Harbour Cold Stores Ltd v Chas E. Ramson Ltd et Al
| Jurisdiction | Jamaica |
| Judge | Zacca P.,Kerr J.A,Carey J.A. |
| Judgment Date | 22 January 1982 |
| Neutral Citation | JM 1982 CA 4 |
| Docket Number | Civil Appeal No. 57 of 1978 |
| Court | Court of Appeal (Jamaica) |
| Date | 22 January 1982 |
Court of Appeal
Zacca P., Kerr, J.A., Carey, J.A.
Civil Appeal No. 57 of 1978
Dr. L.G. Barnett for defendant/appellant
D. M. Muirhead Q.C., Esq., & R. Ashenheim for plaintiffs/respondents
Contract - Exemption clause
Bailment — Breach of contract — Effect of fundamental breach on limitation clause
Facts: Ewe carcasses delivered to the appellants for cold storage were spoilt as a result of the appellants' negligence. Clause 2 of contract excluded liability except caused by negligence. Clause 4 limited the company's liability to $2,000 in any one claim but the trial judge allowed the full amount claimed. On appeal.
Held: The limitation clause was effective. Appeal allowed.
I have had the opportunity of reading the judgment of Carey J.A. I agree with his conclusions.
Kerr J.A.: I have had the benefit of reading the full and careful judgment of Carey J.A. It is enough to say that I concur in his reasoning and his conclusions.
The appellants in this appeal are in the business of operating a cold storage for meats and other perishable products. As a result of their negligence ewe carcases delivered to them for cold storage were spoilt and thereby rendered unfit for human consumption. In the resultant actions by the several bailors the (present respondents) against them as bailees of the goods the latter relied on a limitation clause in the following terms.
“Clause 4. The Company shall not be liable in any circumstances whatever to pay by way of compensation or damage in respect of the goods or their storage, sums of money exceeding in aggregate an amount equal to the wholesale price in Kingston of the goods at the date of their loss damage destruction or deterioration subject to a limit of $2,000.00 in any one claim.”
For completeness it should be said at once that it had been put forward on their behalf as well that an exclusion clause in the following terms: (Clause 2)
“The company will store the goods as delivered and the company will not be liable for any loss, damage, destruction or deterioration of or to the goods unless the owner can show, that the same was caused by the negligence of the company or its servants.”
was applicable to the circumstances and would absolve them of liability. But at the end of the day, it was tacitly accepted by them that they had been negligent. They were driven therefore to rely on clause 4 which has already been set out. The trial judge allowed the full amount claimed in his judgment. In their notice of appeal the appellants pray for an order that the court vary those awards to the amount in clause 4, viz $12,000.00 in respect of each respondent.
(The appeal therefore raises the question of the effect of a fundamental breach of contract on exclusion or limitation clauses.) Strictly speaking, it appears to me that the precise point that calls for elucidation in this appeal is its effect on a limitation clause for the reason that the appellants' liability in negligence was undoubted. Nothing however turns on the nature of the clause, be it exclusion or limiting. For the appellants, it was contended, relying on Photo Production Ltd. v. Securicor Transport Ltd. [1980] 1 All E.R. 556, that “there was no rule of law by which an exception clause in a contract could be eliminated from a consideration of the parties' position when there was a breach of contract (whether fundamental or not) or by which an exception clause could be deprived of effect regardless of the terms of the contract, because the parties were free to agree to whatever exclusion or modification of their obligations, they choose and therefore the question whether an exception clause applied when there was a fundamental breach, breach of a fundamental term or any other breach, turned on the construction of the whole of the contract.” The bailors, it was said, had not repudiated the contract on discovery of the breach, but had elected to treat the contract as still subsisting with the consequence that although the primary obligations of the parties to terminate performance arose, it did not affect secondary obligations including the obligation to pay compensation. Accordingly where a term existed which limited the compensation payable, the guilty party was entitled to the benefit of its provisions providedit covered the breach in question.
The respondents for their part submitted that this was not a case of negligence but of non-performance in which the whole substratum of the contract had been destroyed. Having regard to the nature of the contract which was one of storage and preservation of goods, and the nature of the breach, the appellants had not brought themselves within the four corners of the contract. Learned counsel on their behalf pinned his flag to the mast of Geddes Refrigeration Ltd. v. Ward (1962) 4 W.I.R. 170 and United Fresh Meat Co. Ltd v. Charterhouse Cold Storage Ltd. (1974) 2 Lloyd's Rep. 286. The clause did not apply in the circumstances. And accordingly the judgment was correct and should not be disturbed.
These rival contentions must now be examined, and I propose to venture some comments of my own as respects the relevant law. It is worth noting at the very outset that the contract with which we are concerned is one of bailment which means that the bailee must exercise due, and reasonable care for the safety of the article entrusted to him. In the instant case the appellants were required to store the meat at a particular temperature so that it could be preserved in good condition for human consumption. They were obliged to provide proper plant and equipment in order to effect that purpose. They failed in this their primary obligation for the meat deteriorated and became unfit for human consumption. There was thus a fundamental breach. Lord Diplock in Photo Production Ltd. v. Securicor Transport Ltd [1980] 1 All E.R. 556 at p. 566 provides a useful definition of fundamental breach.
“Where the event resulting from the failure by one party to perform a primary obligation has the effect of depriving the other party of substantially the whole benefit which it was the intention of the parties that he should obtain from the contract, the party not in default may elect to put an end to all primary obligations of both parties remaining unperformed.”
A fundamental breach is one which goes to the root of the contract, not merely to part of it or “goes so much to the root of the contract that it makes further performance impossible.” Hong Kong Fir Shipping Co., Ltd, v. Kawasaki Kisen Kaisha Ltd [1962] 2 Q.B. 26 at p. 64 per UpJohn, L.J.
As to a primary obligation it is the contractual obligation which must be performed according to its terms. In this case, the obligation was to keep and preserve the carcases in a state fit for human consumption. That was “the hard core of the contract, the real thing to which the contract is directed” per Lord Greene M.R. in Alderslade v. Hendon Laundry Ltd [1945] 1 All E.R. 244 at p. 256. The owners of the meat which was deposited, for storage in a preserved state in the appellant's cold storage were thus deprived of the whole benefit of their contract.
Clause 2 which had been inserted excluded, liability except caused by the negligence of the bailees. Since it was plain that the appellants had been guilty of negligence that clause would not have aided their cause. But that was not the basis of the judgment of the judge. He concluded:
“The defendant was disentitled from relying on the exception and limitation clause since it is by defendant's own breach plaintiffs were enabled to bring the contracts to an end and in my view the plaintiffs are entitled to damages for the defendant's breaches.”
In reaching this conclusion, the learned judge was basing himself on the “rule of law” school of thinking in respect of which it will be necessary to make some comment hereafter. It must however be said in favour of the judge that when he dealt with this matter, he did not have the benefit of photo Production Ltd. v. Securicor Transport Ltd. (supra) being cited to him: it had not yet even reached the House of Lords. In that case their Lordships however reviewed Suisse Atlantique Societe D'Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale [1967] 1 A.C. 361 an authority which was in fact cited to and dealt with by the judge in a long and carefully considered judgment.
It is well known that the courts in England urged on by that master of the common law Lord Denning developed the principle that:
“……. exempting clauses of this kind, no matter how widely that are expressed, only avail the party when he is carrying out his contract in its essential respects. He is not allowed to use them as a cover for misconduct or indifference or to enable him to turn a blind eye to obligations. They do not avail him when he is guilty of a breach which goes to the root of the contract.”
Karsales (Harrow) Ltd v. Wallis [1956] 2 All E.R. 856 at pp. 868 - 869. In Alexander v. Railway Executive [1951] 2 All E.R. which was a case of bailment involving an exemption clause, Delvin J. (as he then was) held that:
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(1) the Railway Executive were guilty of a breach of an implied term fundamental to their contract of bailment with the plaintiff in permitting ‘C’ (a third person) to remove articles from the plaintiff's baggage, with the result that the contract was terminated and the Executive could not thereafter rely on the terms and conditions excluding this liability in relation to the rest of the baggage,
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(ii) apart from any question of bailment there had been such a breach of a fundamental term, of the contract as to give the plaintiff the right to rescind it and thereafter the Railway Executive were disentitled from relying on the special conditions of the contracts.
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