Allen Fabrications Ltd v ASD Ltd (t/a ASD Metal Services and/or Klockner & Co Multi Metal Distribution)

Factual and Procedural Background

The case involves preliminary issues arising from litigation between Plaintiff and Defendant, two parties among several in a larger dispute with a main trial scheduled for November 2012. The dispute concerns the design and construction of a two-storey workshop ("the Workshop") and an adjacent rigid steel platform at first floor level ("the Platform") commissioned by Company A in 2004 for boat repairs and maintenance. The Platform was designed to allow boats to be moved on a trolley into the Workshop, with steel grating fixed by clips forming the Platform's surface.

Company A subcontracted the Platform supply and construction to Sub-contractor B, who further subcontracted the supply of the Platform's components, including steel grating and fixings, to Plaintiff. Plaintiff in turn subcontracted the supply of the grating and clips to Defendant. The Workshop and Platform were erected and used by Company A.

On 18 September 2006, an employee of Company A fell approximately 3.4 meters through a section of the Platform where the grating gave way, sustaining severe head injuries. The employee sued Company A, resulting in judgment against Company A with damages agreed around £7 million.

Company A then brought claims against six parties including Sub-contractor B and Plaintiff, alleging negligence and breaches related to the fixing of the grating and compliance with British Standard BS 4592:1995. Sub-contractor B claimed damages and/or contribution from Plaintiff.

Plaintiff's claim against Defendant arises from their contract ("the Agreement") dated 28 January 2005, under which Defendant supplied grating and fixings. Plaintiff alleges Defendant breached implied terms of satisfactory quality, fitness for purpose, and conformity with description, and owed a duty of care to supply sufficient fixings in accordance with BS 4592. Defendant denies these claims and asserts exclusion and limitation clauses contained in its standard terms ("the Terms") apply.

The court was asked to determine four preliminary issues: the date of the Agreement's formation (now agreed), whether the Terms were incorporated into the Agreement, the effect of clauses 8.6 and 8.8 of the Terms on Plaintiff's claim, and whether those clauses are reasonable under the Unfair Contract Terms Act 1977 ("UCTA").

Legal Issues Presented

1. When was the Agreement between Plaintiff and Defendant made?
2. Were the Terms incorporated into the Agreement?
3. If incorporated, what is the effect of clauses 8.6 and 8.8, as properly construed, upon Plaintiff's claim?
4. Are clauses 8.6 and/or 8.8 reasonable for the purposes of the Unfair Contract Terms Act 1977?

Arguments of the Parties

Plaintiff's Arguments

• The Agreement included implied terms that the grating and fixings would be of satisfactory quality and fit for purpose.
• Defendant was to supply sufficient fixings to comply with BS 4592 and conform to descriptions on supplied drawings.
• Defendant owed a duty of care to supply the correct number of fixings or advise Plaintiff if more were needed; failure to do so constituted negligence.
• The limitation clauses in Defendant's Terms do not exclude Plaintiff's claims for breach of warranty or negligence.
• Defendant's exclusion clauses should be narrowly construed and do not apply to the claims made.
• Defendant's Terms were not expressly incorporated and, if incorporated by course of dealing, the "onerous" clauses were not sufficiently brought to Plaintiff's attention (the "Interfoto Point").
• Clauses 8.6 and 8.8 are unreasonable under UCTA.

Defendant's Arguments

• The Agreement was formed on 28 January 2005 by Plaintiff's acceptance of Defendant's quotation.
• The Terms, including exclusion and limitation clauses, were incorporated either expressly by Plaintiff's credit facility application in 2002 or by a course of dealing involving over 250 transactions.
• Clauses 8.6 and 8.8 limit Defendant's liability to the price of the goods or refund, except for death or personal injury and damage to property up to £1 million.
• The exclusion clauses apply to Plaintiff's claims, including negligence and breach of implied terms.
• Clauses 8.6 and 8.8 are reasonable under UCTA given the commercial context, relative bargaining positions, Plaintiff's knowledge of such terms, and the nature of the goods.
• Defendant denies the contractual or tortious duties alleged by Plaintiff and relies on the Terms to exclude or limit liability.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Interfoto Picture Library v Stiletto Visual [1989] QB 433	Requirement that onerous or unusual terms must be fairly and reasonably brought to the other party's attention to be incorporated.	Applied to assess whether Defendant's onerous exclusion clauses were incorporated by course of dealing; court found Plaintiff had sufficient knowledge and the terms were not unusual in the industry, so incorporation was effective.
Thornton v Shoe Lane Parking [1971] 2 QB 164	Onerous clauses require special notice to be incorporated.	Referenced to explain the legal principle governing incorporation of onerous terms; court considered this in assessing incorporation of Defendant's terms.
Amiri v BAE [2003] EWCA Civ 1447	Consideration of notice required for onerous clauses and the character of the parties.	Endorsed the broad approach to assessing notice and fairness in incorporation of terms; court applied this in context of commercial parties with extensive dealings.
AXA Sun Life v Campbell Martin [2011] Lloyds Rep 1	Assessment of bargaining positions and commercial context in reasonableness under UCTA.	Used to support the view that both parties were substantial commercial entities, relevant to the reasonableness analysis.
Balmoral v Borealis [2006] EWHC 1900 (Comm)	Importance of insurance and relative positions in assessing reasonableness of exclusion clauses under UCTA.	Cited to show that Plaintiff had appropriate insurance, a factor supporting reasonableness of the clauses.
Denholm Fishselling v Anderson [1991] SLT 24	Buyer’s choice and availability of alternative suppliers affect reasonableness of terms.	Applied to conclude that Plaintiff had alternatives and was not compelled to accept Defendant’s terms, supporting reasonableness.
Overseas Medical v Orient Transport [1999] 2 Lloyds Rep 273	Real consent to terms and reasonableness of exclusion clauses.	Referenced to support the finding of Plaintiff’s real consent to Defendant’s terms and clauses.
Gill v Mayer [1992] 1 QB 600	Buyer’s knowledge or constructive knowledge of contract terms.	Used to underpin the assessment that Plaintiff knew or ought to have known of the exclusion clauses.
Messer v Britvic [2002] EWCA Civ 548	Reasonableness of exclusion clauses in supply contracts, especially for goods for public consumption.	Distinguished on facts; court found it did not support Plaintiff’s arguments given different commercial context and nature of goods.
Messer v Thomas Hardy [2002] EWCA Civ 548	Assessment of blanket exemption clauses under UCTA.	Considered but found not to support Plaintiff’s case due to differing factual context.
Mitchell v Finney Lock [1983] 2 AC 802	Industry practice regarding non-reliance on limitation clauses relevant to reasonableness.	Considered but found industry evidence insufficient to support non-reliance here; court found Defendant discharged burden of proof on reasonableness.

Court's Reasoning and Analysis

The court began by establishing that the Agreement was formed on 28 January 2005 through Plaintiff's acceptance of Defendant's quotation. It found that Defendant's Terms were incorporated into the contract, primarily by express agreement through Plaintiff's credit facility application in 2002, which likely included acceptance of the Terms, and alternatively by a course of dealing evidenced by over 250 prior transactions. The court rejected Plaintiff's argument that the onerous exclusion clauses were not incorporated due to lack of notice (the "Interfoto Point"), reasoning that the clauses were not unusual in the industry and Plaintiff was aware that such terms commonly contained limitation and exclusion provisions.

On construction, the court interpreted clauses 8.6 and 8.8 as broadly limiting Defendant's liability to the price of the goods or refund, except for liability for death or personal injury and damage to property up to £1 million. It rejected Plaintiff's narrower interpretation and held that the clauses applied to the claims made, including negligence and breach of implied terms.

Regarding the reasonableness of these clauses under UCTA, the court considered the relative bargaining positions, the commercial nature of the parties, Plaintiff's actual and constructive knowledge of such terms, and the nature of the goods supplied. It found that both parties were substantial commercial entities, Plaintiff was insured against such risks, and that the prevalence of similar clauses in the industry and Plaintiff's own terms supported the reasonableness of Defendant's clauses.

The court distinguished authorities cited by Plaintiff involving goods for public consumption and found the industry evidence of non-reliance on such clauses insufficiently persuasive. It concluded that Defendant discharged the burden of proving reasonableness of clauses 8.6 and 8.8.

Holding and Implications

The court ruled in favour of Defendant on the three live issues:

• The Terms were incorporated into the Agreement by express acceptance and/or course of dealing.
• Clauses 8.6 and 8.8 limit Defendant's liability to the price of the goods or refund, excluding Plaintiff's broader claims.
• Clauses 8.6 and 8.8 are reasonable under the Unfair Contract Terms Act 1977.

The direct effect is that Plaintiff's claims against Defendant are limited to the price paid for the goods, subject to exceptions for death or personal injury and property damage up to £1 million. No new legal precedent was established; the decision applies established principles of incorporation, contract interpretation, and UCTA reasonableness in the commercial context.