The courts used to take a strict approach when interpreting limitation and exclusion clauses. But there is a growing recognition that parties to commercial contracts should be free to allocate risks as they see fit. Take, for example, Persimmon Homes Ltd v Ove Arup & Partners Ltd [2017] EWCA Civ 373; [2017] PLSCS 112. The developers were members of a consortium that had engaged Arup to provide services in connection with the acquisition of a site at Barry Quays in Wales. The consortium’s £53m bid for the land was successful, but it then discovered unexpectedly large quantities of asbestos on the site.
Part of Arup’s overall brief had been to investigate and advise upon contamination. Consequently, the issue for the Court of Appeal was whether they were liable for having negligently failed to warn the consortium that the site was contaminated by asbestos, or whether they were exempt from liability because their contract with the consortium provided that “liability for any claim in relation to asbestos is excluded”.
The developers tried to persuade the court that the word “for” had a causative connotation. Therefore, so their argument went, the exclusion clause should be read to mean that liability for causing any claim in relation to asbestos, or for causing the presence of asbestos was excluded. The developers also asked the court to apply the “contra proferentem” rule, claiming that the clause had not excluded liability for negligence.
The Court of Appeal rejected the developers’ arguments. Their interpretation did not make sense. It was nonsensical to suggest that the exclusion clause was aimed at the possibility that Arup might cause contamination by moving asbestos from one place to another during their investigation procedures, but were liable if it was left in place.
Furthermore, the “contra proferentem” rule, which requires any ambiguity in an exclusion clause to be resolved against the party who put the clause forward and relies upon it, now has a very limited role to play in relation to commercial contracts negotiated between parties of equal bargaining power. The exclusion clause was, in any event, clear and unambiguous. So the rule was of no assistance. It was not possible to think of any non-negligent claim relating to asbestos that the parties might have been trying to exclude – and the clause was wide enough to cover negligence by Arup in advising about the extent of asbestos on site.
Lord Justice Jackson noted that, in major construction contracts, parties commonly agree how to allocate the risks between themselves and who will insure against what. He explained that exclusion clauses are part of the contractual apparatus for distributing risk – and said that “there was no need to approach such clauses with horror or with a mindset determined to cut them down”. Contractors and consultants who accept large risks will charge for doing so (and will no doubt insure appropriately). Whereas contractors and consultants who accept lesser degrees of risk will presumably reflect that in the fees that they charge.
The language used by the parties and the application of business common sense led to the same conclusion. The exemption clause represented an agreed allocation of risks between the parties. Its meaning was clear and the court should give effect to it. Therefore, Arup had successfully excluded liability for claims in relation to asbestos.
Allyson Colby is a property law consultant
