Phillips Products Ltd v Hyland (Note)

A contractual transfer of responsibility for an operator’s negligence can amount to an exclusion or restriction of the plant owner’s liability under section 2(2) of the Unfair Contract Terms Act 1977. The court must examine the substance and effect of the term, rather than its label.

Reasonableness is assessed by reference to the circumstances known or contemplated when the contract was made. The party relying on the term bears the burden of proof. An appellate court should respect the trial judge’s evaluative decision and interfere only for an erroneous principle or where the decision was plainly and obviously wrong.

Phillips Products Ltd hired a J.C.B. excavator and operator from Hamstead Plant Hire Co. Ltd under standard C.P.A. conditions. The operator, T. Hyland, negligently damaged Phillips’s premises. Hamstead accepted that it would have been vicariously liable at common law, but relied on Condition 8, which made the hirer responsible for claims arising from the operator’s work.

The High Court entered judgment for Phillips against both defendants. The appeal concerned whether Condition 8 was ineffective under the Unfair Contract Terms Act 1977. The questions were whether Hamstead’s liability involved statutory negligence, whether Condition 8 excluded or restricted that liability, and whether the term satisfied the statutory requirement of reasonableness.

1. Appeal dismissed. The judgment for Phillips was affirmed, with costs.
2. Hamstead’s admitted vicarious liability constituted “negligence” within section 1(1)(b) of the Unfair Contract Terms Act 1977. When deciding whether there was a breach of the relevant common-law duty, the court must leave out of account the contractual term relied upon as defeating the claim. Section 1(4) also makes it immaterial whether liability arises vicariously.
3. Condition 8 purported to exclude or restrict Hamstead’s liability within section 2(2). Although expressed as an allocation or transfer of responsibility to the hirer, its substance was to negative a liability which would otherwise rest on the plant owner. Section 13(1) reinforced that conclusion by extending the Act to terms excluding or restricting the relevant duty.
4. The requirement of reasonableness was particular to the contract and the circumstances existing when it was made. Relevant matters included the parties’ relative bargaining positions, the standard-form and take-it-or-leave-it nature of the terms, the short notice of the hire, the hirer’s inability to select or control the operator, the allocation of expertise, and the uncertain insurance position. The burden under section 11(5) remained on Hamstead.
5. The court noted that Schedule 2 guidelines might apply through section 7(3), but no difficulty arose because the relevant matters had been considered in any event. Evidence of events after contracting had to be treated with caution.
6. Applying the appellate approach stated in Mitchell (George) (Chesterhall) Ltd v Finney Lock Seeds Ltd, the trial judge’s conclusion was entitled to the utmost respect. He had not applied an erroneous principle and was not plainly or obviously wrong. On the evidence, Hamstead had failed to prove that Condition 8 was fair and reasonable in this particular contract.

• Court of Appeal: Appeal by Hamstead Plant Hire Co. Ltd dismissed with costs.
• High Court, Queen’s Bench Division: Mr Justice Kenneth Jones ordered both defendants to pay Phillips Products Ltd £3,043.50 in damages and costs.