Courts Uphold Badly Drafted Liability Cap

• Published date: 13 July 2023
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Real Estate and Construction, Corporate and Company Law, Contracts and Commercial Law, Trials & Appeals & Compensation, Construction & Planning
• Law Firm: Gowling WLG
• Author: Mr David Lowe, Andrew Smith, Helen Davenport, Ashley Pigott and Daniel Wood

In the recent High Court case relating to an IT contract Drax Energy Solutions Limited v Wipro Limited[2023] EWHC 1342 (TCC), the courts have looked closely - as preliminary issues - at the drafting of a clause capping liability.

Disputed liability cap

The liability cap drafting at the core of the dispute provided that:

"the Supplier's total liability to the Customer... arising out of or in connection with this Agreement (including all Statements of Work) shall be limited to an amount equivalent to 150% of the Charges paid or payable in the preceding twelve months from the date the claim first arose."

Wipro (the supplier - relying on the cap) claimed that this wording created a single aggregate cap on liability of just over '11.5 million (150% of the first year's charges of '7,671,118). Drax disagreed, querying:

• why if it was a single cap, the clause did not use the word "aggregate"; and
• why the reference to 12 months prior to the date the claim first arose - how would that work with an aggregate cap potentially covering several claims?

Drax (the customer) claimed instead that the cap was a per claim cap - i.e. liability is capped at '11.5 million per claim. But Wipro challenged this, arguing that:

• if it was a single cap, why...