On 13 October 2023, the High Court handed down judgment in which it granted reverse summary judgment in favour of Pinewood Technologies PLC (Pinewood UK) and summary judgment on Pinewood UK's counterclaim against the claimant, Pinewood Technologies Asia Pacific Limited (Pinewood AP).
The case concerned the proper approach to the construction of exclusion clauses, applications to amend statements of case and for specific disclosure of documents, and the circumstances in which parties deal on standard terms within section 3 of the Unfair Contract Terms Act 1977 (UCTA).
Background
The background to the case concerned two reseller agreements, entered into by the parties in July 2017 and January 2019 (the Reseller Agreements). By the Reseller Agreements Pinewood AP was appointed by Pinewood UK as its authorised exclusive reseller of Pinewood UK's dealer management system (the DMS) in certain territories in the Asia Pacific region.
A dispute subsequently arose between the parties, whereby Pinewood AP alleged that Pinewood UK had breached various obligations to develop the DMS for use in the territories, causing Pinewood AP to suffer losses which were said by Pinewood AP to be "at least" US $312.7 million. Pinewood UK denied that it had breached the Reseller Agreements in any way and, amongst other things, relied upon exclusion of liability provisions included in the Reseller Agreements which excluded Pinewood AP's claims. Pinewood UK also counterclaimed against Pinewood AP for payment of outstanding invoices plus interest, valued at approximately £600,000. In turn, Pinewood AP denied that the invoices were payable, relying on equitable set-off despite a clear no set-off provision included in the Reseller Agreements.
In opposing Pinewood UK's application for summary judgment on both the claim and counterclaim, Pinewood AP advanced that:
- it had a real prospect of successfully demonstrating at trial that the exclusion clauses in the Reseller Agreements did not apply to its claims as a matter of construction, and that these construction arguments could only be dealt with at trial (the Construction Arguments);
- it had a real prospect of demonstrating at trial that both the exclusion clauses and the no set-off clauses included in the Reseller Agreements were unenforceable, by failing to meet the requirement of reasonableness under section 11 of UCTA (the UCTA Arguments), and that it should be permitted to amend its Defence to Pinewood UK's Counterclaim to rely on UCTA; and
- Pinewood UK should provide specific disclosure of documents, so that Pinewood AP could explore the possibility of a potential fraud or fraudulent misrepresentation claim against Pinewood UK, and that the need for such disclosure was a 'compelling reason' for the claim to proceed to trial.
High Court's decision
Pinewood AP failed on all of its arguments. The Judge held that:
- In circumstances where the Construction Arguments involved short points of construction and where the Court had before it all evidence necessary for the proper determination of those Arguments, the Court was entitled to 'grasp the nettle' and decide the Construction Arguments at a summary stage.
- On its true construction the exclusion of liability provisions included in the Reseller Agreements applied to Pinewood AP's claims, other than in respect of Pinewood AP's limited claim for incurred costs, a point that had been conceded by Pinewood UK and which was itself declared by the Court to be subject to separate limitation of liability provisions included in the Reseller Agreements. The Court rejected the suggestion that there is any principle that exclusion clauses cannot apply to alleged non-performance of contractual obligations or to repudiatory breaches of contract and, in doing so, reaffirmed the principle that there is no presumption against exclusion clauses being construed so as to cover a deliberate repudiatory breach. Rather, the extent to which an exclusion clause applies to a particular breach or loss will be a question of construction in every case. The wording of the exclusion of liability provisions included in the Reseller Agreements was "clear and unambiguous" and, even where there might be an imbalance between the parties, there is no requirement for the Court to strain the language. Accordingly, reverse summary judgment on Pinewood AP's claim should be granted in Pinewood UK's favour.
- The UCTA Arguments had no real prospect of success at trial. It was clear from the documents before the Court that negotiations had taken place between the parties which led to amendments being made to the draft agreement originally provided by Pinewood UK which were "clearly substantive", and which directly affected the obligations of the parties. It was therefore impossible to say that the terms ultimately agreed were Pinewood UK's standard business terms for the purposes of section 3(1) of UCTA, and it was "fanciful" to suggest that a trial judge would arrive at a different conclusion. Accordingly, there was no basis on which Pinewood AP should be permitted to amend its case to rely upon UCTA.
- Pinewood AP's application for specific disclosure to allow Pinewood AP to explore the possibility of a claim in fraud or fraudulent misrepresentation should be dismissed, the application being described by the Judge as "entirely speculative" and amounting to "no more than a fishing expedition".
- Summary judgment on Pinewood UK's counterclaim should be granted in Pinewood UK's favour. The Court held that the no set-off clause applied to Pinewood UK's counterclaim and that there was no basis for Pinewood AP's contention that equitable set-off was not caught by the no-set off clause.
Practical implications
This case is an important reminder of the benefit of including in commercial contracts well drafted exclusion and limitation provisions, which can serve to apportion risk between contracting parties. There is no bar to exclusion clauses applying to non-performance or repudiatory breaches of contract, and there is no presumption against exclusion clauses being construed so as to cover a deliberate repudiatory breach. Each case will be assessed on its own merits, and exclusion and liability clauses will be construed in accordance with well-defined guiding principles.
The case is also helpful in showing that the Court will have no hesitation in 'grasping the nettle' and determining issues of construction at an early stage, including in appropriate cases on a summary basis. Perceived legal and factual complexities and very high value cases are not in themselves necessarily reasons to delay summary judgment, and there is no hard and fast rule that the question of the true construction of an exclusion clause must go to trial. As the Judge commented in this case, the question of whether summary judgment is a suitable remedy will depend on the individual circumstances of every case.
Steve Dunseath & Ellie O'Sullivan acted for the successful Defendant in the case, Pinewood Technologies PLC. The judgment can be found here.
