Gill (Stewart) Ltd v Myer (Horatio) & Company Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE BALCOMBE,LORD JUSTICE STUART-SMITH |
| Judgment Date | 12 February 1992 |
| Judgment citation (vLex) | [1992] EWCA Civ J0212-6 |
| Docket Number | 92/0102 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 February 1992 |
[1992] EWCA Civ J0212-6
The Master of The Rolls
(Lord Donaldson)
Lord Justice Balcombe
Lord Justice Stuart-Smith
92/0102
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(HIS HONOUR JUDGE LOYD Q.C.)
Royal Courts of Justice
MR. DAVID JOSEPH (instructed by Messrs. Palmer Cowen) appeared for the Appellants(Plaintiffs).
MR. MICHAEL YELTON (instructed by Messrs. Copleys, St. Ives, Huntingdon) appeared for the Respondents(Defendants).
This appeal raises a not uninteresting point under the Unfair Contract Terms Act 1977. It arises on an appeal against a decision of His Honour Judge Loyd Q.C., sitting in the Official Referee's court, giving the defendants unconditional leave to defend.
In or about October 1988 the defendants, who are manufacturers of beds, entered into a contract with the plaintiffs for the delivery, installation and testing of a twintrack Power and Free Overhead Conveyor system at a price of £266,400 plus V.A.T. There was also provision for additional work and special equipment to be the subject of extra charges. The terms of payment were 15 per cent with the order, 75 per cent by progress payments during the work, 5 per cent on completion of installation and 5 per cent 30 days following completion. All these stages have been reached and I understand the plaintiffs' claim to be for the 10 per cent of the price due on completion or 30 days thereafter. The defence to the claim is based upon alleged breaches of the contract by the plaintiffs giving rise to cross-claims which overtop and pro tanto can be set off against the amount claimed.
The plaintiffs, whilst denying the defendants' cross-claims, accept that, but for a special term of the contract, on these facts the defendants would be entitled to unconditional leave to defend. That term, which is one of the plaintiffs' General Conditions of Sale to which the contract was admittedly subject, is in the following terms:—
"12.4 The customer shall not be entitled to withhold payment of any amount due to the Company under the Contract by reason of any payment credit set off counterclaim allegation of incorrect or defective Goods or for any other reason whatsoever which the Customer may allege excuses him from performing his obligations hereunder."
The defendants accept that if this clause can survive the impact of the 1977 Act, the plaintiffs are entitled to summary judgment, although this would leave it open to the defendants to pursue their claims as a counterclaim and would also, incidentally, leave it open to the court in giving judgment for the plaintiffs additionally in an appropriate case to stay execution upon that judgment or to do so conditionally upon the money being brought into court.
The defendants relied upon sections 3, 7 and 13 of the Act. Judge Loyd held that neither sections 3 nor 7 were applicable, but that section 13 applied and in consequence the clause could only be relied upon if it was reasonable. His conclusion on that issue was expressed in the following terms:—
"I am afraid that I cannot conclude that the material before me in relation to reasonableness is in any way complete. It would be quite wrong on the state of the evidence to say that I am satisfied that the test of reasonableness has been met enabling me to say that clause 12.4 should remain in force.
With some reluctance I have to decline the Plaintiffs' application and give unconditional leave to the Defendants to defend. Defendants' costs in any event."
With all respect to the judge, I think that he overlooked the fact that such a clause, if it is to be effective at all, can only take effect either upon an application for summary judgment under Order 14 or on the subsequent hearing of a preliminary point as to its reasonableness. To give unconditional leave to defend without ordering the hearing of a preliminary point is in effect to render the clause nugatory, since by the end of a final hearing it would not matter whether there was a set-off or separate judgments on claim and counterclaim. He should therefore have reached a decision on its reasonableness in the light of such evidence as he had.
The 1977 Act approaches contracts governed by the law of sale of goods or hire-purchase in some respects differently from other contracts—see for example section 7. Accordingly it needs to be said, and this was not in controversy, that this contract was not governed by the law of sale of goods or hire-purchase, but by the Supply of Goods and Services Act 1982.
Section 3 of the Act applies where, as here, one party to a contract deals with the other on that other's written standard terms of business. However, it is limited to terms excluding or restricting liability or entitling the party concerned to render no contractual performance or a performance which is substantially different from that which was reasonably expected of him. Clause 12.4 is not such a clause, but the section is relevant to a consideration of section 13, although it is not there referred to in express terms.
Section 7 applies where, as here, the contract transfers the ownership of goods otherwise than under a contract for the sale or hire-purchase of goods. Unlike section 3 it is referred to in section 13 but, like section 3, it is concerned with exclusion or restriction of liability.
This leaves section 13 which is in the following terms:—
"Varieties of exemption clause
(1) To the extent that this Part of this Act prevents the exclusion or restriction of any liability it also prevents—
(a) making the liability or its enforcement subject to restrictive or onerous conditions;
(b) excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his pursuing any such right or remedy;
(c) excluding or restricting rules of evidence or procedure; and(to that extent) sections 2 and 5 to 7 also prevent excluding or restricting liability by reference to terms and notices which exclude or restrict the relevant obligation or duty.
(2) But an agreement in writing to submit present or future differences to arbitration is not to be treated under this Part of this Act as excluding or restricting any liability."
It is a trite fact (as contrasted with being trite law) that there are more ways than one of killing a cat. Section 13 addresses this problem. On behalf of the plaintiffs it was submitted that it only did so to the extent of rendering ineffective any unreasonable term which by, for example, introducing restrictive or onerous conditions, indirectly achieved the exclusion or restriction of liability which, if achieved directly, would fall within the scope of other sections. The plaintiffs rightly say that clause 12.4 does not have this effect. On behalf of the defendants it was submitted that it had a wider scope.
The answer is, of course, to be found in the wording of the section, but it does not exactly leap out of the print and hit one between the eyes. Analysing the section and disregarding words which are irrelevant, it seems to deal with the matter as follows:—
"To the extent that this Part of this Act prevents the exclusion or restriction of any liability it also prevents—".
This seems to me to do no more than give expression to the "cat" approach. Both sections 3 and 7 would render ineffective any clause in the plaintiffs' written standard terms of business which excluded or restricted liability in respects which are here material and section 13 extends this in some way. In order to find out in what way, one must read on:—
"It also prevents—
(a) making the liability or its enforcement subject to restrictive or onerous conditions;
(b)...
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