In this article, we look at the judgment in Mott MacDonald Ltd v Trant Engineering Ltd [2021] EWHC 754 (TCC) and how it relates to liability for deliberate breaches of contract.
Background
The case relates to the building of a power station at the military base at RAF Mount Pleasant in the Falkland Islands. Trant Engineering Ltd (“Trant”) had engaged Mott Macdonald Ltd (“MM) to provide initial design consultancy services and they entered into a Settlement and Services Agreement (“SSA”).
MM believed that it had provided and fulfilled the services that it was obliged to under the agreement, but there was a dispute in respect of the work carried out and payment. Following the dispute the MM denied the Trant access to the native data files and detailed calculations database that MM had designed. As a result, Trant had no access to the database.
MM claimed that Trant owed it over £1.6 million for work carried out under their agreement. Trant followed up this claim by bringing a counterclaim against MM for damages of £5 million, being the cost of having to redo the majority of the design work. The counterclaim alleged that MM had ‘fundamentally, deliberately and willfully’ breached the agreement by refusing to perform its obligations and place pressure on Trant Engineering Ltd to pay.
MM argued that it had not breached the agreement, but even if they had, the exclusion and limitation clauses in the agreement would still apply and they sought summary judgment on this specific issue.
The limitation clause in the agreement stated:
“Notwithstanding any other term to the contrary in the [SSA]…and whether the cause of action for any claim arises under or in connection with the [SSA] in contract or in tort, in negligence or for breach of statutory duty or otherwise, in relation to any and all causes of action…the total liability of [MM] in the aggregate for all claims shall be limited to £500,000.”
Judgment
The TCC granted summary judgement to MM.
In giving judgment, Judge Eyre QC made comments about the conflicting authorities on this issue. In Internet Broadcasting Corp LTD v MAR LLC [2009] EWHC 844 (Ch), the court held that there was a presumption that a party in deliberate repudiatory breach of contract cannot rely on an exclusion clause; only strong express language in the contract could change this. However, in the later case of AstraZeneca UK Ltd v Albermarle International Corp [2011] EWHC 1574, the court held that the approach in IBC was contrary to precedent and declined to follow it. LJ Lewison subsequently supported this in the case of shared Network Services Ltd v Nextiraone UK Ltd [2012] EWCA Civ 1171 (albeit in a non-binding judgment).
Judge Eyre QC explained that in order to make an exception in a limit of liability clause for deliberate breach of contract, clear drafting is required. As the clause in the agreement between MM and Trant was clear in language and in broad terms, that was sufficient. The decision meant that Trant’s claim could progress its claim but the ultimate liability of MM would be limited to £500,000.
Comments
The decision is a clear reminder to parties to take care when drafting and agreeing to exclusions of or limitations to their liability.
Below are some issues to consider when drafting such clauses:
- Has clear language been used in the drafting that reflects the parties’ intentions?
- How should the risk proposed to be limited be managed and which party should bear that risk?
- Is it clear from the drafting which risks are being excluded, limited, capped or accepted?
- What types of losses (if any) should be excluded or limited from the liability clause? Should there be carve-outs for contributory negligence or wilful or deliberate breach?
- How does the exclusion or limitation drafting interact with the other provisions of the contract, such as any indemnity clauses?