Ailsa Craig Fishing Ltd v Malvern Fishing

Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd [1983] 1 WLR 964

Difference in interpretation of limitation and exclusion clauses

Facts

The claimant kept their vessels in a harbour, which was guarded under an agreement requiring the defendant to protect the vessels in the harbour, including the claimant’s vessels. Due to negligence on the part of the defendant, one of the claimant’s vessels was hit by another and subsequently sunk. The relevant agreement covering the security services rendered also included a clause which capped the potential liability of the defendant at £1000 per claim or £12 000 per anum, unless the damage being claimed for was caused by theft or by fire. This included negligence or breach of contract.

Issues

The issue in this case was the validity of the clause in question to limit damage, particularly in cases of negligence and near total breach of contract as was the case here (since the defendant failed to perform their part of the contract).

Decision/Outcome

The court held that the clause was not an exclusion clause but a limitation clause and that it was valid. It was observed that the courts are less hostile to such clauses than they are to exclusion clauses, and therefore make less effort to interpret them in ways which strain the language of the clause in order to achieve a measure of justice.

“One must not strive to create ambiguities by strained construction, as I think the appellants have striven to do. The relevant words must be given, if possible, their natural, plain meaning. Clauses of limitation are not regarded by the courts with the same hostility as clauses of exclusion.” (Lord Wilberforce)