South East Water Ltd v Elster Water Metering Ltd

[2024] EWHC 620 (TCC) 

SEW brought a claim to recover losses consequential upon the failure of automated meter reading electronic units. One of the issues that arose was whether, or not, SEW had a real prospect of showing at trial that it dealt with Elster on the latter’s standard terms of business, which would bring into play an argument that part of the terms (to be found in Sched. 11) were unreasonable in accordance with the Unfair Contract Terms Act (“UCTA”).

HHJ Davies noted that the approach to be taken – following the CA case of African Export-Import Bank v Shebah Exploration and Production Co Ltd [2017] EWCA Civ 845 – was that:

(a) The onus of proof is on the party seeking to rely on UCTA to prove that:

(i) the term is written; 

(ii) the term is a term of business; 

(iii) the term is part of the other party's standard terms of business; and 

(iv) that the other is dealing on those written standard terms of business.

(b) For a term to be a part of the other party’s standard terms of business, it has to be shown that that other party habitually uses those terms of business. It is not enough that they sometimes do and sometimes do not.

(c) “A party who wishes to contend that it is arguable that a deal is on standard business terms must, … produce some evidence that it is likely to have been so done. This cannot be difficult in a proper case since anonymised requests about prospective terms of business can be made and participants in the credit market may well have knowledge of how particular lenders go about their business. It cannot be right that any defaulting borrower can just assert that business is being done on standard terms and that the lender then has to disclose the terms of other (how many other?) transactions he has entered into before he is entitled to summary judgment.”

Applying that general approach, which the Judge said could not be said to be specific to the particular market in that case, the credit market, the same onus of proof rested upon SEW.

Here, the evidence that had been adduced was consistent in suggesting that Elster did not habitually use Sched. 11, the subject of SEW’s complaint. This was, in the words of the judge, “fatal” to SEW's case. SEW had to either produce some evidence that Elster did habitually use Sched. 11 at the time or some evidence showing grounds for a belief that such evidence is likely to be available at trial.

Whilst what evidence is required in any individual case is, of course, fact-specific, here the Judge considered that SEW could have at least attempted to do so by way of enquiry of other contracting water companies / utilities. There was no evidence that this had been attempted or reason to think that such companies would have had any good reason not to assist if they had been approached and able. Instead of SEW raising the issue, it was Elster who, by providing disclosure of other transactions, demonstrated that it did not habitually use Sched. 11 in similar transactions at around the same time.

Even though this dealt with the UCTA question, the judge also noted that even considering the “objective interpretation” of Sched. 11, its meaning was plain and obvious from the clear words used. The clause was intended to have the effect of limiting SEW’s entitlement in respect of any claim in relation to a faulty AMR unit identified in operation to the cost of an equivalent replacement device and any incidental costs to the warranty. It was in the view of the judge: 

“frankly, hard to see how its wording could have been improved in terms of conveying its intended effect to the intended reader. It has the undoubted merit of simplicity and clarity instead of being concealed in a thicket of legal boilerplate.”

Further, the manner in which the relevant term was incorporated and brought to the attention to the other party was a very significant factor. This was not a term buried in a mass of small print. It was introduced quite openly in a letter written in response to a request for clarification during the course of contract negotiations. 

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