Scottish Court of Session Decisions

[1] The pursuers in this action seek payment from the defenders of £100,000 being the outstanding balance on an invoice for £578,261.19 submitted to the defenders in respect of the provision by the pursuers of labour to carry out work on one of the defenders' ships. The work related to fire detection equipment, fire doors and low level lighting. According to the terms of the invoice (No 6/3 of process) some £24,151 out of the total of £578,262.19 related to "Travel Plus Materials".

[2] The defenders, who aver that they have deducted the outstanding balance of £100,000 in respect of a claim for damages, challenge the jurisdiction of the Court of Session on the basis of their standard terms and conditions of contract for such transactions. Although at the time of the raising of the action there was some doubt whether the terms and conditions set out on the reverse side of the defenders' standard form of purchase order had been incorporated into the contract to which the invoice relates, it is now expressly accepted by the pursuers that those terms were indeed imported into the contract upon which they sue. It is in view of Clause 13 of the standard terms and conditions that the defenders contend that the parties have prorogated the exclusive jurisdiction of the English Courts. Clause 13 is worded thus:

The other provision contained in the terms and conditions of pertinence to the issue of jurisdiction is Clause 1 which has the headnote "Definition" and states:-

[3] In their adjusted pleadings the pursuers aver -

[4] In opening the debate on the issue of jurisdiction, Mr Glennie, who appeared for the defenders, invited me to uphold the defenders' plea to jurisdiction on the basis that Clause 13 was an effective prorogation of the jurisdiction of the English Courts to the exclusion of others, including the courts in Scotland. His submissions largely comprised argument intended to be anticipatory and destructive of the foregoing contention advanced by the pursuers in their pleadings and developed in their note of argument and in the event that anticipation was to all intents complete.

[5] Among other things, Mr Glennie pointed out that while the pursuers' contentions adverted to the definition of "goods" in Clause 1, the word "order" was also defined in Clause 1 as meaning "this purchase order or contract". That part of Clause 13 prorogating the exclusive jurisdiction of the English courts stated that - "the order shall be subject to the exclusive jurisdiction of the English Court....". Accordingly, the definition of "goods" really did not enter into the area of consideration, since the "order" referred to in Clause 13 was the contract in its entirety, the word "order" being defined in Clause 1. Counsel for the pursuers endeavoured to meet this point by saying that, in Clause 13, the word "order" should be read in the context of the definition of "goods" which then led back to his leading argument that, while "goods" was defined as "items, services or articles described on the purchase order" the reference therein to "services" did not include the provision of labour.

[6] I am not persuaded by the pursuers' contention that the operation of the provisions of Clause 13, which contain no reference to "goods", may be restricted by the definition of goods contained in Clause 1. The operative word used in Clause 13, relating to both the choice of law and the prorogation of the exclusive jurisdiction of the English courts, is "order", whose definition is to my mind much more appropriately found in the initial sentence of Clause 1. If one substitutes in Clause 13 for "order" the word "contract" as that definition invites and, indeed, requires, the prorogation of exclusive jurisdiction over this action to the English courts is in my view plain, even were the prestation supplied to consist solely of labour.

[7] That apart, I consider the pursuers' argument concerning the definition of "goods" also to be unsound. As was pointed out by counsel for the defenders, looking at the word "services" included in the extended definition, as a matter of ordinary usage, the provision of labour is at least part of the provision of services. By way of illustration of that ordinary use of language, counsel referred to other documents in process wherein the pursuers themselves referred to the provision of labour as being the provision of the services of their engineers. If one excluded from the concept of "services" the provision of labour it was difficult to see that any real content was left in that term. For his part counsel for the pursuers sought to define the ambit of "services" as being "actual things, or objects, which are ancillary to the items or goods supplied". As an illustration of that definition he gave the instance of fittings or fixtures ancillary to the supply of a piece of machinery. He frankly acknowledged the difficulty of that definition and its unfortunate practical consequences, which would result in a splitting of jurisdiction dependant on the particular nature of the claim.

[8] It is in my view evident that the pursuers' approach presents substantial practical difficulties as well as being difficult to accommodate in the ordinary linguistic usage and understanding of the word "services". Taking counsel's illustration, an ancillary fitting for a piece of machinery which was in itself defective would be within the definition of "services" whereas an error on the operatives' part when attaching the ancillary fitting to the equipment or the ship would not. It is also to be observed that apart from the splitting of jurisdiction to which counsel for the pursuers refer, the pursuers' approach would also involve a splitting of the applicable law. It is further to be observed that the invoice underlying the present claim includes a sum for the costs of materials. It is, to my mind, very difficult to believe that in incorporating the terms and conditions such a division of jurisdiction (and the possible applicable law) was ever intended by the parties. Employing the language used by Steyn L.J. in Continental Bank NV v Aeakos Compania Naviera SA [1994] 1 WLR 588, 592, to which I was referred by counsel for the defenders, it would be a "forensic nightmare". As he pointed out, the interpretative presumption is clearly in favour of a "one-stop adjudication".

[9] Put more broadly, the pursuers' approach is in my view inconsistent with giving commercial and practical common-sense to the terms which the pursuers now accept to form part of the contract on which they sue. In relation to the interpretative principle of giving commercial good sense to contractual provisions, counsel for the defenders referred to Antaios Compania Naviera SA v Salen Rederierna AB [1984] AC 191; Bank of Scotland v Dunedin Property Investment Co Ltd 1998 SC 657, 661 and Adamastos Shipping Company Limited v Anglo Saxon Petroleum Company [1959] AC 133 but counsel for the pursuers did not take any issue with the general propositions vouched by those authorities and I do not consider it necessary for me to examine them further.

[10] In these circumstances I consider it clear that the jurisdiction of the English Courts has been effectively prorogated to the exclusion of the jurisdiction of the Scottish courts and it follows that the defenders' first plea-in-law must be upheld and the action dismissed.