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Limitation clauses: McGee Group v Galliford Try

A dispute between McGee and Galliford Try has shown the potential importance of liability clauses and the need to ensure they are drafted clearly.

It is a fact of life that things can go wrong in construction projects, despite everyone’s best intentions.

Limitation clauses can be an important part of a contractor’s armoury in protecting themselves against problem jobs.

The recent case of McGee Group Limited v Galliford Try Building Limited [2017] EWHC 87 (TCC) has provided a good illustration of the principles that apply in interpreting such clauses.

Facts of the case

McGee had been engaged by Galliford Try under a JCT design-and-build subcontract, with a number of amendments.

One such amendment was a new clause, 2.21B, which limited McGee’s “liability for direct loss and/or expense and/or damages” to 10 per cent of the subcontract sum.

Clauses 2.21 and 2.21A provided that if McGee failed to complete any section of the works within the relevant period for completion, it would be liable for the “direct loss and/or expenses suffered or incurred”.

“This case is an illustration of the potential importance of liability caps and the need to ensure that they are drafted as clearly as possible”

Additionally, clause 4.21 provided that Galliford Try could claim the sum, damage, expense or cost incurred if the regular progress of the main contract works was materially affected by any act, omission or default of McGee.

Galliford Try sought to argue that the losses claimed under clause 4.21 were different from those claimed under clauses 2.21 and 2.21A, and that only the latter fell within the limitation set out in clause 2.21B.

The decision

The court confirmed that limitation clauses should generally be treated as an element of the parties’ wider allocation of benefit, risk and responsibility and that no special rules apply to the interpretation of such a clause – although a clause limiting liability must be clear and unambiguous.

The court found that the wording of clause 2.21B was clear and that it applied to all claims for delay or disruption that could be made against McGee, irrespective of the contractual basis on which such claims were made.

The essence of claims under both clauses 2.21 and 2.21A and clause 4.21 was the assertion that McGee was on site for too long and this default caused Galliford Try financial loss of various types.

This was a traditional claim for loss and/or expense and therefore caught by the cap in clause 2.21B.

Clarity is vital

This case is an illustration of the potential importance of liability caps and the need to ensure they are drafted as clearly as possible.

Significant sums can turn on such interpretations – in this case over £1.8m – and parties may seek any interpretation they can to escape the consequences of such limitation clauses.

James Worthington is a senior associate in the construction, engineering and projects team at Charles Russell Speechlys

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