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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