This reclaiming motion raises a point of general importance relating to
jurisdiction. The point at issue is one which has received little attention
in Scotland until now, but it has become a matter of some significance
following the coming into force on 1 January 1987 of the Civil Jurisdiction
and Judgments Act 1982. The main purpose of that Act was to give the
force of law in the United Kingdom to certain Conventions on jurisdiction
and the enforcement of judgments in civil and commercial matters
between member states of the European Communities. Its effect was to
make radical changes in the law of the United Kingdom and especially that
of Scotland in respect of the circumstances in which jurisdiction in civil
and commercial matters may be assumed. The principal Convention is
that which was signed at Brussels on 27 September 1968, referred to as
the 1968 Convention, the English text of which is set out in Sched. 1 to
the 1982 Act. It forms the basis for the provisions relating to jurisdiction
and the recognition and enforcement of judgments within the United
Kingdom and for a new set of rules of jurisdiction within Scotland. Since
the defender in the present case is resident and domiciled in West
Germany it is to the provisions of the 1968 Convention that one must turn
in this case in order to see whether he is subject to the jurisdiction of the
Scottish courts in regard to the subject matter of the action.
The pursuers' claim against the defender is for payment of two sums
alleged to be due to them by the defender under and in terms of two
letters of guarantee. The first of these guarantees was granted on 16
February 1981. The defender undertook to pay to the pursuers on
demand all sums and obligations due and to become due to the pursuers
by a company incorporated under the Companies Acts named F. Ltd. The
principal sum under that guarantee was not to exceed £500,000. The
second guarantee was granted on 28 February 1984. In this case the
defender undertook similar obligations in respect of sums due and to
become due to the pursuers by another company incorporated under the
Companies Acts named E. Ltd., these sums not to exceed £400,000. As
the Lord Ordinary has pointed out, the terms of the guarantees and the
averments as to the circumstances in which they were granted are not
materially different, and the parties are agreed that there is no relevant
difference between the two cases for present purposes. Neither guarantee
contains any specification of the address or place of business of the
grantees, who are named in each document as being the Governor and
Company of the Bank of Scotland without any further designation. But
the pursuers aver that the place of business of each of the two companies
was at C.bank in Scotland and that their only account with the pursuers
was maintained at their George Street, Glasgow branch. Both guarantees
bear to have been executed at C.bank by the defender in the presence of
two witnesses. They both have attached to them a backing upon which
are entered certain details regarding the principal amount, the date and
the name of the company on whose account it was granted. The backing
in each case contains a heading with the words "George Square, Glasgow
Branch" which may be taken to be a reference to the pursuers' George
Street, Glasgow branch. But the backings contain no initials or other
marking by the defender to show that he was aware of or approved of
their terms. There is no express provision in either guarantee as to the
place at which any payments due under it are to be made.
The pursuers aver that on 23 April 1987 they appointed administrative
receivers to each of the two companies on whose account the guarantees
had been granted, and that on 8 May 1987 they wrote to the defender
and formally demanded fulfilment by him of his obligations under the
two letters of guarantee. Copies of the letters of that date have been
produced. Each refers to the letter of guarantee in respect of which it was
written and contains a formal demand by the pursuers for fulfilment by
the defender of his obligation under it by payment to the pursuers of the
full amount of his liability, details of which are set out by reference both to
principal and interest. Each letter concludes with the statement that the
defender will be liable for further interest from its date until settlement.
The letters bear to have been signed by a Mr K., chief manager, but the
copies which we have been shown contain no indication of the address
from which the letters were sent or of Mr K.'s place of business. The only
significance of these letters for present purposes is that they show that
sums are due under the guarantees because a demand for payment has
been made.
The ground on which the pursuers maintain that the defender is subject
to the jurisdiction of this court is that, in the circumstances which I have
summarised, the place of performance of the obligation under each
guarantee in favour of the pursuers was the pursuers' George Street,
Glasgow branch. They aver that the defender is resident in West Germany
and is believed to be domiciled there, but they also aver that the sums
for which they claim payment ought to have been paid to them at one
of their offices in Scotland, that is to say their George Street branch
in Glasgow. It is clear, therefore, that the pursuers are relying on the
special jurisdiction available under art. 5 (1) of the 1968 Convention.
The defender admits that he is domiciled in West Germany. He avers that
he is a West German national and that he was living in West Germany
in 1981 and 1984, these being the years in which he executed the two
guarantees. He also avers that he has been domiciled in West Germany
since at least 1981 and that he has never been domiciled in the United
Kingdom. His position is simply that he should be sued in the courts of his
domicile, according to the general rule set out in art. 2 of the Convention.
Article 2 of the Convention, so far as relevant to this case, provides: [his
Lordship quoted the terms of art. 2 set out supra and continued:]
Article 5 (1) which is the first of a list of provisions which enable a person
to be sued in the courts of a place other than those of his domicile in
relation to particular matters, provides that a person domiciled in a
contracting state may, in another contracting state, be sued "in matters
relating to a contract, in the courts for the place of performance of the
obligation in question". The question in the present case, therefore, is
whether "the place of performance of the obligation in question" is in
Scotland. As Professor Anton, Civil Jurisdiction in Scotland (1984), para.
2.18 has remarked with reference to provisions of the Conventions in
general, the apparent clarity of the language of this phrase conceals
serious problems of application.
The Lord Ordinary was satisfied that Scotland was the place of the
performance of the guarantees in question and he repelled the plea of no
jurisdiction.
He held that, according to the law of Scotland, the rule, where the
contract makes no express provision regarding the place of payment,
is that the debtor is bound to tender payment to the creditor at his
residence or place of business. This is the rule as stated by Gloag
on Contract (2nd ed.), p. 709, where this is said to be "the legal
implication" . After examining the facts and circumstances of the present
case he held that the proper inference is that the place of payment under
the contracts of guarantee was in Glasgow. The defender has argued in
this reclaiming motion that the Lord Ordinary was in error and that the
plea of no jurisdiction ought to have been sustained. But in my opinion
the Lord Ordinary's decision was sound as were the reasons which he
gives for it, and I consider that he was right to repel the plea.
I turn first to the provisions of the Convention and to an argument which
was advanced for the defender to the effect that the scheme of the
Convention is that a person should be sued in the courts of the state
of his domicile. It was said that this was the primary rule and that this
therefore was the rule which Scots law should apply in the absence of
an express provision in the contract to the contrary. It was pointed out
that the word "shall" is used in art. 2, in contrast to the word "may"
in art. 5, and the submission was that this showed that there was a
scheme under which a pre-eminent jurisdiction was given to the courts
of the domicile. In my opinion no such implication is to be taken from the
language of the Convention. It is true that the general rule is that if a
person is domiciled in a contracting state he must be sued in the courts
of that state in accordance with the rules of jurisdiction in force in that
state. But the rules which give special jurisdiction with regard to particular
matters are, I think, of equal weight where they apply. The report by Mr
P. Jenard on the 1968 Convention is of assistance in this regard, and it
is material which this court may consider in ascertaining the meaning
or effect of any provision of the Convention: see 1982 Act, s. 3 (3) (a).
With reference to arts. 5 and 6 which deal with the special jurisdiction he
makes the following remarks -- see the Official Journal on the European
Communities [1979] at p. C59/22: "Articles 5 and 6 list the situations in
which a defendant may be sued in a Contracting State other than that of
his domicile. The forums provided for in these Articles supplement those
which apply under Article 2. In the case of proceedings for which a court
is specifically recognized as having jurisdiction under these Articles, the
plaintiff may, at his option, bring the proceedings either in that court or in
the competent courts of the State in which the defendant is domiciled."
A comment to the same effect is to be found in the decision of the
European Court in Zelger v. Salinitri, a case in which the parties had
provided expressly in their contract for the place of performance of
the contractual obligation, at [1980] E.C.R., p. 96: "It is appropriate to
point out that Article 5 (1), which occurs in Section 2 of Title II of the
Convention entitled 'Special Jurisdiction', creates a ground of jurisdiction
which is an exception to the general rule of jurisdiction provided for in
Article 2 of the Convention; the provisions of Article 5, which provide
that in matters relating to a contract a person domiciled in a Contracting
State may, in another Contracting State, be sued in the courts for the
place of performance of the obligation in question, introduce a criterion
for jurisdiction, the selection of which is at the option of the plaintiff and
which is justified by the existence of a direct link between the dispute and
the court called upon to take cognizance of it."
The effect of the special rules is therefore simply this, that the pursuer
has a choice wherever they apply. These rules are special only in the
sense that they make provision for particular circumstances, in contrast to
the general rules. They are not to be seen as subordinate to the general
rules, nor should one, as was suggested in argument, approach any of
the special rules as if they were in conflict with the general rules set
out in art. 2 and as if they were an invitation to the court to exercise
an inordinate jurisdiction. The only question with which the court need
concern itself therefore is whether, giving due weight to all the words
used in art. 5 (1), the special rule applies in this case.
The next point with regard to the Convention is more difficult. The phrase
"the place of performance of the obligation in question" is expressed
in the singular both in the English text of the Convention as set out in
Sched. 1 to the Act and in the original French text which, being one of the
official languages of the original contracting states, is to be taken to be
authentic: see art. 68 of the Convention. As the defender has averred,
and is not disputed, the pursuers have places of business in Scotland and
England. Indeed it is well known that the Bank of Scotland also has a
number of offices overseas. We were referred to averments made on the
bank's behalf in Bank of Scotland v. Investment Management Regulatory
Organisation Ltd., quoted by Lord Dunpark at p. 438. The defender's
counsel argued that art. 5 (1) can apply only where there is a single place
of performance, and that if contrary to their arguments about the law
of Scotland on this matter, payment was to be made to the creditor at
his residence or place of business, the fact that the pursuers have more
than one place of business in more than one country, to which country
payment could be made, means that this special rule is not available.
It was pointed out that the words "the place" appear to direct attention
to one particular place only, and it was submitted that the following
passage in Mr Jenard's report at p. C59/23 showed that this was indeed
their effect: "The Committee considered that it would be unwise to give
jurisdiction to a number of courts, and thus possibly create conflicts
of jurisdiction. A plaintiff already has a choice, in matters relating to a
contract, between the competent courts of the State where the defendant
is domiciled, or, where there is more than one defendant, the courts for
the place where any one of them is domiciled, or finally, the courts for the
place of performance of the obligation in question."
In my opinion Mr Jenard's comment at this point in his report is directed
to a different issue. He had been pointing out earlier that there were great
differences between the laws of the six signatories to the Convention
in their attitude to the jurisdiction of the forum contractus, and after
summarising these differences he concluded by saying that art. 5 (1)
provides a compromise between the various national laws. He then
says this in the paragraph immediately preceding the one on which the
defender's counsel relied: "Only the jurisdiction of the forum solutionis
has been retained, that is to say the jurisdiction of the courts for the place
of performance of the obligation on which the claim is based. The reasons
for this are as follows." The paragraph immediately following the one
on which the defender's counsel relied is as follows: "If the Committee
had adopted as wide-ranging a provision as that of the Benelux Treaty
which recognizes also the jurisdiction of the courts for the place where the
obligation arose, this would have involved very considerable changes for
those states whose laws do not recognize that forum, or do so only with
certain restrictions." As I read Mr Jenard's report it is not concerned at
any point to examine the question whether art. 5 (1) can apply if there is
more than one place of performance.
The only decision of the European Court on this matter to which we were
referred is Tessili v. Dunlop. It was held that the place of performance is
to be determined by the conflicts of law rules of the court before which
the matter is brought. The decision of the court contains this passage,
at [1976] E.C.R., p. 1485: "Having regard to the differences obtaining
between national laws of contract and to the absence at this stage of
legal development of any unification in the substantive law applicable,
it does not appear possible to give any more substantial guide to the
interpretation of the reference made by Article 5 (1) to the 'place of
performance' of contractual obligations. This is all the more true since the
determination of the place of performance of obligations depends on the
contractual context to which these obligations belong."
On the facts of that case the court was concerned with the seller's
obligations regarding delivery rather than with a buyer's obligation to pay,
and it does not appear from any of the material which was before the
court that it was contemplated that there might be more than one place
of performance of the particular obligation in question. The advocate-
general pointed out at p. 1488 that preparatory work, commentaries by
legal writers and the text of the Convention show clearly that its authors
had opted in all cases for the criterion of the "'place where the obligation
has been or is to be performed' ('lieu où l'obligation a été ou doit être
exécutée' )", and that they considered performance to be the ingredient
which best distinguished the transaction as a whole. Cases such as
De Bloos v. Bouyer and Ivenel v. Schwab, to which the Lord Ordinary
referred and which were considered by Lord Maxwell in Bank of Scotland
v. Investment Management Regulatory Organisation Ltd.at p. 446, provide
illustrations of the way in which the search for the place of performance
may be conducted in situations where this matter is in dispute. But they
do not address the issue as to whether the rule can apply if there is more
than one such place. If the contract is already in course of performance,
as where goods have been delivered or an employee has been performing
duties under his contract of employment, this problem is unlikely to arise,
nor is it likely to do so if the point at issue relates to an obligation which
"has been" performed. The problem seems therefore to be one which
has yet to be the subject of any decision or expression of opinion by the
European Court to which we can refer for guidance under s. 3 (2) of the
1982 Act.
In my opinion, however, the language of the English text and also of the
original French suggests strongly that the assumption which underlies
art. 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 musttake 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.
I turn now to the question whether the Lord Ordinary was right to accept
the following passage in Gloag on Contract (2nd ed.), at p. 709 as an
accurate statement of the law of Scotland as to the place of payment:
"Where the contract makes no express provision regarding the place
of payment, the legal implication is that the debtor is bound to tender
payment to the creditor at his residence or place of business." Apart
from several English cases to which I shall refer later the only authority
which he gives for this statement is Haughhead Coal Co. v. Gallocher .
He makes no reference to any institutional authority on this matter. It
appears that the point has received little attention in Scotland, no doubt
because until the new rules relating to jurisdiction were enacted it was
of little practical importance. Scots law has been more concerned with
the time and manner of performing obligations than the place where they
are to be performed. The point is dealt with briefly by Stair, Inst., I.xvii.
19 which contains the statement that "the debtor is not presumed to
follow the creditor's residence if custom or paction be not otherwise". This
appears to contradict Gloag's statement of the law, but no sources are
given and the paragraph as a whole contains little analysis of the basis
for the proposition especially in regard to an obligation to pay money,
which is what we are concerned with in the present case, rather than
to deliver goods. It would not be surprising if the law as understood by
Stair in regard to such a matter had changed since his day, as the law
and practice of commerce has developed and the ways of moving money
around and effecting payment have changed. I would not therefore regard
Stair's statement on this matter as having the same weight as that by
Gloag, so long as an examination of Gloag's references to authority show
that they are at least consistent with what he said. As the late Sir Thomas
Smith has pointed out in Stair Memorial Encyclopaedia, Vol. 22, para.
422, Gloag is among those writers who although not authoritative are
nevertheless held in high esteem, and it is significant that his opinion
on this particular point is shared by more modern writers: see Anton,
Private International Law (1967), p. 17; Walker on Contracts (1979),
para. 31.14 ; McBryde, The Law of Contract in Scotland (1987), para.
22-11. These references would normally be sufficient to enable the point
to be regarded as settled law.
But it was contended by the defender's counsel that Gloag's statement
of the rule is not well founded on authority. It is true that Haughhead
Coal Co. v. Gallocherprovides an uncertain foundation, since the Lord
Ordinary is not reported as giving any reason for his decision. The only
relevant authorities which are mentioned in the note of argument are
Kidwelly v. Brand and Startup v. Macdonald. The judicial dicta in the latter
case seemed to me to be inconclusive on this point and the comment in
the former to the effect that the debtor was bound to seek his creditor
wherever he shall be is to be found only in a comment by the reporter.
The facts in Haughheadwere somewhat special since the averments were
that the creditor was disabled by injury from going to the debtor to obtain
payment, and it is not easy in the absence of an opinion from the Lord
Ordinary to be sure of the exact basis for his decision. It can, however,
at least be said that that decision does not contradict Gloag's statement
of the rule, and the citation of English authority in that case is of some
interest since it is to English authority also that Gloag turns to provide
further explanation for the basis of his statement. Here he is on much
better ground, for there is no doubt that there is a long and consistent
line of authority to the effect that the general principle of English law
is that the debtor must seek out his creditor and pay him where he is.
As in Scotland, this matter has received little attention until it became
necessary to deal with it in order to apply the Rules of the Supreme
Court relating to service out of the jurisdiction. The Rules of the Supreme
Court 1883, Order XI, rule 1 (e) permitted service of an English writ
out of the jurisdiction if the contract which was one which, according to
its terms, "ought to be performed within the jurisdiction". The question
which the English courts then had to consider was not unlike that which
is now raised by art. 5 (1) of the 1968 Convention. In Robey & Co. v.
Snaefell Mining Co. Ltd., which is the first of the English cases to which
Gloag refers, it was held in regard to the price for machinery erected
by the plaintiffs on the Isle of Man, that it must be taken to be part of
the contract that the plaintiffs should receive payment of it in England.
Stephen J. said this at pp. 153-154: "There was no definite agreement
as to where the money was to be paid. We think that so far as regards
the question of jurisdiction the contract was to be executed within the
jurisdiction, and that the debtors having to pay for the goods it was their
duty to send or bring the money to the creditors. Some authority for that
is to be found in Coke upon Littleton to the effect that the obligor of a
bond must go the obligee in order to pay it. This in practice would impose
little inconvenience on the defendant, and therefore there is not likely to
be much authority on the subject at the present day. The question can
only become material in some such case as this. The ordinary course of
business would be for the defendants to send a cheque to the plaintiffs
at Lincoln, and payment would no doubt take place there when the
cheque was received at Lincoln, or was cashed, or at any rate accepted in
payment."
This approach is entirely consistent with Gloag's statement of the rule and
it has been followed consistently in later cases: e.g. The Eider; Fowler v.
Midland Electric Corporation for Power Distribution Ltd. It is not necessary
for me to examine these cases in detail. It is sufficient to say that I agree
with the Lord Ordinary's analysis of those which were cited to him, and
the matter can be brought to a conclusion by referring to Lord Reid's
statement in Arab Bank Ltd. v. Barclays Bankat p. 531 that "Generally it
is the duty of a debtor to seek out his creditor and tender the amount of
his debt". I can see no good reason today why the law of Scotland should
differ from that of England on this matter. There is much to be said, on
practical grounds, for a rule which assumes that the normal place of
payment of a debt is the creditor's residence or place of business, which
payment can be sent by post or other means of transmission, instead of
requiring the creditor to travel to some other place or to appoint an agent
elsewhere to receive it. In my opinion the English cases to which Gloag
refers provide ample support for his statement of the rule as already
being part of Scots law.
The question then is whether, assuming that it was for the defender to
tender payment of the sums due under the guarantees to the pursuers
at their place of business, they were obliged to do so at the pursuers'
George Street, Glasgow branch or whether the place of payment was at
any of the pursuers' places of business whether in Glasgow or elsewhere.
Counsel for the defender contended that the defender was entitled to
make payment of the debt at any of the pursuers' places of business
and that the pursuers were obliged to accept payment there. It was said
that the defender, since he was no more than a guarantor, should not be
prejudiced by being tied to making payment at any particular place. There
was no need to imply a term obliging him to make payment in Glasgow
in order to give efficacy to the contract, and it was submitted that the
Lord Ordinary was in error in drawing an inference to this effect from the
facts and circumstances of the case. In my opinion, however, this criticism
of the Lord Ordinary's opinion is based on a misunderstanding both of
the exercise which art. 5 (1) required to be conducted in this case and
of the Lord Ordinary's reasoning. 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 which were referred
to in Lothian v. Jenolite Ltd. seem to me to be misplaced. The guarantees
provide expressly that payment of the sums due under them must be
paid 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.
In my opinion the defender's submissions on this point fail for two main
reasons. In the first place I consider that the argument that the defender
is entitled to go to any of the pursuers' places of business in order to
make payment fails to address itself to the true issue, which is one
of obligation. It is of no significance that the pursuers may in practice
be willing to receive payment at other branches. The question for the
purposes of art. 5 (1) is whether they are obliged to receive payment
anywhere else than at their George Street branch in Glasgow in order that
the defender's debt to them may be discharged. In the second place it
is necessary, in my opinion, to set the obligation to make payment into
its proper context. As the court said in Tessili v. Dunlop, at p. 1485, the
determination of the place of performance of obligations depends on the
contractual context to which these obligations belong.
The guarantees were given with reference to sums to be advanced to the
two companies in their capacity as customers of the bank. They were
given in consideration of the affording of time, credit and/or banking
facilities and accommodation to these companies by the pursuers. The
pursuers aver that each company maintained an account with them at
their George Street, Glasgow branch and that this was their only account
with them. It is clear on authority that the pursuers' obligations as banker
to the two companies were localised at their George Street, Glasgow
branch. In Clare & Co. v. Dresdner Bankit was held that a customer of
the bank whose account was held in its Berlin branch was not entitled to
demand payment at its branch in London. Rowlett J. said at p. 578 that
the locality was an essential part of the debt owing by a banker to his
customer and that his obligation to pay was limited to the place where
the account was kept. The same point was made in R. v. Lovittwhere at
p. 219 Lord Robson said that it was well settled that for certain special
purposes of banking business the branches of banks may be regarded
as distinct trading bodies and that it would be difficult for a bank to
carry on its business by means of branches on any other footing because
the officials at one branch do not know the state of a man's account at
another branch. In Joachimson v. Swiss Bank CorporationAtkin L.J. said
this at p. 127 of the terms of a contract between banker and customer
in the ordinary course of business where a current account is opened by
the bank: "The promise to repay is to repay at the branch of the bank
where the account is kept, and during banking hours... . I think that it is
necessarily a term of such contract that the bank is not liable to pay the
customer the full amount of his balance until he demands from the bank
at the branch at which the current account is kept."
In my opinion it makes no difference for this purpose whether the
account is in credit or overdrawn. Whatever the state of balance the
account is to be seen for all ordinary purposes as localised at the branch
where it is kept, and it is to that branch that the customer must make
payment in order to discharge or reduce his debt. No doubt he can make
arrangements for the money to be transmitted to that account through
other branches or agencies, but it is not until the money is received at the
branch where the account is kept that the obligation is discharged.
In my opinion the position in respect of the guarantees is the same.
The obligations under the guarantees were undertaken with reference
to advances to be made to the two companies by the pursuers, their
relationship being that of banker and customer. All calculations as to the
present state of indebtedness and the defender's liabilities under the
guarantees would require to be made with reference to records held at
the George Street, Glasgow branch. It is plain that the pursuers would
be entitled to continue to charge interest on sums overdrawn on these
accounts until payment was received at their branch, irrespective of
whether payment was made by the principal debtor or by the guarantor.
As I see it the guarantees are so intimately connected with the two
accounts that no sensible distinction can be drawn between them as
regards the place at which payment was to be made. The fact that the
demands were sent to the defender at his address in West Germany had
no bearing on where payment was to be made when payment became
due in response to that demand. I consider therefore that the defender's
obligation is to pay at the pursuers' George Street, Glasgow branch.
For these reasons I am of the opinion that the pursuers have averred
a sound basis for founding jurisdiction against the defender in the
Scottish court and that the Lord Ordinary was right to repel the plea of no
jurisdiction. I consider that the reclaiming motion should be refused.
LORD SUTHERLAND.
The respondents seek payment under two guarantees granted by
the appellant in respect of overdraft facilities for two companies with
which he was associated. The guarantees were in standard printed
form, guaranteeing "full and final payment on demand of all sums and
obligations due and to become due to you by your customer". They
were addressed to the Governor and Company of the Bank of Scotland
with no address specified although the backing mentions the George
Square, Glasgow branch. The appellant is domiciled in West Germany.
The respondents seek jurisdiction against the appellant on the ground
that the place of performance of the obligations under the guarantees
is Scotland. The Lord Ordinary accepted this contention and it is against
this decision that the appellant appeals. The relevant rules relating to
jurisdiction are now to be found in arts. 2 and 5 (1) of the Convention on
Jurisdiction which forms Sched. 1 to the Civil Jurisdiction and Judgments
Act 1982. [His Lordship quoted the terms of arts. 2 and 5 set out supra
and continued:]
It has been settled in the European Court of Justice that it is for the
court before which the matter is brought to establish whether the place
of performance is situated within its territorial jurisdiction and it must
determine in accordance with its own law the place of performance
of the contractual obligation in question (see Tessili v. Dunlop). The
question accordingly is whether Scotland is the place of performance
of the appellants' obligations under the guarantees and this falls to be
decided in accordance with Scots law.
Before turning to consider what the principles of Scots law are in this
regard, I should deal with three preliminary matters which were raised by
the appellant. In the first place it was argued that the words "on demand"
in the guarantee imply that payment is to be made at the home of the
debtor. If a creditor has to go to a debtor's home to make a demand then
that is the obvious place for the debtor to perform the obligation and
make payment. It is not therefore necessary to consider what general
principles may be applicable in other contracts for payment as this
particular contract has provided a place of performance. I do not consider
that this argument has any validity. It may be that once upon a time a
creditor was obliged to take horse to his debtor's residence in order to
make his demand but since at least the advent of postal communication,
let alone the more advanced and sophisticated methods of electronic
communication, this is no longer necessary. In any event, the demand
is only a preliminary step to fix upon the debtor the obligation to pay
and accordingly it cannot have a conclusive bearing upon the place of
performance of the obligation.
It was next contended that only the terms of the guarantee should be
looked at to discover the place of performance and it is not legitimate to
look at extrinsic facts to determine this question. I would agree with this
proposition to the limited extent that as a general rule it is not legitimate
to construe a document by reference to extrinsic matters. In the present
case, however, neither the date nor the place for performance can be
defined at the time when the guarantee is entered into. It may never
be called up, or if it is this may not happen for years. It may be for any
amount up to the maximum contained in the guarantee. It may be that
there is an overdraft on one or more accounts in one country or more
than one country. There is accordingly contained in the guarantee itself
an element of futurity about the place where the obligation is to be
performed and therefore it is necessary to look at the facts as they are
when the obligation under the guarantee arises. I should add that this
construction appears to me to do no violence to the terms of art. 5 (1) of
the Convention, as is shown clearly by the terms of the French text which
provides that the relevant court is that of the place where the obligation
"a été ou doit être exécutée". Inevitably therefore the facts must be
looked at to ascertain what is the extent of the obligation when the
obligation has become due and what its place of performance must be. In
the third place the appellant contended that the scheme of the Convention
was that domicile of the defender is to be the primary jurisdiction and
that accordingly it is a basic principle that he should be sued in the court
of his domicile. It follows that if the contract is silent as to the place of
performance the proper rule should be that the primary rule of jurisdiction
should apply and therefore the action should be brought in the court of
the defender's domicile. In my opinion this is not a proper construction
of the scheme of the Convention. It is perfectly true that jurisdiction can
be founded upon the defender's domicile in every kind of case. However
in specific types of case further grounds of jurisdiction are provided and
of course in the case of contracts, place of performance qualifies as a
ground of jurisdiction. I do not regard one or other of these grounds of
jurisdiction as having any primary effect. They are both equal grounds of
jurisdiction and it is for a pursuer to decide which of these two grounds
open to him he chooses to use.
I now turn to deal with the general principles which should be applied
to ascertain where is the place of performance of an obligation to pay
money. I should note that in England the principle has been well settled
for over 100 years that it is for the debtor to seek out his creditor to
make payment rather than the converse (see Robey v. Snaefell Mining
Co.) . In Anton, Private International Law, p. 217 it is said that by the
internal law of Scotland the place where the creditor resides is the place
of payment and that this rule is followed in England, the United States,
Switzerland and Holland, although other countries, including France,
Belgium and Germany, regard the place of payment as the place where
the debtor resides. Anton's view as to the Scottish rule is based on the
clear statement in Gloag on Contract (2nd ed.), p. 709 in the following
terms: "Where the contract makes no express provision regarding the
place of payment the legal implication is that the debtor is bound to
tender payment to the creditor at his residence or place of business."
The footnote to this sentence refers only to one Scottish case, namely
Haughhead Coal Co. v. Gallocher. That is an Outer House decision briefly
reported with no reasons given for the decision and which may well
have depended upon its own facts. It is therefore not a decision which
can provide a secure foundation for a rule of general importance and its
only real merit is that it is the only decision upon this matter reported in
Scotland. Nevertheless the rule is stated quite clearly by Professor Gloag
and has his authority behind it. Counsel for the appellant recognised this
difficulty but contended that Professor Gloag's statement was based only
on an unsatisfactory authority and was not consistent with the proper
principles of the law of Scotland which could be deduced from the Roman
law. He then referred to two fairly obscure and elderly textbooks on the
subject of Roman law in an attempt to support this proposition. He did
not however refer to any basic source of Roman law and indeed the two
writers concerned do not appear themselves to be able to produce any
proper basic authority for such propositions as they advance. In the
absence of any reference to proper sources I am not prepared to consider
what may or may not have been the principles of Roman law, even if
Roman law had concerned itself with the problem which is raised in the
present case. A more serious problem, however, is raised by the fact that
the Lord Ordinary did not have before him a reference to any institutional
writer and indeed he says in terms that there appears to be no reference
to this question in the institutional writers. However in Stair, Inst. ,
I.xvii.19 the following appears: "The place for performing obligations, if it
be expressed, is to be observed, and another place cannot be obtruded,
though it may seem as convenient for the creditor, unless there be not
safe access to that place, in which case the debtor may offer, and the
creditor may pursue, as if no place were named; in which case he hath
the choice to pursue, either in the place of the contract, if he find the
debtor there, or wherever the debtor is convenable; and even where the
place is expressed, the creditor may elsewhere pursue for performance,
if he allow the debtor's damage, in not paying at the place appointed;
but if the thing to be performed, be delivery of a certain species or body,
which cannot follow a man, as a horse or a dog, but an inanimate body,
as a coach, coffer, cabinet, or the like, if no place be expressed, the place
where it is must be understood; but if it be a quantity simply, the place of
contract, or where the debtor resides, is understood; for the debtor is not
presumed to follow the creditor's residence, if custom or paction be not
otherwise."
It is to be noted that although throughout the Institutions there is copious
reference to Roman sources there is no such reference in connection with
this chapter. I do not find this chapter easy to understand. It appears
that there is throughout a certain confusion between the place of the
debt, the place for performance of the obligation, and the place where the
obligation may be pursued. It seems surprising that even where the place
of performance is expressed the creditor may "pursue for performance",
whatever that may mean, elsewhere, thus apparently breaching the
terms of the contract. The chapter does not appear to deal with the
simple obligation to pay money but appears to be more concerned with
the delivery of goods. Thus the reference to "a quantity simply" does
not appear to be apt to cover the payment of money, it appears to be
a reference to delivery of unspecified goods, for example a quantity of
grain, as opposed to delivery of a specific item which is dealt with in
the preceding sentence. If that be the proper interpretation it is quite
understandable that it is for the buyer rather than the seller to arrange
delivery.
After careful consideration of this chapter I have come to be of the
opinion that it does not express any rule to the effect that in a matter of
an obligation to make payment it is for the creditor to seek out his debtor
rather than the reverse. Accordingly the only clear expression of opinion
on the relevant matter is that of Gloag supported, for what it is worth, by
the case of Haughhead Coaland the English rule which is well established.
Counsel for the appellant argued that the rule in Gloag should not be
followed because it was not in accordance with the general principle that
an obligor is only required to carry out his obligation in the least onerous
fashion to him -- electio est debitoris. I would accept the validity of this
proposition if there were alternatives available under the terms of the
contract in which case the debtor could elect the manner of performance
which was least onerous to him, but that is in my opinion the extent of
the rule and it does not apply where there is silence as to the manner of
performance if there is a general rule which is applicable.
It is to be noted that in the present case the obligation is to make full
and final payment of all obligations due by the customer. In accordance
with banking practice the obligation due by the customer would be
an obligation due to the particular branch of the bank at which the
account was kept. Accordingly it was for the guarantor to make payment
of the amount outstanding on the account at that particular branch.
His obligation is not to make payment in Germany or anywhere else
but to make payment at the branch in Glasgow. That being so in the
total absence of any authority I would have decided that the place of
performance would be the place where the account is kept. It follows that
I accept the validity of the rule as laid down by Gloag.
Finally, the appellant contended that even if the rule in Gloag was
correct, because the respondents have a number of places of business
not only in Scotland but also in England and indeed in Germany, there
was no one place of performance and the appellant could obtemper his
obligations by making payment to the respondent's place of business
in, for example, Germany. That being so, it could not be said that the
only place of performance of the contract was in Scotland and it could
only be if Scotland was the only place of performance that jurisdiction
could be founded on art. 5 (1). I would accept that if there were a
number of places where the obligation could be performed in different
countries at the option of the debtor, then it could not be said that the
place of performance, as that phrase is to be understood in art. 5 (1),
was necessarily the place which the creditor might choose. The fact is,
however, that the obligation arose in connection with an account which
was kept at the George Street, Glasgow branch of the respondents and
it is that account which has to be cleared in terms of the guarantee. For
the purposes of this transaction the place of business of the respondents
is George Street, Glasgow. The fact that they have many other places
of business in connection with entirely different matters scattered
throughout the world is in my opinion quite immaterial. The only matter
that we are concerned with is the place of business for the performance
of this particular obligation and that place of performance is in my opinion
the George Street branch in Glasgow. It follows therefore that I do not
consider that any complication arises in the circumstances of this case
concerned with the multiplicity of possible places of business or places of
performance.
For these reasons I consider that the Lord Ordinary reached the correct
conclusion that the plea to the jurisdiction falls to be repelled and that the
reclaiming motion should be refused.
LORD PROSSER.
This action arises out of two letters of guarantee, on the same standard
form, granted by the reclaimer to the respondents ("the bank"). In each
case, the reclaimer guaranteed full and final payment on demand of all
sums and obligations due and to become due to the bank by a customer,
in consideration of the bank's giving time, credit and/or banking facilities
and accommodation to the customer in question. One of the guarantees,
granted on 28 February 1984, related to obligations of a company named
E. Ltd., with a limit of £400,000. The other guarantee is averred, and
indeed admitted, to have been signed on 16 February 1981, but this
appears to be a mistake for 16 February 1985. In this case the customer
was F., and the limit was £500,000. The pursuers sue for sums which
they aver represent the total of principal and interest due by each of the
said companies as at 8 May 1987, and they aver that on that date they
wrote to the reclaimer and formally demanded fulfilment by him of his
obligations under the letters of guarantee. The reclaimer has a plea to the
jurisdiction of this court, which the Lord Ordinary has repelled.
The issue of jurisdiction turns upon arts. 2 and 5 (1) of the Convention
set out in Sched. 1 to the Civil Jurisdiction and Judgments Act 1982.
Article 2 provides for jurisdiction based on domicile. The reclaimer is
domiciled in West Germany, and the pursuers plainly do not found upon
that . On behalf of the reclaimer, it was contended that this article had
a primacy, which should limit the scope of other grounds of jurisdiction.
However, art. 2 is expressly subject to the provisions of the Convention,
and art. 5 provides other grounds for jurisdiction which must in my view
be construed upon their own terms, unlimited by art. 2.
Article 5 provides that a person domiciled in a contracting state may, in
another contracting state, be sued in matters relating to a contract, in
the courts "for the place of performance of the obligation in question".
That is the basis upon which the present pursuers claim jurisdiction. The
question is whether the Scottish courts are the courts for the place of
performance of the obligations in question. "Place of performance" in such
a context appears to me to signify the place where an obligation has been
performed, or, if not yet performed, must be performed. Such a reading is
confirmed by the rather fuller expression used in the French text, "lieu où
l'obligation a étéou doit être exécutée" . If at the time when jurisdiction
is invoked the obligant could choose, as of right, to fulfil his obligation
at a place in some other jurisdiction, then it does not appear to me that
a pursuer could establish jurisdiction in the Scottish courts, even if the
obligant could also, as of right, choose to fulfil his obligation in Scotland.
If the reclaimer were entitled to fulfil his obligations at, for example, a
branch of the bank in England, then his plea to jurisdiction would in my
opinion be well founded, notwithstanding that he might also be entitled
to fulfil his obligations at branches in Scotland. Before turning to that
issue, I would, however, observe that the place or places of performance
of the obligations of a guarantor might well vary during the currency of
his guarantee, but that in relation to jurisdiction, all that will matter is the
place for performance of the obligation in question at the end of the day.
No place for performance is stated in the letters of guarantee, and I find
this unsurprising, since the place of performance could not apparently be
finally identified in advance, having regard to the nature of the guarantee
and the range of debts to which it might relate.
In Gloag on Contract, at p. 709, it is stated that "Where the contract
makes no express provision regarding the place of payment, the legal
implication is that the debtor is bound to tender payment to the creditor
at his residence or place of business."I regard Gloag as of high authority.
I am unperturbed that the only Scottish case referred to gives no solid
prior foundation for the statement. While Stair, Inst., I.xvii. 19 can
be read as contradictory to the statement in Gloag, I am not satisfied
that the passage in Stair distinguishes sufficiently between the place
of performance and the jurisdiction in which the obligation might be
enforced. As a practical matter, it is no doubt true that at the stage
of enforcement a creditor may have to chase after his debtor, and
sue in the courts of the debtor's domicile. That practical truth, or any
principle or general provision deriving from it, does not seem to me
to give any guidance as to where parties have intended the place of
performance to be as a matter of contract. In relation to that question,
and in the absence of any authority, I consider that the place intended
for performance will be a matter of inference which depends heavily on
the nature of the obligation in question. The general statements in Stair,
relating to delivery of moveables of various kinds, may well represent
the proper inference where a place for delivery is plainly required, and
none has been specified. It does not however seem to me that these
statements can be readily applied to the obligation to pay money. If a
debt has to be sued for, it is an understandable principle that it should be
seen as located where the debtor himself is to be found. But when the
obligation is undertaken by contract to pay a sum of money, the natural
implication seems to me to be that it is for the obligant to get that money
into his creditor's hands. I thus find the statement in Gloag persuasive in
principle, and if there is any real conflict between that statement and the
passage in Stair it appears to me to reflect the refinement of the law over
the intervening period. I do not find Gloag's reliance on English authority,
in this context, either surprising or unacceptable. I am satisfied that Gloag
correctly states what is now the settled law of Scotland.
I would add that the fact that payment is due "on demand" does
not appear to me to produce any exception to the stated rule. The
demand triggers the obligation, but I see no need to locate the place for
performance of the obligation by reference to that demand or the place
where it is made. Moreover, I find no assistance in general arguments as
to the relative onerousness for the obligant of paying at his own residence
or the creditor's. In theory, it may be less onerous for the obligant to
say "come and get it"than to send his payment to the creditor's address.
But that sort of comparison makes no practical sense to me, and in any
event I do not think that an obligant's right to choose the less onerous
mode of payment, where he has a choice under a contract, is in point
when one is considering what the parties' intention was as to the place for
performance of the obligation to pay.
Finally, in relation to the statement in Gloag, it is to be noted that there
is an exception to the general rule, where the debtor is a bank and
the creditor is its customer. In that situation (and leaving aside for the
moment the question of banks with a number of branches) it is settled
law that the bank must fulfil its obligation not at the creditor's address,
but at its own. That being so, it seems plain to me that where the bank
is creditor, and the customer is debtor, the place for performance will
likewise be at the bank's premises, reflecting the nature and structure
of banking practice. If Gloag is right, an exception to the general rule
is necessary where the customer is creditor, but not where the bank is.
If Gloag were wrong, I would still regard a single place for performance
as appropriate, whether the bank were creditor or debtor. Instead of an
exception to Gloag's general rule, covering the situation where the bank
is debtor, one would require an exception to some different general rule,
to cover the situation where the bank is creditor. I am thus satisfied that
Gloag would be right in relation to a customer owing money to a bank,
even if the rule were not more generally applicable.
So far as a guarantor is concerned I am satisfied that in the absence
of express provision, the place for performance of his obligation will be
the same as the place for performance of the obligations of the principal
debtor. In considering where a guarantor's obligation is to be performed,
I find it unreal, and indeed misleading, to treat that obligation as a simple
undescribed obligation to pay. The guarantee relates to payment of sums
and obligations due by the customer, who is the principal debtor. Without
going into detail as to the various ways in which the guarantor affords
security, or ensures payment, in relation to the customer's obligations,
payment by the guarantor is in practical terms payment of the customer's
debts. In my opinion there is a clear implication, in the obligations
undertaken by a guarantor expressly in relation to those debts, that if
payment has to be made by the guarantor, it will be made where it would
have had to be made by the customer. I find no contrary implication in
the documents here in question, and I am satisfied that the place for
performance of the reclaimer's obligations was the place for performance
of the customer's obligations, at the bank's premises.
As between the bank and each of the customers here in question, it does
not seem to me that there is any doubt that the place for performance of
the customer's obligations, in the actual circumstances of their dealings,
was the bank's George Street, Glasgow branch. As between bank and
customer, it does not appear to me that it is of any significance that the
bank has branches elsewhere in Scotland, England and abroad. In the
light of what I have said, I consider that the obligation of the reclaimer
as guarantor required to be performed at that same branch. In these
circumstances, I consider that the Lord Ordinary correctly repelled the
plea to jurisdiction, and I would refuse the reclaiming motion.