The recent case of McGee Group Limited (“McGee”) -v- Galliford Try Building Limited (“Galliford”) provides a warning “on the all too common” problem of the disparity between the terms of a standard form contract and parties’ bespoke amendments.
The Background
Galliford engaged McGee as a Subcontractor to undertake the design and construction of earthworks and related substructure works on a project in Birmingham. The parties entered into a subcontract that incorporated the JCT Design and Build Sub Contract Agreement, 2011 edition, together with a large number of bespoke amendments.
The financial consequences of delay and disruption were contained in two separate bespoke provisions within the contract.
Clause 2.21 dealt with the Subcontractor’s failure to complete the sub contract works on time, including achieving the “access conditions” by the access target dates.
Clause 2.21B limited the Subcontractor’s “liability for direct loss and/or expense and/or damages” to 10% of the subcontract sum.
Clause 4.21 provided that the Subcontractor 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 Subcontractor.
The Dispute
During the contract, the sub contract works were delayed and Galliford sought to make deductions from sums otherwise due to McGee. Following practical completion, both parties attempted to agree the final account. However, it became apparent that there was a disagreement on how the liability clause cap applied.
Galliford alleged that claims under clause 2.21 for loss and expense caused by the Subcontractor’s failure to complete the subcontract works on time and/or to meet the access dates fell within the liability cap. In terms of all other claims for delay and disruption, such as loss and expense caused by the Subcontractor’s failure affecting the regular progress of the main contract (under clause 4.21) were outside of the cap.
McGee applied to the Court for declaratory relief under a Part 8 claim as to the proper interpretation of clause 2.21B.
The Decision
The court granted a declaration that all of Galliford’s claim for loss and/or expense and/or damages for delay and disruption fell within the liability clause cap of 10% of the subcontract sum. The court held that the natural meaning of clause 2.21B was plain and therefore applied to McGee’s liability for delay and disruption, regardless of whether Galliford claimed under clause 2.21 or clause 4.21.
The Court has confirmed that a clause which seeks to limit the liability of one party to a commercial contract, for some or all of the claims which may be made by the other party, should generally be treated as an element of the parties’ wider allocation of benefit, risk and responsibility.
These clauses were “distinctions without differences” and therefore contained no practical or meaningful difference.
The court condoned Galliford’s interpretation of the contract which was designed to solely avoid the cap. The court commented that it was both “artificial and uncommercial” and “had no basis in practical reality”.
Comment
This case serves as a warning to parties of the importance of ensuring that bespoke amendments are clearly drafted and that the application of the clauses is fully understood.
This is yet another example of the court’s reluctance to interfere with commercially negotiated contracts and recognises that parties are entitled to apportion the risk of loss as they see fit.