Robust principles of interpretation of construction contracts reasserted

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Facts

Persimmon was heading a consortium involving a huge development project at Barry Quays in South Wales.  Ove Arup were attained to provide professional advice and services concerning contamination and pollution risks.  Persimmon alleged that Ove Arup had negligently failed to discover and warn of serious asbestos contamination.  If Persimmon had known this they would not have gone ahead with the purchase of the site for £53m.

Ove Arup’s defence relied among other things upon an exclusion clause in its contact with Persimmon “The Consultant’s aggregate liability whether in contract, tort (including negligence), statutory or otherwise was limited to an aggregate £5m.  Liability for any claim in relation to asbestos was excluded.

Persimmon applied on a preliminary basis for a ruling that the exclusion of liability was not effective as a matter of contractual interpretation.

Held:

  1. The exclusion was effective, both parties had access to legal advice and were sophisticated entities who knew what they were doing.
  2. Although Persimmon appealed to “business common sense” this was not a way of avoiding the plain and natural meaning of the words and one would only use the concept of business common sense where words were clearly and obviously capable of more than one meaning. The Courts should be slow to look for ambiguity where none existed.

Comment

Persimmon does not appear to have tried to use the Unfair Contract Terms Act.  Instead it relied upon principles expounded by the House of Lords in Canada Steamship Lines v The King.  This is a 65- year old case in which the Court suggested that where an exclusion clause could be interpreted as applying to non-negligent risks, then it should be assumed that negligent risks were not included in the absence of express words.  The Judge doubted whether that principle was still effective in modern times and declined to apply it.

Following the continuing stream of cases coming from the TCC there appears to be an increasing emphasis on the plain and literal meaning of contracts as opposed to “purposive” approach of trying to examine the parties’ motives or intention.

For more information, contact Robert Langley on 0191 211 7957 or at [email protected].