Neutral Citation Number: [2015] EWHC 3573 (TCC)
Case No: HT-2014-000199
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 07/12/2015

Before :

MR JUSTICE STUART-SMITH
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Between :

	(1) Persimmon Homes Limited 
(2) Taylor Wimpey UK Limited (3) BDW Trading Limited	
Claimants	
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	(1) Ove Arup & Partners Limited and 
(2) Ove Arup & Partners International Limited	
Defendants	

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Mr Marcus Taverner QC and Mr Tom Owen (instructed by Dentons UKMEA LLP) for the Claimants
Mr Manus McMullan QC and Mr Rónán Hanna (instructed by Nabarro LLP) for the Defendants

Hearing dates: 17 and 18 November 2015
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Judgment
Mr Justice Stuart-Smith : 

Introduction 
1.	The Claimants (who are collectively known at “the Consortium”) are developers who bought and developed a large site at Barry Quays, Barry Waterfront, Barry in South Wales.  The Defendant [“Arup”] is a well known firm of engineers which was involved over many years with the potential and actual development of the site, advising and providing professional services successively to the Association of British Ports [“ABP”], the Welsh Development Agency [“WDA”] and the Consortium.  It is common ground that, at least in general terms, potential contamination of the site was one of the areas of concern for ABP, WDA, the Consortium and Arup.  It is the Consortium’s case that, after committing themselves to the development and purchasing the site on 21 September 2007, the Consortium discovered asbestos contamination of which they had previously been unaware.
2.	In these circumstances, the Consortium has brought proceedings against Arup claiming damages for alleged breach of contract and negligence, as set out in a long and detailed Particulars of Claim running to 85 pages with annexes of another 124 pages that provide copies of the main contractual documents.  The Consortium’s claim is founded on (i) a deed of appointment between ABP and Arup dated 20 February 1996 [“the 1996 Appointment”], (ii) an agreement between the Consortium and Arup reached by exchange of emails in January 2007 for the provision of services in preparation for the Consortium’s bid for the site [“the January 2007 Contract”], (iii) an agreement made under seal on 22 September 2009 between the Consortium and Arup relating to the provision of services concerning the site [“the September 2009 Agreement”], and (iv) warranties provided by  deed by Arup in favour of each of the Claimants, there being three deeds in essentially identical terms [“the 2010 Warranties”].
3.	Arup denies liability and raises multiple issues by its Defence, many of which are beyond the scope of this judgment.
4.	On 10 July 2015 the Court ordered the trial of three preliminary issues, each of which involves the construction of one or more of the various agreements to which I have referred.  The preliminary issues are:
“Issue 1: Was the effect of the [September 2009] Agreement:

(a)	To supersede (and thereby obliterate) the January 2007 Contract so that it ceased to exist as an independent source of contractual obligations and can give rise to its claim for a breach of its terms?

(b)	To cause Clause 6.3 of the [September 2009] Agreement to be incorporated into the January 2007 Contract?

Issue 2: Do the words ‘Liability for any claim in relation to asbestos is excluded’ in Clause 6.3 of the [September 2009] Agreement and Clause 4.3 of the Warranties exclude liability for each and every claim asserted in the Particulars of Claim?

Issue 3: If the answer is negative, is Arup’s liability to the Consortium for each and every claim asserted in the Particulars of Claim limited to £5,000,000.00:
(a)	Under the Agreement?
(b)	Under the Warranties?

5.	Clause 6.3 of the Agreement (to which the preliminary issues refer as above) provides:
“The Consultant's aggregate liability under this Agreement whether in contract, tort (including negligence), for breach of statutory duty or otherwise   (other   than   for   death   or   personal   injury   caused   by   the Consultant's negligence) shall be limited to £12,000,000.00 (twelve million pounds) with the liability for pollution and contamination limited to £5,000,000.00 (five million pounds) in the aggregate. Liability for any claim in relation to asbestos is excluded.”
Clause 4.3 of the Warranties is in the same terms except that the overall limit is not £12,000,000.00 but £5,000,000.00.
6.	The trial of the preliminary issues was heard on 17 and 18 November 2015.  This judgment sets out my decision and reasons.
The Contract Terms and Factual Background 
7.	I set out the potentially relevant terms of the various contracts and warranties as follows:
i)	The 1996 Appointment in Annexe 1;
ii)	The January 2007 Contract in Annexe 2;
iii)	The September 2009 Agreement in Annexe 3; and
iv)	The 2010 Warranties in Annexe 4.
8.	The parties agreed a Schedule of Agreed Facts and Assumptions for the Preliminary Issues Trial [“the SOAFA”].  In addition, factual allegations made in the Claimants’ Statements of Case are to be taken as true for present purposes.
9.	From the start of Arup’s involvement in about 1992, contamination and pollution were recognised as potential problems at the site.  This is clear from the SOAFA at [7] and from express references to the need for Arup to insure against contamination and pollution risks in the 1996 Appointment (Clause 7.1), the reference in the email dated 23 January 2007 timed at 09:56 (which forms part of the exchange that is alleged to constitute the January 2007 Contract) to contamination being one of a number of engineering constraints at the site, Clause 6.3 of the September 2009 Agreement, and Clause 4.3 of the 2010 Warranties.
10.	Quite apart from these specific references to contamination and pollution in the contracts, it is plain that Arup was aware of the presence of asbestos on site from an early stage.  Amongst other references, this appears from Report 92/2069 Volume 1 [1/5/145.34] and the Particulars of Claim at [30].
11.	Initially Arup provided professional services to ABP.  It did so between 1992 and 2007, its appointment being formalised in the terms of the 1996 Appointment: see Annexe 1.  In about 2006 or early 2007, ABP invited tenders for the purchase of the development site; and on 22 January 2007 there was a meeting between Arup and the Consortium.  The idea behind the meeting was that Arup should act as consultant to the Consortium with regard to its bid for the Development.  It is common ground that there was an exchange of emails on the day after the meeting by which the Consortium appointed Arup to provide consultant engineering services with regard to the Consortium’s bid.  The fee for these services was cost plus 10%, with an overall budget cap of £10,000 excluding VAT.  That is the January 2007 Contract: see Annexe 2.
12.	The Consortium bid £53 million for the site and purchased it for that sum on 21 September 2007.  Before then the Consortium and Arup had been in negotiations so that Arup should go on providing engineering services.  On 26 June 2007 Arup provided a document entitled “The Waterfront, Barry// Fees Related to Engineering Scope”.  It outlined Arup’s proposed fee for remediation, earthworks, highways and infrastructure elements at the site, with the fee being split up into Submission Input, Pre-agreement Input and Post-agreement Input.  It recorded that Submission Input had been undertaken between January and March 2006 (which should have been 2007), was already complete and had been invoiced (in the sum of £8,850) and paid: those were the services that Arup had provided pursuant to the January 2007 Contract.  It stated that the Pre-agreement was currently ongoing (elsewhere in the document being described as “specific activities between April and the end of June [2007]”) with a total lump sum cost of £17,500 plus the contractor’s cost for a topographical survey.  It set out a list of the work that was assumed to be required for Post-agreement Input, the “agreement” in question being the prospective agreement by the Consortium to buy the site.  In some respects the works to be included in the Post-agreement Input could be described as further work along the lines that had already been undertaken, including geotechnical/contamination investigation input, transportation assessment, earthworks and remediation, on-site spine road highways, drainage, utilities, services diversions and a footbridge, off-site highways and foul improvement and other services.  But the proposed Post-agreement Input was intended to be much more extensive, as is shown by the proposed fees of more than £1.375 million – against which the combined fees of £26,350 for the Submission Input and Pre-Agreement Input pale into relative insignificance.  By way of further illustration, the proposed fee for the Post-Agreement geotechnical/contamination investigation input alone was £165,000; the proposed fee for the transportation assessment was £135,000; and the proposed fee for earthworks and remediation (which included addressing the challenge of the site being in a floodplain) were £410,000.
13.	Although it is common ground that Arup’s June 2007 proposal is to be treated as forming part of pre-contractual negotiations when interpreting the contracts at issue in these proceedings, it remains of interest that it contained the following, under the heading “Contract and Limits of Liability”:
“We propose that the appointment will be in accordance with ACE agreement or similarly worded appointment contract.  Assuming the above commission includes all of the above elements, and the contract is with one party, we propose that the total liability of Arup is limited to £10m, with the liability for pollution limited to £5m in aggregate.  We would be prepared to provide a professional indemnity of £5m for each and every event.  The liability for any claim in relation to asbestos is excluded.  Warrantees would be made available to the three consortium members, with wording to be agreed.”
14.	Arup and the Consortium did not enter into a contract for the provision of services immediately after the Consortium built the site.  Instead, on 17 October 2007, the Consortium issued a Letter of Intent [“LoI”] which referred to the Arup’s June 2007 proposal and subsequent correspondence and instructed Arup to start providing the Services attached to the LoI.  The LoI stated that, in the event that the Consortium entered into a contractual appointment with Arup, that appointment would supersede the LoI.  It is agreed that the LoI was duly superseded by the September 2009 Agreement and that works originally carried out with the protection of the LoI were subsequently covered by the contractual provisions of the September 2009 Agreement.  Unsurprisingly, the Services (as defined) that Arup was to provide under the September 2009 Agreement can be seen to have their genesis in the description of the services to be provided under the LoI and, before that, in Arup’s June 2007 proposal.  Not all of the services that Arup had proposed in June 2007 were included in the Services to be provided under the September 2009 Agreement and Arup’s fees were adjusted accordingly to be £655,000.  These adjustments were doubtless as a result of continuing pre-contractual negotiations.
15.	In or around December 2009, the Consortium told Arup that it was putting out to tender the remaining scope of the engineering services that it required.  Arup tendered but was unsuccessful.  On 20 January 2010, the Consortium informed Arup that the appointment had been awarded instead to another firm, Healer, and its specialist geotechnical sub-consultant, ESP.
16.	Arup entered into the 2010 Warranties with each of the members of the Consortium in turn.  The 2010 Warranty with the First Claimant was entered into on 24 April 2010; that with the Second Claimant was on 22 June 2010; and that with the Third Claimant was on 2 March 2010: see Annexe 4.
17.	The Consortium engaged groundworks contractors (“Cuddy”) who started work in or about May 2012, including excavation work.  On or about 10 July 2012, Cuddy discovered asbestos at the development site, which the Consortium says that Arup should have warned it about but did not.
18.	It is convenient to deal with one point at this stage, though it may more logically belong later.  During submissions, Mr Taverner QC for the Consortium tried to adjust the balance of the various agreements.  Though he started by submitting that advice with regard to contamination and pollution, particularly with regard to asbestos, was “an important feature of the services provided by Arup”, he consistently tried to upgrade that importance to being a (if not the) central feature of the various agreements.  His overt purpose was to support part of his case on interpretation to the effect that any suggestion that liability in relation to asbestos might have been excluded was commercially unacceptable.  Whatever the purpose, the attempt to rebalance the nature or purpose of the agreements failed.  The agreements speak for themselves and show that Arup’s responsibilities under the various agreements ranged far wider than being concerned about asbestos or, more generally, pollution and contamination.  This appears from the terms of the 1996 Appointment and the Services to be provided under the September 2009 Agreement: See Annexes 1 and 3. The Barry Quays site was a challenging site in many different respects and Arup’s services were required to deal with many important issues, of which pollution and contamination (whether by asbestos or otherwise) was just two.  I return to the context provided by the agreements and the context in which the agreements were made in more detail below.
Principles of Interpretation
19.	The overarching objective for the Court is to identify the intention of the parties.  That is done by determining “what a reasonable person having all the background knowledge which would reasonably have been available to the parties would have understood the parties to have meant.”  In this search for meaning, the law has developed many tools and extensive guidance, which has been set out numerous times, often with minor differences in nuance, by Courts of the highest authority.  The differences of nuance are usually, if not always, attributable to the facts of each case being different, so that different judgments will bring into focus some aspects of the established guidance or let others gently rest in peace because they are so well known as not to need repeating in the particular case.  Also, particular phrases seem to come into vogue for a while before being superseded by others, without any discernable alteration in the meaning of the guidance that is being given.
20.	The principles are so well known that it is unnecessary and wasteful for each judgment at first instance to set them out extensively.  It is merely necessary to record that the Court in this case was referred to (and has read) the following general statements of principle: Wickman Machine Tool Sales Ltd v L Schuler AG [1974] AC 235, 251; Arbuthnot v Fagan [1995] CLC 1396, 1400, ICS v West Bromwich BS [1998] 1 All ER 98, 114-115; Gan Insurance v Tai Ping [2001] CLC 1103 at [16], Chartbrook v Persimmon [2009] AC 1101 at [14]-[15], [28]-[45], Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 at [14]-[30]; Arnold v Britton [2015] AC 1619 at [14]-[23]; Andrew Wood v Sureterm Direct Ltd & Capita Insurance Services Ltd [2015] EWCA 839 at [28]-[31].  The Court was not (but might have been) referred to many others, including Charter Re v Fagan [1997] AC 313, 384, which includes the timely reminder that “the inquiry will start, and usually finish, by asking what is the ordinary meaning of the words used” while providing an extreme example of how the “ordinary” meaning of the words may be supplanted when they are read in the full context available for contractual interpretation.  
21.	These statements of principle are of general application and I shall try to apply them in the present case.  Without derogating in any way from the generality of those authoritative statements, some of the points emphasised by the parties were that:
i)	interpretation should be neither uncompromisingly literal nor unswervingly purposive; 
ii)	the process of interpretation is an iterative process, meaning that although judgments have to be written in two dimensions, giving the appearance of a chronological approach to arguments, it is necessary to keep in mind and bring to bear all relevant considerations and to revisit them as necessary in the search for the correct meaning of the contract;
iii)	where words are capable of more than one meaning, the Court should consider the implications of the rival constructions as part of the interpretive process and is entitled to prefer a construction which is consistent with business common sense and to reject one that is not;
iv)	The Court should treat what it considers to be “business common sense” with caution, because what appears to be business common sense may depend upon the standpoint from which the question is asked;
v)	The Court should not strain to find ambiguity where none exists.  If at the end of the normal interpretative process, the meaning remains unclear and ambiguous, the Court has as a last resort various presumptions to assist it, such as the contra proferentem rule.  But such presumptions, as it seems to me, only fall to be applied if the true meaning of the contract has not emerged from the normal iterative process of interpretation.
These points (apart, possibly, from the last sentence of [21(v)] above) are all well made on high authority and are relevant to the present exercise in interpretation.
22.	One issue of principle divided the parties, namely the approach to be adopted when interpreting limitation or exclusion clauses.  The starting point for any discussion of this point must be the speech of Lord Morton of Henryton in Canada Steamship Lines Ltd v The King [1952] AC 192, 208 (PC): 
“Their Lordships think that the duty of a court in approaching the consideration of such clauses may be summarized as follows:-
(1) If the clause contains language which expressly exempts the person in whose favour it is made (hereafter called "the proferens") from the consequence of the negligence of his own servants, effect must be given to that provision. …
(2) If there is no express reference to negligence, the court must consider whether the words used are wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the proferens. If a doubt arises at this point, it must be resolved against the proferens in accordance with article 1019 of the Civil Code of Lower Canada: "In cases of doubt, the contract is interpreted against him who has stipulated and in favour of him who has contracted the obligation." 
(3) If the words used are wide enough for the above purpose, the court must then consider whether "the head of damage may be based on some ground other than that of negligence," to quote again Lord Greene in the Alderslade case. The "other ground" must not be so fanciful or remote that the proferens cannot be supposed to have desired protection against it; but subject to this qualification, which is no doubt to be implied from Lord Greene's words, the existence of a possible head of damage other than that of negligence is fatal to the proferens even if the words used are prima facie wide enough to cover negligence on the part of his servants.” 
23.	The Consortium relied upon Geys v Société Générale [2013] 1 AC 523 as unqualified endorsement and application of these principles.  There, Lord Hope said at [37]:
“The approach that ought to be taken to the construction of clauses of this kind is well established. In Canada Steamship Lines Ltd v The King [1952] AC 192, 208 Lord Morton of Henryton quoted with approval the principles applicable to clauses which purport to exempt one party to a contract from liability for negligence which were stated by Lord Greene MR in Alderslade v Hendon Laundry Ltd [1945] KB 189 , 192. In summary, these principles are (1) that if the clause expressly exempts the party in whose favour it is made (the proferens) from liability for negligence, effect must be given to it; (2) if there is no express reference to negligence, the court must consider whether the words used are wide enough to cover it; and (3) if a doubt arises on this point it must be resolved in favour of the other party and against the proferens.”
24.	It is immediately to be noted that this passage does not include any reference to the third principle as set out by Lord Morton.  This omission is unlikely to be accidental.  It might be because the claims being brought in Geys were not founded in negligence, but that did not prevent the Supreme Court referring to and endorsing the first two of Lord Morton’s principles.  It is also to be noted that, leaving aside Lord Morton’s third principle for the moment, the language used by the Privy Council in Canada Steamship Lines (though not so clearly by the Supreme Court in Geys) was consistent with the modern approach to interpretation in requiring the Court to see whether (in the absence of express reference to negligence) “the words used are wide enough, in their ordinary meaning, to cover negligence”.  In Geys Lord Hope referred (at [38]) to the statement in W&S Pollock & Co v McCrae 1922 SC (HL) 192, 199 that in order to be effective exemption clauses must be “most clearly and unambiguously expressed.” And he added that “the more improbable it is that the other party would agree to excluding the liability of the proferens, the more exacting the application of the principle will be.”
25.	Despite the re-iteration of at least part of Lord Morton’s principles in Geys, there has been a shift in the approach of the Courts to limitation and exclusion clauses.  This shift has come about for two reasons, which are related.  The first is the passing of the Unfair Contract Terms Act 1977 [“UCTA”]; the second is an increasing recognition that parties to commercial contracts are and should be left free to apportion and allocate risks and obligations as they see fit, particularly where insurance may be available to one or other or both parties to cover the risks being so allocated.  The impact of UCTA and, in particular, the fact that Parliament had chosen not to extend its application to commercial contracting parties of equal bargaining status, was recognised by Lord Wilberforce in Photo Production v Securicor Ltd [1980] AC 827, 843C-E.  Lord Diplock said at 851A-C:
“In commercial contracts negotiated between business-men capable of looking after their own interests and of deciding how risks inherent in the performance of various kinds of contract can be most economically borne (generally by insurance), it is , in my view wrong to place a strained construction upon words in an exclusion clause which are clear and fairly susceptible of one meaning only even after due allowance has been made of the presumption in favour of the implied primary and secondary obligations.”
26.	The recognition that parties may chose to allocate risks and liabilities in a way that may at first sight seem unlikely to an outsider has grown in the field of commercial contracts in general and contracts related to construction in particular where the allocation of risk has been a commonplace in standard forms of building contracts for years – see, for example, Scottish Special Housing Association v Wimpey Construction UK Ltd [1986] 1 WLR 995.
27.	The rationale for this approach was explained (in a slightly different context) by Chadwick LJ in E A Grimstead & Son Ltd v McGarrigan (unreported, 27 October 1999, cited in [2001] EWCA Civ 317):
“There are, as it seems to me, at least two good reasons why the courts should not refuse to give effect to an acknowledgement of non-reliance in a commercial contract between experienced parties of equal bargaining power— a fortiori, where those parties have the benefit of professional advice. First, it is reasonable to assume that the parties desire commercial certainty. They want to order their affairs on the basis that the bargain between them can be found within the document which they have signed. They want to avoid the uncertainty of litigation based on allegations as to the content of oral discussions at precontractual meetings. Second, it is reasonable to assume that the price to be paid reflects the commercial risk which each party—or, more usually, the purchaser—is willing to accept. The risk is determined, in part at least, by the warranties which the vendor is prepared to give. The tighter the warranties, the less the risk and (in principle, at least) the greater the price the vendor will require and which the purchaser will be prepared to pay. It is legitimate, and commercially desirable, that both parties should be able to measure the risk, and agree the price, on the basis of the warranties which have been given and accepted.”  (Emphasis added).
28.	Moore-Bick LJ summarised the shift that has taken place in Tradigrain SA and others v Intertek Testing Services (ITS) Canada Ltd and another [2007] EWCA Civ 154 at [46]:
“It is certainly true that English law has traditionally taken a restrictive approach to the construction of exemption clauses and clauses limiting liability for breaches of contract and other wrongful acts. However, in recent years it has been increasingly willing to recognise that parties to commercial contracts are entitled to apportion the risk of loss as they see fit and that provisions which limit or exclude liability must be construed in the same way as other terms: see, for example, Photo Production Ltd v Securicor Transport Ltd [1980] AC 827 …”
29.	The requirement for clarity of meaning remains when interpreting limitation and exclusion clauses: see, for example, Air Transworld Ltd v Bombardier Ltd [2012] EWHC 243 (Comm) at [26].  I am not convinced that this adds anything material to the normal requirements of contractual interpretation unless it be that, if the normal processes of interpretation do not lead to the conclusion that words have the meaning of an exclusion or limitation clause, they are not to be treated as having that effect.
30.	In approaching the limitation and exclusion clauses in this case I bear in mind the authoritative principles I have set out above.  I also refer to and gratefully adopt the two following passages.
31.	In HIH Casualty v Chase Manhattan Bank [2003] 1 All ER (Comm), Lord Bingham said at  [11]:
“There can be no doubting the general authority of [the well-known principles propounded by Lord Morton of Henryton giving the judgment of the Board in Canada Steamship Lines Ltd v The King [1952] AC 192 at 208], which have been applied in many cases, and the approach indicated is sound. The courts should not ordinarily infer that a contracting party has given up rights which the law confers upon him to an extent greater than the contract terms indicate he has chosen to do; and if the contract terms can take legal and practical effect without denying him the rights he would ordinarily enjoy if the other party is negligent, they will be read as not denying him those rights unless they are so expressed as to make clear that they do. But, as the insurers in argument fully recognised, Lord Morton was giving helpful guidance on the proper approach to interpretation and not laying down a code. The passage does not provide a litmus test which, applied to the terms of the contract, yields a certain and predictable result. The courts' task of ascertaining what the particular parties intended, in their particular commercial context, remains.”
32.	Relying on this and other authority, Popplewell J derived the following principles in Capita (Banstead 2011) Ltd v RFIB Group [2014] EWHC 2197 (Comm) at [15]:
“(1) A clear intention must appear from the words used before the Court will reach the conclusion that one party has agreed to exempt the other from the consequences of his own negligence or indemnify him against losses so caused. The underlying rationale is that clear words are needed because it is inherently improbable that one party should agree to assume responsibility for the consequences of the other's negligence: …. 
(2) The Canada Steamship principles are not to be applied mechanistically and ought to be considered as no more than guidelines; the task is always to ascertain what the parties intended in their particular commercial context in accordance with the established principles of construction:… . They nevertheless form a useful guide to the approach where the commercial context makes it improbable that in the absence of clear words one party would have agreed to assume responsibility for the relevant negligence of the other.”
33.	These statements establish that the Court’s task is essentially the same when interpreting what is said to be an exclusion or limitation clause as it is when interpreting any other provision of a contract: it is to identify what a reasonable person having all the background knowledge which would reasonably have been available to the parties would have understood the parties to have meant.  And in pursuing that task, the commercial and contractual context may make it improbable that one party would have agreed to assume responsibility for the relevant negligence of another, so that clear words are needed.  What matters most, to my mind, is not that the words should initially seem clear (though that often makes life much easier – pace Charter Re) but that, at the end of the interpretative process their meaning should be clear and established.

The Preliminary Issues – General
34.	The Parties framed their submissions by addressing Preliminary Issues 2 and 3 before turning to Preliminary Issue 1.  I shall do the same.  In doing so I will take the two issues together as they are closely interlinked.
Preliminary Issues 2 and 3
35.	At the start of the hearing most, but not all, of the Consortium’s claims could be characterised as increased costs attributable to the Consortium’s late appreciation of the scope of the presence of asbestos, which the Consortium alleges is attributable to Arup’s negligent failure to advise.  However, the Consortium also alleged that Arup failed to prevent the spread of asbestos fibres across the Development site, or to separate capping materials from the deeper fill or to place the deeper fill on a membrane to prevent it from contaminating the capping layers, or to prevent cross-contamination of soils, each of which would involve Arup causing the uncontrolled spread of asbestos: see Particulars of Claim [171(13)].  This was inconvenient for the Consortium in the present hearing because it wished to portray its claims exclusively as claims for financial losses caused by deficient professional advice (liabilities for which, it submits, are not limited or excluded) and not as claims for losses attributable to the uncontrolled spread of asbestos (liabilities for which, it accepted, could be caught by the limitations and/or exclusion).  Accordingly, at the start of Day 2 of the hearing it provided a document clarifying its position.  In so doing it accepted that if, ultimately, any part of the loss claimed is established as being caused by Arup’s performance causing uncontrolled spread of asbestos pollution and contamination, either within or beyond the site, then the Consortium will not recover damages for that loss.  
36.	Despite that concession, it was part of the Consortium’s submission that the limitations and exclusions could have substance or content if limited to excluding liabilities arising from Arup causing the uncontrolled spread of asbestos.  When pressed, the only activity directly undertaken by Arup to which the Consortium could point as giving rise to possible uncontrolled spread was the digging of trial pits, which might cause asbestos to be dug up and spread around.  However, despite the fact that the present claim is very largely based upon the assertion that Cuddy found the additional asbestos before it had been spread around and that suitable steps were taken (albeit at increased cost) to prevent the uncontrolled spread, it is possible to envisage circumstances where negligent advice by Arup could have caused inadequate precautions to be taken with the result that there was an uncontrolled spread of asbestos (or other pollutants or contaminants).  It cannot therefore be said on Arup’s part that the exclusions and limitations must have been directed to claims of the type and arising in the circumstances now being advanced by the Consortium.
37.	Arup’s obligation was to exercise reasonable care and skill under the September 2009 Agreement: see Clause 1.4A.  The Consortium advanced a submission that Arup might incur liability to the Consortium without negligence on the basis of the Construction (Design and Management) Regulations 2007, the Control of Substance Hazardous to health Regulations 2002 and the health and Safety at Work Act 1974.  On being pressed to explain this submission, it appeared to be tenuously based upon Arup’s obligations as employer under those provisions, the suggestion being that breach of those obligations might give rise to a liability to the Consortium without proof of negligence.  If there was any substance or merit in the submission, I have been unable to understand it.
38.	The starting point of the interpretative inquiry is the words themselves.  At this stage in the inquiry there is no material difference between Clause 6.3 of the 2009 Agreement and Clause 4.3 of the 2010 Warranties.  Each clause consists of two sentences.  The first sentence is clear in providing for a limit of aggregate liability under the Agreement of £12 (or £5) million and expressly includes liability in negligence within that aggregate limitation.  It goes on to say “with the liability for pollution and contamination limited to” £5 million in the aggregate.  The use of the words “with the liability for pollution and contamination limited to £5,000,000” and the inclusion of those words in the same sentence and immediately following the express reference to liability for negligence carries the clear meaning that the limitation of liability for pollution and contamination is also a limitation that applies whether the liability is in contract, tort (including negligence) or otherwise.  I therefore have no doubt that the natural meaning of the first sentence when viewed on its own is that the £5 million limitation of liability “for pollution and contamination” applies whether or not the liability arises as a consequence of Arup’s negligence.
39.	Turning to the second sentence, if it is viewed on its own it is an unqualified exclusion of all liability “for any claim in relation to asbestos”.  To my mind, when taken on their own those words are sufficient to show clearly that liability for any claim in relation to asbestos is excluded, whatever the cause although I recognise that such words could be rendered uncertain by the wider context.  Once the second sentence is read with the first, the clarity of its meaning is reinforced.  Taken altogether, what Clause 6.3 is saying is that there are three categories of liability being addressed: aggregate liability overall, liability for pollution and contamination and liability for any claim in relation to asbestos.  The limitations of liability for the first two categories apply (expressly) whether the liability is incurred in negligence or otherwise.  The placing of the full stop between the first and second sentences serves to emphasise that, while the first two categories of liability are limited, the third category of liability (for any claim in relation to asbestos) is excluded altogether.  I reject any suggestion that, as a matter of language, it was necessary to reiterate the words “whether in contract, tort (including negligence) ….” in the second sentence in order to make it clear that the exclusion of liability for any claim in relation to asbestos is excluded whether or not it is liability in negligence.  I would add that the fact that liability in negligence is contemplated and included within the second sentence is implied in this particular clause as being carried over from the first sentence; but it seems to me to be preferable to describe the second sentence as an absolute exclusion given its position and terms as a discrete sentence within the clause overall.  Because of the absolute nature of the exclusion in the second sentence when seen on its own and in context, the alternative view effectively requires the writing in of words so that the second sentence would read: Liability for any claim in relation to asbestos (unless incurred in negligence) is excluded.  That does not seem to me to be either natural or justified in the context of this clause.
40.	Turning to the wider context provided by the 2009 Agreement overall, two features stand out.
41.	The first feature is that Clause 6.3 comes within Clause 6 as a whole, which is headed “Professional Liability Insurance” and sets out a package of provisions regarding the obtaining of insurance and the allocation of risk by the limitation and exclusion of liabilities.  This gathering of provisions indicates, when viewed objectively, that the parties have turned their minds both to the allocation of risk and to what steps are required to ensure that Arup takes steps to protect itself (at least to some extent) by the obtaining of insurance cover.  This in turn removes any moral argument such as was advanced as the fourth of Mr Taverner QC’s introductory submissions, namely that “if as alleged by Arup this claim for this type of financial loss is excluded by the final words of Clause 6.3, a central feature of the agreements and the services provided pursuant to the agreement was devoid of commercial purpose.  This makes a central feature of the agreement void or empty of content.”  More extravagantly he submitted that “a consequence of Arup’s position is that in terms of the predominant focus, Arup need not have cared a jot about performance, in terms of performing their obligations.”  This submission is wrong for a number of reasons.  First, although the submission was couched in the terms normally associated with assertions of repugnancy, it is well established that “it is not, …, permissible to look between the lines of the written contract to extract a part of the cover and then to argue that a particular exception will deprive that part of the cover of any effective meaning. The repugnancy doctrine (even at its most extreme) only entitles a court to disregard an exception clause if the contract as a whole would otherwise be virtually reduced to a declaration of intent”: see Great North Eastern Railway Ltd v Avon Insurance Plc  [2001] Lloyd's Rep. I.R. 793 at [31].  Second, the unlimited power of termination provided by Clause 13.1 meant that Arup would still need to care more than a jot about their provision of all of their services under the September 2009 Agreement, lest their appointment be terminated.  Most importantly, however, the fact that these commercial entities of equal status entered into the September 2009 Agreement including the whole of Clause 6 shows this to be a contract where the clear sense of the words used is not altered, subverted or confused by the wider context. 
42.	This view of the effect of the wider contractual context is reinforced by the second feature of the September 2009 Agreement to which I referred above.  Schedule 2 to the September 2009 Agreement formed an integral part of the contract and included the following provision:
“The total fee for progressing the items listed above is £655,000, this sum includes expenses but excludes VAT. Third party costs for surveys such as topographical, transportation and geotechnical/contamination surveys, together with Statutory Authority costs are not included.
For this scope and fee amount, the total liability of Arup is limited to £12m with the liability for pollution and contamination limited to £5m in aggregate. The liability for any claim in relation to asbestos is excluded. The Professional Indemnity Insurance for this scope and fee is £5m for each and every event.” (Emphasis added)
43.	This passage does not have the added complexity of express reference to liability being in negligence or other causes of action as does Clause 6.3; but it is written in straightforward language that any commercial man could understand, without lawyers’ accretions.  Its meaning is clear and is that the limitations and exclusion of liability are part of the package of rights and obligations to which the parties have agreed.  Given the style of the language here being used, the absence of a reference to liability in negligence is immaterial: the clause means that the specified liabilities are limited or excluded, whatever the cause of action giving rise to them.
44.	To my mind, the meaning of Clause 6.3 is entirely clear in limiting and excluding the specified liabilities whether they arise in negligence or not.  I would reach that conclusion without reference to Schedule 2.  That is potentially significant because the 2010 Warranties do not have any provision equivalent to what is found in Schedule 2 of the September 2009 Agreement.  However, Clause 4.3 of the 2010 Warranties is found in the context of Clause 4 as a whole, which is also entitled “Professional Indemnity Insurance” and which also makes provision for Arup to take out professional indemnity insurance.  Clause 4.1 of the 2010 Warranties differs from Clause 6.1 of the September 2009 Agreement in requiring the professional indemnity limit of £5 million to be “for each and every claim (but aggregate in respect of contamination and pollution risks)” where Clause 6.1 of the September 2009 Agreement requires it to be “for any one occurrence or series of occurrences arising out of any one event”.  But these differences are not material to the main point, which is that the parties have evidently considered and allocated risks and liabilities as a deliberate part of the contractual agreement as a whole.
45.	Before reaching a concluded view on the implications of the full contractual context upon the interpretation of the clauses, it is necessary to consider a further line of argument advanced by the Consortium on the scope of the liabilities that are either limited or excluded.  The Consortium submits that the reference to liabilities “for” pollution and contamination means that the only liability that is excluded is liabilities for causing the uncontrolled spread of pollutants or contaminants.  It goes on to submit that the asbestos liabilities that are excluded are a subset of those pollution and contamination liabilities, with the result that all that is excluded by the last sentence is liability for causing the uncontrolled spread of asbestos.  It then goes on to submit that none of the liabilities alleged against Arup in this case are liabilities for causing the uncontrolled spread of asbestos (or any other pollutant or contaminant).  Accordingly it submits that none of the liabilities that Arup might incur in this litigation are within the scope of the (limited) liabilities for contamination and pollution or the (excluded) liabilities for claims in relation to asbestos that are caught by Clause 6.3 of the September 2009 Agreement or Clause 4.3 of the 2010 Warranties.
46.	In support of the first limb of this argument, the Consortium asserts that to use the phrase liability “for” contamination or pollution “is commonly understood to mean liability for the causing of the spread, discharge, release or escape of pollution”; and that it is “frequently endorsed or qualified in insurance policies, often by standard London Market Clauses.”  It relies upon the Lloyd’s Underwriters NMA1683 clause, which does not itself use the phrase “liability for” pollution or contamination but which does exclude (at paragraph 4) “the cost of removing, nullifying or cleaning-up seeping, polluting or contaminating substances unless the seepage, pollution, or contamination is caused by a sudden, unintended and unexpected happening during the Period of the Insurance”.  And it refers to various authorities in the United Kingdom and Australia which, it submits, treat contamination and pollution as meaning the uncontrolled spread of contaminants or pollutants.
47.	Leaving on one side the fact that the point was not pleaded or advanced before the exchange of skeleton arguments for this hearing, it seems to me to have no merit.  First, the materials placed before the Court at this hearing do not justify the conclusion that the words “liability for” contamination or pollution is a certain term of art in any circumstances.  Second, the examples relied on by the Consortium are all drawn from contexts that are materially different from the present.  For example, NMA1683 is typically used in the context of non-marine liability policies which are different in structure and coverage from professional indemnity insurance where the liabilities that are insured typically arise from the provision of specialist advice or services which require a degree of expertise.  It is also not apposite for inclusion in a claims-made policy without substantial alteration.  None of the authorities cited by the Consortium related to circumstances that are analogous to those of the present dispute and, though I have read them, I find no assistance in them.  Therefore even assuming (though not accepting) that the words “liability for” contamination or pollution are a certain term of art with a set meaning in other circumstances, no justification appears for transporting that meaning into the sphere of professional indemnity insurance.  Third, in any event, paragraph 4 of NMA1683 implies that liabilities arising from the costs of cleaning up pre-existing contaminants and pollutants which were not caused by a sudden, unintended and unexpected happening during the Period of Insurance would be covered if not specifically excluded by that paragraph.  So, if the underlying insurance is against liability “for” contamination and/or pollution, it would cover both liabilities arising because the insured has caused the uncontrolled spread of contaminants and/or pollutants or because the insured has incurred a liability for clean up costs without being responsible for the original spread of contaminants or pollutants.  Fourth, what is being interpreted in the present case is not an insurance policy but the September 2009 Agreement and the 2010 Warranties, and there is no justification for importing a specialist meaning into them.
48.	If, however, I were to be wrong in my conclusion that this argument on the meaning of liability “for” pollution and contamination, there would be a sting in the tail for the Consortium because of the terms of the second sentence.  It excludes “liability for any claim in relation to asbestos”, not liability “for” asbestos pollution or contamination.  Viewed objectively, it is likely that the parties used different words in order to convey a different meaning.  The words “any claim in relation to” convey a broad scope including a wide and loose association between the claim and asbestos.  When viewed on their own they are inappropriate to convey the meaning for which the Consortium contends.  Placing them in context, if the Consortium were right about the meaning to be attached to liability “for” pollution and contamination, the distinction between the language in the two sentences would serve to emphasise the wide scope of the asbestos exclusion.
49.	Standing back, it is apparent that both the September 2009 Agreement and the 2010 Warranties are examples of contracts where businessmen who are capable of looking after their own interests and of deciding how risks inherent in the performance of various kinds of contract can most economically be borne have reached an agreement that the Court should be very slow to disturb or to characterise as unbusinesslike.  The price paid can be said (and, in the case of the September 2009 Agreement, seen) to reflect the commercial risks that have been allocated and the parties were entitled to apportion the risk of loss as they saw fit.  There is in my view no basis for suggesting that the context of the contracts makes it improbable that the parties would have agreed to this allocation of risk, even in the case of negligence.  The Consortium asserted that Arup has not put forward any sensible rationale for why it should be able to exclude such liabilities.  That is not the test: the proper question is whether the implications of Arup’s interpretation shows that it is inconsistent with business common sense.  The Consortium has not begun to show that the limitations and exclusions of liability for which Arup contends are either inherently improbable or lacking in business common sense or that the implications of Arup’s interpretation is inconsistent with business common sense.  On the contrary, there is every business reason why Arup should wish to limit its potential liabilities arising out of contamination or pollution in general or arising out of the presence of asbestos in particular on this site; and it was open to the Consortium either to agree or decline those limitations and exclusions depending upon what could be negotiated and whether the package overall was acceptable to both parties.
50.	For these reasons I conclude that the limitations and exclusions the subject of Preliminary Issues 2 and 3 are clear in their meaning and are apt to cover liabilities arising in negligence of the type being advanced by the Consortium i.e. claims for the increased costs of dealing with pre-existing asbestos contamination or pollution that do not involve allegations that Arup caused the uncontrolled spread of asbestos either within or beyond the bounds of the Development site.  Since the claims are all in relation to asbestos, liability is excluded.  If there were any claims that could not be described as claims in relation to asbestos, liability would be limited to £5 million under the September 2009 Agreement and under the 2010 Warranties for essentially the same reasons.
Preliminary Issue 1
51.	It is common ground that, for the purposes of interpreting the September 2009 Agreement the LoI falls within the category of pre-contractual negotiations.  The facts that the terms of the LoI contemplated that it would be superseded by a subsequent agreement, and that the limitations of liability under the LoI were not the same as those under the September 2009 Agreement do not assist when interpreting the later document.  It is also common ground that the September 2009 Agreement superseded the LoI so that works carried out pursuant to the LoI before the conclusion of the September 2009 Agreement are treated, as a matter of contract, as having been carried out subject to the terms of the September 2009 Agreement.  Clause 6.3 of the September 2009 Agreement applies to liability under that Agreement.  Accordingly, for Clause 6.3 to be applicable, the liability must arise from works carried out under that Agreement, which will include works carried out under the LoI.  
52.	Arup submits that the September 2009 Agreement governs the January 2007 Contract and work carried out pursuant to it.  The Consortium now submits that it does not.  This was not the Consortium’s original pleaded position.  The Particulars of Claim (which have not subsequently been amended) allege the opposite and the present Preliminary Issue only arises because the Consortium has pleaded its present position in the Reply. 
53.	The work carried out pursuant to the January 2007 Contract was not included in the work authorised by the LoI as it had already been done.  It is therefore necessary to examine the terms of the September 2009 Agreement in some detail to see whether it governs the January 2007 Contract and the work done under it.  The relevant terms are set out in Annexe 3.  The relevant question is whether the words “all services [with a small s] performed … in relation to the Project both before and after the date of this Agreement” include work done under the January 2007 Contract.
54.	Background paragraph (B) states the Consortium’s wish to appoint Arup “to provide the services (small s) of an Engineer set out in Schedule  2 with such variations to them as may be made under the Agreement (“the Services”) in relation to the Project and on the terms and conditions set out in this Agreement.”  Having defined the Services (capital S) in this way, the succeeding paragraphs refer to both Services (capital S) and services (small s) in a way which appears and must be assumed to be deliberate and conventional – Services (capital S) means those services defined in Background paragraph (B); services (small s) is not limited to the Services (capital S) as defined.
55.	The Services (capital S) are therefore the services (small s) set out in Schedule 2.  Those services do not include the work provided under the January 2007 Contract even though in some respects the nature of the work can be seen to be more of the same types of activity as Arup had previously undertaken.  This is clear from the allocation of fees to be paid for the services set out in Schedule 2 which are in addition to and do not include the relatively modest fees that had already been incurred and paid for the work done under the January 2007 Contract.  
56.	It is also to be noted that Background paragraph (B) states the Consortium’s wish to appoint Arup to provide the Services (capital S) in relation to the Project and not further or otherwise.  The Project is defined as the project described in Schedule 1, which in turn provides the operative definition: “The Project comprises the design and construction of … the residential and commercial development of Barry Waterfront, Barry.”  As a matter of language, this does not naturally include the pre-purchase works of investigation and reporting for the purposes of enabling the Consortium to decide how much to pay for the site, even if some of that pre-acquisition work might subsequently have some residual usefulness and more work of the same general type is subsequently done.  The language more naturally means the process of designing and developing a site that has now been acquired.
57.	Having stated the Consortium’s wish to appoint Arup to provide the Services in relation to the Project in Background paragraph (B), the Consortium and Arup agree and state the fact of Arup’s appointment in Clause  1.2 by rehearsing Arup’s obligation to “provide the Services (capital S) in accordance with this Agreement.”  Clause 1.2 does not repeat the words “in relation to the Project”: but it does not need to do so as the Services (capital S) are those services set out in Schedule 2 which, for the reasons set out above, exclude the work done under the January 2007 Contract and are by their terms related to the Development site.
58.	The Clause on which Arup relies is Clause 1.1 which states that the terms and conditions of the Agreement and the warranties and undertakings which it contains “are deemed to apply to all services (small s) performed and to be performed by [Arup] in relation to the Project both before and after the date of this agreement.”  Two things are clear.  First, the use of the word “services” (small s) means that the services there being referred to are not limited by definition to the services set out in Schedule 2.  Second, the use of the words “both before and after the date of this agreement” taken together with the words “performed and to be performed” are of themselves wide enough to cover work performed under the January 2007 Agreement, or even before then.  So the determinative question is what is meant by “all services (small s) performed … in relation to the Project.”
59.	It is not sufficient to point to the fact that Clause 1.1 refers to services (small s).  They have to be performed “in relation to the Project”.  So the question is whether the Project as defined includes the work done under the January 2007 Contract.  Looking at the definition of “the Project” in Schedule 1 on their own, I have already given my view that the language more naturally refers to the activities after acquisition of the site.  They do not expressly exclude activities before acquisition of the site and could stretch to activities before formal acquisition if those activities were reasonably to be described as being part of the design and development of the Development site.  But, taken on their own, I would tend to the conclusion that they would not stretch to the limited preliminary advice provided by Arup to enable the Consortium to decide whether to bid and, if so, how much to offer.  If Arup took steps actually to design the development during that period, there is no evidence to that effect before the Court. The terms of the January 2007 Agreement suggest the contrary: See Annex 2.
60.	The wider context of the September 2009 Contract as a whole does not provide much assistance.  Slight support for what I consider to be the more natural meaning of the words when viewed in isolation comes from background paragraphs (A) and (B).  Background paragraph (A) refers to the Consortium’s intention “to proceed with the [Project]” (as defined).  What was being proceeded with by September 2009 was the post-acquisition design and development of the site and not the preliminary pre-acquisition investigations.  Hence the appointment of the Project Manager stated in Schedule 1 which, in the absence of evidence to the contrary, may suggest the managing of the post-acquisition project.  So, although the argument risks circularity, the wider context seems to me to provide some support for what I consider to be the more natural meaning (when taken on their own) of the words at issue.  Looking wider still, the implications of this interpretation are straightforward: Arup has not put in place any terms more specific than those originally agreed in January 2007, not least in relation to limiting its liability.  However, this is not self-evidently un-businesslike since the liabilities that might flow from the limited preliminary works may not have been anticipated to be so greatly in need of limitation or exclusion, for any number of reasons.  Or there may simply have been an oversight.  The mere fact that the January 2007 Contract referred to a proposal to incorporate the terms and conditions of the ACE short form contract does not take matters any further.  The relevant parts of the September 2009 Agreement do not refer to the ACE short form contract, and the provisions that are the subject of this question are not derived from that form of contract.  In other words, the terms of the September 2009 Agreement do not support the inference or interpretation that it was an adjustment or amplification of the terms that had been agreed in January 2007.
61.	Standing back and looking at the critical words themselves, in the context of the contract as a whole and in the wider context of what would reasonably have been known to persons in the position of the contracting parties at the time of contracting, I am not satisfied that the September 2009 Agreement means that it governs the January 2007 Contract or that the terms of the September 2009 Agreement have been incorporated in the January 2007 Contract, for the reasons I have just given.
Conclusion
62.	I answer the Preliminary Issues as follows:
i)	Preliminary Issue 1:
a)	No: the September 2009 Agreement did not supersede, govern or obliterate the January 2007 Contract;
b)	No: Clause 6.3 of the September 2009 Agreement is not incorporated in the January 2007 Contract;
ii)	Preliminary Issue 2: Subject to my answers to Preliminary Issue 1, yes.
iii)	Preliminary Issue 3: In the light of my answer to Preliminary Issue 2, this does not arise.  But if I had answered Preliminary Issue 2 in the negative, my answers to Preliminary Issue 3 would have been:
a)	Yes;
b)	Yes.

Annexe 1
Extracts from the 1996 Appointment of Arup by ABP

1.	DEFINITIONS

1.1	ABP means Associated British Ports.

1.2	The PROJECT means the regeneration of approximately 170 acres of land, adjacent to Barry No 1 Dock by means of site clearance reclamation decontamination earthworks and the provision of infrastructure, shown edged in red on plan no. BD6/OAP/01 contained in Appendix 1.

1.3	CIVIL ENGINEERING CONSULTANCY BRIEF means the original brief enclosed with our invitation letter of 28 February 1992 and appended hereto see Appendix 2.

1.4	CLARIFICATION BRIEF means the clarification brief attached hereto in Appendix 3.

1.5	SERVICES means the engineering and environmental services and duties in relation to the Project which are to be provided by Ove Arup and Partners to ABP pursuant to paragraph 3 of this letter of appointment.

2.	DUTY OF CARE
2.1	That (without prejudice to any other liability of your firm to ABP) your firm hereby covenants with ABP that it has exercised and will continue to exercise all proper skills, care and judgement in the discharge of the Services to the professional standards which may reasonably be expected of a professional person performing the functions of consulting Civil Engineers in relation to the Project with experience of carrying out such services for projects of a similar nature size and complexity as the Project and that it will duly perform the Services in accordance with the terms of the Appointment and in relation to such Services it shall owe a duty of care to ABP and acknowledges that ABP has relied on your firm in performance of those Services.

…

3.	SERVICES

3.1	These are to cover the full duties set out in the ACE Model Form of Agreement for the Design and Supervision of Works of Civil Engineering Construction (Form A) 1 March 1963 as amended July 1979 (copy attached see Appendix 4) subject to the additions and amendments set out in clauses 3 and 4 of the original Civil Engineering Consultancy Brief and clause 2 of the attached Clarification Brief for the detailed design of the proposed Phase 1 area of the Project. To the extent that there is any conflict or inconsistency between the ACE Model Form of Agreement and the terms and conditions of this letter of Appointment the terms of this letter of Appointment will prevail.

For the avoidance of doubt, the services shall include the duties encumbent [sic] upon the firm as designer as required under the Construction (Design and Management) Regulations 1994.

…

7. 	PROFESSIONAL INDEMNITY INSURANCE

7.1	Your firm hereby covenants that it presently has professional indemnity insurance cover (“the Policy”) with a reputable insurance company with a limit of indemnity of not less than £5 million of each and every claim (but aggregate in respect of contamination and pollution risks) against the firm in relation to the Project and that it will (for so long as such insurance is available in the market on reasonable terms) maintain such insurance throughout the duration of the Project and thereafter use its reasonable endeavours to maintain such insurance for a period of 12 years from the date of practical completion of the Project with that insurer or another reputable insurer to cover its liabilities and obligation in relation to the Project.

7.2	Notwithstanding anything to the contrary contained herein, the liability of your firm to ABP under or in connection with this letter of Appointment and to the WDA and any other Beneficiary under or in connection with any Duty of Care Deed which you enter into pursuant to this letter of Appointment, whether in contract, tort or breach of statutory duty shall be limited as follows:-

7.2.1	in respect of any claim or claims arising from contamination and /  or pollution (“CP Claims”), the total sum of £5,000,000 or such lesser sum as is available under the policy in relation to CP Claims PROVIDED ALWAYS  that where the cover available for CP Claims under the Policy is less than £1,000,000 (“the Reduced Cover”) or there is no cover for CP Claims, the liability of your firm for any one claim shall be limited to the sum of the Reduced Cover, if any, and such sum (“the Uninsured Sum”) as together with the Reduced Cover, if any, shall total £1,000,000 provided always that your firm’s liability by way of Uninsured Sums in respect of all CP Claims shall not in any circumstances exceed in total £1,000,000. For the avoidance of doubt, any sums payable by your firm pursuant to this clause 7.2.1 shall be in addition to any sums due from you to your insurers by way of excess under the Policy.
7.2.2	in respect of any other claim or claims not being CP Claims, the further total sum of £15,000,000 and for the avoidance of doubt the said limit on liability of £15,000,000 is in addition to the limit of liability for CP Claims provided for in clause 7.2.1. PROVIDED ALWAYS that the said limit of £15,000,000 shall not apply to any claim or claims not being CP Claims, made against your firm by ABP under on [sic] in connection with this letter of Appointment and / or by the WDA [and any other Beneficiaries] under or in connection with any Duty of Care Deed which you enter into pursuant to this letter of Appointment, whether in contract, tort or breach of statutory duty, in respect of the services or any part thereof relating to the waste disposal facility.
7.3	As and when it is reasonably requested to do so by ABP your firm shall produce for inspection documentary evidence that its professional indemnity insurance is being maintained.

…

ABP / WDA
BARRY MARINE JOINT VENTURE
CIVIL ENGINEERING CONSULTANCY BRIEF

…

1.4	The major items of civil engineering works required to the site and their estimated costs are:

	£m	
Site Investigation:	0.05	
Demolition / Site Clearance	1.16	
Earthworks	0.74	
Contaminant Removal	0.25	
HGV Diversion	2.85	
Gladstone Road Link	0.80	
Spine Road / Infrastructure	1.50	
Footbridge	0.07	
Services	0.65	
Hard Landscaping	1.61	
Soft Landscaping	1.08	
		
	10.76	

3.	TASKS

3.1	These are as set out in the Association of Consulting Engineering Model A Agreement, March 63, amended July 79 (copy attached) subject to the following further additions and amendments,

a)	Preliminary Stage
vi)	A comprehensive desk study into all physical aspects affecting the sites’ development shall be undertaken. This shall take full account of all previous investigations and studies.
vii)	The site investigations will include the determination of all aspects of ground conditions which could affect the reclamation or redevelopment including contamination, existing foundations, and existing services.
viii)	Traffic, structural, archaeological, ecological and any other specialist surveys required must be undertaken.

…

BARRY JOINT initiative
Civil engineering consultant
Clarification of brief
Detailed design – PHASE 1 area

…

2.	SCOPE OF WORK

ABP wishes to confirm instructions to the Consulting Engineer to:

2.1	Review the preliminary design reports listed in 1.2(a) above and identify significant implications arising from the revised proposals in terms of programme, procurement, cost estimates, reclamation, infrastructure and ground conditions envisaged for future development uses. A brief report in respect if this review will be required.
2.2	Liaise and provide assistance to the appointed planning consultant and development consultant in respect of development concept review, masterplan preparation and marketing exercise, and the submission of an outline planning application for the Phase 1 land area.
2.3	Prepare and submit applications for Planning and Licensing Approval in respect of the establishment of a waste disposal facility at the former Graving Docks.
2.4	Prepare and submit planning applications required in respect of the decontamination reclamation and provision of infrastructure to the Phase 1 area.
2.5	Consider the requirements for additional site investigations or trials as appropriate to enable detailed design of reclamation and infrastructure to be progressed.
2.6	Carry out site investigation and formulate proposals for the interim reclamation treatment of ‘A’ Site and the Mole following demolition of the existing storage tanks pending future development, and such preliminary and detailed design of reclamation as may be instructed.

…

2.9	Undertake detailed design of:
(i)	Controlled excavation of contaminated material from the proposed Phase 1 area, West Pond area (including asbestos) and other vacant areas to be agreed.
…

(iii)	Controlled disposal of contaminated material into the licensed disposal facility but with a view to maintaining flexibility for the retention of part of the former Graving Docks as a water feature for the development.
(iv)	Road and associated infrastructure on the preferred alignment recommended by the planning consultant.
(v)	Services and drainage (including diversions of existing) to the Phase 1 area but taking account of the future requirements of the remainder of the site.
2.10	Advise on the procurement of the works to enable them to be undertaken in an economical manner with minimum risk of claims due to unforeseen conditions, in particular to consider procurement of advance contracts e.g. contamination treatment.
…

Annexe 2
The January 2007 Contract

1.	There are 3 relevant emails as follows:
(1)	23 January 2007 (Arup to Consortium): 
“Dear All
It was good to meet you yesterday to discuss the bid for the project, thank you for asking us to be part of your team.
As discussed at the meeting, the site has a number of engineering constraints in terms of access and transportation, contamination and geotechnics together with utilities and drainage, whilst the flooding issue will also need to be checked out.  … In the first instance you have asked us to draw up a constraints plan for the site, and you have also asked us to advise on sustainability and the potential for removal of the railway in the west.  We assume that, in due course, you will need us to supply information on infrastructure quantities and abnormals to cost up the scheme.  We note that you have asked us to pencil-in weekly meetings up to the 16th March and have assumed that we will need to attend most of these.  
In terms of our input, we propose that we are remunerated for our work on a cost plus 10% basis.  It is difficult to judge how much input will be required, however, we suggest that an overall budget ceiling of £10,000 plus VAT is allowed.  Should our level of input during the process suggest that the ceiling budget may be exceeded, we will let you know in due course.  We propose that we incorporate terms and conditions of the ACE Short Form 2002, and we invoice monthly, in areas for our input.”
(2)	23 January 2007 (Consortium to Arup): “Thanks John – quote seems reasonable to me.  Please confirm you will be able to invoice three ways in thirds to each of us.”
(3)	23 January 2007 (Arup to Consortium): “… yes we can invoice three ways in thirds.”  Arup also referred to a forthcoming meeting and advised the Consortium of the names of the other tenderers.
Annexe 3
Extracts from the September 2009 Agreement between Arup (“the Consultant”) and the Consortium

BACKGROUND:
(A)	The Consortium intends to proceed with the project described in Schedule 1 (“the Project”) at the site stated in Schedule 1 (“the Site”).
(B)	The Consortium wishes to appoint the Consultant to provide the Services of an Engineer set out in Schedule 2 with such variations to them as may be made under this Agreement (“the Services”) in relation to the Project and on the terms and conditions set out in this Agreement.

IT IS NOW AGREED THAT:

1. CONSULTANT’S OBLIGATIONS

1.1	The terms and conditions of the Agreement and the warranties and undertakings which it contains are deemed to apply to all services performed and to be performed by the Consultant in relation to the Project both before and after the date of this Agreement.
1.2	The Consultant shall provide the Services in accordance with this Agreement and with such reasonable written instructions (if any) as the Consortium and/or the project manager stated in Schedule 1 (“the Project Manager”) may give to the Consultant.
1.3	Where and to the extent that the Consultant has already performed or partly performed any of the Services, the Consultant warrants that:

1.3.1	it has done so in accordance with the standards of reasonable skill and care and all other terms and conditions set out in this Agreement;
1.3.2	all warranties and undertakings in this Agreement apply to them;
1.3.3	the Consultant shall complete the performance of any part performed Services in due time in accordance with this Agreement; and 
1.3.4	all sums (if any) paid to the Consultant to date in respect of work done in relation to the Project are payments on account of sums due under this Agreement.

1.4	The Consultant warrants that it has exercised and shall continue to exercise in the performance of its duties under this Agreement all the reasonable skill and care as is to be expected of a properly qualified and competent member of its profession experienced in carrying out work such as its duties under this Agreement in relation to Projects of similar scope, size, nature, timescale and complexity and on a similar site or at a similar location to the Project.

1.4A	Notwithstanding any other term of this Agreement the Consultant’s obligation in relation to the performance of the Services shall be to exercise the duty of care in clause 1.4 and the Consultant shall only be liable if and to the extent that he has failed to exercise the duty of care and for the avoidance of doubt the Consultant shall not be under any fitness for purpose obligation under this Agreement.
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1.6	The consultant shall comply with the Construction (Design and Management) Regulations 2007 or any replacement or amendment of them and with all relevant legal requirements including but not limited to the requirements of any relevant planning, building regulations or other consent licence, approval or authority of which the Consultant is or should be aware.

6.	PROFESSIONAL INDEMNITY INSURANCE

6.1	The Consultant will at its own cost take out and maintain professional indemnity insurance, with reputable insurers carrying on business in the European Union, with a limit of indemnity of not less than £5,000,000.00 (five million pounds) for any one occurrence or series of occurrences arising out of any one event provided always that:

6.1.1	such insurance shall be in place from the date of this Agreement until no less than 12 years after completion of the Services;
6.1.2	the insurance premiums in respect of the insurance shall at all times be the responsibility of the Consultant;
6.1.3	If such insurance is not available to the Consultant (and/or members of the Consultant’s profession engaged in services of a similar size, nature and complexity as the Consultant) at commercially reasonable rates and terms (excluding any increase in premiums attributable to the actions, omissions, errors or defaults of the Consultant), the Consultant and the Consortium will meet and the Consultant will outline the steps he intends to take to manage such risks. The parties shall use reasonable endeavours to agree a method of managing such risk; and
6.1.4	The Consultant will provide the Consortium with documentary evidence that the policies referred to in this clause 6 are in full force and effect together with a summary of the policy terms and conditions.

6.2	If the Consultant has not provided evidence of any policies required under this Agreement to the Consortium at tender stage, he will provide it immediately after the execution of this Agreement. In the event that in the Consortium’s reasonable opinion those policies do not effect proper cover in accordance with this Agreement, the Consortium may require the Consultant to effect and the Consultant will effect such further insurance as the Consortium may reasonably require.
6.3	The Consultant’s aggregate liability under this Agreement whether in contract, tort (including negligence), for breach of statutory duty or otherwise (other than for death or personal injury caused by the Consultant’s negligence) shall be limited to £12,000,000.00 (twelve million pounds) with the liability for pollution and contamination limited to £5,000,000.00 (five million pounds) in the aggregate. Liability for any claim in relation to asbestos is excluded.

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10. SUB-CONTRACTING
10.1	If the Consultant considers it necessary for specialist sub-consultants to undertake any part of the Services, the Consultant shall make such recommendations to the Consortium. If such recommendation is accepted by the Consortium in writing, the Consultant shall procure deeds of collateral warranty from such sub-consultants in favour of the Consortium and the Third Parties in the form set out in Schedule 4 in respect of that part of the Services to be undertaken by the sub-consultants. The Consultant shall remain liable for the performance of the Services as if such sub-consultants had not been appointed.

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13. TERMINATION
13.1	In addition to any other rights and remedies which the Consortium may have, the Consortium may at any time by written notice to the Consultant immediately terminate the whole or any part of the Consultant’s engagement in relation to the Project.
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SCHEDULE 1
Details of the Project

19.	The Project comprises the design and construction of: The residential and commercial development of Barry Waterfront, Barry.
20.	The Site is the area of land known as: Arno Quay, East Quay, Castleland Quay, Castleland Quay West, West Pond and South Quay at Barry Waterfront, Barry.
21.	…

SCHEDULE 2
The Services

The engineering scope has been discussed with the Client and Project Manager. The engineering input includes TA, Flooding, Site Investigation, Earthworks and Remediation up to Unconditional Consent/Discharge of Conditions relating to the Outline Planning Application for East Quay, Arno Quay, West Pond and South Quay, together with Initial Strategic Input on Highways and Drainage and Engineering Input on the EIA. The input involves the following elements outlined in our original scope:

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Revised constraints plan and programme updates, cost advice and input on drainage and highways up to Nov 2007 – Fee - £22K
•	Assess desk study information on obstructions, ground conditions, contamination, site levels and services, plot on O/S base, subdivide showing areas of similar constraints and highlight in terms of high (red), medium (amber) and low (green) level constraints, produce four separate constraints drawings, one for each area.

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Geotechnical/Contamination Investigation – Fee - £165K
•	Desk study updates for Arno Quay, East Quay, West Pond and South Quay
•	Scope investigations
•	Liaise with EA, VoG and ABP
•	Produce contract documents and drawings
•	Obtain quotes/tender investigations
•	Supervise site investigation and administer the contracts
•	Prepare testing schedules
•	Assess data provided including contamination risk assessment
•	Prepare and submit geotechnical and risk assessment reports for Arno Quay, East Quay, West Pond and South Quay

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It should be noted that the planning condition related to remediation is likely to require some contractor input for complete discharge, we have not included for this element – Fee - £265K

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•	Detailed earthworks and remediation design of Arno Quay, East Quay, West Pond and South Quay including all drawings

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Engineering input in EIA dealing with geology and ground conditions, water quality and drainage, transportation, including text sections and figures – Fee - £15K

The total fee for progressing the items listed above is £655,000, this sum includes expenses but excludes VAT. Third party costs for surveys such as topographical, transportation and geotechnical/contamination surveys, together with Statutory Authority costs are not included.

For this scope and fee amount, the total liability of Arup is limited to £12m with the liability for pollution and contamination limited to £5m in aggregate. The liability for any claim in relation to asbestos is excluded. The Professional Indemnity Insurance for this scope and fee is £5m for each and every event.

It should be noted that the above options do not include preparation of information for tender and construction. …

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SCHEDULE 4
Forms of Collateral Warranty
[The forms of collateral warranty evidently form much of the basis for the 2010 Warranties but they differ from the 2010 Warranties.  In particular, where Clause 4.1 of the 2010 provides for a limit of indemnity under the professional indemnity policies of £5 million “for each and every claim (but aggregate in respect of contamination and pollution risks)”, the Schedule 4 Warranty provided for a limit of £5 million “for any one claim or series of claims arising out of the same occurrence (but in the aggregate for claims arising out of contamination/pollution).”  In addition, the Schedule 4 forms of Collateral Warranty had no clause equivalent to clause 4.3 of the 2010 Warranties.]

Annexe 4
Extracts from the 2010 Warranties

BACKGROUND
(A)	The Consultant has been appointed by Associated British Ports (“the Client”) under a deed of appointment dated 20th February 1996 (“the Appointment”) to provide professional services in relation to the regeneration of No1 Dock, Barry – Phase 1 (as defined in the Appointment as “the Project” which expression has the same meaning in this Deed).
(B)	By an agreement dated 21st September 2007 and made between the Client and the Beneficiary the Client is required to procure a warranty from the Consultant in favour of the Beneficiary.
(C)	The Consultant is obliged under the Appointment to give a warranty in favour of the Beneficiary.

OPERATIVE PROVISIONS

1.	CONSIDERATION
		
This deed is made in consideration of the payment of one pound (£1.00) by the Beneficiary to the Consultant receipt of which the Consultant acknowledges.

2.	CONSULTANT’S WARRANTIES

The Consultant warrants to the Beneficiary that it has performed and will continue to perform its duties under the Appointment in accordance with the Appointment and that it has exercised and will continue to exercise in the performance of those duties the reasonable skill and care to be expected of a properly qualified member of its profession experienced in carrying out duties such as its duties under the Appointment in relation to a Project of a similar scope, nature, timescale and complexity and on a similar site or at a similar location to the Project.

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4.	PROFESSIONAL INDEMNITY INSURANCE

4.1	The Consultant by this Deed covenants with the Beneficiary that it has at its own cost taken out and will maintain professional indemnity insurance with reputable insurers carrying on business in the European Union with a limit of indemnity of not less than £5,000,000 (five million pounds) for each and every claim (but aggregate in respect of contamination and pollution risks), in relation to the Project provided always that:
4.1.1	such insurance shall be in place from the date of commencement of the Consultant’s services until no less than 12 years after completion of the services under the Appointment;
4.1.2	If such insurance is not available to the Consultant (and/or members of the Consultant’s profession engaged in services of a similar scope, size, nature and complexity as the Consultant) at commercially reasonable rates and terms (excluding any increase in premiums attributable to the actions, omissions, errors or defaults of the Consultant), the Consultant and the Beneficiary will meet and the Consultant will outline the steps he intends to take to manage such risks. If the steps proposed by the Consultant are not reasonably acceptable to the Beneficiary, the parties shall agree an alternative method of managing such risk.
4.2	The Consultant will provide the Beneficiary with reasonable evidence that the policies referred to in this clause 4 are in full force and effect together with a summary of the policy terms and conditions.
4.3		The Consultant’s aggregate liability under this Deed whether in contract, tort (including negligence), for breach of statutory duty or otherwise (other than for death or personal injury caused by the Consultant’s negligence) shall be limited to £5,000,000.00 (five million pounds) with the liability for pollution and contamination limited to £5,000,000.00 (five million pounds) in the aggregate. Liability for any claim in relation to asbestos is excluded.