Circle Freight International Ltd (trading as Mogul Air) v Medeast Gulf Exports Ltd (trading as Gulf Export)

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
Judgment Date21 April 1988
Judgment citation (vLex)[1988] EWCA Civ J0421-2
Date21 April 1988
Docket Number88/0338

[1988] EWCA Civ J0421-2






Royal Courts of Justice.


Lord Justice O'Connor

Lord Justice Bingham


Lord Justice Taylor


1984 C. No. 5770

Circle Freight International Limited (Trading as Mogus Air)
(Plaintiffs) Appellants
Medeast Gulf Exports Limited
Trading as Gulf Export
(Defendants) Respondents

MR. JULIAN MALINS (instructed by Messrs. Clyde & Co.) appeared on behalf of the (Plaintiffs) Appellants.

MR. JEREMY GOMPERTZ, Q.C. (instructed by Messrs. Albin Hunt & Stein) appeared on behalf of the (Defendants) Respondents.


I will ask Lord Justice Taylor to give the first judgment.


This is a plaintiff's appeal from a decision, dated the 19th June, 1987, of Mr. Justice Stuart-Smith (as he then was) whereby he gave judgment for the defendants on their counterclaim. The plaintiffs are freight forwarding agents. The defendants are exporters of various goods to the Middle East. In 1983 they exported dresses on a number of occasions using the services of the plaintiffs. By a writ dated the 13th June, 1984 the plaintiffs sued for the balance of their account, a sum of £10,222. They obtained Order 14 judgment for this sum on the 26th July, 1984. However, there was a stay of execution as to £6,371, the subject of a counterclaim. This arose from an incident on the 15th August, 1983 when a quantity of the defendants' dresses, collected by the plaintiffs for export, was stolen from the plaintiffs' van which had been left unattended in Fleet Street by the plaintiffs' driver Huggins. The plaintiffs conceded that Huggins was negligent but contended that liability for the defendants ' loss was excluded by trading terms incorporated in the contract. Alternatively, they said, those terms limited the amount recoverable to the sum of £192.


It is convenient at this stage to set out the trading terms relied upon. They are the Standard Trading Conditions of the Institute of Freight Forwarders Ltd. (IFF), 1981 edition. Omitting irrelevant words, the conditions begin:

"All or any business undertaken, including any…service provided is transacted subject to the conditions hereinafter set out."


Clauses 18(a) and 19 read as follows:

"18. The Company shall not be liable to the Customer or Owner

  • (a) for loss or damage caused by any failure to carry out or negligence in carrying out the Customer's or Owner's instructions, or by any failure to perform or negligence in performing the Company's obligations (whether such obligations arise by contract or otherwise), unless such loss or damage is due to the wilful neglect or default of the Company or its own servants;

  • (b)…

19. In no case whatsoever shall any liability of the Company, however arising, and notwithstanding that the cause of loss or damage be unexplained, exceed

  • (a) the value of the relevant goods, or

  • (b) a sum at the rate of £800 per tonne of 1000 kilos on the gross weight of the goods; or

  • (c) £15,000 in respect of any one claim whichever shall be the least."


The plaintiffs argued two points: First, that clause 18(a) excluded liability for the defendants' loss altogether as Huggins, although negligent, was not guilty of wilful neglect. Secondly, in the alternative, if Huggins was guilty of wilful neglect, liability was limited by clause 19 to the sum of £192.


The learned judge found that the conditions were not incorporated into the contract, and accordingly the counterclaim succeeded. He further held that Huggins was guilty of wilful neglect so that, had the conditions applied, the defendants would have recovered £192.


On this appeal the same two issues have been raised on behalf of the plaintiffs.


The facts concerning whether or not the conditions were incorporated are within a small compass. Mr. Zacaria is the managing director of the defendant company, which is small and employs only four people. In 1980 he met Mr. Thomas, managing director of Transmarcom (UK) Ltd. which carried on business as freight forwarders using the trade name Mogul Air. The business was transferred to Mogul Steamship Co., still under Mr. Thomas and still trading as Mogul Air. Mr. Thomas notified his clients, including the defendants, of that change of ownership. He also told his clients by letter that the business was being carried out under the IFF conditions, but did not claim to have sent them a copy of the conditions. About March 1983 Mogul Steamship Co. Ltd. sold the business of Mogul Air to the plaintiffs, who continued to operate it under the same trade name. This time no notification that the business had changed ownership was sent to the defendants. They continued to use its services, Mr. Zacaria believing he was still dealing with Mr. Thomas's company.


Individual contracts were made orally by telephone. Usually Mrs. Chapman, a clerk in the defendant company, 'phoned Mr. Boulter, the plaintiffs' clerk, to indicate there was freight to collect. Mr. Boulter quoted the rate for the work. That being accepted, arrangements were made for the goods to be collected by the plaintiffs' vehicle. The contract concerning the dresses which were stolen was arranged orally in this way. The number, value and weight of the goods were not usually ascertained until they were received in the plaintiffs' warehouse at Heathrow. An invoice would then be sent to the defendants and this was the only document which passed. At least eleven such invoices were sent between March and August 1983. Each was headed "Mogul Air" in large letters. Underneath in small type were the words "parent company C.F.I. Ltd.", but Mr. Zacaria did not notice those words. At the bottom righthand corner of the invoice, also in small type, were the following words:

"All business is transacted by the company under the current trading conditions of the Institute of Freight Forwarders a copy of which is available on request."


The defendants never asked for a copy and were not sent one.


Mr. Zacaria's account of his state of mind was accepted by the learned judge, who summarised it as follows:

"Mr. Zacaria, in his evidence, said that he did not know that either Mr. Thomas or the plaintiffs traded on I.F.F. terms. He was cross-examined about his knowledge and what he said was this: he did not seek to impose his own terms on the transaction. He knew that some terms applied to freight forwarding agents, that they might impose some terms and that that is what he expected. He never sought to find out, in this case, what terms were applicable. He accepted that he knew that commercial men often dealt on terms and that they might frequently be standard terms, but said that he had never read the terms in question and never seen them before the loss occurred. He knew that standard terms sometimes or frequently dealt with the question of risk. He also accepted that if he wished for all-risk insurance from the plaintiffs, he had to ask for it."


The learned judge referred to three cases on this


first issue— McCutcheon v. David MacBrayne Ltd. [1964]1 W.L.R. 125, Hardwick Game Farm v. Suffolk Agricultural. Poultry Producers Association [1969] 2 A.C. 31, and Keaton, Sons & Co. v. Carl Prior Ltd., an unreported decision of this court given on the 14th March, 1985. He adopted the test propounded in the latter case by Lord Justice Ackner (as he then was) at page 4 of the transcript:

"The question in a case of this kind must always be, 'has reasonable notice of the terms been given? This is essentially a question of fact depending on the circumstances of the case, and in particular on the nature of the business and position of the parties to the transaction."


The crucial part of the learned judge's reasoning on this issue is at page 9H of his judgment. He said:

"In my view, the plaintiffs have to show that they have taken reasonable steps to bring to the notice and the attention the term in question. As I have said, there is no contractual document in this case which refers to them, unlike the Keaton case, and unlike the Hardwick Game Farm case where the contract note itself contained the relevant clause—indeed, no contract document which even refers to the sets of conditions.

In my judgment, if they wish to rely upon a course of dealing as incorporating written terms, it is only reasonable that the specific term should be set out and not left to the defendants to chase around and find out for themselves. I am not satisfied in this case that the plaintiffs did take reasonable steps to draw the defendants' attention to the specific terms of exclusion of liability upon which they seek to rely. Therefore, in my judgment, the defence to the counterclaim fails."


Inherent in that reasoning are two propositions which are challenged by the appellants. First, that the specific condition relied upon must be drawn in terms to the customer's attention, and a reference to the conditions generally with the offer of a copy of them on request will not suffice. Secondly, that notice of the condition must be in a contractual document. Mr. Malins for the appellants submits that the proper test here was as follows. Where there is a course of dealing, conditions will be incorporated into a contract where by words or conduct each party can be said to have led the other to believe the conditions were accepted. He relies upon a number of authorities.


First, Hardwick Game Farm v. Suffolk Agricultural Poultry Producers Association. At page 104 of the report Lord Guest said this:

"In the case of SAPPA and Grimsdale there was a verbal contract followed on the next day by a...

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