Strachan & Henshaw Ltd v Stein Industrie (UK) Ltd & Anor

A contractual variation requires an alteration to the plant or work that the contractor is obliged to provide. A direction changing the location of welfare and timekeeping facilities, with consequent extra walking time for employees, does not alter that contractual work.

An exhaustive liability clause covering rights, obligations and liabilities arising out of, under or in connection with the contract has its natural breadth. References to breach, statutory duty and tort are examples, not limits. Such a clause may exclude contractual damages and damages for misrepresentation arising in connection with the contract.

The appeal arose from an arbitration concerning a subcontract for erection and commissioning work at a power station. Strachan & Henshaw claimed the additional labour cost caused by instructions requiring its tea cabins and clocking station to be moved away from the workplace.

The arbitrator held that the instruction was not a variation under Condition 27 and that Condition 44.4 barred damages claims. On appeal, His Honour Judge Cyril Newman QC, on 22 July 1997, reached the opposite conclusions on those two conditions. The defendants appealed, maintaining that the conditions excluded the claims. The central issues were the construction of the variation clause and the scope of the exhaustive liability clause.

The Vice-Chancellor delivered the leading judgment. Lord Justice Aldous agreed entirely, and Sir Patrick Russell agreed with both judgments. The court unanimously allowed the defendants’ appeal and dismissed Strachan & Henshaw’s associated cross-appeal.

1. Precedence of documents. On the amended Condition 4.1, the words “subject thereto” meant that the Special Conditions and General Conditions prevailed over the other contractual documents. The Special Conditions prevailed over the General Conditions in the event of conflict.
2. Condition 27. “Variation” meant an alteration of the Works. The Works comprised the Plant and the work to be done by the contractor under the Contract. The definition of Plant did not include the contractor’s workforce. The contractual work therefore meant the work which S&H had undertaken to perform, not the arrangements made to bring its employees to the workplace. Relocating the tea cabins and clocking station increased walking time but did not alter that work. The instruction was consequently not a variation. The court referred to Photo Production Limited v Securicor Transport Limited [1980] AC 827 in support of giving the contractual expression its ordinary meaning.
3. Condition 44.4. The clause made the rights, obligations and liabilities provided in the Conditions exhaustive of those arising out of, under or in connection with the Contract or Works. The references to breach, statutory duty and tort were words of exemplification, not limitation. A claim for misrepresentation could therefore be barred if it arose in connection with the Contract. The reasoning was supported by Ashville Investments Ltd v Elmer Contractors Ltd [1989] QB 488, whose relevant dicta the court adopted. The parties were entitled to use a broadly drafted exclusion clause even if it made an assumed contractual right practically worthless.
4. Remaining issues. The success on the two construction points made it unnecessary to decide the contractual entitlement, representation and waiver issues. The Vice-Chancellor added, obiter, that without deceit a statement of present intention would not be a representation of fact capable of supporting a damages claim under the Misrepresentation Act 1967.

S&H’s claim accordingly failed. Declarations and costs orders were made, and leave to appeal to the House of Lords was refused.

• Court of Appeal (Civil Division): Allowed the defendants’ appeal on Conditions 27 and 44.4, dismissed the plaintiff’s associated cross-appeal, made declarations and costs orders, and refused leave to appeal to the House of Lords.
• High Court of Justice, Queen’s Bench Division, Official Referee’s Business: His Honour Judge Cyril Newman QC, on 22 July 1997, reversed the arbitrator’s conclusions on Conditions 27 and 44.4 and upheld findings concerning contractual entitlement, representation and waiver.
• Arbitration: Mr J A Tackaberry QC’s Interim Award on liability dated 14 May 1996 held that the instruction was not a Condition 27 variation and that Condition 44.4 barred the damages claims.