Scottish Court of Session Decisions

The defenders are a delivery company which offers to customers a delivery system for domestic, European and other destinations. In July 1997 they offered a portfolio of services including a "UPS Express" service. That service was described in their brochure as:

The asterisk carried a reference to the defenders' terms and conditions of carriage.

On 3 July 1997 the pursuers and the defenders entered into a contract for the delivery by the latter to the TACIS Procurement Unit of the European Communities at an address in Brussels of a document from the pursuers. That document was in the event a tender for a contract concerned with a Commission project for services to be rendered to the Mongolian Government and the Mongolian Business Development Agency with a view to attracting foreign investment to Mongolia. The contract between the pursuers and the defenders ("the delivery contract") was for the "UPS Express" service and was subject to the latter's terms and conditions. In terms of that contract the defenders undertook to the pursuers to deliver the document to the addressee by 10.30am on 4 July 1997. The defenders failed to comply with that undertaking. Delivery was not made to the addressee until 8 July 1997 by which time, according to the pursuers, it was too late to be considered by the Commission and was accordingly rejected. The pursuers sue the defenders for breach of contract. The defenders admit liability but maintain that no specific damage has been relevantly averred and that no damages are accordingly relevantly claimed save such as might be awarded for general inconvenience in accordance with the principle enunciated by Lord President Inglis in Webster & Co v Cramond Iron Co (1875) 2 R. 752 at p. 754. The attack on the relevancy of the pursuers' averments of specific damage was concerned with remoteness of damage at common law and with the application of a restriction on damages contained in Clause 10 of the defenders' terms and conditions which are admitted to apply.

The pursuers specifically aver that the contract was for delivery of a tender document. They also make the following averments:

Although the alternatives in those propositions are expressed in the form of obligations, they are, as I understood it, intended to relate to knowledge imputed to the defenders by reason of knowledge had by certain of their employees or of knowledge to be attributed to the defenders as arising in accordance with the usual course of things within the meaning of that expression as used by Alderson B. in Hadley v Baxendale (1854) 9 Ex.341 at p. 354.

The pursuers then aver that, had their tender been considered, it would have been accepted. They describe the relative tendering process as being one dealt with under standard guidelines for the European Commission's TACIS programme. Under those guidelines an evaluation panel is appointed which considers the technical component and thereafter the financial component of a tender, each being scored separately. A tender failing to meet a defined threshold for the technical component is rejected. Tenders passing that threshold are scored for the financial component and the technical and financial ratings are then weighted. The pursuers then aver that, apart from the pursuers' tender which was rejected as out of time, four tenders were submitted. Two of those failed to meet the technical threshold. The project was awarded to one of the others. The pursuers aver that their tender, if considered, would have achieved a higher technical rating than any of the others and that that factor and other circumstances, including the pursuers' prior experience in this field, would have led to their tender being recommended for acceptance and being accepted. They continue: "The pursuers have lost the profits and fees which they would have earned in the performance of the instant project". They calculate the lost profits and fees on that project at 315,683 ECU (approximately £209,062 Sterling). They aver "Alternatively the pursuers have lost the opportunity to secure the contract and to earn the resulting profits and fees". Averments in relation to the loss by the pursuers of future contracts with the Commission were, at the outset of the debate, deleted by Mr Dunlop on behalf of the pursuers, a claim in respect of such loss no longer being insisted in by them.

The pursuers make averments in respect of communications between certain of their employees and certain employees of the defenders, all on 3 July 1997 in the context of the arrangements concerning the document. The defenders' employees referred to are a clerkess at their booking office (with whom initial communication was made), a driver (who uplifted the package from the pursuers' premises) and another employee of the defenders whom the pursuers aver completed on request the relative waybill on their (the pursuers') behalf. The information said to have been communicated was in part orally conveyed and in part evident from the label on the package.

Mr Francis for the defenders challenged the relevancy of the pursuers' averments to instruct knowledge on the part of the defenders of matters of fact material to the issue of remoteness of damage. In particular, he argued, the pursuers' averments were insufficient to set up in the case of any of those employees either actual or ostensible authority to receive the information relied on and thus to fix the defenders, as their employers, with knowledge of it. The position of an employee could for this purpose be equiparated to that of an agent (Billins - Agency Law A. 3.3) Reference was also made to Bowstead & Reynolds on Agency (16th Ed.) paras. 8-204, - 206 and - 209. A relative passage in an earlier edition of Bowstead had been quoted with approval in Chapelcroft Ltd v Inverdon Egg Producers Ltd 1973 S.L.T.(N.) 37. Wyllie v Pollen (1873) L.J. 32 Ch. 782 was also in point. The doctrine of ostensible authority was, as an aspect of holding out, related to the principles of personal bar. Reference was made to Rankine on Personal Bar p. 217. The pursuers required to aver (1) a representation by the defenders (not by the employees referred to) holding these employees out as having authority to receive information of the category referred to, (2) reliance by the pursuers on such representation and (possibly) (3) prejudice to the pursuers. Reference was made to Gatty v Maclaine 1921 S.C.(H.L.) 1, per Lord Birkenhead, L.C., at page 7 and to Morrison's Exs. v Rendall 1986 S.L.T. 227, per L.J.C. Ross at p. 231. There were no sufficient averments in respect of either actual or ostensible authority. Moreover, some at least of the information appeared to have been conveyed after the bargain had been made. The averments of communication of information, in so far as they were the basis for special circumstances communicated to the defenders, were thus irrelevant and the necessary foundation for any contention that the damages claimed were recoverable (as not being too remote at common law) was absent. On this basis the averments touching on such communications should be excluded from probation.

Mr Dunlop for the pursuers submitted on this aspect of the case that it was artificial to draw a distinction between the authority of employees to receive information and their authority to enter into the delivery contract on behalf of the defenders. Information conveyed to a person authorised on behalf of his employer to enter into such a contract and who so entered into it was information conveyed to the employer. The pursuers offered to prove that the contract between the parties was not simply to deliver a package but to deliver a package which both parties knew at the time of contracting to be a tender. All the employees referred to were concerned in one way or another on the defenders' side with the making of that contract. The defenders in their publicised brochure had invited prospective customers to call a specific telephone number for "bookings and enquiries". The pursuers had telephoned that number and had, in response to an enquiry from the defenders' clerkess who answered that call, told her that the package was a tender document. The other employees of the defenders referred to (the driver and the person who completed the waybill) were all involved in the steps leading up to the making of the contract by the completion of that waybill. The passages cited from Billins and from Bowstead & Reynolds supported the pursuers. Reference was also made to Bell's Commentaries (McLaren's Ed.) I, pp.506 and 509. Baldwin v Casella (1872) L.R. 7 Ex. 325 supported the proposition that a servant's knowledge acquired in relation to the relevant subject matter was to be imputed to his master. The pursuers had made relevant and sufficiently specific averments to support a case that the persons who made the contract on behalf of the defenders were aware at the relevant time that the package was a tender document. The defenders were fixed with that knowledge.

In my view the pursuers have made sufficiently specific and relevant averments to entitle them to inquiry as to the information imparted to the defenders' employees and the imputation of that knowledge to the defenders. The criticisms made by Mr Francis related largely to detail and to whether certain inferences sought to be drawn by the pursuers on averment could properly be so drawn. I do not find it necessary to particularise those criticisms. The pursuers give a full narrative of their dealings with the defenders. The inferences criticised were largely inferences of fact. Whether such factual inferences are properly to be drawn is best determined after evidence has been heard. The pursuers' averments on this aspect cannot reasonably be criticised in respect of lack of fair notice. There is, it is true, a certain ambiguity as to what extent the pursuers seek to rely on actual authority and to what extent on ostensible authority but in the whole circumstances fair notice has, in my view, been given of each of those. It cannot be said that in respect of either basis the pursuers' averments are so plainly irrelevant that inquiry into them should be denied.

There is, so far as counsel's researches have disclosed, remarkably little authority in relation to the principles on which, for the purposes of remoteness of damage for breach of contract, knowledge of an employee is to be imputed to his employer. It does not appear to have been doubted that the information, insofar as it went, conveyed to the defendants' clerk in Hadley v Baxendale was information with which the defendants were fixed. On the other hand, doubts were raised in Horne v Midland Railway Co (1878) L.R. 8 Ex. 131 as to whether intimation to the stationmaster was intimation to his employers, the railway company - though those doubts may have related to the peculiar position of the company as a carrier at common law and have been influenced by the view (adopted by the majority in that case but subsequently disapproved by Lord Upjohn in C. Czarnikow Ltd v Koufos [1969] 1 AC 350 at pp. 421-2) that liability for damages under the second branch of the rule in Hadley v Baxendale must be made a term of the contract. However that may be, where an employee such as the defenders' booking clerkess, in the course of her employment and, as the pursuers aver, in response to an enquiry by her of the nature of the package, is informed of that nature, it may not be difficult to infer either that the contract was one for carriage of a package of that particular nature, namely, a tender document or, in any event, that the defenders were fixed at the time of contracting with knowledge of that particular nature. It was that aspect of the information conveyed on which Mr Dunlop primarily, if not wholly, relied on.

The other source of information relied on by the pursuers on averment is the label on the package itself. That package and its label were seen, according to the pursuers, by the defenders' driver and by the defenders' other employee who completed the waybill. The label on the face of it referred to "the tender opening session". It also set out among other things the addressee and the title of the project for which it was to be submitted. It emphasised, by underlining, the requirement for delivery before 10.30am on 4 July. That line of evidence may not, otherwise than by emphasis and confirmation, take matters significantly beyond the information conveyed to the defenders' clerkess; but it at least completes the picture of the sources of information said to have been available to the defenders. While it may be more open to argument, it cannot in my view be held at this stage that information received by such employees (in both cases, according to the pursuers, prior to the making of the final bargain by signature of the waybill) could not in the light of the whole evidence be imputed to the defenders as their employers.

In the whole circumstances I am unable to accede to Mr Francis' motion that the particular averments related to those matters should be excluded from probation.

The substantive issue in relation to remoteness was argued by Mr Francis on the assumption that the pursuers' whole averments in relation to notice or at least some of them would be admitted to probation. Even on that assumption their claim of specific damage, he argued, was on principles of remoteness irrelevant. What the pursuers were claiming was the loss of a particular contract and of the apparently lucrative profits and fees which would, they say, have been earned in performance of it. In order to bring such a claim within the reasonable contemplation of the defenders at the time of the making of the delivery contract it would require to be averred and proved that the defenders had in view the particular kind of contract to be tendered for, the particular mechanism whereby loss would be sustained and the particular extent of loss which was not unlikely to be the consequence of the breach. The present claim was for "pure economic loss", not for a loss involving any physical damage. In such a case there would require, to avoid disallowance on grounds of remoteness, to be brought home to the defenders knowledge of the terms of the contract to be tendered for or at least something very close to that. At best for the pursuers all the defenders knew was that the package was to be delivered to a particular addressee by a particular time and that the tender opening session related to an identified project. The pursuers did not offer to prove that the defenders were aware of (1) the nature of the pursuers' ordinary business, (2) that this particular contract related to that ordinary business, (3) that the contract if awarded would have yielded profits of the sort generated in that ordinary business, (4) that the tender was likely to succeed or (5) the terms of the contract to be tendered for. To allow the pursuers' case for loss of this contract to proceed would be to defeat the rule laid down in Hadley v Baxendale and developed in subsequent cases. The policy of the law was that a party anticipating a particular loss should give notice of that to the other party to allow that other, in knowledge of such special circumstances, to decide whether or not to contract and, if so, on what special terms. Mr Francis cited and examined, in addition to Hadley v Baxendale, Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 K.B. 528 (where ordinary business losses had been allowed but the profits anticipated on particularly lucrative special contracts disallowed), A/B Karlshamns Oljefabriker v Monarch Steamship Co 1949 S.C.(H.L.) 1 and Czarnikow. Although some of the observations in Victoria Laundry had subsequently been criticised, the principles as explained in it remained unimpaired (Aruna Mills Ltd v Dhanrajmal Gobindram [1968] 1 Q.B. 655, per Donaldson J. at p.668). Knowledge acquired casually of the general purpose of the carriage was not enough (British Columbia Saw-Mill Co v Nettleship (1868) L.R. 3 C.P. 499 per Willes J. at p. 510 and Horne v Midland Railway Co). Both those cases had been referred to without criticism in A/B Karlshamns by Lord Porter at p. 13 and by Lord Wright at p. 22. Lord Porter at p. 13 had also distinguished between loss of transhipment costs and loss of profits in a business. Reference was also made to McGregor on Damages (16th Ed.) at paras. 1192-3. The observations by Orr and Scarman L.JJs. in H. Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] Q.B. 791 were distinguishable and, in any event obiter. Loss of ordinary business profits was different in kind from that flowing from a particular contract which gave rise to very high profits (Brown v K.M.R. Services Ltd [1995] 2 LL.L.R. 513, per Stuart-Smith L.J. at p. 542). In relation to knowledge by one contracting par

Mr Dunlop submitted on this aspect of the debate that the starting point for any discussion was the principle that a party affected by breach of contract should be placed, insofar as money could do so, in the same position as he would have been had the contract been performed (McGregor on Damages (16th Ed) para. 247, Victoria Laundry, per Asquith L.J. at p. 539). Remoteness was a policy brake on that principle. It was a matter of fact whether in the particular circumstances a head of loss was too remote to be recoverable (A/B Karlshamns, per Lord Wright at p. 20 and per Lord du Parcq at p. 28). Unless it could be said that on examination of the pursuers' averments it was clearly demonstrated that the loss claimed could not fall within the rule in Hadley v Baxendale, the pursuers were entitled to inquiry on their claim; it was incumbent on the defenders to aver and prove circumstances which excluded the claim on the ground of remoteness. In the present case damages were claimed on alternative bases - (1) for the profit which would have been earned on the contract or (2) for the loss of the opportunity to secure the contract and to earn the resulting profits and fees. Given the nature of the delivery contract (which the pursuers averred to be a contract to deliver a tender document) the case clearly fell within the first branch of the rule in Hadley v Baxendale. The defenders' argument, insofar as it assumed that the pursuers relied on the second branch of that rule, was misconceived. The loss which the pursuers claimed was the obvious and natural loss which would, in the reasonable anticipation of businessmen, arise in the ordinary course of things from the breach of this contract. Reference was made to A/B Karlshamns at pp. 21-2 and 29, Victoria Laundry at pp. 537-8, 539-40 and 543 and to Czarnikow at pp. 389, 395-6, 397, 399 and 400. Given that the nature of the contract was the delivery of a time-sensitive tender to an office in Brussels by a particular time, the most obvious and natural consequence of failure to deliver it on time was that it would not be considered. The tender had a value in the prospective realisation of profit consequential on its acceptance. Reference was made to McGregor on Damages (16th Ed.) at para. 1193-5, including the reference there made to The "Pegase" [1981] 1 Ll.L.R. 175. The cases referred to in para. 1195 of McGregor were closely analogous. It was for the defenders to demonstrate that the contract tendered for was exceptional or would give rise to exceptional profits. The fact that the tender would have been in competition with other tenders pointed to it being unexceptional. The amount of profit which would arise was immaterial. What was material was that the type of damage claimed was in reasonable contemplation. The particular mechanism need not have been anticipated (H. Parsons (Livestock) Ltd v Uttley Ingham & Co, per Orr L.J. at p. 805 and per Scarman, L.J. at p. 812-3). Reference was also made to Balfour Beatty Construction (Scotland) Ltd v Scottish Power Plc, per Lord Jauncey at p. 28 and at pp. 31-2 and to Brown v K M R Services Ltd, per Stuart-Smith L.J. at p. 542. On this branch of the case there were also cited Saint Line Ltd v Richardsons, Westgarth & Co [1940] 2 K.B. 99, Croudace v Cawoods [1978] 2 Ll.L.R. 55 and Ogilvie Builders Ltd v City of Glasgow District Council 1995 S.L.T. 15. The pursuers' claim was relevant for inquiry.

I accept that the starting point in resolving a problem as to the measure of damages for breach of contract is the rule that the pursuer is entitled to be placed, so far as money can do so, in the same position as he would have been had the contract been performed (McGregor on Damages (16th Ed) para. 247). As the learned author points out in the same paragraph, that rule is limited by two factors. The first is concerned with principles as to causation:

Whether in a particular case a head of damage is excluded by the factor of remoteness will frequently involve consideration of issues of fact; the question will in the end fall to be decided by a jury, or in modern times more commonly by a judge of fact, essentially as a jury question (A/B Karlshamns per Lord du Parcq at p. 28). The legal test to be applied has been formulated in what may appear to be a bewildering variety of words or phrases. Lord Denning M.R. in H Parsons (Livestock) Ltd v Uttley Ingham & Co at p. 802 protested that he was unable "to swim in this sea of semantic exercises". Lord Morris in Czarnikow at pp. 396-7 expressed the hope that, in applying the guidance given in Hadley v Baxendale, no undue emphasis would be placed upon any word or phrase. Accordingly, in seeking to exclude at debate a head of damage for breach of contract as being too remote, a defender requires to satisfy the Court that, even were the pursuer to prove all the facts within the scope of his averments and the judge of fact were to apply the guidance derived from Hadley v Baxendale and subsequent authorities as liberally in favour of the pursuer as such authorities might legitimately allow, the pursuer's claim would be bound to be rejected.

In Czarnikow Lord Reid adopted the words "not unlikely" as the test of likelihood to be used for the purposes of damages for breach of conduct. He used those words "as denoting a degree of probability considerably less than an even chance but nevertheless not very unusual and easily foreseeable." (p. 383). In a later passage (at p. 390), having criticised the expression "on the cards" used by Asquith L.J. in Victoria Laundry, he nonetheless considered the issue if likelihood in the context of a well-shuffled pack of playing cards. He described it as "likely or not unlikely" that the top card should prove to be a diamond (the odds being only 3-1 against); but he considered that most people would not say that it was quite likely to be the nine of diamonds (51-1 against). He accordingly appears to have contemplated a prospect of 3-1 against as within the range of "not unlikely"; greater odds (though less than 51-1) might also have been regarded by him as giving rise to a prospect which was "not unlikely". The formulations "a serious possibility" or "a real danger" were approved by other of the judges in Czarnikow. Although Lord Jauncey in Balfour Beatty cited and applied a dictum from Lord Reid's speech in Czarnikow in which reference was made, in dealing with a particular argument, to "a very substantial degree of probability", I do not understand their Lordships in Balfour Beatty to have disapproved any of the tests adopted in Czarnikow.

Applying those tests to the pursuers' alternative claim, namely, that directed to the loss of the opportunity to secure the service contract, I have no difficulty in holding that it is relevant. A carrier undertaking to deliver a tender document within a particular (and in this case relatively short) timescale or, if it is different, undertaking to deliver within that timescale a package which he knows contains such a document must, in my view, be assumed to contemplate that failure to deliver it timeously will result in the consignor being deprived of the opportunity of having his tender considered. That result is indeed highly likely and the requisite tests stipulated in Czarnikow are easily satisfied. I say nothing at this stage as to how the valuation of that loss of opportunity might be approached.

More difficult is the pursuers' primary claim, namely, for loss of the profits and fees which, had their tender been successful, they would have earned by the performance of the service contract. Mr Dunlop's submission was that, given the nature of the delivery contract, that loss also was plainly in the assumed contemplation of the parties as one naturally arising, within the first branch of the rule in Hadley v Baxendale, from the breach of contract itself. It was in effect simply a further link in the natural chain which ran from the breach through the denial of the opportunity to have the tender considered to denial of the benefit of the contract which, had the tender been considered, would have been awarded to the pursuers. On that approach it was unnecessary, at least as a matter of relevancy, for the pursuers to aver that the defenders had prior knowledge of the terms of the tender, the procedures for its consideration, the prospects for its success, the nature of the contract tendered for or the order of financial award to be derived from performance of that contract, if awarded.

I doubt whether the matter is as simple as Mr Dunlop's submission might suggest. Although it appears that the pursuers had used the defenders' delivery service on more than one prior occasion, there is on averment nothing to suggest that the latter had acquired any particular knowledge from their mutual dealings of the character of the former's business - nor, in particular, of the contracts for which they were in the practice of submitting tenders or of the prospects generally to be expected of their securing these. The parties moreover were, in contrast to many buyers and sellers of goods, not in the same trade with corresponding mutual acquaintance with the incidents of that trade. For the purposes of remoteness of damage the position at the time of entering this contract is accordingly not essentially different from that of a person contracting for the first time with a carrier to deliver for him a tender document within a stipulated timescale.

On the approach adopted by Mr Dunlop in argument it would appear, at least as a matter of relevancy, to be unimportant whether the tender happened to be for a contract for the provision of investment services to Mongolia or, say, for the exploitation of European mineral reserves or for catering provision at a specific function in Brussels. Nor would it appear, at least as a matter of relevancy, to be important what order of financial consequences might be expected to flow from the loss of any such bargains. This approach, in my view, is not directly supported by any decided case cited to me and may be difficult to reconcile with the weight of authority. The application of the rule adopted in Hadley v Baxendale involves the attribution to the subsequent contractor-breaker of a state of knowledge (general or special) at the time when the contract was made. The Court requires to determine whether the type of loss sustained was, on the basis of that attributed state of knowledge, such as flowed naturally from the breach or is reasonably supposed to have been within the contemplation of the contract-breaker. Where parties engage in the same trade or the pattern of the other party's ordinary business is generally familiar in the commercial world or goods to be carried are commonly sold in a recognised market, it may not be difficult to attribute to the contract-breaker a state of knowledge which includes such elements and to infer from the basis of that knowledge what was or is presumed to have been in his contemplation. When such conditions are absent, it will, at least in many cases, be much more difficult, if not impossible, to attribute to the contract-breaker a state of knowledge from which the necessary inferences can be drawn. The incidents (including the financial implications) of a contract for the provision of investment services to Mongolia are potentially different from those of a contract for exploitation of European mineral reserves or those of a contract for catering at a specific function. It may accordingly be appropriate for the purposes of remoteness of damage to categorise the loss of the one as a different type of loss from the loss of either of the others. If that be so, it would be necessary for the purposes of recoverability to bring home to the contract-breaker knowledge, at least in general terms, of the subject matter of the potential contract and perhaps of the normal incidents of contracts in respect of such subject matter. Without these there may be no base on which the contract-breaker's assumption or presumed assumption of risk can be rested.

Mr Dunlop's approach would also appear to treat as unnecessary, for the purposes of relevancy, any consideration of whether in the ordinary course of things the pursuers' tender would have been expected to be successful. General experience suggests that in the ordinary course of business many more tenders are submitted than are successful. Whether the pursuers can succeed in this claim without bringing home to the defenders prior knowledge or presumed knowledge that the pursuers' tender was in the circumstances not unlikely to be successful seems to me at least doubtful.

Despite those doubts I am not satisfied that the pursuers' claim for loss of profits and fees can be dismissed without inquiry. What a contracting party is presumed to know about the business activities of the other is always a question of circumstances (Balfour Beatty, per Lord Jauncey at p. 31). Difficulties in practice may arise in categorisation of loss into types or kinds, especially where financial loss is involved (Brown v K M R Services Ltd, per Stuart-Smith L.J. at p. 542). Although loss of profits has, it seems, seldom been recovered as damages, such recovery is not unknown even in circumstances where there is no available market (The "Pegase", per Robert Goff J. at pp. 183-4). So far as appears from the cases cited to me, none has been decided without inquiry into the facts. Additionally, although Mr Dunlop did not put particular reliance on it in argument, the pursuers aver elements of knowledge or presumed knowledge beyond the simple fact of the package being a tender document. Moreover, the defenders offered a service specifically for delivery of time-sensitive documents. Timeous delivery was accordingly central to the contract not, as in many of the decided cases, an incident, albeit an important incident, of the contract. If, as appears to be the case, remoteness of damage in contract is a policy restraint, it may be necessary in the absence of direct guidance to decide that issue in the present case as a matter of legal policy - in particular, whether it is appropriate in the circumstances that the loss claimed be excluded at common law rather than its recoverability be regulated by contractual provision, so far as lawful. It is, in my view, undesirable to decide such policy issues without first ascertaining the whole facts. I say nothing at this stage about the onus of proof.

I have already held that the pursuers' claim for damages for the loss of the opportunity to have their tender considered is relevant for inquiry. Some at least of the pursuers' averments relative to the procedures adopted by the European Commission for consideration of such tenders and to the likelihood in fact of success of the pursuers' tender, if considered, may also be relevant to evaluation of that claim. Thus, inquiry into such matters will, at least to some extent, be necessary in any event.

Reliance is placed by the defenders on their terms and conditions of contract which were admittedly incorporated into the parties' bargain. Under Clause 10 of those terms and conditions provision is made for the limitation of damages to certain specified monetary sums subject to proof of loss. The defenders maintain on averment that by virtue of Clause 10 any liability to the pursuers is limited to £75 Sterling. However, in the course of the debate, Mr Francis conceded that, having regard to a later part of Clause 10, that limitation would not apply where the loss, damage or delay to goods arising out of or in connection with the defenders' service had been caused by the defenders' negligence and there had been no contributory negligence on the part of the pursuers. The defenders on averment accept that they were in breach of contract and that the delay in delivery of the document was not attributable to anything done by the pursuers. They do not formally admit that the pursuers' loss was caused by their (the defenders') negligence but the relevant parts of the parties' pleadings are as follows. The pursuers aver:

The defenders aver in this respect:

In these circumstances, notwithstanding the absence of a formal admission of negligence by the defenders in their pleadings, they cannot, in my view, maintain that such loss, if any, sustained by the pursuers was not caused by their (the defenders') negligence. The documents were admittedly delivered into their possession for delivery at the stipulated address in Brussels by 10.30am on 4 July. No explanation is offered by the defenders for the loss of four days consistent with the absence of negligence on their part or on the part of those for whom they are in law responsible. In the absence of such an explanation from the party having possession of the documents at the relevant time, the inevitable inference is that there was such negligence. Mr Francis, while not conceding the point, felt quite properly unable to advance any argument to the contrary. In these circumstances the defenders' averments in support of the monetary limitation of liability fall to be excluded from probation and their relative plea-in-law, insofar as so directed, repelled.

There remains a further issue under Clause 10. The Clause continues:

The final phrase was not relied on in argument. Mr Francis, however, argued that the loss claimed by the pursuers was excluded by this contractual provision. Mr Dunlop argued that this provision was irrelevant to the pursuers' claim and ought to be excluded from inquiry.

In my view it would be inappropriate to dispose of this issue prior to ascertainment of the facts. A contractual exclusion of this kind arises for consideration only once it has first been determined that the loss claimed is recoverable at common law. However, the concepts which are built into "indirect or consequential" loss or damage may reflect, at least to some extent, common law concepts. Thus in Saint Line Ltd v Richardsons, Westgarth & Co (where the phrase "indirect or consequential damages or claims" was construed) Atkinson J. stated at p. 103:

He also cited Millar's Machinery Company v David Way & Son (1935) 40 Com. Cas. 204 where "consequential" damages were contrasted with damages which "resulted directly and naturally from the plaintiffs' breach of contract". In Ogilvie Builders Limited v City of Glasgow District Council (where the phrase "direct loss and/or expense" was construed) both in argument and in the discussion concepts derived from Hadley v Baxendale and subsequent authorities on remoteness of damage were explored. While the phrase "indirect or consequential" may be largely concerned with the issue of causation, it may also derive part of its colour from concepts connected with remoteness of damage at common law. In these circumstances it would be inappropriate in the present case to endeavour to construe and apply that phrase without first considering after inquiry the application of the common law rules in relation to remoteness of damage.

In the whole circumstances I shall sustain the pursuers' second plea-in-law to the extent of repelling the defenders' fourth plea-in-law insofar as that plea relates to contractual limitation of recoverable loss and damage and excluding from probation the sentence "Accordingly, any liability of the defenders was limited to £75" in Answer 3 and the sentence "They maintain that it limits liability ... Convention apply" in Answer 4. I shall then put the case out By Order on Wednesday 2 September 1998 at 2.30pm for determination, in light of this Opinion, of the scope of the proof before answer to be allowed.