Northern Electric Plc v Econofreight Heavy Transport Ltd

Whether a contractual term is reasonable under the Unfair Contract Terms Act 1977 is primarily a matter for the tribunal deciding the issue. An appellate court should accord that assessment the utmost respect and interfere only where the tribunal applied an erroneous principle or was plainly and obviously wrong. A party should not ordinarily obtain permission to advance on appeal a statutory basis that was not argued at first instance and on which no findings were made.

The claimant’s transformer was damaged while being moved by the defendant as sub-bailee. The defendant relied on a standard term requiring proceedings to be brought within one year. On preliminary issues, Judge Behrens held that the term applied between the parties and was unreasonable and void under section 11(1) of the Unfair Contract Terms Act 1977.

The defendant sought permission to appeal, arguing that the judge had considered the wrong relationship and that section 11(3), rather than section 11(1), applied. It also sought permission to adduce further evidence. The central issues were whether the alternative statutory basis could be raised for the first time on appeal and whether the judge’s assessment of reasonableness was plainly wrong.

1. Permission refused. The defendant was not permitted to argue that section 11(3), rather than section 11(1), governed the term. The case had been conducted below on the common basis that section 11(1) applied. The judge had not been asked to apply section 11(3) and had made no findings on that basis. It would therefore be inappropriate to grant permission so that the point could be considered for the first time on appeal.
2. The assessment of reasonableness under section 11 was a matter for the tribunal determining the issue. The Court of Appeal applied the guidance in George Mitchell Chesterhall Limited v Finney Lock Seeds Ltd [1983] 2 AC 803: appellate interference is justified only where the tribunal proceeded on an erroneous principle or reached a plainly and obviously wrong conclusion. The decision in Overseas Medical v Orient Transport [1999] 2 Ll Rep 273 did not qualify or add a gloss to that principle.
3. The judge’s conclusion that the one-year time-bar was not fair and reasonable was not even arguably based on an erroneous principle or plainly and obviously wrong. The Court therefore declined to undertake its own comparison of the contractual conditions.
4. The application to adduce further evidence was not pursued in practical terms. In any event, the evidence had been available at trial, and no adjournment had been sought to introduce it. The court would not have been disposed to admit it.

Lord Justice Kennedy agreed. Permission to appeal was refused.

• Court of Appeal (Civil Division): Permission to appeal from the preliminary decision of Judge Behrens, sitting as a deputy High Court Judge, was refused.
• Queen’s Bench Division: On preliminary issues, Judge Behrens held that the defendant’s standard conditions applied and that clause 14.3 was unreasonable and void under section 11(1) of the Unfair Contract Terms Act 1977.