On the sixth day of Christmas, the High Court gave to me…six exclusion clauses
With Advent upon us, and Christmas on the horizon, RPC takes a musical look back at the most important English judgments of 2018. Liability for all failures of numbering, rhythm and rhyme is hereby excluded.
Geese, which normally feature in this verse, can pack a nasty bite. In a gaggle of cases this year, exclusion clauses bit claimants hard – but in two cases the claimants successfully fought back.
In Goodlife v Hall Fire, Hall Fire was responsible for installing a fire suppression system in Goodlife's factory. Hall Fire's standard terms, which Goodlife had accepted, provided that Hall Fire would not be liable for any loss to property caused by its negligence or by malfunction of its system. Insurance was said to be available to cover those risks at extra cost. Following the installation of the system, the factory burned down. Goodlife sued Hall Fire for its losses, arguing that the exclusion clause was unreasonable in its breadth and so void under the Unfair Contract Terms Act 1977 (UCTA). At both first instance (2017) and in the Court of Appeal (2018), Goodlife failed and exclusion clause prevailed. Sauce for the goose.
By way of sauce for the gander, in First Tower Trustees v CDS, a landlord wrongly told a tenant that there was no asbestos in the property in pre-contractual inquiries. To defend a claim from the tenant, the landlord relied upon a contractual provision that the tenant acknowledged that it had not relied on any statement made by the landlord. This created a contractual estoppel. Since Springwell v JP Morgan, that has been the end of the enquiry. However, in this case, both at first instance and in the Court of Appeal, the court was not willing to stop there. It held that the entire agreement clause operated as an exclusion clause and therefore subject to the requirement of reasonableness in s3, Misrepresentation Act 1967. Since pre-contractual enquiries are critical in most property transactions, the clause was held to be unreasonable and therefore unenforceable. This case may have significant ramifications: honk, the herald goose, for future cases on contractual estoppel.
Finally, in NF Football v NFCC Group, the Master at first instance held that an entire agreement clause in an SPA selling Nottingham Football club successfully excluded claims for misrepresentation. On appeal, HHJ Cooke disagreed.
In an ideal world, an entire agreement should provide that (i) the contract is to be found within the four corners of the document; (ii) the parties have not relied upon anything not referenced in the document; (iii) the parties have no remedy for misrepresentation; and (iv) nothing excludes liability for fraud. The clause in this case provided simply that the SPA "constitutes the entire agreement between the parties and supersedes and extinguishes all previous discussions, correspondence, negotiations, drafts, agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to its subject matter". HHJ Cooke held that that was sufficient only to prevent the pre-contractual representations from becoming part of the contract; it did not prevent the buyers from pursuing a claim in misrepresentation. As a result, the entire agreement goose was cooked.
Whether or not you'll be eating goose for Christmas dinner this year, exclusion clauses look set to provide more food for lawyers in the years to come.
For more on the first instance decision on Goodlife, see here, and on the appeal decision, see here and here. For more on the first instance decision in NF Football, see here. For more on the appeal decision in First Tower Trustees, see here and here.
The Twelve Judgments of Christmas (2018)
On the first day of Christmas, the High Court gave to me….a privilege in E-N-RC.
On the second day of Christmas, the High Court gave to me…two LIBOR reps.
On the third day of Christmas, the High Court gave to me…three corporate crimes.
On the fourth day of Christmas, the High Court gave to me…four contracts.
On the fifth day of Christmas, the High Court gave to me… five time bars!
On the sixth day of Christmas, the High Court gave to me…six exclusion clauses.
On the seventh day of Christmas, the High Court gave to me…[to be continued]