The recent Court of Appeal case of Trident Turboprop (Dublin) Ltd v First Flight Couriers Ltd ([2009] 1 AII ER (Comm) 16) will be of interest to both litigators and non-litigators. Although the main issue of appeal was whether the particular lease agreements in question fell within section 26 of the Unfair Contract Terms Act 1977 (UCTA), the Court of Appeal dealt with two novel questions which concerned the interpretation of section 26 of UCTA and section 3 of the Misrepresentation Act 1967 (the 1967 act).

To understand the issues which arose in Trident and in order to fully appreciate the Court of Appeal’s ruling, one must first consider the main statutory provisions with which the case was concerned.

As many will be aware, UCTA will apply to those terms and notices (including non-contractual terms and notices) which seek to limit or exclude liability, and UCTA will generally apply to ‘business liability’. However, there are certain exceptions and section 26 of UCTA excludes international supply contracts from the application and control of UCTA.

The next statutory provision for our purposes is section 3 of the 1967 act. The right for a party to limit his liability for misrepresentation and the limits to this was first introduced by section 3 of the 1967 act, which did not provide for any exceptions in respect of international supply contracts. Section 3 was, however, later modified by section 8 of UCTA, which allowed for parties to exclude for misrepresentation subject to meeting the requirements of reasonableness as provided under section 11 of UCTA.

The interpretation of the above statutory provisions was considered in detail by the Court of Appeal. In brief, Trident Turboprop (Dublin) Ltd (Trident) agreed to lease various aircraft to First Flight Courier Ltd (First Flight). First Flight failed to make rental payments under the lease agreements and Trident was successful in bringing proceedings against First Flight and, subsequently, obtaining summary judgment in its favour.

First Flight appealed and argued that Trident’s aircraft were unreliable and that they were, as a result, inoperable. First Flight also argued that it had a claim for misrepresentation against Trident. First Flight maintained that it had a right to (or was entitled to) rescind the lease agreements and that, on this basis, it had a valid defence which would mean that the order for summary judgment would have to be set aside. Trident on the other hand contended that First Flight was prevented from relying on a claim for misrepresentation as the lease agreements had excluded First Flight’s rights to bring any claim for misrepresentation and, in any event, section 26 of UCTA excluded the test of reasonableness from applying as the leases were international supply contracts.

Apart from considering whether the lease agreements fell within the scope of section 26 of UCTA, the Court of Appeal dealt with the following two questions which counsel for First Flight raised on appeal: whether the limits (that is the test of reasonableness) imposed on Trident’s rights to rely on a clause excluding any remedy for misrepresentation were imposed by UCTA itself or by the 1967 act; and whether any liability for misrepresentation in this case was liability ‘under a contract’ within the meaning of section 26(1) of UCTA.

UCTA or the 1967 act?Counsel for First Flight contended that the words ‘the limits imposed by this act on the extent to which a person may exclude or restrict liability’, which appear at the beginning of section 26(1), actually referred to limits which the 1967 act imposed and not the limits which UCTA imposes. Counsel for First Flight also contended that the original section 3 of the 1967 act did not exclude international supply contracts and that there was nothing in the legislative background to UCTA which indicated that parliament wanted to exclude international supply contracts from the 1967 act. However, Lord Justice Moore-Bick, giving the leading judgment of the court, rejected this analysis. According to his lordship, to deal with this issue, one had to look at the wording of subsection (1) and (2) of section 26 as a whole. Having considered these two subsections in the light of the entire wording of section 26, Moore-Bick LJ held that:Statutory interpretationCounsel for First Flight also submitted that liability for misrepresentation arises outside rather then under a contract and therefore does not fall within the wording of section 26(1), which provides ‘liability arising under such a contract as is described in subsection (3) below’. This submission was dismissed by Moore-Bick LJ who argued: ‘I think that the purpose of section 26 as a whole is to exclude international supply contracts from the statutory regime governing exclusion clauses. If that is right, there is every reason to interpret the expression "liability arising under such a contract" as extending both to liability for damages for misrepresentation and to the right of the injured party to rescind the contract where that remains possible.’

  • section 26(1) of UCTA excludes or restricts liability by reference to contract terms in general and is not limited for breach of contract, and as such it was capable of extending to liability for misrepresentation;
  • section 26(2) was also worded generally and also extended to any contract which contains terms purporting to exclude liability and excluding from the requirement of reasonableness any contract which fell within subsection 26(3); and
  • the wording in section 26 which states ‘the limits imposed by this act on the extent to which a person may exclude or restrict liability by reference to a contract term’ actually referred to the requirement of reasonableness as embodied in UCTA and, by operation of section 8 of UCTA, to terms excluding liability for misrepresentation.

Although the court went on to find that the leases did, in fact, fall within the scope of section 26 of UCTA, it dealt with important issues of statutory interpretation. By amending the original section 3 of the 1967 act and by introducing the test of reasonableness by virtue of section 8 of UCTA, it was clear, as noted by Moore-Bick LJ, that parliament intended to bring the law relating to excluding liability for misrepresentation in line with excluding liability for breach of contract. To argue, as counsel for First Flight attempted to, that the limits on Trident to exclude liability for misrepresentation lay in the 1967 act rather than under UCTA would surely have had the effect of frustrating the intentions of parliament. Moore-Bick LJ’s valuable guidance as to the meaning of section 26 seemed not only to reaffirm parliament’s intentions to exclude international supply contracts from statutory control, but also confirmed that the general wording found in section 26 encapsulated terms which purported to exclude or restrict liability for misrepresentation as well as for breach of contract.

Masood Ahmed, Senior law lecturer, Birmingham City University