Gross negligence in construction contracts
Law and practice
Abstract
The starting point has remained the same for almost 200
years: the tort of gross negligence is not a concept that is
recognised by English law. Nevertheless, gross negligence
is a term that, for better or worse, is often embedded into
important clauses of a construction contract. For instance,
the liability of a party may be limited save for where that
party has been grossly negligent. Consequential loss may
be excluded except where the loss is caused by gross
negligence; a right to terminate right may arise in the event
of gross negligence; one party may agree to indemnify the
other save for gross negligence; or a professional consultant
may exclude liability save for instances of gross negligence.
Each of the above examples relate to core clauses in a
construction contract. In the event any one of them
is triggered by an act or omission amounting to gross
negligence, the consequences are likely to be draconian.
And yet, despite its importance, the term gross negligence is
almost never defined. This is either because it is a term that
has not been given a meaning in law, because no thought
is given to the consequences of not defining it, or because
the parties are unable to reach a suitable definition that is
mutually agreeable.
Absent any contractual terms to the contrary, gross
negligence has been said to embrace not only conduct
undertaken with actual appreciation of the risks involved, but
also a serious disregard of or indifference to an obvious risk.
In all cases, whether or not gross negligence has occurred
will be determined by considering the contract as a whole
and the surrounding circumstances. It will always be a
matter of fact and degree. When negotiating a construction
contract, the advice is: avoid using the term gross negligence
at all, but if it is necessary to use it, clearly define it. The
success of a claim for loss flowing from gross negligence
will depend on the claimant demonstrating that the gross
negligence caused the loss.
This article considers development of the tort of gross
negligence in England and Wales, the use of gross
negligence in other areas of English law, the status of gross
negligence in foreign jurisdictions, whether and if so how
to include reference to gross negligence in construction
contracts, whether an act or omission does or does not
constitute gross negligence and how to claim loss that flows
from gross negligence.
A history of the tort of gross negligence
The tort of negligence dates back to Roman times. It is the
most well-known and pervasive cause of action in England
and Wales. Put simply it imposes, in certain circumstances,
a duty to take reasonable care. This duty may arise under
statute, under contract or at common law. To succeed in an
action for negligence at common law, it is necessary for a
claimant to establish that (i) the defendant owed a duty to the
claimant; (ii) the defendant breached the duty owed to the
claimant; and (iii) the defendant’s breach of duty caused the
claimant to suffer recoverable loss. How and when the duty of
care is owed is a matter of some debate, but it often requires
there to be a proximal relationship between the parties.
Gross negligence (or crassa negligentia) also has its genesis
from Roman law. The concept was applied in numerous
circumstances, including the liability of a lawyer to his client,
or of a doctor to his patient; whether the holder of a bill
of exchange would be affected by a defect in the bill; and
whether a tenant was barred from relief against forfeiture.1
However, the tides turned against the concept of gross
negligence in tort and indeed any rule of law that sought to
demarcate degrees of negligence, such that by the mid 19th
Century it did not find favour with the courts of England
and Wales. In Hinton v Dibber (1842), the court held that
“It may well be doubted whether between gross negligence
and negligence merely, any intelligible distinction exists”
and a year later in Wilson v Brett, the court held that “gross
negligence is negligence with vituperative epithet”. That
position remains to this day. In the 2007 Court of Appeal
case of Traidigrain S.A. v Intertek Testing Services Ltd,2 the
court held that gross negligence had a recognisable meaning
under German law (the contract in that case was subject
to German law) but noted that the term itself “has never
been accepted by English civil law as a concept distinct
from simple negligence”. Broadly, the rationale behind this
stance is that, in the court’s view, a party had either met
the requisite duty of care or it had not and distinguishing
between levels of negligence was not necessary, as explained
by the judge in Pentecost v London District Auditor:3
“The use of the expression “gross negligence” is always
misleading. Except in the one case of the law relating
to manslaughter, the words “gross negligence” should
never be used in connection with any matter to
which the common law relates, and for this reason:
negligence is breach of duty. If there is a duty and
there has been a breach of it which causes loss, it
matters not whether it is a venial breach or a serious
one: a breach of a legal duty in any degree which
causes loss is actionable.”
1 D. Ibbetson, An Historical Introduction to the Law of Obligations (Oxford
1999), pp. 92-95.
2 [2007] EWCA Civ 154, 23.
3 [1951] 2 K.B. 759, 766.
Recent developments in England and Wales
In the past 15 years, there have been a number of cases in
England and Wales that address tortious gross negligence.
Whilst none of these cases recognise gross negligence as
concept in English tort law, where parties to a contract have
used the term gross negligence and where there is a dispute
as to whether a party is or is not grossly negligent, it has
been necessary for the courts to consider what it means.
The starting point in recent times is the case of Red Sea
Tankers Ltd v Papachristidia (the “Ardent”).4 There, Mance J
considered circumstances from a range of cases to establish
whether the conduct of a party was grossly negligent. The
characteristics he considered were:
1. the existence of a high degree of risk of loss or damage;
2. the foreseeability of that high degree of risk;
3. the seriousness of loss which ought to have been
foreseen; and
4. the extent to which the defendant took any precaution
to avoid the risk.
The judge said:
“Gross negligence is clearly intended to represent
something more fundamental than failure to exercise
proper skill and care and/or care constituting
negligence... As a matter of ordinary language and
general impression, the concept of gross negligence
seems to me capable of embracing not only
conduct undertaken with actual appreciation of the
risks involved, but also a serious disregard of or
indifference to an obvious risk.” 5
4 [1997] 2 Lloyds Rep 547.
5 Ibid at 586.
Thus, the court acknowledged a separation between
negligence and gross negligence. The description by the
judge seems eminently sensible. Intuitively, it must be
right that gross negligence means something more then
negligence. The court went on to say:
“All the circumstances must be weighed and balanced
when considering whether acts or omissions causing
damage resulted from negligence meriting the
description of “gross””.
Whilst Ardent is useful, it can only be used as guidance
because (i) the contract between the parties was subject
to New York state law; and (ii) the comments on gross
negligence were obiter dicta. However, the judge indicated
that he would have come to the same conclusion had he
been ruling on a point of English law. The characteristics in
Ardent were therefore seen as a set of building blocks that
the English court could use to develop a set of parameters
that directly apply to that jurisdiction.
In the Court of Appeal case of Great Scottish & Western
Railway Co Ltd v British Railways Board,6 the court was asked
to consider the following clause:
“The Board... will not be liable to GS&W for any
damage to or loss...except to the extent that such
loss or damage or any severable portion thereof was
caused wholly by the gross negligence or wilful neglect
of the Board.”
6 Unreported, 10 February 2000, Court of Appeal.
The court interpreted the meaning of gross negligence in
this way:
“In the context of [this clause], the words “gross
negligence” take their colour from the contrast
with “wilful neglect” and refer to an act or
omission not done deliberately, but which in the
circumstances would be regarded by those familiar
with the circumstances as a serious error. The likely
consequences of the error are clearly a significant
factor. Thus, whether negligence is gross is a function
of the nature of the error and the seriousness of the
risk which results from it.”
Gross negligence was considered again, albeit briefly, in A
v Bottrill.7 There, the court held that gross negligence is not
the same as subjective recklessness, although it may come
close to it.
More recently, in Camarata Property Inc v Credit Suisse
Securities (Europe) Ltd,8 the court was asked to consider
gross negligence. In this case, the contract between the
parties was subject to the law of England and Wales and
gross negligence was one of the substantive points to be
decided. It concerned the provision of financial advice by
Credit Suisse to Camarata Property in relation to a financial
note which, due to the collapse of Lehman Brothers, lost all
value. Camarata alleged that the advice provided by Credit
Suisse was grossly negligent by not highlighting the risk of
counterparty default.
7 [2003] 1 AC 449.
8 [2011] EWHC 479 (Comm).
Whilst Camarata failed even to prove negligence in the case,
the ruling did provide some useful clarification on how the
English courts will interpret gross negligence:
“The relevant question, however, is not whether
generally gross negligence is a familiar concept in
English civil law, but the meaning of the expression
in these paragraphs of the Terms and Conditions. I
cannot accept that the parties intended it to connote
mere negligence: in paragraph 1.2 and also in
paragraph 1.3 both the expression “gross negligence”
and the expression “negligence” were used, and some
distinction between them was clearly intended...... I
therefore accept that, as a matter of interpretation,
paragraphs 1.1 and 1.2 provide that, in order to
establish liability, Camarata have to show more than
mere negligence on the part of [Credit Suisse]”
The court supported the view of the judge in Ardent that gross
negligence does have a meaning and that it means more than
just negligence. However, it arrived at that view based on an
interpretation of the contract as a whole and not on the basis
of past precedent or a derivation from an English law concept.
In other words, because the contract referred to negligence
and gross negligence, the parties must have intended gross
negligence to mean something else, something more.
This case was followed shortly thereafter by Winnetka Trading
Corporation v Julius Baer International Ltd, which is the most
recent case to consider gross negligence.9 The court in that
case referred to the contract, which contained limitation
and exclusion provisions, both of which referred to gross
negligence and negligence. Gross negligence was not defined.
Agreeing with the decision in Camarata, the court held that
negligence and gross negligence cannot have the same
meaning and must be interpreted by reference to the contract.
It went on to say that the parameters for that interpretation
should be consistent with the guidelines laid out in Ardent.
9 [2011] EWHC 2030 (Ch).
Gross negligence in other areas of
English law
Although gross negligence as a concept has been
abandoned by the English law of tort, gross negligence is
regularly deployed in other areas of English law. It is helpful
to touch on some of these areas now.
In English criminal law, it is well established that
manslaughter can be committed by gross negligence.10 The
straight forward test laid down is whether the “conduct
falls far below the standard of the reasonable person”. The
concept is also used (in effect) to distinguish dangerous
driving from the lesser offence of careless driving.11
However, one wonders the extent of comparison that can be
legitimately drawn from criminal law. The jury in a criminal
trial does not have to give reasons for its verdict, and in
determining whether the defendant’s conduct crosses the
line of criminality, it is able to concentrate solely on the
circumstances of an individual case without fear of setting a
precedent for future occasions.12 The judge in a civil trial is
charged with very different responsibilities.
The Credit Rating Agencies (Civil Liability) Regulations 2013,
implementing Article 35a of Regulation (EC) No 1060/2009
on credit rating agencies, defines gross negligence of a credit
rating agency as the recklessness of its senior management,
where senior management are reckless if they “act without
caring whether an infringement occurs”. This definition
seems to marry more closely with subjective recklessness and
indeed, this aligns with the position under New York law as
described below.
Gross negligence has recently been considered in trust law.
In the Privy Council case of Spread Trustees v Hutcheson,13
the beneficiaries under a trust were claiming damages for
breach of trust from the professional trustees for failing
to identify and investigate breaches of trust on the part of
previous trustees. In their defence, the trustees sought to rely
on an exclusion clause in the trust deed that purported
10 Corporate Manslaughter and Corporate Homicide Act 2007, s. 1(4)(b).
11 Road Traffic Act 1988, s. 2A(1) (a person drives dangerously if, inter alia,
“the way he drives falls far below what would be expected of a
competent and careful driver”).
12 The Law Commission Consultation Paper No 171.
13 [2011] 071 PBLR.
to exclude liability for gross negligence. The question raised
in this preliminary hearing was whether it was permissible
for a trustee exoneration clause to exclude liability for
acts of gross negligence under Guernsey customary law.
Supporting the decision reached in Armitage v Nurse,14
the court held that a trustee exoneration clause can validly
exclude liability for gross negligence.
Thus, it can be seen that gross negligence is not a concept
that is alien under English law, nor is it one which the courts
have found difficult to decipher. The widespread reliance
on the distinction between gross and ordinary negligence
would suggest that the distinction is perfectly intelligible
and that its application is not particularly problematic. The
definitions and the court decisions in these other areas may
be helpful when parties are negotiating a contract or they
may be deployed as persuasive authority in the context of a
contractual claim arising out of gross negligence.
Gross negligence in foreign jurisdictions
How is gross negligence considered outside of England
& Wales? Many jurisdictions follow the same line and do
not recognise gross negligence as a concept. They include
(unsurprisingly) a number of the Commonwealth jurisdictions,
including Australia and New Zealand. However, civil law
jurisdictions such as China and Belgium also follow suit.
In contrast, there are a number of jurisdictions that do
recognise the tort of gross negligence. The law in these
different jurisdictions has tended to focus on gross
negligence in the context of exclusion clauses more than any
other area of contract.
United States
The position in the United States varies from state to state.
Under New York law, misconduct that rises to the level of gross
negligence must show “reckless indifference to the rights
of others.” 15 To put in another way, gross negligence must
“smack of intentional wrongdoing” and that it is conduct that
“evinces a reckless indifference to the rights of others.”16 Under
New York law, not only is it impossible to exclude liability for
gross negligence, but any gross negligence will in fact bar the
enforcement of an exclusion clause.17
14 Op Cit. No. 4.
15 Kalisch-Jarcho, Inc. v. New York, 448 N.E.2d 413, 416 (N.Y. 1983).
16 Sommer v. Federal Signal Corp., 79 N.Y.2d 540 (N.Y. 1992)
17 Gregory Odry, ‘Exclusion of Consequential Damages: Write What You
Mean’, [2012] ICLR 142, 159.
The position is the same in California,18 albeit what amounts
to gross negligence has its own spin. In the City of Santa
Barbara case, the California Supreme Court held that gross
negligence “has long been defined in California and other
jurisdictions as either a ‘want of even scant care’ or ‘an
extreme departure from the ordinary standard of conduct.’”
The Sommer standard would seem to require greater
misconduct than does the City of Santa Barbara standard on
the basis that Sommer invokes recklessness.
Perhaps because there is no uniform definition of gross
negligence, some states do not recognise it, among them
Pennsylvania. The view taken aligns with that in England
& Wales namely that negligence, whatever epithet is given
to characterise it, is the failure to exercise the care and skill
which the situation demands and that it is more accurate
to call it simply ‘negligence’ than to attempt expressions of
degrees of negligence.
France
Under French law, an exclusion clause cannot exclude
liability for a breach of contract which constitutes wilful
misconduct (dol) or gross negligence (faute lourde). The
position is the same in France as it is in New York. If a clause
contains an exclusion for gross negligence, the whole clause
may be held unenforceable. The Chronopost19 decisions of
the Court of Cassation suggest the gross negligence rule
will operate to make any exclusion clause unenforceable
to the extent it seeks to exclude liability for the breach of
an essential contractual obligation. The Court in the recent
“Faurecia”20 case, on the other hand, adopted a more
subjective approach, focussing on the “seriousness of the
breaching party’s conduct” under which a breach of an
essential obligation is not in itself sufficient to constitute
gross negligence.
18 City of Santa Barbara v. Superior Court, 161 P.3d 1095 (Cal. 2007)
19 Joint Chamber of the Court of Cassation, 22 April 2005, JCP 2005.I.149
n°3 Note Viney; Commercial Chamber of the Court of Cassation, 21
February 2006, Recueil Dalloz 2006 n°10, 717; Commercial Chamber of
the Court of Cassation, 30 May 2006, Recueil Dalloz 2006 n°33, 2288;
Commercial Chamber of the Court of Cassation, 13 June 2006, Revue
Lamy Droit Civil, October 2006, n° 31, 17.
20 Commercial Chamber of the Court of Cassation, 28 June 2005, n°09-
11.841 (French original: “attendu que la faute lourde ne peut résulter
du seul manquement à une obligation contractuelle, fût-elle essentielle,
mais doit se déduire de la gravité du comportement du débiteur… seule
est réputée non écrite la clause limitative de réparation qui contredit la
portée de l’obligation essentielle souscrite par le débiteur”).
Germany
In Germany, a limitation of liability is enforceable unless
the loss or damage was caused intentionally or by gross
negligence. Where loss or damage is so caused, the loss
cannot be capped or otherwise limited.21 There is extensive
reliance on gross negligence in other areas of German law
also. If, for example, an object gratuitously given or lent
to another causes him injury, the donor is liable only for
wilful default or gross negligence.22 Where an employee
causes loss in the course of his employment, this is generally
apportioned between employer and employee if the worker’s
fault was “normal”, but borne entirely by the worker in the
case of gross negligence.
Switzerland
In Switzerland, § 44 (2) of the Swiss Civil Code provides
that where the tortfeasor would meet economic difficulties
as a result of fully compensating for the damage, and if the
tortfeasor did not cause the damage by gross negligence or
intentionally, the court may reduce the compensation. Under
Swiss law, limitations or exclusions of a service provider
(which is not subject to special regulations) are not valid
in case of, among other things, gross negligence or wilful
intent of the provider.23 Hence, a complete exclusion of
damages for lost profits will be valid and applied by a court
only to the extent that such losses were caused by a provider
behaving in a manner that would qualify as slight or medium
negligence.
UAE
The position in Germany is broadly reflected in UAE law.
The law supports freedom of contract, but this is limited
by a number of mandatory legislative provisions, which
include the rule that parties cannot exclude liability where
there is evidence of wilful (deliberate) breach and/or gross
negligence.
Ireland
Like England, Irish law does not recognise a formal distinction
between negligence and gross negligence. However, the Irish
Courts have recently had occasion to consider the meaning
of “gross negligence” in a limitation of liability clause. At first
instance,24 the High Court held that gross negligence meant
“a degree of negligence where whatever duty of care may
be involved has not been met by a significant margin”. The
Supreme Court upheld this view and gave effect to a clause
which purported to provide that a limit on liability did not
apply where damage was caused by a “wilful act or gross
negligence”.
21 Section 309 subsection 7 lit. b) BGB
22 §§ 521, 599 B.G.B.
23 Article 100 of the Swiss Code of Obligations
24 (ICDL GCC Foundation FZ-LLC & Anor v European Computer Driving
Licence Foundation [2011] IEHC 343 (High Court) and on appeal to the
Supreme Court, GCC Foundation FZ-LLC & Anor v European Computer
Driving Licence Foundation [2012] IESC 55
The case is helpful in that the court recognised that undefined
‘gross negligence’ terminology in commercial contracts can
and should be given effect to provide business efficacy to
the agreed terms. However, the standard of gross negligence
endorsed appears to represent a significantly lower level of
culpability than in England and therefore it is important to
draw a distinction between the two jurisdictions.
Incorporating gross negligence into
the contract
Having considered the English law position on the tort of
gross negligence, the consideration of gross negligence
in other areas of English law and the treatment of gross
negligence is some foreign jurisdictions, it is now possible to
turn to whether and if so how one might incorporate gross
negligence into a contract.
In tort, it is clear the concept of gross negligence is not
recognised and as a result, there is no meaning given by
the court as to what gross negligence means. At best, all
that has been provided is a broad set of parameters. Where
the contract does not make express provision as to the
precise meaning of gross negligence, there will be manifest
uncertainty as to exactly what is required before it can be said
that there has, or has not been an act of gross negligence.
That uncertainty will inevitably lead to a difference of opinion
between the contracting parties, which may formalise into a
dispute. Clearly this is not in either party’s interests.
Before analysing how one limits the risk of uncertainty
with a definition of gross negligence, consider whether it is
necessary to refer to gross negligence at all. Most standard
forms do not entertain any distinction. By way of example,
the most recent editions of the JCT, NEC, FIDIC and IChemE
forms make no mention of gross negligence. Where
negligence is raised, the phrase is often ‘any negligence’.
This no doubt is intended to reflect the court’s view that there
is either negligence or there is not and that gross negligence
is not a recognised concept under English law. It is submitted
that the position in law, reflected in the major standard form
contract, is the correct position to adopt.
However, if it proves necessary to refer to gross negligence,
it should be defined. That task is not without difficulty. Quite
what the definition should be will depend on the particular
circumstances of the contract and so there is unlikely to
be a one size fits all definition. That said, it should not be
particularly troubling to define gross negligence. In the same
way as the law has derived a test for negligence, can there
not be a further test which considers whether a person fell,
not only below the duty of care, but sufficiently far below to
it constitute gross negligence?
However, care should be taken when defining gross
negligence. For example, gross negligence should not be
equiparated with a conscious act in the way that recklessness
might be. Recklessness is a state of mind, while negligence
(of any kind) is a failure to comply with a particular standard
of conduct. Furthermore, negligence is different from fraud
or wilful misconduct because it may be committed in good
faith and so it must follow that gross negligence may also be
distinguished. Finally, the difference between negligence and
gross negligence is one of degree, not kind. In that regard,
any workable test of gross negligence should require a clear
and obvious departure from the standard test of negligence.
Quite aside from the challenges of crafting a suitable
definition, reaching agreement between parties presents
a further challenge. Where for instance, there is a clause
limiting the contractor’s liability save for an act or acts of
gross negligence by the contractor, the employer will surely
want to negotiate a definition which lowers the threshold
that must be met before the contractor can be said to be
grossly negligent. The contractor will want the reverse.
Where the balance of the clause ends up will come down
to the bargaining power of each party. Whatever the result,
parties should ensure that they maintain a paper trail which
explains the history of negotiation between the parties.
Practical considerations to consider when interpreting
whether an act or omission does or does not
constitute gross negligence
Where there is a test of gross negligence in a contract, how
might one go about determining whether an act or omission
does or does not constitute gross negligence? In any analysis
concerning the application of the contractual rights and
obligations of contracting parties to a given factual scenario,
there is one principle that must come above all others. It is
this: the contract is king. The contract determines the precise
relationship between the parties. If the contract states that
gross negligence means X, then it means X, not any other
meaning set out by the courts. For example, if the contract
states that gross negligence means that the offending party
has to commit a specific act, that is the test the parties and
the court must apply.
With that in mind, the following types of behaviour could
satisfy a test of gross negligence:
• Obvious and sustained lack of any diligence in the
carrying out of acts;
• Disregard of professional duties by, for example, issuing
incomplete design documents or inaccurate designs;
• Ignoring specific instructions; and/or
• Disregard of contractual obligations to manage the
project properly, by failing to supply qualified personnel
for the project, failing to assign personal to carry out
critical tasks and refusing to allocate enough resource to
the project.
Evidence will be vital. The more evidence that is available to
demonstrate that the particular act does or does not amount
to gross negligence, the better. This is particularly important
because however gross negligence is defined in the contract
(if it is defined), the evidential threshold to overcome is high.
It is likely that only the clearest evidence will compel a court
or tribunal to find gross negligence.
Claiming losses caused by gross
negligence
Unlike negligence, gross negligence is not a cause of action.
The cause of action for a claim for loss flowing from an act
of gross negligence is contractual. The cause of action may
arise as a result of a clause which requires a party not to
commit gross negligence such that, where gross negligence
is committed, that party is in breach of contract. Alternatively,
it may arise in the context of an exclusion or limitation which
is released, or a right which is triggered (such as a right to
termination or a right to claim loss) upon the occurrence of
gross negligence.
Where the act or omission constituting gross negligence itself
leads to loss and the recovery of that loss is contingent upon
it being demonstrated that there was gross negligence, it
will be necessary to demonstrate that the gross negligence
was linked to, or caused the loss claimed. The most
straightforward approach is to demonstrate that particular
losses flowed from a particular instance of gross negligence.
So, the claimant needs to show that the gross negligence
caused the loss claimed.
However, it may be the case that numerous acts have
occurred which in themselves do not amount to an act of
gross negligence, but together meet the required threshold.
In theory, the claimant may claim a “rolled up” sum of all
the resulting losses which have arisen as a result of all the
individual acts. However, this is likely to be a difficult claim to
succeed on and will only be available where it is impractical
or impossible to prove the specific causal link and where
there is no material causative factor for which the defendant
is not liable. Furthermore, the approach is usually seen as an
indication of a weak or exaggerated claim. Another problem
is that without clear demonstration of causal linkages if one
element of the claim fails then it becomes more difficult for
the court to choose a “middle ground” approach.
 Author
James Pickavance
Partner
+44 207 919 4646
jamespickavance@eversheds.com

For further information please contact:

Simon Oats
Global Head of Construction
and Engineering
+44 207 919 4750
simonoats@eversheds.com

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