Author Name: Amy Mathew
Institution: Queen’s University Belfast
Introduction and Case Overview
In this case, Last Bus v Dawson[1], the issue to be considered by the Court of Appeal (Civil Division) was whether the High Court of Justice Business and Property Courts of England and Wales Commercial Court was correct in summarily dismissing the claim brought forward by Last Bus or the case should proceed to full trial. [2]The interested parties are Last Bus Limited (appellant), DawsonGroup Bus, and Coach Limited (defendant) and EvoBus (UK) Limited (defendant).
The Court of Appeal considered a plethora of key facts. Firstly, Last Bus has been on contractual terms with Dawson for over 20 years, and all the contracts had an exclusion clause for liability. Secondly, Last Bus signed a contract directly with EvoBus on the latter’s terms. Thirdly, Dawson leased out the coaches to Last Bus on the former’s standard business terms, including the exclusion clause 5(b). Further, four buses caught fire, and the Last Bus suffered from an expensive maintenance charge. Last Bus held that both EvoBus and Dawson were liable for the breach of contract and the 30 Mercedes Turismo coaches manufactured by EvoBus and financed by Dawson, were of unsatisfactory quality. Last Bus hence claimed damages exceeding £10m. Lastly, EvoBus denied the claim and relied on its exclusion clause. Similarly, Dawson relied on the exclusion clause 5(b). [3]
High Court Decision and Reasoning
On 14 March 2022, Dawson filed for a summary judgment in the High Court (HC), which was heard by Andrew Baker J. The legal principle that was placed on trial was the test of reasonability. HC concluded that Dawson is merely a financing company rather than the manufacturer. Last Bus had the option to purchase the coaches directly from EvoBus, and the parties were of equal bargaining power. The HC dismissed the claim against Dawson on the grounds that the exclusion clause 5(b) satisfied the reasonability test under the Unfair Contract Terms Act 1977. [4]
Further, Last Bus filed for appeal, which was heard by Lord Justice Bean, Lord Justice Singh, and Lord Justice Phillips in the Court of Appeal (CoA). The CoA overturned the decision of the HC and unanimously ruled that the case proceeds to full trial. To arrive at this conclusion, LJ Phillips critically evaluated the approaches and case law employed by Baker J. [5]
Court of Appeal’s Reversal and Legal Reasoning
Firstly, Baker J engaged “marked reluctance to intervene”[6] with regard to previously established precedent in the case of Photo Production Ltd v Securicor Transport Ltd [7]in which Lord Wilberforce establishes that “in commercial matters where the parties are of equal bargaining power, the parties are free to apportion risk as they see fit without judicial intervention, including by way of exclusion clauses”. [8] Courts actively adopted this approach in cases such as Watford, Glanville, and Goodlife. Nevertheless, it is crucial to note that the facts of the case at hand differ from the abovementioned cases as they do, in fact, have equal bargaining power. The viewpoint adopted by the HC based on these cases fails to consider the legislation enacted by parliament, stating that exclusion clauses in hire purchase agreements and contracts based on one party’s written terms are subject to the test of reasonableness. The reasoning underpinning this legislation is that exclusion clauses in the abovementioned contracts are “prima facie unreasonable.”[9] This approach, according to LJ Phillips, was hence incorrect.
Critique of the High Court’s Approach
Secondly, Baker J, with regard to the facts of the case at hand and the case laws mentioned above, concluded that both parties were of equal bargaining power. This was also deemed incorrect by the Court of Appeal. [10]LJ Phillips quotes Christopher Clarke J in the case Balmoral Group Ltd v Borealis (UK) Ltd [11] to support his point; “even where the parties are large commercial concerns and of equal bargaining strength as regards the price to be paid under the contract, which does not mean that they are of equal bargaining strength in respect of the terms.”[12] He points out that there is no evidence of negotiation regarding the allocation of risks between the concerned parties. He also observed that Dawson would only have entered into the contract with the exclusion clause, and there was no alternative option available in the market. Hence, he concluded that the parties did not constitute equal bargaining power. Therefore, LJ Phillips criticises the approach undertaken by Baker J in this regard[13].
Key Legal Principles and Precedents Considered
Thirdly, clause 5(b) left Last Bus in a predicament and devoid of a remedy. They had to pay Dawson for the buses in full and incur an expensive bill for the repairs. Lease Management Serviced Ltd v Purnell Secretarial Serviced Ltd[14] makes it clear that such clauses are “prima facie unreasonable.” Andrew BJ failed to recognise this legal implication of clause 5(b). According to LJ Phillips, the judge should have employed the approach taken in the cases of Sovereign and Danka[15].
Fourthly, Baker J committed a significant error, concluding that a trial is not necessary to determine the reasonableness of clause 5(b). [16]It is necessary to note that in the judgment on various occasions, the judge himself has pointed out that certain facts can be thoroughly analysed only through a full trial[17]. This implies that to thoroughly analyse the key facts of the case, it is necessary to proceed to a full trial. According to the CoA, this is a “fact-sensitive issue,” and the contractual terms between all three parties must be carefully evaluated. Another relevant fact that the HC did not give much significance to was the lack of evidence to prove the insurance position of the parties. After evaluating the approaches undertaken by the HC, the CoA concluded that Baker J adopted the wrong approach in many circumstances and allowed an appeal. [18]
Convincing Aspects of the Court of Appeal’s Judgment
I find the decision of the Court of Appeal convincing as it is logically structured and has adhered to its commitments under the doctrine of Judicial Precedent. The application of significant case law, such as the Purnell case, enhances the credibility of the judgment. The judge also supports the judgment with other relevant case law, such as the Balmoral case, while cleverly drawing a distinction between the case at hand and cases such as Goodlife, Watford, and Glanville. The alignment of the court with previously established precedents and statutes, such as the UCTA, makes the decision of the court convincing. There is a wider implication to the judgement as it established that the test of reasonability, especially in a fact-sensitive case, cannot be determined through a summary judgement. This establishes precedence over contract law cases in the future with accordance to the Doctrine of Judicial Precedence[19].
Disagreement with the Court’s View on Bargaining Power
However, this paper disagrees with two aspects of the judgement, while agreeing with the overall decision. Firstly, judgment duly pointed out that Dawson would not have entered the contract without the exclusion 5(b). I submit that this is not reason enough to conclude that there is inequality of bargaining power. Last Bus could have purchased the coaches from EvoBus directly by obtaining finance through bank lending. They willingly choose not to opt for this, regardless of knowing this would grant them a “clear and unequivocal contract” with EvoBus. However, it is noted that inequality of bargaining power cannot be the only factor considered while determining the reasonableness of a term.[20]
Secondly, one of the requirements for reasonableness according to section 7 of the UCTA 1977 [21]is “whether the customer knew or ought reasonably to have known of the existence and extent of the term”[22]. This paper argues that this section is applicable in the case at hand, as Last Bus has been on contractual terms with Dawson for a substantial period and hence ought to have been aware of the exclusion clause 5(b). This fact did not receive sufficient weightage in the Court of Appeal’s judgement.
Importance of a Full Trial in Fact-Sensitive Cases
The judges have been hesitant to interfere with the decision of trial judges on this issue, and this is visible in [23]George Mitchell Ltd v. Finney Lock Seeds Ltd [24]. Even so, in such cases, they have already undergone a thorough trial, unlike the case in question. Moreover, the UCTA clearly mentions that all the facts need to be considered during the test of reasonability. This legislation demands the need for a trial.[25] Therefore, I conclude that I find the decision of the judge convincing as it is necessary to proceed to a full trial to understand the tripartite contractual relationship between all the parties and derive a thorough understanding of all the key facts of the case.
Bibliography
Primary Sources
Last Bus Ltd (t/a Dublin Coach) v Dawsongroup Bus And Coach Ltd & Anor [2022] EWHC 2971 (Comm).
Last Bus Limited (Trading as Dublin Coach) and Dawsongroup Bus and Coach Limited
(Formerly Dawson Rentals Bus and Coach Limited) and Another (2023) EWCA Civ 1297.
Lease Management Services Ltd (Plaintiffs) v Purnell Secretarial Services Ltd (Appellants Canon (South West) Ltd (Respondents (Third Parties) [1992] EWCA Civ J1207-1.
George Mitchell (Chesterhall) Ltd v. Finney Lock Seeds Ltd [1983] 2AC 803, p.444, Section 4.
Balmoral Group Ltd v Borealis (UK) Ltd [2006] EWHC 2531 (Comm).
Photo Production Ltd v Securicor Transport Ltd [1980] UKHL 2.
Unfair Contract Terms Act 1977.
Secondary Sources
Mckendrick E, Contract Law:Text,Cases and Materials (7th edn, Oxford 2016).
Elizabeth Macdonald, Exemption Clauses and Unfair Terms (2edn, Tottel 2006).
Finch, E and Fafinski, S Legal Skills (9th edn, OUP 2023) 154.
[1] [2023] EWCA Civ 1297.
[2] Ibid (n1).
[3] Ibid(n1).
[4] [2022] EWHC 2971.
[5] Ibid(n1).
[6] Ibid(n1)[50].
[7] [1980] UKHL 2.
[8] Ibid(n7) [3].
[9] [2023] EWCA Civ 1297[48].
[10] [2022] EWHC 2971[35](i).
[11] [2006] EWHC 2531 (Comm).
[12] Ibid(n9)[49].
[13] Ibid(n9)[50].
[14] [1992] EWCA Civ J1207-1.
[15] Ibid(n9)[53].
[16] Ibid(n9)[53].
[17] Ibid(n10)[34].
[18] Ibid(n9)[53].
[19] E Finch and S Fafinski, Legal Skills (9th edn, OUP 2023) 154.
[20] Elizabeth Macdonald, Exemption Clauses and Unfair Terms (2edn, Tottel 2006)175.
[21] Unfair Contract Terms Act 1977, s7.
[22] Elizabeth Macdonald, Exemption Clauses and Unfair Terms (2edn, Tottel 2006)170.
[23] Ewan Mckendrick, ‘Exclusion Clauses’ in Contract Law Text, Cases and Materials (7th edn, Oxford 2016)433.
[24] [1983] 2AC 803, [4].
[25] Unfair Contract Terms Act 1977,s11(3).
About the Author
