High Court Applies Contractual Cap On Liability Only After Reducing Damages For Contributory Negligence

In a recent case, the High Court has clarified the correct approach to reducing damages in order to reflect a finding of contributory negligence where there is also a contractual cap on liability: Natixis SA v Marex Financial and Access World Logistics (Singapore) Pte Ltd [2019] EWHC 3163.

The defendant argued that the court should apply the contractual cap first, and then make the reduction for contributory negligence. The court disagreed, holding that the reduction for contributory negligence had to be applied to the total amount of the damage suffered and not to the capped amount.

The court's decision will be welcome to claimants as it will often result in a higher award of damages than if the defendant's preferred approach were adopted. It is also consistent with previous authority in the context of the application of the so-called SAAMCO cap (which operates to limit a defendant's liability in negligence to those losses which fall within the scope of the duty of care). The court referred to the decision in Platform Home Loans Ltd v Oyston Shipways Ltd [2000] 2 AC 190, in which the House of Lords held that a reduction for contributory negligence had to be applied before considering the application of the SAAMCO cap, rather than resulting in a further reduction of the capped figure.

The decision also illustrates the court's typical approach to awarding costs where allegations of fraud are abandoned at a very late stage. In this case, the court found that the defendant's costs of responding to the fraud allegations should be paid on an indemnity basis.

Harriet Tolkien, an associate in our disputes team, considers the decision further below.

Background

In a previous judgment in this case ([2019] EWHC 2549 (Comm)), Mr Justice Bryan held that a bank, Natixis, was entitled to damages from a commodities broker, Marex, for breach of five purchase contracts. Under the contracts, Marex had agreed to sell Natixis nickel, which was stored at the warehouses of a third party, Access World. The court found that Marex had provided Natixis with forged warehouse receipts and Natixis was therefore entitled to recover damages of approximately US$ 32 million.

Marex brought a Part 20 claim against Access World alleging both negligence and fraud, but the fraud allegations were withdrawn at a very late stage.

Bryan J held that Access World was liable to Marex in negligence because one of its employees had verified that some of the warehouse receipts...