England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(NEWCASTLE UPON TYNE DISTRICT REGISTRY)
(MR JUSTICE BEHRENS)

		Royal Courts of Justice Strand London WC2A 2LL Tuesday 20 February 2001

1. LORD JUSTICE KENNEDY: I will ask Lord Justice Dyson to give the first judgment.
2. LORD JUSTICE DYSON: This is an application by the defendant for permission to appeal that part of the decision of Judge Behrens, sitting as a deputy High Court Judge on 11 December 2000, whereby, on the hearing of certain preliminary issues, he decided that clause 14.3 of the defendant's standard conditions of transport was unreasonable and therefore void within the meaning of the Unfair Contract Terms Act 1977.
3. The proceedings arose from an accident that occurred on 14 February 1994 when the defendant, as sub-bailee, was attempting to move a 90-tonne transformer, that belonged to the claimant, from a plinth when it toppled and sustained substantial damage. The bailee was Yorkshire Transformer Services Ltd ("Yorkshire"). It was not a party to the proceedings as it had been dissolved. The defendant's standard conditions were incorporated into the subcontract between itself and Yorkshire. The judge held that these conditions also applied as between the claimant and the defendant.
4. Clause 14.3 was in these terms:

"The Company shall in any event be discharged from all liability whatsoever in respect of the goods unless suit is brought within one year of the delivery date when they should have been delivered."

5. Clause 13 provided for a limit of the amount of damages recoverable in certain circumstances. Section 11 of the Act sets out the test of reasonableness. Subsection (1) concerns contract terms. It provides:

"In relation to a contract term, the requirement of reasonableness .... 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."

6. Subsection (3) provides:

"In relation to a notice (not being a notice having contractual effect), the requirement of reasonableness under this Act is that it should be fair and reasonable to rely reliance on it, having regard to all the circumstances obtaining when the liability arose or (but for the notice) would have arisen."

7. It has been common ground throughout these proceedings that the burden of proving that clause 14.3 was reasonable rested on the defendant, it being the party seeking to rely on it. The standard terms and conditions used in a number of other contracts of carriage were placed before the judge. These are set out in section 6 of the judgment. When dealing with the reasonableness of clause 14.3, the judge noted that it was common ground that the approach which recommended itself to Judge Hallgarten QC in the case of Sonicare v EAFT [1997] 2 Lloyd's LR 48 at 54-55 should be adopted. That is that the relevant relationship to be examined for the purposes of considering reasonableness was that between the defendant and Yorkshire, albeit that it had to be examined on the basis that such relationship bore on the movement of the goods belonging to a third party, the claimant in this case.
8. The judge then went on to consider the submissions of counsel. Points had been made to him on both sides, comparing the conditions that were referred to in section 6 of the judgment with the conditions in the instant case and, in particular, clause 14.3. It was urged on behalf of the claimant that the conditions of the defendant's contract were more onerous than the other conditions. Mr Lamb QC, for the defendant, contended that the conditions in the defendant's contract were more generous.
9. Having rehearsed those submissions, the judge reached his conclusions. He said at page 27 of his judgment:

"I have not found the balancing exercise I have to perform straightforward but in the end largely for the reasons submitted by Mr Morton I am not satisfied that Econofreight has established that clause 14.3 is fair and reasonable. In particularly I am not satisfied it is necessary or even reasonably necessary to protect any legitimate interest of Econofreight. Many of the other Standard Terms do not include such a clause. It reduces the limitation period provided by statute by 5 years; it makes no provision for latent damage or any other form of extension. I can see no real countervailing necessity for such a clause."

10. He then added a tailpiece in these terms:

"I am fortified in this view by considering what the position would have been if Northern Electric had chosen to sue Yorkshire under the terms of the main contract. In that event Yorkshire would be precluded from seeking an indemnity from Econofreight unless Northern Electric brought its proceedings within a year. Furthermore it would be difficult for Yorkshire to protect its position by issuing proceedings within a year. Until Northern Electric makes a claim it has suffered no loss. This state of affairs, which arises because the goods carried by Econofreight belong to a third party, seems to me to be neither fair nor reasonable."

11. Mr Lamb advances two grounds of appeal. He submits, first, that the judge attached too much weight to the relationship between the claimant and the defendant and insufficient weight to the relationship between Yorkshire and the defendant. He also submits that, notwithstanding that the approach adopted by the judge was one which was common ground between the parties, he reserved his position before the judge to argue that the approach adopted by Judge Hallgarten was not correct and that the case should be considered not under section 11(1) but under section 11(3) of the Act.
12. In my judgment, if Mr Lamb had wished to reserve the right to argue that the matter should be dealt with on the basis of section 11(3) he should have made it clear that he was reserving his right so to argue in the Court of Appeal. It is not at all clear that he did in fact do that. But, more importantly, he should not have argued the case on the basis of the common ground to which I have referred, but should have sought to persuade the judge to apply section 11(3).
13. It is possible, and I would put it no higher, that if the judge had applied section 11(3) he wold have reached a different conclusion on the issue of reasonableness. But the fact remains that the judge was not asked to, nor did he, make findings on the common basis of section 11(3). It seems to me that, since the case was conducted on the basis to which I have referred, it would not be right to give permission to appeal in order to permit the Court of Appeal to consider whether section 11(3), rather than section 11(1), is the relevant subsection in a case of sub-bailment.
14. The second ground of appeal amounts to a challenge to the conclusion that the judge reached on the essential question of whether the term was reasonable. In particular, Mr Lamb submits that the conclusion reached by the judge as to the relative onerousness of clause 14.3, as compared with exclusion and limitation of damage clauses in other standard conditions of contract, was wrong.
15. The difficulty facing Mr Lamb is that it has been stated in the plainest terms by the House of Lords in George Mitchell Chesterhall Limited v Finney Lock Seeds Ltd [1983] 2 AC 803 at 815G and following that questions of whether a clause is reasonable are matters for the judgment of the tribunal determining the matter. They are closely analogous to the exercise of judicial discretion. Lord Bridge said, in terms, that 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. He added:

"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."

16. Our attention has been drawn to the decision of this court in Overseas Medical v Orient Transport [1999] 2 Ll Rep 273 and the passage in the judgment of Potter LJ at paragraph 9. I can see nothing in what Potter LJ says which in any way qualifies, or is a gloss on, the passage in Lord Bridge's speech.
17. I am quite satisfied that this is not a case in which it is even arguable that the judge proceeded upon an erroneous principle or reached a conclusion that was plainly and obviously wrong. I do not find it necessary on this application to embark on my own analysis of the various conditions of contract.
18. Those are the two points. Mr Lamb also has an application for permission to adduce further evidence, but, as I understand it, he realistically does not seek to pursue that if, as I have held, I reach the conclusion that he has not satisfied the relevant criteria for grant of permission to appeal on either of his two principal grounds of appeal.
19. For completeness I would say that I would not have been disposed to admit this additional evidence in any event. If Mr Lamb had wanted this additional evidence at the trial it was available; if necessary he could have sought an adjournment in order to adduce it. He did not seek an adjournment to that end.
20. For all these reasons I would refuse this application.
21. LORD JUSTICE KENNEDY: I agree.
Permission to appeal refused.