High Court considers whether cap on liability was single, aggregate cap or multiple caps
The High Court has issued its judgment in the case of Tata Consultancy Services Ltd v Disclosure and Barring Service [2024] EWHC 1185 (TCC).
The case arose in the context of a contract for the digital transformation of the services of a public body. As is often the case with digital projects, it did not go well. There were immediate challenges with transition, leading to delay and revision of milestones. DBS said the system had significant defects, and each party blamed the other for delays.
The liability clause provided that its “aggregate liability”:
“in respect of all other claims, losses or damages, shall in no event exceed £10,000,000 (subject to indexation) or, if greater, an amount equivalent to 100% of the Charges paid under this Agreement during the 12 month period immediately preceding the date of the event giving rise to the claim under consideration less in all circumstances any amounts previously paid (as at the date of satisfaction of such liability) by the CONTRACTOR to the AUTHORITY in satisfaction of any liability under this Agreement.”
The court had to decide if the limitation of liability clause provided a single, aggregate cap that applied to all claims rather than multiple, separate caps.
The court’s decision
The High Court said “Clause 52.2.6 is far from a model of clarity” and held that it provided for a single cap rather than multiple caps. This was because:
- the words ‘the aggregate liability … in respect of all other claims, losses or damages, shall in no event exceed’ were a clear indicator that the clause was setting out the total liability notwithstanding however many claims, losses or damages might exist;
- the simple language of ‘per claim’ was absent;
- whilst the ‘claim under consideration’ within the alternative (if greater) to the figure of £10,000,000 suggested that more than one claim may be under consideration, the clause then sought to net off sums previously paid. This meant that the capped sums calculated in accordance with the clause were not intended to be additive (although it might have been that a later claim considered would give rise to a larger overall cap being applied than had previously been calculated by reference to an earlier claim).
- even without the express ‘netting off’ process, the court favoured a construction which implied a reference to the first claim because the clause was intended to provide an aggregate liability figure for all other claims. However, this was not necessary, and it might have been that a later claim than the first would set the cap. The effect of this would be that the alternative cap would be, in effect, the charges under the contract in 12 months before any claim brought giving rise to the greatest cap. However, the court said that determining the precise mechanics of this was unnecessary because DBS had not brought a claim by reference to a cap calculated in accordance with the alternative possibility.
Last year the court considered a similarly unclear clause in Drax Energy Solutions Ltd v Wipro Ltd [2023] EWHC 1342 (TCC)and decided that similarly unclear drafting should be interpreted as a single cap. In that case, the contract had included drafting often encountered in IT contracts whereby the liability cap would flex, up and down, to match the delivery risk profile and charges received over time, with charges being assessed over a rolling period rather than the whole term.
In addition, in the Tata case, the limitation clause sought to exclude liability for loss of profits. Tata had claimed for loss of revenue. It argued that anticipated cost savings were not realised because of customer delays and so net revenue was reduced. On the other hand, DBS argued that this claim was actually a claim for loss of profits by another name and consequently was excluded by the contract. The court agreed with DBS and referred to the Court of Appeal’s judgment in Soteria Insurance Ltd v IBM United Kingdom Ltd [2022] EWCA Civ 440, where it found that an exclusion of loss of profit, revenue and savings did not exclude a claim for wasted expenditure.
