Spoornet's breach of contract stance raises hackles - Non-performance claims under the spotlight

ALAN PEAT
A SLAP in the face for the rail transport industry, was how Peter Lewin, director of MSC Depots and chairman of the Container Rail Operators' Forum (Crof), saw Spoornet¡¯s notification to users that it will no longer consider breach of contract (non-performance) claims. This followed a communication to all customers from Sibusiso Gumede, Spoornet portfolio business manager in sales and marketing, which said: ¡°It should be noted that Spoornet¡¯s terms and conditions do not make provision for breach of contract claims (non-performance claims). Please refer to the liability Clause 17 in this regard. ¡°Kindly take note that with effect from April 1, 2007, Spoornet will no longer accept non-performance / breach of contract claims. ¡°A large number of ¡°breach of contract¡± claims have in the past arised (sic) due to alleged wagon shortages and service failures. In this regard reference is made to Clause 6.4 of the transport agreement, which clearly stipulates that: ¡°Subject to clause 6.1, we will try, without obligation, to adhere to the global train plan of which you have been advised; however, this will be subject to the available capacity and is not a guarantee that the transport will be provided unless stated otherwise in a schedule.¡± ¡°In the interim, we will process current claims submitted before March 31, 2007, subject to proven monetary loss (excluding consequential damages), subject to both liability and loss having been proven by the customer.¡± This exclusion is nothing new, according to Lewin. ¡°Spoornet has always denied any liability regarding lack of performance,¡± he told FTW. ¡°But they have been accepting claims under certain circumstances, and paying usually less than the full amount on an ex gratia basis, and without prejudice.¡± Lewin felt that this was not showing a good face to the industry in a highly competitive environment, and just encouraged the use of other means of transport, where performance is protected. ¡°There¡¯s no way business can entrust its cargoes into the hands of a service provider which offers no responsibility,¡± he said ¨C pointing out that Crof had pressed Spoornet for service level agreements ¡°to show good face to the industry¡±. Although legally it seems that there is some room to manoeuvre, FTW¡¯s legal advisers suggested that the industry should take steps to protect itself. Tony Norton, head of Garlicke and Bousfield¡¯s maritime section, suggested that the clause referred to by Spoornet (6.4) might not be broad enough in its interpretation to deny ALL non-performance claims. ¡°I wouldn¡¯t like people to get the impression that they are automatically excluded,¡± he said, ¡°but rather that they should look closely at the conditions with Spoornet to see if they are excluded or not.¡± Meanwhile, Andrew Robinson, director and maritime specialist at Deneys Reitz, took a more fatalistic viewpoint. ¡°Generally,¡± he said, ¡°Spoornet contracts with goods owners on an owner's risk basis. That is the risk of loss or damage to goods rests with the owner of the goods and Spoornet need not compensate any cargo owner if the goods are damaged.¡± However, in this instance, Spoornet is concerned about instances where they fail to provide wagons to pick up the goods, and the cargo interest suffers loss as a result. ¡°This is often referred to as pure economic loss,¡± Robinson added, ¡°and it seems as though no provision was made for such losses either in the general conditions or in the ¡°standard¡± contracts with rail users. ¡°They have sought to rectify this with the current clause.¡± Given this situation, Robinson recommends that the industry should guard its back. ¡°Cargo interests must ensure that they have suitable insurance cover for such claims,¡± he said, ¡°as they can no longer rely upon obtaining compensation from Spoornet.¡± On a broader issue, all three of our commentators suggested that there was still some debate as to whether state-owned enterprises such as Spoornet should be entitled to contract out of liability ¨C when there is no alternative. As Norton put it: ¡°Whether a monopoly would have a right to exclude all such claims is a different matter entirely.¡± The authority behind this statement from our three sources would seem to be the Competition Act, which firmly stands against ¡°abuse of a dominant position¡±. ¡ñ Spoornet replies: ¡°This letter to customers is nothing new, it¡¯s just a reconfirmation that Spoornet¡¯s terms and conditions do not make provision for breach of contact claims/non-performance claims. ¡°The reason for sending this letter was as a result of a number of customers abusing the gesture of goodwill. ¡°We need to reiterate that the contracts between Spoornet and its customers should be treated with all the confidentiality they deserve. Should there be any misunderstanding, we would prefer to engage our customers directly and not through the media.¡±