TT Talk - Liability when staff steal
Peter Jones reports a recent South African case on his Forwarderlaw website, where the issue was whether a company could rely on its trading conditions to limit or exclude liability for consignments stolen by its staff. Writing in the bulletin, William Fullard of Fullard Mayer Morrison comments that many forwarders believed that they were not liable at all if goods were stolen by an employee but points out that in South African law there is legal precedent for the view that an employer would be liable for the loss of goods entrusted to its safekeeping if an employee breached that duty of care by stealing the customer's goods.
The courts have however decided that an employer can, by agreement, contract out of liability for such thefts. It is not even considered to be contrary to public policy since the thefts are not for the benefit of the employer.
As with most other forwarding contracts in South African, in Goodman Brothers (Pty) Ltd v Rennies Group Ltd, the relations between the two companies were subject to the conditions of the South African Association of Freight Forwarders. Rennies' driver and his assistant collected a consignment of watches from Johannesburg airport for delivery to the customer's premises. The employees then stole the consignment en route.
The forwarder contended that clause 17 of its trading terms and conditions absolved it of liability. Clause 17 reads as follows:
"GOODS REQUIRING SPECIAL ARRANGEMENTS
"Except under special arrangements previously made in writing the company will not accept or deal with bullion, coin, precious stones, jewellery, valuables, antiques, pictures, human remains, livestock or plants. Should the customer nevertheless deliver such goods to the company or cause the company to handle or deal with any such goods otherwise than under special arrangements previously made in writing the company shall incur no liability whatsoever in respect of such goods, and in particular, shall incur no liability in respect of its negligent acts or omissions in respect of such goods"
The court accepted that the watches constituted valuables and that no special arrangements had been made for handling them. The court found that clause 17 did exempt the forwarder from all liability, even for losses caused by its employees stealing the goods. Had special arrangements been made, the forwarder would have been in a position to protect itself against the dishonesty of its employees by taking out fidelity insurance, or by taking additional precautions for the safe conveyance of the watches, but that such measures would have incurred an increased cost to the customer. One of the judges commented that a rightthinking community would understand and accept as fair a decision by a clearing agent that,as it was only being paid at the rate for cargo of ordinary value, it could not afford to pay for additional security measures to protect high-value cargo and that it was therefore going to
exclude liability for risks which arose from the nature or value of the goods.http://www.forwarderlaw.com/library/view.php?article_id=339
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Effective incorporation of standard trading conditions remains a fundamental business practice. Seeing them interpreted robustly by the courts in South Africa adds confidence.