Jurong Port Pte Ltd v Huationg Inland Transport Service Pte Ltd

Woo Bih Li J:

[2] Before me, the plaintiff raised the following clauses of the contract for consideration:

[3] The plaintiff was relying on Condition 13(1) and Specifications 23b and 23e to impose the desired liability and the other provisions referred to above to aid in its construction of the provisions relied upon.

[4] It is evident from a perusal of the clauses how unwieldy and infelicitously drafted they were. The issue was whether the clauses which the plaintiff relied on were clear enough to require the defendant to indemnify the plaintiff for liability resulting from negligence by the plaintiff’s own employee. The district judge applied the test adopted by the Court of Appeal at [7] in Marina Centre Holdings Pte Ltd v Pars Carpet Gallery Pte Ltd [1997] 3 SLR 625 (“Marina Centre Holdings”) from the judgment of Lord Morton of Henryton delivering the judgment of the Privy Council in Canada Steamship Lines Ld v The King [1952] AC 192 at [208] on the construction of exemption clauses. The three steps enunciated there have been referred to as three tests but I will refer to them as the three-step test which seems more appropriate. The steps are:

[5] The district judge found that the first step of the test (as the plaintiff conceded) was not satisfied since there was no express reference to negligence of the plaintiff or its employees; the second step was satisfied as the ordinary meaning of the words in Condition 13(1) encompassed such negligence; but at the third step, the words in Condition 13(1), while wide enough to cover such negligence, could also be construed to refer to another type of culpability, ie, wilful misconduct on the part of the plaintiff’s employees and this was fatal to the plaintiff’s claim. The district judge also noted at [16] that his finding on the third step of the test was:

[6] He thus allowed the defendant’s appeal and dismissed the plaintiff’s claim for indemnity. Before me, the plaintiff argued that the district judge erred in finding that the words of Condition 13(1) could be construed to refer to a ground of damage other than negligence and, in particular, that they covered wilful misconduct but not negligence on the part of the plaintiff’s employees. This argument is addressed below. It is apposite to first consider the “inherently improbable” principle.

[7] In Marina Centre Holdings at [37], LP Thean JA explained in relation to the third step of Lord Morton’s test:

[8] In CST Cleaning & Trading Pte Ltd v National Parks Board [2009] 1 SLR 55 (“CST”), Chan Sek Keong CJ observed at [22]-[23] that the “inherently improbable” principle was equally applicable to indemnity clauses:

[9] In the present case, the plaintiff sought an indemnity from the defendant for the admitted negligence of the plaintiff’s own employee which resulted in the death of the defendant’s employee. It seemed to me inherently improbable that the defendant had agreed to indemnify the plaintiff in such circumstances. In any event, the language of Condition 13(1) was that of indemnity without specifying for whose conduct the defendant should indemnify the plaintiff. Thus, it was one thing to say that Condition 13(1) required the defendant to indemnify the plaintiff in respect of “any liability… whatsoever arising” but those words did not necessarily mean indemnifying the plaintiff for liability arising from the negligence of the plaintiff’s own employee. The most obvious liability intended to be covered would be that arising from the conduct of the defendant’s employees and perhaps also for that arising from the conduct of those for whom the plaintiff was not responsible.

[10] The plaintiff also referred to Condition 13(2) which imposed a liability on the defendant to indemnify the plaintiff for damage to property. Condition 13(2) had a proviso that the damage must be caused by the defendant or its sub-contractor or something within the defendant’s control. The plaintiff’s argument was that since Condition 13(2) had this proviso whereas Condition 13(1) did not, this meant that under Condition 13(1), the defendant was liable to indemnify the plaintiff for the negligent conduct of the plaintiff’s own employee. I did not agree that such an omission was sufficient to do the job for the plaintiff under Condition 13(1).

[11] Besides, there was yet another provision which the plaintiff had conveniently ignored. Condition 45 stated:

[12] Under Condition 45, the plaintiff was not liable to the defendant or its employees for injury which did not arise from the conduct of the plaintiff or its employees. This in turn implied that the plaintiff would be liable for injury to the defendant’s employees if the injury arose from the conduct of the plaintiff’s own employees.

[13] Specification 23b also did not impose on the defendant the liability desired by the plaintiff for similar reasons. Specification 23e was further off the mark as it seemed to apply to a situation covering an employer’s liability to employees and provisions where certain persons may be deemed to be the employer of a workman for the purpose of specific legislation. In any event, Specification 23e also did not impose on the defendant the liability desired by the plaintiff.

[14] The other provisions which the plaintiff raised to bolster its construction of Condition 13(1), Specifications 23b and 23e did not help the plaintiff.

[15] The defendant also submitted that the contra proferentem principle of construing the clause against the party who had drafted and/or sought to benefit from it (this contract being a standard-form contract supplied by the plaintiff to its contractors) also applied. In this case, I agreed that the clauses relied on by the plaintiff were ambiguous since the plaintiff’s negligence was not clearly included as one of the situations giving rise to indemnity liability on the defendant’s part. That, together with the inherently improbable principle, would have been sufficient to dispose of the plaintiff’s appeal. It was therefore not necessary to consider the third step of Lord Morton’s test. Nevertheless, I will also address the third step as applied by the district judge for completeness.

[16] As mentioned, the district judge found, at para 22 of his grounds of decision, that the third step of the test was not satisfied because Condition 13(1) as well as Specifications 23b and 23e were capable of covering more than negligence, such as loss arising from the wilful conduct of the plaintiff or its employees and such a liability was neither fanciful nor remote. It seemed incongruous to me that the defendant could be liable to indemnify the plaintiff for wilful conduct of the plaintiff’s employees but not to indemnify the plaintiff for the negligent conduct of the plaintiff’s employees. Nevertheless, while I agreed with the plaintiff that the analysis of the district judge at the third step of the test was flawed, I still did not agree with the plaintiff that Condition 13(1) or any other provision it had relied on, would apply to cover the negligence of the plaintiff’s own employees for the reasons stated above.

[17] It seemed to me unreasonable for the plaintiff to seek an indemnity for a liability arising from the conduct of its own employee although, in fairness, I should mention that I was informed that its claim was driven by its insurer.

[18] At present, the common law allows a party to include a contractual term to exempt itself from liability for its own negligence. It even allows a party to go one step further, that is, to claim an indemnity from the other contracting party for the claiming party’s own negligence provided that the contractual term is clear in imposing such an indemnity.

[19] With the qualification that I have not had the benefit of full arguments on the point and if I were not constrained by authority, I would be inclined to the view that such a provision for an indemnity should not be upheld even if the contractual term is clear in imposing such a liability unless (a) there is clear evidence that such a liability was drawn specifically to the attention of the other contracting party, instead of being hidden in a host of provisions, and accepted or, (b) it satisfies the requirement of reasonableness (like the one stipulated in s 4 of the Unfair Contracts Term Act (Cap 396, 1994 Rev Ed) which applies to consumer contracts). Furthermore, bearing in mind that many of those who do not qualify to be categorised as consumers are actually in weak bargaining positions, the common law should perhaps go one step further and make requirement (b) above mandatory, whether in addition to requirement (a) above or not.