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Hall Fire Melts Away Frozen-Food Company’s £6.6 million Claim

20-July-2018
20-July-2018 15:26
in Contract
by Christopher Hanges

 

  1. In Goodlife Foods Limited v Hall Fire Protection Limited [2018] EWCA Civ 1371, the Court of Appeal held that the express alternative of insurance meant that a ‘far-reaching’ exclusion clause was reasonable pursuant to Unfair Contract Terms Act 1977.

 

  1. Goodlife, a frozen-food production company, purchased a fire detection and suppression system from Hall Fire a year after being provided with a quotation. Not only were Hall Fire’s T&Cs attached to both the quotation and acknowledgment of order, but also the face of the quotation drew attention to Clause 11, which read:

 

‘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.’

 

  1. A decade later, Goodlife claimed negligence against Hall Fire for a fire which caused property damage and business interruption losses. The first instance judge found that the exclusion clause was incorporated and satisfied the s11 ‘reasonableness’ test pursuant to UCTA 1977.

 

  1. At the appeal, three issues were raised:

Issue 1a): Was Clause 11 particularly unusual and/or onerous?

Issue 1b): Even if it was, was it fairly and reasonably brought to the attention of Goodlife?

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

 

Issue 1a

  1. Despite being ‘at the far-reaching end of the spectrum’, there was real, albeit limited, value to the warranty, thus Clause 11 was not a ‘blanket’ exclusion clause. Critically, the court observed the norm of commercial practice and found protection against unlimited liability in one-off supply contracts to be reasonable.

 

Issue 1b

  1. Submissions made against notice were deemed ‘commercially unrealistic’. The ‘almost apocalyptic’ terms were not hidden in small print; rather, it was on the front of the quotation and provided with the purchase acknowledgement a year later. The court found that Goodlife had ample time to understand the T&Cs, therefore even if issue 1a were unsatisfied, Clause 11 was fairly and reasonably brought to their attention.

 

Issue 2

  1. With reference to the ‘reasonableness’ guidelines, Schedule 2 UCTA, the court was persuaded by the parties’ similar bargaining positions and the express alternative of insurance to hold that Clause 11 satisfied the s11 ‘reasonableness’ test.

 

  1. The court warned against judicial intervention in freely-agreed contracts and reinstated that UCTA was intended to protect vulnerable parties against unconscionable behaviour.

 

  1. Further, the court stressed the importance of identifying the party ‘best-placed to effect the necessary insurance’. The court held that Goodlife had the opportunity of wider protection but risked accepting the basic tender. The availability of insurance was hence ‘at the heart of the reasonableness issue’. 

     

  2. This decision is welcomed as the court upheld ‘party autonomy’ as a fundamental pillar of English commercial law. Where equal-powered parties freely contract, it is these parties who are the best judge of commercial fairness and allocation of risk. The court should only interfere to protect vulnerable parties and will always consider commercial realities and industrial practices.

     

  3. Lastly, the court’s emphasis on insurance serves as a caution to ensure that express alternatives to exclusion clauses are appropriately incorporated to avoid the clauses being found ‘unreasonable’. Setting out ‘almost apocalyptic’ terms certainly saved Hall Fire on Judgment Day.

 

 

Christopher Hanges ©

20 July 2018

ch@whitestonechambers.com

 

 

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