Too Close for Comfort: a Constitutional Court Ruling in South Africa

Late last year, the Constitutional Court in South Africa had occasion to consider the enforceability of an exemption of liability clause in Fujitsu Services Core (Pty) Limited v Schenker South Africa (Pty) Limited (“Fujitsu”).

The hearing took place in November 2022 and the judgment was handed down in June 2023, with the Constitutional Court taking approximately eight months to deliberate the final award. The delay may have been attributable – at least partly – to the narrow 6/5 split between the majority and the minority, a split that is in direct contrast to the court’s recent decisions, which have largely been unanimous. 

In Fujitsu, Fujitsu Services Core (Pty) Ltd (“Fujitsu Services”) contracted with Schenker South Africa (Pty) Ltd (“Schenker”), for Schenker to provide logistics services for the import of various goods into South Africa for Fujitsu Services. The contract provided that special arrangements had to be made in writing for Schenker to deal with certain valuable goods. The specific exemption clause in question provided that if Fujitsu Services caused Schenker to handle or deal in these valuable goods without any arrangements in writing, Schenker would not incur any liability “whatsoever” in respect of those goods, “howsoever arising” and in particular, would incur no liability in respect of its negligent acts or omissions in respect of such goods.

Fujitsu Services delivered a consignment of laptops and accessories and engaged the services of Schenker to assist with the logistics and clearing of the consignment. Fujitsu Services did not make any special arrangements in writing for these services, and it so happened that a Schenker employee stole these goods.

In the High Court, Fujitsu Services instituted a delictual claim against Schenker on the basis that Schenker was vicariously liable for the loss occasioned by the theft. Schenker argued that the contract excluded liability. The High Court found in favour of Fujitsu Services on the basis that the theft was an act outside of the performance of the contract and that the exemption clause could not apply. On appeal, the Supreme Court of Appeal (SCA) held that the words “whatsoever” and “howsoever arising” were “sufficiently wide enough in their ordinary import to draw into the protective scope of the exemption the deliberate and intentional conduct of the employees of Schenker”. The SCA also relied on the decision of Goodman Brothers (Pty) Ltd v Rennies Group Ltd (“Goodman Brothers”), which concerned an exemption clause almost identical to the clause under consideration in Fujitsu.

After making its way through the High Court and the SCA, the Constitutional Court was faced with the question as to whether the exemption clause was contrary to public policy and unenforceable.

The minority’s views were, inter alia:

The majority, carrying the day, albeit by a slim margin, found, inter alia:

Fujitsu represents just one example in the recurring tug of war between the principle of pacta sunt servandaand the principle of fairness as derived from the Constitution. Although a fair amount of ink has been spilled in the figurative battle, in many ways, Fujitsu places us further away from resolution. The split in a largely harmonious court is a harbinger of things to come and the narrow avoidance of a potentially seismic shift in settled contractual principles is perhaps too close for comfort.

Whichever way the groundswell carries us, it is prudent for contracting parties to be aware that any onerous, one-sided, or potentially prejudicial terms may run the risk of offending public policy. Given that public policy, as a concept, is nebulous and contingent on subjective considerations, a pre-emptive exercise to scour contracts for offending terms will require extraordinary prescience and insight into the judiciary’s next moves. For the time being, clauses should be drafted as expressly and narrowly as circumstances allow, and if possible, with a crystal ball in hand.