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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Persimmon Homes Ltd v Ove Arup & Partners Ltd & Anor  EWCA Civ 373 (25 May 2017)
Cite as:  EWCA Civ 373, 172 Con LR 1,  CILL 4005,  BLR 417,  PNLR 29,  2 CLC 28
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ON APPEAL FROM Queesn's Bench Division, Technology and Construction Court
Mr Justice Stuart-Smith
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE BEATSON
LORD JUSTICE MOYLAN
| (1) Persimmon Homes Limited
(2) Taylor Wimpey UK Limited
(3) BDW Trading Limited
|Appellants / Claimants
|- and -
|(1) Ove Arup & Partners Limited
(2) Ove Arup & Partners International Limited
|Respondents / Defendants
Manus McMullan QC & Rσnαn Hanna (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Respondent
Hearing dates : Wednesday 3rd & Thursday 4th May 2017
Crown Copyright ©
Lord Justice Jackson :
Part 1 Introduction
Paragraphs 2 7
Part 2 The facts
Paragraphs 8 30
Part 3 The present proceedings
Paragraphs 31 36
Part 4 The appeal to the Court of Appeal
Paragraphs 37 39
Part 5 Grounds 1 & 2: The natural meaning of the exemption clauses
Paragraphs 40 50
Part 6 Ground 3 & 4: The canons of construction and whether the exemption clauses extend to negligence by Arup
Paragraphs 51 62
"Liability for any claim in relation to asbestos is excluded."
"ABP" means Associated British Ports.
"Berridges" means Berridge Environmental Laboratories Limited.
"Cuddy" means Cuddy Demolition and Dismantling Limited.
"ESP" means Earth Science Partnership.
"Healer" means Healer Associates Limited.
"UCTA" means the Unfair Contract Terms Act 1977.
"WDA" means the Welsh Development Agency.
a) Geotechnical/contamination input;
b) Transportation assessment;
c) Earthworks and remediation;
d) On-site spine road highways, drainage, utilities, services diversions and footbridge;
e) Off-site highways and foul improvement;
f) Input into environmental impact assessment produced by others;
g) Public realm and public open spaces;
h) Site presence and as-built drawings;
i) BREEAM eco-homes assessment.
"14.0 Contract and Limits of Liability
We propose that the appointment will be in accordance with ACE agreement or similarly worded appointment contract. Assuming the above commission includes all of the above elements, and the contract is with one party, we propose that the total liability of Arup is limited to £10m, with the liability for pollution limited to £5m in aggregate. We would be prepared to provide a professional indemnity of £5m for each and every event. The liability for any claim in relation to asbestos is excluded. Warrantees would be made available to the three consortium members, with wording to be agreed."
"Your liability to us under this letter (whether in contract, tort (including negligence), breach of statutory duty, restitution or otherwise) shall be limited to £2,000,000 (two million pounds)."
a) Strategic Flooding Consequences Assessment;
b) Revised constraints plan and programme updates, costs advice an input on drainage and highways up to November 2007;
c) Geotechnical/Contamination investigation;
d) Transport assessment input;
e) Specific input on earthworks and remediation consisting of the preliminary and detail design of East Quay, Arno Quay and West Pond and South Quay and the preparation and submission of design information to discharge planning conditions;
f) Strategic level input on on-site highways and drainage to assist masterplanning and earthworks/remediation;
g) Engineering input in environmental impact assessment dealing with geology and ground conditions, water quality and drainage, transportation including text sections and figures.
"1. CONSULTANT'S OBLIGATIONS
1.1. The terms and conditions of this Agreement and the warranties and undertakings which it contains are deemed to apply to all services performed and to be performed by the Consultant in relation the Project both before and after the date of this Agreement.
1.2. The Consultant shall provide the Services in accordance with this Agreement and with such reasonable written instructions (if any) as the Consortium and/or the project manager stated in Schedule 1 ("the Project Manager") may give to the Consultant.
1.3. Where and to the extent that the Consultant has already performed or partly performed any of the Services, the Consultant warrants that:
1.3.1 it has done so in accordance with the standards of reasonable skill and care and all other terms and conditions set out in this Agreement;
1.3.2 all warranties and undertakings in the Agreement apply to them;
1.3.3 the Consultant shall complete the performance of any part performed Services in due time in accordance with this Agreement; and
1.3.4 all sums (if any) paid to the Consultant to date in respect of work done in relation to the Project are payments on account of sums due under this Agreement.
1.4. The Consultant warrants that it has exercised and shall continue to exercise in the performance of its duties under this Agreement all the reasonable skill and care as is to be expected of a properly qualified and competent member of its profession experienced in carrying out work such as its duties under this Agreement in relation to Projects of similar scope, size, nature, timescale and complexity and on a similar site or at a similar location to the Project.
1.4A Notwithstanding any other term of this Agreement the Consultant's obligation in relation to the performance of the Services shall be to exercise the duty of care in clause 1.4 and the Consultant shall only liable if and to the extent that he has failed to exercise the duty of care and for the avoidance of doubt the Consultant shall not be under any fitness for purpose obligation under this Agreement.
6. PROFESSIONAL INDEMNITY INSURANCE
6.1 The Consultant will at its own cost take out and maintain professional indemnity insurance, with reputable insurers carrying out business in the European Union, with a limit of indemnity of not less than £5,000,000 (five million pounds) for any one occurrence or series of occurrences arising out of any one event provided always that:
6.1.1. such insurance shall be in place from the date of this Agreement until no less than 12 years after the completion of the Services;
6.1.2. the insurance premiums in respect of the insurance shall at all times be the responsibility of the Consultant;
6.3 The Consultant's aggregate liability under this Agreement whether in contract, tort (including negligence), for breach of statutory duty or otherwise (other than for death or personal injury caused by the Consultant's negligence) shall be limited to £12,000,000 (twelve million pounds) with the liability for pollution and contamination limited to £5,000,000 (five million pounds) in the aggregate. Liability for any claim in relation to asbestos is excluded."
2nd March 2010: warranty in favour of BDW;
24th April 2010: warranty in favour of Persimmon;
22nd June 2010: warranty in favour of Taylor Wimpey.
(A) The Consultant has been appointed by Associated British Ports ("the Client") under a deed of appointment dated 20th February 1996 ("the Appointment") to provide professional services in relation to the regeneration of No1 Dock, Barry Phase 1 (as defined in the Appointment as "the Project" which expressions has the same meaning in this Deed).
(B) By an agreement dated 21st September 2007 and made between the Client and the Beneficiary the Client is required to procure a warranty from the Consultant in favour of the Beneficiary.
(C) The Consultant is obliged under the Appointment to give a warranty in favour of the Beneficiary.
2. CONSULTANT'S WARRANTIES
The Consultant warrants to the Beneficiary that it has performed and will continue to perform its duties under the Appointment in accordance with the Appointment and that it has exercised and will continue to exercise in the performance of those duties the reasonable skill and care to be expected of a properly qualified member of its profession experienced in carrying out such duties such as its duties under the Appointment in relation to a Project of a similar scope, nature, timescale and complexity and on a similar site or at a similar location to the Project.
4. PROFESSIONAL INDEMNITY INSURANCE
4.1 The Consultant by this Deed covenants with the Beneficiary that it has at its own cost taken out and will maintain professional indemnity insurance with reputable insurers carrying on business in the European Union with a limit of indemnity of not less than £5,000,000 (five million pounds) for each and every claim (but aggregate in respect of contamination and pollution risks), in relation to the Project provided always that:
4.1.1. such insurance shall be in place from the date of commencement of the Consultant's services until no less than 12 years after completion of the services under the Appointment;
4.1.2. if such insurance is not available to the Consultant (and/or members of the Consultant's profession engaged in services of a similar scope, size, nature and complexity as the Consultant) at commercially reasonable rates and terms (excluding any increase in premiums attributable to the actions, omissions, errors or defaults of the Consultant), the Consultant and the Beneficiary will meet and the Consultant will outline the steps he intends to take to manage such risks. If the steps proposed by the Consultant are not reasonably acceptable to the Beneficiary, the parties shall agree an alternative method of managing such risk.
4.2 The Consultant will provide the Beneficiary with reasonable evidence that the policies referred to in this clause 4 are in full force and effect together with a summary of the policy terms and conditions.
4.3 The Consultant's aggregate liability under this Deed whether in contract, tort (including negligence), for breach of statutory duty or otherwise (other than for death or personal injury caused by the Consultant's negligence) shall be limited to £5,000,000.00 (five million pounds) with the liability for pollution and contamination limited to £5,000,000.00 (five million pounds) in the aggregate. Liability for any claim in relation to asbestos is excluded."
"Issue 2: Do the words 'Liability for any claim in relation to asbestos is excluded' in Clause 6.3 of the [September 2009] Agreement and Clause 4.3 of the Warranties exclude liability for each and every claim asserted in the Particulars of Claim?
Issue 3: If the answer is negative, is Arup's liability to the Consortium for each and every claim asserted in the Particulars of Claim limited to £5,000,000.00:
(a) Under the Agreement?
(b) Under the Warranties?"
(i) The Barry Quays site was a challenging one. Arup's services were required to deal with many important issues. Contamination, by asbestos or otherwise, was a modest part of those issues.
(ii) There has been a shift in the approach of the courts to limitation and exclusion clauses since the enactment of UCTA. In commercial contracts to which UCTA does not apply there is a growing recognition that parties should be free to allocate risks as they see fit.
(iii) Most of the claimants' claims are for losses attributable to the Consortium's late appreciation of the extent of the asbestos on site. The claimants also allege that Arup failed to prevent the spread of asbestos on site. The claimants accept that the latter claims are barred by the exemption clauses.
(iv) Properly construed, the exemption clauses cannot be limited in their operation to claims for causing the spread of asbestos or claims for non-negligent breaches of statutory duty.
(v) The exemption clauses bar all claims for asbestos, including those pleaded in the particulars of claim, and limit Arup's liability in respect of other contamination to £5 million.
(vi) The fact that the exemption clauses form part of wider contractual provisions relating to professional indemnity insurance reinforces that conclusion.
(vii) The word "for" in the exemption clauses does not mean "for causing".
(viii) The exemption clauses represent an agreed allocation of risks between the parties. Their meaning is clear. The courts should give effect to that meaning.
(i) The phrase "liability for pollution and contamination" in the first sentence of the two exemption clauses meant "liability for causing pollution and contamination". It did not mean any liability in connection with pollution and contamination.
(ii) The phrase "liability for any claim in relation to asbestos" in the second sentence of the two exemption clauses should be construed in the same way. Asbestos is a sub-category of pollution and contamination. Therefore the second sentence excluded liability for any claim against Arup for causing the presence of asbestos.
(iii) Even if the above arguments are rejected, the second sentence of the clauses does not exclude liability for negligence.
(iv) The contra proferentem rule and the rules governing the construction of exemption clauses remain in place. The judge erred in failing to apply those rules.
" the word "for" has a causative connotation such that it means "for" in the sense of meaning "for causing". It is not a matter of adding words, it is simply a matter of construing the meaning of the word "for" in its context.
48. In contrast, a liability consequent upon a failure properly to advise about a pre-existing, in-situ state of contamination or pollution is not a liability "for" pollution, or contamination but for failing to advise about a state of affairs."
(i) Arup's interpretation accords with the natural meaning of the words used.
(ii) If "for" means "for causing" as Mr Taverner submits, the last sentence of the exemption clauses becomes bizarre, if not ungrammatical. One cannot sensibly read that sentence as saying: "Liability for causing any claim in relation to asbestos is excluded".
(iii) As Mr McMullan submits, it would be nonsensical for the parties to agree that Arup are not liable if asbestos is moved from one part of the site to another, but are liable if it is left in place.
(iv) Clause 6 of the 2009 agreement and clause 4 of the individual warranties set out the professional indemnity insurance which Arup were required to obtain for the Barry Quays project. Clause 6.3 of the 2009 agreement and clause 4.3 of the warranties were clearly intended to limit Arup's liability to the extent of the insurance cover. In that context it is absurd to read limbs 2 and 3 of the exemption clauses as confined to claims for moving contamination from one place to another.
" Quite apart from raising abstruse issues as to who is the proferens (and, in particular, whether the issue turns on the precise facts of the case or hypothetical analysis), "rules" of interpretation such as contra proferentem are rarely decisive as to the meaning of any provisions of a commercial contract. The words used, commercial sense, and the documentary and factual context, are, and should be, normally enough to determine the meaning of a contractual provision."
The judgment of Moore-Bick LJ in Transocean Drilling UK Ltd v Providence Resources PLC  EWCA Civ 372;  2 Lloyd's LR 51 at  to  is to similar effect.
"Their Lordships think that the duty of a court in approaching the consideration of such clauses may be summarized as follows:-
(1) If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called "the proferens") from the consequence of the negligence of his own servants, effect must be given to that provision. Any doubts which existed whether this was the law in the Province of Quebec were removed by the decision of the Supreme Court of Canada in The Glengoil Steamship Company v. Pilkington.
(2) If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens. If a doubt arises at this point, it must be resolved against the proferens in accordance with article 1019 of the Civil Code of Lower Canada: "In cases of doubt, the contract is interpreted against him who has stipulated and in favour of him who has contracted the obligation.
(3) If the words used are wide enough for the above purpose, the court must then consider whether "the head of damage may be based on some ground other than that of negligence", to quote again Lord Greene in the Alderslade case. The "other ground" must not be so fanciful or remote that the proferens cannot be supposed to have desired protection against it; but subject to this qualification, which is no doubt to be implied from Lord Greene's words, the existence of a possible head of damage other then that of negligence is fatal to the proferens even if the words used are prima facie wide enough to cover negligence on the part of his servants."
(i) The words of the two clauses in their ordinary meaning are wide enough to cover negligence by Arup in advising about the extent of asbestos on site.
(ii) It is not possible to think of any non-negligent ground of claim relating to asbestos which the parties might have had in mind. The suggested non-negligent breaches put forward by the claimants, namely breaches of various regulations, fall into Lord Morton's "fanciful or remote" category. The parties cannot sensibly have been agreeing that Arup's only liability in relation to asbestos would be for non-negligent breaches of those regulations.
Lord Justice Moylan :
Lord Justice Beatson :