HT-2021-000363 - [2025] EWHC 532 (TCC)

The material part of clause 1.11.4 provides:

“Unless otherwise required by applicable law without the possibility of contractual waiver or limitation, i) neither party will bring a legal action, regardless of form, arising out of or related to this Agreement or any transaction under it more than two years after the cause of action arose; and ii) after such time limit, any legal action arising out of this Agreement or any transaction under it and all respective rights related to any such action lapse.”

The defendants submit that clause 1.11.4 bars any cause of action which arose more than two years prior to the issue of proceedings (21 September 2019 in respect of the Original Claims and 29 November 2021 in respect of the New Claims). The express wording of the clause is wide enough to cover all claims by IBM against Winsopia for breach of contract and unlawful means conspiracy. Further, on a proper construction of the provision, it applies to all legal action by IBM arising out of or related to the ICA, against Winsopia and the other defendants.

IBM submits that, save for Winsopia, the defendants are not entitled to rely on clause 1.11.4 of the ICA because they were not parties to it; there is no privity of contract. Further, on a proper construction of clause 1.11.4, it does not apply where the wrongdoing has been dishonestly or deliberately concealed by the party in breach.

The starting point is that the general principles of contractual interpretation, set out above in the ICA section of the Judgment apply, save that, where there is material ambiguity in a contractual provision which purports to restrict or exclude the parties’ common law rights, the court will require clear words before finding that a party has given up its valuable rights: Triple Point Technology Inc v PTT Public Co Ltd [2021] UKSC 29 per Lord Leggatt at [110]-[111].

I accept the defendants’ submission that, as against Winsopia, the express words of clause 1.11.4 are clear in precluding IBM from bringing a legal action more than two years after the cause of action arose. The use of the words “arising out of or related to this Agreement” are sufficiently wide to include the claims for breach of contract and the claim for unlawful means conspiracy (which relies on breaches of contract as the unlawful means). I reject IBM’s argument that, absent deliberate concealment, the two year period starts only from the date of knowledge of the facts constituting the breach because the clause expressly provides for the start date to run from the date on which “the cause of action arose”.

As to the application of the clause to the other defendants, IBM relies on Credit Suisse First Boston v MLC [1999] 1 Lloyd’s Rep 767, a case concerning the scope of a jurisdictional clause. The relevant clause (clause 5.2) stated: “The courts of England are to have jurisdiction to settle any disputes which may arise out of or in connection with this Agreement and accordingly any legal action or proceedings arising out of or in connection with this Agreement (“Proceedings”) may be brought in such courts.” The court rejected the claimant’s argument that the reference to “disputes” in that clause applied to disputes with non-parties to the agreement per Rix J at p.777:

“it seems to me to be far-fetched to regard “any disputes” as covering disputes between MLC and anyone other than MLC’s contract partner under the Purchase Agreements, namely CS Europe. Clause 5.2 is part of a bilateral agreement between a seller and a buyer, and the disputes to which such an agreement may give rise are prima facie bilateral disputes. Indeed, it is I would have thought axiomatic that, at any rate in the absence of plain language to the contrary, a contract seeks neither to benefit nor to prejudice non-parties: even where such plain language is used, it is black-letter law that the non-party can himself neither take the benefit nor suffer the burden of the contract”.

I recognise that the case involved consideration of a jurisdictional clause rather than a limitation clause but I consider it apposite here. The ICA was a bilateral agreement between IBM and Winsopia. Any legal action arising out of the ICA would be in respect of bilateral disputes. There is nothing in the language of clause 1.11.4 to suggest that it is intended to have an ambit beyond the parties to the ICA, or to affect either party’s rights to bring claims against third parties. For the same reason, clause 1.11.4 cannot be read as containing a promise by IBM not so sue third parties more than two years after the cause of action arose. A similar approach was taken to the interpretation of a limitation provision by Fraser J (as he then was) in Bloomberg v Sandberg [2015] EWHC 2858 (TCC) at [21] and [25].

Although the defendants correctly point out that the tort of procuring a breach of contract is a form of secondary liability, it does not depend on a continuing right of legal action in respect of the underlying breach. In any event, this argument would not affect the claims of unlawful means conspiracy, which is a tort of primary liability.

Accordingly, in my judgment, clause 1.11.4 and the other terms of the ICA do not apply to parties other than IBM and Winsopia. Therefore, clause 1.11.4 does not preclude IBM’s claims against the other defendants.

IBM contends that, on its proper construction, clause 1.11.4 does not apply where the cause of action involves dishonest conduct or the defendant dishonestly sought to conceal relevant matters from the claimant; or where a breach was deliberately concealed by the defendant.

Reliance is placed on Granville Oil v Davis Turner [2003] EWCA 570, a case concerning the enforceability of a contractual limitation period of nine months which barred a claim brought outside that period. The Court of Appeal held that in the absence of express words, the clause did not operate to bar claims where there was fraud or fraudulent concealment per Tuckey LJ at [15]:

“I think it is an inescapable conclusion from what he said that the judge did think that the clause applied to a claim for fraud and to a claim which had been fraudulently concealed by the conduct of the freight forwarder. The judge was not asked to construe the clause so widely and I do not think such a construction was justified. The clause is obviously designed to meet ordinary contractual claims such as those made in this case which a freight forwarder would expect to have to face in the ordinary of course of his business.”

Reliance is also placed on 4Eng Ltd v Harper [2007] EWHC 1568 (Ch), a case in which the court held that a contractual time bar did not apply for a claim for fraudulent warranties per Briggs J at [66]:

“… it does not follow, in my judgment, that the parties, in giving and receiving the warranties in the sale agreement and imposing a two-year period for giving notice of warranty claims, must be taken to have contemplated not merely that there might be a fraud but that the fraud would be deliberately concealed by the warrantors. For example, the relevant fraud could be one committed by an employee unknown to and therefore inevitably not disclosed by directors acting honestly and in good faith. It is, in my judgment, well arguable by parity of reasoning with the passage in the Granville Oil case, to which I have referred, that clause 5.1 is not as a matter of construction applicable to warranties fraudulently given in circumstances where the truth and thereby the breach of warranty is deliberately concealed. I would go further and say that, in my judgment, and this is a pure question of construction, if it were necessary to decide the question now I would indeed hold that clause 5.1 does not so extend.”

Although the above cases turned on their specific facts, the common theme is the established rule of construction set out in Alghussein Establishment v Eton College [1988] 1 WLR 587 (HL) at p.595, that clear express provisions are required to contradict the presumption that it was not the intention of the parties that either should be entitled to take advantage of his own wrong to obtain a benefit as against the other party.

As a matter of construction of clause 1.11.4, there are no words, let alone clear express words, indicating that the parties intended it to bar a claim which was dishonestly or deliberately concealed by the defendants. I accept IBM’s submission that, if the position were otherwise, it would allow a party to escape liability by taking advantage of its own dishonest or deliberate concealment of wrongdoing, which would have the perverse effect of encouraging a party purposefully to conceal its wrongdoing and thus depriving the innocent party of any effective remedy. In those circumstances, the presumption that the parties intended the provision to have no effect, where Winsopia dishonestly or deliberately concealed its own wrongdoing, until IBM discovered the concealment or with reasonable diligence could have done so, must prevail.

I reject IBM’s case that the two-year limitation period should be disapplied entirely where there has been dishonest or deliberate concealment. Such concealment might operate for a very short period of time before disclosure to or discovery by IBM. In those circumstances, there would be no sound reason for disapplying the agreed limitation period following IBM’s notice of the breach. On that basis, the clause should be construed in line with section 32 of the Limitation Act 1980, namely, that time is postponed where a fact relevant to a party’s right of action has been deliberately concealed or there has been a deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time but time starts to run when a party has discovered the concealment or with reasonable diligence could have done so.

I reject as having no merit IBM’s alternative argument based on estoppel by implied representation. Winsopia’s use of the mainframe software and payments made under the ICA could not amount to an implied representation that there was no wrongdoing.

In conclusion on this issue, clause 1.11.4 is an effective time bar provision as between IBM and Winsopia in respect of the claims against Winsopia but does not apply to the claims against the other defendants and does not apply to wrongdoing where there has been deliberate concealment until IBM discovered the concealment or with reasonable diligence could have done so.