First National Bank of Southern Africa Limited v Rosenblum, Hirsch and Rosenblum, Jeanette

In 1983, the first respondent entered into a contract with Barclays National Bank Ltd (predecessor to appellant bank) for the provision of a safe deposit box at the Auckland Park branch. The annual fee was approximately R150. The first respondent placed valuable articles in the box, which he locked with his own keys. The bank was unaware of the nature or value of the contents. On or about 28 October 1996, the bank informed the first respondent that it was unable to return the safe deposit box and its contents. One or more of the bank's staff members had stolen the safe deposit box or allowed third parties to steal it, or acted in concert with such third parties. The theft did not involve violence, threat, robbery or burglary. The bank sought to rely on clause 2 of the standard contract, which exempted it from liability for loss or damage caused by various causes including theft and negligence. The respondents (husband and wife) sued for damages. A stated case was brought to determine whether clause 2 excluded the bank's liability in these circumstances.

• Whether clause 2 of the contract exempted the bank from liability for theft committed by its employees acting in the course and scope of their employment
• Whether clause 2 exempted the bank from liability for negligence (including gross negligence) of its employees in controlling keys to the storage area
• Whether the principle in Wells v SA Alumenite Co (that one cannot contract out of liability for deliberately committed dishonest acts) applies to vicarious liability for employee theft
• The proper interpretation of exclusionary clauses in contracts, particularly whether the eiusdem generis principle applies to limit their scope
• Whether gross negligence is covered by an exemption clause referring to 'negligence'

The appeal was upheld with costs, including costs of two counsel. The costs were to be paid by the respondents jointly and severally, the one paying the other to be absolved. The order of the court a quo was set aside and substituted with an order dismissing the claims of first and second plaintiffs with costs (to be paid jointly and severally).

An exclusionary clause in a commercial contract that exempts a party from liability for loss caused by specified causes including 'theft' and 'negligence' (and 'any cause whatsoever'), without qualification, will be interpreted to cover theft and negligence by the party's employees acting in the course and scope of their employment. The principle that one cannot contract out of liability for one's own dishonest acts (Wells principle) does not apply to vicarious liability for employee dishonesty where the employer does not benefit from the dishonest conduct. An exemption from liability for 'negligence' covers both ordinary negligence (culpa levis) and gross negligence (culpa lata) unless the clause expressly distinguishes between them. The eiusdem generis principle of interpretation will not be applied to restrict an exclusionary clause where the listed items do not constitute a single identifiable genus sharing a common characteristic.

The Court observed that clause 3 (recommending insurance) was a neutral factor that did not assist in interpreting clause 2, as a mere recommendation to insure does not necessarily imply complete absence of liability. The Court noted that various commercial factors (the bank's ignorance of contents, inability to insure, modest fees, inability to open boxes without client cooperation) might make it reasonable for a bank to immunize itself from liability, but these factors do not determine whether the clause actually achieved that result as a matter of law - that must be determined by objective interpretation of the clause itself. The Court suggested that the introductory words in clause 2 ('while it will exercise every reasonable care') were merely 'an honest statement of intent' with no significant bearing on the ambit of the exemption - they were not a precondition to the operation of the clause, as accepting such interpretation would entirely deprive the exclusionary provisions of contractual force.

This case is significant in South African contract law for establishing the broad scope that may be given to exclusionary clauses in commercial contracts. It confirms that: (1) exemption clauses can validly exclude liability for theft and negligence (including gross negligence) by employees acting within the course and scope of employment; (2) the Wells principle (prohibiting contracting out of one's own dishonest acts) does not extend to vicarious liability where the contracting party does not benefit from the employee's dishonest conduct; (3) courts will not artificially restrict the scope of exclusionary clauses through inappropriate application of the eiusdem generis principle where the listed items do not constitute a true genus; (4) the interpretation of such clauses must be contextual and commercial, recognizing the practical realities of corporate entities acting through employees; (5) exemption from liability for gross negligence is not contrary to public policy in South Africa (following Fibre Spinners). The case demonstrates the courts' willingness to uphold clearly worded exclusionary clauses in commercial banking contracts, placing the onus on customers to obtain insurance rather than imposing custodial liability on banks in all circumstances.