MESSER UK LIMITED and Anr. v BRITVIC SOFT DRINKS LIMITED and Others [2002] EWCA Civ 548

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL ( CIVIL DIVISION)
ON APPEAL FROM THE QUEEN’S BENCH
DIVISION (COMMERCIAL COURT)
(TOMLINSON J.)
[2002] EWCA Civ 548Case No Case No: A3/2001/1385Venue Royal Courts of Justice, Strand,, London, WC2A 2LL
Between
MESSER UK LIMITED and Anr.AppellantsBRITVIC SOFT DRINKS LIMITED and OthersRespondents
Before
Lord Justice ThorpeLord Justice ManceMr Justice NeubergerAndrew Prynne QC, Charles Gibson QC & Geraint Webb (instructed by Messrs Eversheds) for the AppellantsJohn McCaughran (instructed by Messrs Nicholson Graham & Jones) for the RespondentsDate 30 April 2002

Lord Justice Mance:

Introduction

[1]This appeal now relates to very limited parts of a judgment which was handed down by Tomlinson J on 9th May 2001 and extends to 130 pages.[2]The litigation arises from the discovery in May 1998 that carbon dioxide being produced at the Severnside, Bristol chemical plant operated by Terra Nitrogen (UK) Limited ("Terra") contained trace levels of benzene. It was subsequently ascertained that the cause was a leak, which had enabled natural gas, containing benzene, to by-pass the reforming section of the plant where it would normally have been removed. Benzene in sufficiently high quantities is a carcinogen.[3]In the months prior to the discovery, Terra had supplied quantities of carbon dioxide, contaminated in this way with benzene, to Messer UK Limited. Messer had in turn sold it on to a variety of end users, including the four respondents, Britvic Soft Drinks ("Britvic"), Bass Brewers Limited ("Bass"), Thomas Hardy Packaging Limited ("THP") and to Brothers Drinks Company Limited ("Brothers") who had used it in the manufacture of sparkling drinks. These as a result contained traces of benzene, although not in quantities that could pose any risk to health. Considerable publicity was nonetheless given to the discovery. The travails of Perrier, following somewhat similar contamination of its product by carbon dioxide in 1990, were well-known, and the claimants had to allay public concern regarding contamination and to protect its business by withdrawing from wholesalers quantities of the drinks which had been manufactured and remained unsold. The present claim was brought to recover loss thereby suffered.[4]The judge found that the only relevant express term of the supplies to Britvic and Bass was that the carbon dioxide would conform with British Standard 4105 ("BS 4105"). He held that, both under the terms of BS 4105 and under terms to be implied by virtue of s. 14 of the sale of Goods Act 1979, Britvic and Bass were entitled to recover damages from Messer in respect of such supplies in the amounts of respectively, £2,077,195 and £80,500. The appeal which was brought with the judge's permission against that conclusion has now been abandoned. But the appellants continue to argue, for reasons which will appear, that the judge was wrong to rely on the terms of BS 4105 as containing any undertaking relevant to the presence of benzene.[5]I turn next to the supplies made by Messer to THP and Brothers. Any claims which THP and Brothers have against Messer arising out of these supplies have been assigned by THP to Bass. The judge held that Bass was in this capacity entitled to recover a further £34,500 from Messer. The correctness of the judge's conclusion in that regard is the remaining issue on this appeal. It is however of considerable significance for other proceedings, including those between Barcardi-Martini Limited, THP, Messer and Terra [2002] EWCA Civ 549 the appeal in which was argued before us immediately after the present.[6]Messer's supplies to THP and Brothers were made under the terms of two contracts in, for present purposes, materially identical terms. The first contract was signed with Brothers on 30th January 1997, the second with THP on 13 th May 1997. The contract with Brothers covered an estimated annual requirement of 220 tonnes for a minimum of five years. The contract with THP provided for THP to order and Messer to supply a minimum of 750 tonnes and of five years. Each contract was on Messer’s standard terms providing, inter alia, as follows:
“Definitions In this contract: 2.3 'Equipment' means storage vessel(s) together with associated vaporising and/or other Equipment, which is supplied to the Customer by Messer under a separate Contract agreement. 2.4 'Standard' means Messer's industrial grade specifications for the Gas. 2.5 'Delivery Point' means the place at the Premises at which the Gas leaves the flexible hose connected to the Messer road or rail tanker which is used to transfer the Gas into the Equipment. …. 8.3 Messer shall deliver the Gas by discharging it into the Equipment or such other storage vessels as have been agreed by Messer to be both safe and suitable for the storage of Gas. The risk but not the property of the Gas shall pass to the Customer on delivery to the Delivery Point. Subject to Clause 2.0 of Messer's Conditions of Sale the property of the Gas shall pass to the Customer on payment in full of the Contract price. 8.4 Messer will measure the quantities delivered by the method it customarily uses for the type of delivery made. Messer's delivery of the Gas into the Equipment at the Customer's Premises will constitute the Customer's purchase thereof ….. 8.7 The Customer will: 8.7.1 determine the suitability, compatibility and proper use of the Gas supplied by Messer; 8.7.2 have the right, in order to verify compliance of any Gas delivered, to obtain and install devices on the Customer's distribution system in order to sample such Gas prior to use., 8.7.3 monitor the inventory of the Gas in the Equipment and shall regularly advise Messer of the level thereof The Customer shall order the Gas from Messer in sufficient time to permit delivery prior to effective exhaustion of such inventory; 11.0 Warranty 11.1 Messer warrants that the purity of the Gas is not less than that laid down in the Standard. All other implied warranties and conditions as to quality or description are excluded except to the extent that such exclusion is prevented by law. 11.2 It is the Customer's responsibility to satisfy itself that the Gas is suitable for the purpose for which the Customer intends to use it. Recommendations relating to the use of the Gas made by Messer, in writing or otherwise, are given in good faith but no warranty is given as to the suitability of the Gas for any particular purpose. 12.0 Limitation of Liability 12.1. Subject to any other limitation or exclusion of liability expressed elsewhere in this Contract, the liability of Messer, its employees and Agents to the Customer in respect of personal injury or direct physical damage to property (and losses, costs and expenses directly arising ftom such injury or damage), whether through negligence or otherwise, shall be limited to £500,000 in respect of any one incident, except that nothing in this Contract shall restrict Messer's liability to an injured person or his personal representatives for personal injury or death resulting from negligence. 12.2 Messer, its employees and Agents shall have no liability whatsoever in respect of losses, costs or expenses of a purely financial or economic nature (including, but not limited to, loss of profits, loss of use or other consequential loss), or any other loss or damage not covered in Clause 12. 1, unless such loss, cost, expense or damage be caused by Messer supplying Gas that is not of the purity warranted or by failure to deliver or by late delivery of Gas by Messer and unless such defective or late delivery or failure to deliver is notified within five days of the delivery or failure to deliver is notified within five days of the delivery or intended delivery, in which case Messer's liability shall be limited to the value of the quantity of Gas concerned (at Messer's selling price).”
[7]Messer’s industrial grade specification for the gas provided as follows:
“1. PURCHASE SPECIFICATION 1. A solution of the gas in water shall be free of any objectionable taste or odour. …. 4. Hydrocarbons (as CH) 10ppm by volume 2. SALES SPECFICATION The product complies with BS 4105: 1990 and BS 6535 The product meets the requirements of the Miscellaneous Food Additives Regulations SI 3187 wherein it is referred to as “E290”.”
A summary of the specific requirements of BS 4105 followed.[8]BS 4105 (as it was formulated at the relevant time) consisted of a foreword, a general section 1, followed in sections 2 and 3 by descriptions and specifications of particular constituent elements for carbon dioxide types 1 and 2, then by appendices dealing with sampling and methods for determination of the amount of such particular elements, and finally by figures showing such methods or the equipment used. Section 1 provides as follows:
“ Section 1. General 1. Scope This British Standard specifies two types of carbon dioxide for industrial use. Type 1 is suitable for industrial non-food applications, e.g. purging, inerting, life raft inflation. Type 2 is a higher quality grade which is also suitable for industrial food applications, e.g. beverages, gas packaging, food freezing and chilling. Note 1. Type 2 carbon dioxide is covered by the specific and general criteria of purity laid down in The Miscellaneous Additives in Food Regulations 1980 (SI 1980 No. 1834) in which carbon dioxide is referred to as E290. This standard does not apply to carbon dioxide for: (a) medical use, for which a specification is included in the British Pharmacopoeia., (b) fire fighting, for which BS 6535: Part 1 applies; (c) welding. Note 2. Throughout this standard, concentrations expressed by mass or volume are at a temperature of 20'C and 101.3 kPa 1 pressure. Note 3. The titles of the publications referred to in this standard are listed on the inside back cover. 2. Definition For the purposes of this British Standard the following definition applies. carbon dioxide A high pressure liquefiable gas expressed by the chemical formula C02.”
[9]It is common ground that the carbon dioxide agreed to be supplied by Messer to Brothers and THP was of type 2. Section 3 of BS 4105 provides in relation to type 2:
“ Section 3. Carbon dioxide, type 2 8 Description The product shall consist essentially of carbon dioxide, C02, in liquid form. A carbonated solution of the product in tasteless water, with a headspace vapour pressure of 300 kPa at 200C, shall be free from any objectionable taste or odour. 9 Sampling The product shall be sampled from the liquid phase by the method specified in the appropriate method of test and as described in appendix A. Care shall be taken to purge the valve and connecting line before taking a sample. Note. Attention is drawn to the provisions of BS 341: Part l. 10 Residual gases content . ...... 11 Water content …… 12 Oil content …… 13 Content of sulphur compounds …… 14 Content of nitric oxide (NO) and nitrogen dioxide (N02) …… 15 Packaging and identification …… ”
The first point – the scope of BS 4105[10]The judge concluded that “the gas supplied simply did not conform with the words of description in BS 4105, in other words .... that the gas supplied was not suitable for industrial food applications". He went on to say that 'It is implicit in this conclusion that they [the claimants] are equally entitled to succeed on the broader basis of breach of the statutory implied terms” - referring to the undertakings in respect of satisfactory quality and fitness for purpose arising prima facie under s. 14 of the Sale of Goods Act 1979.[11]As regards BS 4105, Mr Prynne QC submits before us, as he submitted before the judge, that this conclusion involved a misreading of, and attached too extensive a meaning to, BS 4105. BS 4105 is in his submission concerned to identify certain scientific characteristics considered essential in carbon dioxide for industrial food applications, here used in beverages. It also covers taste and odour. It does not deal with other characteristics, and does not contain any general undertaking of satisfactory quality or fitness for purpose. In so far as any such undertaking exists, it must be found in other express or implied terms of the relevant contract. Thus, he now accepts, the judge was right to hold Messer liable to Britvic and (as regards Messer's sales to Bass) Bass for breach of the Sales of Goods Act terms as to satisfactory quality and fitness for purpose. Despite the fact that the quantities of benzene present in the sparkling water were in medical terms negligible, they were in commercial terms (especially following the Perrier water debacle of the early 1990s) dynamite. The carbon dioxide supplied was on this basis wholly unsatisfactory and unfit for its purpose. However, Mr Prynne submits, the judge was wrong to find in the terms of BS 4105 any basis for holding Messer liable.[12]Mr McCaughran for the claimants responds that this would involve the unacceptable conclusion that a British Standard does not in fact set an appropriate standard for carbon dioxide. That assumes however that the authors of BS 4105 succeeded in identifying and covering every conceivable matter, or at least every conceivable physical matter, that could bear on the quality and fitness for purpose of the carbon dioxide. Mr McCaughran accepts that what BS 4105, as it was in force at the relevant time, did was to identify and set specifications for characteristics that might be expected to be present in carbon dioxide. It did not refer to or specify any test for benzene, because no-one foresaw any risk of benzene being present in carbon dioxide. For the like reason, it did not (for example) refer to or set any test for strychnine or arsenic.

The judge relied on the sentence, appearing in Section 1 of BS 4105:

[13]"Type 2 is a higher quality grade which is also suitable for industrial food applications, e.g. beverages ….”. But this sentence amounts at most to a representation that carbon dioxide complying with the specifications identified for type 2 and free of any objectionable taste and odour "will be suitable for industrial food applications, e.g. beverages. The representation may be understood as confined to characteristics that could in the ordinary course of manufacture be expected to be present, and, if it is to be understood more widely, then it may be said simply to be wrong. But in each case this is because BS 4105 does not address or cover the possibility of other contaminants, such as benzene, which no-one would have expected would be present in the final product, and everyone would assume would have been excluded in the manufacturing process. It provides no basis for reading BS 4105 either as covering such other contaminants or as containing a general contractual undertaking of suitability.[14]A further consideration is that Mr McCaughran did not suggest that any undertaking of suitability to be derived from the reference in BS 4105 to "a higher quality grade which is also suitable for industrial food applications" could extend beyond matters arising from the physical composition of the carbon dioxide. But the present case indicates that the resulting distinction would not necessarily be easy to draw. The objection to the use of the material did not rest on any actual threat to health, but on public perception and the risk of damage to reputation. In another case, carbon dioxide might be unsuitable for industrial food application, simply because it included an ingredient which the media or public perceived as the product of sweated labour in a producer country.[15]Nor do I think that the respondents obtain any assistance on this point from the wording of Messer's conditions, incorporated into the contracts with THP and Brothers. Leaving on one side the issue of the validity of some of those conditions, it seems to me, if anything, that they would tend to underline the relatively limited role of BS 4105 - cf e.g. the warranty in clause11.1 'that the purity of the Gas is not less than that laid down in the Standard" - a reference to Messer's printed standard which in turn identifies and summarises BS 4105; and the attempts in clause11.2 to impose responsibility for assessing suitability on THP and Brothers.[16]1 therefore accept the submissions of Mr Prynne and conclude that the judge was wrong to treat BS 4105 as containing any express term relevant to benzene for breach of which the claimants could obtain damages from Messer. It follows that the respondents, Bass, as assignees of THP and Brothers, can only claim against Messer if they can rely on undertakings as to satisfactory quality and fitness for purpose implied by virtue of s. 14 of the Sale of Goods Act 1979. The second point – the reasonableness of clause11.1 and11.2 [17]That leads to the second point argued before us. Messer relied in its defence upon the terms of clauses 11. 1 and 11. 2 "to limit its liability", by excluding any liability for breach of any implied undertaking of satisfactory quality or fitness for purpose under s. 14 of the 1979 Act. Bass replied that clauses 11. 1 and 11.2 did not satisfy the requirement of reasonableness in the Unfair Contract Terms Act 1977. That statute provides as follows: “2 Negligence liability(1) A person cannot by reference to any contract term or to a notice given to persons generally or to particular persons exclude or restrict his liability for death or personal injury resulting from negligence.(2) In the case of other loss or damage, a person cannot so exclude or restrict his liability for negligence except in so far as the term or notice satisfies the requirement of reasonableness.(3) Where a contract term or notice purports to exclude or restrict liability for negligence a person's agreement to or awareness of it is not of itself to be taken as indicating his voluntary acceptance of any risk. 3 Liability arising in contract (1) This section applies as between contracting parties where one of them deals as consumer or on the other's written standard terms of business. (2) As against that party, the other cannot by reference to any contract term-- (a) when himself in breach of contract, exclude or restrict any liability of his in respect of the breach; or (b) claim to be entitled-- (i) to render a contractual performance substantially different from that which was reasonably expected of him, or (ii) in respect of the whole or any part of his contractual obligation, to render no performance at all, except in so far as (in any of the cases mentioned above in this subsection) the contract term satisfies the requirement of reasonableness. 6 Sale and hire-purchase (2) As against a person dealing as consumer, liability for breach of the obligations arising from-- (a) [section 13, 14 or 15 of the 1979 Act] [FN2] (seller's implied undertakings as to conformity of goods with description or sample, or as to their quality or fitness for a particular purpose); (b) section 9, 10 or 11 of the 1973 Act (the corresponding things in relation to hire-purchase), cannot be excluded or restricted by reference to any contract term. (3) As against a person dealing otherwise than as consumer, the liability specified in subsection (2) above can be excluded or restricted by reference to a contract term, but only in so far as the term satisfies the requirement of reasonableness.(4) The liabilities referred to in this section are not only the business liabilities defined by section 1(3), but include those arising under any contract of sale of goods or hire-purchase agreement. 11 The "reasonableness" test (1) In relation to a contract term, the requirement of reasonableness for the purposes of this Part of this Act, section 3 of the Misrepresentation Act 1967 and section 3 of the Misrepresentation Act (Northern Ireland) 1967 is that the term shall have been a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made. (2) In determining for the purposes of section 6 or 7 above whether a contract term satisfies the requirement of reasonableness, regard shall be had in particular to the matters specified in Schedule 2 to this Act; but this subsection does not prevent the court or arbitrator from holding, in accordance with any rule of law, that a term which purports to exclude or restrict any relevant liability is not a term of the contract. (3) In relation to a notice (not being a notice having contractual effect), the requirement of reasonableness under this Act is that it should be fair and reasonable to allow reliance on it, having regard to all the circumstances obtaining when the liability arose or (but for the notice) would have arisen. (4) Where by reference to a contract term or notice a person seeks to restrict liability to a specified sum of money, and the question arises (under this or any other Act) whether the term or notice satisfies the requirement of reasonableness, regard shall be had in particular (but without prejudice to subsection (2) above in the case of contract terms) to-- (a) the resources which he could expect to be available to him for the purpose of meeting the liability should it arise; and (b) how far it was open to him to cover himself by insurance.(5) It is for those claiming that a contract term or notice satisfies the requirement of reasonableness to show that it does. …. SCHEDULE 2 GUIDELINES" FOR APPLICATION OF REASONABLENESS TEST The matters to which regard is to be had in particular for the purposes of sections 6(3), 7(3) and (4), 20 and 21 are any of the following which appear to be relevant-- (a) the strength of the bargaining positions of the parties relative to each other, taking into account (among other things) alternative means by which the customer's requirements could have been met; (b) whether the customer received an inducement to agree to the term, or in accepting it had an opportunity of entering into a similar contract with other persons, but without having to accept a similar term; (c) whether the customer knew or ought reasonably to have known of the existence and extent of the term (having regard, among other things, to any custom of the trade and any previous course of dealing between the parties); (d) where the term excludes or restricts any relevant liability if some condition is not complied with, whether it was reasonable at the time of the contract to expect that compliance with that condition would by practicable; (e) whether the goods were manufactured, processed or adapted to the special order of the customer.[18]It was accepted both before the judge and before us that clauses11.1 and11.2 of Messer’s conditions purport to exclude Messer's liability for breach of the implied terms arising from s. 14 of the Sale of Goods Act 1977, within the meaning of s.6(2) and (3) of the l977 Act, and so that it is for Messer to show that such clauses satisfy the requirement of reasonableness, having regard in particular to the matters specified in Schedule 2 to the Act.[19]The judge, after considering what he identified as the relevant circumstances, found that the clauses did not satisfy that requirement. In these circumstances, the correct approach in this court is that prescribed in Mitchell (George)_(Chesterfield) v. Finney Lock Seeds Ltd. [1983] 2 AC 803, 815-6 per Lord Bridge:
“It may, therefore, be appropriate to consider how an original decision as to what is "fair and reasonable" made in the application of any of these provisions should be approached by an appellate court. It would not be accurate to describe such a decision as an exercise of discretion. But a decision under any of the provisions referred to will have this in common with the exercise of a discretion, that, in having regard to the various matters to which the modified section 55 (5) of the Act of 1979, or section 11 of the Act of 1977 direct attention, the court must entertain a whole range of considerations, put them in the scales on one side or the other, and decide at the end of the day on which side the balance comes down. There will sometimes be room for a legitimate difference of judicial opinion as to what the answer should be, where it will be impossible to say that one view is demonstrably wrong and the other demonstrably right. It must follow, in my view, that, when asked to review such a decision on appeal, the appellate court should treat the original decision with the utmost respect and refrain from interference with it unless satisfied that it proceeded upon some erroneous principle or was plainly and obviously wrong.”
[20]I start with the scope of clauses11.1 and 11.2. Clause 11.1 warrants a purity not less than that laid down in Messer's standard, which in turn incorporates BS 4105. This cannot be read as an absolute warranty of "purity" in the abstract, or of anything other than compliance with Messer's standard. The clause qualifies its exclusion of other warranties “to the extent that such exclusion is prevented by law”. But this qualification simply refers to, and requires consideration of, the potential effect of the 1977 Act. Mr Prynne suggested in opening the appeal that clauses 11.1 and11.2 might leave room for an implied undertaking that the carbon dioxide supplied would not be injurious to health, contrary to the Food Safety Act 1990, which could cater for possibilities such as the presence of strychnine. But, except in cases where the purity of the carbon dioxide laid down in Messer's standard was affected, clauses 11.1 and 11.2 would in terms exclude any such implied undertaking, and there is nothing in ss.7 and 8 of the Food Safety Act 1990 to override such exclusion.[21]The judge accepted that the parties were to be regarded as having been of equal bargaining power - see paragraph (a) in Schedule 2 to the Act. There were other suppliers (Hydrogas and BOC) to which THP and Brothers could have gone. The judge also treated it as axiomatic for the purposes of paragraph (c) that "on the footing that the terms are applicable at all” the buyers "must be regarded as cognisant of their existence and effect". I am not satisfied that paragraph (c) can be quite so easily disposed of. Contractual incorporation may in some circumstances occur without a party either knowing, or being realistically in a position where he or it can be blamed for not knowing, of the extent of certain terms. Take someone contracting for the carriage of a parcel by rail or air on the carriers' standard conditions. No-one really expects him to obtain or read the terms. Nor do I think that paragraph (c) is to be necessarily even to be read as equating the positions of someone who actually knows and someone who "ought reasonably to have known" of the existence and extent of a term. It seems to me legitimate to consider and take into account the actual extent and quality of the knowledge of a party, however much he or it may, under ordinary contractual principles, have become contractually bound by the particular term(s).[22]Thus, in the case of Watford Electronics Ltd. v. Sanderson CFL Ltd. [2001] EWCA Civ 317 ; [2001] 1 AER 696, cited to the judge and to us, the judge found as a relevant factor under paragraph (c) that the buyer of the relevant software was "aware of the existence of the term, only first learned of its existence towards the end of the pre-contract discussions, attempted unsuccessfully to have it substantially amended, only succeeded in achieving a make-weight amendment and learnt from Sanderson [the supplier] that a term excluding liability was standard software industry practice."[23]The Court of Appeal in Watford , in upholding the validity of an exclusion of liability for any "claims for indirect or consequential losses whether arising from negligence or otherwise", regarded that as a most material factor, as appears from the judgment given by Chadwick LJ (with which Buckley J agreed) at paragraphs 54(vii) and 56 and that of Peter Gibson LJ at paragraph 62(4). In the present case, the commercial and contractual background were significantly different. The manufacture of carbon dioxide so as to exclude benzene does not compare with the provision of software (an exercise notoriously liable to give rise to problems). No-one would have contemplated that the manufacturing process would allow benzene in, or (despite clause 11. 2) that the buyers (THP and Brothers) would test for benzene, or indeed for compliance with BS 4105, which Messer anyway warranted. The parties did not discuss or negotiate with regard to the specific provisions of the contract, clauses11.1 and11.2 in particular. Clauses 11.1 and 11.2 were simply incorporated as part of Messer's standard provisions. Although this is not a consideration specifically identified in Schedule 2, it seems to me that it can be relevant under paragraph (c) and anyway as a general consideration under s. 11(2) (cf also by analogy s. 3(1)).[24]Messer's basic contention, as the judge recognised, was and is that it was reasonable for it as a supplier (but not a manufacturer) to limit its liability to compliance of the carbon dioxide supplied with BS 4105, on the basis that this represented the contemporary understanding of the required purity. The judge in rejecting this said: “I suspect that if the parties had been asked when they were contracting on whom should lie the risk of a breakdown in the manufacturing process permitting the unexpected introduction into the CO2 of a redundant carcinogen in quantities which, whilst not injurious to health would render products made using that CO2 unsaleable, they would have unhesitatingly replied that of course that risk should be borne by the supplier...... In my judgment it is wholly unreasonable for the supplier of a bulk commodity such as CO2 for a food application to seek to exclude liability for the commodity not being of satisfactory quality or being unfit for its purpose where that has come about as a result of a breakdown in the manufacturing process allowing the inadvertent introduction of a redundant carcinogen."[25]Messer submits that the judge was in this first sentence posing the wrong question. He was taking advantage of hindsight, and his knowledge of what had actually happened and its consequences, instead of asking whether the term was a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.[26]In my judgment, however, the judge was entirely justified in rejecting Messer's submission that it was reasonable for it as a supplier (and not a manufacturer) to limit its liability to compliance of the carbon dioxide supplied with BS 4105, on the basis that this represented “the contemporary understanding" of the required purity. The authors of BS 4105 were concerned to regulate the quantities of and methods of testing for elements which carbon dioxide might be expected to contain. They did not identify or regulate other elements, not because the contemporary understanding was that carbon dioxide might contain them, but because the presence of an extraneous or deleterious substance such as benzene or strychnine was wholly unexpected, and could only occur due to some manufacturing or other mishap. If one asks whether it was reasonable to limit Messer's liability to compliance with BS 4105, the answer seems to me, therefore, to be that it ought to have been appreciated that compliance with BS 4105 would not, by itself, necessarily mean that the carbon dioxide supplied was suitable for use. BS 4105 assumed that the process of manufacture and supply would exclude the introduction of other extraneous elements, and so did not actually address such elements. Clauses11.1 and11.2 are thus unreasonable, because they contradict a fundamental assumption that all parties would have made in this respect. Since it is accepted that there was no basis on which the buyers, THP and Brothers, could have been expected to test for extraneous components which they had no reason to consider could be present, and since their presence could only arise from some mishap in manufacture or supply, responsibility should rest on the supplier, Messer, who would be expected to be able to pass it on, where appropriate to the manufacturer, Terra (as it can in fact in the present proceedings). Conclusions[27]Accordingly, I consider that the judge reached the right conclusion on the second ground pursued before us. Although the appellants are right on the first ground, in that BS 4105 contains no express warranty or undertaking of suitability, clauses11.1 and11.2 are not shown to satisfy the requirement of reasonableness and cannot therefore be relied upon by the respondents to exclude their liability for breach of the implied undertakings as to suitability and fitness for purpose, which, as is accepted, arose by virtue of s.14 of the Sale of Goods Act 1979 unless they were validly excluded by clauses 11.1 and 11.2. It follows that this appeal against the judge’s full and helpful judgment fails. Mr Justice Neuberger :[28]I agree, but would add a few words of my own on the sole issue on which we are differing from the Judge, namely, the effect of the parties having contracted for the sale and purchase of carbon dioxide by reference to BS 4105. Mance L J has set out the relevant contents of that document. Paragraph 1 of Section 1 identifies two categories of carbon dioxide, of which the second, Type 2, “higher quality grade”, is in point in this case, because it is “suitable for food applications e.g. beverages …”. Sections 2 and 3 then set out certain specific requirements, which have to be satisfied by Types 1 and 2 carbon dioxide respectively.[29]The issue between the parties is whether the description, in paragraph 1 of Section 1, of Type 2 carbon dioxide as “a higher quality grade which is also suitable for industrial food applications”, resulted in there being carried into the contracts a term that the carbon dioxide supplied would be so suitable. In my judgment, no such term was thereby imported into the contracts. Quite apart from that, on the facts of the present case, if there had been a term to that effect, I doubt that there would have been any breach of the term, in any event.[30]The centrally relevant part of BS 4105, namely the first three sentences of paragraph 1 of Section 1, headed “Scope”, provides as follows:
“This British Standard specifies two types of carbon dioxide for industrial use. Type 1 is suitable for industrial non-food applications, e.g. purging…. Type 2 is a higher quality grade which is also suitable for industrial food applications, e.g. beverages…”
These sentences must, of course, be read in their context. Paragraph 2, the only other paragraph of Section 1, defines carbon dioxide. Section 2, in paragraphs 3 to 7, and Section 3, in paragraphs 8 to 15, then set out certain specific requirements which Types 1 and 2 carbon dioxide “shall” respectively satisfy.[31]The function of the second and third sentences of paragraph 1 of Section 1 of BS 4105 is clearly to identify and explain the two different categories of carbon dioxide, for which there are different specifications: otherwise one would not know what the two Types were. To read the definition of Type 2 (or Type 1) carbon dioxide as going further than identifying and explaining the categorisation, and as amounting to a statement that any sample must, in addition to satisfying the requirements of Section 3 (or Section 2), be “suitable for industrial food applications” (or “suitable for industrial non-food applications”) seems to me to be impermissible. It is the purpose of Section 3 (and Section 2) to identify, on the basis, no doubt, of practical experience and expert scientific, technological, and medical advice, the maximum permitted levels of impurities one might expect to find in carbon dioxide, for Type 2 (and Type 1) uses.[32]To read the second and third sentences of paragraph 1 of Section 1 as being standard-setting, as well as identificatory and explanatory, is contrary to the natural meaning of the words used, particularly in their context, and, indeed, requires them to have a slightly uncomfortable double function. The second sentence of paragraph 1 of Section 1 suggest that Type 1 is merely being described: “Type 1 is suitable …”, not “should be” or “shall be” suitable. That point is reinforced by the use of “shall” and “shall be” in Section 2, which relates to Type 1, and is expressed in similar terms to, albeit with fewer requirements than, Section 3. The same point may be made about the definition of Type 2 in the third sentence of paragraph 1 of Section 1: it “ is a higher quality grade…”, and the contrast of “is” with “shall” and “shall be” in Section 3 speaks for itself. This reading is reinforced by the structure of BS 4105: paragraph 1 of Section 1 simply defines the two categories (a view confirmed by paragraph 2), and the next two Sections specify the standards for each category. Further, as I have mentioned, it is clear that the words of paragraph 1 of Section 1 define and explain Types 1 and 2; it is not therefore likely that they were intended to have the additional and distinctive function of setting a standard. So to hold would involve giving a double meaning to the word “is” in the second and third sentences of paragraph 1, which it does not naturally or comfortably bear.[33]It is true that the task in this case is not to construe BS 4105 on its own, but to do so in the context of the two contracts under which Messer supplied carbon dioxide to THP and to Brothers. However, if the description of Type 2 carbon dioxide in Section 1 of BS 4105 does not amount to a requirement in the document in which it appears, it is difficult to see how it could be converted into a requirement in a contract, which simply incorporates the whole of that document by reference. Further, it is not as if the description of Type 2 carbon dioxide in Section 1 of BS 4105 had no purpose in relation to the contracts: it enabled one to identify which of Sections 2 and 3 applied to the contracts.[34]In addition, if the description of Type 2 carbon dioxide in Section 1 of BS 4105 was intended to operate as a warranty of fitness for industrial food application, there seems to be little point in bothering with Section 3, which sets out maximum concentrations of specific impurities (e.g. oil, sulphur compounds, nitric oxide). The respondents’ answer, namely, that the effect of the specific provisions of Section 3 was to ensure that the buyer could raise no objection to the presence of any impurity mentioned therein, provided that its concentration was no higher than that stipulated in Section 3, does not convince me. First, the conclusion that the provisions of Section 3 of BS 4105 were intended by the contracting parties to protect the seller alone appears to be unlikely, given that the Section is primarily concerned with identifying the maximum permitted concentrations of certain specified substances. Secondly, this argument would have the somewhat paradoxical result that the greater the number of impurities identified in Section 3, the lesser the protection thereby afforded to the buyer. Thus, because Type 1 requires a lower degree of purity than Type 2, Section 2 refers to fewer impurities than Section 3. Yet, on the respondents’ case, Section 3 would give more protection to a seller, and less protection to a buyer, under a contract relating to Type 2, than Section 2 would give under a contract in relation to Type 1, carbon dioxide.[35]For these reasons, as well as those given by Mance LJ, I agree with his conclusion on the first point in this appeal, on which, I think, we heard rather fuller argument than the Judge. I should add that, although it is unnecessary to express a concluded view on the topic, I am not convinced that, even if the respondents were right on this point, it would have assisted their case. BS 4105 appears to me to be concerned with issues relating to health, safety, and matters of that sort, rather than being directed to commercial or marketing considerations. As Mance L J has explained, the concentration of benzene in the carbon dioxide supplied in the present case was so low that it posed no danger to health; its presence was, however, enough to make any drink into which it had been introduced unsaleable. At least as at present advised, I do not consider that that would have been enough to render the carbon dioxide not “suitable for industrial food applications” within the meaning of those words as used in BS 4105, even if the respondents were right as to the effect of incorporating paragraph 1 of Section 1 into the contracts. The suitability problem suffered by the respondents in this case was purely commercial, arising from public perception; there was no physical or physiological danger, and, therefore in my present view, there would have been no want of suitability within paragraph 1 of Section 1, even if it had the effect of amounting to a requirement as the respondents contend.[36]The conclusion derives support by considering the position by reference to impurities specified in Section 3, e.g. sulphur compounds. In sufficient concentration, their presence would, no doubt, be injurious to health; yet paragraph 13 of Section 3 of BS 4105 permits certain (very small) amounts of such compounds in Type 2 carbon dioxide. That protects the buyer: any greater concentration of sulphur compounds would put the seller in breach. However, it also protects the seller: the presence of sulphur compounds to the extent permitted by paragraph 13 of BS 4105 could not form a basis of complaint by the buyer. The maximum permitted concentration of sulphur compounds provided for in BS 4105 is, no doubt, governed by considerations of health and safety, not by concerns about public perception or marketability. If there were a public scare about sulphur compounds in drinks, as there was in relation to benzene, there would be a conflict between the warranty allegedly arising from Section 1, and the provisions of paragraph 13 in Section 3, of BS 4105, unless the alleged warranty is limited to health and safety.[37]As to the second point, the effectiveness of clause11.1 and11.2 of the contracts, in the light of section 3 of the Unfair Contract Terms Act 1977, I have nothing to add to what has been said by Mance LJ, and, indeed by Tomlinson J, with both of whom I agree. Accordingly, I, too, would dismiss this appeal.

Lord Justice Thorpe:

[38]I agree with both judgments.

Cited in 5 later judgments