What is ‘gross negligence’ anyway?

Commercial and contract managers will often hear their lawyers debate the exclusion of “gross negligence” from contract clauses which limit or exclude one party’s liability under the contract.

But what does ‘gross negligence’ actually mean?

Is it any different from mere ‘negligence’?

Isn’t a person either guilty of negligence or not guilty of negligence, with there being nothing in between?

The traditional view was that there is no difference between negligence and gross negligence. Indeed, it has been said that a distinction between negligence and gross negligence has no significance in tort law.

The position is different, however, in contract law. His Honour Justice Tottle of the Supreme Court of Western Australia confirmed as much earlier this week in the decision of GR Engineering Services Ltd v Investmet Ltd [2019] WASC 439.

Some takeaways from the decision are:

• gross negligence is not a term of art and its meaning in any given case is to be determined by the usual principles of contractual construction;
•  that means the court will interpret the term in the context of the contract as a whole;
• gross negligence may therefore mean something more than mere negligence; it being intended to represent something more fundamental than, say, a failure to exercise proper skill or care. It may be a grave, serious or significant departure from the standard of care which a reasonable person would have observed;
• gross negligence may mean something amounting to reckless disregard, including conduct undertaken with actual appreciation of the risks involved and serious disregard or indifference to an obvious risk;
• it might exist even without any conscious appreciation of the risk, judged by reference to how a reasonable person would have appreciated the risk; and
• the difference will be one of degree and not of kind.

In the circumstances before Tottle J, while it was not in the end necessary for him determine the matter, he remarked that the mere adoption by a party of an incorrect interpretation of the contract would not have constituted gross negligence (if indeed it would have even amounted to negligence in the first place).

The key point from my perspective is that if the draftsperson is going to use such nebulous terms as gross negligence, then at least define in the contract what it means! Perhaps a definition that requires that the party knew the offending conduct would involve a breach of a duty of care or had a reckless disregard whether or not the conduct would involve such a breach, but proceeded anyway.

The material in this article is provided only for general information. It does not constitute legal or other advice.

Contact Grondal Bruining on  +61 8 6500 4300 for advice specific to your circumstances.

Dean Grondal – Principal, GRONDAL BRUINING

Ph: +61 8 6500 4320

Email: [email protected] 

Web: www.grondalbruining.com.au

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