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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Internet Broadcasting Corporation Ltd. (T/a Nettv) & Anor v Mar LLC (T/a Marhedge) [2009] EWHC 844 (Ch) (24 April 2009) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2009/844.html Cite as: [2009] EWHC 844 (Ch), [2009] 2 Lloyd's Rep 295, [2010] 1 All ER (Comm) 112 |
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CHANCERY DIVISION
B e f o r e :
sitting as a deputy High Court Judge
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(1) INTERNET BROADCASTING CORPORATION LTD (t/a NETTV) (2) NETTV HEDGE FUNDS LIMITED (formerly MARHEDGE TV LIMITED) |
Claimants |
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-v- |
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MAR LLC (t/a MARHedge) (a US incorporated company) |
Defendant |
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Anthony Boswood QC and Simon Atrill instructed by Field Fisher Waterhouse for Defendant
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Crown Copyright ©
Introduction
Facts relevant to the preliminary issue
The exemption clause
"16. Nothing in this Agreement shall operate to exclude or limit either party's liability for death or personal injury caused by its default or negligence, any breach of the terms implied by the sale of goods and supply of goods and services legislation, fraud, or any other liability that cannot be excluded or limited under applicable law.
17. Subject to clause 16 neither party will be liable to the other for any damage to software, damage to or loss of data, loss of profit, anticipated profit, revenues, anticipated savings, goodwill or business opportunity, or for any indirect or consequential loss or damage.
18. Subject to clause 17, NETTV's aggregate liability in respect of claims based on events relating to this Agreement shall not exceed the total amount of cash fees paid by the Client to NETTV in connection with this Agreement or any collateral contract, whether in contract or tort (including negligence). NETTV shall not be liable for the value of media contributed by the Client as part of this Agreement."
Exemption clauses and fundamental breach
Relevance of deliberate and repudiatory breach
"Some deliberate breaches ... may be, on construction, within an exceptions clause (for example, a deliberate delay for one day in loading). This is not to say that "deliberateness" may not be a relevant factor: depending on what the party in breach "deliberately" intended to do, it may be possible to say that the parties never contemplated that such a breach would be excused or limited."
"Since the presumption is that the parties by entering into the contract intended to accept the implied obligations exclusion clauses are to be construed strictly and the degree of strictness appropriate to be applied to their construction may properly depend on the extent to which they involve departure from the implied obligations. Since the obligations implied by law in a commercial contract are those which, by judicial consensus over the years or by Parliament in passing a statute, have been regarded as obligations which a reasonable businessman would realise that he was accepting when he entered into a contract of a particular kind, the court's view of the reasonableness of any departure from the implied obligations which would be involved in construing the express words of an exclusion clause in one sense that they are capable of bearing rather than another, is a relevant consideration in deciding what meaning the words were intended by the parties to bear." [emphasis added]
"In commercial contracts negotiated between business-men capable of looking after their own interests and deciding how risks inherent in the performance of various kinds of contract can be most economically borne (generally by insurance), it is, in my view, wrong to place a strained construction upon the words in an exclusion clause which are clear and fairly susceptible of one meaning only even after due allowance has been made for the presumption in favour of the implied primary and secondary obligations." [emphasis added]
Personal wrongdoing
"Clearly, any by-law which purports to limit the authority's liability in respect of a loss occurring with the actual fault or privity of the authority would be ultra vires; and that is precisely what by-law 91(1) does. It distinguishes between the misconduct or negligence of the authority itself and that of its servants for which it is also responsible. If anyone who could properly be described as the alter ego of the defendants, for example, their managing director, had been privy to the theft of the 64 missing crates, this would constitute a loss occurring with the actual fault or privity of the defendants ..., yet the defendants would be exempt from liability because the loss would have been caused partly by the actual thieves and therefore not solely the fault of the defendants. There is however, no power under section 29 to make a by-law which limits the liability of the authority in respect of any loss occurring with its actual fault or privity." [emphasis added]
Rejection of literalism
"There has been a shift from literal methods of interpretation towards a more commercial approach. In Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191, 201, Lord Diplock, in an opinion concurred in by his fellow Law Lords, observed: "if detailed semantic and syntactical analysis of a word in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense". In Mannai Investment Co Limited v Eagle Star Life Assurance Co Limited [1997] AC 749, 771, I explained the rationale of this approach as follows:
"In determining the meaning of the language of a commercial contract ... the law ... generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language."
The tendency should therefore generally speaking be against literalism."
Main object
Allocation of risk
Summary of principles
(1) There is no rule of law applicable and the question is one of construction.
(2) There is a presumption, which appears to be a strong presumption, against the exemption clause being construed so as to cover deliberate, repudiatory breach.
(3) The words needed to cover a deliberate, repudiatory breach need to be very "clear" in the sense of using "strong" language such as "under no circumstances...".
(4) There is a particular need to use "clear", in the sense of "strong", language where the exemption clause is intended to cover deliberate wrongdoing by a party in respect of a breach which cannot, or is unlikely to be, covered by insurance. Language such as "including deliberate repudiatory acts by [the parties to the contract] themselves..." would need to be used in such a case.
(5) Words which, in a literal sense, cover a deliberate repudiatory breach will not be construed so as to do so if that would defeat the "main object" of the contract.
(6) The proper function between commercial parties at arm's length and with equal bargaining power of an exemption clause is to allocate insurable risk, so that an exemption clause should not normally be construed in such cases so as to cover an uninsurable risk or one very unlikely to be capable of being insured, in particular deliberate wrongdoing by a party to the contract itself (as opposed to vicarious liability for others).
(7) Words which in a literal sense cover a deliberate repudiatory breach cannot be relied upon if they are "repugnant" - I have not dealt with this in detail because it is not relevant to this case.
The construction of clause 17
"17. Subject to clause 16 neither party will be liable to the other for any damage to software, damage to or loss of data, loss of profit, anticipated profit, revenues, anticipated savings, goodwill or business opportunity, or for any indirect or consequential loss or damage."
euNetworks Fiber UK Limited v AboveNett Communications UK Limited
"The principles applicable to the construction and effectiveness of contractual limitations on liability such as [the exemption clause] are to be found set out in detail in Photo Production Limited v Securicor Transport Limited [1980] AC 827, and may be summarised as follows:-
(1) There is no principle that a party may not exclude liability for fundamental breach of contract.
(2) In relation to a commercial contract (where the parties are usually bargaining on equal terms and free to insure against risks) the parties are at liberty to apportion the risks arising from breach of contract as they think fit, so that the extent of an exclusion clause is merely a question of construction.
(3) Nonetheless, if the effect of an exclusion clause is to deprive the agreement of the legal characteristics of a contract, by conferring on one party to the liberty to ignore his obligations with impunity, the exclusion may be held to be repugnant to the contract and of no effect."
Other construction arguments of the Claimant
Damages in lieu of specific performance
Conclusion
MR G. MOSS QC