Macdonald, ''In the course of a business

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You are here: BAILII >> Databases >> United Kingdom Journals >> Macdonald, ''In the course of a business - a fresh examination' URL: http://www.bailii.org/uk/other/journals/WebJCLI/1999/issue3/macdonald3.html Cite as: Macdonald, ''In the course of a business - a fresh examination'

'In the course of a business' - a fresh examination.

Elizabeth Macdonald,

First Published in Web Journal of Current Legal Issues in association with Blackstone Press Ltd.

Summary

In Stevenson v Rogers [1999] 1 All ER 613 the Court of Appeal had to consider the meaning of 'in the course of a business' in the context of the Sale of Goods Act 1979, s14(2), where it limits the statutory implication of a term as to the quality of the goods to sales where sellers are acting 'in the course of a business'. The court rejected the meaning given to that phrase in the context of the Trade Descriptions Act 1968 and the Unfair Contract Terms Act 1977 and took a broader approach. It will be contended that the broader meaning would also be more appropriate than that currently adopted in relation to the definition of 'deals as consumer' under the Unfair Contract Terms Act 1977.

In Stevenson the defendant had been a fisherman for some twenty years. He sold his boat the Jelle to the plaintiff in April 1988, intending to have a new boat built to his requirements. Shortly afterwards he changed his mind and in May, purchased another boat, the Marilyn Jane. He had previously owned and sold one other boat, the Dolly Mopp. The plaintiff claimed that the Jelle was not of merchantable quality within the term then implied by the Sale of Goods Act 1979, s14(2). (Since the amendments made by the Supply of Goods and Services Act 1994, the term implied by s14(2) is that goods are of 'satisfactory quality'). However, a requirement of merchantability was only implied if the sale was made 'in the course of a business' (and that remains the case in relation to satisfactory quality). The meaning to be given to the phrase 'in the course of a business' came to be considered as a preliminary matter.

Approach at first instance - other statutory contexts

Under the Unfair Contract Terms Act 1977, s12, and the Trade Descriptions Act 1968, s1, the courts have taken the line that basically a sale will only be made by a seller in the course of a business if it is either (i) integral to the seller's business, in itself, or (ii) if merely incidental to that business, regularly occurring (eg R&B Customs Brokers v United Dominion Trust [1988] 1 All ER 847; Davies v Sumner [1984] 3 All ER 831; Havering LBC v Stevenson [1970] 3 All ER 609). 'One off adventures in the nature of trade' have also been identified as being made 'in the course of a business' in those statutory contexts (eg R&B Customs Brokers v United Dominion Trust [1988] 1 All ER 847; Davies v Sumner [1984] 3 All ER 831), but such cases fall within (i) and, in any event do not require separate consideration here. Applying the basic alternatives in (i) and (ii) above, the judge at first instance in Stevenson v Rogers concluded that the defendant's sale of his fishing boat did not occur 'in the course of a business' and that no term as to the quality of the boat was implied by s14(2). Clearly there was no regular pattern of such sales by the defendant, and the question of whether a transaction is 'integral' to a business depends upon the transactions carried out by a business as such and not what it uses to facilitate those transactions. A car is key to the way in which a courier by car, or a taxi business, earns money but the sale of a car is, in itself, integral to neither (Davies v Sumner [1984] 3 All ER 831; Devlin v Hall [1990] RTR 320). It is only if the business is buying and selling cars that the sale of a car is integral to the business and similarly, the sale of a ship by a fisherman is not integral to his business (Stevenson v Rogers Potter LJ at 626).

Court of Appeal - meaning under the particular Act

However, the Court of Appeal in Stevenson v Rogers held that the judge had not applied the correct test in determining whether the sale was 'in the course of a business' within the Sale of Goods Act 1979, s14(2). The phrase had first appeared in the context of the implied term when it was amended by the Supply of Goods (Implied Terms) Act 1973. Until then the Sale of Goods Act 1893 had implied the term as to merchantability only where goods were 'bought by description from a seller who deals in goods of that description'. The change to a requirement that the sale be made 'in the course of a business' was to broaden the availability of the implied term. It was made to ensure that 'every buyer from a business seller should have a right ... to receive goods of merchantable quality' (Law Com No 24, para 46). The obligation was to be imposed on 'every trade seller no matter whether he is or is not habitually dealing in goods of the type sold' (Law Com No 24, para 31, note 29). In other words, the reference to sales 'in the course of a business' in s14(2) was not intended to be restrictive of the application of the implied term, but was to remove any requirement of regularity of dealing in the goods sold. In Stevenson v Rogers Potter LJ made the comment (at 623) that the phrase was there to:

On the basis of the approach taken in Stevenson v Rogers, as long as a sale is even incidental to the seller's business, and not a 'purely private sale', it should be in the course of a business for the purposes of s14(2), and that is in keeping with the legislative history of the subsection.

Unfair Contract Terms Act 1977, s12

However, consideration should now be given to the appropriate approach to be taken to the phrase 'in the course of a business' in the Unfair Contract Terms 1977, s12, where it is central to the meaning of 'deals as consumer' - a categorisation which can be of considerable significance in the application of the Act. Section 3, for example, renders ineffective unreasonable exemption and related clauses in contracts where the party against whom it is sought to use the clause 'deals as consumer' or on the other party's 'written standard terms of business'. In relation to sale of goods contracts, s6 prevents a seller excluding or restricting liability for breach of the terms implied by the Sale of Goods Act 1979, ss13-15, if the buyer 'deals as consumer'. If the buyer does not 'deal as consumer', the seller can exclude or restrict liability, but only if the term satisfies the requirement of reasonableness. (The Unfair Contract Terms Act 1977, s6, also makes similar provision for hire purchase contracts and see also sections 7 and 4).

The definition of 'deals as consumer' is in the Unfair Contract Terms Act 1977 s12(1), which states:

(There is an additional requirement, (c), as to the 'type' of goods in contracts dealing with goods, but that is not of significance here). The point to be made here is that clearly, the meaning given to 'in the course of a business' is central to the question of who 'deals as consumer' and as has been indicated, that phrase was considered in this context in R&B Customs Brokers v United Dominion Trust [1988] 1 All ER 847. In that case, the court was concerned with the purchase of a car by a company which was in business as a freight forwarding agent. The car did not comply with the terms implied by the Sale of Goods Act 1979, s14(2) and s14(3). The vehicle was intended for use by the two directors of the company and it was the second or third such transaction by the company. Whether the sellers had excluded liability for breach of the terms implied by the 1979 Act depended on whether the purchasing company had dealt as consumer, within the definition in the Unfair Contract Terms Act, s12, in making the purchase and that, in turn, depended upon whether it had bought in the course of a business. The approach taken by the Court of Appeal has already been indicated and clearly the purchase was not integral to a freight forwarding business nor one regularly carried out by the company.

Effect of the R&B Customs Brokers' approach.

The narrow approach taken to 'in the course of a business' in R&B Customs Brokers enabled the greater protection provided by the Unfair Contract Terms Act 1977 to purchasers who deal as consumers to be extended in one direction. It allowed merely incidental, and not regularly occurring, business purchases to gain that protection. However, although at first sight extending the protection provided by the 1977 Act, the approach taken to 'in the course of a business' by the Court of Appeal in R&B Customs Brokers is inappropriately restrictive of it. It is inappropriately restrictive because of the use of the phrase 'in the course of a business' in both s12(i)(a) and s12(i)(b) and this point can be most easily made by the use of a simple example. Suppose that there was nothing wrong with the car when R&B bought it, but that it did have the relevant defects when sold by R&B to a purchaser, X, who clearly had no business connections. On the basis of the approach taken in R&B Customs Brokers, X would not be dealing as consumer in making the purchase. Clearly, X would not have bought in the course of a business, but that only fulfills the requirement in s12(i)(a). In order for X to have dealt as consumer, it is also required by s12(i)(b) that the seller must have sold 'in the course of a business' and equally clearly that would not have been the case (the sale would not have been integral to the seller's business and there would have been no sufficient regularity). In R&B Customs Brokers in extending the protection afforded to those who deal as consumers to the type of purchase by a business there considered, the Court of Appeal took more appropriate cases outside of the scope of that protection. The line taken by the court in Stevenson v Rogers would not have allowed R&B to be regarded as dealing as consumer in purchasing the vehicle, but it would mean that a sale by someone in the position of R&B to a person with no business connections would be to a party 'dealing as consumer'.

Other support for a broader approach

Other than the simple example given above, it is possible to find other support for the argument that the line taken in Stevenson v Rogers would also be appropriate in relation to the Unfair Contract Terms Act 1977. Firstly, it is possible to find some support for a move away from the R&B Customs Brokers approach in the fact that it was it was not applied by the court in St Alban's City and District Council Ltd v International Computers Ltd [1995] FSR 686. There Scott Baker J considered that the local authority had not 'dealt as consumer' in contracting for a new computer program to deal with the Community Charge. He reached that conclusion simply on the basis that the definition of `business' in the Unfair Contract Terms Act 1977, s14, includes ' the activities of any ... local or public authority'. He moved from the definition of business to the decision that the council contracted 'in the course of a business' and did not 'deal as consumer', without any consideration of the relationship of the transaction to the 'business' of the local authority (ie whether the transaction was integral to it) or whether it was a transaction regularly carried out by the local authority. In other words, he made no attempt to apply the R&B Customs Brokers approach to whether the transaction was 'in the course of a business', but took a much wider approach to that phrase, simply treating it as covering a transaction carried out by a business. (The issue was not addressed on appeal as the council accepted that 'in the light of s12(1)(a) and the definition of "business" in s14' it did not deal as consumer - see Nourse LJ [1996] 4 All ER at 490. See also the assumption that the hirers of a photocopier contracted 'in the course of a business' in Lease Management Services v Purnell Secretarial Services [1994] Tr L 337 at 344. Contrast Peter Symonds & Co v Cook [1981] NLJ 758, Lexis).

In Stevenson v Rogers the court appealed to legislative history to justify its approach. Similarly, the background to the Unfair Contract Terms Act 1977 provides further support for the idea of utilizing that approach in the context of s12 of that Act. The reference to 'in the course of a business' in the context of the Unfair Contract terms Act 1977, s12, originated in the Supply of Goods (Implied Terms) Act 1973, alongside the amendment to the Sale of Goods Act 1893 (subsequently 1979, s14(2)), indicated above. In Stevenson v Rogers the court was not willing to allow that fact to influence the meaning they were giving to the Sale of Goods Act 1979, s14(2), but the link is clearly there. It would seem odd for the same phrase to have been used to different effect in neighbouring sections of the 1973 Act and if the Court of Appeal has now identified the correct approach to that phrase in the context of the Sale of Goods Act 1979 s14(2), that may provide an impetus to modify the line taken under the Unfair Contract Terms Act 1977. Of course, the 1973 Act defined 'consumer sales', and that was not identical to the definition in the Unfair Contract Terms Act 1977, s12, of 'deals as consumer', but the point can still be made as to the same, original, source for the use of the phrase 'in the course of a business' in both the sale of Goods Act 1979, s14(2), and under the Unfair Contract Terms Act 1977, s12. In addition, the point can also be made, that there was every reason for the Court of Appeal in Stevenson v Rogers not to bring their approach into line with an incorrect one and their refusal to apply R&B Customs Brokers does not deny the impetus towards the adoption of the same approach under the Unfair Contract Terms Act 1977 as has now been taken under the Sale of Goods Act 1979.

Another, argument in favour of a broader approach to 'in the course of a business' under the Unfair Contract Terms Act 1977, is that the phrase does not only appear in s12 of that Act. It also appears in s1, where it assists in setting the scope of the Act. Basically, the protection afforded by the Unfair Contract Terms Act 1977 extends to 'business liability', the definition of which appears in s1 and in which the phrase 'in the course of a business' is again key. The scope of the Act would be far too restricted if the R&B Customs Brokers' approach prevailed in that context, but there is considerable impetus to giving the same meaning to the same phrase used in different sections of the same Act.

The final points to be made here concern the natural interpretation of the phrase 'in the course of a business' and also the source of the line taken in R&B Customs Brokers. The point has been made that the phrase is 'in the course of a business' and not 'in the course of business' and that whereas the 'latter suggests acts limited to the kind of business in which a person is engaged', the former merely 'suggests things done by and for a business' (Kidner 1987, at p 53). In other words, the broader approach taken in Stevenson v Rogers reflects the more natural meaning of the words used. Additionally, the point can be made, that in R&B Customs Brokers the Court of Appeal was adopting the approach taken under the Trade Descriptions Act 1968. The statutes may broadly share a purpose of consumer protection, but it must not be lost sight of that the 1968 Act involves criminal offences. It is appropriate to narrowly construe a provision which sets the limits of criminal liability. There is no similar impetus to narrow construction when what is in question is a statute which will impact upon civil liability. There are far better reasons for bringing the Unfair Contract Terms Act 1977 into line with the Sale of Goods Act 1979, than for construing either of them in the same way as an Act imposing criminal liability.

Conclusion

There is every reason to view as unsatisfactory the approach taken in R&B Customs Brokers to the meaning of 'in the course of a business' in the Unfair Contract Terms Act 1977, s12. That point is made clearly enough when the effect of that approach is viewed in the light of the double use of that phrase in that section. In Stevenson v Rogers, in construing the Sale of Goods Act 1979, s14(2), the Court of Appeal took a much more appropriate approach to the meaning of 'in the course of a business' and that could provide a basis for reconsideration of the Unfair Contract Terms Act 1977, s12.

Bibliography

Kidner, R (1987) `The Unfair Contract Terms Act 1977 - Who Deals As Consumer?' 38 Northern Ireland Legal Quarterly 46.

Law Commission No 24 (1969), Exemption Clauses in Contract First Report: Amendments to Sale of of Goods Act 1893 (London: HMSO) HC 403 of 1968-69.

United Kingdom Journals

'In the course of a business' - a fresh examination.

Elizabeth Macdonald,