Goodlife Foods Ltd v Hall Fire Protection Ltd, Court of Appeal - Civil Division, June 18, 2018, [2018] EWCA Civ 1371

Resolution Date:June 18, 2018
Issuing Organization:Civil Division
Actores:Goodlife Foods Ltd v Hall Fire Protection Ltd
 
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Case No: A1/2017/1602

Neutral Citation Number: [2018] EWCA Civ 1371

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

His Honour Judge Stephen Davies

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 18/06/2018

Before :

LORD JUSTICE GROSS

LORD JUSTICE MOYLAN

and

LORD JUSTICE COULSON

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Between :

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Aidan Christie QC & Martyn Naylor (instructed by Clyde & Co Solicitors) for the Appellant

Leigh-Ann Mulcahy QC & Simon Paul (instructed by Plexus Law Solicitors) for the Respondent

Hearing date: Thursday 10th May 2018

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Judgment

Lord Justice Coulson :

  1. Introduction

  2. This appeal concerns an exclusion clause in the standard terms of a specialist fire suppression contractor. The issues are whether the clause was incorporated into the contract between the parties and, if so, whether the clause was reasonable within the meaning of the Unfair Contract Terms Act 1977 (``UCTA'').

  3. Following a fire at their factory premises in Warrington on 25 May 2012, the appellant (whom I shall call ``Goodlife'') commenced proceedings against the respondent (whom I shall call ``Hall Fire'') for breach of contract and/or negligence in the supply and installation of a fire suppression system which Hall Fire had installed some ten years before. It is common ground that the claim for breach of contract is statute-barred. However, the claim in negligence, where the six year limitation period did not begin to run until the date of the fire, is not statute-barred. The parties are, however, rightly agreed that the terms of the contract are directly relevant to the nature and scope of Hall Fire's duty of care.

  4. In their defence to the claim, Hall Fire seeks to rely on clause 11 in their standard terms and conditions. If they are entitled to rely on clause 11, it would exclude their liability for any part of Goodlife's claim for damages. In consequence, the issues as to incorporation and reasonableness were deemed suitable to be taken as a preliminary issue. In a detailed judgment dated 19 April 2017 ([2017] EWHC 767 (TCC)), His Honour Judge Stephen Davies decided the preliminary issue in favour of Hall Fire. In particular, he concluded that clause 11 was not particularly unusual or onerous, and was fairly and reasonably drawn to Goodlife's attention. It was therefore incorporated into the contract. In addition, he held that, by reference to the UCTA guidelines and the case-law, Hall Fire had shown that clause 11 was reasonable.

  5. On 1 August 2017, permission to appeal against those findings was given by Jackson LJ. At the same time, he refused permission to appeal in respect of an entirely separate aspect of Goodlife's pleaded case, to the effect that the fire suppression system amounted to electrical equipment within the meaning of the Electrical Equipment (Safety) Regulations 1994. Thus, if this court upholds the judge's findings about clause 11, that is the end of these proceedings.

  6. Two distinct issues are raised on this appeal, although the first can be sub-divided. They can be summarised as follows:

    1. Issue 1a): Was clause 11 particularly unusual and/or onerous and Issue 1b): even if it was, was it fairly and reasonably brought to the attention of Goodlife?

    2. Issue 2): If clause 11 was incorporated into the contract, was it unreasonable (and therefore ineffective) as a result of the operation of UCTA?

  7. The Facts

  8. The judge's findings of fact are set out at paragraphs 13 - 36 of his judgment. Neither party to the appeal quarrels with those findings, and I gratefully adopt them for the purposes of the following summary.

  9. Goodlife produces frozen food products at its factory in Warrington. It had a multi-purpose fryer which it used to cook the food products which were subsequently frozen before being sold to customers, such as supermarkets. At the time of the contract with Hall Fire, its annual turnover was in the region of £2.7 million.

  10. Hall Fire had been trading since 1972 in the business of automatic fire sprinkler systems used in a variety of commercial, industrial and retail developments, with projects ranging in value from £1,000 to £1,000,000. They had their own standard terms and conditions. They were a company of a similar size to Goodlife, with an annual turnover of around £4.8 million.

  11. At paragraph 20 of his judgment, the judge noted that it was common ground that, at the time of the contract, Goodlife was insured against property damage and business interruption. Thus, this claim is an adjusted claim pursued by subrogation by Goodlife's insurers. Hall Fire too are insured against this claim. The judge inferred that both parties carried the same or similar insurance at the time of the contract. He was satisfied ``that this is precisely what would have been expected to be the position, had attention been given to the question at the time''.

  12. In early 2001, Goodlife sought a quotation from Hall Fire for the provision of a fire detection and fire suppression system for the multi-purpose fryer. The quotation was dated 30 January 2001. The judge found Hall Fire's standard terms and conditions were expressly referred to on the face of the quotation and, as the judge found, they were also sent with that quotation. They are headed ``Section 4 CONDITIONS OF CONTRACT (Hall Fire Solutions)''.

  13. The opening paragraph of the conditions is in the following terms:

    ``We draw your particular attention to the following specific conditions and assumptions on which the tender is based, unless qualified in our covering letter. Any contract would be based on our tender and these supplementary conditions sections 4 - 12 which do not provide for the imposition of any form of damages whatsoever and are based on English Law...''

  14. Section 4 comprised 22 separate conditions, of which the first 19 were on the first page, correctly described by the judge as being ``in relatively small but no means illegible type. The individual clauses do not have headings''.

  15. Clause 11, approximately two thirds of the way down the page, read as follows:

    ``11) We exclude all liability, loss, damages or expense consequential or otherwise caused to your property, goods, persons or the like, directly or indirectly resulting from our negligence or delay or failure or malfunction of the systems or components provided by HFS for whatever reason.

    In the case of faulty components, we include only for the replacement, free of charge, of those defected parts.

    As an alternative to our basic tender, we can provide insurance to cover the above risks. Please ask for the extra cost of the provision of this cover if required.''

    Although the text was not separated into these three separate components, this division of clause 11 is in accordance with paragraph 39 of the judgment of Judge Davies, and I use the same division in my analysis of the clause below.

  16. The judge also referred to clause 19, at the bottom of the first page of the terms and conditions, which provided as follows:

    ``(19) We exclude any costs associated with the provision of Performance Bonds Design/Collateral Warranties, or any other special insurance. Please refer to the enclosed letter from our insurance brokers which details the extent of insurance cover by us. Please note that HFS do not provide Professional Indemnity Insurance. Any subsequent warranties provided (at extra cost) will be as our standard HFP/WA: Sept 2001.''

  17. It was common ground that no letter from Hall Fire's insurance brokers was in fact enclosed and there was no evidence about what it might have said. The evidence from Hall Fire's Mr Green was that he had not had any specific discussion with Hall Fire's insurance brokers or its insurers about providing insurance to its customers to ``cover the above risks, nor had any previous customer ever asked for it''. At paragraph 32 of his judgment, Judge Davies found:

    ``Whatever its relevance to this case in the terms of the true construction and/or the reasonableness of clause 11, it is quite clear that if Goodlife had in fact responded to ask about the possibility of taking out such insurance all that Hall Fire would have been able to do would have been to refer it to its own insurance brokers to see what insurance might be available and at what cost. There is no evidence that there was any such conversation, and of course the likelihood in my view is that Goodlife would have had no reason to want to do so anyway, since it would have its own insurance which it would have regarded as perfectly adequate for its own purposes.''

  18. At paragraph 33 of his judgment, the judge referred to Section 9 of Hall Fire's supplementary conditions entitled `Warranty'. That said:

    ``Major plant items supplied under this contract will carry out [sic] suppliers' guarantees which will normally apply from the date of delivery to site of the plant item in question. Accepting these items, the 12 months defects liability period will start from the date of practical completion, which is the date on which the system is available for the beneficial use of the customer, even though on this date, minor snagging items may still be outstanding. The guarantee is only valid if you have carried out the necessary and preventative maintenance fully in accordance with the recognised standards and our recommendations, manufacturers' detail, insurance company's recommendations etc.''

  19. Although the quotation was produced in January 2001, Goodlife did not accept it for well over a year. They provided a purchase order dated 2 April 2002. No copy of that purchase order was available to the judge but, as he noted at paragraph 34 of his judgment, there was no suggestion or evidence that the purchase order amounted to a counter-offer. Clause 11, along with the rest of the conditions noted at paragraph...

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