McGee Group Ltd v Galliford Try Building Ltd  EWHC 87 (TCC)
This interesting case is a reminder of some of the pitfalls that can arise when drafting limitation clauses in a contract and highlights the need for such clauses to be clear and unambiguous.
The TCC was asked by McGee Group Ltd (Sub-contractor) to make a declaration under Part 8 proceedings regarding the interpretation of a clause in a sub-contract that capped the Sub-contractor's liability where claims were made against them by Galliford Try Building Ltd (Main Contractor) for delay and disruption.
The Main Contractor engaged the Sub-contractor to deliver groundworks services under the terms of a heavily amended JCT Design and Build Sub-Contract 2011 edition in relation to the construction of a new £150 million Resorts World hotel and casino in Birmingham.
The sub-contract contained the following bespoke provisions regarding the financial consequences of delay and disruption:
- Clause 2.21 set out the financial consequences for failure by the Sub-contractor to complete the works in time that would affect the Main Contractor's ability to achieve the "Access Condition" by the "Access Target Date"
- Clause 2.21B limited the Sub-contractor's "liability for direct loss and/or expense and/or damages" to 10% of the sub-contract sum
- Clause 4.21 stipulated that the Sub-contractor was liable for any "loss, damage, expense or cost" suffered by the Main Contractor as a result of any delay in the progress of the main contract works caused by the Sub-contractor.
The Main Contractor presented several claims to the Sub-contractor for delay and disruption and sought to differentiate between a claim under clause 2.21 and a claim under clause 4.21 as follows:
- The Main Contractor accepted that claims made under clause 2.21 for loss and expense caused by the Sub-contractor's failure to complete the works on time and/or meet the access dates fell within the cap
- Other claims for loss and expense for the financial consequences of delay and disruption that arose out of the Sub-contractor's failure affecting the progress of the main contract were made under clause 4.21 and which the Main Contractor argued were not caught by the cap. This claim totalled £2,291,495.53.
The Sub-contractor sought a declaration that all of the Main Contractor's claims for loss and/or expense and/or damages for delay and disruption fell within clause 2.21B and thus were capped at 10% of the sub-contract sum.
Coulson J granted the declaratory relief sought by the Sub-contractor.
In arriving at his decision, Coulson J made the following comments:
- A clause limiting liability must be clear and unambiguous. Such a clause was generally treated as "an element of the parties' wider allocation of benefit, risk and responsibility"
- Clause 2.21B was a straightforward cap on the Sub-contractor's liability that was not expressed to be applicable to claims made under particular clauses of the sub-contract or limited to clause 2.21 claims only
- Clause 2.21B was found to be a cap for a particular type of claim, i.e. one for "direct loss and/or expense and/or damages" that flowed directly from delay and disruption. This meant that if a claim for delay and disruption was caught by clause 4.21, it would also be caught by clause 2.21 and so the cap would apply
- A possible cause of the issue in this case was the potential "mismatch" between the JCT standard terms and the bespoke amendments
- The Main Contractor's interpretation of the contract was "artificial and uncommercial" and "had no basis in practical reality". Their reading of the sub-contract was designed to avoid the cap and this would not be condoned by the court.
This judgement is a reminder that care should be taken not only when drafting limitation clauses to ensure they are clear and unambiguous, but also ensure they properly reflect the intentions of both parties.
In addition, any bespoke amendments to the standard terms of a contract should be double checked for consistency as even one amendment can have a huge (and costly!) impact.