When is negligence "gross" negligence (contractually speaking)?

In Scotland or England the law of delict/tort does not make a distinction between negligence and "gross" negligence, as appears in some other jurisdictions. The recent case of Camarata Property Inc v Credit Suisse Securities (Europe) Ltd [2011] EWHC 479 (Comm) is the first case where the Courts in either England or Scotland have ruled that the term "gross negligence" is a different concept from just simple ‘negligence’.

On the question of gross negligence, the Court held that this had to be considered in view of the contract as a whole as opposed to being a strictly defined concept under English law. The Court said that, since the agreement in this case referred to both negligence and gross negligence, it was clear that the parties had intended there to be a difference between the two terms. The Court noted that something more than just failure to exercise due care and skill would be required in order to satisfy ‘gross’ negligence. The Court held that, by its very nature, ‘gross’ negligence could only apply to conduct demonstrating a serious disregard of, or indifference to, an obvious risk.

What does this mean?

This is yet another case in which the Courts have focused on the intention of the parties, rather than just the strict words in the contract, in order to determine what the contract really means. In this case, the parties had separated the concept of ‘gross’ negligence from ordinary negligence in the agreement, therefore the Court ruled that the parties had intended there to be a difference. It was this separation of the two terms rather than any hard and fast rule about contractual gross negligence that influenced the Court’s decision. If you intend to include the terms "negligence" and "gross negligence" in a contract, you should make sure that they are clearly and separately defined in order to benefit from any difference in meaning between the two terms. Alternatively, if you are the party who is likely to be enforcing the negligence provisions, you may wish not to include the term ‘gross’ negligence in the contract since this may mean that the other party will only be liable for conduct demonstrating a “serious disregard of, or indifference to, an obvious risk”. In this case it may be better to stick with plain negligence.