High Court Considers Enforceability of Jurisdiction Clause

In Clubgear v Mitre Sports International Ltd and Prostar Sports Ltd [2015] IEHC 708 the High Court upheld the validity of a jurisdiction clause, in favour of the Courts of England and Wales.  The jurisdiction clause was contained within the defendants' terms and conditions of trading, on the reverse side of a credit account opening form.  The plaintiff had certified, through a person who was entitled to bind the company, that he/she had read and accepted the terms of business printed overleaf.  The Court held that whether or not the plaintiff had actually read and considered the terms and conditions, and the jurisdiction clause, was immaterial.

The Court, following the decision in Estasis Salotti v RUWA [1976] ECR 1831, confirmed that a jurisdiction clause included among general conditions of sale of one of the parties meets the requirements of Article 23 of the Council Regulation (EC) 44/2001 (the Brussels Regulation), if there is an express reference to those terms and conditions in the contract signed by the parties.

The Law
Article 23 of the Brussels Regulation states: 

"1. If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. Such an agreement conferring jurisdiction should be either:

(a) in writing or evidenced in writing; or

(b) in a form which accords with practices which the parties have established between themselves; or

(c) in international trade or commerce, in a form which accords with a usage of which the parties are or ought to have been aware and which in such trade or commerce is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade or commerce concerned.”

Background
The defendants brought an application seeking an order to the effect that the Court should decline jurisdiction in favour of the Courts of England and Wales, as the parties had nominated that jurisdiction by way of insertion of a jurisdiction clause in their contract. 

The plaintiff is a limited liability company registered in Ireland, and the first and second named defendants are limited liability companies each registered in England and Wales.  In August/September 2011, the plaintiff which was in the business of supplying sports attire, made contact with the first named defendant with a view to being supplied with sporting goods.  Negotiations between the parties at this time were conducted on the basis that, for practical purposes, the defendants were a single trading entity.

The plaintiff was required to complete a credit account opening form before business could commence.  The form contained a paragraph, immediately above the space provided for the signature of the applicant for credit, stating: "I certify that the above information is correct and that I have read and accepted the terms of business printed overleaf…"  On the reverse side of the form appeared the standard terms and conditions of trading of the defendants, in small but legible print.  Clause 23, the jurisdiction clause, provided: "The construction, validity, and performance of all Contracts between the parties shall be governed by English law and shall be subject to the exclusive jurisdiction of the English Courts although this shall not limit the right of the Company to commence proceedings in any other jurisdiction the Company deems appropriate."  The defendants accepted the plaintiff's application and an account was opened in September 2011.  In January 2012, the plaintiff was required to complete a second credit application form with identical terms and conditions, and jurisdiction clause.  The defendants' terms and conditions of trading were not included on invoices issued by the defendant to the plaintiff during the course of trading.

Between February and May 2012, the parties entered into discussions for the supply of goods by the defendants to the plaintiff for the purpose of a franchise which the plaintiff had succeed in obtaining, called "Little Kickers".  The defendants subsequently ran into difficulties in meeting the plaintiff's orders.  It is the plaintiff's claim that as a result of these difficulties in supply it lost the Little Kickers franchise.  Before the plaintiff took legal action against the defendants, the second named defendant's debt collection agent sent a letter of demand to the plaintiff for STG £49,718.20 in respect of goods supplied.  The letter stated that in default of payment, papers would be sent to its solicitors in Dublin to issue proceedings to recover the amount claimed. 

The plaintiff subsequently issued proceedings and wrote to the defendants requesting them to nominate a firm of solicitors in Ireland to accept service of proceedings.  No response was received, and the plaintiff's solicitors served proceedings directly on the defendants.  The defendants' Dublin-based solicitors then wrote the plaintiffs requesting payment of the outstanding sum owed, warning that in default of receipt of payment within 7 days, proceedings would be issued against the plaintiff.

The Defendants' Case
The defendants' solicitors entered an appearance on behalf of the defendants which was stated to be entered for the purpose of contesting jurisdiction.  The defendants' solicitor contended that pursuant to Article 23 of the Brussels Regulation, the Irish courts must decline jurisdiction in favour of the Court nominated by the parties in the choice of jurisdiction clause. 

The defendants further argued that even if the Court concluded that the choice of jurisdiction clause did not apply the Courts of England and Wales were the appropriate forum by reason of Article 5 of the Brussels Regulation, which provides that in matters relating to contract a person domiciled in a Member State may, in another Member State, be sued in the courts of the performance for the obligation in question, which is the place where the goods were delivered.  It argued that the goods were delivered directly to the plaintiff's customers, Little Kickers, in Australia, Canada, South Africa, Saudi Arabia, New Zealand, Hong Kong, UK, and Ireland, and therefore the Irish courts were not the place for performance of the obligations under the contract.

The Plaintiff's Case
The plaintiff resisted the defendants' application, contending that the jurisdiction clause did not form part of the agreements between the parties due to a lack of consensus on same, and that there was no evidence it had agreed to the choice of jurisdiction clause as required by the Brussels Regulation.

The plaintiffs also claimed that even if the clause was found to be part of the contract between the parties, and although the general principle was that the choice of jurisdiction of the parties must be upheld, there may be exceptions to this where there are strong reasons not to enforce the choice of jurisdiction.  The plaintiffs submitted that the letter of demand from the defendants' debt collection agent stating that they intended to pursue the plaintiff for the amount owed in the Irish courts estopped the defendants from resiling from this initial choice of jurisdiction.

In addition, the plaintiffs argued that the first defendant could not rely on the terms and conditions provided by the second defendant; and, further, that the contract did not apply because it pre-dated the contract giving rise to the proceedings, and constituted a different agreement between the parties to the agreement the subject of the proceedings.

The Decision
Mr Justice Binchy at the High Court granted an order declining jurisdiction of the Irish courts, in favour of the courts of England and Wales.  The judge summarised his conclusions as follows:

(1) The parties entered into an agreement for the supply of goods by both the defendants to the plaintiffs;

(2) Predominantly, the place of performance of the contract was Ireland, as more than 50% of the goods were delivered to the plaintiff in Ireland, and were then distributed by the plaintiff to franchisees in other countries;

(3) The agreement was subject to terms and conditions signed and accepted by the plaintiff in September 2011, and again in January 2012, which applied to all goods supplied by the defendants to the plaintiff;

(4) Even if the original agreement for sale and supply of goods, when the terms and conditions were accepted in writing by the plaintiff, was a different supply agreement between the parties to that agreed in May 2012, the terms and conditions still applied to all subsequent dealings with the parties unless varied by specific written agreement;

(5) The defendants were not estopped from relying on the jurisdiction clause due to their letter of demand providing a promise or assurance that they submitted to the jurisdiction of the Courts of Ireland.  The Judge noted, by analogy, that if this argument were to succeed, a party who threatened to issue court proceedings in circumstances where an arbitration clause applied could afterwards be deemed to be estopped from relying upon the arbitration clause without doing anything further to advance proceedings before the court.  This could not be correct.

(6) There had been no delay of any significance by the defendants in issuing this motion;

(7) The defendants were entitled to an order declining jurisdiction in favour of the Courts of England and Wales.

Comment
The decision serves as a reminder to commercial parties, and legal practitioners, that a jurisdiction clause included in terms and conditions on the reverse of a contract drawn up on a commercial paper will not satisfy the requirements of Article 23 of the Brussels Regulation, unless there is an express reference to those terms and conditions in the contract signed by the parties. 

For further information please contact Davinia Brennan at dbrennan@algooodbody.com

Date Published: 8 December 2015