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Interpreting an exemption clause

26th June 2009

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The contract governing the rights and duties between a store owner and the contractor asked to extend the store is likely to be analysed in some detail if that contract becomes the subject of a R169 million claim.

Masstores (Pty) Ltd v Murray & Roberts Construction (Pty) Ltd and another 2008 (6) SA 654 (SCA) revolved around the following clause in the contract governing the relationship between the appellant and the first respondent:

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Clause 9 Indemnities

9.1 Subject to the provisions in terms of 9.2 the contractor indemnifies and holds the employer harmless against any loss in respect of all claims, proceedings, damages, costs and expenses arising from:

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9.1.1 Claims from other parties consequent upon death or bodily injury or illness of any person or physical loss or damage to any property, other than the works, arising out of or due to the execution of the works or occupation of the site by the contractor.

9.1.2 A non-compliance by the contractor with any law and regulation and bylaw of any local or other authority arising out of or due to the execution of the works or occupation of the site by the contractor.

9.1.3 Physical loss or damage to any plant, equipment, or other property belonging to the contractor or his subcontractors.

9.2 The employer indemnifies and holds the contractor harmless against loss in respect of all claims, proceedings, damages, costs and expenses arising from:

9.2.1 An act or omission of the employer, the employer's servants or agents and those for whose acts or omissions they are responsible.

9.2.2 An act or omission of a direct contractor appointed in terms of [a later clause].

9.2.3 Design of the works where the contractor is not responsible in terms of [an earlier clause].

9.2.4 The use or occupation of the site by the works.

9.2.5 The right of the employer to have the works or any part thereof executed at the site.

9.2.6 Interference with any servitude or other right that is the unavoidable result of the execution of the works including the weakening of or interference with the support of land adjacent to the site unless resulting from any negligent act or omission by the contractor or his subcontractors.

9.2.7 Physical loss or damage to an existing structure and the contents thereof in respect of which this agreement is for alteration or addition to the existing structure.

9.2.8 Physical loss or damage to the contents of the works where practical completion has been achieved in terms of [a later clause].

9.2.9 The occupation of any part of the works by the employer or his tenants.

The second respondent was a subcontractor of Murray & Roberts. Some of the second respondent's employees were cutting the roof of Mass Stores' existing store with an angle grinder when a fire broke out which destroyed the entire store and all its contents. Mass Stores sued Murray & Roberts for breach of contract, which included failure to comply with all the relevant laws and regulations, failure to carry out the work in a proper and workmanlike manner and failure to ensure that its subcontractors complied with safety levels.

Murray & Roberts excepted to the claim on the basis that the indemnity clause in their contract (clause 9) with Mass Stores exempted them from liability. In response, Mass Stores argued that the indemnity clause only indemnified Murray & Roberts from claims by third parties, or that it indemnified Murray & Roberts only for its non-negligent conduct. The Supreme Court of Appeal upheld the exception on the following basis:

* The use of the words "indemnify" and "hold harmless" in clause 9.2 is inelegant, but clear. Normally the use of these words would indicate that a person is being protected against a claim by a third party. A number of judgments have held that these words also mean "keep free from, or secure against hurt, harm or loss" or "to secure someone against legal responsibility for their actions". If the parties had intended clause 9.2.7 to only govern third party claims, they would have stated it so, as they did for example in clause 9.1.
* The apparent conflict between clauses 9.1 and 9.2.7 is only apparent as the contract stated that clause 9.1 is "subject to" clause 9.2. Where clause 9.1.2 may appear to be in conflict with clause 9.2.7, clause 9.2.7 must be followed. The indemnity granted in clause 9.1.2 is therefore a limited indemnity.
* The absence of any explicit reference to negligence did not mean that negligence was excluded. There is authority that where an exemption clause specified specific instances for which liability was excluded, but did not expressly refer to negligence, that liability for negligence was not excluded. This principle, however, does not apply if there is no doubt that negligence is included in the ambit of the exemption clause. Clause 9.2.6 contains an express reference to negligence, which indicates that the parties had considered liability for negligent conduct in one situation, and specifically rendered the first respondent liable for it. The exclusion of a reference to negligence elsewhere in the clause must therefore have been deliberate. In all the other subclauses the presence or absence of negligence therefore plays no role.

Webber Wentzel acted for the Murray & Roberts in this matter.

 

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