Common sense prevails in appeal case

The courts have long been against clauses which limit or exclude a party’s liability and have thus tended to interpret them strictly using a variety of methods, including the contra preferentem rule. This states that where the meaning of a clause is considered ambiguous or uncertain, it will be interpreted against the party who drafted it. However, a recent Court of Appeal decision suggests that the courts are now prepared to take a different approach.

In Persimmon Homes Ltd and others v Ove Arup & Partners Ltd and another (2017), Arup had provided the developers with a collateral warranty, the last sentence of which attempted to exclude liability for any asbestos-related claim. After finding more asbestos than expected, the developers claimed that Arup had been negligent in failing to identify and report this earlier.

The Technology and Construction Court (TCC) held that it was “entirely clear” that the clause excluded all liability relating to asbestos, whether arising from negligence or not. The developers appealed, saying that the clause did not exclude liability for negligence and that the contra preferentem rule should be applied. The Court of Appeal upheld the TCC’s decision and concluded that both the language used by the parties and any application of business common sense led to the same result.

The decision suggests that the courts may be increasingly willing to interpret and enforce exclusion clauses, or indeed any clause agreed by parties of equal bargaining power, and that the contra preferentem rule now has a very limited role in the strict interpretation of commercial contracts negotiated between such parties.