Persimmon Homes Ltd & Ors v Ove Arup & Partners Ltd & Anor

Contractual exclusion and limitation clauses are construed by applying the ordinary principles of contractual interpretation. The court must identify what a reasonable person with the relevant background knowledge would understand the parties to have meant. Guidance such as the Canada Steamship principles is not a mechanistic code.

Commercial parties of equal bargaining strength may allocate risks, including negligence risks, as they choose. Clear words are required, but commercial improbability does not justify departing from clear language. An exclusion of liability for any claim in relation to asbestos may therefore exclude liability for negligent advice concerning pre-existing asbestos, where that is the natural meaning in the contractual context.

The claimants were developers who acquired and developed Barry Waterfront in South Wales. They claimed damages from professional engineers for alleged breach of contract and negligence concerning asbestos contamination.

The court tried three preliminary issues concerning the construction and effect of a September 2009 agreement and 2010 warranties. The issues included whether the later agreement superseded or governed an earlier January 2007 contract, whether clauses limiting pollution and contamination liability and excluding asbestos claims applied to the pleaded claims, and whether liability was capped at £5 million.

1. Interpretation of exclusion clauses. The court’s task was to ascertain the parties’ objective intention in their commercial and contractual context. Limitation and exclusion clauses are construed by the ordinary iterative process of contractual interpretation. The Canada Steamship principles are useful guidance, but are not to be applied mechanically. The requirement remains that the meaning of the exclusion must be clear at the end of the interpretative process.
2. Commercial risk allocation. Commercial parties of equal status are entitled to allocate risks and liabilities as they see fit, particularly where insurance is available. The court should not strain to find ambiguity or reject a clear allocation merely because it appears unattractive in retrospect. The repugnancy doctrine could not be used to disregard the exclusion where the contract was not virtually reduced to a declaration of intent.
3. Meaning of the clauses. The first sentence of clause 6.3 of the September 2009 Agreement limited liability for pollution and contamination to £5 million, whether liability arose in contract, tort, negligence or otherwise. The separate sentence excluding liability for “any claim in relation to asbestos” was an absolute exclusion. Its broad wording covered claims for increased costs resulting from negligent failure to advise about pre-existing asbestos, whether or not Arup had caused the uncontrolled spread of asbestos. The same conclusion applied to clause 4.3 of the 2010 Warranties.
4. January 2007 Contract. The September 2009 Agreement did not supersede, govern or obliterate the January 2007 Contract, and clause 6.3 was not incorporated into it. The reference in clause 1.1 to all services performed in relation to the Project did not naturally extend to the limited pre-acquisition advice supplied under the earlier contract.
5. Preliminary Issue 1 was answered “No” on both limbs. Preliminary Issue 2 was answered “Yes”, subject to that conclusion. Preliminary Issue 3 did not arise; had it arisen, the court would have answered “Yes” under both the Agreement and the Warranties.