In the House of Lords
Buildfast Ltd v Surething Plc
Surething Plc, a small independent insurance broker based in Blacktown, decided to extend and improve its office premises, including the construction of a new secure parking area for staff. They contracted with Buildfast Ltd for the work to be done for a price of £100,000. After the work got underway, part of the old office building was damaged when some machinery was being manoeuvred; the repair cost £10,000. Further, on the last day of work, one of the trucks owned by Buildfast reversed into a car belonging to a Surething employee; she was injured in the collision and her car was written off.
When Buildfast submitted their final bill, it showed a total of £104,000. The additional £4,000 represented the cost of levelling the ground prior to laying the car park. When challenged about this, they referred to Clause 4 of their standard terms (which the managing director of Surething had signed and returned, after the work had begun, when he found them on his desk under a pile of other papers). Clause 4 provided that:
"Buildfast are entitled to levy additional charges where extra work is required to prepare the site before construction can commence".
Furthermore, Buildfast denied liability for the damage to the office building, pointing to Clause 11:
"Buildfast will not be liable for any loss or damage arising out of the work carried out under this contract".
They also refused to pay for the injuries to the employee or for the damage to her car, saying that this liability was covered under the contract in Clause 28, which said:
"Surething agrees to indemnify Buildfast in respect of any loss or damage caused to others, including employees of either company, while carrying out the construction works".
Surething refused to pay more than £90,000, being the original price less the cost of repairing the damage. In the County Court, Buildfast claimed against Surething for 1) the balance of £10,000 which they considered to be outstanding; 2) the £4,000 cost of levelling the ground; 3) enforcement of their indemnity clause. Surething argued that all three clauses should be construed against Buildfast as, on this occasion, Surething had been acting in the capacity of a consumer.
Justice J held:
a) That Surething was liable for the £10,000 because Buildfast were fully protected by Clause 11. This is because it had been incorporated into the contract by virtue of being signed, was not ambiguous so was properly constructed, and satisfied the reasonableness test imposed by s2(2) Unfair Contract Terms Act (UCTA) 1977. Justice J considered that although there was a difference in bargaining strength between the parties, it would have been equally open to Surething to cover this eventuality with insurance.
b) That Surething was not liable for the £4,000 because Clause 4 was not in fact properly incorporated into the contract. Despite the fact the terms were signed – and this had in fact incorporated other terms of the contract – this had clearly not happened before work began, and the rule in Interfoto v Stiletto Visual Programmes should still apply because this particular term was unusually onerous and was not fairly drawn to Surething's attention before the contract was made. He also held, obiter, that even had the clause been incorporated, it would have failed the reasonableness test imposed by s3(2)(b)(i) UCTA due to its extremely broad scope.
c) That the indemnity clause was effective as it had been properly incorporated and constructed, and was not unusually onerous. No challenge could be mounted against it using the UCTA or the Unfair Terms in Consumer Contracts Regulations (UTCCR) 1999 as Surething had not been dealing as a consumer. This meant the UTCCR did not apply at all and, though UCTA might apply in some circumstances, nothing within it dealt with indemnity clauses outside of a consumer context (s4(1)).
The findings were all upheld by the Court of Appeal.
Surething appeals to the House of Lords on the first and third findings and Buildfast mounts a cross appeal on the second.
© Dr Kirsty Horsey 2009
