What is determined as ‘reasonable’ when interpreting commercial terms and conditions in a contract? A recent judgment from the Commercial Court serves as a warning for those seeking to rely wholly on widely used standard T&Cs.

The Commercial Court, which typically handles complex and high value international business disputes, recently considered an application for summary judgment based on the interpretation of Clause 27B of the British International Freight Association (BIFA) Standard Terms and Conditions. His Honour Judge Worcester refused the application of the Defendant, John Good Logistics Limited (JGL), for summary judgment against Tornado Wire Limited (TWL) who was claiming for breach of contract and negligence.

Background

When the UK left the EU, most steel wired products became subject to a quota regime requiring all imports to be entered onto HMRC’s CHIEF (Customs Handling of Import and Export Freight) system.

TWL hired JGL as its logistics agent, authorising it to be its direct representative and relying on JGL entirely for the processing of its import entries. TWL hoped this structure would minimise its tax liabilities arising from these imports.

TWL claimed JGL had mishandled and incorrectly used the HMRC CHIEF system, leaving TWL with a large tax bill as a result. TWL issued proceedings in May 2023.

JGL responded by saying the parties dealt with each other on JGL’s industry-standard terms. These terms included a provision barring any claims issued against it nine months from ‘the date of the event or occurrence [giving] rise to a cause of action’. JGL’s position was that the final import entry was entered onto the HMRC CHIEF system in June 2021, so the time limit for issuing a claim against it expired in March 2022.

However, TWL claimed it was unaware it was subject to any tax liabilities until the tax bill was received from HMRC in August 2022. As such the time limit was nine months from that notification and TWL had therefore issued its claim within that period.

JGL made an application for summary judgment which was dismissed.

Grounds for the dismissal

JGL relied on two Court of Appeal judgments, decided on the same terms (Granville Oil and Chemicals Ltd v Davies Turner & Co Ltd, and Rӧhlig (UK) v Rock Unique Ltd). However, TWL opposed the application on the grounds that the nine month time limit was unreasonable under UCTA and thus unenforceable. The opposition also drew on revenue law to argue there was good reason why the time limit did not begin until August 2022.

The application for summary judgment was dismissed. In his judgment, HHJ Worster concluded:

• The parties did not, on the face of it, appear to have equal bargaining power, nor was there any negotiation of terms and the time limit was, at least to some extent, insufficient to allow TWL to bring the claim.
• There was a reasonable prospect that TWL would be able to establish that the 9-month term was, on the facts, unreasonable.

HHJ Worster emphasised each case must be considered on its own facts and the reasonableness of the terms will be dependent on the circumstances under which they are engaged. It is not sufficient to simply use a decision on reasonableness from a previous case, purely because it is related to the same terms. Drawing on the recent decision in Last Bus v Dawsongroup Bus and Coach Limited, HHJ Worcester stated that ‘there should be a consideration of the question of reasonableness on the particular facts of this case.’

This matter is due to go to trial in 2025.

What is ‘reasonableness’?

This case has sparked an important discussion around the meaning of ‘reasonableness’ under the Unfair Contract Terms Act 1977 (UCTA). It has shown it is not enough for companies to rely on standard terms and conditions, even if they are widely used across the industry. It serves as a warning to any party that is hoping to rely on these terms, that any determination of reasonableness will be based on the unique facts of the case, and standard terms will not exempt this consideration.

The Hamlins Commercial Disputes team seeks to obtain the best outcome possible for every client. If you would like a conversation to find out how we might help you, please get in touch.