Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Universal Steels Ltd v. Skanska Construction UK Ltd [2003] ScotCS 271 (31 October 2003)
URL: http://www.bailii.org/scot/cases/ScotCS/2003/271.html
Cite as: [2003] ScotCS 271
[New search] [Help]
Universal Steels Ltd v. Skanska Construction Uk Ltd [2003] ScotCS 271 (31 October 2003)
|
OUTER HOUSE, COURT OF SESSION |
|
|
CA43/02
|
OPINION OF LORD DRUMMOND YOUNG in the cause UNIVERSAL STEELS LIMITED Pursuer; against SKANSKA CONSTRUCTION UK LIMITED Defender: ________________ |
Pursuer: Logan; Macbeth Currie & Co
Defender: Howie, Q.C.; Anderson Strathern, W.S.
31 October 2003
[1] The pursuer has raised an action against the defender in which it concludes for declarator that on or about 22 February, 7 June and 12 July 2002 the pursuer and the defender entered into a contract of storage in respect of 158 steel piles at Methil Yard, in Fife, at a weekly rate of £5,400 plus value added tax. The pursuer further concludes for payment of sums of £101,520, £38,070 and £11,035, which are said to be storage charges due under that contract It has enrolled a motion for summary decree in terms of the foregoing conclusions. The defender has tabled a plea to the jurisdiction of the court in relation to the pursuer's claim for storage charges. I allowed a debate on that plea, and appointed the debate to take place at the same time as the pursuer's motion for summary decree. I should add that the pursuer has a further claim for payment in respect of an alleged contract for the testing of the piles, but neither the motion for summary decree nor the debate was concerned with that part of the claim.[2] According to the pursuer's averments, the action relates to the storage by a pursuer of a substantial quantity of steel piles belonging to the defender at a yard in Methil. In the instance of the summons the pursuer is designed as having its registered office in England, at Rainham in Kent, and a place of business at St Margaret's Hope House, North Queensferry. The defender is designed as having its registered office in England, at Maple Cross House, Denham Way, Rickmansworth, Hertfordshire. Its domicile is not stated, and thus there is no assertion that it is domiciled in Scotland. Consequently the pursuer does not contend that the court has jurisdiction over the defender by reason of its domicile. What the pursuer avers in relation to jurisdiction is as follows:
"This action concerns the defender's obligation to make payment in respect of a contract for the storage of goods at Methil, Fife and an additional contract for testing carried out on those goods there. The services of storage were provided entirely within Scotland .... The proper law of each contract was Scots law. Invoices in respect of each contract were issued from the pursuer's principal place of business at North Queensferry, Fife from where the contracts were operated. Payment in respect of each contract was due to be made there. This Court accordingly has jurisdiction".
In response to the defender's averments, the pursuer admits that the obligation under the contract of storage that it seeks to implement is the obligation of payment. It further admits that it has places of business in both England and Scotland. By way of explanation, however, the pursuer avers as follows:
"... it was an implied term that payment would be made at the address from which the contracts were operated and from which the invoices seeking payment were issued. The pursuer has a registered office in England but does not trade from there. All correspondence referring to the contracts of storage and testing was addressed by the defender to the pursuer at North Queensferry. All of the work undertaken to generate the obligation for payment was instructed from there and carried out there or at Methil, Fife. The undertaking in principle to pay storage was made at a meeting at North Queensferry on 22nd February 2002 ... In the circumstances the pursuer's address at North Queensferry was the place of performance of the obligations in each contract that the pursuer seeks to enforce in terms of Schedule 8 paragraph 2(b) of the Civil Jurisdiction and Judgments Act 1982 as amended".
The defender, as I have mentioned, denies that the pursuer has established the jurisdiction of the Scottish courts in respect of the contract for storage of the piles. The defender admits that invoices were issued which bear the address of the pursuer's place of business in Scotland, but otherwise denies the pursuer's averments. By way of explanation, the defender makes the following averments:
"The alleged obligation under [the contract for storage] upon which the pursuer sues is an obligation on the defender to make payment. As a locatio custodiae, said contract is not a contract for services. The said alleged contract made no provision which obliged the defender to make payment to the pursuer at any particular place. The pursuer has places of business both in Scotland and in England, a fact to which it is own stationery attested, giving addresses of places of business in Chatham and Greenwich. As well as St. Margaret's Hope. Accordingly, the defender would have been entitled to discharge said alleged obligation as well in England as in Scotland. There was no 'place of performance' of said obligation in which jurisdiction over the defender could be assumed pursuant to Article 5(1) of Schedule 4 to the Civil Jurisdiction and Judgments Act, 1982, as amended. There was no implied term in the contract such as is condescended upon [to make payment at the pursuer's address in North Queensferry]. It was not necessary to accord business efficacy to the contract, which was perfectly workable in its absence".
"General
1. Subject to the rules of this Schedule, person is domiciled in a part of the United Kingdom shall be sued in the courts of that part.
Special jurisdiction
2. Persons domiciled in a part of the United Kingdom may be sued in the courts of another part of the United Kingdom only by virtue of rules 3 to 13 of this Schedule.
3. A person domiciled in a part of the United Kingdom may, in another part of the United Kingdom, be sued-
(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;
...".
One further provision of the 1982 Act was referred to by counsel in the course of their arguments. Section 42 (which has not been amended in consequence of Regulation 45) provides as follows:
"(1) For the purposes of this Act the seat of a corporation or association (as determined by this section) shall be treated as its domicile.
...
(4) A corporation or association has its seat in a particular part of the United Kingdom if and only if it has its seat in the United Kingdom and --
(a) it has its registered office or some other official address in that part; or
(b) its central management and control is exercised in that part; or
(c) it has a place of business in that part".
[5] Counsel for the pursuer began by referring to the decision of Lord Hamilton in William Grant & Sons International Limited v Marie Brizard España SA, 1998 SC 536, a case which, it was said, bore strong similarities to the present. Counsel submitted that the proper law of the present contract was Scots law, and consequently it was for Scots law to determine the place of performance. In the present case, it was clear as a matter of Scots law that the obligation to make payment was to be implemented at the pursuer's premises in North Queensferry. The courts should normally come to the conclusion that there was only one place where payment under a contract could be made as of right. Once that place had been identified, the fact that other places existed was not relevant. Moreover, the matter should be approached from the point of view of the creditor; in Bank of Scotland v Seitz the focus had been on the position of the creditor. The factors that were relevant as establishing jurisdiction in Scotland were essentially those described in William Grant: the contract had been formed in Scotland, invoices had been issued from North Queensferry, and payment of a sum admitted to be due had been made by the defender to the pursuer in North Queensferry. In essence, the parties' contract was for the storage of materials in Scotland by the pursuer, whose principal place of business was in Scotland; these factors pointed to Scottish jurisdiction. The rules governing the implication of terms into a contract were not relevant for present purposes, because the issue was simply where the place of performance was situated.
[6] The crucial question is whether rule 3(a) of Schedule 4 to the 1982 Act applies in the circumstances averred by the pursuer. That rule refers to the place of performance of "the obligation in question". In the present case, the obligation founded on by the pursuer is averred to be an obligation of the defender to make payment of sums due under a contract of storage. It is accordingly necessary to identify the place of performance of that obligation. In that connection, two principles are relevant. In the first place, if rule 3(a) is to operate, it is essential to identify a single jurisdiction where the obligation must be performed. If that is impossible, unless one of the other special rules applies, the pursuer must fall back on the domicile of the defender as the only general ground of jurisdiction in Schedule 4. That is clear from the decision of the First Division in Bank of Scotland v Seitz, supra. While that case turned on the meaning of article 5(1) of the Brussels Convention, the reasoning clearly applies to rule 3(a) of Schedule 4, which uses identical wording. The Lord President (Hope) puts the matter as follows (at 1990 SLT 588H-J):
"The language of the English text and also of the original French suggests strongly that the assumption which underlies article 5(1) is that the obligation in question is to be performed in only one place. But the words 'doit être exécutée' in the French text indicate that what we are concerned with here is not the place or places where the obligation may be performed should the parties wish to give and accept payment or performance of the obligation, but rather with the place where this must take place in order to discharge the obligation if the parties are in dispute. Difficulty may arise in cases where the contract has provided expressly for performance in a number of places in different states, but where -- as in this case -- there is no express provision, an analysis of the facts may well show that, as a matter of obligation, there is only one such place. On this view the fact that the creditor may have more than one residence or place of business is immaterial, if the facts show that he could insist upon performance at only one of them".
The same point is made by Lord Sutherland at 592K-593A and by Lord Prosser at 593G-J. In the second place, the place of performance of the obligation must be identified in accordance with the conflict of laws rules of the jurisdiction where the action has been brought, in this case Scotland. That again appears from Bank of Scotland v Seitz: see L.P. Hope at 588C-D and Lord Sutherland at 591C.
[7] It is accordingly necessary to determine, according to Scots law, whether the only place where the defender's obligation to make payment could be implemented as a matter of right was Scotland. As the passage quoted from Bank of Scotland v Seitz makes clear, that refers to the place where the debtor could insist upon the creditor's accepting payment; the corollary is that, if payment were tendered anywhere else, the creditor would be entitled to refuse it. There is inevitably a degree of artificiality in determining such a place. Usually a creditor is only too willing to accept payment of a debt if it is tendered, and questions of the place where payment can be made as of right are wholly irrelevant. Nevertheless, it must be recognised that acceptance of payment in a particular place may simply involve the creditor's acquiescing in a place chosen by the debtor where strictly speaking payment could not be insisted on. As a matter of legal theory, it must be possible to identify one or more places where the debtor can compel the creditor to accept payment. The general rule of Scots law is that, if no express provision is made in the parties' contract, a debtor can only insist on his creditor's accepting payment if such payment is tendered at the creditor's residence or place of business. Authority is found in Gloag on Contract at 709, in a passage approved in Bank of Scotland v Seitz: see L.P. Hope at 588K-589K, Lord Sutherland at 591K-592J and Lord Prosser at 593J-594B. In the present case, however, it was accepted by both parties that the pursuer had three addresses, one situated in Scotland and two situated in England. One of the English addresses, at Rainham in Kent, was the pursuer's registered office, and the other, at Greenwich, was held out as a place of business on the pursuer's stationery. The defender argued that it was entitled to insist on the pursuer's accepting payment at any of those offices.[8] Whether that is correct turns in my opinion on the construction of the parties' contract. In interpreting that contract, however, it is necessary to bear in mind that the critical question is whether, in terms of that contract, it is possible to identify a place where the creditor can insist on the debtor's making payment and, correspondingly, the debtor can insist on the creditor's accepting payment. The issue is one of contractual obligation. That was the approach adopted in Bank of Scotland v Seitz, where it was held that the matter was governed by a special rule applicable to banking contracts, namely that payment by or to the bank could only be insisted on at the branch where the account was maintained: see Bank of Scotland v Seitz, per L.P. Hope at 590E-L, Lord Sutherland at 592L-593B, and Lord Prosser at 594H-J; and also William Grant & Sons International Limited v Marie Brizard España SA, supra, per Lord Hamilton at 1998 SC 541B-542D, and Montagu Evans v Young, supra, per Lord Hamilton at 2000 SLT 1086G-H. In approaching that question, I do not think that there can be any presumption that payment can only be insisted upon in one particular place. Each case must turn on its own facts. Indeed, if no single place is identified as the place where payment can be insisted upon, there is much to be said for the view that the debtor can insist on acceptance of payment at any of the creditor's places of business in the United Kingdom. For the purposes of the present action, however, it is not necessary to decide whether any such presumption exists.
[9] In support of its argument that the only place where payment could be insisted upon was at North Queensferry, the pursuer avers a number of matters. First, the performance of the main obligation in the contract other than payment, storage of the steel piles, was to take place in Scotland, at Methil. Secondly, the proper law of the contract was Scots law. Thirdly, invoices in respect of the storage of the goods and their testing were issued from North Queensferry. Copies of these invoices were produced, and they clearly bear to be issued from the pursuer's address in North Queensferry. That address appears in large lettering at the top of each invoice, whereas the other two addresses appear in small lettering at the foot. Fourthly, the contract of storage was operated by the pursuer from North Queensferry. All correspondence in respect of the contract was addressed by the defender to the pursuer at North Queensferry. All work undertaken by the pursuer under the contract was instructed from there, and carried out at Methil. Fifthly, the contract of storage was entered into at a meeting held in North Queensferry. On the basis of these averments, the pursuer seeks to draw the inference that the defender could only insist on making payment under the contract at the pursuer's place of business in North Queensferry.
[10] In determining the place where the debtor is entitled to insist on the discharge of its obligation to make payment, it is in my opinion necessary to focus on factors that are relevant to the obligation to make payment, and the implementation of that obligation. Thus it is relevant to consider whether it is possible to identify a place where, to the debtor's knowledge, the creditor would conduct its dealings under the contract with the debtor. That might include the place where the creditor carried out the financial administration of the contract, provided that that place was known or ought to have been known to the debtor. It is essential that the debtor knows or ought to know where the place was because a contractual term is involved; any contractual term must be such as the parties have agreed, expressly or impliedly, or such as reasonable men in the position of the parties would have agreed had they thought about the matter. It is important that the place in question should be one where the creditor carried out its dealings with the debtor. In my opinion the place where the creditor carried out its own internal administration of the contract, for example by issuing instructions to its employees for the performance of its own obligations, is of lesser importance in this connection, even if it is known to the debtor. That is because the contractual term in issue relates to the dealings of the parties with each other; consequently it is the place where the external rather than the internal administration of the contract is carried out that matters. In some cases, however, the evidence may indicate that the creditor's activities were overwhelmingly in one place of business, even though it maintained offices in one or more other places. In such a case, it may be relevant to give some weight to the place where internal administration is carried out, at least if it is known to the debtor. The same may be true of the place from which contracts are concluded. Nevertheless internal administration and the place of contracting will normally be of lesser importance than the place from which the creditor's external dealings were conducted. The external administration of the contract obviously involves the issuing of invoices. In this connection, however, a further difficulty arises. Invoices under a contract will almost invariably be issued after the contract has been concluded. Any contractual term, however, must originate at the date when the contract is concluded, unless it is the subject of an agreed variation after that date. An invoice issued after the contract was concluded could not affect the terms of that contract except as part of an agreed variation of the contract. Consequently the address stated in invoices issued under a particular contract is not of great value in determining whether that contract contains a term that payment can only be insisted on at a particular place. On the other hand, in many cases there will be a course of dealing between the parties involving a succession of broadly similar contracts. For example, one party may regularly place orders for a particular category of goods with the other. In that event, if the invoices under earlier contracts have consistently been issued from a particular address, that may be an important reason for drawing the inference that there was a single place where payment could be insisted on. That appears to have been the position in William Grant & Sons International Limited v Marie Brizard España SA, supra.
[11] In my opinion the pursuer's averments in the present case are sufficient to justify an inquiry into whether the parties agreed that payment could only be insisted on at the pursuer's place of business in North Queensferry. The critical averments are that the contracts were operated from North Queensferry and that all correspondence referring to the contract of storage was addressed by the defender to the pursuer at North Queensferry. On the basis of these averments, I consider that the pursuer may be able to establish that the whole of the external administration of the present contract was conducted from North Queensferry. Indeed, the pursuer may be able to establish that its activities, at least in relation to the present contract, were overwhelmingly centred in North Queensferry. In supporting such an inference, it might be relevant that the pursuer's internal administration was conducted from North Queensferry, at least if that were known or ought to have been known to the defender; in this connection, the pursuer avers that " the work undertaken to generate the obligation for payment" was instructed from North Queensferry. The other matters relied on by the pursuer as giving rise to an inference that payment must be made at North Queensferry appear to me of dubious relevance, but they may provide some background material. That applies to the pursuer's averments about the proper law of the contract of storage and the place where the contract was concluded, and also to performance of the pursuer's obligations under the contract of storage at Methil. Counsel for the pursuer referred me to the form of invoices issued by the pursuer for the purposes of the storage contract. For the reasons stated in the last paragraph, I do not think that these can be relevant to establishing a place of payment under the storage contract. The parties had, of course, concluded an earlier contract for the sale of the steel piles, and if invoices were issued under that contract their form might be relevant in establishing that the pursuer's financial administration was conducted from North Queensferry and that the defender was aware of that fact; in particular, if prominence was given to the pursuer's North Queensferry address, with the two English addresses in small print at the bottom of the page, that might be a significant indication that payment was to be made in North Queensferry. No reliance has been placed on invoices issued under the earlier contract, however, and accordingly this cannot be a relevant factor.
[12] For the reasons stated in the previous paragraph, I am of opinion that the pursuer has stated a relevant case that jurisdiction exists under rule 3(a) of Schedule for to the 1982 Act. The critical averments regarding the operation of the contract and the parties' correspondence, however, are denied by the defender. In these circumstances I cannot decide as a matter of relevancy that jurisdiction exists under rule 3(a), and a proof on jurisdiction will be necessary. At such a proof it will be possible to consider the weight that should be placed on the correspondence between the parties and the pursuer's administration of the contract from North Queensferry, if those matters are established.
[13] I must, however, comment on certain further arguments that were presented by the parties on the question of jurisdiction. Counsel for the defender submitted that, if payment could only be insisted on at a single place, that involved the implication of a term into the parties' contract. The familiar tests for the implication of contractual terms had not been met, however. In particular, the test of business efficacy had not been met; the contract of storage was perfectly workable if no place of payment were specified, because the defender could then pay the pursuer at any of its places of business. Moreover, this is not a case where reasonable men in the parties' position would unhesitatingly have agreed that the contract should contain a term about the place of payment; they might just as readily have assumed that payment could be made at any of the pursuer's places of business. In my opinion the rules relating to the implication of contractual terms are not material to the issue that arises in the present case. That is because the exercise that the court is being asked to perform is not to decide whether a term should be implied, but rather to determine the content of a term that already exists. The relevant term, which is implied by law in default of any contractual provision to the contrary, is that the debtor must pay its creditor at the latter's place of business. The issue that now arises is the identification of that place of business. The rules regarding the implication of contractual terms do not have a bearing on a question of that nature. The point is made by L.P. Hope in Bank of Scotland v Seitz, supra, at 1990 SLT 590A-C:
"It is not necessary to imply a term into the contract about the place of payment in order to give efficacy to the transaction, and arguments as to whether this is a proper subject for the application of the well-known principles to this effect ... seem to me to be misplaced. The guarantees provide expressly that payment of the sums due under them must be made on demand, and no further terms or conditions are necessary to give efficacy to the transaction. The law implies, for whatever purpose this may be necessary, that the debtor must make payment of the debt to the creditor at his place of business. The question at issue is therefore simply one as to the identity of that place of business for present purposes, and in particular as to whether the defender is well founded that any place of business of the pursuers will do".
[15] Reference was made to the decision of Lord Hamilton in Montagu Evans v Young, supra, where a case based on article 5(1) of Schedule 4, the predecessor of rule 3 (a), was held irrelevant. In that case a firm of chartered surveyors claimed payment of a fee alleged to be contractually due by the defender in respect of a portfolio of properties acquired by a company in which the defender was interested. The matters that was said to give rise to jurisdiction in Scotland were, first, that the initiative for the transaction occurred at the pursuers' Glasgow office and, secondly, that the partner in charge was based there. These were considered of limited relevance, especially as the properties that formed the subject matter of the transaction were spread throughout the United Kingdom. The pursuers also relied on the fact that their accounting arrangements for the transactions were localised at that Glasgow office, but it was not suggested that that was known to the defender or to have been concurred in by him. In the present case, by contrast, it is averred that all correspondence referring to the contract of storage was addressed by the defender to the pursuer at North Queensferry, and that the contracts were operated from there. For these reasons I am of opinion that Montagu Evans v Young can be distinguished.
[16] For the foregoing reasons I will refuse the defender's motion for dismissal of the action on the ground of lack of jurisdiction, and I will accordingly refuse in hoc statu to sustain the defender's second plea in law. The result of this decision is that the pursuer has not yet established that jurisdiction exists. Consequently the motion for summary decree must be refused at this stage. In these circumstances I will put the case out by order for further procedure.