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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Internet Broadcasting Corporation Ltd. (T/a Nettv) & Anor v Mar LLC (T/a Marhedge) [2009] EWHC 844 (Ch) (24 April 2009)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2009/844.html
Cite as: [2010] 1 All ER (Comm) 112, [2009] 2 Lloyd's Rep 295, [2009] EWHC 844 (Ch)

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Neutral Citation Number: [2009] EWHC 844 (Ch)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

24 April 2009

B e f o r e :

Mr. G. Moss QC
sitting as a deputy High Court Judge

____________________

(1) INTERNET BROADCASTING CORPORATION LTD (t/a NETTV)
(2) NETTV HEDGE FUNDS LIMITED (formerly MARHEDGE TV LIMITED)
Claimants
-v-

MAR LLC (t/a MARHedge) (a US incorporated company)
Defendant

____________________

Antony White QC and Eleni Mitrophanous instructed by Bankside Commercial Ltd for Claimants
Anthony Boswood QC and Simon Atrill instructed by Field Fisher Waterhouse for Defendant

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Introduction

  1. This is a reserved judgment arising from the trial on liability only of a claim. The claim is in respect of a wrongful repudiatory termination of contract. The Defendant has, at almost the last possible moment, admitted that there was a wrongful repudiatory termination. It relies upon an exemption clause to protect it from substantial liability in respect of loss of profits from a contract which turned out to be profitable for both parties. The preliminary issue debated at the hearing and dealt with in this judgment is the true construction of the exemption clause.
  2. Facts relevant to the preliminary issue

  3. The First Claimant ("NETTV") is in the business of constructing and providing interactive internet television platforms. NETTV is effectively owned by Graham Loughridge, an entrepreneur with hedge fund and electronic media experience. The Defendant ("MARHedge") is a US corporation, now no longer in business, which provided, inter alia, information and services to hedge funds and arranged conferences for the hedge fund industry. At all material times its President was Gary Lynch.
  4. On 18 May 2005, NETTV entered into a written agreement ("the Agreement") with MARHedge under which NETTV would set up and provide an internet television channel located at www.marhedge.tv on which would be broadcast material agreed with MARHedge, including coverage of MARHedge's conferences (clause 1). MARHedge agreed, amongst other things, that it would support and publicise the services of NETTV, provide it with promotional material from MARHedge's existing print media and promote any financial services companies that agreed to pay NETTV for a channel and place that channel on MARHedge TV (clause 3). NETTV would operate an online payment and collection system for subscriptions to the channel and in the first year remit 35% of the monies received net of tax to MARHedge, this figure rising to 40% in the second year and 45% in the third year (clause 1.2). The Agreement could not be terminated for three years other than in response to a material breach that was not remedied within 30 days of a notice requiring such a cure (clause 13).
  5. The venture envisaged by the Agreement was essentially that NETTV would construct and operate the MARHedge TV channel and produce what was to be shown on the channel, e.g. by filming MARHedge's conferences and screening these. The income for the venture was envisaged to be the subscription fees to be charged to those wishing to view the channel.
  6. It became clear a few weeks after the signing of the Agreement that the venture in its anticipated form would not succeed, since no subscriptions were sold. In about late June/early July 2005 a meeting took place at a Starbucks coffee shop in London between Mr Loughridge and Mr Lynch and at that meeting a revision of the contractual arrangement between NETTV and MARHedge was discussed.
  7. The question of whether or not a further contractual agreement was made at that meeting is no longer relevant in view of the sensible concession by the Claimants that any new agreement would also incorporate the exemption clause.
  8. As a result of the discussion at the Starbucks meeting, NETTV established a subsidiary, the Second Claimant. Instead of selling subscriptions to the MARHedge TV channel to potential viewers as envisaged by the Agreement, the Second Claimant sold opportunities to hedge funds and related organisations to appear on the channel. Such opportunities would consist of filmed participation in hedge fund manager discussions and interviews which would be filmed and screened on Marhedge TV by the new company.
  9. Following the Starbucks discussion, the Second Claimant between August 2005 and May 2006 achieved sales of nearly 600,000 and remitted tens of thousands of pounds to MARHedge by way of a "royalty" of 10% of all monies received from the sales discussed at the Starbucks meeting. It is not necessary for present purposes to decide whether this contractual performance was under the Agreement, whether in its original form or in a varied form, or under some new or additional agreement with one or other or both Claimants, since it is agreed that the exemption clause was part of the relevant contract in any event and would bind both Claimants.
  10. The Second Claimant's impressive sales, which showed a substantial month by month increase, were described by Mr Lynch of the Defendant as "fantastic". The joint venture seemed to be going very well.
  11. However, on 26 May 2006, MARHedge gave notice purporting to terminate the Agreement with immediate effect and has failed to provide any content for the channel since. The Defendant's reasons for this abrupt and ostensibly self-defeating termination have not been established, since the parties have sensibly agreed that the subjective position of the Defendant is not relevant to the issue. The issue is whether the exemption clause applies to the Defendant's admitted repudiatory breach so as to exempt it from liability in respect of loss of profits. The material point is that the Defendant now accepts that it had no contractual justification for repudiating the Agreement (or any other agreement that may have applied).
  12. The exemption clause

  13. The exemption clause, clause 17, set in the context of the adjoining clauses, is as follows:-
  14. "16. Nothing in this Agreement shall operate to exclude or limit either party's liability for death or personal injury caused by its default or negligence, any breach of the terms implied by the sale of goods and supply of goods and services legislation, fraud, or any other liability that cannot be excluded or limited under applicable law.
    17. Subject to clause 16 neither party will be liable to the other for any damage to software, damage to or loss of data, loss of profit, anticipated profit, revenues, anticipated savings, goodwill or business opportunity, or for any indirect or consequential loss or damage.
    18. Subject to clause 17, NETTV's aggregate liability in respect of claims based on events relating to this Agreement shall not exceed the total amount of cash fees paid by the Client to NETTV in connection with this Agreement or any collateral contract, whether in contract or tort (including negligence). NETTV shall not be liable for the value of media contributed by the Client as part of this Agreement."

  15. The parties are agreed that no legislation which limits the ability of a party to rely on an exemption clause applies in this case.
  16. Exemption clauses and fundamental breach

  17. It seems odd at first impression that a party who deliberately repudiates a contract should at the same time be able to rely on a clause in that contract containing an exemption from liability in respect of the loss caused to the other party to the contract as a result of such repudiation. The normal anticipation of commercial parties is that a party who repudiates his contractual obligations should be liable to compensate the other party for the loss caused.
  18. The underlying principle against allowing a party to a contract to profit from his own wrong was so strong that the courts and, in particular, Lord Denning, one of the great Judges of the 20th century, held that there was a rule of law which prevented exemption clauses applying to a fundamental breach.
  19. However, the current position is that I am bound by the decisions of the House of Lords in the Suisse Atlantique case [1967] 1 AC 361 and Photo Production Limited v Securicor Transport Limited [1980] 1 AC 827 to reject the notion that there is any such rule of law and treat the issue as one of construction only.
  20. Relevance of deliberate and repudiatory breach

  21. Nevertheless, even as a matter of construction, the fact that a breach is deliberate and repudiatory is relevant to the question of whether the exemption clause, on its true interpretation, covers the breach. Thus Lord Wilberforce in the Suisse Atlantique case said at page 435:-
  22. "Some deliberate breaches ... may be, on construction, within an exceptions clause (for example, a deliberate delay for one day in loading). This is not to say that "deliberateness" may not be a relevant factor: depending on what the party in breach "deliberately" intended to do, it may be possible to say that the parties never contemplated that such a breach would be excused or limited."

  23. In the Photo Production case there are statements which suggest that there is a presumption against an exemption clause being interpreted so as to cover a repudiatory breach.
  24. Thus, Lord Diplock states at page 850:-
  25. "Since the presumption is that the parties by entering into the contract intended to accept the implied obligations exclusion clauses are to be construed strictly and the degree of strictness appropriate to be applied to their construction may properly depend on the extent to which they involve departure from the implied obligations. Since the obligations implied by law in a commercial contract are those which, by judicial consensus over the years or by Parliament in passing a statute, have been regarded as obligations which a reasonable businessman would realise that he was accepting when he entered into a contract of a particular kind, the court's view of the reasonableness of any departure from the implied obligations which would be involved in construing the express words of an exclusion clause in one sense that they are capable of bearing rather than another, is a relevant consideration in deciding what meaning the words were intended by the parties to bear." [emphasis added]

  26. He went on to say at page 851 :-
  27. "In commercial contracts negotiated between business-men capable of looking after their own interests and deciding how risks inherent in the performance of various kinds of contract can be most economically borne (generally by insurance), it is, in my view, wrong to place a strained construction upon the words in an exclusion clause which are clear and fairly susceptible of one meaning only even after due allowance has been made for the presumption in favour of the implied primary and secondary obligations." [emphasis added]

  28. What then is meant by "clear and fairly susceptible of one meaning only"? There seems to be a clue in the speech of Lord Wilberforce at page 846 where he appears to equate "clear words" in this context with drafting "in strong terms". The phrase he refers to as amounting to "strong terms" is "under no circumstances ...".
  29. The "presumption" language in the House of Lords can be traced back to the Suisse Atlantique case [1967] 1 AC 361, where Lord Upjohn at p.427 D-E refers to a "strong, though rebuttable, presumption".
  30. In the same vein, but without using the word "presumption", Lord Wilberforce in the Suisse Atlantique case [1967] 1 AC 361 at page 432C had stated: "...the more radical the breach the clearer must be the language...". In the light of his statement cited above from the Photo Production case, clarity of language is to be equated with strength of language: the more radical the breach, the stronger the language that needs to be used.
  31. Personal wrongdoing

  32. It also seems to me that a stricter approach needs to be taken where the wrongdoing is personal to the wrongdoer as opposed to cases of, for example, vicarious liability. It seems to me much less likely that the parties would have intended the words of an exemption clause, particularly one not using "strong" words, to cover a deliberate personal repudiation as opposed to a repudiation by reason of vicarious liability. In the case of a corporate entity such as the Defendant, personal liability refers to the relevant controlling mind, Mr Lynch, who was in this case the one who repudiated the contract.
  33. Some indirect support for a stricter approach, as a matter of construction, where there is a personal breach, can be found in the Privy Council case of Port Swettenham Authority v T.W. Wu and Co. (M) Sdn. Bhd. [1979] AC 580, in which one finds at page 592D:-
  34. "Clearly, any by-law which purports to limit the authority's liability in respect of a loss occurring with the actual fault or privity of the authority would be ultra vires; and that is precisely what by-law 91(1) does. It distinguishes between the misconduct or negligence of the authority itself and that of its servants for which it is also responsible. If anyone who could properly be described as the alter ego of the defendants, for example, their managing director, had been privy to the theft of the 64 missing crates, this would constitute a loss occurring with the actual fault or privity of the defendants ..., yet the defendants would be exempt from liability because the loss would have been caused partly by the actual thieves and therefore not solely the fault of the defendants. There is however, no power under section 29 to make a by-law which limits the liability of the authority in respect of any loss occurring with its actual fault or privity." [emphasis added]

    Rejection of literalism

  35. It is also clear in my judgment that the reference to uclear and fairly susceptible of one meaning only" point in the Photo Production case is not to be equated with simply the literal meaning of the words. It is clear that, even as a matter of construction, as opposed to a rule of law, an exemption clause will never normally be interpreted as extending to a situation which would defeat the main object of the contract or create commercial absurdity, despite the literal meaning of the words used.
  36. Thus for example in Tor Line A.B. v Alltrans Group of Canada Limited [1984] 1 WLR 48, the House of Lords refused to apply the literal meaning of the words "in any other case". Had the words been read literally the owners would have been covered by the exemption clause because it would have applied "... in any other case nor for damage or delay whatsoever and howsoever caused even if caused by the neglect or default of their servants ..." The reason for rejecting the literal construction was that"... the owners would be under no liability if they never delivered the vessel at all for service under the charter or delivered a vessel of a totally different description from that stipulated in the preamble" (at page 54A-B). A literal interpretation would have defeated the central objective of the charter contract and would have been commercially absurd. As a result, the exemption was read, not literally, but very restrictively and the owners were held to be liable, notwithstanding the exemption clause, for financial damage resulting from their breach of warranty.
  37. The rejection of literalism when it conflicts with commercial common sense is now a regular feature of the approach of the House of Lords in construing commercial agreements. Thus in Sirius International Insurance Co v FAI General Insurance Limited [2004] 1 WLR 3251, Lord Steyn stated at paragraph 19:-
  38. "There has been a shift from literal methods of interpretation towards a more commercial approach. In Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191, 201, Lord Diplock, in an opinion concurred in by his fellow Law Lords, observed: "if detailed semantic and syntactical analysis of a word in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense". In Mannai Investment Co Limited v Eagle Star Life Assurance Co Limited [1997] AC 749, 771, I explained the rationale of this approach as follows:
    "In determining the meaning of the language of a commercial contract ... the law ... generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language."
    The tendency should therefore generally speaking be against literalism."

  39. Three out of five of the members of the House of Lords rejected the literal meaning of the words being considered in Sirius because they did not consider the words to make commercial sense in the context.
  40. Main object

  41. One important example of where literalism is rejected is where a literal reading would "defeat the main object of the contract": per Lord Reid in the Suisse Atlantique case [1967] 1 AC 361 at 398G.
  42. Allocation of risk

  43. Many of the cases on the subject of exemption clauses point out that the normal function of exemption clauses is to allocate risk between the parties, normally insurable risk, so that the parties as commercial men know on whom is the obligation to insure. Thus Lord Wilberforce in Photo Production at page 843 states that after the passing of the Unfair Contract Terms Act 1977, "... in commercial matters generally, when the parties are not of unequal bargaining power, and when risks are normally borne by insurance, not only is the case for judicial intervention undemonstrated, but there is everything to be said, and this seems to have been Parliament's intention, for leaving the parties free to apportion the risks as they think fit and for respecting their decisions." [emphasis added]. The same point about allocation of insurable risk is made by Lord Diplock in the Photo Production case at page 851, quoted above.
  44. Although insurance is generally available for non-deliberate acts and for vicarious liability, I suspect that it is non-existent or very rare in the case of deliberate wrongful conduct by one contractual party repudiating the contract entirely. It cannot therefore sensibly be the function of an exemption clause, in normal circumstances, to allocate insurable risk with regard to a deliberate repudiatory act by a party himself, as opposed to a servant or agent for that party. The fact that an event is of a type not normally capable of being covered by insurance must in my judgment be a relevant factor and in my view emphasises the difference in approach between cases of deliberate repudiatory conduct by a party themselves as opposed to vicarious liability for the conduct of others.
  45. Accordingly, if the parties intend an exemption clause to cover a deliberate repudiatory act by one party or either party personally, one would expect to see "clear" language in the sense of "strong" language, for example, "including deliberate repudiatory acts by [the parties to the contract] themselves ...". Words which literally cover the situation, but also a whole range of lesser situations, will not in my judgment be sufficient.
  46. Summary of principles

  47. The principles I deduce from the authorities which are relevant to the present type of case of deliberate, repudiatory breach involving personal wrongdoing are as follows:
  48. (1) There is no rule of law applicable and the question is one of construction.
    (2) There is a presumption, which appears to be a strong presumption, against the exemption clause being construed so as to cover deliberate, repudiatory breach.
    (3) The words needed to cover a deliberate, repudiatory breach need to be very "clear" in the sense of using "strong" language such as "under no circumstances...".
    (4) There is a particular need to use "clear", in the sense of "strong", language where the exemption clause is intended to cover deliberate wrongdoing by a party in respect of a breach which cannot, or is unlikely to be, covered by insurance. Language such as "including deliberate repudiatory acts by [the parties to the contract] themselves..." would need to be used in such a case.
    (5) Words which, in a literal sense, cover a deliberate repudiatory breach will not be construed so as to do so if that would defeat the "main object" of the contract.
    (6) The proper function between commercial parties at arm's length and with equal bargaining power of an exemption clause is to allocate insurable risk, so that an exemption clause should not normally be construed in such cases so as to cover an uninsurable risk or one very unlikely to be capable of being insured, in particular deliberate wrongdoing by a party to the contract itself (as opposed to vicarious liability for others).
    (7) Words which in a literal sense cover a deliberate repudiatory breach cannot be relied upon if they are "repugnant" - I have not dealt with this in detail because it is not relevant to this case.

    The construction of clause 17

  49. The words used in the present case are:
  50. "17. Subject to clause 16 neither party will be liable to the other for any damage to software, damage to or loss of data, loss of profit, anticipated profit, revenues, anticipated savings, goodwill or business opportunity, or for any indirect or consequential loss or damage."

  51. The starting point must be the rebuttable presumption that the clause is not intended to cover a deliberate repudiatory breach of the contract. In addition, a deliberate, personal repudiation by Mr Lynch as the relevant mind of the Defendant is either uninsurable or very unlikely to be insurable. There would have to be very clear, in the sense of strong, language to persuade a court that the parties intended the words to cover such a case. Pointing to a mere literal meaning is not enough.
  52. The words used in this case contain no strong language at all. They contain no clear statement that deliberate wrongdoing is intended to be covered, let alone deliberate, personal and repudiatory wrongdoing.
  53. I cannot on any established approach to construction hold that these words cover such wrongdoing. I cannot imagine that any reasonable businessman would understand the words to cover such a situation. If he read the words with an eye to an allocation of insurable risk, he would understand that they did not extend to risks which were uninsurable or very likely to be uninsurable such as losses flowing from a deliberate, personal, repudiatory breach.
  54. It also seems to me that the literal meaning here would defeat the main object of the contract. The main object can be described as a joint venture in internet broadcasting for mutual profit for an agreed period. A literal reading of the exemption clause would enable either party deliberately and personally to repudiate at any time during the agreed period without any consequences as to lost profit, even though loss of profit is likely to be the only very serious consequence for either party of repudiation. Mr Boswood's argument that the Claimant's set up costs are recoverable as damages does not adequately meet this point.
  55. The Claimant's set up costs were likely to be modest compared to the potential profit over the agreed term of the agreement if the venture were successful. Having to pay set up costs is therefore unlikely to be a serious deterrent to a deliberate and personal repudiatory breach by the Defendant in this case. Moreover, looked at from the Claimant's point of view, the Defendant was likely to have little or no set up costs at all and very light ongoing obligations, so that repudiation by the Claimant would be free of any meaningful cost to the Claimant in terms of having to pay damages for direct loss: the only realistic claim of the Defendant for substantial damages would be for loss of profits. The Defendant's construction of the exemption clause would in effect deprive the contract of any real meaning from the Claimant's point of view.
  56. One can further test the intention of the parties by supposing the clause had said "neither party will be liable to the other for any indirect or consequential loss or damage even if caused deliberately by the personal act of the controlling mind of that party in a way which deliberately repudiates the contract between them". I cannot imagine for a moment that any reasonable businessman on either side would have signed up to such a clause in this case.
  57. Construing the exemption clause so as not to cover a personal and deliberate repudiation does not, as Mr Boswood for the Defendant suggests, amount to deleting the words relating to loss of profits etc. Those words remain effective to cover loss of profits in other situations involving other types of breaches. It is neither necessary nor desirable and probably not even possible for me to set out all the situations in which the exemption clause would bite, but I am satisfied that the clause retains plenty of scope for operation.
  58. I can add here the irony, without placing any reliance upon it in coming to my conclusions, that the Defendant is counterclaiming for a share of the revenues due to it under the contract which it has deliberately and personally repudiated, whilst attempting to deny the Claimant any right to recover profits lost by reason of the repudiation.
  59. euNetworks Fiber UK Limited v AboveNett Communications UK Limited

  60. Mr Boswood for the Defendant relied forcefully on the decision at first instance of Briggs J in euNetworks Fiber UK Limited v Abovenet Communications UK Limited [2007] EWHC 3099 (Ch), a very substantial reserved judgment delivered on 23rd December 2007.
  61. At paragraph 256 of the judgment, Briggs J sets out an exemption clause which has some similarities to the present clause.
  62. At paragraph 257 he states as follows:-
  63. "The principles applicable to the construction and effectiveness of contractual limitations on liability such as [the exemption clause] are to be found set out in detail in Photo Production Limited v Securicor Transport Limited [1980] AC 827, and may be summarised as follows:-
    (1) There is no principle that a party may not exclude liability for fundamental breach of contract.
    (2) In relation to a commercial contract (where the parties are usually bargaining on equal terms and free to insure against risks) the parties are at liberty to apportion the risks arising from breach of contract as they think fit, so that the extent of an exclusion clause is merely a question of construction.
    (3) Nonetheless, if the effect of an exclusion clause is to deprive the agreement of the legal characteristics of a contract, by conferring on one party to the liberty to ignore his obligations with impunity, the exclusion may be held to be repugnant to the contract and of no effect."

  64. Based on this summary, Mr Boswood erects an argument to the effect that providing the exemption clause in the present case is not repugnant, in other words leaves open an ability to sue for some substantial loss, it will be given effect in its literal terms.
  65. In the euNetworks case, Briggs J found that there was no repugnancy because the exemption clause was not so widely drawn as to enable one party to commit a deliberate breach of its obligations with impunity: see paragraph 263 of the judgment.
  66. In the present case, Mr Boswood says that giving literal effect to the exemption clause would not allow a deliberate breach of obligations by the Defendant with impunity because it would still be liable for direct damage, for example by way of set up costs relating to the enterprise.
  67. It seems to me that it is unsafe to lift Briggs J's summary of the Photo Production case out of context and then attempt to rely on it as a complete statement of the principles of construction in this area. Briggs J was not required by the case before him to set out a comprehensive summary such as one might find in a textbook and, as I read his judgment, did not attempt to do so. The summary which he set out was a summary of those principles which were relevant to the particular case before him and the particular question that he had to decide.
  68. The case did not concern repudiatory breach. The issue before Briggs J was whether the clause in that case covered non-repudiatory breach, which on its face it did. As a result, the Claimant in that case was required to argue and make out a case to the effect that the clause was "repugnant" and therefore could not cover any breach at all. The Claimant failed in that case to demonstrate that the clause was repugnant. However, the Claimant did not argue that on its true construction the clause did not cover the breach. Since the breach was not repudiatory, there was no basis for such an argument. The Claimant therefore had to make out of a case of repugnancy or lose on this point.
  69. It was in this context that the relevant principles were summarised by Briggs J at paragraph 257 of his judgment and the "repugnancy" test used, since that was the relevant test for the purposes of the case. Once looked at closely, neither the judgment of Briggs J nor the summary of the Photo Productions Limited case has any relevance to a case concerning repudiatory breach and a question of construction as to whether or not an exemption clause covers such a breach.
  70. In the present case it is certainly possible for there to be damages other than those covered by the exemption clause on a literal reading, including the set up costs mentioned by Mr Boswood. There is therefore no question of repugnancy in the present case but that is not the point relied on by the Claimant. The fact that there is no repugnancy does not answer the question as to the true construction of the clause and in particular whether it covers a deliberate personal repudiatory breach.
  71. Mr Boswood also cited in support of his submissions the first instance case of Mitsubishi Corporation v Eastwind Transport Limited [2004] EWHC 2924 (Comm); [2005] 1 Lloyds Rep 383, a decision of Mr Ian Glick QC, sitting as a Deputy Judge of the High Court. This again, however, was a case where there was no allegation of repudiatory breach and only a repugnancy argument was run. The learned Deputy Judge gave the words used in that case a non-literal meaning and on that basis held that there was no repugnancy. Otherwise the decision is simply another first instance case stressing the modern non-literalist approach and the importance of having a construction which is not at odds with the "main object" of the contract.
  72. Other construction arguments of the Claimant

  73. Mr White for the Claimant also put forward arguments on the construction of clause 17 which would have restricted the words relating to loss of profit, etc only to damage to software and damage to or loss of data. That is certainly a possible approach and one which I might have been tempted to take were other, more straightforward approaches not available, as set out above. It seems to me that construing clause 17 so as not to include claims relating to deliberate personal repudiatory breaches makes more sense and gives better effect to the intention to the parties than attempting to subsume loss of profits, etc under the heading of damage to software and damage to or loss of data.
  74. It seems to me that the approach to construction I have taken also produces the right result in relation to the exclusion of damage to software and damage to or loss of data, in other words construing those exclusions so as not to apply to a deliberate personal repudiatory breach. It would have led to a truly absurd situation if either party could by a deliberate repudiatory action have damaged the software of the other party or its data and yet claim to be free of contractual liability. If I am right in thinking that the exemption in relation to damage to software and damage to data must be construed so as not to apply to a deliberate personal and repudiatory act of damage, then it is reasonable to suppose that this approach applies to the rest of the clause. I cannot think why the parties would have agreed to exclude deliberate and personal wrongdoing in the case of damage to software and damage to or loss of data but not to other cases involving a loss of profit, etc.
  75. If that is the correct approach, there seems to me to be no reason for reading clause 17 as subsuming loss of profits, etc under damage to software or damage to or loss of data. On this basis, it is better to leave loss of profits, etc as a separate heading, so that those words in clause 17 can have full effect in other types of cases, which do not involve deliberate personal repudiatory breach. However, if the approach I have taken above were not possible, I would be attracted, as a fallback, to reading loss of profits, etc as a subset of damage to software or damage to or loss of data, if that were the only way to prevent absurdity and a ridiculously wide ambit for the loss of profits, etc provision.
  76. Damages in lieu of specific performance

  77. Given that there is a claim for damages in lieu of specific performance, in the alternative to damages for breach of contract, I raised, during the hearing, the question of whether the exemption clause, even if it applied to a deliberate and personal repudiatory breach, would apply to damages in lieu of specific performance. However, the parties had not prepared any argument on this point or raised it themselves and it was agreed during the hearing that the issue would be left over to be dealt with, if necessary, on a subsequent occasion. Mr Boswood also kept open an argument that such an approach was not open to the Claimant. Having heard no argument on these points, I express no opinion on them.
  78. Conclusion

  79. My conclusion on the preliminary issue is therefore that clause 17 does not cover the deliberate personal repudiatory breach in the present case.
  80. I am indebted to Counsel on both sides for their clear and helpful arguments and for the sensible narrowing of issues, albeit at a very late stage.
  81. MR G. MOSS QC


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