Building contract – Breach of contract – Construction – Claimant consortium purchasing land in South Wales for development – Defendant engineers providing advice and professional services – Claimants subsequently discovering asbestos contamination on site – Claimants commencing proceedings for breach of contract and negligence against defendants – Court considering preliminary issues as to effects of agreements between parties – Whether later agreement superseding original contract between parties – Whether warranties excluding liability for asserted claims – Preliminary issues determined
The claimant consortium comprised developers who had bought and developed a large site at Barry Quays, Barry Waterfront, Barry, South Wales. The defendants were engineers which had been involved with the potential and actual development of the site, providing advice and professional services. Potential contamination of the site was of concern to all parties involved. It was the claimant’s case that, after committing itself to the development and purchasing the site, it had discovered asbestos contamination of which it had previously been unaware.
In those circumstances, the consortium brought proceedings against the defendants, claiming damages for alleged breach of contract and negligence. The claim was founded on various agreements between the parties and a number of preliminary issues arose for determination: (i) whether an agreement between the claimant and the defendants reached by exchange of emails in January 2007 for the provision of services in preparation for the claimant’s bid for the site was superseded a later agreement made in September 2009 relating to the provision of services concerning the site so that the 2007 agreement ceased to exist as an independent source of contractual obligations and could give rise to a claim for a breach of its terms; and (ii) whether the words “liability for any claim in relation to asbestos is excluded” in clause 6.3 of the September 2009 agreement and clause 4.3 of warranties provided by deed in 2010, which made provision for the defendants to take out professional indemnity insurance, excluded liability for each and every claim asserted in the particulars of claim.
Held: The preliminary issues were determined.
(1) The overarching objective for the court was to identify the intention of the parties. Interpretation should be neither uncompromisingly literal nor unswervingly purposive. The process of interpretation was an iterative process. Although judgments had to be written in two dimensions, giving the appearance of a chronological approach to arguments, it was necessary to keep in mind and bring to bear all relevant considerations and to revisit them as necessary in the search for the correct meaning of the contract. Where words were capable of more than one meaning, the court had to consider the implications of the rival constructions as part of the interpretive process and was entitled to prefer a construction which was consistent with business common sense and to reject one that was not. Further, the court had to treat what it considered to be “business common sense” with caution, because what appeared to be business common sense might depend upon the standpoint from which the question was asked. Moreover, the court should not strain to find ambiguity where none existed. If, at the end of the normal interpretative process, the meaning remained unclear and ambiguous, the court had as a last resort various presumptions to assist it, such as the contra proferentem rule. But such presumptions only fell to be applied if the true meaning of the contract had not emerged from the normal iterative process of interpretation: Arbuthnot v Fagan [1995] CLC 1396, ICS v West Bromwich Building Society [1998] 1 WLR 896, Wickman Machine Tool Sales Ltd v L Schuler AG [1974] AC 235, Gan Insurance v Tai Ping [2001] CLC 1103, Chartbrook Ltd v Persimmon Homes Ltd [2009] 3 EGLR 119, Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, Andrew Wood v Sureterm Direct Ltd & Capita Insurance Services Ltd [2015] EWCA 839 and Arnold v Britton [2015] EGLR 53 applied.
(2) The court’s task was essentially the same when interpreting what was said to be an exclusion or limitation clause as it was when interpreting any other provision of a contract: it was to identify what a reasonable person having all the background knowledge which would reasonably have been available to the parties would have understood the parties to have meant. In pursuing that task, the commercial and contractual context might make it improbable that one party would have agreed to assume responsibility for the relevant negligence of another, so that clear words were needed. What mattered most was not that the words should initially seem clear but that, at the end of the interpretative process their meaning should be clear and established: HIH Casualty v Chase Manhattan Bank [2003] UKHL 6 and Capita (Banstead 2011) Ltd v RFIB Group [2014] EWHC 2197 (Comm) applied.
(3) Standing back and looking at the critical words themselves, in the context of the contract as a whole and in the wider context of what would have reasonably have been known to persons in the position of the contracting parties at the time of contracting, the September 2009 agreement did not govern the January 2007 contract. Nor had the terms of the September 2009 agreement been incorporated in the January 2007 contract. The September 2009 agreement did not supersede, govern or obliterate the January 2007 contract. Moreover, clause 6.3 of the September 2009 agreement had not been incorporated in the January 2007 contract.
(4) The limitations and exclusions which were the subject of the second preliminary issue were clear in their meaning and were apt to cover liabilities arising in negligence of the type being advanced by the claimant, namely, claims for the increased costs of dealing with pre-existing asbestos contamination or pollution that did not involve allegations that the defendants had caused the uncontrolled spread of asbestos either within or beyond the bounds of the development site. Since the claims were all in relation to asbestos, liability was excluded. If there were any claims that could not be described as claims in relation to asbestos, liability would be limited to £5m under the September 2009 agreement and under the 2010 warranties for essentially the same reasons.
Marcus Taverner QC and Tom Owen (instructed by Dentons UKMEA LLP) appeared for the claimant; Manus McMullan QC and Ronan Hanna (instructed by Nabarro LLP) appeared for the defendants.
Eileen O’Grady, barrister
