“Rainy Sky” pours cold water on Defendant’s attempt to rely on exclusion clause

08/07/21

The Commercial Court (Mr Justice Robin Knowles) has given judgment following the trial of a preliminary issue regarding the interpretation of an exclusion clause.

The claim related to the supply of a medicinal product, Estrace, by the Defendant to the Claimant.  For over two and a half years, the Defendant had failed to supply any Estrace.  The Defendant argued that an exclusion clause in the supply agreement barred the Claimant from bringing any claim against it to recover the lost profits suffered as a result of the Defendant’s failure of performance. 

The exclusion clause stated, in material part, that “notwithstanding anything contained in this Agreement in no circumstance shall either party be liable to the other in contract, tort… or otherwise howsoever to the other, and whatever the cause thereof (i) for any increased costs or expenses, (ii) for any loss of profit… or (iii) for any special indirect or consequential loss or damage of any nature whatsoever…”.

The Court accepted the Claimant’s argument that, on its true construction, the intention of the parties had not been to bar their ability to bring all contractual and tortious claims for loss of profit.  Looked at in its proper context, as the Supreme Court’s judgment in Rainy Sky v Kookmin [2011] UKSC 50, [2011] 1 WLR 2900 requires, the clause was intended to exclude claims between the parties triggered by matters giving rise to liability to third parties. 

Although the language of the exclusion clause was “plain”, “wide” and “general” when read as a freestanding provision, the Judge considered that the context was also plain, and led to the “clear conclusion” that the clause was not intended to bar the Claimant’s claim.

The judgment is here.