[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".
[3] The statutory provisions dealing with jurisdiction among the
constituent parts of the United Kingdom are found in Schedule 4 to the
Civil Jurisdiction and Judgments Act 1982, as substituted by Schedule 2
to the Civil Jurisdiction and Judgments Order 2001 (SI 2001 No 3929).
The 1968 Brussels Convention on which the 1982 Act was based has
been replaced by Regulation 45 of 22 December 2000, and the Civil
Jurisdiction and Judgments Order 2001 makes a number of amendments
consequential upon the enactment of Regulation 45; in particular, it
replaces the whole of Schedule 4 to the 1982 Act. The material parts of
Schedule 4 are as follows:
"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".
[4] Counsel for the defender referred to the provisions of Schedule 4 to
the 1982 Act. He drew attention to the width of the concept of domicile,
which according to section 42 of the Act may be established by the mere
existence of a place of business. He referred to a number of recent cases
on the ground of jurisdiction now contained in rule 3(a) of Schedule 4,
namely Eddie v Alpa Srl, 2000 SLT 1062, Ferguson Shipbuilders Limited
v Voith Hydro GmbH, 2000 SLT 229, Montagu Evans v Young, 2000
SLT 1083, and Bank of Scotland v Seitz, 1990 SLT 584. These cases
established the requirement that, if the ground of jurisdiction in rule 3(a)
were to be relied on, it must be possible to hold that the obligation whose
implement was sought could be performed in one place only. If one could
not say that, the pursuer could only rely on the single general ground
of jurisdiction, namely domicile. In the present case, the pursuer did
not rely on any express provision relating to the place where payment
must be effected. Nor did the pursuer make any averments sufficient
to imply a term that payment was to be made in Scotland as against
one of the pursuer's English offices. Such a term was not required to
give business efficacy to the contract; consequently the normal tests for
the implication of contractual terms were not satisfied. Consequently
the parties were left with the default term implied by law: payment
must be made at the creditor's place of business. That could be any of
its places of business, however, including its place of business in the
London area and its registered office in Kent. The pursuer averred that
the defender had sent all its correspondence regarding the contract to
North Queensferry, and that the pursuer's obligations of storage had
been performed at Methil, but both of these were irrelevant. They merely
amounted to statements that other obligations under the contract had
been performed in Scotland. Counsel referred to Bitwise Limited v CPS
Broadcast Products BV, 2003 SLT 455, where it was held, following
decisions of the European Court of Justice, that the obligation referred
to in article 5(1), the predecessor of rule 3(a), was the obligation that
corresponded to the contractual right on which the pursuer's action was
based, and also to Kleinwort Benson Limited v Glasgow City Council,
[1999] 1 AC 153. The defender's approach involved no hardship to the
pursuer, who could always full back on the defender's domicile. The
factors relied on by the pursuer as establishing a place of performance in
Scotland were insufficient to draw the inference that payment could only
validly be made in Scotland. In particular, anything that had happened
since the contract was concluded was not material unless it were set
up as a variation of the contract. No attempt had been made to aver a
variation, however, and without such averments all that the pursuer was
doing was asking the court to construe the contract by reference to the
subsequent actings of the parties. That was an incorrect approach.
[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".
[14] Counsel for the defender further laid stress on the fact that the
pursuer's registered office was in England. He submitted that there
was nothing wrong with tendering payment there, and if payment was
so tendered the pursuer was bound to accept it. In my opinion this
involves a misunderstanding of the function of a registered office. Every
company incorporated under the Companies Acts is required to have
a registered office, but that is to achieve two particular purposes. The
first is that certain information relating to the company, including its
register of members, is available at that office. The second is that formal
legal documents can be served there in the certain knowledge that such
service will be effective. Receiving payment of ordinary trading debts,
however, is not a normal function of the company's registered office.
Indeed, many small companies have their registered offices in premises
occupied by firms of solicitors or accountants. It would not be usual to
pay trade debts at such offices, unless the professional firm concerned
had become involved in recovery procedures. I should add, however,
that the above remarks are confined to the payment of ordinary trade
debts. The payment of other categories of debt, such as loans made by
the company, may be in a different position.
[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.