Citation: 2 All ER (Comm) 133; [2000] 2 Lloyds Rep 272 (Court of Appeal)
Nature of case: BHP Petroleum entered into a contract with British Steel, under which the latter was to provide a large quantity of steel piping and associated equipment, for construction of an offshore oil and gas production development. Under clause 17.5 of the contract, extensively modified by the terms of the purchase order, British Steel was obliged to “immediately remedy, at the contractual point of delivery, at his expense any defect in the Work … which shall appear within 18 months of the date stated in the Purchase Order or any such longer period … but not later than 24 months after delivery of the Work … at which time all liability of the Supplier relating to the Work shall terminate”. More than 24 months after delivery, latent defects appeared in the steel piping, and BHP began proceedings against British Steel. The trial of a preliminary issue was ordered, namely whether, on a true construction of clause 17.5, British Steel were freed from all liability under the contract for defects after 24 months, or merely from their liability under clause 17.5 to remedy those defects. The trial judge found in British Steel’s favour, and BHP appealed.
Dismissing the appeal, the Court of Appeal held that the clause was to be construed in the former sense. The use of the phrase “howsoever arising” elsewhere in clause 17.5 underlined the intention of the parties that the term should be comprehensive in its scope. The Court also drew attention to the contrast between the phrase “all liabilities” used in clause 17.5, and the phrase “liability hereunder” used elsewhere in the contract to limit the scope of any limitation or exclusion to a particular clause or provision.