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Exclusion clauses: grasping the nettle at the summary stage

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The High Court has granted summary judgment on the basis that a claim for breach of various general contractual obligations were subject to an effective exclusion clause. The clause was also not subject to the “reasonableness” test under the Unfair Contract Terms Act 1977, known to most as UCTA. Although the exclusion clause remained untouched, the parties had made material changes to the written standard terms of business.

Under two reseller agreements, Pinewood UK appointed Pinewood Asia Pacific as its exclusive reseller of dealer management software in various countries in the Asia-Pacific region. 

The dispute arose when Pinewood Asia Pacific claimed damages of around USD300m for Pinewood UK’s alleged breach of various obligations to develop the software for use in the Asia-Pacific region. Pinewood UK sought summary judgment on the basis that the loss was excluded.

In response, Pinewood Asia Pacific denied the loss was excluded but said that, even if it was, the reseller agreements formed part of Pinewood UK’s written standard terms of business within the meaning of UCTA and the exclusion did not satisfy the UCTA “reasonableness” test.

The court confirmed that ordinary methods of contractual interpretation apply to exclusion clauses. A Court of Appeal decision, Kudos, had interpreted the exclusion clause before it as not applying to a repudiatory refusal to perform. Pinewood Asia Pacific tried to run the same argument in this case but the High Court distinguished Kudos as, essentially, confined to its facts.

On the question of UCTA “reasonableness”, the court pointed to evidence of negotiations between the parties which had led to substantial amendments to the original draft reseller agreements. Accordingly, although the exclusion clause itself was unamended, it could not be said that Pinewood Asia Pacific was dealing on Pinewood UK’s standard terms for UCTA purposes. Therefore, the court did not need to consider the “reasonableness” of the exclusion clause.

Judgment: Pinewood Technologies Asia Pacific Ltd v Pinewood Technologies Plc