Mitsubishi Corporation v Eastwind Transport Ltd. & Ors

An exclusion clause in a commercial contract is construed in its contractual context. Words which, read literally, would defeat the contract’s main purpose may be given a restricted meaning. A clause may transfer most risks of loss to the other contracting party, but does not necessarily cover dishonesty or an arbitrary refusal to perform. Case-by-case application does not make the clause uncertain.

The claimant, holder of 19 bills of lading, claimed for damage to frozen chicken carried from Brazil to Japan. The defendants relied on clause 4, an extensive carrier’s exemption clause covering loss or damage however caused, including negligence, unseaworthiness and refrigeration defects.

The preliminary issue was whether clause 4 exempted the defendants from potential liability for the pleaded claims. The claimant argued that it was repugnant to the main object of the carriage contracts; the defendants argued that it should be construed and applied according to its terms.

1. Clause 4 was effective to exempt the defendants from potential liability for the pleaded claims.
2. The clause covered loss or damage caused by negligence, unseaworthiness or uncargoworthiness.
3. Following Glynn v Margetson & Co [1893] AC 351, contractual words which would conflict with the contract’s main object may receive a restricted meaning. The modern contextual approach was also illustrated by Sirius International Insurance Company (Publ) v FAI General Insurance Limited [2004] UKHL 54.
4. The clause did not cover dishonesty or an arbitrary refusal to ship the goods. The contra proferentem principle did not require an inconsistent construction where a meaning consistent with the contract’s purpose was available.

not stated in the judgment.