Exclusion me, is that a wilful breach in our airspace?

Under a settlement and services agreement Mott Macdonald provided consultancy services about work being carried out by Trant Engineering at an RAF military base in the Falkland Islands. The agreement contained three clauses limiting or excluding Mott Macdonald’s liability for breach. Following the failure by Trant Engineering to make certain payments, Mott Macdonald started proceedings. Trant counterclaimed, alleging that Mott MacDonald had “fundamentally, deliberately and wilfully” breached the agreement. Mott Macdonald sought summary judgment as to whether the exclusion clauses applied to the alleged breaches even if those alleged breaches were found to be fundamental, wilful or deliberate.

The judge rejected the findings in Internet Broadcasting Corp v MAR that there was a presumption against exemption clauses being interpreted to cover deliberate, repudiatory breaches, and that very clear words were needed for an exemption clause having this effect.

Instead, the correct approach was that adopted in Photo Production v Securicor and summarised in AstraZeneca v Albemarle International, namely that exemption clauses, including those excluding or limiting liability for deliberate and repudiatory breaches, are to be construed by reference to the normal principles of contractual construction. There was no presumption against excluding liability for deliberate or repudiatory breaches and no particular language was required to achieve this effect. That finding was, however, subject to the proviso that an exclusion or limitation of liability will not be read as operating to reduce a party’s obligations to the level of a mere declaration of intent (ie having no contractual force).

Applying the usual rules of contractual interpretation, the judge held that the exclusion clauses in question were drafted in clear language capable of covering the alleged breaches, were part of a bespoke agreement stated to comprehensively govern the parties’ future relationship and would not render the contract nugatory. Accordingly there was no basis to construe the clauses in a manner that would restrict their scope and the clauses therefore applied to any breach of the agreement, including fundamental, deliberate or wilful breaches.