West and another v Ian Finlay & Associates

[2013] EWHC 868 (TCC)

In a claim where the main contractor had become insolvent, one question that arose for HHJ Edwards-Stuart QC was whether the architect would be liable for loss or damage caused by that contractor. Whilst the architect had design and inspection responsibilities in relation to that contractor’s work, it had also sought to limit its liability under the following net contribution clause:

Our liability for loss or damage will be limited to the amount that it is reasonable for us to pay in relation to the contractual responsibilities of other consultants, contractors and specialists appointed by you.”

The homeowners said that this clause did not exclude the liability of the main contractor. The Judge said that this clause had to be construed in its context. At the time when the agreement was signed, everyone understood that several aspects of the work would be procured directly by the Wests and would not form part of the main building contract. The main building contract would not amount to more than about 60%. IFA was aware of this. Whilst one reading of the words “other consultants, contractors and specialists appointed by you” meant everyone with whom the Wests entered into a contract in relation to this project apart from IFA, against the background of the project, those words could be read as referring to the various specialists or suppliers with whom the Wests were proposing to enter into direct contracts outside the main building contract. The expression was not one that readily describes any party other than IFA, because IFA was not a contractor. However, it would be appropriate if it was intended to refer to any contractor other than the main contractor whose contract IFA would be expected to administer. This seemed to the Judge to be a natural reading of the words in their context.

Under the Unfair Contract Terms legislation, the Judge noted that where there was, as there was here, doubt about the true meaning of the clause, he was required to give the interpretation most favourable to the consumer (here the homeowners). This meant that IFA would be liable for the loss and damage caused by the main contractor. On the facts, the Judge felt that everyone understood the words of the net contribution clause to be directed to the consultants, contractors and specialists who had been or were to be instructed directly by the Wests outside the scope of the main contract. Each of them had in mind the clear distinction between, on the one hand, the main contract on which IFA was receiving a percentage fee and, on the other hand, the contracts between the Wests and the other suppliers and specialists on which IFA was not receiving a fee. So whilst the Judge did not consider it necessary to decide whether or not on its true construction the net contribution clause was to be given the meaning he considered the parties were attributing to it, if he had to, he would have said that:

in the context of the factual background to this agreement, the clause means what I consider the parties thought it meant, namely that it does not apply so as to limit IFA’s liability to the Wests in a situation where the other party liable is [the main contractor].