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

A shipping company bought a car which proved faulty. The court held the company was 'dealing as a consumer' under the Unfair Contract Terms Act 1977 because the car purchase was incidental, not integral, to its business, thus invalidating the seller's exclusion clause.

Facts

The plaintiff, R & B Customs Brokers Co Ltd, was a small company acting as a shipping broker and freight forwarding agent. The company was effectively run by its two directors, Mr and Mrs Bell. The company purchased a second-hand Colt Shogun car from a supplier, which was financed through a conditional sale agreement with the defendant finance company, United Dominions Trust Ltd. The car was intended for use by Mr Bell for both business and private purposes. This was only the second or third vehicle the company had acquired on credit terms. After the purchase, the car’s roof was found to leak, which constituted a breach of the implied condition of merchantable quality under the Sale of Goods Act 1979. The defendant sought to rely on an exclusion clause within the contract that negated liability for such breaches.

Issues

The central legal issue was whether the plaintiff company, in purchasing the car, was ‘dealing as a consumer’ as defined by section 12(1) of the Unfair Contract Terms Act 1977 (UCTA). If the plaintiff was found to be dealing as a consumer, section 6(2)(a) of UCTA would render the defendant’s exclusion clause void. The determination rested on the interpretation of the phrase ‘in the course of a business’. For the plaintiff not to be a consumer, the contract for the car had to be made ‘in the course of a business’.

Judgment

The Court of Appeal unanimously dismissed the defendant’s appeal, affirming the trial judge’s decision that the plaintiff company was dealing as a consumer. The court analysed the meaning of ‘in the course of a business’ under UCTA 1977.

Reasoning of Dillon LJ

Dillon LJ held that the phrase required a distinction to be made between a transaction that is an integral part of a business and one that is merely incidental to it. He also emphasised the importance of regularity. For a transaction to be ‘in the course of a business’, it must be a core part of the business or done with a degree of frequency. He stated:

In my judgment the first question to be considered – did the plaintiff company make this contract in the course of a business? – requires one to look at the course of the business of the plaintiff company. The business of the plaintiff company was that of a shipping broker and freight forwarding agent. The motor car was not acquired for resale, nor was it acquired for a purpose of being used for the provision of a car hire service. It was acquired for the use a director. So far as the evidence goes, the plaintiff company had only acquired on hire purchase two, or at the most three, motor cars over the years for the use of its directors.

He concluded that purchasing a car for a director was not integral to the company’s business as a shipping broker and lacked the necessary regularity to be considered ‘in the course of’ that business. He added:

There must be a degree of regularity, and a transaction must be an integral part of the business carried on, before it can be said that it was entered into `in the course of` that business.

Reasoning of Neill LJ

Neill LJ agreed, distinguishing transactions that are incidental to the business from those done in its course. He noted the difficulty in drawing the line but concluded that on the facts, this transaction fell on the consumer side. He explained:

It seems to me that the words ‘in the course of’ are not used in the Act in the broadest possible sense… some transactions may be so incidental to the business activity that they cannot be said to be in the course of that business, even though they are entered into for the purposes of the business. I am satisfied that the words ‘in the course of’ in section 12(1)(a) of the 1977 Act are not used in the same sense as the words ‘in the course of’ in the phrases ‘in the course of trade or business’ in the Trade Descriptions Act 1968 or ‘in the course of a business’ in section 4(1) of the 1979 Act. It seems to me that in the 1977 Act a degree of regularity is required.

Implications

The decision established that, for the purposes of UCTA 1977, a company could be deemed to be ‘dealing as a consumer’ if the relevant transaction was not an integral part of its business and lacked a sufficient degree of regularity. This provided greater protection against unfair exclusion clauses for smaller companies making ancillary purchases. It narrowed the interpretation of ‘in the course of a business’ in the context of consumer protection, distinguishing it from wider interpretations in other statutes. While the Consumer Rights Act 2015 has since confined the definition of ‘consumer’ to natural persons, this case’s reasoning on the meaning of ‘in the course of business’ remains influential in the context of business-to-business contracts still governed by UCTA 1977.

Verdict: The appeal by United Dominions Trust Ltd was dismissed with costs.

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