Author: Gillian Birkby
Where one judge may find that wording is ambiguous, another three (more senior) may find that it is crystal clear. This arose in a case in which extensive works had been carried out in the home of Mr and Mrs West. The work was defective, the contractor became insolvent and the Wests sued the architect. The trial judge expressed doubt over the meaning of a clause in the architect’s appointment. Part of the clause provided:
“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 trial judge interpreted this clause in a way that was most favourable to the Wests as consumers. He said that the words “other … contractors” could mean specialist contractors working outside the main building contract. As a result the judge held that the clause did not limit the architect’s liability in a situation where the other liable party was the main contractor.
However, the Court of Appeal decided that there was no ambiguity in this key clause. The result: there was no need to resort to the interpretation most favourable to the consumers; the clause was “back in play”. If it was valid the clause would impose a risk on the clients, as it reduced the architect’s liability in the event of him being jointly and severally liable with the now insolvent main contractor.
The Wests argued that the clause should not limit the architect’s liability, as it was contrary to the requirements of fair and open dealing (i.e. good faith) and caused a significant imbalance in the parties’ rights and obligations under the contract to their detriment. Finally, it was not fair and reasonable to allow the architect to rely on the clause having regard to all of the circumstances of the case.
The appeal judges considered a number of different factors in coming to a judgment. For a variety of reasons the clause was allowed to operate, thereby limiting the architect’s liability. Interestingly, the judges attached weight to the fact that Mr West had banking experience. Bearing in mind this background, it was said that the claimants would very likely be alive to the fact that the contractor’s financial stability was a matter of importance. These particular clients were identified as having a “savvy nature” and attributed with equal bargaining power to the professional architect. The appeal judges had little doubt that they were well able to understand the clause and its ramifications, had they taken the time to do so.
Perhaps it would have been better for the Wests if they could have pleaded ignorance. The architect’s lack of knowledge and understanding of the clause certainly did him no harm: it was noted in the judgment that there was doubt whether the architect understood the clause, even though it worked to his benefit and he was the one who had inserted it into the contract.
Gillian Birkby, Head of Construction, Fladgate LLP (firstname.lastname@example.org)