Regus (UK) Ltd v Epcot Solutions Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix |
| Judgment Date | 15 April 2008 |
| Neutral Citation | [2008] EWCA Civ 361 |
| Docket Number | Case No: A3/2007/1092 |
| Court | Court of Appeal (Civil Division) |
| Date | 15 April 2008 |
[2008] EWCA Civ 361
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LONDON MERCANTILE COURT
HHJ MACKIE QC
Royal Courts of Justice
Strand, London, WC2A 2LL
President Of The Family Division
Lord Justice Rix and
Lord Justice Keene
Case No: A3/2007/1092
2006-FOLIO 856
Mr Richard Gillis QC, Mr Thomas Braithwaite (instructed by Messrs Barlow Robins LLP) for the Appellant/Claimant
Mr Richard Colbey (instructed by) for the Respondent/Defendant
Hearing dates : Wednesday 20 th February 2008
Regus (UK) Ltd (“Regus”) is part of a large group which is an industry leader in the provision of serviced office accommodation. Epcot Solutions Ltd (“Epcot”) is a small but ambitious provider of professional IT training. For a number of years between January 2001 and October 2004 Epcot took space in Regus's buildings, first at its Heathrow location and later at Stockley Park. Over the years a number of issues arose: principally arising out of Regus's closure of its Heathrow location during the course of Epcot's contract there and the consequential need to relocate Epcot to Stockley Park; and also out of the inadequacy of the air-conditioning system at Stockley Park. The former led to certain relocation expenses including the waste of brochures printed with Epcot's old address; the latter led to complaints about the premises being uncomfortably too hot, particularly in summer months, even to the extent of Epcot's staff and trainees being made to feel unwell. These issues gradually built up to Epcot withholding fees otherwise due to Regus for the provision of its services, and to Regus for its part issuing a notice of suspension of its services. That led to Epcot promptly relocating to a competitor's building at Stockley Park, and to this litigation.
It seems to me a great shame that this dispute about, as will appear, comparatively small sums, has led to protracted litigation which has in all probability given rise to great expense. It must have been a matter of considerable frustration that the air-conditioning did not work as it should have done. Similarly, no doubt Regus was concerned about not being paid its fees and Epcot was upset to be facing a suspension of what amounted to its business. However, at least two matters have contributed to this litigation, once started, being incapable of settlement. One was Epcot's counterclaim in the sum of £626 million. The other was Epcot's challenge to Regus's standard term exception clause as being unreasonable and thus unenforceable under the Unfair Contract Terms Act 1977 (“ UCTA”).
The judge, HHJ Mackie QC sitting in the London Mercantile Court, found that the air-conditioning was defective and that Regus was thereby in breach of contract. He also found that Regus's contract terms dealing with liability amounted to a total exclusion of any remedy at all and on that ground held that they were unreasonable and unenforceable under UCTA. Regus appeals.
Regus's standard terms
Regus's exception clause was contained in clause 23 of its standard terms, see below. I have numbered its sub-paragraphs for convenience of reference. I also set out a number of other standard terms which explain the nature of the agreement made between Regus and its clients.
“23. Our Liability
(1) We are not liable for any loss as a result of our failure to provide a service as a result of mechanical breakdown, strike, delay, failure of staff, termination of our interest in the building containing the business centre or otherwise unless we do so deliberately or are negligent. We are also not liable for any failure until you have told us about it and given us a reasonable time to put it right.
(2) You agree (a) that we will not have any liability for any loss, damage or claim which arises as a result of, or in connection with, your agreement and/or your use of the services except to the extent that such loss, damage, expense or claim is directly attributable to our deliberate act or our negligence (our liability); and (b) that our liability will be subject to the limits set out in the next paragraph.
(3) We will not in any circumstances have any liability for loss of business, loss of profits, loss of anticipated savings, loss of or damage to data, third party claims or any consequential loss. We strongly advise you to insure against all such potential loss, damage, expense or liability.
(4) We will be liable:
· without limit for personal injury or death;
· up to a maximum of £1 million (for any one event or series of connected events) for damage to your personal property;
· up to a maximum equal to 125% of the total fees paid under your agreement up to the date on which the claim in question arises or £50,000 (whichever is the higher), in respect of all other losses, damages, expenses or claims.
24. The nature of your agreement
Your agreement is the commercial equivalent of an agreement for accommodation in a hotel. The whole of the business centre remains our property and in our possession and control…
27. Ending your agreement immediately
We may put an end to your agreement immediately by giving you notice if:
· you become insolvent…
· you are in breach of your obligations which cannot be put right or which we have given you notice to put right and which you have failed to put right within fourteen days of that notice…
If we put an end to the agreement for any of these reasons it does not put an end to any then outstanding obligations you may have and you must:
· pay for additional services you have used
· pay the standard fee for the remainder of the period…or (if longer) for a further period of three months, and
· indemnify us against all costs or losses we incur as a result of the termination.
28. If the business centre is not available
In the unlikely event that we are no longer able to provide the services and accommodation at the business centre stated in your agreement then your agreement will end and you will only have to pay standard fees up to the date it ends and for the additional services you have used. We will try to find suitable alternative accommodation for you at another Regus business centre…
39. Late payment
If you do not pay fees when due, we may charge interest at the rate of 2% per month on the amounts outstanding. If you dispute any part of an invoice you must pay the amount not in dispute by the due date. We also reserve the right to withhold services (including for the avoidance of doubt, denying you access to your accommodation) while there are any outstanding fees and interest or you are in breach of your agreement.”
The background to the dispute
The chief executive officer of Epcot is Mr Charanjit Randhawa, whom the judge described as an intelligent and experienced businessman with a tendency to exaggerate both in his business dealings and in his evidence to the court. In late November 2000 he decided to go into business for himself, offering an intense extended half day of IT training in a high quality environment. He chose Regus's World Business Centre at Heathrow as a suitable first location. His initial contract with Regus was for two months from 31 March to 31 May 2001 at £368 per day or £2,162 (inclusive of VAT) for a five day week. Mr Randhawa had large ambitions to franchise his concept on a global basis. He also sought to interest Regus in his concept, but without success.
This first arrangement appears to have run on until 21 August 2001 when Epcot signed a one year contract with Regus to cover the period from 18 June 2001 to 17 June 2002. The fee had become a monthly fee of £5,500 for the same premises. Regus's contract terms at that time were not yet in the form which applied to Epcot's later contract in respect of which the parties came to litigate. One of Regus's then terms, under the heading of “Consequential loss”, was that “If for any reason we cannot provide you with any service our liability is limited to crediting or returning to you a fair proportion of the relevant fee.” That term did not survive into the later contract.
On 7 December 2002 Epcot proposed a reduced fee of only £2,750 per month for the last six months of the current contract. Regus conceded this, on the basis apparently of Epcot's bad cash flow.
On 8 August 2002 Epcot and Regus renewed their contract for a further one year from 1 July 2002 to 30 June 2003, on this occasion for a monthly fee of only £1,500. This had followed negotiations in which Mr Randhawa had stated that he could only pay £1,375 for the final month of his previous contract; Regus had offered to renew at £2,750 per month; Mr Randhawa threatened to go to a rival provider, HQ Global, at Stockley Park for a quoted fee of first £2,300 per month (“The choice is with Regus”) and then £1,500 per month; and Regus conceded the renewal at that last figure. It is not clear whether the renewal was on Regus's old or new contract terms, but I will assume it was on the latter, for those were the only terms discussed at trial.
During that second one year contract, Regus decided to shut its Heathrow location and offered Epcot alternative accommodation at Stockley Park, a few miles distant. Regus's contract (clause 28) allowed it to terminate its agreement in such circumstances, but it stated that “We will try to find suitable alternative accommodation for you at another Regus business centre”. On 5 November 2002 Regus notified Epcot of the impending closure of its Heathrow premises, and on 13 March 2003 Epcot signed its first contract with Regus for accommodation at...
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