West and another v Ian Finlay & Associates (A Firm) ( EWHC 868 (TCC)) addressed the meaning of a net contribution clause in a contract between an architect and his home-owning clients. The clause in the architect’s appointment stated that the architect’s “liability for loss or damage will be limited to the amount that it is reasonable for [the architect] to pay in relation to the contractual responsibilities of other consultants, contractors and specialists appointed by [the homeowners]”.
The main contractor in this case had become insolvent, and a key question was whether the architect would be liable for loss or damage caused by that contractor. The architect had design and inspection responsibilities in relation to the main contractor’s work and had received a percentage fee. The architect sought to limit his liability to the homeowners under the net contribution clause, stating that it excluded liability for all other parties. The homeowners disputed the meaning of the clause, contending that the clause did not exclude of liability of the main contractor.
Edwards-Stuart J said that there was “doubt” as to the true meaning of the clause, but that under the Unfair Contract Terms legislation, he was required to give the interpretation most favourable to the consumer (here the homeowners). He decided that the architect would be liable for the loss and damage caused by the main contractor. The Judge emphasised that the clause needed to be construed in its context. The homeowners had employed a number of other contractors themselves, outside the arrangement with the architect, and the Judge felt that correspondence between the parties revealed an agreement as to a distinction between the main contract and these “other” contracts where the architect had a limited role. With regard to the wider implication of this case, Edwards-Stuart J gave this opinion:
“In these circumstances, it is not necessary for me to decide whether or not on its true construction the net contribution clause is to be given the meaning that I consider the parties were attributing to it. But if I had to do so, I would hold 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 [the architect’s] liability to [the homeowners] in a situation where the other party liable is [the main contractor].”
This principle in this case seems to be limited to a very particular set of facts. Neither party seems to have fully considered or understood the meaning of the clause at the time that the contract was entered into, and it is perhaps unfortunate for the architect, or his insurers, that the ambiguity in the contract was so closely reflected in the factual situation that they found themselves in. It will be interesting to see how the courts interpret this case in the future.