CNM Estates (Tolworth Tower) Ltd v VeCREF I Sarl & Ors (Rev 1)

Exemption clauses are construed by applying ordinary contractual principles, informed by special principles requiring sufficiently clear language before valuable rights or negligence liability are excluded. The Canada Steamship framework is a helpful guide, not a rigid code. A clause limiting liability to loss directly caused by gross negligence or wilful misconduct necessarily excludes liability for ordinary negligence. A contractual acknowledgement that duties are owed under general law does not itself create or preserve unrestricted liability where later provisions clearly limit the circumstances in which claims may be brought. Related contractual provisions should be read consistently, and the meaningful obligations principle does not require a court to preserve an unrestricted remedy where the relevant obligation remains legally recognisable but its enforceability is qualified.

The claimant property developer brought claims against receivers appointed over a development site, alleging breach of their equitable duty to take reasonable skill and care to obtain the best price reasonably obtainable on sale. The receivers relied on clause 19.1 of a debenture and clause 16.10(a)(i) of an intercreditor agreement as contractual defences.

The preliminary issues concerned whether those provisions excluded or limited the receivers’ liability, and how clause 9.5 of the intercreditor agreement affected their construction. The court also considered the interaction between the contractual provisions and the general-law equitable duty of care.

1. Clause 19.1 of the Debenture. The clause did not exclude the receivers’ liability for breach of the equitable duty of care. The words concerning acts, defaults, omissions and misconduct were not sufficiently clear in their contractual context. The nature of the receivers’ functions, the background supplied by Bishop v Bonham, and the related terms of the intercreditor agreement supported that conclusion.
2. Construction of exemption clauses. The court applied ordinary contractual construction, while retaining the special principles associated with Gilbert-Ash (Northern) Ltd v Modern Engineering (Bristol) Ltd, Canada Steamship v The King and the meaningful obligations principle. The Canada Steamship stages are guidance directed to identifying the parties’ intention, not rules to be applied mechanically.
3. Clause 9.5 of the ICA. Clause 9.5 described the duty owed to mezzanine creditors by reference to the duty owed under general law by a receiver or mortgagee to a mortgagor. It did not create or define the duty owed by the receivers to the claimant, nor did it prevent later provisions from limiting liability.
4. Clause 16.10(a)(i) of the ICA. The clause’s provision that liability existed only where directly caused by gross negligence or wilful misconduct necessarily excluded liability for ordinary negligence. Its wide wording applied to actions taken in connection with the debt documents or security property, including realisation and sale of the security.
5. The clause could operate consistently with clause 9.5 and with the equitable duty of care. The duty remained owed, but breach was actionable only where the enhanced factual threshold was met. The meaningful obligations principle did not require a different construction.
6. Disposition. Clause 19.1 of the Debenture did not provide the asserted exclusion. Clause 16.10(a)(i) limited liability for breach of the equitable duty of care to cases directly caused by gross negligence or wilful misconduct.