LORD JUSTICE SLADE: This is the judgment of the court, to which all its members have contributed, on an appeal by Hamstead Plant Hire Co. Ltd. ("Hamstead") from a judgment of Mr. Justice Kenneth Jones given at the trial of an action on the 15th October, 1982 whereby he ordered the two defendants to pay the plaintiffs a sum of £3,043.50 damages and costs. The issues concern the applicability or otherwise of the Unfair Contract Terms Act 1977 to certain conditions in a contract of hire. Surprisingly, we have been referred to only one reported case in which this Act has been mentioned.
The plaintiffs in the action were Phillips Products Ltd. ("Phillips"). The two defendants were Mr. T. Hyland and Hamstead, which carries on a plant hire business.
In 1980 Phillips, who are steel stockholders, were carrying out extensions to their factory. They arranged with a builder, Mr. Pritchard, that he should do the building work, but they themselves were to be responsible for buying materials and arranging for the provision of plant, so far as necessary. In December 1979 Phillips reguired the use of a J.C.B. excavator. For this purpose they placed an order for hire with Hamstead. The learned judge found that this was apparently the first occasion on which Phillips had found it necessary to hire plant in this manner. Mr. J.M. Phillips, who we infer was a director of Phillips, accepted in evidence at the trial that at this time Hamstead sent to his company a specimen form of Hire Contract which had attached to it Hamstead's "General Conditions for the Hiring of Plant", which we will call the "General Conditions". It is common ground, as it was at the trial, that the General Conditions were incorporated in the Contract of Hire concluded between Hamstead and Phillips in December 1979, and in the two subsequent contracts to which we will refer. Accordingly, it is not necessary to consider the precise manner in which these three contracts came into being.
The General Conditions incorporated in all these three contracts were in fact a standard form of conditions referred to in Hamstead's invoices as "C.P.A. Conditions of Hire". We have been told that this standard form had been agreed between the Association then known as the Contractors Plant-Hire Association (now known as the Construction Plant-Hire Association), as representing persons in the business of plant hire, and the Federation of Civil Engineering Contractors.
We mention at this stage two points concerning these General Conditions. First, they were clearly intended to be comprehensive and exhaustive. This is shown by Condition 2, which stated: "No conditions or warranty other than herein specifically set forth shall be implied or deemed to be incorporated in or to form part of the contract". Secondly, Mr. Phillips accepted in cross-examination that he had read Condition 8, which is the Condition most relevant to this present appeal, before the last of the three contracts of hire was concluded.
In July 1980, Phillips again hired a J.C.B. excavator from Hamstead, on this occasion for the purpose of digging out a drain. It appears from the evidence that Mr. Phillips was responsible for arranging this and the earlier hiring. At the end of July 1980 Mr. Phillips himself went away on holiday. Before he departed, he gave Mr. Pritchard permission to place an order with Hamstead for the hiring of a J.C.B. when it should be required to back-fill the trench which had been dug in July. On the 6th August, 1980, while Mr. Phillips was still away, Mr. Pritchard made arrangements by telephone with Hamstead for the hire of a J.C.B. and driver. On the 7th August the first defendant, Mr. Hyland, arrived at Phillips' premises with a J.C.B. machine. Mr. Pritchard told Mr. Hyland that he wanted him to back-fill the drain. According to Mr. Pritchard's oral evidence, he offered to come and help as a "banksman". He explained in evidence that the function of a banksman is to tell the operator of the machine how deep to dig and where his bucket is going and so forth. His evidence was that Mr. Hyland told him that he did not need his services, that he was an experienced operator who had done it long enough and that he did not need anyone to act as banksman. Mr. Hyland did not accept that Mr. Pritchard had offered his help in this manner. He said that Mr. Pritchard, having told him what had to be done, just "disappeared". The learned judge made no findings in relation to this particular conflict of evidence. However, he did find as a fact that Mr. Hyland made it perfectly plain to Mr. Pritchard that he would brook no interference in the way he operated his machine; and this particular finding is amply borne out by the evidence of Mr. Hyland himself. Mr. Hyland accepted in cross-examination that, while he expected to be told what was to be done, he did not need to be told what to do, and that after that it was up to him, as the driver, to do it properly.
During the course of operating the J.C.B. excavator on the 7th August, 1980, Mr. Hyland unfortunately drove it into collision with part of Phillips' buildings and did considerable damage. In consequence, Phillips issued a writ, on the 9th January, 1981, against Mr. Hyland and Hamstead claiming damages against both defendants. Their statement of claim served on the 13th January, 1981 indicated that their claim against Hamstead was based both on alleged breach of contract and in tort, in the latter case on the grounds of vicarious liability. At the trial before Mr. Justice Kenneth Jones in October 1982, an allegation that Mr. Hyland was not a competent driver was not pursued. However, it was conceded on behalf of both defendants that he had driven the J.C.B. with less than reasonable care and that the cost of repairing the premises was £3,043.50. The learned judge gave judgment for Phillips against him in that sum.
The argument at the trial centred on the liability or otherwise of Hamstead in tort. It was conceded on their behalf that, apart from any special terms in the contract of hire of August 1980, they would have been liable for the negligence of Mr. Hyland as their employee, so as to entitle Phillips to judgment against them for the same sum as that awarded against Mr. Hyland. However, it was contended on behalf of Hamstead that of the General Conditions incorporated in the contract, No. 8 gave them a complete defence to any such claim.
General Condition 8 reads as follows:
"HANDLING OF PLANT
When a Driver or Operator is supplied by the Owner to work the Plant, he shall be under the direction and control of the Hirer. Such Drivers or Operators shall for all purposes in connection with their employment in the working of the Plant be regarded as the servants or agents of the Hirer who alone shall be responsible for all claims arising in connection with the operation of the Plant by the said Drivers or Operators. The Hirer shall not allow any other person to operate such Plant without the Owner's previous consent to be confirmed in writing."
Hamstead and Phillips are respectively "Owner" and "Hirer" within the definitions of these words to be found in General Condition 1.
It was submitted on behalf of Hamstead at the trial that under the express terms of Condition 8, Mr. Hyland was to be regarded as the servant of Phillips who alone were to be responsible for all claims arising in connection with the operation of the J.C.B. by him, and that accordingly Hamstead could bear no responsibility in law for Mr. Hyland's negligence.
On behalf of Phillips, two principal arguments were advanced at the trial in answer to these submissions. First, it was contended that the wording of Condition 8 on its true construction is not apt to exempt Hamstead from liability for the present claim based, as it is, on negligence; in support of this argument reliance was placed non the decision of the House of Lords in Smith v. South Wales Switchgear Co. Ltd. [1978] 1 WLR 165. Alternatively, it was submitted, that if, on its proper construction, the wording of Condition 8 were apt to provide such an exemption, the Unfair Contract Terms Act 1977 would preclude Hamstead from relying on it.
The learned judge came to the conclusion that this second argument advanced on behalf of Phillips was well founded. He therefore found it unnecessary to reach any decision as to the proper construction of Condition 8 and gave judgment for Phillips against both defendants in the same sum.
At the start of the hearing of this appeal, counsel for Hamstead accepted (as had been accepted at the trial) that Hamstead would in the absence of Condition 8 have been vicariously liable in tort to Phillips for the conseguences of the admitted negligence of the operator. Counsel for Phillips accepted that, in the absence of a respondent's notice (which he did not seek to deliver), he could not contend that Condition 8 would not afford Hamstead a complete defence against liability to Phillips, if it were to be held that, despite the Unfair Contracts Act 1977, Hamstead are entitled to rely on this Condition.
Thus, ultimately the sole question which falls to be decided on this appeal is whether or not Condition 8 is rendered ineffective as a defence by reason of the Unfair Contract Terms Act 1977, which we will henceforth call "the Act".
The Unfair Contract Terms Act 1977
Section 1(1) of the Act provides:
"For the purposes of this Part of this Act, 'negligence' means the breach -
(a) of any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill in the performance of the contract;
(b) of any common law duty to take reasonable care or exercise reasonable skill (but not any stricter duty);
(c) of the common duty of care imposed by the Occupiers' Liability Act 1957 or the Occupiers' Liability Act (Northern Ireland) 1957."
Part I of the Act includes sections 1 to 14.
Section 1(3) renders sections 2 to 7 applicable generally only to "business liability" as therein defined, but it is common ground that any liability in the present case falls within this definition.
Section 1(4) provides:
"In relation to any breach of duty or obligation, it is immaterial for any purpose of this Part of this Act whether the breach was inadvertent or intentional, or whether liability for it arises directly or vicariously."
Section 2 provides:
"(1) A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence.
(2) In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness.
(3) Where a contract term or notice purports to exclude or restrict liability for negligence a person's agreement to or awareness of it is not of itself to be taken as indicating his voluntary acceptance of any risk."
Section 11, so far as material, provides:
"(1) In relation to a contract term, the requirement of reasonableness for the purposes of this Part of this Act ... is that the term shall have been a fair and reasonable one to be included 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.
(5) It is for those claiming that a contract term or notice satisfies the requirement of reasonableness to show that it does."
Section 13(1) of the Act provides:
"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."
The issues arising on the appeal
The principal question arising on this appeal concerning the applicability or otherwise of the Act, as argued before us, itself gave rise to three issues. The first two do not appear to have been argued before the learned judge, before whom the defendants were not represented by the same counsel as has argued the appeal on their behalf. No objection, however, was raised on behalf of Phillips to these points being taken; and as they were issues of law not involving evidence, it seemed right to allow Hamstead to take them. These three issues are:
(i) On the admitted facts of the present case, was there on the part of Hamstead "negligence" within the definition of that word contained in section 1(1) of the Act?
(ii) If the answer to (i) is "Yes", is Condition 8 a contract term which, apart from the effect of the Act, can properly be said to "exclude or restrict" Hamstead's liability for negligence within the meaning of these words in section 2(2) of the Act? In considering this issue, it is necessary to bear in mind the concluding words of section 13(1) which bring within the ambit of section 2(2) terms "which exclude or restrict the relevant obligation or duty".
(iii) If the answers to (1) and (11) are both "Yes", does Condition 8 satisfy the requirement of reasonableness, within the meaning of that phrase as used in the Act?
Issue (i)
As to (i), the argument for Hamstead is simple, and runs on these lines. If a claim is based on contract, "negligence" within the definition of section 1(1)(a) can have occurred only if there has been a breach of "any obligation, arising from the express or implied terms of a contract, to take reasonable care or exercise reasonable skill m the performance of the contract". So, it is said, if in the case of such a claim the contract has by its express terms excluded liability for negligence, there can ex hypothesi have been no breach of any obligation of the nature referred to in section 1(1)(a).
The claim in the present case, as it happens, is of the nature referred to in section l(l)(b); the breach of a common law duty to take reasonable care is alleged. Here again a similar argument is advanced. It is suggested that there can be no breach of a common law duty to take reasonable care, within the meaning of section 1(1)(b), by a party to a contract which contains a condition which purports to absolve him from liability for negligence.
These arguments, though superficially attractive, are m our judgment fallacious. If correct, they would make nonsense of the Act. They would mean that the very contractual term which pre-eminently is suitable to be subject to review for reasonableness under the Act would be taken out of its scope. The Act, however, is not nonsensical. Its purpose is not defeated by the wording of its first section. In our judgment, in considering whether there has been a breach of any obligation of the nature referred to in (a) or of any duty of the nature referred to in (b) or (c), the court has to leave out of account, at this stage, the contract term which is relied on by the defence as defeating the plaintiffs' claim for breach of such obligation or such duty, and section 1(1) should be construed accordingly.
If any support were necessary for this construction of section 1(1), it is to be found in the concluding words of section 13(1) of the Act. For these words make it clear that section 2 is capable of negativing the effect of contract terms which purport to exclude or restrict "the relevant obligation or duty".
Section 1(4), by its reference to "vicariously", defeats a further argument which counsel for Hamstead at one stage sought to raise on issue (i): namely, that the admitted negligence of Mr. Hyland was not sufficient and that there had to be shown personal negligence on the part of Hamstead.
Accordingly, though the validity of Condition 8 still remains to be considered, on the admitted facts of this case there was "negligence" on the part of Hamstead falling within section 1(1)(b) of the Act. This took the form of a breach (subject to the effect, if any, of Condition 8) of Hamstead's common law duty to take reasonable care, by reason of the fact that Mr. Hyland who, subject to Condition 8, was Hamstead's servant, had caused the loss to Phillips by his negligence in the performance of his duties as such servant.
Issue (i) therefore has to be answered "Yes".
Issue (ii)
Issue (ii) brings us to section 2(2). Subsection (1) does not apply because there was, fortunately, no death or personal injury. Section 2(2), set out as incorporating the relevant wording of subsection (1), provides that in case of other loss or damage a person cannot by reference to any contract term exclude or restrict his liability for negligence except in so far as the term satisfies the requirement of reasonableness. The argument for Hamstead is that they do not, by reference to Condition 8, "exclude or restrict" their liability for negligence. Condition 8, it is stressed, is not an "excluding" or "restricting" clause. It may have an effect on the liability for negligence which would otherwise have existed if there were, as there was in the present case, negligence. (For "may" we would substitute "must" assuming that Hamstead's submission as to the validity of Condition 8 is correct). Nevertheless, the Condition does not, it is said, amount to an attempt by either party to the contract to "exclude or restrict" liability: it is simply an attempt on their part to divide and allocate the obligations or responsibilities arising in relation to the contract by transferring liability for the acts of the operator from the plant owners to the hirers. A transfer, it is suggested, is not an exclusion; hence the hirers fail at the section 2(2) hurdle.
We were referred by counsel for Hamstead to the House of Lords case Arthur White (Contractors) Ltd. v. Tarmac Civil Engineering Ltd. [1967] 3 All E.R. 586 in which the construction and effect of a clause ("Clause 8") in more or less identical terms to that of Condition 8 was considered. In that case, which concerned a contract of hire, a driver had been supplied by the owners with a crane excavator. During the period of hire an accident occurred due to the driver's negligence in which the plaintiff, an engineer on the site, was severely injured. The question on the appeal was whether the hirers were, as between themselves and the owners, solely responsible for the amount recovered by the plaintiff in damages, judgment having been entered against both of them. It was held that as between the hirers and the owners the responsibility was placed on the hirers by Clause 8. It was argued on behalf of the hirers that on the basis of the Alderslade principle (a reference to the judgment of Lord Greene M.R. in Alderslade v. Hendon Laundry Ltd. [1945] K.B. 189) a clause of exception or exemption against loss by one contracting party is presumed not to apply to a case where the loss is occasioned by the negligence of that party unless the clause expressly covers that event, or there is no other liability to which the clause could reasonably refer. This argument was rejected, essentially on the grounds that Clause 8 was not an exemption clause but was intended to allocate the responsibility for claims as between the hirers and the owners: (see at page 593E per Lord Pearce, at page 597F per Lord Upiohn and at page 599 H-1 per Lord Pearson). If we may respectfully say so, it is readily intelligible that the House of Lords should have concluded that the Alderslade presumotion could not possibly have applied to a clause such as Clause 8.
However, the question for this court is not whether the Alderslade presumption applies to Condition 8. It is whether or not the provisions of Condition 8 "exclude or restrict" Hamstead's liability for negligence within the meaning of section 2(2) of the Act. We see nothing in the Arthur White decision or in the speeches in that case which have any relevant bearing on this point. Certainly there is nothing which leads to the conclusion that a plant-owner who uses the General Conditions is not excluding his liability for negligence in the relevant sense by reference to the contract term Condition 8. We are unable to accept that in the ordinary sensible meaning of words in the context of section 2 and the Act as a whole, the provisions of Condition 8 do not fall within the scope of section 2(2). A transfer of liability from A to B necessarily and inevitably involves the exclusion of liability so far as A is concerned. Mr. Thompson pointed out that in other circumstances liability for the acts of the operator might well have fallen on the hirers at common law in any event: see, for example, Mersey Docks and Harbour Board v. Coggins and Griffiths (Liverpool) Ltd. [1947] AC 1 per Lord Simon at page 10 and per Lord Macmillan at page 13. This, in our judgment, is immaterial. On the particular facts of this case the effect of Condition 8, if valid, is to negative a common law liability in tort which would otherwise admittedly fall on the plant-owner. The effect of Condition 8 making "the hirer alone responsible for all claims" necessarily connotes that by the Condition the plant-owner's responsibility is excluded. In applying section 2(2), it is not relevant to consider whether the form of a Condition is such that it can aptly be given the label of an "exclusion" or "restriction" clause. There is no mystique about "exclusion" or "restriction" clauses. To decide whether a person "excludes" liability by reference to a contract term, you look at the effect of the term. You look at its substance. The effect here is beyond doubt. Hamstead does most certainly purport to exclude its liability for negligence by reference to Condition 8. Furthermore, Condition 8 purports to "exclude or restrict the relevant obligation or duty" within the provisions of section 13(1) of the Act. Issue (ii) has to be answered "Yes".
Issue (iii)
Issue (iii) is the issue which alone it would seem, apart from the construction of Condition 8 itself, the learned judge was asked to decide. Does the Condition, on the evidence and in the context of the contract as a whole, satisfy the "requirement of reasonableness", as defined by section 11(1) and elsewhere in the Act?
Under section 11(5) the onus falls on Hamstead to show that Condition 8 satisfies the condition of reasonableness. For this purpose, having regard to section 11(1), it has to show that the Condition was "a fair and reasonable one to be included, 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". As the learned judge pointed out, all the relevant circumstances were known to both parties at that time. The task which he therefore set himself was to examine all the relevant circumstances and then ask himself whether, on the balance of probabilities, he was satisfied that Condition 8, in so far as it purported to exclude Hamstead's liability for Mr. Hyland's negligence, was a fair and reasonable term. As to these matters, his conclusions as set out in his judgment were as follows:
"What then were the relevant circumstances? Firstly, the second defendants carried on the business of hiring out plant and operators. In contrast the first defendants were steel stockholders, and as such had no occasion to hire plant except on the odd occasions when they had building work to be done at their premises. There had been apparently only three such occasions: one in 1979, one in July 1980 when the drainage trench was dug and the final occasion when the damage was done in August 1980.
Secondly, the hire was to be for a very short period. It was arranged at very short notice. There was no occasion for the plaintiffs to address their mind to all the details of the hiring agreement, nor did they do so. The inclusion of condition 8 arose because it appeared in the second defendants' printed conditions. It was not the product of any discussion or agreement between the parties.
Thirdly, there was little if any opportunity for the plaintiffs to arrange insurance cover for risks arising from the first defendant's negligence. Insofar as the first defendant was to be regarded as the plaintiffs' servant it might have been an easy matter to ensure that the plaintiffs' insurance policies were extended, if necessary, to cover his activities in relation to third party claims. Any businessman customarily insures against such claims. He does not usually insure against damage caused to his own property by his own employees' negligence. Thus to arrange insurance cover for the first defendant would have required time and a special and unusual arrangement with the plaintiffs' insurers.
Fourthly, the plaintiffs played no part in the selection of the first defendant as the operator of the JCB. They had to accept whoever the second defendant sent to drive the machine. Further, although they undoubtedly would have had to, and would have had the right to, tell the JCB operator what job he was required to do, from their previous experience they knew they would be unable in any way to control the way in which the first defendant did the job that he was given. They would not have had the knowledge to exercise such control. All the expertise lay with the first defendant. I do not think condition 8 could possibly be construed as giving control of the manner of operation of the JCB to the plaintiffs. Indeed in the event the first defendant made it perfectly plain to Mr. Pritchard, the plaintiffs' builder, that he would brook no interference in the way he operated his machine.
Those being the surrounding circumstances, was it fair and reasonable that the hire contract should include a condition which relieved the second defendants of all responsibility for damage caused, not to the property of a third party but to the plaintiff's own property, by the negligence of the second defendants' own operators? This was for the plaintiffs in a very real sense a 'take it or leave it' situation. They needed a JCB for a simple job at short notice. In dealing with the second defendants they had the choice of taking a JCB operator under a contract containing some 43 written conditions or not taking the JCB at all. The question for me is not a general question whether any contract of hire of the JCB could fairly and reasonably exclude such liability, but a much more limited question as to whether this contract of hire entered into in these circumstances fairly and reasonably included such an exemption.
I have come to the conclusion that the second defendants have failed to satisfy me that condition 8 was in this respect a fair and reasonable term." Before reverting to the conclusions and reasoning of the learned judge, it is unfortunately necessary to deviate from the arguments as they were presented to us. Schedule 2 ^ the Act contains what are called'"Guidelines' for Application of Reasonableness Test". These Guidelines state:
"The matters to which regard is to be had in particular for the purposes of sections 6(3), 7(3) and (4), 20 and 21 are any of the following which appear to be relevant -
(a) the strength of the bargaining positions of the parties relative to each other, taking into account (amongst other things) alternative means by which the customer's requirements could have been met;
(b) whether the customer received an inducement to agree to the term, or in accepting it had an opportunity of entering into a similar contract with other persons, but without having to accept a similar term;
(c) whether the customer knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties);
(d) where the term excludes or restricts any relevant liability if some condition is not complied with, whether it was reasonable at the time of the contract to expect that compliance with that condition would be practicable;
(e) whether the goods were manufactured, processed or adapted to the special order of the customer."
We were told that the Guidelines in Schedule 2 of the Act were not applicable in this case. It would seem, on a study of the provisions of the Act to which we were not referred in argument, that this may have been wrong. The contract here was a contract of hire. Normally in such a contract, and, it would seem consistently with the provisions of the General Conditions in this case, the hirer takes possession of the article hired. Therefore, it appears to us that subsection (3) of section 7 (which we do not think it necessary to quote) would apply and thus render Schedule 2 applicable. On this basis the Guidelines would fall to be considered. Fortunately, however, in view of the way in which the case has been argued on both sides, no difficulty arises on this account. Guideline (d) is, on any footing, irrelevant. Guidelines (a), (b) and (c) were argued as factors properly to be taken into account, even though not because of the Guidelines themselves. Guideline (e) would no doubt have been mentioned in argument if counsel on either side had thought that it affected the decision as to "fair and reasonable" in this case.
In approaching the learned judge's reasons and conclusions on this issue, four points have, in our judgment, to be borne in mind.
First, as the learned judge himself clearly appreciated the question for the court is not a general question whether or not Condition 8 is valid or invalid in the case of any and every contract of hire entered into between a hirer and a plant owner who uses the relevant C.P.A. Conditions. The question was and is whether the exclusion of Hamstead's liability for negligence satisfied the requirement of reasonableness imposed by the Act, in relation to this particular contract.
Secondly, we have to bear in mind that the relevant circumstances, which were or should have been known to or contemplated by the parties, are those which existed when the contract was made. Section 11(1) is specific on that point. Hence, evidence as to what happened during the performance of the contract must, at best, be treated with great caution. As we have indicated, such evidence was adduced at the trial, apparently without objection. At best, it could probably be used to show, by evidence of conduct and absence of objection to that conduct, what the attitude of the parties would have been in that respect, what they would have contemplated, at the time when they made the contract.
Thirdly, the burden of proof falling upon the owner under section 11(5) of the Act is, in our judgment, of great significance in this case in the light, or rather in the obscurity, of the evidence and the absence of evidence on issues which were, or might have been, relevant on the issue of reasonableness. One particular example is the matter of insurance. The insurance position of all the parties was canvassed to some extent in oral evidence at the trial, but such evidence seems to us to have been singularly imprecise and inconclusive.
Finally, by way of approach to the issue of reasonableness, it is necessary to bear in mind, and strive to comply with the clear and stern injunction issued to appellate courts by Lord Bridge in his speech, concurred in by the other members of their Lordships' House, in Mitchell (George) ...Chesterhall) Ltd. v. Finney Lock Seeds Ltd. (1983) 2 A.C. 803 at pages 815-816:
"But the several provisions of the Unfair Contract Terms Act 1977 which depend on 'the requirement of reasonableness' defined in section 11 by reference to what is 'fair and reasonable', albeit in a different context, are likely to come before the courts with increasing frequency. It may, therefore, be appropriate to consider how an original decision as to what is 'fair and reasonable' made in the application of any of these provisions should be approached by an appellate court. It would not be accurate to describe such a decision as an exercise of discretion. But a decision under any of the provisions referred to will have this in common with the exercise of a discretion, that, in having regard to the various matters to which ... section 11 of the Act of 1977 directs attention, the court must entertain a whole range of considerations, put them in the scales on one side or the other, and decide at the end of the day on which side the balance comes down. There will sometimes be room for a legitimate difference of judicial opinion as to what the answer should be, where it will be impossible to say that one view is demonstrably wrong and the other demonstrably right. It must follow, in my view, that when asked to review such a decision on appeal, the appellate court should treat the original decision with the utmost respect and refrain from interference with it unless satisfied that it proceeded upon some erroneous principle or was plainly and obviously wrong."
In the context of issue (iii), criticism has been made by Hamstead's counsel of some parts of the learned judge's reasoning. It is said that in some respects he misunderstood or mis-recollected the evidence. Some of the evidence was indeed confused and not easy to follow. It is, in some passages, difficult to be confident what was really meant. It may be that the learned judge placed more stress than we would think right on the lack of opportunity of Mr. Phillips to study and understand the Conditions, and in particular Condition 8. But this is the very sort of point to which Lord Bridge referred in saying that there is room for a legitimate difference of judicial opinion.
Against this, there is to be set the fact, as it appeared at the trial, that the General Conditions with their 43 clauses were adopted by and used by all the members of the Trade Association to which Hamstead belonged. (Counsel has told us that there is other material which might alter the picture, but we cannot go beyond the evidence which was in fact before the judge). Thus, we think he was justified in saying that in dealing with Hamstead this was for Phillips in a very real sense a "take it or leave it situation". As he said, they needed a J.C.B. for a simple job at short notice and, in dealing with Hamstead, had the choice of taking a J.C.B. operator under the General Conditions or not taking the J.C.B. at all. Even if Mr. Phillips had understood and had been worried by the effect of Condition 8 before he arranged for the conclusion of the earlier contracts or before he authorised Mr. Pritchard to conclude the contract in August 1980 now in question, it is reasonable to assume, on the evidence as it stood, that he would not have thought that there was much that he could do about it, except to take the Conditions offered. It is fair to say that we were told that various changes had been made, including the alterations to some of the General Conditions since the coming into force of the Act and that the position today might be very different. But counsel for Hamstead necessarily and realistically accepts that we have to deal, as the learned judge had to deal, with the contractual terms as they were and with the facts as to relevant considerations as they were given in evidence at the trial: not as the terms are now or as the relevant facts might have appeared to be if further evidence had been given.
As appears from the passage which we have cited, other matters which influenced the judge in his decision on unreasonableness, and which we think were clearly relevant factors to be weighed in the balance, were that the hirers could play no part in the selection of the operator who was to do the work. Nor did the General Conditions contain any warranty by Hamstead as to his fitness or competence for the job. Furthermore, despite the words in Condition 8 "he shall be under the direction and control of the Hirer", we think it reasonable to infer that the parties, when they made the contract, would have assumed that the operator would be the expert in the management of this machine and that he would not, and could not be expected to, take any instructions from anyone representing the hirers as to the manner in which he would operate the machine to do the 30b, once the extent and nature of the job had been defined to him by the hirers; in short they would tell him what to do but not how to ao it. If such evidence is admissible, which we do not find it necessary to decide, this inference would be strongly supported by the evidence of what actually happened on the site before the accident occurred.
It may be that in several respects this is a very special case on its facts, its evidence and its paucity of evidence. But on these facts and on the available evidence, we are wholly unpersuaded that the learned judge proceeded upon some erroneous principle or was plainly and obviously wrong in his conclusion that Hamstead had not discharged the burden upon them of showing that Condition 8 satisfied the requirement of reasonableness in the context of this particular contract of hire. It is important therefore that our conclusion on the particular facts of this case should not be treated as a binding precedent in other cases where similar clauses fall to be considered but the evidence of the surrounding circumstances may be very different.
Issue (iii) accordingly has to be answered "No" and we dismiss this appeal.
(Order: Appeal dismissed with costs)
