Last Bus Limited v Dawsongroup Bus and Coach Limited & Anor

The Court of Appeal allowed Last Bus’s appeal against summary dismissal of its claim for breach of hire purchase agreements. The appeal concerned whether clause 5(b) in standard form hire‑purchase terms validly excluded the statutory implied term that goods would be of satisfactory quality under section 10(2) of the Supply of Goods (Implied Terms) Act 1973, and whether Dawson had proved that the exclusion satisfied the requirement of reasonableness under section 6(1A)(b) and section 11 of the Unfair Contract Terms Act 1977 and Schedule 2. The judge below had held on summary judgment that clause 5(b) was reasonable, but the Court of Appeal concluded he adopted the wrong starting point by treating the parties as of equal bargaining power in relation to the standard term, failed to give proper weight to the prima facie unreasonableness of a blanket exclusion (following Purnell, Sovereign and Danka), and overlooked important factual matters requiring investigation at trial (notably the tripartite contractual matrix, insurance and any back‑to‑back indemnities). The Court remitted the question to trial rather than expressing any view on the ultimate reasonableness of the clause.

Background and parties: Last Bus (a substantial Irish coach operator) entered five hire‑purchase agreements with Dawson for 30 Mercedes Tourismo coaches, each incorporating Dawson’s standard terms including clause 5(b), which sought to exclude all conditions and warranties including the statutory implied term of satisfactory quality under section 10(2) of the Supply of Goods (Implied Terms) Act 1973. Last Bus alleged that several coaches were defective, causing fires and requiring costly maintenance, and claimed damages in excess of €10m. EvoBus (the manufacturer/supplier) was the second defendant and denied liability.

Procedural posture: Dawson applied for summary judgment. At first instance Andrew Baker J concluded clause 5(b) excluded the statutory implied term and that Dawson had shown the clause satisfied UCTA’s reasonableness test; he dismissed Last Bus’s claim against Dawson ([2022] EWHC 2971 (Comm)). Permission to appeal to the Court of Appeal was granted (Males LJ).

Relief sought and issues framed: Last Bus sought damages for breach of the implied term that the vehicles were of satisfactory quality. The principal issues on appeal were (i) whether clause 5(b) did in truth exclude the implied statutory term, (ii) whether Dawson had discharged the burden of proving that the exclusion satisfied the UCTA reasonableness test (section 6(1A)(b) and section 11 and Schedule 2), and (iii) whether the judge was right to determine reasonableness on summary judgment rather than at trial, in particular in the context of the tripartite relationships with the supplier and the absence of evidence about any back‑to‑back rights or insurance.

Court’s reasoning: The Court accepted that clause 5(b) purported to exclude the implied term (no challenge on appeal). On reasonableness the Court criticised the judge’s approach: he had treated the parties as of equal bargaining power in relation to the clause and relied upon a line of Court of Appeal authority emphasising respect for negotiated commercial bargains. The Court held the correct starting point was that exclusion clauses in standard terms of hire purchase which would leave the hirer without any remedy are prima facie unreasonable (following Purnell, Sovereign and Danka). The Court identified material factual issues (whether Dawson had back‑to‑back contractual rights against EvoBus, the insurance positions of the parties and the tripartite context) that required full investigation. Given those materially contested and potentially decisive matters, the question of UCTA reasonableness was not suitable for summary disposal and should proceed to trial. The Court therefore allowed the appeal and remitted the matter for trial, expressing no final view on the clause’s ultimate reasonableness.

Wider comment: the Court emphasised the statutory regime under UCTA and the significance of Schedule 2 factors, and cautioned against treating commercial bargaining strength as dispositive where standard terms have not been negotiated and may be take‑it‑or‑leave‑it.

The appeal was allowed. The Court held that the judge below adopted the wrong starting point by treating the parties as of equal bargaining strength in relation to Dawson’s standard term, failed to accord proper weight to the prima facie unreasonableness of a blanket exclusion of statutory implied terms, and overlooked material factual matters (the tripartite contractual matrix, insurance and any back‑to‑back rights) that required trial determination. Therefore summary judgment dismissing Last Bus’s claim against Dawson was unsafe and the matter should proceed to trial; the Court expressed no final view on the ultimate reasonableness of clause 5(b).

First instance: High Court of Justice, Business and Property Courts (Commercial Court, KBD), Mr Justice Andrew Baker, [2022] EWHC 2971 (Comm). Permission to appeal granted by Males LJ (3 February 2023). Appeal to the Court of Appeal (Civil Division): [2023] EWCA Civ 1297 (this judgment).