R & B Customs Brokers Company Ltd v United Dominions Trust Ltd [1987] EWCA Civ 3 (21 December 1987)

A company purchased a car through a conditional sale agreement. The car's roof leaked badly and was unfit for purpose. The Court of Appeal held that the company was 'dealing as consumer' under the Unfair Contract Terms Act 1977 despite being a business, because purchasing vehicles was not integral to or regular in its freight forwarding business.

Facts

R & B Customs Brokers Company Ltd, a shipping brokers and freight forwarding company owned by Mr Bell and his wife, purchased a Colt Shogun vehicle in 1984. The purchase was arranged through United Dominions Trust Ltd (UDT), a finance company, using a conditional sale agreement, with Saunders Abbott (1980) Ltd acting as the dealer. The car was the second or third vehicle the company had acquired on credit terms. After taking possession, Mr Bell discovered the roof leaked. Despite multiple repair attempts, the leak worsened, rendering the car unfit for ordinary road use in England. The company rejected the car and sought recovery.

The Contractual Arrangement

The usual tripartite arrangement applied: the dealer sold to UDT, who entered into a conditional sale agreement with the company. The agreement was formally concluded on 3rd November 1984 when UDT countersigned the documents, though the company had possessed the car since 21st September 1984.

Issues

The key issues were:

• Whether there was an implied condition under section 14 of the Sale of Goods Act 1979 that the car was fit for purpose
• Whether the company was ‘dealing as consumer’ within section 12 of the Unfair Contract Terms Act 1977
• If not dealing as consumer, whether UDT’s exclusion clause satisfied the requirement of reasonableness

Judgment

Implied Condition of Fitness for Purpose

The Court held that an implied condition arose under section 14(3) of the Sale of Goods Act 1979. The particular purpose (ordinary road use) was made known by implication. The company continued to rely on the dealer’s skill and judgment despite discovering the leak before the contract date, as evidenced by arrangements for repair.

Dealing as Consumer

The Court applied the test from Davies v Sumner [1984] 1 WLR 1301, holding that the phrase ‘in the course of a business’ requires some degree of regularity. Lord Justice Dillon stated that transactions merely incidental to carrying on a business require regularity before being considered integral parts of that business. Since purchasing vehicles was not part of the company’s regular business practice (being only the second or third such purchase), the company was dealing as consumer.

Lord Justice Neill agreed, stating that where the same phrase appears in section 12(1)(a) and (b), consistent construction is required, and the Davies v Sumner test should apply to both paragraphs.

Effect of Consumer Status

As the company was dealing as consumer, section 6(2) of the Unfair Contract Terms Act 1977 applied, rendering UDT’s exclusion clause ineffective. The implied condition under section 14(3) could not be excluded.

Implications

This case established important principles regarding the interpretation of ‘dealing as consumer’ under the Unfair Contract Terms Act 1977:

• A business entity can still deal as consumer when making purchases incidental to its main business
• The test requires examination of whether the transaction is integral to or regular within the buyer’s business
• Sporadic purchases of equipment not connected to the core business activity do not prevent consumer status
• The same interpretation of ‘in the course of a business’ applies to both buyer and seller under section 12

The decision provides significant consumer protection to businesses making occasional purchases outside their regular trading activities.

Verdict: Appeal dismissed. The company was entitled to judgment against UDT as it was dealing as consumer and the exclusion clause was therefore ineffective. The implied condition of fitness for purpose under section 14(3) of the Sale of Goods Act 1979 was breached.

Source: R & B Customs Brokers Company Ltd v United Dominions Trust Ltd [1987] EWCA Civ 3 (21 December 1987)