High Court upholds liability caps in professional services contract

​Does your business provide professional advice or consultancy services? If so, the good news is that a recent high court decision considering the enforceability of liability caps in contracts was in favour of professional service firms.

If your customer contracts limits your liability to a level you’re happy with, you can rely on these liability caps in the event of a dispute arising.

This case followed the collapse of CBL Insurance (CBL). The liquidators of CBL brought proceedings against PwC employees that had served as appointed actuaries, and sought to recover an amount ($278 million) that was far in excess of the liability cap agreed to.

Most relevant to this case was that PwC’s liability was limited to five times the total fees paid in the relevant period (Liability Cap) as outlined in the contract itself.

The liquidators disregarded this liability cap as it was alleged the PwC actuaries had failed in their duties to CBL in various ways which contributed to CBL’s liquidation. In response, PwC applied to the court to have the amount claimed against them limited to the liability cap.

In making its decision, the Court decided that the terms of the contract between PwC and CBL were clear and unambiguous and ruled that PwC’s liability was indeed limited to what was agreed in the contract.

Businesses providing professional advice or consultancy services that have contracts with liability caps will find this decision reassuring and should continue to include liability limitations in their customer contracts.