Professional Liability Guide

CHAPTER 2 – CONTRACTUAL INDEMNITIES AND LIMITATIONS

In short, the indemnity was found to be sufficient to reduce the hiring agency’s liability to 0%, even in circumstances where its operator had been the primary tortfeasor.

Contractual limitations Another common method to limit exposure to liability is to use temporal or monetary limitation clauses either to limit the time in which a claim can be made or to cap exposure to that claim. In construing such clauses, a court will apply the test from Darlington Futures Limited v Delco Australia Pty Ltd , 161 which requires a limitation clause to be determined by giving the words their: ‘… natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract and, where appropriate, construing the clause contra proferentum in the case of ambiguity.’ 162 Temporal limitations are a common and often effective way for contracting parties to place limits on the time in which a claim may be brought, altering the ordinary six-year statutory limitation applicable to claims in contract and tort. ‘The relevant law as to the enforceability of a time limitation clause, in my opinion, is not in doubt and needs no detailed exploration. The decision in Suisse Atlantique Société d’Armement Maritime S.A. v. N. V. Rotterdamsche Kolen Centrale indicates, in my opinion, that whilst exemption clauses which, for present purposes, can be assumed to include a time limitation such as cl 17, should be construed strictly, they are of course enforceable according to their terms unless their application according to those terms should lead to an absurdity or defeat the main object of the contract or, for some other reason, justify the cutting down of their scope.’ 163 In Owners SP 62930 v Kell and Rigby Pty Ltd, the New South Wales Supreme Court considered the terms of a retainer between a building owner and an engineering firm, which contained the following temporal limitation: ‘The Consulting Engineer shall be deemed to have been discharged from all liability in respect of the Services, whether under the law of contract, tort or otherwise, at the expiration of the period specified in Item 10 of the Schedule or if no date is specified on the expiration of one year from the completion of the Services, and the Client shall not be entitled to commence any action or claim whatsoever against the Consulting Engineer in respect of the Services after that date.’ 164 The period specified in Item 10 of the Schedule in that instance was two years. The retainer in that case also included a monetary limitation of $5 million, but that was not the focus of the case. In Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd , Barwick CJ said that:

The Court (having determined that the claim against the engineers triggered the indemnity) observed – while upholding the indemnity as a bar to the claim against the engineers – that:

161 (1986) 161 CLR 500. 162 Ibid 510.

163 (1978) 139 CLR 231, 238. 164 [2009] NSWSC 1342 [9].

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