Exclusion Clauses & Liability Caps When There Has Been A Deliberate, Wilful Or Fundamental Breach Of A Contract

In the recent case of Mott MacDonald Ltd v Trant Engineering Ltd [2021] EWHC 754 (TCC), the Technology & Construction Court had to consider whether an exclusion clause, liability cap and a net contribution clause in a professional services agreement could apply to a deliberate, wilful or fundamental breach of the contract.

Mott MacDonald Ltd v Trant Engineering Ltd

Case background

The Claimant (Mott MacDonald Ltd) and Defendant (Trant Engineering Ltd) had entered into a Settlement and Services Agreement (SSA) for which the Claimant was contracted to provide design services to the Defendant in respect of mechanical and electrical elements of a £55 million power station at the UK’s permanent military base on the Falkland Islands.

Mott MacDonald Ltd believed that they carried out the services they were contracted to provide but there was a dispute in respect of the work they had undertaken and, consequently, payment from the Defendant to the Claimant. As a result, the Claimant revoked the passwords which they previously provided to the Defendant which gave them access to the building information modelling database which they had designed. This meant that Trant Engineering Ltd had no access to the database.

Mott MacDonald Ltd claimed that Trant Engineering Ltd owed them over £1.6 million for the work they had carried out under their agreement. However, the Defendant brought a counterclaim against the Claimant for damages of £5 million (the cost of having to redo the majority of the design work). The counterclaim alleged that the Claimant had “fundamentally, deliberately, and wilfully” breached the SSA by not completing the design projects they were contracted to provide and by not providing them with the native data files and detailed calculations. Trant Engineering Ltd argued that these actions by Mott MacDonald Ltd were a deliberate attempt by them in order to place pressure on the Defendant to pay.

The Claimant argued that they had not breached the SSA, but even if they had, the exclusion and limitation clauses in the agreement would still apply and they sought a 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.”

Court judgment

The Technology & Construction Court ruled in favour of the Claimant and granted a summary judgment, finding that a clause in a SSA which contained a liability cap, exclusions on liability and a net contribution clause applied even if there had been a fundamental, willful, or deliberate breach of the agreement.

The Technology & Construction Court followed the decision in Astrazeneca UK Ltd v Albermarle International Corporation & another [2011] EWHC 1574, where Flaux, J concluded that the exemption clause before him did apply to deliberate, repudiatory breaches as the clause was “sufficiently clearly worded to cover any breach…whether deliberate or otherwise.

Additionally, the Technology & Construction Court said that if the Defendant considered that the Claimant’s actions had been a deliberate, wilful or fundamental breach of the contract, it could have treated itself as being discharged from the contract, thus ending its own contractual obligations. However, the Defendant did not do this.

Mott MacDonald Trant EngineeringHow we can help

Andy Rudkin is a Partner in our expert Dispute Resolution team, providing specialist advice in relation to commercial disputes.

If you have any questions in relation to the subjects discussed in this article or any related topics, please get in touch with Andy or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online enquiry form.