High Court holds that contractual claim excluded claim for loss of profit

October 26, 2023

The High Court has ruled in favour of the defendant, Pinewood Technologies in Pinewood Technologies Asia Pacific Ltd v Pinewood Technologies plc [2023] EWHC 2506 (TCC). Pinewood is a UK-registered company and a subsidiary of Pendragon plc, an automotive retailed. It develops and supplies a dealer management system for the automotive industry.

Typically, Pinewood Technologies enters into arrangements with resellers to market and sell the dealer management system to motor vehicle dealerships overseas. Despite its similar name, Pinewood Asia is not related to Pinewood Technologies, and is a reseller which is registered in Hong Kong.

The case arose in the context of a counterclaim regarding the interpretation of an exclusion clause. Pinewood Technologies asserted that Pinewood Asia’s claim for breach of two reseller agreements was excluded because it was a claim for “loss of profit”.

The two reseller agreements contained an identical exclusion clause:

Subject to Clause 16.1, Pinewood excludes, in relation to any liability it may have for breach of this Agreement, negligence under, in the course of or in connection with this Agreement, misrepresentation in connection with this Agreement, or otherwise howsoever arising in connection with this Agreement, any such liability for: (1) special, indirect or consequential loss; (2) loss of profit, bargain, use, expectation, anticipated savings, data, production, business, revenue, contract or goodwill; (3) any costs or expenses, liability, commitment, contract or expenditure incurred in reliance on this Agreement or representations made in connection with this Agreement; or (4) losses suffered by third parties or the Reseller’s liability to any third party.

Pinewood Asia argued that the reseller agreements formed part of Pinewood Technologies’ written standard terms of business under section 3(1) of UCTA, and the exclusion clause did not meet the requirement of reasonableness under section 11 of UCTA.

The judge said that the evidence showed that negotiations took place between the parties involving email exchanges and calls. She also said that both parties had legal advice and there were travelling drafts. As a result, the UCTA argument had no realistic prospect of success at trial.

The judge also rejected the proposition that there is any principle that exclusion clauses cannot apply to the non-performance of contractual obligations or to repudiatory breaches of contract.

She said that the words of the exclusion had to be read in the context of the whole exclusion clause, the contract as a whole, the material background and circumstances at the time the reseller agreements were entered into.

The judge was satisfied that on a true interpretation any liability on the Pinewood Technologies’ part for breach of the reseller agreements giving risk to damage in the form of loss of profit and wasted expenditure fell within the terms of the exclusion. The language was clear and unambiguous.