Scheps v Fine Art Logistic Ltd

Standard terms are not incorporated merely because a trade commonly uses them or because a customer probably expected terms limiting liability. Incorporation depends on what the parties objectively communicated and whether the supplier was entitled to conclude that the customer contracted on those terms.

A contractual liability limit for fine-art storage may be fair and reasonable where it is clearly brought to the customer’s attention, particularly because the owner can insure the goods. A conversion claim is ordinarily valued at the date of conversion, with consequential loss allowed where the subsequent loss was caused by the conversion and was reasonably foreseeable.

The claimant entrusted a sculpture to the defendant for storage and transport. The sculpture disappeared while in the defendant’s custody. The defendant relied on standard terms limiting liability by reference to volume.

The court determined whether those terms formed part of the contract, whether the limitation was fair and reasonable under the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999, whether delivery up could be ordered, and how damages for conversion should be assessed.

1. The claim succeeded. The defendant’s standard terms were not incorporated. Although the claimant probably knew that transport and storage businesses used terms which might limit liability, the defendant had never supplied or referred to its terms. Objectively, there was no basis for concluding that the claimant intended to contract on them. British Crane Hire v Ipswich Plant Hire and Lacey’s Footwear (Wholesale) Ltd v Bowler International Freight Ltd were materially distinguishable.

2. Had the terms been incorporated, the liability limit would not have been fair and reasonable in the circumstances. A fixed limit based on weight or volume can be reasonable in fine-art storage because values vary greatly and the owner can insure the goods. The limit must, however, be clearly brought to the customer’s attention. That had not occurred.

3. The sculpture had been taken into the defendant’s custody, placing the evidential burden on the defendant to show that it was no longer in its custody. On the balance of probabilities, it had been accidentally placed in a skip and destroyed. Delivery up was therefore impossible. The destruction constituted wrongful interference with goods, in particular conversion.

4. Following Kuwait Airways Corpn v Iraqi Airways Co (Nos 4 and 5), the primary measure was the market value at the date of conversion. The claimant could also recover the subsequent rise in value as consequential loss, since it was caused by the conversion and was not too remote. The claim for the increase during trial delay caused by a change of solicitors was excluded.

5. Judgment was entered for £351,375, comprising £132,000 for the sculpture’s value in September 2004 and £219,375 consequential damages. Interest and costs were left for agreement or further submissions.

First-instance judgment. No prior appellate decision is stated in the judgment.