The High Court decision was reported in Commercial Bulletin 80.
ECDLF, an Irish company, granted ICDL a licence of a computer training package in Saudi Arabia. The licence contained an obligation on ICDL to obtain all licences etc necessary to carry on its business in Saudi Arabia. The ECDLF's liability was limited to €50,000, except for damage caused by "a wilful act or gross negligence".
The Saudi governmental body responsible for vocational training, TVTC, wished to take over much of the training from ICDL. It entered into negotiations directly with ECDLF. Eventually, TVTC told the sub licensee in Saudi Arabia to stop providing training, saying that it was no longer lawful for it to do so – contrary to advice from a local firm shown to ECDLF. Nonetheless, ECDLF terminated the licence and began to contract with TVTC. This led to litigation in Saudi Arabia and Ireland. The High Court in Ireland had to decide whether ICDL was in breach of contract in failing to get the necessary permissions in Saudi Arabia and, if it was not, whether ECDLF's behaviour amounted to gross negligence.
The High Court of Ireland held that "gross negligence" meant "a degree of negligence where whatever duty of care may be involved has not been met by a significant margin". On the facts, the actions of ECDLF did amount to gross negligence and so its liability was not capped. ECDLF appealed.
The Supreme Court of Ireland upheld the High Court's decision:
- It agreed that gross negligence involved "a significant degree of carelessness". A difficulty here was that this was a contractual claim, where there is no duty of care. ICDL had to prove that "the negligence amounted to a significant degree to a breach of the party's duty to the other party under the contract." On the facts the court found this proven.
- The court also looked at "wilful act", something which the High Court had not focused on. The authorities showed that, for an act to be wilful, it should be done deliberately. It was not necessary that it be committed with the intention to injure or that the person who committed it knew that it was unlawful. On the evidence, the Supreme Court considered that ECDLF had committed a wilful act.
- Mr Justice O'Donnell gave a dissenting judgment:
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- He considered the phrase "wilful act or gross negligence" as a whole. It was clear that the distinction made was one of culpability. The wilful act must give rise to a cause of action. What must be intended is a breach of contract. The parties had clearly agreed a limitation of liability that would apply other than in exceptional circumstances. He read the phrase as meaning, therefore, that the limitation of €50,000 would apply unless the licensor had deliberately breached the contract or had been grossly careless as to whether its conduct was in breach of contract or not. In his view the evidence revealed significant misjudgements and shortcomings, but did not involve a deliberate or obstinate breach or negligence so grave as to fall outside the intended sphere of immunity. It was relevant that ECDLF was a not-for-profit organisation, so it did not set its fees to maximise gain - limited fees for limited exposure.
- "Gross negligence" did not mean simply "negligence to a significant degree". ""Gross" even after its appropriation by teenagers across the world is not some pallid or superfluous adjective. It seems to me to convey the sense of something flagrant, clear or obvious and perhaps offensively so". The concept of negligence comports a duty of care, and the mere existence of a contract does not give rise to a duty of care on either side. The contract defines the conduct which is expected. Since a contract does not normally require any standard of care, it is difficult to speak in terms of assessing any conduct as negligence, still less gross negligence. He considered the concept must be applied in the context of gross negligence in relation to the breach alleged and the possibility of substantial damages flowing from it.
- "Wilful act" clearly meant more than "intentional" in the sense that the act was voluntary – otherwise, as most acts are voluntary, the exclusion clause would apply only to inadvertent acts and this cannot have been intended by the parties. There must be a deliberate and obstinate breach.
Comments. The discussions on the terms "gross negligence" and "wilful act" are useful, but the case (inevitably) involved consideration of the meaning of phrases in a particular contract and the judges held differing views. The result is that we are probably not much closer in knowing what the terms mean. Given the focus which the dissenting Mr Justice O'Donnell placed on commercial purpose and the fact that exclusion clauses are, as he said, generally intended to exclude all but the worst behaviour, it may be that his reasoning will be that adopted by the English courts in future. Note the point made by the judges that use of "negligence" or "gross negligence" in relation to contractual terms is often inappropriate and difficult to apply.
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