The Technology and Construction Court has recently found that an exclusion clause which excluded any claim in negligence was reasonable and therefore valid under the Unfair Contract Terms Act 1977 (“UCTA”) (see Goodlife Foods Ltd v Hall Fire Protection Ltd [2017] EWHC 767 (TC)).

In 2002, Hall Fire was contracted by Goodlife to install and commission a fire detection and suppression system at its food production factory. A fire occurred at the factory 10 years later and Goodlife issued a claim for property damage and business interruption losses in excess of £6 million. The claim was based on the cause of the fire being the failure of the fire suppression systems installed by Hall Fire.

Hall Fire sought to rely on its exclusion of liability clause which stated:

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 Fire] for whatever reason.”

The key issues were whether the clause had been incorporated and whether it was reasonable under UCTA. The court first found that the clause was not unusual taking into account the exclusion and limitation clauses used by similar companies and that it had been incorporated because Goodlife had the opportunity to read and consider the terms before concluding the contract. Further, there was no evidence to suggest that Goodlife did not have access to appropriate advice.

Goodlife had submitted that the clause was unreasonable because it purported to exclude liability for death and personal injury caused by negligence. The first key consideration for the court was whether the entire clause was unenforceable as a result of Hall Fire’s attempt to exclude liability for death and personal injury in breach of section 2(1) of UCTA.

Interestingly, the court, bound by the decision in Trolex Products Ltd v Merrol Fire Protection Engineers Ltd (unreported), found that the ineffective exclusion of liability for death and personal injury did not render the entire clause unreasonable and the clause was therefore deemed valid if it satisfied the reasonableness test.

When considering reasonableness, the court did recognise that the clause was extremely wide reaching as it sought to exclude almost all of Hall Fire’s liability. However, in this particular case, the court concluded that as the only loss Goodlife was likely to suffer was the loss resulting from a fire not being prevented; it should and could be covered for such a loss by insurance. The court’s view was that this was a sensible allocation of the risk of loss and damage, particularly taking into account the fact it is normally more economical for the party sustaining the loss to insure against and Hall Fire had offered to arrange insurance on Goodlife’s behalf.

Conclusion

What is considered reasonable will of course vary on a case by case basis and an exclusion this extensive may not be considered reasonable if for example the loss and damage could not be covered by insurance or the cause, effect, nature and amount of loss and damage is variable.  

In addition, although the case is an interesting example of the way in which a partly invalid clause will be dealt with, it does not negate the need to draft clear and unambiguous exclusion clauses. Further, drafting a clause which includes an exclusion of liability for negligence causing personal injury, death or for fraud would be poor practice and misleading. 

Finally, when drafting or negotiating limitation and exclusion clauses, it is important to review exclusion clauses in their specific context by identifying the risks at the outset, considering other ways in which the risks might be mitigated and considering what insurance cover is available.