Net Contribution Clauses

West v Finley [2014] Volume 1 BLR 324 Court of Appeal

Facts

Mr and Mrs West appointed with Finley Associates to act as Architect on the alteration of their house in Putney, London.  The contract for services included a net contribution clause “our liability for loss and damage will be limited to the amount that is reasonable for us to pay in relation to the contractual responsibilities of other consultants, contractors and specialists appointed by you.”  The building contractor carried out the works badly, leaving massive problems with damp ingress.  The building contractor then went into liquidation, so was not worth pursuing.  The Wests got judgement for over £600,000 against Finley, for its own negligent designs and supervisions.  This represented the whole remedial cost. Finley appealed.

Court of Appeal held:

1. The test for what was reasonable between Finley and the Wests was the same as the just and equitable test under the Civil Liability Contribution Act 1978.  It was irrelevant whether or not other contributors, such as the building contractor, could pay.
2. The case was therefore sent back to the trial judge to ascertain what was a reasonable share of £600,000 to be paid by the Architect bearing in mind the extent of the contractor’s culpability for what had happened.
3. The Wests’ interest entitlement was not to be determined by reference to what they’d actually spent (Mr West had taken out a disastrous Swiss Franc mortgage) but rather by what someone in their position would normally spend.

Commentary

Net contribution clauses are very common.  They avoid the obvious injustice that a party who is guilty of relatively minor wrongdoing can be landed with the whole claim.  This is on the basis of the logical argument that if the wrongdoing had not occurred, then the loss would not have been suffered.  From the victim’s point of view, arguments as to relative culpability between wrong-doers are irrelevant.  He has paid each to do their job, and each has let him down.  This case is however an indication by the Court of Appeal that it regards net contribution clauses as being acceptable in policy terms.  It also shows why clients in the construction process may not want them.

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