Exclusion clauses are a popular topic at the Courts at the moment. Construction Senior Associate Will Cursham looks at a very recent Court of Appeal decision on the subject.

Millions of pounds can ride on whether an exclusion clause in a contract is enforceable or not. This is because a valid exclusion clause can operate to exclude a party’s liability for a specified issue (or issues) entirely.

So it is no surprise that the enforceability of exclusion clauses is an issue that frequently comes before the Courts, and that parties faced with exclusion clauses are prepared to try to persuade the Courts that those exclusion clauses are unenforceable.

Take for example the consortium of housebuilders (the consortium) who were developing some apartment blocks on the waterfront in Barry, South Wales. The consortium engaged Ove Arup (Arup) as its engineer. One of Arup’s responsibilities covered ground investigations and contamination (including asbestos).

When construction works started, the consortium discovered a good deal more asbestos than Arup had identified. Understandably, the consortium looked to Arup to recover the losses that it suffered as a result. Fortunately for Arup both its appointment with the consortium, and its warranties with each individual member of the consortium, contained the following clause: “Liability for any claim in relation to asbestos is excluded”.

On the face of it at least, this clause looks like it would cover any claim in relation to asbestos, including claims against Arup due to the fact that it had failed to identify all the asbestos at the site.

The consortium, however, took the view that the parties could not have intended to exclude Arup’s liability for negligence, and that it should have read: “Liability for causing any claim in relation to asbestos is excluded”.  In other words, the clause did not cover negligence on the part of Arup for not identifying all the asbestos, but rather liability for “causing” asbestos contamination.

The dispute went all the way to the Court of Appeal[1], which was not persuaded by the consortium’s argument. In its decision, it emphasised that the wording of the exclusion clause was quite clear, and that it did cover negligence on Arup’s part. There was no reason to go behind the natural and ordinary meaning of the words. On the practical side, the Court of Appeal pointed out that the consortium’s interpretation of the clause did not make sense – how would an engineer “cause” asbestos contamination?

Conclusion

The consortium’s argument was a determined attempt to try and overcome an exclusion clause that meant that the consortium had no recourse to Arup for the very substantial losses it sustained as a result of Arup’s failure to identify all the asbestos at the site. Yet the Court of Appeal’s decision is not at all surprising, given that the meaning of the exclusion clause is clear.

In the past, exclusion clauses have been regarded by the Courts as something of a bête noire. However, as Lord Justice Jackson said in his judgment in this case: “There is no need to approach such clauses with horror or with a mindset determined to cut them down”. In construction contracts, parties are free to allocate risk as they see fit. Those parties who accept lesser degrees of risk (by including exclusions) will usually reflect this in the fees that they agree. The Courts should not be looking to cut such clauses down.

This decision is in keeping with the Courts’ recent softening attitude towards exclusion clauses. If the wording of the clause is clear, the Courts are very unlikely to go behind it and try and work out what the parties intended.

This blog post was written by Will Cursham. For further information, please contact:

Will Cursham, senior associate, Construction

T: 0121 234 0066

E: William.Cursham@gateleyplc.com 

[1] Persimmon Homes Limited and Others v Ove Arup & Partners Limited and Others [2017] EWCA Civ 373.


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.