Introduction
The case of Goodlife Foods Ltd v Hall Fire Protection Ltd concerns the interpretation and application of a contractual exclusion clause in connection with a dispute over alleged negligence between the two parties Goodlife Foods Ltd (‘the Appellant’) and Hall Fire Protection Ltd (‘the Respondent’). The Appellants insurers pursued a claim against the Respondents following a fire at their factory. The Appellants sued the Respondents for property and business interruption damages in the sum of £6 million and costs were sought also.
Key issues
The key facts of this cases were not in dispute. Instead, the operation of a contractual exclusion clause in the Respondent’s standard terms was deemed the main issue. The clause specifically negated all liability for loss caused to ‘…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’ . The Appellants argued that the reference to ‘persons’ was an attempt to exclude liability for death/personal injury which rendered the exclusion clause void . As a consequence, if the clause was correctly assimilated into the contract and adjudged to be reasonable, the Appellant’s primary claim in negligence against the Respondent would fail.
Procedural History
The Court of Appeal (CoA) was presented with the case on Appeal from the Technology and Construction Court in the High Court . Judgment in the High Court was delivered by His Honour Judge Steven Davies. It was held by Judge Davies that the relevant clause included an attempt by the Respondent to exclude or limit liability for death or personal injury. Somewhat unsurprisingly, however, he decided that that did not render the whole clause invalid . Therefore, on this basis the Appellants lodged an Appeal owing to the fact that the clause in question was incorporated into the contract. On 1st August 2017 leave to Appeal was granted by Lord Justice Jackson.
The CoA was presented with two general issues to consider and these were formulated as follows: –
i. Issue 1a) – was the exclusion clause particularly unusual and/or onerous;
ii. Issue 1b) – even if it was, was it fairly and reasonably brought to the attention of Goodlife;
iii. Issue 2) – if the exclusion clause was incorporated into the contract, was it unreasonable (and therefore ineffective) as a result of the operation of UCTA?
Resolution of key issues
Regarding the incorporation of a term into a contract, the Court affirmed the ruling of Denning LJ concerning specifically unusual or onerous terms that which would ‘need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient.’ This issue continued to be considered by the CoA through understanding the necessary correlation between the onerousness of a specific clause and the amount of notice subsequently required to be given to a third party. Concurring with the High Court in Allen Fabrications Ltd v ASD Ltd , the CoA noted that the ‘mere fact’ a clause under consideration is a limitation or exclusion clause it ‘does not of itself mean that it is onerous or unusual.’ Further authorities were cited by the CoA illustrating various types of clauses which have not deemed particularly onerous including those limiting specialists to the ‘often modest’ contract price.
A further issue considered by the CoA was that a reasonableness and heavy reliance was placed on Schedule 2 of UCTA as this provision issues guidelines for the application of a reasonableness test. The reasonableness test established under section 11 UCTA requires that a term is ‘a fair and reasonable one…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 case of Overseas Medical Supplies Ltd v Orient Transport Services Ltd was cited by the CoA for providing a record of various factors relating to the issue of reasonableness. These included the necessity to evaluate the relevant clause in its entirety and the option of contracting without the exclusion clause at a higher cost. The CoA also emphasised the key principle of freedom of contract with regards to ‘terms freely agreed by parties of broadly equal size and status’ citing Photo Production Ltd v Securicor Transport Ltd ., Granville Oil & Chemicals Ltd v Davis Turner & Co Ltd , and Watford Electronics Ltd .
In addition, numerous factors were relied on by the CoA in finding that the exclusion clause under review was not particularly unusual or onerous. First, the Court found that it was not a ‘blanket exclusion clause’ on account of minor warranty contained therein . The Court’s approach was to view the clause ‘in the context of the contract as a whole’ emphasising the absence of any continuing maintenance obligations for the Respondent and the possibility offered for them to accept greater liability through additional insurance arrangements . Furthermore, the CoA considered that exclusion and limitation clauses were frequently employed within the industry although this particular clause under review resided at the ‘far end of the spectrum.’
Addressing the issue of providing sufficient notice of the clause in question the CoA likewise maintained the findings of the High Court that the clause was not concealed by small print, was a usual condition ‘expressly referred to’ on the Respondent’s quotation and printed distinctly . Particularly relevant was the further caution provided at the start of the usual conditions in that the CoA observed that if the warning ‘did not alert them to the effect of [the exclusion clause], then nothing would have done.’ The CoA also found it relevant that the Appellant had more than a year between receiving the Respondents standard terms and entering into the contract thus offering ample time for the terms to be considered and for independent advice to be sought if required .
Applying UCTA, the CoA began with the Schedule 2 guidelines and arrived at several conclusions directing towards the reasonableness of the relevant clause including the lack of inducement to agree the clause, the fact that the Appellant ought reasonably to have known of the clauses existence and the expansive equal bargaining power between the two parties with this last issue discerned by Arthurs and Finlayson as attributable to the ruling that the clause was reasonable . The Court took into account the ‘important consideration’ of insurance in favour of the Respondent finding there to be ‘no doubt; that the appellant was best positioned to insure against the negative consequences which occurred. As McKendrick observes, this decision implies that the Court will be more willing to confirm an exclusion clause as reasonable ‘if the loss in respect of which the claim has been brought is one which the court would expect the claimant to be insured against in any event.’
In relation to its approach to the three main issues in this case, the CoA therefore felt that there were no grounds to interfere with the High Court’s conclusion, that the clause was not particularly onerous or unusual and that notice of it was fairly and reasonably given to the Appellants. In such circumstances the Court felt it would be commercially unrealistic to say this . In this instance the Appellants Appeal was dismissed and the Appellants were condemned in costs.
Critical Analysis
Gross LJ placed particular emphasis on the significance of party autonomy and the ability of two equivalent parties to ‘allocate risks as they see fit.’ He further cited Granville as providing that whereas UCTA plays an instrumental role in protecting vulnerable customers the argument is weaker for its ‘intrusion’ into commercial contracts between parties of relatively equal bargaining power . These remarks denote a coherent focus on the commercial reality of the situation in which an exclusion or limitation clause is being assessed. Both the ruling in Goodlife and the relevant authorities cited are arguably indicative of a more limited role for UCTA to play in commercial contracts between relatively equal parties .
Depicted as a surprising and unexpected case , it could also be argued that Goodlife suggests a fall in the standard necessary to find that a contractual clause is not unusual or onerous or regarding the measures which must be adopted to bring such a clause to the party’s attention especially against a commercial backdrop. Both Courts considered that the exclusion clause under examination was at the furthest end of the spectrum of similar clauses applied within the industry and was particularly far-reaching in its potential application. Notwithstanding this, the extent to which the clause was highlighted in the terms and conditions was arguably modest as it was presented in regular print alongside other contractual terms with only one further notice in their terms to signify the existence of the exclusion clause.
It could further be argued that at least within such a commercial setting, little additional needs to be done to emphasise even the most far reaching of exclusion or limitation clauses, far removed from Denning LJ’s suggestion that such clauses might require highlighting in colour to indicate its existence. Lees succinctly summarises Goodlife’s message as signalling that, ‘when it comes to the interpretation of a wide exclusion/limitation clause, context will be key.’ This viewpoint parallels that of Arthurs and Finlayson as illustrated through their employment of sporting wordplay to deduce their perception of Goodlife’s decision: ‘we don’t think we ‘Kane’ make this any clearer: read the entire contract, terms and conditions and all, or it may get ‘Messi.’ O’Sullivan also aptly observes that there exists authorities where such terms have been held unreasonable within a non-consumer contract and ‘from now on, …such a finding should and will be exceptionally rare.’
Therefore, from a theoretical and practical point the CoA’s decision has far reaching implications for parties entering into commercial contracts. Parties should be advised that rarely can a limitation/exclusion of a liability clause be absolutely water tight and Goodlife would seem to suggest that each contract has to be looked at on a case by case basis. It is best now that parties should indulge in lengthy negotiations so as to establish the possible risks from the outset and to think about how best those risks can be allocated or mitigated without the need for lengthy and protracted litigation though the Court . For example, limitation/exclusion clauses should be drafted in a series of separate, self-contained provisions so that if any part of the clause is found to be void or unreasonable there is at least a chance that that part can be severed thereby leaving the remainder of the clause as enforceable . I would wholly endorse this approach given that the CoA has identified their ‘slow to intervene’ approach in commercial contracts between parties who are of broadly equal size and bargaining power .