Insurance Informer: Exemption from liability for theft by own employee

Exemption clauses exempt a contracting party from liability in certain circumstances. The enforceability of these clauses, especially in light of the Constitution, has long been a difficult topic, raising interesting debates.

The recent judgment of the Constitutional Court, in the matter of Fujitsu Services Core (Pty) Ltd v Schenker South Africa (Pty) Ltd,1 is no different. The issue before the Court was whether an exemption clause in a contract between the parties exempted Schenker from liability to Fujitsu for loss arising from the theft by Schenker's employee of goods belonging to Fujitsu.

The exemption clause in question required Fujitsu to make special arrangements in writing for the handling of the goods which were stolen, failing which Schenker would incur no liability "whatsoever" for them. Fujitsu had engaged logistic support from Schenker for these goods, which is when they were stolen, without making special arrangements.

In a narrowly split decision, the majority held that Schenker was absolved from liability on the basis of the exemption clause. The majority was not moved by the submission that the exemption did not apply when the act complained of, in this case the theft, did not fall within the business undertaken by Schenker. Exemption from liability, the majority added, is required for conduct that is in breach of the contract or the law and not for conduct that is in line with the contract and with the law.

Applying the approach outlined in Barkhuizen v Napier, the majority was also not convinced that the clause was unfair or unreasonable. It also found that there was no merit in the contention that the clause did not cover intentional conduct, such as theft by Schenker's employees, as that would be contrary to public policy. On the contrary, it found that previous cases have rejected the proposition that it is contrary to public policy to have a clause in a contract which exempts one of the parties from liability for loss arising from the intentional conduct of its employees, such as theft. What is prohibited is that a party benefits from, for instance, fraudulent misrepresentations inducing a contract. This does not arise in the case of a theft, which is not for the benefit of the employer but for the benefit of the employee.

In a strong dissenting judgment, the minority approached the matter on a different footing. It found that theft did not fall within the ambit of the clause. If a party wishes to be absolved from liability for theft, this should be clearly spelt out. It did not make sense that the clause did not exclude liability for gross negligence, yet excluded liability for theft. If a party cannot escape liability for fraud or dishonesty by inserting an exemption clause to cover such conduct, that should also apply to theft by parity of reasoning.

The minority concluded that a clause that "allows employees to steal goods" in the circumstances of this case was against public policy as it offends the values of human dignity, the achievement of equality, the advancement of human rights and, most importantly, the rule of law. Enforcing the clause in this case would deprive Fujitsu of its basic contractual rights and offend the principles of good faith and fairness.

The strong opinions expressed in the judgment should serve as a warning to parties to pay special attention to their contractual arrangements.

1 Fujitsu Services Core (Pty) Limited v Schenker South Africa (Pty) Limited [2023] ZACC 20.


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