Scottish Court of Session Decisions

LORD KISSEN'S OPINION.—[After narrating the history of the action, the basis of the action and the parties' pleas-in-law his Lordship continued.]—Pursuer's counsel moved that the pursuer's said fourth plea-in-law should be sustained; that the averments in Answer 6, other than the first sentence, should be excluded from probation; that the first defenders' third plea-in-law should be repelled and that quoad ultra there should be a proof before answer. The first defenders' counsel moved that there should be a preliminary proof on the matters raised in this said third plea-in-law.

The essence of the first defenders' averments, in support of their said third plea-in-law, is a contract of service dated 2nd November 1968, which, they aver, was signed by the deceased "and on behalf of the defenders by the Master of the ship" and under which he was employed at the time of the said accident. It was agreed by counsel for both parties that, for the purposes of the debate on the Procedure Roll, the document, in Norwegian, which is number 10 of process, was to be treated as the original of the said contract and another document, in English, which is number 10

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"(22). Journey to ship, if any, begins—date and place: 2nd November 1968. Tyne. (23). Commencement of service, date and place: 2nd November 1968. Tyne. (24). The engagement applies to voyages in (between): Tyne and further."

The said contract was signed in Newcastle-upon-Tyne. Although the deceased's nationality is described as "Norwegian" in the said contract, his domicile is said to be "Dunbartonshire."

The first defenders aver, inter alia, that the proper law of the said contract is Norwegian law and that the deceased, who was of Norwegian nationality, agreed, in terms of the said contract, that service on board the said vessel should be governed by the duties and rights stipulated in Norwegian legislation. They further aver that, in terms of two Norwegian Acts, the deceased was entitled to receive and did receive certain limited payments under Norwegian National Insurance legislation as a result of the said accident and that Norwegian law confers no further or other rights to the deceased. There is a further averment:

"Under Norwegian law, the law of Norway applied exclusively to the relationship of the deceased and the first defenders during the defender's service on said ship and the terms of said contract by virtue of their reference to Norwegian legislation effectively excluded any rights and remedies, whether contractual or delictual, available to the deceased or his personal representative against the first defenders under any other system of law."

The pursuer, in answer to the first defenders' averments, avers, inter alia, that:

"Any provisions in said contract purporting to have the effect of excluding or limiting any liability on the part of the first defenders towards the deceased caused by the negligence of other servants of the first defenders are void."

The legal basis for that averment is section 1 (3) of the Law Reform (Personal Injuries) Act 1948 which is in these terms, viz:—

"Any provision contained in a contract of service or apprenticeship, or in an agreement collateral thereto (including a contract or agreement entered into before the commencement of this Act), shall be void in so far us it would have the effect of excluding or limiting any liability of the employer in respect of personal injuries caused to the person employed or apprenticed by the negligence of persons in common employment with him."

The pursuer admits that the deceased was of Norwegian nationality under the explanation that he had lived in the United Kingdom since the age of four and neither spoke nor read Norwegian.

The essence of the argument for the pursuer was that the delict, which is the basis of the pursuer's action, occurred in Scotland, that therefore the law which governs the rights of the parties in this action is Scots law, that said section 1 (3) of the said Act of 1948 accordingly applies and that the defence, based on Norwegian law, is irrelevant. The submission was, in other words, that the lex loci delicti, which in this case is also the lex fori, was paramount. The essence of the argument for the first defenders was that the law which governed the rights of the parties in this reparation action was the proper law of the said contract of service, under which the deceased was employed at the material time, that this was Norwegian law, and that said Section 1 (3) could not apply in these circumstances. The fact that the said accident occurred in Scotland had, it was said, no bearing on the rights of the parties. The submission was, in other words, that the lex loci contractus was paramount.

For the purposes of the debate, I assume that the first defenders' averments about the effects of Norwegian legislation on the rights of the deceased or the pursuer, because of the terms of the said contract of service, are correct. There was some criticism of these averments. Part of the criticism was met by an amendment which was made by the first defenders after the first day's hearing. Although there was some force in the criticism of the specification of these averments, I think that, if the pursuer's argument on relevancy fails, the first defenders' averments on the effects of Norwegian legislation are sufficiently relevant for a proof before answer.

I propose to consider, firstly, the submissions which were made on behalf of the first defenders. Not only is this approach more convenient but it is also consistent with my view that, in the particular circumstances of this case, the onus is on the first defenders to prove that said section 1 (3) does not apply in this case because of Norwegian Law: see Anton on Private International Law, p. 565, and Dicey and Morris on The Conflict of Laws (8th Ed), p. 1118. I was referred by counsel to a large number of cases, both English and Scottish. I do not intend to discuss all these cases in detail because, in my opinion, some of them could be of no assistance in reaching a decision in this case. Not only were the facts very different but such principles as could be taken from them had no bearing on the points which were argued in this case. I refer only to the cases on which counsel mainly relied and which have some bearing on the legal question before me. There was no reported case in which the legal question which I have to decide in this case was considered. There was, however, a recent decision by the Court of Appeal in England in which said section 1 (3) of the said Act of 1948 was considered and on which first defenders' counsel strongly relied. I commence by a consideration of that case.

That case is Sayers v. International Drilling Co. NV . The facts of that case have some resemblance to the facts of this case but there is at least one vital difference. The plaintiff in that ease was injured by the alleged negligence of a fellow servant and he sued his employers for damages. The plaintiff's contract of employment with his employers, a Dutch company, contained a clause which provided that, in return for the employers' "Compensation Program," he would accept the benefits under the Program as his exclusive remedy in lieu of any other claims which might accrue because of accidental injury. The defendants founded on this clause in the action for damages by the plaintiff and the plaintiff then relied on said section 1 (3) of the said Act of 1948 to meet that defence. The vital difference from the present case is that the accident occurred when the plaintiff was employed on the defendants' oil rig off the Nigerian coast and in the territorial waters of Nigeria. The Court of Appeal decided that said section 1 (3) did not apply and could not be invoked by the plaintiff. The ground of the decision by Lord Denning M.R. was that the proper law of the tort was Dutch, and that, as the claim was founded on tort, the issue of liability should be decided by Dutch Law, despite the fact that, according to him, the proper law of the contract of employment was English. On the other hand, the ground of the decision by both Salmon L.J. and Stamp L.J. was that the proper law of the contract of employment was Dutch and that accordingly the rights of the plaintiff were governed by Dutch Law.

I do not think that this case can assist the first defenders. The facts were different in that, in the present case, the accident occurred in Scotland where section 1 (3) of the said Act of 1948 is part of the law relating to delicts. Another difference is that the terms of employment were such that the pursuer in the present case would be employed, at times, in ports in England where said section 1 (3) is also part of the law relating to torts (see No. 10

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The principle governing the decision in Sayers, supra was, it was maintained by the first defenders' counsel, in line with a general principle which supported their argument. This general principle of statutory construction was that there was a presumption against the application of a statute "extra-territorially," that "extra-territorially" included the operation of a contract which was governed by foreign law and that said section 1 (3) could not therefore apply to the contract of employment which was governed by Norwegian law. They referred to Dicey and Morris, supra at p. 732 and to some reported cases as authority for this general principle. The exact words used in Dicey and Morris, supraare:—

"If the statute is silent, the general rule of interpretation comes into play, according to which an English statute is not to be deemed to have any extra-territorial operation unless such operation is required by the terms of the Act or by its ‘object, subject-matter or history’."

They add that:—

"‘Extra-territorial’ operation in connection with the law of contract will sometimes mean operation with regard to a contract governed by foreign law."

The passage which I have quoted from Dicey and Morris, supra occurs in the discussion on Rule 128 which is thus stated:

"The validity or invalidity of a contract must be determined in accordance with English law, independently of the law of any foreign country whatever, if and in so far as the application of foreign law would be opposed to the public policy of English law, or to the provisions of an Act of Parliament which, by the terms of the Act or by virtue of established principles of statutory interpretation, applies to the contract."

It will be observed that there is a difference between the general principle as stated by the first defenders' counsel and the passages quoted from Dicey and Morris, supra. I stress the use of the word "sometimes" in the second passage quoted. I refer also to Cheshire's "Private International Law" (8th Ed.) at pp. 209, 212 and 223 et seq.

The various cases to which I was referred by the first defenders' counsel to support that general principle were not helpful in reaching a decision in this case. They do not support the said general principle in the wide terms suggested in relation to contracts governed by foreign law. They were decisions based on different facts, circumstances and statutes. I refer to two of the cases on which the first defenders' counsel particularly relied. The first of these was Clayton v. Clayton . In that case a contract was made in Scotland relating to a ticket in the Irish Hospitals sweepstake. The argument for the defender in that case was that the contract was illegal because the lottery involved in the sweepstake was illegal in terms of section 21 of the Betting and Lotteries Act 1934. The Court held that the illegality of the sweepstake lottery could not be sustained because said section had no application to foreign lotteries. If anything, that case stresses that United Kingdom legislation applies only within the United Kingdom. The other case was Draper v. Turner which related to the application of section 2 (2) of the Fertilisers and Feeding Stuffs Act 1926 to "transactions" outside the United Kingdom. Reliance was placed on the words of Lord Denning M.R. (at p. 432) that this Act "applies only to sales which take place within the United Kingdom and not to those which take place elsewhere. This is in accord with the general rule that an Act of Parliament only applies to transactions within the United Kingdom and not to transactions outside." It was maintained that the word "transactions," applying it to the facts of the present case, would include the contract of employment which was "outside the United Kingdom." I have difficulty in understanding how this case can assist the first defenders, especially as Lord Denning distinguishes between the "sale" and the "contract for sale." If an analogy with "transactions" is to be drawn, "accidents" would be more appropriate than "a contract." See Anton, supra at pp. 75 and 76.

Applying this general principle of construction which I have mentioned, it was then maintained for the first defenders that it was plain from the terms of said section 1 of the said Act of 1948 that it was not intended to apply to foreign contracts of employment. The terms of sub-section (1) were particularly founded upon as was the legal basis for the pre-1948 law relating to common employment as explained by Lord Watson in Johnson v. Lindsay . It was said that sub-section (1) could only affect contracts of employment which were governed by Scots and English law, that they could not affect contracts governed by a foreign system of law and that, therefore, section 1 (3) must be similarly restricted. This line of argument seems to me to beg the question. Said sub-section (1) altered the law of Scotland relating to liability of employers for accidents occurring in Scotland. A foreigner who meets with an accident in the course of his employment in Scotland can found on the law of Scotland to make a claim in the Courts of Scotland against his foreign employer for negligence, if he can establish jurisdiction. See Anton, supra at p. 238. That employer would be liable, if negligence was established, unless he could show that his liability was excluded. Prior to 1948, that employer could, inter alia, have founded on common employment. I cannot see why sub-section (1) should or could have the limited effect suggested. It seems to me that the locus delicti is of importance and there is nothing to suggest, in my opinion, that subsection (1) was only intended to apply to delicts in Scotland which were based on contracts whose proper law was Scots or English. The intention was simply to alter the law of Scotland to rid it of a rule which had been much criticised. These observations also apply to said sub-section (3). The suggestion that said section 1 (3), if applicable, would mean an application "exterritorially" of an Act of Parliament is, in my view, incorrect. The validity of the contract or of the provision to which said section 1 (3) is applied is not affected generally. The Court, in applying it, is simply saying that for the purpose of Scots law, applied by a Court in Scotland, that provision is unenforceable. I prefer the use of the word "unenforceable" to "void", as used in the pursuer's averments. It follows that I cannot accept the submissions made for the first defenders.

The opinion which I have reached, that the first defenders' contention is incorrect, is reinforced by the case of English v. Donnelly to which I was referred by pursuer's counsel. As is pointed out in Anton, supra at p. 209 that case illustrates the general principle that "a contract is unenforceable in Scotland, whatever may be the proper law, if it requires doing what is expressly forbidden by a statute which is binding on the Scottish Courts." It is also referred to in Dicey and Morris supra as an illustration of Rule 128. That case related to hire purchase legislation but, in my opinion, the principle does not depend on that. The relevant contract had a provision that the law of England was to apply. The Inner House held that, despite this provision, section 2 of the Hire Purchase and Small Debt (Scotland) Act 1932 (22 and 23 Geo. V, cap. 38), which applied only to Scotland, applied to the transaction, and that the contract was void and could not be enforced because of non-compliance with the said section 2. The terms of said section 1 (3) of the said Act of 1948 are as mandatory and as peremptory as said section 2 of the said Act of 1932. An object of the contract on which the first defenders found in this case is the "contracting out" of a peremptory statutory provision of the lex foriand the lex loci delicti. There is, furthermore, no limitation stated and the application must be to persons and conduct in, among other places, Scotland. Whatever the law chosen by the parties to govern a contract or whatever the law of a contract may be, that law must, I think, yield to an Act of Parliament which has provided otherwise. The provision is, in other words, unenforceable in Scotland, whatever its effect elsewhere.

I was also referred by pursuer's counsel to the cases of Luszczewska v. Luszczewska and Duncan v. Motherwell Bridge and Engineering Co. Ltd . and by the first defenders' counsel to a passage in Dicey and Morris, supra at p. 916, together with some cases quoted there, but I did not find these references of much assistance.

The first defenders also have a preliminary plea-in-law in these terms, viz:—

"Separatim the pursuer's averments in the ante-penultimate sentence of Condescendence 6 being irrelevant should not be remitted to probation."

While there was some force in this plea-in-law, I would, if I had been in favour of the first defenders on their main argument, allowed these averments, which were attacked, to remain.

For the reasons which I have given, I sustain the pursuer's fourth plea-in-law, repel the first defenders' second and third pleas-in-law and exclude from probation the first defenders' averments in Answer 6 other than the first sentence, and the pursuer's averments in answer to them. Quoad ultra I allow a proof before answer.