Scottish Court of Session Decisions

At advising on 2nd July 1980, the opinion of the Court was delivered by the Lord Justice-Clerk.

LORD JUSTICE-CLERK (Wheatley).—The appellants raised an action in the Sheriff Court at Dundee in which they sought (1) a declarator that the respondents were in breach of three contracts between the parties and (2) a very substantial sum of damages in respect of an alleged breach of these contracts by the respondents. The one point in issue in this appeal is such that it is not necessary to rehearse the whole of the parties' pleadings. The respondents tabled a plea in law (No. 1) in the following terms:

"The defenders not being subject to the jurisdiction of the Courts of Scotland in relation to the subject matter of the present action, the action should be dismissed."

This was based on a condition which appeared in each of the contracts. It was in the following terms:

"Proper Law. This agreement shall be governed and construed in accordance with the Laws of England, and the parties hereto submit to the jurisdiction of the English Courts."

The Sheriff sustained the respondents' plea in law, holding that the terms of that condition showed clearly that it was the intention of the parties that any disputes between them in relation to the agreement were to be settled by English Courts. He went on to say:

"It is true that in many contracts agreements to settle matters by arbitration are stated in express terms but there is nothing to prevent a matter such as this being agreed by implication and I regard the agreement between the parties as containing the necessary implication that the jurisdiction of the Scottish Courts was to be excluded."

The appeal has been taken against that judgment.

When the appeal opened, counsel for the appellants advanced an argument which was not presented to the Sheriff. Briefly stated, it was to the effect that the Sheriff's judgment was premature in that the first fundamental issue in the case was whether there was a binding agreement between the parties in respect of the three contracts in regard to which the parties were in dispute on the pleadings. If there was not a binding agreement, then the interpretation and effect of the said condition would not arise. It was only if the agreement was established that the question already determined by the Sheriff would fall to be considered. We propose, however, to deal in the first place with the point debated before and determined by the Sheriff, since this was the issue on which ex facie the appeal was taken.

This point turns on whether the condition headed "Proper Law" ousts the jurisdiction of the Scottish Courts. It has been stated, albeit in relation to arbitration cases, that the jurisdiction of the Courts cannot be ousted unless the provision therefor has been "expressly specified" or "distinctly expressed," of. Lord Justice-Clerk Inglis in Calder v. Mackay 22 D. 741 at p. 744 and Lord Dundas in M'Connell & Reid v. Smith 1911 S.C. 635 at p. 638. We see no reason for a different standard being applied to the agreement here.

In construing the meaning and effect of the condition, we start by noting that both parties are companies with their registered office in Scotland and the contracts had to be carried out in Scotland. In that situation the normal forum for an action for breach of contract would be a Scottish Court. The condition, however, provided that the agreement would be governed and construed in accordance with the laws of England. That in itself provides no obstacle to a Scottish Court entertaining such an action, since our procedure provides for English law being proved as a matter of fact in Scottish Courts. The condition, however, goes on to provide that "the parties hereto submit to the jurisdiction of the English Courts." The respondents argued that this, read in conjunction with the earlier part of the condition, clearly indicated that the parties were agreeing that all disputes arising out of the contracts would come within the exclusive jurisdiction of the English Courts. Reliance was placed on the case of Austrian Lloyd Steamship Company v. Gresham Life Assurance Society [1903] 1 KB 249 in support of this argument. In that case the condition was in these terms:

"For all disputes which may arise out of the contract of insurance, all the parties interested expressly agree to submit to the jurisdiction of the Courts of Budapest having jurisdiction in such matters."

The facts were that a life assurance policy was effected by a foreigner with an English insurance company which had an office in Budapest. The policy was in French language and provided that the premiums and insurance money should be payable at Budapest. The Court of Appeal, overturning the decision of a single judge, ordered a stay of proceedings, on the basis that the condition attached to the contract of insurance, properly construed, meant that the parties had agreed that all disputes arising under the contract should be determined by the Court in Budapest. Romer L.J. took the view that this is what the condition provided for, and rejected the contention that it simply meant that the parties would not take any objection to the jurisdiction of the Budapest Court. Mathew L.J. said that the condition meant that both parties were bound to refer such a dispute to that Court. We note that there were features in that case which distinguish it from the instant case. The person effecting the policy was a foreigner, the insurance company, although an English one, had an office in Budapest, and the premiums and insurance money were to be paid in Budapest, whereas in this case the parties were both companies incorporated and operating in Scotland, the contracts were to be carried out in Scotland, and no reference was made to disputes in the condition. The respondents maintained, however, that this last point had no significance since a proper reading of the condition necessarily implied that it related to all disputes arising out of the contract.

As we have already noted, the normal forum for an action arising out of these contracts was the Scottish Courts which could deal with the law agreed to in the condition. In considering whether that jurisdiction has been ousted on the ground that the condition meant that the parties had agreed that all disputes arising out of the contract had not only to be governed and construed by English law but that the English Courts would have exclusive jurisdiction to entertain such disputes, we have to determine whether the wording of the condition was so expressly specified or distinctly expressed as to produce that effect. On the face of it, the wording does not do so. In our view the proper meaning and effect of the second part of the condition is that the parties agree to submit to the jurisdiction of the English Courts if an action is raised there. It does not provide that the parties agree that all disputes must be submitted to the jurisdiction of the English Courts. Nor does it mean that the parties agree to abandon their right to resort to the otherwise obvious jurisdiction of Scottish Courts. Had it been intended to give exclusive jurisdiction to the English Courts, that could easily have been clearly specified. We are not dissuaded from that view by the opinions expressed by the Judges in Austrian Lloyd Steamship Company, supra because the circumstances there were clearly different, and these different circumstances seem to have weighed with the Judges in reaching their decision. The view which we have taken accords with the view expressed by Baron Pollock in Hoerler (1893) 10 T.L.R. 22 at p. 23.

That being so, it is unnecessary to consider the fresh argument submitted to this Court by appellants' counsel. We shall accordingly sustain the appeal, repel the respondents' first plea in law and remit the case back to the Sheriff to proceed as accords.