South East Water Limited v Elster Water Metering Limited

On a strike-out and summary judgment application, the court may decide a short point of law or contractual construction without conducting a mini-trial. A party relying on the Unfair Contract Terms Act 1977 must produce evidence giving a real prospect of establishing that the relevant term formed part of the other party’s written standard terms of business; mere assertion is insufficient.

Specific contractual provisions governing a defined failure take precedence over general remedies. A clearly worded warranty and fault-attribution schedule limited recovery for faulty devices to the specified replacement arrangements and incidental-cost limits. Claims for consequential loss, loss of anticipated savings, profit or revenue were additionally excluded by the general liability clause.

South East Water Limited claimed substantial losses from alleged premature failure of automated meter-reading units and batteries supplied by Elster Water Metering Limited under a framework agreement. Elster applied to strike out the claim and/or obtain summary judgment.

The application concerned the proper construction and effect of Schedule 11, headed meter AMR warranty and fault attribution, and its interaction with the general contractual remedies and exclusions. South East Water also relied on the Unfair Contract Terms Act 1977 and argued that factual issues required a trial.

The central issues were whether Schedule 11 formed part of Elster’s written standard terms of business, whether it was a limitation clause, whether it was reasonable under the Act, and which pleaded heads of loss remained reasonably arguable.

Application allowed in substantial part. The court was entitled to investigate the contractual and statutory issues summarily. It could not conduct a mini-trial on disputed factual evidence, but it could decide a short point of law or construction. A party resisting summary judgment on a construction issue had to identify evidence likely to exist and be available at trial which could affect the outcome; a bare assertion that something might emerge was insufficient.

1. South East Water had no reasonably arguable prospect of proving that Schedule 11 was part of Elster’s written standard terms of business. The evidence showed that the schedule was introduced late in the tender process, was specific to the products and failure scenario, and was not habitually used in comparable contracts. The claim under the Unfair Contract Terms Act 1977 therefore failed at the threshold.
2. On its proper objective construction, Schedule 11 was a limitation clause governing the specific case of a faulty device identified in operation. It was not merely an additional or optional remedy under Schedule 2, condition 13.1.3. The specific provisions of Schedule 11 took precedence over the general remedies in condition 13.
3. Alternatively, if the Act applied, Schedule 11 was reasonable. The court considered its narrow scope, the contractual allocation of risk, the clarity and prominence of the provision, the commercial context, the parties’ bargaining position, the opportunity for negotiation, the absence of evidence showing disproportionate replacement costs, and the exclusion of consequential losses elsewhere in the agreement.
4. Claims for replacement costs exceeding the Schedule 11 limits and claims for incidental costs could not proceed as pleaded. Claims for manual meter-reading costs were also losses of anticipated savings. Claims for lost revenue were in substance losses of profit, revenue or anticipated savings and were excluded by clause 9.4.

The relevant paragraphs of the Particulars of Claim were struck out. South East Water was permitted to provide proposed amended particulars confined to claims which did not offend the contractual provisions and were properly arguable.