NOTES OF CASES
| Date | 01 November 1977 |
| DOI | http://doi.org/10.1111/j.1468-2230.1977.tb02454.x |
| Published date | 01 November 1977 |
NOTES
OF
CASES
EXEMPTING
THE
SUB-BAILEE
THE
problem of whether someone who is not
a
party to
a
contract
may rely
on
or otherwise be affected by an exemption clause con-
tained in the contract is one which has occasioned considerable
discussion in recent years.
Johnson Matthey
&
Co.
v.
Constantine
Terminals‘
is an important decision
on
a
specific aspect
of
this
problem-whether, when
A
bails goods to
B
and
B
sub-bails them
to C, C may rely
on
the terms of the contract between himself and
B
to escape liability in negligence to
A.
Although similar cases
have come before the courts several times in recent years,* not until
now has this question been definitively answered.
In
Johnson Marthey,
A,
the owners of
a
metric ton of silver grain,
contracted with
B
to arrange for it to be transported to Milan.
B
arranged for the silver to be stored overnight by C at the London
International Freight Terminal. While there awaiting loading on to
railway wagons, it was stolen.
B
and C, as was normal in dealings
between them, contracted on the basis of C’s standard conditions of
handling, which provided that C would not be liable for losses unless
they occurred while goods werz in their actual custody, and even then
only where the loss was due to the wilful neglect or default of C or
their servants. A similar term was incorporated into the contract
between A and
B
to
limit
B’s
liability. A sought to sue both
B
and C.
Having held that
B
were protected by their exemption clause,
since the
loss
had occurred when the goods were not in their actual
custody, Donaldson
J.
turned to the liability of C. There was
no
contractual relationship between
A
and C-he had already held that
B
contracted as
a
carrier
(i.e.
as a principal) and not as
a
forwarding
agent,3 and he also rejected
a
suggested oral contract between A
and
C
to the effect that C should load goods on to railway wagons
on the day
of
arri~al.~ Therefore C would be liable, if at all, in
negligence.
There was ample evidence that C were negligent.g
As
to duty,
previous authority had sufficiently determined that
a
sub-bailee owed
a
duty to the original bailor to take reasonable care to prevent theft
1
[1976] 2 Lloyd’s Rep. 215.
2
Lee Cooper
v.
C.
H.
Ieakins
&
Sons
[19641 1 Lloyd’s Rep. 300; [1967] 2
Q.B. 1;
Morris
v.
C.
W.
Martin
&
Sons
[I9661 1 Q.B. 716 (exemption clause,
on
its
construction, not applicable);
Leoroyd Bros.
&
Co.
V.
Pope
&
Sons
[
19661 2 Lloyd’s
Rep. 142
(C
did not
seek
to
rely
on the exemption clause);
Moukotof
v.
B.O.A.C.
[1967]
1
Lloyd’s Rep. 396 (the clause did not exempt
C‘s
liability);
Mayfair
Photo-
Rraphic’SuppIies (London)
v.
Baxter
Hoare
[1972]
1
Lloyd’s Rep. 410
(C
was not
negligent).
:I
[
19761 2 Lloyd’s Rep. 215, 216.
4
Ibid.
at p. 217.
He
also rejected a suggested oral contract to the
same
effect
between B and
C: ibid.
at pp. 217-218.
5 Ibid.
at P. 218.
706
Nov.
19771
NOTES
OF
CASES
707
of
goods in his charge 6-although it has been suggested,
for
reasons which perhaps have not been taken sufficient notice of,
that in this situation no duty should exist.? The question in issue,
however, was whether the duty arose only from the fact of the sub-
bailment or was independent of it. C accepted that, if A could sue
in
negligence without alleging a bailment, then, as a result of the
decision in
Scruttons
v.
Midland SiliconesY8
they would not be able
to rely
on
the exemption cla~se.~
C‘s
argument was that the duty
arose only from the fact of the bailment-and that, in relying
on
the contract establishing the bailment, A had to accept the other
clauses of that contract, which (as Donaldson
J.
accepted lo)
exempted
C
from liability.
So,
the applicability of the exemption
clause in this situation-which, as Donaldson
J.
observed, was a
question of fundamental importance, which he hoped would be
considered by
a
higher court “--depended
on
the nature of the duty.
As
authority for the proposition that the duty arose independently
of
the bailment,
A
relied on
Lee Cooper
v.
C.
H.
Jeakins
&
Sons,IZ
where, on facts similar to the case
in
hand, Marshall
J.
held that
C
owed
A
a
duty of care, applying Lord Atkin’s
“
neighbour principle
”
in
Donoghue
v.
Stevenson
l3
and distinguishing cases holding that
there was
no
duty to protect another’s goods from theft
l4
on the
rather tenuous ground that they involved contracts of service, rather
than for handling goods.lS As for the exemption clauses, Marshall
J.
applied
Scruttons
v.
Arlidland Silicones
and held that no exemption
clause could in any way affect
a
person who was not a party to the
contract in which they were contained.16 Rightly, this decision has
been much criticised,’? and Donaldson
J.
refused to follow it, point-
ing out that
in
Donoghue
V.
Stevenson
Lord Atkin was fixing limits
to the ambit of duty of care-he was saying not that a duty existed
6
Morris
v.
C. W. Martin
&
Sons
[1966] 1
Q.B.
716 (Lord Denning citing
Pollock
&
Wright
on
Possession
(1888), p. 169);
Gilchrist Waft
&
Sanderson Pty.
v.
New York
Products Pty.
[1970] 1 W.L.R. 1262;
Moukafaff
V.
B.U.A.C.
[1967]
1
Lloyd’s
Rep. 396.
7
Weir [1965] C.L.J. 186, in
a
note on
Lee Cooper
v.
C.
H.
Jeakins
&
Sons
[1964] 1 Lloyd’s Rep.
300,
suggests that there should be no duty (1) because
A
could not sue C in conversion
or
detinue, (2) because
A
will normally insure the
goods against
loss,
and in most cases it will be the insurer suing in
A’s
name
and attempting to pass on his loss to C
or
his insurer, (3) that the arguments for
the esistence of
a
duty
are
weak, because the
loss
is solely economic, and caused
by
omission rather than by
a
positive act.
8
[
19621
A.C.
446.
9
[
19761 2 Lloyd’s Rep. 215, 219.
10
Ibid.
at pp. 218-219.
11
Ibid.
at p. 219. This hope
was
not realised since there is to be
no
appeal-
information from
Mr.
Akeroyd
of
Messrs.
Elborne Son
&
Mitchell, the plaintiff’s
solicitors.
12
119641 1 Lloyd‘s Rep. 300; [1967] 2
Q.B.
1.
13
ii932j
A.C.
562.
14
Deyong
v.
Shenburn
[1946]
K.B.
227;
Tinsley
v.
Dudley
[1951] 2
K.B.
18;
Edwards
v.
West Herts Group Hospital Mana.eement Committee
[19571 1 W.L.R. 415.
..
1s
[1964] 1 Lloyd’sRep. 300,
31i;
[1967]
2Q.B.
1, 7.
16
[I9641
1
Lloyd’s Rep. 300. 309-310. This part
of
the judgment is not reported
17
See
especially Weir,
op. cit., ante,
n.
7.
in the
Law Reports.
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