Exclusion Clauses Re-Examined - Regus (UK) Ltd v Epcot Solutions Ltd

The recent Court of Appeal decision in Regus (UK) Ltd v

Epcot Solutions Ltd considered the enforceability of an

exclusion clause which purported to exclude liability for

financial losses in a supplier's standard terms of

business. In this article, Julia Jones examines the Court of

Appeal's comments and the factors which were taken into

account in reversing the High Court's earlier decision

which had caused some considerable concern to many

suppliers.

What's happened?

On 15 April 2008 the Court of Appeal handed down its ruling

in the case of Regus (UK) Ltd v Epcot Solutions Ltd

overturning a High Court decision that had previously caused

suppliers considerable concern. The Court of Appeal decision

set out some important factors that may be taken into account

in determining whether an exclusion clause is enforceable.

The case concerned the reliance by a supplier of serviced

office accommodation (Regus) on part of an exclusion clause in

its standard terms of business. The part of the exclusion

clause in question sought to exclude liability "in any

circumstances" for "loss of business, loss of

profits, loss of anticipated savings, loss of or damage to

data, third party claims or any consequential losses" (the

"Exclusion Clause"). A further clause limited

Regus' liability for other losses, damages or expenses to

50,000.

The customer (Epcot) complained to Regus about defective air

conditioning in the office, and when this was not fixed by

Regus, Epcot stopped paying Regus the service charges due under

the agreement. Regus brought proceedings against Epcot for the

amounts due to it, and in response, Epcot argued that the

failure to provide air conditioning amounted to a breach of

contract and counterclaimed for loss of profits, loss of

opportunity to develop its business and distress, inconvenience

and loss of amenity.

In order to defeat part of Epcot's claim, Regus had to

show that the Exclusion Clause was enforceable in particular

that it was reasonable under the Unfair Contract Terms Act 1977

(UCTA). In a High Court judgement of May 2007, the court had

ruled that although in theory it was entirely reasonable for

Regus to restrict damages for loss of profits and consequential

loss, the clause was unreasonable as a whole as the exclusion

was so wide that it effectively left Epcot without a remedy for

a basic service such as defective air conditioning. It was

therefore unenforceable, leaving Regus exposed.

Regus appealed on the grounds that the...

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