Exclusion of liability for indirect or consequential loss

In Ferryways NV v Associated British Ports [2008] EWHC 225 (Comm), Teare J considered the construction of a clause in a stevedoring contract which excluded the stevedores' liability for indirect or consequential loss "including without limitation...the liabilities of the Customer to any other party". The chief officer of the claimant's vessel was killed by the negligence of an employee of subcontractors engaged by the defendant stevedores. The claimant sought to recover from the defendant an indemnity in respect of sums which it had been obliged to pay to the chief officer's next of kin. The defendant relied upon the exclusion clause, arguing that the exclusion clause had defined "indirect or consequential" losses as including "the liabilities of the Customer to any other party".

Teare J rejected this argument. It was well established that the term "indirect and consequential" loss referred to loss which was not the direct and natural result of the breach of contract. Here, the losses claimed were not indirect or consequential, and where an exclusion clause referred to "indirect and consequential" loss, "very clear words indeed" would be required to indicate an intention to exclude losses falling outside that established meaning. The words "including without limitation" were not sufficiently clear to extend the exclusion of liability to the losses claimed. Rather, those words were intended to identify types of loss which might fall within the scope of the clause, but only if they were also indirect or consequential.

The case is a useful pointer to the proper construction of an increasingly common form of exclusion clause, and a reminder that where the "indirect and consequential loss" formula is used, clear words will be required to exclude any further or additional types of loss.