UCTA ousted, but reasonableness nevertheless in the spotlight

Convrgnt Value Engineering LLC v Kennedys Dubai LLP [2026] EWHC 1754 (Ch)

In this preliminary issues hearing, the Court determined four issues concerning the application of a £3m limitation of liability clause in the retainer between the parties. In particular, it considered the application of the Unfair Contract Terms Act 1977 in circumstances where the applicable law is UK law only by choice of the parties and would otherwise be the law of some other country. However, it also went on to consider a number of issues which are of wider relevance to solicitors practicing in this jurisdiction and, therefore, subject to UCTA.

The Claimant was represented by Nicholas Bacon KC and Chris Greenwood of 4 New Square Chambers, acting alongside Nikki Singla KC and Nik Yeo. The Defendant was represented by Roger Stewart KC and Ben Smiley, also of 4 New Square Chambers.

Clare Dixon KC and Pippa Manby consider the judgment in this action and the lessons which solicitors and their clients can take from it.

Facts

1. Kennedys Dubai LLP (“KD”) acted for a UAE-registered construction company, Convrgnt Value Engineering LLC (“CVE”) in litigation in the UAE against CVE’s former client, Emaar Properties PJSC (“Emaar”), for which it had undertaken a large residential construction project in the UAE.
2. KD was and is a limited liability partnership incorporated and registered in England and Wales and regulated, as an overseas practice, by the SRA. KD was and is a wholly-owned subsidiary of Kennedys Law LLP (“KL”) which is also incorporated in England and Wales. KD’s registered office was KL’s physical office at 25 Fenchurch Street, London. KD’s only physical office was in Dubai and its financial statements recorded that its place of business was in Dubai.
3. On 21 February 2023 KD sent CVE the Letter of Engagement (“LOE”) and Terms of Business (“TOB”) which formed the Retainer. The covering letter stated: “I enclose a copy of this firm’s standard terms and conditions. I have amended these in manuscript to reflect the agreement that we have reached. I do not anticipate that there is any great likelihood of disagreement arising out of these terms and conditions, but if any aspect of them is unclear, please let me know.”
4. Clause 14 of the TOB stated: “The aggregate liability of [KD]… in any circumstances whatsoever, whether in contract, tort, under statute or otherwise and howsoever caused (including but not limited to our negligence or non-performance) for loss or damage arising from or in connection with the services provided shall, in relation to each matter, be limited to £3,000,000…” (the “Liability Cap”).
5. Clause 17 provided that the Retainer would be governed by and construed in accordance with the laws of England and Wales and the parties submitted to the non-exclusive jurisdiction of the courts of England and Wales.
6. CVE brought proceedings against KD on the basis that it had obtained a less favourable result in the Emaar litigation than it should have done. It sought both damages for that less favourable outcome and restitution of the fees paid to KD. In response, KD denied liability and placed reliance on the Liability Cap.
7. A number of issues arose on the pleadings concerned with the Liability Cap which were reduced to four preliminary issues which are set out (in abbreviated terms), and considered, below.

Issue 1: Does s. 27 of the Unfair Contracts Terms Act 1977 (“UCTA”) disapply ss. 2-7 and 16-21 UCTA in respect of the Retainer?

8. Sections 2-7 and 16-21 of UCTA are concerned with the statutory restrictions on contracting parties to exclude or limit their liability save to the extent that such exclusions or limitations satisfy the requirement of reasonableness. However, s. 27 UCTA provides that: “Where the law applicable to a contract is the law of any part of the United Kingdom only by choice of the parties (and apart from that choice would be the law of some country outside the United Kingdom) sections 2 to 7 and 16 to 21 of this Act do not operate as part of the law applicable to the contract”.
9. It was KD’s case that English law applied only by the choice of the parties and that, absent that choice, the applicable law would be that of the UAE. If KD was right in its argument then s21 applied and the Liability Cap did not have to satisfy the UCTA reasonableness test.
10. Rome I Regulation (“Rome I”) Article 4(1)(b) provides “a contract for the provision of services shall be governed by the law of the country where the service provider has his habitual residence”. It was common ground that KD’s habitual residence was the United Kingdom. KD, however, argued that there were two bases upon which the retainer should be governed by the law of Dubai rather than the law of England and Wales.
11. First, Article 19(2) of Rome 1 states: “Where the contract is concluded in the course of the operations of a branch, agency or any other establishment, or if, under the contract, performance is the responsibility of such a branch, agency or establishment, the place where the branch, agency or establishment is located shall be treated as the place of habitual residence”. KD’s argument was that the Retainer was concluded in the course of operations of a branch and/or that performance of the Retainer was the responsibility of the branch and, if that was right, then as the branch was located in Dubai, Dubai was to be treated as the place of habitual residence. The Judge disagreed. Notwithstanding the fact that the partnership deed governing KD repeatedly referred to it as a “branch” the Judge found that, as a matter of fact, KD was not an extension of any parent entity. Rather KD was “in control of itself” and was not “subject to the direction and control of any parent body”.  
12. Second, Article 4(3) of Rome I states: “Where it is clear from all the circumstances of the case that the contract is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply”. On this issue, the Judge was with KD. She stated that the focus should be less on the jurisdiction in which KD was incorporated or regulated, and more on the substantive elements of the Retainer. Considered in this light she found that the high threshold required by Article 4(3) had been “exceeded, with room to spare”. The Emaar Claim was determined in the Dubai courts, concerned a contract between two UAE entities and centred upon a development in the UAE. In short “England and Wales had nothing to do with the Emaar Claim, whether as to law or evidence”.
13. Having so found, the Judge’s findings in relation to Issues 2 to 4 are obiter. They are nevertheless both of interest generally and are likely to be cited in future disputes on solicitor’s liability clauses.

Issue 2: If not, is the Liability Cap reasonable, as required by section 11(5) of UCTA, taking account of the guidelines in Schedule 2 to UCTA?

15. The Judge found that the £3m Liability Cap was unreasonable. She did so for three main reasons.
16. First, s11(4)(a) states that, when considering the requirement of reasonableness, regard should be had to “the resources which he could expect to be available to him for the purpose of meeting the liability should it arise”. On this, whilst KD was itself balance sheet insolvent, the Judge accepted that, if there had been a liability, it would have been assisted by KL which had net assets in 2011-2013 ranging between £30million and £23.5million.
17. Second, s11(4)(b) states that regard should also be had to “how far it was open to him to cover himself by insurance”. On this, the Judge noted that whilst KD had not itself provided evidence on the level of professional indemnity insurance which it held there was evidence before the Court that it was £30million which led to an inference that the Liability Cap was disproportionately low.
18. Third, s11(1) requires that the “term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made”. The Judge accepted, based on existing case law, that when considering the reasonableness of the Liability Cap she should “take the highest sum which CVE could reasonably be expected to recover, and to make further allowance for any adverse costs outcomes”. Whilst there was contested evidence on this issue the Judge was satisfied that there was an expectation that the sum recovered would be well in excess of £3million.

Issue 3: If the Liability Cap is reasonable, does it also cap any liability of KD for the reimbursement of its fees?

18. The Court rejected CVE’s arguments that the Liability Cap did not apply to its claim in restitution. It rejected CVE’s argument that, as restitutionary claims are a “gains based” ground of recovery they are not claims for “loss and damage”, noting that an essential element of a restitutionary cause of action is that the claimant has suffered a loss. Proper construction required considering the whole of the Liability Cap including its broad introductory wording. This encompassed the claim in restitution.

Issue 4: Did KD make actionable misrepresentations regarding the TOB? If so, is KD thereby estopped from relying on the Liability Cap and/or liable to CVE under section 2(1) or section 2(2) of the Misrepresentation Act 1967 (the “1967 Act”), such that any reliance by KD on those clauses to reduce its liability is in practice ineffective?

19. This focussed upon the covering letter referred to in paragraph 3 CVE alleged that the sentence “I do not anticipate that there is any great likelihood of disagreement arising out of these terms and conditions, but if any aspect of them is unclear, please let me know” constituted a false representation (the “Representation”) which either founded a claim by CVE in misrepresentation or resulted in KD being estopped from relying on the Liability Cap. CVE’s case was that, by the Representation, KD had asserted that: there were no terms in the TOB which CVE should be concerned about, there was nothing of significance in the TOB and/or CVE did not have to read the TOB.
20. The Judge dismissed CVE’s argument on a number of grounds. She found that:
    1. The Representation could not reasonably be read in the manner for which CVE contended. Rather, by saying, “if any aspect of them is unclear, please let me know” the writer clearly had intended that CVE should read the TOB;
    2. The Representation was not a statement of fact but a statement of opinion; and
    3. CVE’s witness having given evidence that he did understand KD intended CVE to read the TOB, there was no reliance.

Comment

21. The result of the Judge’s findings is that KD was able to rely upon the Liability Clause without having to establish that it was reasonable for the purposes of UCTA. However, it may well be that the case will have greater longevity because of the obiter findings made regarding the reasonableness of a £3m limit of liability clause and the evidence which should be adduced by solicitors seeking to maintain that clause and former clients seeking to challenge it. It is another reminder to parties that they should be carefully checking and negotiating both the amount of any Liability Cap and its wording.
22. On Issue 3, it appears that had the position been that CVE had not paid KD’s fees and was being pursued for the same, it would have been able to raise a full defence to the fees claim as well as counterclaiming for its losses (without the fees being subject to the Liability Cap). It also appears that CVE could have claimed a declaration that the fees were not payable without falling with the Liability Cap. However, if those fees had been paid and a return of them was sought (as in this case) that would come within the wide wording of the Liability Cap and so be subject to its limits. This creates a seemingly illogical distinction between paid and unpaid fees in circumstances where the liability issues regarding the same may be identical.

© Clare Dixon KC and Pippa Manby, 4 New Square Chambers, July 2026

This article is not intended as a substitute for legal advice. Advice about a given set of facts should always be taken.