This Court of Appeal ruling confirms a broader approach to exclusion clauses in contractual disputes.
A unanimous decision by the Court of Appeal furthers a recent line of authority that promotes a natural reading of exclusion clauses for liability, and diminishes the scope of the Canada Steamship principles (a Privy Council decision on factors for dealing with exclusion clauses) and the contra proferentem rule (that an ambiguous clause will be interpreted against the interests of the party that requested that the clause be included).
A consortium (Persimmon Homes) was set up to buy a site of development called the Barry Waterfront and contracted a firm of civil engineers, Arup to advise it on the bid for the site, which it won. The consortium contracted Arup further for more advice (including contamination problems) relating to the development of the site.
When construction began, however, the Consortium discovered a large amount of asbestos present at the site, which would have led to the consortium paying less for the site if had they known this originally. The consortium took Arup to court for breach of contract, negligence and breach of statutory duty. Arup relied on exclusion claused in its contract.
The Court of Appeal ruled in favour of Arup, noting that a natural reading of the exclusion clauses did not lend itself to the restrictive rules suggested by the Consortium. It noted that both the Canada Steamship principles and the contra proferentem rule cited by the Consortium applied only in cases where a usual process of interpretation would genuinely not resolve ambiguity, which was not deemed the to be so in this case.
Consequences? The use of the contra proferentem rule and the Canada Steamship principles may diminish as it applies to exclusion clause disputes due to the decreased scope of authority, but the same may not be true of their influence in relation to the interpretation of indemnity and other clauses.
**This article was researched and prepared by Jamie Crosbie Chen – Hedges Law intern 2017**
Businesses disputing clauses in agreements which exclude liability for certain acts or omissions of the other party should concentrate on other means of attacking those clauses