is unclear from the judgement why clause 23.1 of the ECB4 was not mentioned in relation to this point, but if it had been, the outcome would have been the same.