Court allows appeal on contract interpretation, finding no gross negligence or wilful act in computer service provision.

THE SUPREME COURT

389/11

Hardiman J.

Fennelly J.

O’Donnell J.

McKechnie J.

MacMenamin J.

Between:

ICDL, GCC FOUNDATION, FZ-LLC,

AND

SHARIKAT TAKNIAYAT ALMAAREFA LIL TAALIM, AL MUTATWER, AL MOHADODA,

TRADING AS ICDL SAUDI ARABIA

PLAINTIFFS/RESPONDENTS

- AND -

THE EUROPEAN COMPUTER DRIVING LICENCE FOUNDATION LIMITED

DEFENDANT/APPELLANT

Judgment of Mr Justice O’Donnell delivered the 14th day of November 2012.

1 This is an appeal from an interlocutory ruling in a commercial court case in which Clarke J. in the High Court and Fennelly J. in this

court have delivered detailed judgments to the same effect. These judgments will control the future conduct of this litigation and

accordingly it is only necessary to express, as briefly as possible, my reasons for respectfully disagreeing with them on one of the

issues in the case. For that purpose, I gratefully adopt the account of the facts and the issues contained in the judgment of Fennelly

J. which, together with the judgment of Clarke J. in the High Court, sets out the full background to the matters now in dispute.

Approach to Interpretation of Contracts

2 I am in full agreement with the views expressed by Clarke J. in his judgment in the High Court that the judgment of Geoghegan J. in

the Supreme Court in Analog Devices BV v. Zurich Insurance Company [2005] 1 IR 274 represents the law in Ireland, approving as it

does the well known passage from the judgment of Lord Hoffman in Investors Compensation Scheme v. West Bromwich Building

Society [1998] 1 W.L.R. 896 in the House of Lords. I would respectfully endorse and adopt the statement by Lord Hoffman in full.

Paragraph 4 of that statement gives, in my view, helpful guidance in the approach to the interpretation of contracts. In particular it

seems to me that the following observation: “The meaning which a document (or any other utterance) would convey to a reasonable

man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning

of a document is what the parties using those words against the relevant background would reasonably have been understood to

mean”, is not only correct but is a useful corrective to a tendency of lawyers which can often lead to a misinterpretation of the

document. I also agree that the principle of interpretation, contra proferentem, may usefully be applied not just to exemption clauses

but to a contract in general but normally only as a last resort in the case of ambiguity and not as a general approach. As has been

observed, the purpose of the principle is to resolve ambiguity, not to create it. In this case, in my view, it is not necessary to have

resort to this principle to resolve the issues of interpretation.

The First Issue

3 The first issue was the central issue on the hearing of this appeal. Much of the argument focussed on the meaning of the last

sentence of clause 14.1 of the licence:

“The licensee shall obtain at its own expense all licences, permits and consents necessary for it to carry on its business in

the Designated Territory.”

The European Computer Driving Licence Foundation limited (“the Foundation”) sought to argue that this sentence was not limited to

licence permits and consented that the absence of a licence “would render the operation of the programme in Saudi Arabia unlawful”

as held by Clarke J.. Instead it was suggested that the clause had a broader meaning and covered agreements required to conduct

the business as a matter of commercial and practical, rather than legal, necessity. In this regard the Foundation pointed out that the

Technical and Vocational Training Corporation (“TVTC”) controlled approximately 68% of the market since it had its own training

centres and licensed private training centres. Thus the agreement, and on one view of the word, the consent of TVTC, was

necessary if the second named plaintiff (“TAM”) was to conduct its business which involved the provision of training in private

facilities including those controlled by TVTC. It was also argued that this interpretation was reinforced when the sentence was read in

the context of the clause as a whole. The first sentence of the clause provided that the exercise of the licence granted to the

licensee under the contract was, “subject to all applicable laws, enactments, regulations and other similar instruments in the

Designated Territory … and that the Licensee shall at all times be solely liable and responsible for such due observance and

performance.” Accordingly, the Foundation argued that if a licence permit or consent was required to render the business lawful, then

that obligation was already imposed upon the licensee pursuant to the first sentence since it was solely liable and responsible for due

observance and performance in accordance with the applicable laws. On this reading therefore, in to avoid the last sentence

becoming an unnecessary redundancy it was necessary to read the words licences, permits and in particular “consents” more broadly.

The reference to “its business” meant the business in which it was anticipated under the contract that the licensee would carry out.

In this case it was intended that the licensee would carry on business in the private sector and this indeed occurred. In order to do

so, the “consent” of TVTC was necessary for it to carry on that business. It did not have that consent. Accordingly the Foundation

was entitled to terminate the licence.

4 Skilfully put though this argument was, it seems to me, with respect, to be an example of the approach criticised by Lord Hoffman in

his judgment in the West Bromwich case. That is, it focuses too closely on the words and their possible dictionary definitions to the

exclusion of their meaning to be gleaned from the context in which they were expressed. First it appears to me that the words;

“licences”, “permits” and “consents” are to be read together. The principle noscitur a sociis is, I think, applicable. Therefore “consent”

is intended, in this context, to be akin to a permit or licence both of which connote a legal rather than a commercial or practical

requirement. The fact that “consent” has a somewhat broader connotation than “licence” or “permit” makes sense in this context

since, as pointed out by Clarke J., this form of contract was applicable in a number of very different territories and it would not be

possible to predict in advance the precise format of the necessary legal authorisation in any given state. Furthermore, the sentence

must be read as part of clause 14.1 as a whole. The clause undoubtedly deals with legal requirements and I see no reason to read the

second sentence as shifting the context to commercial or practical matters. If such a change of gear was intended then it might have

been expected that it would be the subject of a separate clause. In any event, I doubt very much that the clause should be read

with the degree of precision which the Foundation’s argument demands. There is no rule that if something is covered in one sentence

in a contract it cannot also be addressed in another. Contracts, like speech, often involve some degree of overlap and repetition.

Finally, I do not necessarily accept the premise on which this argument is based. It is not apparent to me that the sentences are

necessarily repetitive. Thus it appears that the first sentence requires the licensee to be liable for due observance and performance.

The second sentence makes it clear that any expenses incurred will be the liability of the licensee and in particular a licensee will not

be able to look to the licence holder for any contribution to, or liability for, such cost.

5 This brings us to the most difficult issue in the case, that is whether as a matter of the law of the Kingdom of Saudi Arabia (“KSA”)

it was necessary for the Dubai company or TAM to have the licence permit or consent from TVTC to operate the licence in KSA. I

fully agree with Clarke J. that this is both a difficult and delicate task. It involves the resolution of an issue of foreign law which

involved the Irish court in making a determination on evidence which was in stark conflict. That task is made all the more complex

where, as here, the legal system differs markedly from those systems with which a common law court is familiar. Once the foreign law

is ascertained and understood, there still remains the difficult task of attempting to apply that understanding to the concept of

“licence permits or consents” which is drawn from the common law world. This was a very difficult task and there was in my view, a

distinct lack of clarity about the respective contentions, but I can see no basis for interfering with the conclusion to which the trial

judge came. Accordingly I agree that the appeal on this point should be dismissed.

The Second and Third Issues

6 I agree with Fennelly J. that the agreement did not permit of partial termination and accordingly, that any such purported partial

termination was ineffective. I also agree with him that the question of whether the letter of the 9th of August, 2010, was sufficient

notice of termination does not appear to have been properly before the court as a distinct ground of appeal. Furthermore, I agree

with him that since the High Court judge was correct to hold the agreement had not been lawfully terminated on at least two bases,

it is unnecessary to address this issue. It follows that I agree that the judgment of the Court on liability should be upheld.

The Fourth Issue: Clause 25; Limitation of Liability

7 The trial judge made no finding on the question of whether the Foundation had been guilty of a “wilful act.” He considered

furthermore that “gross negligence” involved something more than simple negligence, which he defined as negligence of a significant

degree. He concluded that the Foundation had been guilty of such negligence, which could properly be described as gross negligence,

and therefore clause 25 did not avail the Foundation and limit its liability for damages to ten per cent of the total amount paid by the

licensee or €50,000 whichever was the lesser. In this court Fennelly J. has concluded that the trial judge was entitled to make this

finding of gross negligence and in any event, the action of the Foundation in serving the notice purporting to terminate the agreement

was a wilful act within the meaning of clause 25 and accordingly there was a further ground for holding that the clause 25 limitation

did not apply. While I recognise the force of the reasoning leading to this outcome, I regret that I am not able to agree with either

conclusion.

8 I have some doubts as to whether the issue of wilful act was properly before this court since the High Court judge made no finding

on the matter and the plaintiff did not serve any notice to vary. Indeed, the issue was only addressed in one paragraph of the

plaintiff/respondent submissions to this court. However since this is an interlocutory appeal in respect of a case which has still to be

disposed of in the High Court, it seems to me that it is preferable to resolve as many questions as possible so as to reduce the

matters which might be the subject of any further argument and appeal to this court. In any event, for reasons which I hope will

become apparent it think it is more helpful to address the issues of gross negligence and wilful act together since they form part of

the same phrase and in my view cast some helpful light upon each other.

9 The plaintiff contended in the High Court, and in this respect relying on respectable authority, that the term “gross negligence”

meant no more than negligence and in the vivid phrase of Lord Cranworth in Wilson v. Brett (1843) 11 M.&W. 113 at p.116 that “…I

could see no difference between negligence and gross negligence – that it was the same thing with a vituperative epithet”. It was

also argued that the words “wilful act” had similarly received judicial interpretation. Reliance was placed on the dictum of Bowen L.J.

in re Young and Hartson’s (1886) LR 31 Ch D 168 at pp.174 and 175 relating to a vendor and purchaser summons where he observed

that the phrase wilful default was commonly used in such contracts. He stated that:

“Default is a purely relative term, just like negligence. It means nothing more, nothing less, than not doing what is

reasonable under the circumstances- not doing something which you ought to do, having regard to the relations which

you occupy towards the other persons interested in the transaction. The other word which it is sought to define is

“wilful”. That is a word of familiar use in every branch of law, and although in some branches of the law it may have a

special meaning, it generally, as used in courts of law, implies nothing blameable, but merely that the person of whose

action or default the expression is used, is a free agent, and that what has been done arises from the spontaneous action

of his will. It amounts to nothing more than this, that he knows what he is doing, and intends to do what he is doing, and

is a free agent”.

On this basis it is argued that it was only necessary that the act alleged to found the cause of action was an intentional act in the

sense of being a voluntary one. It was not necessary that the person intend a breach of contract or a tort as the case may be.

10 By this process of reasoning it was contended that clause 25 was to be read as limiting any claim except where the claim arose

from the willed voluntary act of the other party, or from simple negligence. I confess that this is a form of reasoning which I find

wholly unconvincing. It is akin to the translation of a literary text by computer programme: the result rarely captures the sense of the

text, and often makes little sense. It seems to me that this is a form of the approach to interpretation by dictionary definition

compounded by judicial decision but leading to unintended results, which is the approach the courts both in this jurisdiction and in the

UK have rejected, correctly in my view, in recent years. No Irish case has been cited endorsing the interpretation of the words

contended for. If this phrase or its component parts had become terms of art or had been so sanctified by authority that it could be

said that both the drafter and the parties to the contract must have had a shared understanding of the meaning to be attributed to

the phrase, then I would agree that such an interpretation should be accepted even if strained or unnatural as a matter of English,

unless the contrary was clearly indicated. However, in the absence of such evidence or direct authority establishing the meaning

attributed, I do not think the court should adopt the approach of reading into the clause definitions used in a different time and

context, particularly when it leads to an outcome that in my view, makes little sense and therefore, is unlikely to have been intended

by the parties.

11 I observe that the phrases “gross negligence “and “wilful act” which have become the focus of attention in this case form part of

a clause headed “limitation of liability”. The structure of the clause therefore is to impose a general limit on the liability of the licensor

to which this clause creates an exception. I find it is an important starting point that the parties have plainly agreed to a general rule

of limitation of damages no matter how extensive such damages might be. But if the interpretation proposed by the plaintiff is correct,

then the exception almost swallows the general limitation. It is worth asking what, on the plaintiffs’ interpretation, is the subject of

the limitation on damages contained in clause 25.1. If all intentional acts are captured then only unintentional or accidental acts (or

possibly failure to act still giving rise to a cause of action) are captured by the limitation. But no plausible reason can be proffered for

making such a stark distinction. If the licensee does not have to intend to breach the contract then there is no difference in terms of

culpability of the licensee, or the damage capable of being done to the licensor, which would justify confining the licensee in one case

to very limited damages and in the other permitting unlimited damages. Furthermore, the scope of the limitation in clause 25.1 is

further cut down when it is recognised that any such failure to act or unintentional act (which would not be a wilful act) might readily

be characterised as negligence, and therefore, per Lord Cranworth, gross negligence. Indeed it would not be difficult for a competent

drafter to characterise a failure to act as itself (if intentional) as a wilful act. Since the only acts captured by clause 25 are those

which give rise to a cause of action (which by definition must be a valid cause of action since clause 25 will only apply to limit the

damages to which the other party would otherwise be entitled), then it is difficult to conceive of the circumstances in which

inadvertence could not be characterised as negligence.

12 Not only is it surprising and implausible that the parties would have intended such a narrow scope to the limitation of damages in

clause 25.1, but it is difficult to reconcile that interpretation with a reading of clause 25 as a whole. Clause 25.2 provides for a very

wide ranging limitation of liability so that neither party will be liable for “incidental, indirect or consequential damages, including but

not limited to loss of profits.” The limitation contained in clause 25.2 is undoubtedly a broad one. For example, it applies to limit

damages both where clause 25.1 is engaged, and damages are otherwise limited to €50,000 (or 10% of receipts) and where the

exception applies, and there has been a finding of wilful act or gross negligence. It is clear therefore that the parties were willing to

agree to a severe restriction on any claim for damages. This in turn suggests that clause 25.1 should not be interpreted as

restrictively as the plaintiffs suggest. Indeed the correct approach to clause 25 in my view is that the parties had agreed that other

than in exceptional circumstances any claim for damages would be limited first by a monetary cap and second, by a restriction to a

claim for losses other than consequential losses including losses of profit. The interpretation proffered by the plaintiff would subvert

this understanding since it would make the exception so extensive that it removes almost everything from the general limitation

contained in clause 25.1. It is difficult to imagine a rationale for such narrow limitation in the particular context of this contract, and

hard to understand why, if such an outcome was intended, it was sought to be achieved in such a circuitous way.

13 Another relevant aspect of the matrix of facts against which the clause is to be interpreted is the circumstances in which the

clause is introduced into the contract. Where in consumer contracts there is inequality of bargaining power, a contract of adhesion

and an exemption clause which operates almost to remove any substance from the contract itself, then the law is justified, in my

view, in adopting a very strict and approach to the interpretation of the limitation clause. However, in other circumstances the

limitation may be simply an essential part of the bargain made by the parties defining the extent of the obligations being undertaken

by each party, allowing them to enter the contract and this is often reflected in the consideration for the contract. Thus promoters

of particularly risky activities may simply not be able to offer the service at any reasonable cost to willing consumers without some

guaranteed limitation of liability being accepted by the consumer. Otherwise, no fees chargeable would be sufficient to pay any

necessary insurance premium (if insurance were available) let alone cover any possible claim for damages. The same principle applies

where there is a significant disparity between the cost of the activity and the potential profit that the other party may make, and

therefore lose if there is found to be a breach of the contract. Here it is a significant background fact that the Foundation is not a for

profit company limited by guarantee and the object of which is to promote the European Computer Driving Licence (“ECDL”) concept

which has been a very successful qualification. The Foundation is not organised for commercial gain and accordingly does not set its

fees to maximise the amount it can recover from any individual operator of the concept in any different territory. It seeks instead the

broadest spread of the concept. However, the licence granted does carry the possibility of exploitation by a licensee for considerable

profit. It is obvious therefore why the Foundation would seek to limit its liability to licensees. If it did not do so, it would, at a

minimum, have to set fees much higher to cover potential liabilities. That however would deter prospective licensees, and thus reduce

the potential spread of the ECDL. Accordingly, the deal offered by the Foundation is to make the ECDL product available at a limited

cost in return for inter alia, a limitation on its exposure to future claims by licensees. Once again, this suggests the limitation should

not be given a narrow almost non existent interpretation suggested by the plaintiffs since to do so might significantly alter the

bargaining between the parties.

Gross Negligence

14 It is in this context, factual, structural and textual, that the particular words of the clause should be interpreted. I fully agree with

Clarke J. that the term “gross negligence” must mean something more than mere negligence. But I do not agree that it means simply

“negligence to a significant degree”. “Gross” even after its mass 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, “to a significant degree”, is much more elastic. “Significant” is often used in the double negative formulation “not

insignificant.” I do not think that anyone would, in normal language, equate gross negligence with negligence which was not

insignificant. While it might be said that any act of gross negligence is significant (or not insignificant) the contrary does not in my

view, hold true.

15 I also respectfully disagree with the trial judge’s approach that this assessment should be made in the context of the facts of the

case and not, as he put it, “in the abstract”. On the contrary, and in particular since the words in this clause are to be found in

numerous other contracts applying in different countries and different factual circumstances, the appropriate course in my view is to

seek, so far as possible, to separate the legal question of the interpretation of the words used in the contract from the question of

whether the facts found reach that standard. It is necessary to attempt to arrive at an understanding of what the parties agreed to

when they entered this contract and provided for limitation of liability other than in a case of gross negligence. That exercise must be

approached, so far as is possible, by looking at the terms used against the factual matrix at the time the contract was made and

without regard to the dispute which subsequently emerged. There is a real risk when the bar is set at the same time as or after the

competitor has jumped, or when a pass mark is set after the examination has been marked. It is easy for the question posed to

collapse into, and be substituted by, what may be the more congenial question as to whether the plaintiff should succeed. In

circumstances where this issue only comes to be determined after there has been a finding of a breach and the possibility of loss

caused exceeding the limitation period, substitution of such a question will inevitably favour the plaintiff.

16 In assessing and considering the question what is meant by gross negligence, the judgment which I have found most useful, is

that of Mance J. (as he then was) in the Hellespont Ardent Red Sea Tankers Ltd v. Papachristidis (1997) 2 Lloyd's. Rep. 547 at p.586,

and the decisions of the New York courts there reviewed. At p.587 of the report Mance J. stated:

“Whether one looks to the authorities decided and the principles identified in the context of New York public policy [being

the general law of New York which prohibited exclusions of liability for gross negligence] or to the simple meaning of the

words without attributing to them any special meaning under New York law at all, the concepts of "gross negligence" here

appears to me to embrace serious negligence amounting to reckless disregard, without any necessary implication of

consciousness of the high degree of risk or the likely consequences of the conduct on the part of the person acting or

omitting to act.

If the matter is viewed according to purely English principles of construction, I would reach the same conclusion. “Gross”

negligence is clearly intended to represent something more fundamental than failure to exercise proper skill and/or care

constituting negligence. But, as a matter of ordinary language and general impression, the concept of gross negligence

seems to be capable of embracing not only conduct undertaken with actual appreciation of the risks involved, but also

serious disregard of or indifference to an obvious risk….

As to authority, I was not referred to the criminal field, where “gross negligence” features in the law of manslaughter. In

essence, the position there is that a breach of duty of care will amount to manslaughter if its seriousness in all the

circumstances is such that a jury considers that it should be characterised as a crime. See R v. Adamoko [1995] 1 A.C.

171. The analogy in the civil field would be to explain gross negligence as conduct so seriously negligent that the

defendant should not be entitled to rely on the exemption clause. The test involves an element of circularity, but Lord

Mackay in Adamoko said it was “necessarily a question of degree, and an attempt to specify that degree more closely is

… extra likely to achieve only a spurious precision.” Although, in the present context, the question cannot be left to a jury

and it will be necessary to attempt to identify and evaluate various factors bearing on the decision, the question whether

any negligence in the present case was “gross” appears to me ultimately still very much a matter of degree and

judgment.”

The court also found particular assistance in the case of Shawinigan v. Vokins [1961] 3 All E.R. 396, (which in my view is also helpful

here) where Megaw J. stated at p.403:

“ In my view ‘recklessly’ means grossly careless. Recklessness is gross carelessness – the doing of something which in fact

involves a risk, whether the doer realises it or not; and the risk being such, having regard to all the circumstances, that

the taking of that risk would be described in ordinary parlance as ’reckless’.”

At p. 618 of Hellespont Ardent Mance J. concluded:

“The question is, as the end of the day, a jury question, but it arises in the context of a clause which makes it clear that

it is only in certain exceptional cases that immunity from suit is lost. The present case, although it reveals significant

misjudgements and shortcomings in approach and in observance of proper standards in relation to Ardent, does not in my

view involve negligence of so grave a nature as to fall outside the intended sphere of immunity.”

While I would not wish to place decisive emphasis on any individual linguistic formulation, it is I think noteworthy that “significant

misjudgments and shortcomings in approach and in observance of proper standards” which Mance J. considered would not amount to

gross negligence, is something clearly capable of being described as “negligence to a significant degree.” I also agree with the

observations of Smith J. in Camerata Property Inc. v. Credit Suisse Securities [2011] E.W.H.C. 479 (Comm) at paragraph 161:

“I cannot accept the parties intended [the reference] to connote mere negligence… I accept that the distinction between

gross negligence and mere negligence is one of degree and not of kind: see Armitage v. Nurse [1998] Ch 241 at p.254C/D

per Millett LJ. As such, it is not easy to define or even to describe with any precision. However as Mance J. recognised in

Red Sea Tankards Ltd. v Papachristidis (The “Ardent”) [1997] 2 Lloyd’s Report 547, 586 ‘If the matter is viewed according

to purely English principles of construction,…“Gross” negligence is clearly intended to represent something more

fundamental than failure to exercise proper skill and/or care constituting negligence,’…”

Accordingly I would consider that the concept of gross negligence in the context of this contract is best understood as something

flagrantly and conspicuously wrong , and conduct undertaken with actual appreciation of the risks involved, or in serious disregard of ,

or with indifference to an obvious risk, akin to recklessness. It seems obvious to me that the risk in question in this context must be

to a breach of contract giving rise to a claim for damages .

17 The fact that I consider the formulation “to a significant degree” as an unduly broad definition of gross negligence does not in any

way resolve this matter. Since this is a matter of degree and judgment, it is necessary to consider whether the facts of the case

satisfy the test of gross negligence set out above, all the more so because the trial judge’s definition is clearly capable of

encompassing conduct which would constitute gross negligence as so defined . I also agree with the trial judge that it is difficult to

apply the concept of negligence in the context of an allegation of breach of contract. The concept of negligence itself 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 question of due

performance of the contract is one to which care or lack of it is normally irrelevant. The contract defines the conduct which is

expected from each party. Since a contract will not normally require any standard of care from the contracting parties it is difficult to

speak in terms of assessing any conduct as negligence, still less gross negligence, in some general way. As set out above, I consider

that the concept must be applied in the context of gross negligence in relation to the breach alleged and the possibility of substantial

damages flowing therefrom. This indeed is something which in my view may be relevant to the overall interpretation of the clause and

the fact that this approach may avoid or reduce the difficulty of considering negligence in the abstract is a further pointer in the

interpretation of the term.

18 For my part I do not think it is particularly relevant that it can be said that the Foundation had “in effect” done a deal with TVTC

at a time when the legal relationship between the Foundation and the Dubai company remained in full force. There is nothing in the

contract which precluded the Foundation from discussing any matters with the TVTC and it was obviously very much in its practical

and commercial interests to do so. Had the Foundation been entitled to terminate the contract there could have been no objection to

it discussing the matter with TVTC or doing a deal, effective or otherwise, with it. Similarly, if the contract with the Dubai company

was due to expire there could be no objection to the Foundation discussing future arrangements with the TVTC however much that

might offend the plaintiffs. Accordingly I do not see how any duty of care to avoid a discussion with TVTC while the licence remained

in force could be said to arise and it follows that I respectfully cannot agree that it was negligence, still less gross negligence to

“effectively” do a deal with TVTC. For the same reasons I cannot see that it was negligent or still less grossly negligent to keep TVTC

informed of the steps it had taken even if it were possible to say that it removed any realistic possibility of resolution of the dispute

within TAM and TVTC. Looked at with the cool wisdom of hindsight, the Foundation might well have been more astute, not to say

cunning, in its dealings with the parties who were clearly involved in a complex dispute by reference to laws, customs and practices

which were only dimly and imperfectly discernible from the perspective of the Foundation. But the fact that if the Foundation had

played its hand very skilfully it might have procured an agreement between TAM and TVTC cannot amount to negligence, unless it

can be said that it was under some sort of duty to do so. This approach in any event seems to me to implicitly suggest that somehow

the Foundation was obliged to take TAM’s side in its dispute with TVTC, and does not give sufficient weight to the difficulty facing

the Foundation which on any view was that TAM had now got itself into a position where it had antagonised a body which

undisputedly controlled 68% of the market for the ECDL product in a very important territory.

19 The last two points relied upon by the plaintiffs can, I think, be taken together and are more difficult. It is asserted that it was

grossly negligent of the Foundation to proceed to purport to terminate the contract in circumstances where, what was described as

at least a credible view, had been presented that TVTC’s view of its licensing powers was incorrect. This refers to the fact that on

the 2nd March, 2010, the Foundation had received correspondence from a London firm of solicitors, Squires Saunders, to the effect

that TVTC’s view of its powers was contested by a Saudi law firm. It is quite correct that the response of the Foundation was not to

seek advice of its own but to take the view, as stated in the letter of response by Messrs A&L Goodbody of the 5th March, 2010,

that the Foundation was “…entitled to rely upon the statements of law provided by a Government authority in the jurisdiction …”. I

have no doubt that seen in hindsight it was undoubtedly foolish of the Foundation to seek to terminate the plaintiffs contract without

obtaining its own Saudi law advice, or at least an indemnity from TVTC (although there would still an interesting question as to

whether although the Foundation would undoubtedly have acted carefully in obtaining the indemnity. That would mean that it would

able to rely on clause 25.1 if it wrongfully terminated the contact). I would also be prepared to accept that in a straightforward case

it would be negligent, and probably grossly negligent, for a party contemplating the termination of the contract on grounds that were

contested, to fail to seek legal advice on the lawfulness of any purported termination, and all the more so if such advice would have

been unequivocal. However on any view, this was not a straightforward case. Indeed the question on which advice would have to be

sought, the entitlement of TVTC to licence TAM, is undoubtedly the most difficult aspect of this case shrouded as it is in the

complexity of seeking to understand from the perspective of an Irish court, the Saudi legal structure and the place of TVTC therein. I

am therefore influenced by the fact that the sharp difference of opinion in this case, even after a period for reflection and

consideration, demonstrates fairly clearly that had advice been sought, it is very unlikely that it would have been clear cut, still less

that it would have confirmed the view put forward on behalf of the plaintiffs.

20 Furthermore, it is particularly significant that in their responding letter of the 5th of March Messrs A&L Goodbody expressly sought

sight of the legal opinion relied upon. The response of Messrs Squires Saunders on the 11th March, 2010, was decidedly curious. It

stated merely that “Our client does not agree with the statement of law provided by TVTC and has engaged counsel to take the

matter up directly with TVTC.” The letter did not expressly deal with the request to provide a copy of the opinion and seemed to

avoid it. Instead it attached “a copy of TVTC’s letter to our client dated 13th February 2010 together with our client’s Saudi Arabian

lawyers response dated the 11th March 2010.” The letter from the Saudi Arabian lawyers to TVTC contained a statement that “we

would like to reassure you [TVTC] that our client, ICDL Arabia, is complying with all laws and regulations applicable in the Kingdom of

Saudi Arabia and with all contracts related with governmental or private authorities”, and simply requesting that TVTC explain its

contention that ICDL was in breach of its agreement and was practising without a legal permit. This falls far short of a formal legal

opinion that TVTC had no legal power to licence either TAM or the program. Indeed a formal opinion was only provided after repeated

requests and six months later in late August, and after the letter from A&L Goodbody’s of the 19th August, 2010, which the court

found was a formal notification of termination. Furthermore, it was accepted in evidence that the plaintiff had never stated to TVTC

in writing that they disputed the authority of TVTC. The letter of the Saudi Arabian law firm referred to, rather than disputing the

authority of TVTC, requested that TVTC clarify what activities were practised by ICDL without a permit. It is also significant, that it

appears that the plaintiff took no step to have the matter determined in the Saudi Arabian courts. Finally, when the opinion came to

hand with the letter of late August, 2010, it is clear that it was based upon an understanding which was not consistent with the

evidence, or indeed with the basis upon which the trial judge for his part concluded with obvious difficulty that a licence from TVTC

was not required. The position was therefore very far removed from the clear cut situation where a legal opinion is provided by one

side, and legal advice though readily available, is not sought by the other. I accept that this is perhaps a difficult issue of judgment,

but particularly in circumstances where I am not at all convinced that any request for legal opinion would have provided any clear

advice that TAM was not operating unlawfully. I would conclude, adopting the language of Mance J., that although there were indeed

significant misjudgments and shortcomings, this is not such an exceptional case involving negligence of such grave a nature as to fall

outside the intended sphere of immunity. Finally, in this regard I should say that I do not think that it is sufficient to conclude, if this

were the case, that the learned trial judge was entitled to find the Foundation guilty of gross negligence. It appears to me that this is

essentially an issue of law for this court to decide: on the facts found, was the Foundation guilty of gross negligence? In my view, it

was not.

Wilful Act

21 It is therefore necessary to consider the question of “wilful act.” It is for my part significant that the trial judge did not come to

any conclusion on this ground. The first issue is to consider what was meant by the parties in adopting this phrase. The essential

question here is whether the term “wilful act” means no more than “intentional” in the sense that the act was voluntary. In particular,

if the intention does not relate in any way to the breach of contract but merely to the act alleged to be such a breach, then it will,

as Fennelly J. observes, be axiomatic that the purported termination that gave rise to the cause of action at least in specific

performance was intentional and therefore a wilful act. Unfortunately I cannot agree with this approach precisely because in most, if

not all cases it would lead to the automatic disapplication of the limitation clause.

22 As already touched on above, such an interpretation would make little sense of the clause. Prima facie as observed by Mance J. in

The Hellespont Ardent, the apparent intention of the clause is to provide for a general limitation on the liability save in exceptional

circumstances. However, if wilful act is to be interpreted as meaning no more than the act giving rise to the cause of action is

intentional, then the vast majority of potential breaches of contract (and other causes of action) will fall within the exception, and

very little if anything, will fall within the general clause. If “wilful act” means no more than “intentional act,” then the only thing not

covered by that provision would be inadvertent or accidental or unintended acts and possibly failure to act, although even then, if a

person deliberately intended to act for some reason giving rise to a cause of action, it would not take much imagination to see that it

could be plausibly argued to be a wilful act. It is difficult to conceive of the scope of inadvertent or accidental actions (as opposed to

actions giving rise to inadvertent or accidental breaches) but if such matters can be conceived of their scope is significantly narrowed

when the clause is read as it must be in conjunction with the limitation as to gross negligence. Furthermore, even if assuming for the

moment that there is a realistic distinction in fact between intentional acts and other types of acts which can give rise to a cause of

action, it is difficult to conceive of any sensible reason why the parties would wish to make such a distinction. Once the act is shorn

of any intention to breach the contract (or knowledge of the possible consequences), there is no sufficient distinction in logic or

morality between an intentional act giving rise to an unintended breach of contract, or other wrong, and an accidental act giving rise

to the same consequence, and consequently no reason for the parties to severely limit damages in one case and not the other.

Accordingly, it is for me a serious difficulty with the interpretation advanced by the plaintiffs, that it offers no sensible distinction

between those acts captured by the general limitation clause, and those subject to the exception.

23 Here, a consideration of the phrase “wilful act or gross negligence” as a whole may be of some assistance. Once it is accepted

that gross negligence is a concept different from mere negligence, then it also becomes clear that the distinction made is one of

culpability. It is clearly more reprehensible to be guilty of gross negligence which is a flagrant or obvious breach, than mere

negligence. One might expect therefore that the same distinction is being made in introducing the concept of a wilful act, and that

what is conceived of is, and exceptionally, that the licensor may be guilty of conduct sufficiently reprehensible to justify this

application of the limitation on damages which would otherwise apply

24 It is of course the case that when viewed in isolation, the words “wilful act” can be understood as meaning no more than

intentional, voluntary, or willed, and not automatic, inadvertent or accidental. But those words have to be viewed in the context in

which they are used. It also carries a connotation of self-will, perversity, and being headstrong and even obstinate. Furthermore, it is

not merely a “wilful act” which is required to disapply the limitation contained in clause 25.1: it must be a wilful act which gives rise

(“causes” in the language of the clause) to a cause of action. The act in its wilful or intentional nature cannot be separated from the

cause of action, in this case an alleged breach of contract. It is in my view clear, that what must be intended, or willed or be the

subject of obstinacy, is a breach of contract (or other wrong giving rise to a cause of action arising out of the contract). This is not

only consistent with what I consider to be the natural meaning of the words, but also the structure of the clause, and with the

limitation in clause 25.1 being disapplied only in exceptional circumstances. The line which is drawn is a logical one and furthermore

consistent with the distinction being made in the context of gross negligence. In this way there is a continuum of the type of conduct

which will lead to the limitation clause not being applied. This conduct runs from intentional breach, through headstrong conduct,

recklessness and gross negligence. In each case the conduct must relate to the possibility of a breach of contract. In this way the

clause is being read as a consistent and coherent whole, rather than by reference to dictionary, or judicial, definitions of individual

words. It will also be recalled that one of the difficulties with approaching the clause and looking at its individual components, is that

the concept of negligence is difficult to apply, and almost illogical, in the absence of a duty of care. Negligence, as Fennelly J.

observed in Glencar v. Mayo County Council [2002] 1 I.R. 84 at p.155, does not exist in the abstract: “…the failure to exercise due

care can only be established by reference to a recognised duty.” However, if gross negligence is as Megaw J. suggested in

Shawinigan v. Vokins akin to recklessness in a sense that as he said “recklessness is gross carelessness” it becomes more

understandable. The negligence, gross carelessness, or recklessness, is to be understood in connection with the acts giving rise to

the cause of action. Thus, in the case of a breach of contract, which is after all the most obvious cause of action likely to arise in

connection with the contract, clause 25 will normally impose a limitation of €50,000 or ten percent of revenue, whichever is lower,

unless the licensor has deliberately breached the contract or has been grossly careless as to whether his contract was a breach of

contract or not. This appears to me to be consistent with the contract as a whole. Furthermore, in the particular context of this

case, it appears to be that the words of Mance J. in the Hellispont Ardent are equally applicable here. The evidence reveals

significant misjudgements, shortcomings and errors, but it does not in my view involve a deliberate or obstinate breach, or negligence

so grave so as to fall outside the intended sphere of immunity.

25 It remains to consider however, whether this interpretation of the words “wilful act” is precluded by authority. In this regard the

plaintiff has relied on a number of cases. Perhaps the most important of these is in re Young and Hartson’s (1886) LR 31 Ch D 168

which was a vendor and purchaser summons. The dictum of Bowen L.J. in the Court of Appeal has already been set out at paragraph

7 above. In my view, there is no reason to read that judgment as compelling an interpretation of the relevant conduct here, namely

wilful act giving rise to a cause of action as merely that the person is a free agent and that what has been done arises from the

spontaneous action of his will. There is a certain irony in this citation of what is merely a dictum in the judgment of Bowen LJ, as

somehow setting in stone the understanding of the word wilful even when used in a different textual and legal context since the

passage quoted is immediately preceded by an express disavowal of the benefits of using one decision to define the meaning of the

word for all future cases: At p.174 of the report he said:

“The term “wilful default” – though one in common use in such contracts – is not a terms of art, and to pursue authorities

with a view to defining for all time what is its meaning in a contract like this appears to me to press citation far beyond

the point at which it ceases to be useful. Default is purely relative term, just like negligence.”

The other authority relied on was Wheeler v. New Merton Board Mills Ltd [1933] 2 K.B. 669. There a young workman had been

seriously injured in an industrial accident when, clearing out a machine, his arm was cut off between the elbow and the wrist. Section

29 of the Workman’s Compensation Act, 1925, provided that the employer should not be liable in any proceedings “except in case of

such personal negligence or wilful act as aforesaid.” The evidence showed that although there was negligence, it was the negligence

of the foreman. At this time, contributory negligence, the defence of volenti non fit injuria and the defence of common employment,

were all hurdles which a plaintiff had to surmount if he was to be successful. Negligence of an employer was not enough and

negligence of a co- employee was positively fatal to a claim against the employer. In such circumstances only the possibility of proof

of “wilful act” offered the opportunity of recovering against the employer. At first instance, Talbot J. at pp.677 and 678 said of the

concept “wilful act”:

“It is true that though ’wilful’ and ’intentional’ are synonymous … ’wilful’ is more commonly used in modern speech of bad

conduct or actions than of good, though it does not necessarily connote blame (see per Bowen L.J. in re Young and

Hartson’s contract); but that is far from supporting the strange contention that wilful act in s.29, sub-s.,1 must be

confined to something done with intent to injure.”

In consequence, the court was prepared to conclude that the provision of a dangerous machine with the intention that it should be

used by the company’s workmen was more properly described as an act than as negligence. To the modern eye I think this would

more naturally fall to be considered negligence than as a deliberate or intentional act, and perhaps outside the constraints of the law

as it stood in 1933 it might have been so understood That only illustrates the fact that this is a decision which must be understood in

its time, and particular legal context. Accordingly, I do not think it provides any useful guidance to the interpretation of a modern

contract for the provision of computer services. Accordingly, I would conclude that the limitation provision in clause 25.1 applies and

that the Foundation was not guilty of either gross negligence or wilful act and accordingly, for my part, I would allow the appeal on

this point.