Liability clauses Limiting liability McGee Group Ltd v Galliford Try Building Ltd 2017 EWHC 87 TCC

How do the courts interpret limitation clauses?

The facts

Galliford Try Building Ltd were the main contractors at a site known as Resort’s World in Birmingham. In 2013 Galliford engaged with McGee Group Ltd as sub-contractors to undertake design and construction on the site in Birmingham. The parties entered into a sub-contract that incorporated the JCT Design and Build Sub-Contract Agreement, 2011 Edition, together with a large number of bespoke amendments. The contract contained two separate provisions addressing the financial consequences of delay and disruption:

• clause 2.21 dealt with the “Failure of the Sub-Contractor to complete on time” and “Non-achievement of Access Condition by the Access Target date caused by Sub-Contractor”. Clause 2.21B limited the sub-contractor’s “liability for direct loss and/or damages” to 10% of the sub-contract sum

• clause 4.21 provided that the sub-contractor was liable for any “loss, damage, expense or cost” suffered by the contractor as a result of any delay to the regular progress of the main contract works caused by the sub-contractor.

The sub-contracted works were delayed and Galliford made deductions from the sums due to McGee for “failing to regularly and diligently progress their works”. Subsequently, the parties disagreed over the application of clause 2.21B.

Galliford accepted that under clause 2.21 claims for loss and expense caused by McGee’s failure to complete the sub-contract works on time and/or to meet the access dates fell within the 10% cap. However, Galliford agreed that, under clause 4.21, claims for delay and disruption, such as loss and expense caused by McGee’s failure affecting the regular progress of the main contract fell outside the 10% cap.

McGee sought a declaration that all of the 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.

The decision

The court granted declarations sought by McGee. The court considered the natural meaning of the clause which it found straightforward and had no doubt as to the meaning. The court therefore concluded that there was no difference at all between claims under clauses 2.21 and 4.21. Clause 2.21B was a stand-alone provision that limited McGee’s liability for all delay and
disruption claims.

Why is this important?

This case is another example of the courts applying the rules of contractual interpretation to limitation clauses.

Any practical tips?

When drafting limitation clauses, ensure they are clear and unambiguous and properly reflect the intentions of both parties.

Any bespoke amendments to the standard terms of a contract should be checked for consistency as conflicting provisions could have a significant impact.