Interpreting Limitation And Exclusion Of Liability Provisions

Last month the Judge in charge of the Technology and Construction Court handed down Judgment in Persimmon Homes Ltd & others v Ove Arup & Partners Ltd & another [2015] EWHC 3573 (TCC). The Judgment concerned in part the interpretation to be given to limitation and exclusion of liability provisions within Arup appointments/warranties. It is a useful summary of well established principles concerning how the Courts approach interpreting such provisions. It also illustrates the increased weight given by the Courts, when they decide interpretation disputes, to the parties' decisions on risk allocation.

Summary of the Facts

Arup advised a consortium that developed a site at Barry Docks in Cardiff. When site works commenced asbestos was discovered. The consortium brought a claim against Arup for breach of contract and negligence - it being alleged that Arup had failed to warn the consortium of the asbestos.

The relevant limitation and exclusion of liability provisions were in the following Clause 6.3:

"The Consultant's aggregate liability under this Agreement whether in contract, tort (including negligence), for breach of statutory duty or otherwise (other than for death or personal injury caused by the Consultant's negligence) shall be limited to £12,000,000.00 (twelve million pounds) with the liability for pollution and contamination limited to £5,000,000.00 (five million pounds) in the aggregate. Liability for any claim in relation to asbestos is excluded."

A central issue was whether the final sentence of the provisions excluded liability for negligence.

Why There was an Issue to be Decided

At first blush, it might seem odd that such a debate could even arise. However, there is a line of authorities that where there is no express reference to negligence in an exclusion clause, the Court must consider whether the words used are wide enough to cover such an exclusion. Further, if a doubt arises on this point it must be resolved by the Court in favour of the other party. The consortium also ran the argument that asbestos liabilities were a sub-set of pollution and contamination liabilities.

Courts approach interpretation questions with the presumption that neither party intends to abandon any remedies for a contract's breach, and that it will be inherently unlikely that the parties intend there will be no sanction for non-performance. However, it is also firmly settled that if clear words are used in an exclusion clause they are to be given...