England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION (COMMERCIAL COURT)
(MR JUSTICE SIMON)

		Royal Courts of Justice Strand, London, WC2A 2LL
		9 June 2010

Lord Justice Toulson:

1. This appeal raises a short point as to whether the words "terms and conditions available upon request" at the foot of a form of work order were reasonably capable of being understood as intended to incorporate the contractor's standard conditions of trading. Simon J held that they were not and on that basis struck out certain paragraphs of the defence of the appellant, CSE, which relied on the relevant standard terms. He gave permission to appeal because he considered that it was a point of construction on which views might differ and that therefore there was a reasonable prospect of a successful appeal.
2. The facts were summarised by the judge as follows:

"1. … The claim arises from an accident to a Cessna Citation aircraft owned by Rooney Air Limited, the second claimant. That is a company owned by Paul Anthony Rooney, the first claimant. At the time of the accident, the aircraft was being operated by EBJ Operations Limited, under a management agreement between EBJ and Mr Rooney.

2. The defendant, CSE, is approved by the CAA to carry out repair and maintenance work on this type of aircraft. The company had for a number of years before the accident performed maintenance works on various aircraft operated by EBJ. CSE and EBJ had entered into two basic agreements in connection with the work; first a maintenance agreement, the latest version of which was dated 4th February 2008; secondly a continuing airworthiness managing support contract, or CAMSC, between EBJ, CSE and a company named Vector, also dated 4th February 2008. At all times, it appears to have been CSE's practice to require a work order to be signed by, or on behalf of, EBJ before work was commenced on an aircraft. There are over 50 signed Work Orders dating from between August 2008 and June 2008 signed off by EBJ or its agents. 40 of these included at the foot of the page, just below the signature box, the statement which is central to this dispute, "Terms and conditions available upon request".

3. On about 20th June 2008, the aircraft was delivered to CSE, for maintenance work and before any maintenance work was carried out, a work order, identified by its number 06425, describing the work in question was signed by Mr McLaren of Vector on behalf of EBJ, and then returned to CSE. The work described in the work order was performed negligently in that CSE's engineers failed to secure the engine cowling fasteners on completion of the work. As a result, during a flight between Bournemouth and Biggin Hill on 29th June, approximately 75% of the left engine upper cowling became detached, causing damage to the aircraft. Subsequently, CSE repaired the aircraft without charge, and it was returned to service on 30 July.

4. On 9th October 2008, EBJ and Mr Rooney executed a Deed of Assignment by which EBJ purported to assign to Mr Rooney any causes of action that it had against CSE, in exchange for a consideration. Mr Rooney and Rooney Air Limited, the claimants, now claim damages totaling £347,000-odd, under various heads, both in their own right and, in the case of Mr Rooney, as EBJ's assignee."

3. In its defence, CSE pleaded that it undertook the work on its standard conditions of trading and it relied on a number of those conditions. The claimants applied for summary judgment under CPR 24.2 in relation to those parts of the defence on the ground that CSE had no real prospect of successfully defending the claim on such grounds, and the judge ordered that the paragraphs be struck out.
4. The claimants advanced various arguments in support of their application. Their main arguments were that the work order was not a contractual document and that in any event its wording was insufficient to incorporate CSE's standard conditions of trading. The judge accepted that the work order was arguably a contractual document, but he concluded that CSE had no real prospect of establishing that its standard conditions of trading were incorporated into the contract. CSE appeals against that conclusion.
5. For the present purposes, that is the only issue, because the claimants have not challenged the judge's other conclusions. In particular, we are not concerned at this stage with the details of CSE's standard conditions or questions regarding their reasonableness.
6. The judge's reasoning was as follows:

"25, … Here, there are no words of incorporation at all, simply a reference to 'Terms and conditions available on request'. Those words are, on the face of it, a statement of fact; they neither identify the conditions, nor do they purport to incorporate them. They do not, for example, state whether the defendant contracted on such terms, or that work was done subject to conditions. The words are at least capable of being read as referring to the financial terms and conditions which may apply to work done, for example discount for earlier payment which might be available on request.

26. The ultimate question is whether reasonable people would understand the words used as referring to contractual terms upon which the defendant agreed to do the work. In my view, the words are insufficient to convey to a reader that the defendant's 'standard conditions' which were not described as 'Terms and conditions' were intended to be mutually binding terms of the contract. The words conveyed no more than that there were terms and conditions which were available, if asked for. If that is right, it is immaterial how often the works orders were signed."

7. There were, therefore, two features which caused the judge to conclude that CSE had no real prospect of showing that their standard conditions of trading formed part of the contract under which they did the work. One was that the work order did not use express language of incorporation such as "this order is subject to terms and conditions". It referred to terms and conditions, but it did not state that they were to be terms of the contract. The second was that it did not refer explicitly to CSE's standard terms of trading, but referred merely to terms and conditions without further identification.
8. Mr Shah QC submitted that the judge was wrong to regard these linguistic points as fatal to CSE's case when viewed in the contractual and factual setting. For this he relied on a witness statement made by Ms Kathryn Ward of CSE Solicitors on the basis of information provided by CSE's managing director Mr Phillip Lammiman. EBJ, as operator of the aircraft, was required by law to hold an air operator's certificate under Article 6 of the Air Navigation Order 2005. In issuing such certificates the CAA has to comply with European aviation safety legislation, including Regulation 2042/2003. Article 3 of that regulation and Annexe 1 headed "Part M" provide among other things that:

"In the case of commercial air transport, when the operator is not appropriately approved to Part-145, the operator shall establish a written maintenance contract between the operator and a Part-145 approved organisation or another operator, detailing the functions specified under M.A.301-2, M.A.301- 3, M.A.301-5 and M.A.301-6, ensuring that all maintenance is ultimately carried out by a Part-145 approved maintenance organization…"

9. EBJ was not itself approved to part 145 and therefore in order to hold an air operator's certificate it needed to have a maintenance support contract with an approved maintenance organisation. This it had in the form of its maintenance support contract with CSE. The underlying purpose was set out in paragraph 1 of the contract:

"The operator not being approved in accordance with PART 145 for base and line maintenance on the aircraft type(s) specified in paragraph 2.1, has entered into agreement with the Contractor [CSE]. The contractor is a PART 145 approved/accepted maintenance organisation with the capability to maintain the aircraft type listed in para 2 below. The terms and conditions of the agreement are structured to ensure compliance with Part M and shall be as set forth in the schedule below. …"

10. The contract was an umbrella arrangement under which the necessary maintenance work would be done and so fulfilled EBJ's regulatory obligations, but it was silent as to commercial terms. The contract also anticipated that specific agreements would be made when individual items of work were required to be done. Thus, it provided:

"2.8.2 Prior to input for Base Maintenance the Operators Subcontractor 1 [a reference to Vector) shall ensure a work-scope that details all the maintenance requirements is produced. This work- scope shall be reviewed by the Contractor prior to work commencing and will only be amended by mutual consent.

2.8.3 For Line maintenance work the work required shall be agreed between the Operator and Contractor prior to commencement as detailed on a specific Contractor's work order. When particular work was required to be done details would be set out in a work order which CSE required to be signed and returned to it before it began the work.

11. The work order identified the name of the customer, the aircraft, the place where the work was to be carried out and the items of work to be done. In place of a priced quotation were the letters T&M, standing for "time and materials". It was a short document. At its foot were words in large capital letters stating that no work would commence until the order was signed and returned, below which appeared in smaller but legible capital letters "terms and conditions available upon request". CSE's standard conditions of trading contained a raft of terms dealing with matters including CSE's price lists, payment, delivery, passing of title, warranties, limitation of damages, force majeure, governing law and jurisdiction.
12. Mr Shah argued that against that background a company signing a pro forma work order would reasonably understand CSE to be drawing attention to the fact that they had standard terms and conditions for carrying out work, their standard nature being apparent from the fact they were referred to in their standard form of works order, and that a copy would be available on request. The absence of the use of the word "standard" was not significant, he submitted, when the evidence was that they only ever had one set of trading terms.
13. Mr Leabeater submitted that the judge was right for the reasons which he gave. The words did not identify the terms and conditions or say that they were to apply to the work. The reference to "terms and conditions being available" did not mean that they were incorporated. He accepted that the reference to terms and conditions being available implied that they were in existence in the sense that somebody had formulated them, but it meant no more than that. The expression was consistent with CSE simply being willing to agree to other terms and conditions, for example by agreeing to extend credit. On this construction the word "available" meant, in effect, available for inclusion at the customer's option rather than simply available to read it. Mr Leabeater has struggled to find a third possible meaning of "terms and conditions available", other than the meaning advanced by CSE, ie that there were terms of the contract that were available for inspection, or alternatively there were terms available for incorporation at the customer's request.
14. We were referred to a number of authorities on the incorporation of printed terms, but it is unnecessary to cite them. The case does not raise any new or difficult principle of law. We are concerned with the meaning of the words "terms and conditions available upon request". The principle of construction of contractual documents are well established. Lord Hoffmann stated the fundamental principle in Investors Compensation Scheme Limited v West Bromwich Building Society [1998] 1 WLR 896 at 916 as follows:

"Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would have been available to the parties in the situation in which they were at the time of the contract."

15. The judge rightly said that the ultimate question was whether reasonable people, ie in the position of the parties, would understand the words used as referring to contractual terms upon which CSE agreed to do the work.
16. In the factual context I disagree with the judge's conclusion. He concluded that the words conveyed no more than that terms and conditions were available in the sense that there were terms which might be included at the customer's request. I can see that grammatically the words could be construed that way, but it is not a construction which I would expect to occur to a businessman in the position of the parties. The work order was intended to be sent to the customer for signature as a contractually binding order rather than a form of pre-contractual negotiation. It would also be commercially most odd to have a contract for the performance of services where, instead of it containing any detailed commercial terms, eg as to payment, the contractor devised such terms but left them for inclusion only at the customer's request.
17. Since this is not an appeal from a trial of a preliminary issue but an appeal from an order striking out part of the defence, the issue is only whether CSE's construction is reasonably arguable. In my judgment it is the more likely construction on the present material, although there may be evidence of a more detailed nature about the underlying contractual framework and contractual background.
18. I would allow the appeal.

Mr Justice Hedley:

19. I have taken the liberty of adding a few words of my own in deference to the learned judge, whose judgment when I first read it seemed redolent with good sense and whose conclusion I found attractive. I think it right briefly to explain why I find that I cannot now support that conclusion.
20. It is common ground that in paragraph 26 of his judgment the judge posed to himself the correct question namely:

"The ultimate question is whether a reasonable person would understand the words used as referring to contractual terms upon which the defendant agreed to do the work."

And then he gave his answer in the same paragraph:

"In my view, the words are insufficient to convey to a reader that the defendant's 'standard conditions' which were not described as 'Terms and conditions' were intended to be mutually binding terms of the contract."

21. The work order was a contractual document which took its place within the contractual framework of an aircraft maintenance agreement. The prevailing regulatory regime prescribed the technical content of the contracts, but left the parties free to negotiate such commercial terms as they wished. The work order, a signed document, was that which activated work being done under the contract. The document bears the words "Terms and conditions available on request". Given the nature of this contract and an expectation there would be commercial terms, it seems to me that these words must bear some meaning.
22. I no longer think it is enough simply to say that they were insufficient to amount to incorporation. Once, then, the quest begins for meaning I find myself unable to conclude that they do not reasonably arguably bear the construction contended for by the appellants. Indeed, I share my Lord's view that, on the present material, it is the more likely construction. It is in those circumstances that I agree that this appeal should be allowed.

Lady Justice Arden:

23. I also consider that this appeal should be allowed. I agree with the judgment of Toulson LJ, and I also agree with the point just made by Hedley J.
24. As I read the judgment of the judge, the judge jumped to the conclusion in paragraph 25 of his judgment that because there were no express of words of incorporation in the relevant words, "Terms and conditions available on request", there could be no incorporation on those words by their interpretation.
25. I further agree with Toulson LJ, for the reasons that he gives, that the words can reasonably bear the interpretation that terms and conditions apply and that those terms and conditions are indeed those terms which CSE used and which indeed were available for inspection. That process of interpretation has logically to be carried out without reference to the principles of sufficiency of notice on which Mr Leabeater relied and which do not, in my judgment, apply if the terms and conditions are in fact incorporated by the provisions of the parties' contract on its true interpretation. If effectively incorporated by the provisions of the contract to which the normal rules of interpretation apply, the question of sufficiency of notice simply does not arise.
26. I also agree with both my Lords that, for the reasons given by Toulson LJ, on the information before the court that is the most likely interpretation.

Order: Appeal allowed