Scottish Court of Session Decisions

At advising, on 18th December 1992, the Lord Ordinary repelled the preliminary pleas-in-law of the defenders and allowed a proof before answer.

LORD SUTHERLAND'S OPINION—The pursuer in this action seeks enforcement of and damages for non-performance of contractual obligations, performance of which was due in Scotland. In July 1990 the parties entered into a franchise agreement under which it was stated inter alia as follows: [his Lordship quoted the terms of the agreement set out supra and continued:]

The case came on procedure roll on two pleas-in-law for the defenders, namely that the court having no jurisdiction the action shall be dismissed, and forum non conveniens. In support of the first plea, counsel for the defenders argued that the terms of the agreement conferred exclusive jurisdiction on the English courts except insofar as the defenders would be entitled to proceed in another jurisdiction if they so chose. Clause 9.25.1 showed that the agreement was governed by English law. Clause 9.25.2 showed that any proceedings may be brought in any court in England. Counsel accepted that in cl. 9.25.2 the word "may" was used which was normally to be regarded as permissive, but he contended that having regard to the terms of cl. 9.25.3 it was clear that what was intended by 9.25.2 was to confer exclusive jurisdiction. Clause 9.25.3 showed that it was only the franchisor who was entitled to commence any proceedings in any other jurisdiction than England.

Counsel for the pursuer argued that the provisions of this agreement did not confer exclusive jurisdiction. If it was sought to confer exclusive jurisdiction then it was necessary that such conferment should be expressed and not left as a matter of implication. Even if it could be a matter of implication it would need to be necessary implication rather than a possible implication. He referred to Scotmotors (Plant Hire) Ltd. v. Dundee Petrosea Ltd. 1980 SC 351 where the agreement provided that it should be "governed and construed in accordance with the Laws of England and the parties hereto submit to the jurisdiction of the English Courts". The court agreed with the proposition that the jurisdiction of the courts cannot be ousted unless the provision therefor has been expressly specified or distinctly expressed. It was held that the proper meaning and effect of the agreement was that the parties agreed to submit to the jurisdiction of the English courts if an action was raised there, but not that the parties agreed that all disputes must be submitted to the jurisdiction of the English courts. Counsel submitted that cl. 9.25.2 showed that the bringing of proceedings in a court in England was only permissive rather than mandatory. While cl. 9.25.3 confers a specific right on the franchisor to commence any proceedings in another jurisdiction, it did not exclude the possibility of the franchisee commencing any proceedings in another jurisdiction. The only effect of cl. 9.25.3 would be to prevent the franchisee objecting to proceedings being brought in another jurisdiction on the ground of forum non conveniens, on the basis that parties to an agreement can agree that one party should have the choice of jurisdiction: see Elderslie Steamship Co. Ltd. v. Burrell & Son (1895) 22 R. 389.

In my opinion the argument for the pursuer is to be preferred. I accept that it is open to parties in any contract to provide for the exclusive jurisdiction of some particular court. If that is to be done however, it must be done, in my view, expressly and not be left to ambiguous implication. Clause 9.25.2 is merely permissive and does not confer exclusive jurisdiction in England. Clause 9.25.3 can be given content without necessarily implying that the franchisee is restricted to the jurisdiction of courts in England. There is nothing in this agreement which expressly ousts the jurisdiction of the Scottish courts, and in that situation I am of the opinion that if jurisdiction can be founded in Scotland on valid grounds then it has not been excluded. It was not disputed in this case that the action concerns the enforcement of and damages for non-performance of contractual obligations, performance of which was due in Scotland and accordingly the Scottish courts would have jurisdiction. I therefore repel the defenders' first plea-in-law.

Counsel for the defenders then argued that the appropriate jurisdiction was that of England and that accordingly his plea of forum non conveniens should be upheld. For a useful summary of the principles to be applied in considering such a plea he referred to the speech of Lord Goff of Chieveley in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] AC 460 at p. 474. The basic principle is to be found in the opinion of Lord Kinnear in Sim v. Robinow (1892) 19 R 665 where he said:

"The plea can never be sustained unless the Court is satisfied that there is some other tribunal, having competent jurisdiction, in which the case may be tried more suitably for the interests of all the parties and for the ends of justice."

The word "conveniens" should not be translated as "convenient" but as "appropriate". It is for the defender to satisfy the court that there is another available forum which is prima facie the appropriate forum for the trial of the action. It is a factor which may be taken into account that jurisdiction is founded as of right rather than on some fragile ground. While convenience is not a factor to be taken into account by itself, the natural forum should be that with which the action has the most real and substantial connection, and in that regard convenience may be taken into account as may be expense and other factors such as the law governing the relevant transaction and the places where the parties respectively reside or carry on business. Counsel for the defenders argued that in the present case all other factors were equal except for the fact that parties had agreed in the agreement that the proper law was to be English law and that the proper forum was to be the English courts. In the whole circumstances the obvious and natural forum was the English court and accordingly the plea of forum non conveniensshould be upheld.

Counsel for the pursuer accepted the tests set out in Lord Goff's speech. He contended however, that the defenders had not made out a valid case for ousting the jurisdiction of the Scottish court which jurisdiction was founded not on some technicality but on the fact that the contractual obligations were due to be performed in Scotland. There was accordingly a very real connection between the contract which was the subject of the litigation and the Scottish court. The fact that parties had agreed that English law was to be applied was of no materiality. If it was to be suggested that there was any difference between English law and Scots law in relation to the construction of this contract, it would be necessary for the defenders to aver what that difference was in the present action. They have made no such averments, and accordingly it must be assumed that the English law is the same as Scots law as far as the construction of the contract is concerned. The pursuer is domiciled in Scotland and although the defenders are domiciled in England, the agreement related to a franchise to be operated in Aberdeen. It is perfectly clear therefore that Scotland is the country with which the action has the most real and substantial connection. The onus is on the defenders to show that another court was "clearly or distinctly" more appropriate, to borrow the words used in Argyllshire Weavers Ltd. v. A. Macaulay (Tweeds) Ltd. 1962 SC 388.

In my opinion, again, the contentions of the pursuer are to be preferred. It is true that the defenders are a company domiciled in England, that English law is to be applied in the construction of the contract, and that the parties appeared to have agreed that jurisdiction in England might be appropriate. As against that however, the pursuer is domiciled in Scotland, the agreement relates to the operation of a franchise in Scotland, the majority of the contractual obligations which are the subject of this action were due to be performed in Scotland, and the country which has the clearest connection with the subject matter of the action is Scotland. Looking at all the factors which have been put before me, I am not satisfied that it has been shown that the English court is clearly or distinctly more appropriate as the forum in which this action should be tried than this court. It follows that I am not satisfied that the defenders have made out suitable grounds for upholding their second plea-in-law and I shall repel that plea.

Parties were agreed that if the defenders' first two preliminary pleas were repelled, the case should go to proof before answer with all remaining pleas standing.

The defenders reclaimed on the jurisdiction point, their ground of appeal being in the following terms:

"The Lord Ordinary erred in holding that, on a proper construction of cl. 9.25.2 of the franchise agreement, permissive and not exclusive jurisdiction was conferred on the English courts."

The reclaiming motion called before an Extra Division, comprising Lord Murray, Lord Prosser and Lord Wylie, for a hearing.

At advising, on 19th August 1993, the opinion of the court was delivered by Lord Murray.

OPINION OF THE COURT—The defenders are a delivery and courier company operating franchised outlets throughout the United Kingdom. On 13th July 1990 the pursuer and the defenders entered into a franchise agreement whereby for five years from November 1989 the pursuer, as franchisee, would be permitted to trade as "Panic Link (Aberdeen)" in specified postal districts in the north of Scotland. After payment of an initial fee by the pursuer to the defenders the latter were to pay to the pursuer a percentage of the turnover of business transacted by him and paid by customers to the defenders. After a period of training the pursuer complained of the defenders' failure to fulfil their obligations under the contract. Accordingly the pursuer's solicitors wrote to the defenders on 18th December 1990 holding the defenders in material breach of contract and resiling therefrom. The pursuer then raised the present action in the Court of Session seeking payment of commission due to him under the contract to that date and for damages for breach of contract. Both parties tabled pleas to the relevancy. The first two pleas-in-law for the defenders were that the court had no jurisdiction and forum non conveniens. The case came before the Lord Ordinary in procedure roll on these two pleas. After hearing parties the Lord Ordinary repelled these pleas and allowed a proof before answer. The defenders reclaimed against his interlocutor of 18th December 1992 so ordering.

The defenders' preliminary pleas in law were directed to certain clauses in a section of the contract dealing with proper law and jurisdiction. The text of the contract is printed in the appendix. The clauses in issue are in the following terms: [their Lordships quoted the terms of the agreement set out supra and continued:]

In support of the plea of no jurisdiction counsel for the defenders argued in procedure roll that the terms of the foregoing clauses, and in particular cll. 2 and 3, confer exclusive jurisdiction on the courts in England except insofar as the defenders, but not the pursuer, would be entitled to choose to proceed in another jurisdiction. Counsel for the pursuer contended that cl. 2 in its context did no more than confer permissive jurisdiction on the courts in England. The Lord Ordinary preferred the argument for the pursuer and repelled the plea of no jurisdiction. He also repelled the plea of forum non conveniensbut counsel for the defenders indicated that he did not challenge the Lord Ordinary's conclusion on that matter.

The defenders tabled the following ground of appeal:

"The Lord Ordinary erred in holding that, on a proper construction of clause 9.25.2 of the franchise agreement permissive and not exclusive jurisdiction was conferred on the English courts."

Counsel for the defenders argued that cll. 1, 2 and 3 of the section of the contract dealing with law, read together, indicated that the intention of the parties was to apply English law to the contract and that the English courts were to have jurisdiction in any proceedings under it except that the franchisor could choose another jurisdiction. The English courts were to have exclusive jurisdiction, subject only to the latter option in favour of the franchisor. Failure to use the word "exclusive" in the agreement was not fatal if the meaning was there. A not dissimilar form of words had been held to confer exclusive jurisdiction in Austrian Lloyd Steamship Co. v. Gresham Life Assurance Society Ltd. [1903] 1 KB 249 where for all disputes all parties agreed to submit to the jurisdiction of courts of Budapest; and this was held to confer exclusive jurisdiction on the latter. The Inner House had distinguished that case in Scotmotors (Plant Hire) Ltd. v. Dundee Petrosea Ltd. 1980 SC 351 where, in a contract under the heading "proper law", it was agreed that English law was to be applied and that the parties submitted to the jurisdiction of the English courts. The Second Division had held that this was not sufficient to oust the jurisdiction of the Scottish courts which otherwise clearly applied. The present case was closer to the Austrian Lloyd case,particularly when cll. 2 and 3 were taken together, as they had to be because of their interrelationship, use of the word "may" in cl. 2 could point to permissive rather than exclusive jurisdiction, but there were contexts in which "may", as a matter of law, meant "must" and this was one. The reference in cl. 3 to cl. 2 not limiting the franchisor's right to choose another jurisdiction could only mean that the franchisor's right otherwise to enforce the terms of cl. 2 was unqualified and did not extend to the franchisee. This was the only reading which gave full content to cl. 3. The Lord Ordinary had been wrong in his opinion in supposing that the only purpose of cl. 3 was to prevent the franchisee objecting by way of forum non conveniens plea if the franchisor chose a jurisdiction which he disliked. The clause might be a makeweight but it would not bar such a plea, the essence of which had recently been restated by Lord Goff of Chieveley in Spiliada Maritime Corporation v. Cansulex Ltd. [1987] AC 460 at p. 474. The suggestion that cl. 3 was an avoidance of doubt provision would depend on there being an intelligible doubt. There was none. The provision clearly gave the franchisor an option which was denied to the franchisee. The Lord Ordinary's interlocutor should be recalled, the defenders' preliminary pleas sustained and the action dismissed.

Counsel for the pursuer accepted that cl. 3 gave the franchisor an express right to choose another jurisdiction than that of the courts in England. But, he submitted, that did not necessarily mean that the English courts had exclusive jurisdiction otherwise. The Scotmotors case showed that exclusiveness had to be a necessary implication from the contractual provisions. See Lord Justice-Clerk Wheatley, 1980 SC 351 at pp. 354 and 355. As regards the Austrian Steamship case, agreement by the parties to submit to a jurisdiction was not to be equiparated with agreeing to submit to an arbiter or to a particular court. Nor would an agreement to prorogate a particular jurisdiction necessarily confer exclusive jurisdiction. See the Civil Jurisdiction and Judgments Act 1982, Scheds. 4 and 8. In the case of Hoerler v. Hanover Caoutchouc Etc. Works (1893) 10 T.L.R. 22, the Queen's Bench Division had held that a provision in a contract that in case of disputes the plaintiff firm submitted "to the laws in force in Hanover and jurisdiction" did not confer exclusive jurisdiction there but would prevent the firm objecting to that jurisdiction.

As to the terms of the contract, counsel for the pursuer stressed that cl. 2 was in terms permissive as it stood, using the word "may" rather than "shall" or any other word inferring exclusion. Consequently the defenders had to rely upon the terms of cl. 3 to provide words of exclusion, which had to be a necessary inference from those words. See Calder v. Mackay (1860) 22 D. 741, Lord Justice-Clerk Inglis at p. 744 (top) to the effect that the jurisdiction of the courts could not be ousted except to the extent "expressly specified"; and McConnell & Reid v. Smith 1911 S.C. 635, Lord Dundas at p. 638 (middle) to the effect that an intention to oust the jurisdiction of the courts must be "distinctly expressed" (see also Lord Justice-Clerk Wheatley, in the Scotmotors case at p. 354). When regard was had to the terms of cl. 3 no necessary inference was to be drawn. It could reasonably be given content without implying exclusive jurisdiction. First, it could be no more than an avoidance of doubt provision to express the franchisor's option to choose another jurisdiction. Secondly, it could be designed to counter a possible plea of forum non conveniens by the franchisee: see Anton on Private International Law (2nd edn.), p. 216 (top). Thirdly, the clause left open the possibility that the franchisee could raise proceedings in another competent jurisdiction, for the clause did not deal with that. Accordingly no necessary implication could be drawn and there was no ground for concluding that ell. 1, 2 and 3 expressed the parties' intention to confer exclusive jurisdiction on the English courts.

Further, if, contrary to the submission for the pursuer, ordinary grounds of jurisdiction were relevant—which on one reading the Scotmotors case might imply one of the two parties was domiciled in Scotland and the franchise which was in issue was entirely within the territory of Scotland. To oust the jurisdiction of the Scottish courts, which would ordinarily apply, that required to be "expressly specified" or "distinctly expressed" which was not the case here. The court should refuse the reclaiming motion and adhere to the interlocutor of the Lord Ordinary.

Counsel for the defenders presented a full and careful argument to this court but he has not persuaded us that the Lord Ordinary erred in law or that he reached the wrong conclusion on the issue argued before us. As counsel himself recognised, the use of the word "may" in cl. 2 of sec. 9.25 of the contract, though not fatal to his argument, does mean that the context in which it is used must indicate clearly and unambiguously that it is intended to convey an exclusive obligation. While we accept that there is a necessary interrelationship between cll. 2 and 3, we are not persuaded that cl. 3 is necessary in order to interpret the terms of cl. 2 even although cl. 2 is necessary for the interpretation of cl. 3.

Further we agree with counsel for the pursuer that reasonable content can be given to cl. 3 other than that for which the defenders contend. Clause 3 can indeed reasonably be read as an avoidance of doubt expression of the franchisor's right to initiate proceedings in another jurisdiction of his exclusive choice as much as a reservation to the franchisor of a right—denied to the franchisee—to initiate proceedings elsewhere. On a strict reading of the words used it is not obvious how the unlimited right of the franchisor to raise proceedings in a jurisdiction other than England touches at all on any right which the franchisee may or may not have to initiate proceedings in a court which has jurisdiction apart from contractual agreement.

On the whole matter we agree with the conclusion which the Lord Ordinary reached and we see no reason to differ from the reasoning by which he reached that conclusion. Accordingly we refuse the reclaiming motion and adhere to the interlocutor of the Lord Ordinary.