Keele University V Price Waterhouse

Keele University logoKeele University V Price Waterhouse

University of Keele v Price Waterhouse (a firm)

Source: All England Reporter
Publisher Citation: [2004] All ER (D) 264 (May)
Neutral Citation: [2004] EWCA Civ 583
Court: Court of Appeal, Civil Division
Judge: Buxton, Arden and Wall LJJ
Representation Justin Fenwick QC and Graeme McPherson (instructed by DLA) for the claimant.
Laurence Rabinowitz QC and Mark Cannon (instructed by Richards Butler) for the defendant.
Judgment Dates: 19 May 2004

Catchwords

Contracts – Contractual term – Construction – Exclusion clause – Limitation clause.

The Case

The correct approach to the construction of a contractual clause was to consider it as a whole and to consider whether separate limbs therein were capable of reconciliation. In the instant case the use of the word ‘other’ determined which limb of the clause took precedence.

Wednesday 19th May 2004

Mr Laurence Rabinowitz QC and Mr Mark Cannon (instructed by Richards Butler) for the Appellants

Mr Justin Fenwick QC and Mr Graeme McPherson (instructed by DLA) for the Respondent

Judgment

Lady Justice Arden :

1. This is an appeal with the permission of the judge against the orders of Hart J dated 2 and 10 July 2003. By these orders the judge gave judgment against the appellants, Price Waterhouse, for £1,670,163.06 with interest in the sum of £170,914.90 as damages for professional negligence. The judge held that these damages were not within a limitation clause in Price Waterhouse’s terms of business and that accordingly it was unnecessary for him to consider whether the Unfair Contract Terms Act 1977 prevented the appellants from relying on this clause. Price Waterhouse appeal against these two rulings of the judge.

2. Price Waterhouse agreed to provide professional services to the respondent, The University of Keele, in connection with the establishment of a profit related pay scheme (“PRP scheme”). The University operated a PRP scheme in its financial year beginning 1 August 1996. A PRP scheme involved employees substituting “or sacrificing” part of their existing taxable pay in order to participate in the scheme. The scheme had to be registered with the Inland Revenue. A scheme could be designed to ensure that, so long as there was sufficient profit, both employer and employee could be better off. However, a number of requirements had to be satisfied, including a requirement that the scheme contained provisions that no payment of profit should be made if less than 80% of the employees participated in the scheme. Certain employees could be excluded, including employees employed for less than three years. The scheme could be either “opt in” or an “opt out” scheme. The University chose an opt in scheme. In the event the University failed to satisfy all the requirements for a valid PRP scheme. For the purpose of calculating the 80%, it took as the numerator non-casual employees of both above and below three years’ service who opted to join the scheme and as the denominator it took all employees with greater than three years’ service, whether or not they opted to join the scheme, but only non-casual employees with less than three years’ service who opted to join. So the result was that short-term employees who did not opt to join the scheme were not counted for the purposes of the denominator used to establish the 80% requirement but they were entitled to opt into the scheme. The judge considered that Price Waterhouse’s interpretation of the scheme, on the basis of which this denominator was adopted, was unsustainable and indeed Price Waterhouse accepted in their defence that their advice had been negligent. The principal issues at trial, therefore, were causation and the measure of damages. Read more