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South Africa: Freight forwarders may exclude liability for theft of goods by employees

7 July 2023
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On Wednesday, 28 June 2023, the Constitutional Court handed down its judgment in Fujitsu Services Core (Pty) Ltd v Schenker South Africa (Pty) Ltd (CCT 32/22) [2023] ZACC 20 (28 June 2023). In a six to five decision (the Chief Justice writing for the narrow majority), the Court found that clauses excluding liability for theft by freight forwarders’ employees are not contrary to public policy.

The matter concerned a dispute between Fujitsu Services Core (Pty) Ltd (Fujitsu) and Schenker South Africa (Pty) Ltd (Schenker) as to whether Schenker was liable to Fujistu for its loss suffered as a result of theft of its consignment of laptops in 2012 by an employee of Schenker. In terms of the agreement for freight forwarding services between Fujitsu and Schenker (Agreement), Schenker would collect, clear and carry Fujitsu’s goods and deliver them in accordance with Fujitsu’s instructions.

The Agreement incorporated clause 17 of the Standard Trading Terms and Conditions of the South African Association of Freight Forwarders (Standard Terms), in terms of which Schenker would not accept or deal in ‘high value goods’ except under special arrangements made with Fujitsu in writing in advance. The Agreement further provided that Fujitsu would not incur any liability in respect of such goods if such special arrangements had not been made.

In 2012, without having made these special arrangements, Fujitsu engaged Schenker for the dealing of high value goods. Schenker’s employee stole Fujitsu’s consignment, and Fujistu instituted proceedings in the High Court for the loss it had suffered as a result of the theft.

In the High Court, Schenker argued that it was not liable for Fujistu’s loss because the consignment stolen qualified as ‘high value goods’ for the purposes thereof. Accordingly, Schenker argued that Fujistu’s failure to make the required special arrangements excused Schenker from liability for the theft. Fujitsu, on the other hand, argued that the Agreement did not apply to intentional conduct, such as theft. The High Court rejected Schenker’s arguments and found that it was liable for Fujitsu’s loss, ordering Schenker to pay damages to Fujitsu. In the Supreme Court of Appeal, Schenker’s appeal was upheld with costs.

On appeal to the Constitutional Court, the parties led the same arguments, with the addition by Fujitsu that the exclusion of liability clause was contrary to public policy and, accordingly, that the Court should not enforce it.

The majority dismissed Fujitsu’s appeal, finding that the exclusion of liability clause was not against public policy. It held that is open to parties to an agreement of this sort to include an exclusion of liability clause of this kind, especially in circumstances where Fujitsu had options available to it to hold Schenker liable if it so wished. The Court found that, as the consignment qualified as ‘high value goods’ for the purposes of the Standard Terms and, further, had failed to make the requisite special arrangements, that Schenker was not liable.

The Court’s decision has notable implications for companies offering, and making use of, freight forwarding services. Companies offering these services may include clauses in their agreements with clients excluding liability for both negligent conduct (such as damage to consignments) and intentional conduct (such as theft). Companies making use of these services should be aware, however, of freight forwarders’ limitation of liability, where provided for, and be sure to make such ‘special arrangements’ where required in terms of these agreements ahead of causing freight forwarders to deal with consignments.

The Court’s decision may also have wider implications for limitation of liability clause in general, the implications of which may extend across industries. The Court adopted a purposive, common-sense approach to clause 17’s apparent limitation of liability only in circumstances of ‘negligent acts or omissions’, finding that Schenker could not have intended to exclude its liability for negligence, but not intentional acts.

Click here to read the judgment and here to read the Constitutional Court’s media summary.