Monthly Archives: November 2012

Gross negligence = ordinary negligence + vituperative epithet?

grossIP Draughts first encountered references to gross negligence in contracts in about 1984.  Working as an in-house lawyer for a UK-based research and engineering consultancy, he negotiated some contracts that were based on US templates.  Often, those US-style contracts would include clauses that limited liability or provided for indemnities, yet made an exception in the case of liability caused by a party’s gross negligence or wilful misconduct.

In his callow youth, IP Draughts’ reaction to such an exception in negotiations was to point out that gross negligence did not feature as a well-understood concept in English contract law.  Sometimes, he would negotiate to remove the exception.  On other occasions, he would propose alternative wording, such as “reckless or wilful misconduct”.

Nowadays, in his near dotage, IP Draughts has seen references to gross negligence so many times in contracts that he is inured to them. (Inure: there is another word that features in contracts – in assignment clauses – and is sometimes spell-checked to death; IP Draughts has seen it more than once spelled as insure, which is quite another kettle of fish).

He hopes that an English court today, given the slew of recent cases in which the courts have bent over backwards to give effect to the parties’ commercial intentions, would find a sensible way of interpreting gross negligence in a contractual liability clause.

Irish Supreme Court

Irish Supreme Court

These thoughts are prompted by a case in the Irish Supreme Court that has come to IP Draughts’ attention today.  The case is called ICDL GCC Foundation FZ-LLC v. European Computer Driving Licence Foundation Ltd [2012] IESC 55.  The case report was published on 14 November 2012 and can be found here.  One of the issues that the court considered was the meaning of the phrase “wilful act or gross negligence” in the following contract clause:

The Licensee’s exclusive remedy and the total liability of ECDL-F in respect of any cause of action relating to or arising out of this Contract will, to the extent that it is not caused by a wilful act or gross negligence by ECDL-F, not exceed 10 per cent of the total amounts paid to ECDL-F by the Licensee, or €50,000.00, whichever is the lesser amount.

Irish law has, of course, been completely independent of English law for nearly a century.  Nevertheless, they share a common heritage and English court judgments are often cited in Irish cases.  This case is no exception; the judge cites a number of old and recent English cases, including the important speech of Lord Hoffmann in the West Bromwich case in 1998, on the principles to be followed when interpreting contracts.  This Irish case is therefore very interesting to this English contract lawyer.

One of the older cases cited in the present case is Grill v General Iron Screw Collier Company (1866) LR 1 CP 600 @ 612, where Willes J remarked that “gross negligence is ordinary negligence with a vituperative epithet”.  Rightly, in IP Draughts’ view, the Irish Supreme Court rejected this as an accurate statement of Irish (or for that matter, English) contract law in 2012.

Mr Justice Fennelly

Mr Justice Fennelly

In the Supreme Court in the present case, Mr Justice Fennelly summarised (see paragraph 59) the trial judge’s interpretation of “gross negligence” as follows:

The learned trial judge emphasised the fact that the term was here being used in a commercial contract. It followed, in his view, that whether it was a term of art used in any particular area of law might not be particularly significant. The words had to be construed by reference to their text but in their context. He concluded that the term “gross negligence” meant a degree of negligence involving a breach of the relevant duty of care by a significant margin. Business efficacy had to be given to the clause. Thus, in order for the exclusion clause to be ineffective, it was necessary to find that any breach of contract established resulted from a significant degree of carelessness by the Foundation.

In other words (and echoing other parts of the Supreme Court judgment), the fact that “gross negligence” might or might not have a particular legal meaning in the context of tort cases, was not relevant to interpreting the term in contract cases.  For contract cases, general principles of contract interpretation should be applied to the term.

Mr Justice Fennelly seems to have agreed with this approach.  In particular, he comments (at paragraph 134):

The context of the present case is not tort but contract. Where the parties have used the word “gross negligence,” the courts should endeavour to give it meaning. As Clarke J remarked, the difficulty of assigning a meaning to gross, as distinct from ordinary, negligence is compounded by the fact that the liability of the Foundation, which is in contemplation is in contract rather than tort. In my view, he was correct to decide that he should endeavour to give meaning to the term in a context where the parties had agreed to use it in the contract. The general law lays down the liability of parties in tort. Where the parties decide to regulate the relations between them by reference to a particular set of words, the courts should endeavour to give effect to their intentions.

He goes on to discuss how gross negligence should be interpreted.  His comments include the following (at paragraphs 139 – 142):

I am persuaded that an agreement such as the present intentionally establishes a distinction between ordinary negligence and gross negligence. Any liability of the Foundation is to be limited in accordance with Clause 25 unless the plaintiff can show gross negligence...

The difficult question is how to define the degree of fault…

Clarke J adopted the term “significant” or “significantly” as a type of quantitative yardstick and I cannot readily see a more appropriate measure…

In my view, therefore, Clause 25 allows the Foundation to limit its liability unless the Dubai company can prove that it has, to a significant extent, been negligent in and about the act of breach of contract which is alleged, namely termination of the agreement.

The judgment also considers the meaning of “wilful act”, and the discussion of this point is also interesting, as are Mr Justice Fennelly’s comments on the application of the contra proferentem rule.  But that is enough for a short blog article.

So, in the context of a liability clause in a contract, gross negligence means something “significantly” more than ordinary negligence. In IP Draughts’ view, this interpretation makes good sense from a commercial perspective.

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Please vote for us in the ABA Blawg 100 contest

We are delighted to report that this blog has been selected by the American Bar Association for inclusion in the Blawg 100 for 2012.  This is the ABA’s annual listing of what it considers to be the best 100 legal blogs.  According to Twitter comment (we have not checked) we are the only blog outside North America to receive the accolade this year.

This year’s list includes some legal blogs that we admire and consult regularly, such as Ken Adam’s Koncision and the China Law Blog, led by Dan Harris, and others that we visit very occasionally, such as Bryan Garner’s Law Prose, and Dennis Crouch’s Patently O.  The blog that we consult on a daily basis, IPKat, led by Jeremy Phillips, was selected for the Blawg 100 in 2010 but not this year.

Honorees of the Blawg 100 are entered in a popularity contest, in which the ABA invites members of the public to vote for the blog that they like best.  Please consider registering to vote and voting for us here.  When voting, find us in the “legal research / writing” category.

To help you make up your minds, we include below some comments that others have made about this blog in the last few months.  We are grateful for all of these comments (no, really!)

IPKat is reported to have said that we are his favourite legal blog (other than his own), noting that we are “pedantic, smug, practical and generally right”.

voting for the blawg 100 begins…

Danish Member of the European Parliament, and member of the Pirate Party, Amelia Andersdotter, chided us in a comment on this blog for our “insanely fine-tuned nuance”.

Ken Adams of Koncision, when proposing our inclusion in the Blawg 100, noted that our “interesting and insightful” blog is leavened with “gently offbeat and self-deprecating humor”.

We are really thrilled (but not, we hope, insanely smug) about winning this award and hope it will help us raise the blog’s profile and increase our international readership.  Thank you to everyone who proposed us and to everyone who votes for us!

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A modest proposal for improving clarity

The previous article on this blog briefly mentioned a lecture that was recently given by Lord Neuberger, the President of the UK Supreme Court.  Having now read the transcript of the lecture – available from the Supreme Court website here – here are some further comments.

One of the main themes of the lecture was the clarity of court judgments.  Several of the points that Lord Neuberger made can also be applied to the drafting of contracts.

In Lord Neuberger’s view, “judgments must speak as clearly as possible to the public”.  However, he recognises that in some cases, such as patent cases, it may not be possible to explain the facts very simply.  Similarly, “some issues of law are intricate, complex and hard to express simply.  But that is no excuse for judges not expressing themselves as clearly and simply as possible.”

These views echo IP Draughts’s views about contracts.  Wherever possible, they should be drafted in a clear, simple manner.  At the same time, there are certain aspects of contracts, eg the wording of liability clauses, that cannot be reduced to plain English because they raise complex issues of law.  Recognising the difference between complexity for its own sake, and necessary complexity, is an important part of the drafter’s toolkit.  Complexity for its own sake should be avoided.

In support of his theme, Lord Neuberger cited an American author, Joseph Kimble, who (as part of an academic study in 2003) rewrote a Michigan court judgment.  Lord Neuberger quoted the opening paragraph of the court judgment in both its original and revised form.  Version A read as follows:

Plaintiff Robert Wills filed a declaratory judgment against defendant State Farm Insurance Company to determine whether defendant has a duty to pay benefits under the uninsured motorist provisions found in plaintiff’s policy with defendant. Pursuant to the parties’ stipulated statement of facts, the trial court granted summary disposition in plaintiff’s favor upon finding coverage where gunshots fired from an unidentified automobile passing plaintiff’s vehicle caused plaintiff to drive off the road and suffer injuries. Defendant appeals as of right. We reverse and remand.

Version B read rather differently:

Robert Wills was injured when someone drove by him and fired shots toward his car, causing him to swerve into a tree. He filed a declaratory-judgment action to determine whether State Farm had to pay him uninsured-motorist benefits. The issue is whether there was a ‘substantial physical nexus’ between the unidentified car and Wills’s car. The trial court answered yes and granted a summary disposition for Wills. We disagree and reverse. We do not find a substantial physical nexus between the two cars, because the bullets were not projected by the unidentified car itself.

Version B was written by Professor Kimble.  He asked lawyers which they preferred.  They expressed a “strong preference” for Version B.  An excerpt from the Kimble paper, which explains his study further, can be found here.

Lord Neuberger, and before him Professor Kimble, are not focussing just on the words used.  They are also concerned about the structure of court judgments, including use of headings and other “signposts” and, in IP Draughts’ words, with telling an interesting story.  Similarly, in contracts, use of plenty of headings, an index in the case of longer contracts, and an interesting sequence of clauses, are all important in communicating the information that is to be found in the contract.  For example, in IP Draughts’ view, it is important to “get to the point” early in the contract, dealing with work and payment obligations before more esoteric points such as ‘boilerplate’ interpretation issues.  This goes against the practice of M&A contracts, in which interpretation clauses are typically set out immediately after the definitions, and are sometimes numbered as clause 1.2.

Lord Neuberger makes many other interesting points in his lecture, some of which are not so easily applied to contracts.  His comment about reducing the length of court judgments is one that probably can be applied to contracts, some of which are unjustifiably long.

The transcript of his lecture is well worth a read.  IP Draughts cannot resist pointing out the score that Lord Neuberger’s transcript gets in the Bla Bla Meter: 0.22.  This is perfectly respectable (a low score is good), but one can’t help feeling that if Lord Denning had written a similar speech, the score would have been lower.  Perhaps that is an unfair comparison.  Lord Denning was exceptionally clear in his writing.  His judgment in the case of Hinz v Berry, in 1970 (the famous case in which he starts, “It was bluebell time in Kent.”) achieves a score of 0.09.  This game can be played endlessly.  Version A of the Michigan judgment, above, scores 0.32, while Version B scores 0.19.  As one might expect.

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Judging the judges

David is seen here modelling the blue and red robes of a Doctor of Laws of University College London

Judges seem to be in the news.  On a serious note, the new President of the UK Supreme Court, Lord Neuberger, has called for court judgments to be clearer and more concise.  Hear, hear, says IP Draughts.  English High Court judgments are becoming incredibly long.  Some judges in the Patents Court are guilty of this – you know who you are!

Meanwhile, Lord Justice Leveson is being criticised in the UK press for accepting an offer of an all-expenses-paid trip to Australia for him and his missus, so that he can give a talk on privacy laws at Sydney’s University of Technology.  IP Draughts has solemnly promised his wife that, if any Australian university cares to offer him an expenses-paid trip for two Down Under, he will stoically bear any public opprobrium that may arise.

Finally, IP Draughts is saddened to hear that Lord Judge, the senior judge in England and Wales, is retiring.  Can readers think of any other people in public life whose name so beautifully matches their occupation?  The fictional Major Major doesn’t count!

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