Adler v Dickson [1954] EWCA Civ 3 (29 October 1954)

Facts

The plaintiff, Mrs Fay Adler, was a first-class passenger on the P. & O. steamship ‘Himalaya’ for a cruise. Her ticket, which constituted the contract of carriage with the company, contained an exemption clause. This clause stated that passengers were carried at their own risk and that the company would not be liable for injury to any passenger arising from the negligence of its servants. During the voyage, while Mrs Adler was descending the gangway, it moved and she was thrown onto the quay from a height of sixteen feet, sustaining serious injuries. Rather than suing the P. & O. company, against whom the exemption clause would likely have been a complete defence, Mrs Adler brought an action in tort for negligence against the master of the ship (Captain Dickson) and the boatswain, who were employees of the company.

Issues

The central legal issue before the Court of Appeal was whether the servants of the shipping company (the master and boatswain) could rely on the protection of the exemption clause contained in the contract of carriage between their employer and the plaintiff, to which they were not parties. This question directly engaged the common law doctrine of privity of contract, which provides that only parties to a contract can sue upon it or be bound by its terms.

Judgment

The Court of Appeal unanimously dismissed the appeal, affirming the decision of Ashworth J. It held that the defendants, as servants of the shipping company, were strangers to the contract and could not claim the benefit of the exemption clause. The action against them in tort for their personal negligence could therefore proceed.

Key Reasoning of the Court

The judges delivered separate but concurring judgments, all centred on the doctrine of privity.

Lord Justice Denning acknowledged that preventing the servants from relying on the clause might seem unjust, as it allowed the purpose of the clause to be circumvented. However, he felt bound by established precedent, particularly Cosgrove v. Horsfall (1945) and the House of Lords decision in Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915]. He systematically rejected the argument that the principle from Elder, Dempster & Co Ltd v Paterson, Zochonis & Co Ltd [1924] created a general rule of ‘vicarious immunity’ whereby a servant could benefit from their master’s contractual defences. He concluded that the defendants owed a personal duty of care to the plaintiff in tort, which was independent of the contract. He stated:

My conclusion is that in the case of the carriage of a passenger, the master and crew are, in the absence of an express contract to the contrary, under a duty to the passenger to take reasonable care. The exemption clause in the ticket is no protection to them: for the simple reason that they are not parties to the contract. They are not parties in their own right. They are not parties by their principals, because their principals, the steamship company, were not contracting for them. The contract on its face purports to be a contract with the passenger on the one side and the steamship company on the other.

Lord Justice Jenkins provided a more orthodox, black-letter analysis of the privity rule. He considered and dismissed the three main arguments advanced by the defendants: (1) that the contract negatived any duty of care on the part of the servants; (2) that the company had contracted as agent for its servants; and (3) that the doctrine of volenti non fit injuria applied. He found no evidence in the wording of the ticket to support an agency relationship and concluded that the servants remained liable in tort as strangers to the contract. He articulated the foundational principle as follows:

But, leaving authority aside, I think the position is plain. It is a fundamental principle of our law of contract that a stranger to a contract cannot sue on it, and this is hardly surprising, inasmuch as he has given no consideration for it. It is sometimes stated as a corollary to this principle that a stranger to a contract cannot take advantage of the provisions of the contract, …. To my mind, it is a necessary corollary.

Lord Justice Morris concurred, emphasising that the claim was rooted in tort. The defendants owed the plaintiff a duty to take reasonable care, and they could not rely on a contract to which they were not a party to absolve themselves of liability for an alleged breach of that duty.

Implications

The decision in Adler v Dickson is a landmark case in the law of contract. It starkly highlighted a commercial inconvenience caused by the strict application of the doctrine of privity. The ruling meant that a carefully constructed exemption clause agreed between two parties could be easily outflanked by suing the employees of the protected party in tort. In direct response to this case, commercial drafters developed the ‘Himalaya clause’. Named after the ship in this case, a Himalaya clause is a contractual provision which expressly states that it is intended to protect the agents, servants, and independent contractors of a contracting party. While the Contracts (Rights of Third Parties) Act 1999 has since provided a more general statutory basis for third parties to enforce contractual terms, the case and the clauses it inspired remain of critical importance in shipping, transport, and insurance law.

Verdict: The appeal was dismissed. The defendants (the Master and the boatswain) were not entitled to the protection of the exemption clause in the contract of carriage and were therefore potentially liable in negligence.