Another aggregate cap v per claim cap debate; Clause "far from a model of clarity"

Suppliers in contracts often wish to include an overall aggregate cap on liability to ensure that as far as possible, their maximum potential liability is known. Whether the cap is a total overall cap or, in contrast, is a per claim cap is clearly of major significance to both parties, and can be hotly contested when the language allows in debate.

We reported last year on Drax Energy Solutions Ltd v Wipro Ltd [2023] EWHC 1342 (TCC), where the limitations on the liability of the software supplier Wipro came under scrutiny. There, Wipro succeeded in arguing that despite the potentially confusing language, the clause should be interpreted as an overall cap and not a per claim cap.

The TCC has again been considering how to interpret a limitation on liability clause that was not as clear as it might be in relation to this issue. In this factually complex case, Tata Consultancy Services Ltd (Tata) was to provide a new digital system to modernise the processes of the Disclosure and Barring Service (the Authority) - perhaps more familiar to people using the “DBS checks” terminology. The agreement between the parties was entered into in 2012, and in fact expired in 2020. As often seems to be the case, the project hit difficulties and each party alleged breach by the other in the performance of the contract and had a number of claims against the other. 

In relation to the liability of Tata, the limitation of liability clause in question said:

52.2  […] the CONTRACTOR's total aggregate liability:
[various specific losses dealt with]

52.2.6 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 Authority argued that the cap of £10,000,000 applied separately to each of its counterclaims - the language indicated that for each claim under consideration there was a separate limit defined by the charges over a separate period.

Tata argued that the clause provided a single, aggregate cap of £10,000,000 which applied to all claims.

The judge agreed that the clause was “far from a model of clarity”, but nevertheless, the correct construction was that the clause gave rise to a single cap applicable to all claims:

• The language “aggregate liability … in respect of all other claims” clearly meant the total liability however many claims there were
• The simple language of “per claim” was absent
• Whilst the "claim under consideration" language in the “alternative” part of the clause suggested multiple claims, the judge felt that because the clause netted off sums “previously paid”, the limits were not intended to apply to each claim separately
• Even without this, the judge considered that “it may be” that if there were successive claims, a later claim rather than the first, set the cap - i.e., where this alternative applied (because the charges were higher than £10m) the alternative cap would be the charges in 12 months prior to the later claim.

However, the judge noted that because of the findings on liability and quantum “the question of whether one or multiple caps applies to the Authority's claims is academic”.

The agreement also contained an exclusion of liability for direct or indirect loss of profit. Tata had a claim based on its loss of anticipated savings as it had expected its costs to fall. The Authority contended that this claim was in fact a claim for loss of profits, and was therefore excluded - the judge agreed. 

Although the clause here did withstand the scrutiny it received pretty well, the case provides another interesting example of the challenges faced by clause drafters when considering the precise language to use when crafting more complex limitations on liability and the amount of tyre kicking that is needed to try to ensure they work in a real scenario.

Case - Tata Consultancy Services Ltd v Disclosure and Barring Service [2024] EWHC 1185 (TCC)

For more information or advice, please contact Beverley Flynn or another member of the commercial and technology team.