Net Contribution clauses: TCC decision turned on its head by West v Ian Finlay turned on its head by Court of Appeal

Net Contribution clauses: TCC decision turned on its head by West v Ian Finlay turned on its head by Court of Appeal

Emily Monastiriotis and Jonathan Spencer of Bond Dickinson LLP discuss the application and construction of net contribution clauses (NCCs) following the recent Court of Appeal decision in West v Ian Finlay.

Original news

West v Ian Finlay & Associates (a firm) [2014] EWCA Civ 316, [2014] All ER (D) 281 (Mar)

The claimants had retained the defendant architect during a house renovation project. Following completion of the works, significant defects in them were discovered. Following remediation of the defects, the contractor became insolvent. The claimants subsequently issued proceedings against the architect and an issue arose as to whether the architect’s liability was limited by the net contribution clause in its appointment, excluding liability for losses for which the contractor was responsible. The judge found that the net contribution clause had not limited the architect’s liability in respect of losses caused by the contractor as it had been ambiguous and so the Unfair Terms in Consumer Contracts Regulations 1999, SI 1999/2083 (UTCCR) required the court to give the clause the interpretation that was most favourable to the claimants. The Court of Appeal, Civil Division, allowed the architect’s appeal and held that the clause had been an effective limit on the architect’s liability. The clause had not been ambiguous in its meaning and nor had it been unfair for the purposes of UTCCR, reg 5(1).

What is a net contribution clause?

The general principle behind NCCs is to limit the liability of a consultant or contractor to an amount that would be considered by a court to be just and equitable for the consultant or contractor to pay, in the event of a claim, based on the consultant’s or contractor’s actual responsibility for the loss. Without an NCC, the normal legal position is that of joint and several liability—ie the employer can pursue

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About the author:

Sarah specialises in non-contentious construction law. She has extensive experience advising contractors, public- and private-sector employers, consultants, developers and banks on construction projects and in relation to construction contracts and their associated documents. Sarah also has experience advising project companies and construction contractors on PFI projects in various sectors. She qualified at CMS Cameron McKenna before joining Trowers & Hamlins. She subsequently spent nearly five years in the construction & engineering team at Pinsent Masons. For three years prior to joining LexisNexis, Sarah was Commercial Legal Adviser at Wates Group Limited, a major contractor, where she provided legal advice to the business units in relation to pre- and post-contractual commercial activities.