Ailsa Craig Fishing Company Ltd v Malvern Fishing Company Ltd

The only questions for decision in these appeals are (i) whether the liability of the respondents, Securicor (Scotland) Ltd., under a short-term contract made on 31st December 1971, has been effectively limited by a special condition in that contract and if so (ii) whether the applicable limit is £1,000 or £10,000.

Whether a clause limiting liability is effective or not is a question of construction of that clause in the context of the contract as a whole. If it is to exclude liability for negligence, it must be most clearly and unambiguously expressed, and in such a contract as this, must be construed contra proferentem. I do not think that there is any doubt so far. But I venture to add one further qualification, or at least clarification: one must not strive to create ambiguities by strained construction, as I think that the appellants have striven to do. The relevent words must be given, if possible, their natural, plain meaning. Clauses of limitation are not regarded by the courts with the same hostility as clauses of exclusion: this is because they must be related to other contractual terms, in particular to the risks to which the defending party may be exposed, the remuneration which he receives, and possibly also the opportunity of the other party to insure.

It is clear, on the findings of the Lord Ordinary, that the respondents were negligent as well as in material breach of their contractual obligations. The negligence consisted in a total or partial failure to provide the service contracted for viz. "continuous security cover for your [the pursurers'] vessels from 1900 hours on 31/12/71 until 0700 hours on 5/1/72" over the increased area specified in the contract. It is arguable, in my opinion, that the failure was not total, in that some security against some risks was provided, though not that which was necessary to prevent the actual damage which occurred. But I do not think that it makes a difference as regards the applicability of the clause of limitation whether this is right or not, and since their Lordships in the Inner House were of opinion that the failure was total, I will proceed on the assumption that this was so.

The clause of limitation was as follows (special condition of contract 2( f)):

"( f) If, pursuant to the provisions set out herein, any liability on the part of the Company shall arise (whether under the express or implied terms of this Contract, or at Common Law, or in any other way) to the customer for any loss or damage of whatever nature arising out of or connected with the provision of, or purported provision of, or failure in provision of, the services covered by this Contract, such liability shall be limited to the payment by the Company by way of damages of a sum …"

[alternatives are stated to which I shall refer later].

This clause is on the face of it clear. It refers to failure in provision of the services covered by the contract. There is no warrant as a matter of construction for reading "failure" as meaning "partial failure", i.e. as excluding "total failure" and there is no warrant in authority for so reading the word as a matter of law. I am clearly of opinion that Pollock & Co. v. Macrae 1922 S.C. (H.L.) 192 is no such authority and if the latter case of Mechans Ltd. v. Highland Marine Charters Ltd. 1964 S.C. 49 so decided, it ought in my view not to be followed.

The appellants tried to find an ambiguity in this clause in three ways.

(i) First they relied upon the finding of the Lord Ordinary, with which the Inner House generally agreed, that there was such an inconsistency between the provisions of condition 2( a), excluding liability, and those of condition 2( f) as to create uncertainty as to the meaning of the former condition. It was this inconsistency which led the courts below to conclude against the validity of the exclusion clause. So it was argued the same inconsistency and the doubts engendered by it must invalidate condition 2( f). But this is transparently fallacious. Because clause A casts doubt upon the meaning of clause B, it does not follow at all that the converse is true and that clause B casts doubt upon the meaning of clause A. Clause B must be looked at on its own, and may turn out to be perfectly clear. A similar argument was presented as to an inconsistency between clause 2( f) and clause 4(i) and, in my opinion, fails for the same reason.

(ii) It was contended that the initial words "If, pursuant to the provisions set out herein" are ambiguous and that their ambiguity invalidates the whole subclause. But I accept on this the conclusion of Lord Dunpark that the words are "open to construction" and I agree on the construction which he prefers. The possibility of construction of a clause does not amount to ambiguity: that disappears after the court has pronounced the meaning.

(iii) There is an inconsistency between subclauses 2( f)(i)( a) and ( b) so that it is impossible to arrive at a figure of limitation clearly expressed. Therefore, it is said, no limitation has effectively been made. I reproduce these subclauses:

"(i) in the case of all services other than the Special Delivery Service

• ( a) Not exceeding £1,000 in respect of any one claim arising from any duty assumed by the Company which involves the operation, testing, examination, or inspection of the operational condition of any machine, plant or equipment in or about the customer's premises, or which involves the provision of any service not solely related to the prevention or detection of fire or theft;

• ( b) Not exceeding a maximum of £10,000 for the consequences of any incident involving fire theft or any other cause of liability in the Company under the terms thereof;

and further provided that the total liability of the Company shall not in any circumstances exceed the sum of £10,000 in respect of all and any incidents arising during any consecutive period of twelve months."

For my part I find these clauses, though intricate, perfectly clear. Subclause ( a) limits any one claim; subclause ( b) limits any aggregate of claims the consequences of any one incident; the proviso limits the total liability of Securicor in respect of incidents arising in any period of 12 months. The clauses may overlap, in the sense that more than one may apply: they may give rise to difficulty, e.g. if the total liability is exhausted early in the 12 months period, and other claims arise. But I cannot find any ambiguity in them, notably in relation to the present case. And this answers the second question. I have no doubt that subclause ( a) applies so as to limit individual claims to £1,000 each. There is no question here of applying subclause ( b). For these reasons I would dismiss the appeals.

I have had the advantage of reading in draft the speeches of my noble and learned friends. Lord Wilberforce and Lord Fraser of Tullybelton. For the reasons they have given I would refuse the appeal and I agree that the respondents must have their costs in this House.

I have had the advantage of reading the speeches of my noble and learned friends, Lord Wilberforce and Lord Fraser of Tullybelton. Although I consider that Securicor's contract was deplorably drafted, I agree for the reasons stated by my noble and learned friends that the appeal must be dismissed.

The only surviving issue in these appeals is whether the respondents ("Securicor") have succeeded in limiting their liability under a contract between themselves and the Aberdeen Fishing Vessel Owners' Association Limited ("the Association") who were acting on behalf of a number of owners of fishing vessels, including the appellants. Nothing turns upon the fact that the appellants were not themselves a party to the contract and I shall proceed as if the contract had been made with them.

The appellants were the owners of the fishing vessel "Strathallan" which sank while berthed in Aberdeen Harbour on 31st December 1971, at a time when Securicor were bound, under the contract with the Association, to provide security cover in the Harbour. Her gallows fouled the vessel moored next to her on the starboard side, called the "George Craig", which also sank. Both vessels became total losses. Two actions were then raised. In one the appellants claimed damages from the owners of "George Craig" as first defenders and from Securicor as second defenders. In the other the owners of...