Tornado Wire Limited v John Good Logistics Limited

A contractual time bar may operate as a substantive discharge of liability, rather than merely as a procedural limitation period. Its construction depends on the objective meaning of the contract read as a whole. Where a term is contained in written standard business terms, its reasonableness under the Unfair Contract Terms Act 1977 must be assessed on the particular facts, with the burden on the party relying on the term. Industry-wide use and commercial purpose do not establish reasonableness in every case. A short time bar may be unreasonable where the claimant could not reasonably discover the breach or loss within the period and the term may remove any effective remedy for failure to perform the central purpose of the contract.

The claimant appointed the defendant as its customs agent to make import declarations intended to secure quota treatment for steel wire imports. The claimant alleged that the defendant failed to use the correct information and codes, causing an HMRC liability of £953,616.29.

The defendant applied for summary judgment under CPR Part 24, alternatively strike out under CPR Part 3.4, relying on clause 27(B) of the BIFA standard terms. The clause discharged all liability unless suit was brought and written notice given within nine months of the event or occurrence giving rise to the cause of action. The central issue was whether the clause barred the claim and, if so, whether it satisfied the statutory requirement of reasonableness.

1. Application dismissed. The claimant had a real prospect of establishing that clause 27(B) was unreasonable. Directions were to be agreed for a Defence, Reply and case management conference.
2. Clause 27(B), on its natural language and in the context of clause 27(A), was a substantive time bar. It discharged liability nine months after the event or occurrence alleged to give rise to the cause of action. Unlike clause 27(A), it did not expressly require knowledge of the event or provide an exception where compliance was impossible. Section 32 of the Limitation Act 1980 therefore did not apply.
3. The judge provisionally considered that knowledge of the event might not be necessary to start time running. He also considered that the liability to HMRC was probably sufficient to amount to actual damage in negligence, although neither issue required final determination.
4. The defendant accepted that the contract was made on its written standard terms for the purposes of section 3 of the Unfair Contract Terms Act 1977. Under section 11(5), the defendant bore the burden of proving reasonableness. The assessment under section 11(1) and Schedule 2 had to be made on the circumstances of this contract, including bargaining strength, negotiability, alternative terms, insurance and the practicability of discovering and pursuing the claim.
5. The decisions in Granville Oil and Rohlig did not justify importing a finding of reasonableness. Those cases concerned different factual settings. The decision in Last Bus required attention to whether the parties were of equal bargaining strength in relation to the standard term, rather than merely in relation to price.
6. There was a real prospect that the nine-month period was insufficient for a claim arising from customs declarations, because HMRC’s notification might occur after the period had expired. The clause potentially deprived the claimant of any remedy for failure to perform the central purpose of the contract and was therefore capable of being prima facie unreasonable. The claim was not a clear case suitable for strike out.