Every now and again, the English courts hand down a judgment which seems to fly in the face of established law. The recent High Court decision in Goodlife Foods Limited v Hall Fire Protection is one such judgment.

Hall installed a fire suppression system in Goodlife’s premises. A fire subsequently broke out causing property damage and business interruption losses to Goodlife in excess of £6 million. Goodlife claimed that the cause of the fire was the failure of the fire suppression system and sued Hall. Goodlife’s claim for breach of contract was statute barred under the Limitation Act 1980 so Goodlife brought proceedings instead for negligence. Hall sought to rely on clause 11 of its standard terms and conditions which purported to exclude its liability in negligence. Clause 11 said:

We exclude all liability, loss, damage or expense consequential or otherwise caused to your property, goods, persons or the like, directly or indirectly resulting from our negligence or delay or failure or malfunction of the systems or components provided by [Hall] for whatever reason…”

The High Court was satisfied that Hall’s standard terms and conditions were incorporated into the contract. It went on to hold that:

(1) Clause 11 purported to exclude liability for death or personal injury caused by negligence (“…damage … caused to your … persons”);

(2) Despite this, clause 11 was not an unusual or onerous clause and was successfully incorporated into the contract without Hall having to take additional steps to bring it to Goodlife’s attention;

(3) The exclusion for death or personal injury was not fatal to the validity of clause 11. Although section 2(1) of the Unfair Contract Terms Act 1977 (UCTA) prohibited such an exclusion, the court could simply excise those words before assessing if the remainder of the clause was reasonable;

(4) Even though the remainder of clause 11 was extremely wide-ranging, it satisfied the UCTA reasonableness test. The only likely loss that Goodlife would suffer would result from a fire not controlled by the suppression system. This was a risk that Goodlife could (and indeed should) insure against. Accordingly, the court was satisfied that clause 11 represented “a perfectly sensible allocation of the risk of loss and damage”.

This ruling goes against decades of judgments in which the courts have consistently held that an exclusion of death or personal injury automatically renders the entire exclusion clause void. The courts have not been willing to ‘blue pencil’ (sever) that aspect of the clause and leave the rest standing. In addition, the courts have traditionally struck down as unreasonable exclusion clauses that leave the innocent party without a meaningful remedy in respect of the loss they have suffered. Clause 11, excluding as it did all liability of Hall, did not give Goodlife a meaningful remedy. However, it was still found to be a reasonable allocation of risk on the basis that Goodlife should have insured against the very losses that it had purchased the fire suppression system to prevent.

Perhaps this judgment is a one-off? That remains to be seen.