Court rules plaintiffs entitled to remuneration for introducing candidate despite employer's failure to test suitability.

[*366] 1980 May 19

(PAPADOPOULOS, S.D.J.)

IN THE DISTRICT COURT OF NICOSIA

Photo-Staff Consultants Limited,

Plaintiffs,

v.

Michael Gead.es and Others,

Defendants.

(Action No. 645/77)

Contract - Exemption clause - Principles applicable - Introduction of personnel - Exemption clause regarding abilities of candidates, which have to be tested by employer - Defendants employing candidate, introduced by plaintiffs, after direct contacts with him for initial test period of one month - Employee found unsuitable after employment of seven weeks - Plaintiffs acting within the "four corners of the contract" - Not responsible for not finding appropriate candidate to introduce to defendants - Entitled to their agreed remuneration.

A. Indianos, for the Plaintiffs.

X. Xenopoulos, for the Defendants.

JUDGMENT

The following judgment was delivered by:-

PAPADOPOULOS, S.D.J.: The plaintiffs are a company registered in England, specialising in the placement of personnel in photographic enterprises, both in England and abroad. Defendant No.1 is a well known Cyprus photographer and defendant No.2 is a company registered in Cyprus, of which defendant 1 is the Managing Director. Defendants 2 are engaged in photographic enterprises in Cyprus. [*367]

The defendants, which are sometimes acting in their company capacity and sometimes in their individual capacity, entered into an agreement with the plaintiffs which was signed on 15.4.76, whereby the plaintiffs undertook the obligation to find suitable personnel for the defendants on payment of a certain reward. The plaintiffs, by virtue of this agreement, found a certain John Barnes whom they introduced to the defendants and who employed him as they themselves, admitted in a letter dated 3.8.76. It was an express term of the agreement between the parties that the plaintiffs have no responsibility whatsoever for the abilities and expertise of the person that would be employed by the defendants. The said John Barnes worked with the defendants for a period of eight weeks, and the plaintiffs, according to the calculations made on the basis of their agreement dated 15.4.76 (Exhibit 3) ,were entitled to the equivalent sum of £S294. 84 p in Cyprus Pounds.

The defendants in their defence admitted that they signed the contract referred to above, as well as the standard terms of business for engagement of staff overseas. But they further alleged that they have made it clear to the plaintiffs what they expected of the person that they would employ, the terms, the qualifications, the specialisations, experience and knowledge, and they further alleged that by their letter dated 3.8.76 they have pointed out to the plaintiffs that they employed Mr. Barnes for only a period of one month, for trial purposes. They alleged that John Barnes remained in their services for only a period of one [*368] month. During this period, they ascertained that he did not have even the elementary qualifications and abilities or experience, and that he was totally unsuitable for the post.

The defendants alleged that the plaintiffs are not entitled to any remuneration whatsoever as the person that they introduced to the defendants was not suitable, and in fact, the defendants have suffered damages for the period that they have employed him. They counterclaimed a sum of £1,040.- which amount represents the ticket expenses of Mr. John Barnes, salary of one month, stay of one month, hotel expenses, and various other items bought for him, and expenses for a photographic apparatus called "Densitometer". In their reply, plaintiffs stated that, by virtue of the contract signed between the parties, the plaintiffs are entitled to the sum claimed as it is provided in the contract (Clause 4) that:-

(A) The plaintiffs cannot accept any responsibility for the credentials of employees.

(B) Applicant's references should in every case be confirmed by defendants, and

(C) should the employee leave within a period not exceeding ten weeks from commencement of duties, the charge will be 10% of the total fee for each week the employee is in defendants' employ.

They further stated that the defendants are estopped from claiming any amount by way of counterclaim. [*369]

Both counsel by consent produced a bundle of documents which is before me as exhibit 1-38, The plaintiffs did not call any other evidence.

For the defendants Mr. Michael Geades gave evidence. Mr. Geades in essence alleged what the defendants say in their Statement of Defence, i.e. that they have applied to this firm, the plaintiffs, to secure an expert for their photographic laboratory and what the plaintiffs sent to them was totally unsuitable and, therefore, they were not entitled to any remuneration. In fact, they suffered damages which they counterclaim.

From the Exhibits before me, I can see that the defendants wrote a letter to the plaintiffs in which they gave the particulars of their work and what they were asking for. The plaintiffs, in their letter of 15.4.76, sent to the defendants their "standard terms of business for engagement of staff overseas" contract, which the defendants signed.

As there is no dispute as to the amount claimed, if the plaintiffs are entitled to, I shall only deal with clause 4 of this contract which reads:-

"You are obliged to advise us in writing within 7 days of any Employee leaving your employment or ceasing to be employed by you and until such notification is received by us you shall continue to be liable for the fee hereinbefore set out.[*370]

Applicants' references should he confirmed by you in every case. This Agency cannot accept any responsibility for the credentials of Employees".

Another provision of this contract, which is worth noting, is clause 2, which reads:-

"All fees shall be due and payable immediately on commencement of employment if the Employer has obtained the Employee".

From the correspondence between the parties, it appears that the plaintiffs at least introduced another three persons to the defendants and they directed them to come in direct contact with them to enable them to check their credentials and save time. This procedure was obviously accepted by the defendants. This is also clear from Exhibit 10. it appears that what the plaintiffs actually did, was to get in touch with the candidates, prepare a resume of the candidates, like e.g. their name, address, telephone number, nationality, marital status, present employment, position, salary, previous engagement, notes of their present employment which they sent to the defendants who, in their turn, came in touch with the candidates for further correspondence and verification of their credentials.

By a letter, dated 3.8.76, the defendants wrote to the plaintiffs that they have decided, to offer the job to Mr. Barnes who was due to arrive in Cyprus within a few days. They further informed the plaintiffs that they would employ him for one month for testing purposes only, and if [*371] he was found to be satisfactory, then, they would extend the contract. By a letter, dated 8.9.76, the defendants wrote a letter to the plaintiffs, saying that Mr. Barnes, who was engaged on a trial basis, greatly disappointed them as not being qualified and experienced in photo-finishing and training, so they felt obliged to contact another candidate. They said that they would settle the fees as soon as they secured somebody for the job who ought to be exceptionally keen in the photo-finishing field, active and energetic, and capable to undertake the management of their laboratory. The plaintiffs insisted on payment by their letter of 10.9.76, as mentioned in Exhibit 26, which is a confirmation of a telephone conversation between the parties. By Exhibit 7, the defendants denied any payment in respect of Mr. Barnes' employment, and by their reply dated

28.9.76 the defendants reiterated their demand for payment. A rather obscure letter and difficult to understand was sent by the defendants to the plaintiffs on 5.10.76, which is Exhibit 30. What I gather from this letter is that they deny responsibility for payment, but that they would like the plaintiffs to continue their efforts in finding a more suitable person and that they would pay double. It is a rather conflicting letter, speaking about the settlement of a credit note as soon as they get the confirmation from the Central Bank, but at the same time, denying liability, yet they would employ some one else, again on a trial period, and I must say that I am rather confused by this letter. Exhibit 23 is a debit note by the plaintiffs claiming £S294.80p. The plaintiffs [*372] claim the amount stated above, by way of breach of contract, but they also claim under the quantum meruit principle. I think that it would be better and more convenient if the position between the parties was examined first in their contractual capacity and then on a quantum meruit basis.

Both counsel in the case have addressed the Court in an elaborate manner and I must say that they have tackled their case with diligence and profoundness. The essence of the defence is that clause 4 of the contract signed between the parties is an exemption clause and as such, it cannot, be resorted to by the plaintiffs in order to claim what they are not actually entitled to. In other words, it is the allegation of the defendants that it was the duty of the plaintiffs to see that the person they introduced to the defendants was a suitable person in accordance with their demands, and the fact that by clause 4 of the contract it is provided that they should not be responsible as this is the responsibility of the defendants, cannot be resorted to. This is a very fine and delegate legal problem, one of the most difficult if I may say so.

We have the fortune to find the most important English cases in the leading Cyprus case of Ioannis Kokkalos & Sons Ltd., v. Nicos Karayiannis in the judgment of President Triantafyllides,reported in (1976)11 J.S.C.163O. In the case of J. Spurling Ltd. v. Bradshaw (1956) 1 W.L.R. p. 461, it is stated:-

"These exempting clauses are nowadays all held to be subject to the overriding proviso that [*373] they only avail to exempt a party when he is carrying out his contract, not when he is deviating from it or is guilty of a breach which goes to the root of it. Just as a party who is guilty of a radical breach is disentitled from insisting on the further performance by the other, so also he is disentitled from relying on an exempting clause".

It appears to me that the leading case in the matter is that of Suissee Atlantique Societe d' Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale (1967) 1 A.C. 361.

In a most elaborate judgment Lord Reid had this to say:-

"As a matter of construction it may appear that the terms of the exclusion clause are not wide enough to cover the kind of breach which has been committed. Such clauses must be construed strictly and if ambiguous the narrower meaning will be taken. Or it may appear that the terms of the clause are so wide that they cannot be applied literally: that may be because this would lead to an absurdity or because it would defeat the main object of the contract or perhaps for other reasons. And where some limit must be read into the clause it is generally reasonable to draw the line at fundamental breaches. There is no reason why a contract should not make a provision for events which the parties do not [*374] have in contemplation or even which are unforseeable, if sufficiently clear words are used. But if some limitation has to be read in it seems reasonable to suppose that neither party had in contemplation a breach which goes to the root of the contract".

Also, in his judgment, in the same case, Lord Hodson stated (at p. 410):-

"Sometimes it has been declared that where a fundamental breach of contract had occurred an exceptions clause could not as a matter of law be relied upon, but the better view on the authorities, and that accepted by both sides before your Lordships, is that as a matter of construction normally an exception or exclusive clause or similar provision in a contract should be construed as not applying to a situation created by a fundamental breach of contract. I have here quoted the language used by Pearson L.J. in U.G.S. Finance v. National Mortgage Bank of Greece and National Bank of Greece, S.A. (1964) 1 Lloyd's Rep. 446 which is contained in the passage cited by my noble and learned friend, Lord Reid - see also the judgment of Diplock L.J. in Hardwich Game Farm v. Suffolk Agricultural Poultry Producers Association (1966)1 W.L.R. 287 in which judgment was delivered on December 20, 1965 - a recent [*375] example of the acceptance of the opinion of Pearson L.J.

So long as one remembers that one is construing a document and not applying some rule of law superimposed upon the law of contract so as to limit the freedom of the parties to enter into any agreement they like within the limits which the law prescribes one can apply one's mind to each contract as it comes up for consideration.

I would adopt the language of Atkin L.J. in The Gap Palos (1921) p. 458, 471, 472.

'I am far from saying that a contractor may not make a valid contract that he is not to be liable for any failure to perform his contract, including even wilful default; but he must use very clear words to express that purpose....'".

In a more recent case, however, in 1973, Gillespie Brothers & Co. Ltd. v. Roy Bowles Transport Ltd. & Another (1973) 1 All E.R. 193, Lord Denning M.R. had this to say:-

"The correct proposition, as I have always understood it, is this: even though the words of a clause are wide enough in their ordinary meaning to exclude liability for negligence, nevertheless if it is apparent that sufficient content can be given to them without doing so (as in the case of a common carrier), then they will be given that content only. They will not [*376] be held to cover negligence.

………………………………………………………………………….......

But, even so, I say to myself: this indemnity clause, in its ordinary meaning, is wide enough to cover the negligence of the carrier himself. Why should not effect he given to it? What is the justification for the courts, in this or any other case, departing from the ordinary meaning of the words? If you examine all the cases, you will, I think, find that at bottom it is because the clause (relieving a man from his own negligence) is unreasonable, or is being applied unreasonably in the circumstances of the particular case. The judges have, then, time after time, sanctioned a departure from the ordinary meaning. They have done it under the guise of ’construing’ the clause, They assume that the party cannot have intended anything so unreasonable. So they construe the clause ’strictly'. They cut down the ordinary meaning of the words and reduce them to reasonable proportions. They use all their skill and art to this end. Thus they have repeatedly held that words do not exempt a man from negligence unless it is made clear beyond doubt; nor entitle a man to indemnity from the consequences of his own negligence; see Great Western Railway Co. v. James Durnford & Sons Ltd. (1928) All E.R. Rep. 89, and John Lee & Son (Grantham) Ltd. v. [*377] Railway Executive (1949) 2 All E.R. 581. Even when the words are clear enough to ordinary mortals, they have made fine distinctions between the kind of loss and the cause of loss; so that, if a clause exempts from ’any loss’ it is hot sufficient, hut if the magic words ’however caused’ are added, it is: see Joseph Travers & Sons Ltd. v. Cooler (1915) 1 K.B. 73 at 101, Gibaud v. Great Eastern Railway Co.

(1921) 2 K.B.426 at 437 and Rutter v. Palmer (1922) 2 K.B. 87 at 94. Likewise, they have regularly disallowed exemption negligence: see Hollier v. Rambler Motors (AMC) Ltd. (1972) 1 All E.R. 399. Nor will the words of an exemption clause normally be held to apply to a situation created by a fundamental breach of contract: see UGS Finance Ltd. v. National Mortgage Bank of Greece and National Bank of Greece S.A. (1964) 1 Lloyd’s Rep. 446 at 453, per Pearson L.J., which was approved by the House of Lords in Suisse Atlantique Socifete d’ Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale (1966) 2 All E.R. 61. The time may come when this process of 'construing' the contract can be pursued no further. The words are too clear to permit of it. Are the courts then powerless? Are they to permit the party to enforce his unreasonable clause, even when it is so unreasonable, or applied so unreasonably, as to be unconscionable? When it gets to this [*378] point, I would, say* as I said many years ago,'..….there is the vigilance of the common law which, while allowing freedom of contract, watches to 'see that it is not abused': see John Lee & Son (Grantham) Ltd. v. Railway Executive

(1949) 2 All E.R. at 584. It will not allow a party to exempt himself from his liability at common law when it would be quite unconscionable for him to do so".

I also have in mind Chitty on Contracts "General Principles" 24th ed., p. 361, where the chapter on Exemption Clauses is examined at length.

From the authorities and the interpretation given by our Supreme Court and the Courts in England, I am of the view that one can rely on an exemption clause only if such an exemption clause does not come outside the contract. The exemption clause must be within the four corners of the contract, not to be contrary to the main object and intent of the contract and of its intention. In the case of Alderslade v. Hendon Laundry Ltd. (1945) Q.B. Div. p. 149 at p. 192, Lord Greene M.R. had this to say:-

"A limitation clause of this kind only applies where the damage in respect of which the...... clause is operative takes place within the 'four corners of the contract'. But it does not apply where the loss 'is due to some act [*379] by the defendants outside what they had 'contracted to do'.(1) Thus a distinction must be drawn between acting defectively within the contract and. acting outside it altogether. This distinction can be most clearly illustrated by 5 contrasting the position of a ship-owner who supplies an unseaworthy ship with that of a ship-owner who deviates (i.e. departs from the agreed route). One who supplies an unseaworthy ship is regarded as acting defectively within the contract and can rely on an exemption clause(2) But one who deviates is regarded as acting outside the contract and so cannot rely on an exemption clause(3). The same principle applies to land carriage(4). And similarly a warehouseman can rely on an exemption clause if he stores the goods in the agreed place and they are damaged through his negligence;(5) but one who stores the goods in a place other than that agreed loses the protection of the exemption clause(6) The [*380] principle is not confined to cases in which the defendant acts in a geographical sense outside the contract. Long delay(1) or some wholly unauthorised method of performance may bring it into operation, Thus in Davies v. Collins (2) the defendants accepted the plaintiff’s uniform for cleaning under a contract exempting them from liability for loss or damage. They had it cleaned by a subcontractor, who lost it. It was held that the defendants could not rely on the exemption clause as the loss occurred 'in the course of some operation which was never contemplated by the contract at all(3).”

“Whether an act is 'outside' the contract depends on the true construction of the contract. In Gibaud v. G.E.R.y4 the plaintiff left his bicycle at the defendants’ cloakroom and was given a ticket containing an exemption clause. The bicycle was not put in the cloakroom, but left in the hall and stolen from there. Had the contract been to store the bicycle in the cloakroom the defendants would have acted outside [*381] the contract. But it was held that the contract was, on its true, construction, simply one to store in any convenient place. Thus the defendants could rely on the exemption clause. Similarly, the question whether a ship has deviated depends on the construction of the contract of carriage: in this connection it should be remembered that clauses giving liberty to deviate are restrictively construed. Again, the reason why in Davies v. Collins1 subcontracting was 'outside' the contract was that the exemption clause began with the Words Whilst every care is taken. ……. The defendants could not take care of the uniform while someone else was cleaning it."

From the material before me, it is clear that the plaintiffs in fact supplied the defendants with someone who might or might not be suitable for what he would be employed. It is, in my opinion, and in the light of the authorities cited, quite within the intention of the parties at the time of making of the contract, and the plaintiffs can, in fact, rely on the provisions of their contract regarding the terms of their relationship, both as regards to the mode and amount of payment, as well as the non obligation of the plaintiffs regarding the credentials of the candidates. Furthermore, I would like to stress that the defendants themselves accepted to have direct contract with the . candidate, it was their choice to take one out of three [*382] or four, and check his abilities and skill, and it was their

decision to have this man tested for a period of one month. In fact, he was tried for seven weeks, and if a man is tested for seven whole weeks by his expert employer, and only then it is ascertained that he is not the right person for the right job, then I do not see how the plaintiffs would in any way be responsible for not finding the appropriate candidate to introduce to the defendants. Only this fact might be a proof that the plaintiffs were acting within the "four corners of the contract".

I have no doubt in the light of the above that the plaintiffs fulfilled their part of the contract whilst the defendants failed to do so.

In conclusion, the plaintiffs are entitled to their remuneration, as asked for. Regarding the counterclaim, I think I must say very little about it because there is admission by the defendants themselves that they accepted to have the candidate tested for a period of one month and if he was not satisfactory, then they would send him back. This is exactly what happened. I fail to see how they can claim any damages for this employment. Whatever expenses they incurred, it was their affair, they chose to be very generous to him, taking him to luxurious hotels, but I fail to see how they can possibly claim any damages for their extravagancies. [*383]

The counterclaim, therefore, fails.

In the result, I give judgment for the plaintiffs as per claim, against the defendants, with costs. Counterclaim dismissed without any order to costs. Costs to he assessed by the Registrar.

Judgment for plaintiffs as per claim, with costs. Counterclaim dismissed.

1 (1945) K.B. Div., p.149 at p. 192.

2 The Europa (1908) p. 84; Kish v. Taylor (1912) A.C. 604.

3 Joseph

Thorley Ltd. v. Orchis SS. Co. Ltd. (1907) 1 K.B. 660; James Morrison & Co Ltd, v. Shaw Savill & Albion Co. Ltd. (1916) 2 K.B. 783.

4 L. & N.W. Ry. V. Neilson (1922) 2 A.C. 263.

5 J. Spurling Ltd. v. Bradshaw (1956)1 W.L.R. 461.

6 Woolf v. Collis Removal Services (1948) 1 K.B. 11, 15.

1 Bontex Knitting Works Ltd. v. St. john' s Garage (1943) 2 All E.R. 690; (1944) 1 All E.R. 381.

2 (1945) 1 All E.R. 247.

3 Ibid., p. 249.

4 (1921) 2 K.3. 426; cf. Harris v. Great Western Ry. (1876) 1 Q.B.D. 515.

1 (1945) 1 All s.R. 247.