A reminder to all that when the time comes the Courts will read exclusion clauses carefully and seek to give effect to the words used in the context in which they are used.
We see many examples of exclusion clauses that are vague and ambiguous. That opens the way to arguments that any ambiguity should be construed against the party seeking to rely on the clause.
In a recent Court of Appeal decision (1) it was argued that a claim for wasted expenditure incurred by one party was in fact another way of bringing a claim for loss of profit which was expressly excluded. That was the decision of the first instance Court but it was overturned on appeal. It was held that the wording of the exclusion clause was not wide enough to cover claims for wasted expenditure and that a claim for expenditure incurred was not a claim for loss of profit even though the expenditure may have resulted in the company generating a lower profit than would otherwise have been the case.
This case is a timely reminder to clients to take care when drafting exclusion clauses and to seek to couch them in the widest possible way. In this case, the consequence was a claim for £80M. Ouch!
- Soteria Insurance Ltd (formerly CIS General Insurance Limited) v IBM United Kingdom Limited [2022] EWCA Civ. 440.
Nick Burgess
Partner
Stephen Mann
Senior Associate
