BANK of SCOTLAND v INVESTMENT MANAGEMENT REGULATORY ORGANISATION Ltd
| Jurisdiction | Scotland |
| Judgment Date | 27 January 1989 |
| Docket Number | No. 16. |
| Date | 27 January 1989 |
| Court | Court of Session (Inner House - Extra Division) |
EXTRA DIVISION.
Lord Cullen.
JurisdictionContractJudicial review of administrative decision by organisation exercising statutory functions based in EnglandReview sought by corporate member based in ScotlandWhether obligation to comply with decision a contractual obligation with a specific place of performanceWhether place of performance place where organisation based, giving English courts jurisdiction,1
or place where corporate member based, giving Scottish courts jurisdictionCivil Jurisdiction and Judgments Act 1982 (cap. 27), Sched. 8, r. 2 (2) and (12).1
The petitioner applied to the respondent, a self-regulating organisation in terms of the Financial Services Act 1986 of which the petitioner was a corporate member, for a waiver of one of its rules, which imposed an obligation on members not to recommend certain types of life assurance policy under certain circumstances. The respondent refused the application and the petitioner sought judicial review of that decision on the grounds that it was unreasonable and irrational. The respondent contended that the petition for judicial review was incompetent and that the Court of Session had no jurisdiction. The petitioner argued that the rules under which the decision in question was made were contractual in nature, that the place of performance of the contractual obligation was Scotland and that, accordingly, the Court of Session had jurisdiction under r. 2 (2) of Sched. 8 to the Civil Jurisdiction and Judgments Act 1982. The Lord Ordinary (Cullen) held that the application was competent and that the court had jurisdiction in terms of r. 2 (2). The respondent reclaimed, conceding that the application for judicial review was competent but arguing under reference to r. 2 (12) that the court did not have jurisdiction.
Held (rev. the judgment of Lord Cullen) (1) that the purpose of r. 2 (2) was to cover contracts in which a particular place of performance was specified or might reasonably be implied; (2) that the present contract did not appear to fall within r. 2 (2) but that, if it did, the implication was that the place of performance was London, where the respondent was based, as that was where the decision in question had been taken; and (3) that the terms of r. 2 (12) governed jurisdiction in this case and that, accordingly, the English courts had exclusive jurisdiction; and reclaiming motion allowed and petition dismissed.
Quaere, whether the different parts of r. 2 were mutually exclusive.
The Bank of Scotland presented a petition seeking judicial review and reduction of decisions made by Investment Management Regulatory Organisation Limited. The respondent lodged answers with pleas of no jurisdiction and as to the competency of the petition.
The cause came before the Lord Ordinary (Cullen) for a first hearing on 27th October 1988. At advising, on 4th November 1988, the Lord Ordinary repelled the respondents' pleas and continued the first hearing.
At advising on 27th January 1989,
LORD DUNPARK.This is a petition by the Bank of Scotland (hereinafter referred to as "the bank") for judicial review of two decisions of the Investment Management Regulatory Organisation Ltd. (hereinafter referred to as "I.M.R.O."). The bank seeks reduction of these decisions upon the ground that I.M.R.O., in reaching them, failed to take into account two relevant and material matters which are stated in I.M.R.O. general rule 4.01. The sole issue before us is whether the Court of Session has jurisdiction to entertain this petition. On 4th November 1988 the Lord Ordinary held that it had and repelled the first two pleas-in-law of I.M.R.O., the first being one of no jurisdiction and the second being that the petition was incompetent. I.M.R.O. has reclaimed that interlocutor upon the ground that its first plea of "no jurisdiction" should be upheld.
Narrative
As this case was fully argued in four speeches over two and a half days, I narrate these arguments lest the case should go farther, but, in my opinion, the issue of jurisdiction is to be resolved by deciding whether r. 2 (2) of Sched. 8 to the Civil Jurisdiction and Judgments Act 1982 (hereinafter referred to as "the Act"), confers jurisdiction upon this court in this petition.
Article 1 of the petition is in the following terms: "That the petitioner is the Bank of Scotland a bank incorporated by Act of Parliament in 1695 and having its head office at The Mound, Edinburgh. Its principal place of business is in Scotland, where it has over 500 branches. It also has 16 offices in England and seven offices overseas. The petitioner is a member of Investment Management Regulatory Organisation Ltd. (hereinafter I.M.R.O.). The respondent is I.M.R.O., a private company limited by guarantee having its registered office at Centre Point, 103 New Oxford Street, London. I.M.R.O. is a recognised self-regulating organisation as defined by sec. 207, Financial Services Act 1986. Reference is also made to secs. 8 and 10 of the said Act. The petitioner is bound by articles of association of I.M.R.O. which constitute the rules and regulations of the recognised self-regulating organisation. Reference is made to sec. 14 of the said Act. The petitioner seeks to have reviewed a decision made under the respondent's rules. Said rules are contractual in nature. Performance of said contractual obligations takes place in Scotland. This court accordingly has jurisdiction."
I.M.R.O.'s reply to this is to be found at the end of ans. 1 as follows: "In the present proceedings the petitioner purports to have a decision taken by the respondent under its said rules reviewed under the supervisory jurisdiction of the Court of Session. In the circumstances averred by the petitioner the court has no such jurisdiction over the respondent for that purpose."
The ratio decidendi of the Lord Ordinary is that r. 2 (2) of Sched. 8 to the Act applied. Section 20 of the Act provides that Sched. 8 determines in what circumstances a person may be sued in civil proceedings in the Court of Session or in a sheriff court. Rule 1 of Sched. 8 is: "Subject to the following Rules, Persons shall be sued in the courts for the place where they are domiciled." Rule 2 provides additional grounds of jurisdiction, and parties agree that, as I.M.R.O. was domiciled in England, if this court has jurisdiction to entertain this action, the ground of jurisdiction must be found in r. 2.
We are not concerned with r. 3, 4 or 5, which do not apply to this action, so the substance of r. 2 (2) is that a person may also be sued "in matters relating to a contract, in the courts for the place of performance of the obligation in question." That is the ground of jurisdiction which the Lord Ordinary held established and r. 2 (2) was the only ground upon which the bank founded.
Relationship of the parties
Before considering the applicability of that rule to the facts of this case, it is necessary to refer to the relationship between the parties. The Financial Services Act 1986 (hereinafter referred to as "the 1986 Act") empowered the Secretary of State to regulate the conduct of investment business. Section 114 empowered him to delegate his functions under the 1986 Act to a body known as the Securities and Investments Board Ltd. (hereinafter referred to as "the S.I.B."). This he did by [the Financial Services Act 1986 (Delegation) Order 1987] S.I. 1987 No. 942. The effect of sec. 3 of the 1986 Act is that no person may carry on investment business in the United Kingdom unless he is an authorised or an accepted person in terms of the 1986 Act. Section 7 provides that a member of a recognised self-regulating organisation is an authorised person by virtue of its membership of that organisation. I.M.R.O. is a self-regulating organisation within the meaning of secs. 8, 9 and 10 of the 1986 Act and made rules which bind its members on the conduct of their investment business. On 11th March 1988 the bank became a member of I.M.R.O. and thus became an authorised person under sec. 7 (1), bound by I.M.R.O. rules. Number 14 of process contains the I.M.R.O. rules, which include definition rules, general rules and conduct of business rules. It is common ground that these rules are contractual.
The Standard Life Assurance Co. is entitled to exercise or control the exercise of more than 15 per cent of the voting rights at any general meeting of the bank and accordingly, under the definition rules, is an "associate" of the bank for the purpose of I.M.R.O.'s conduct of business rule 4.05. The effect of this rule is that the bank cannot recommend the acquisition of a life policy issued by Standard Life unless "the Member believes, having exercised reasonable care in forming its belief, that such an Investment will secure the Customer's investment objectives more advantageously than any other Life Policy which is then available, or likely to be available on the market." General rule 4.01 empowers I.M.R.O., on the written application of a member or an applicant, to alter the requirements of the rules or to adapt them to suit the member or applicant. General rule 4.02 prohibits I.M.R.O. from exercising its power under 4.01 "unless it appears that: (a) compliance with the requirements in question would be unduly burdensome for the relevant Member or Applicant having regard to the benefit which compliance would confer on investors; and (b) the exercise of the power will not result in any undue risk to investors; and (c) the exercise of the power will not otherwise be inappropriate."
Remedy sought by the bank
On 10th February 1988 the bank applied to I.M.R.O. for waiver of conduct of business rule 4.05 in relation to Standard Life policies on the ground that the rule was unduly restrictive in the circumstances. On 18th February 1988 I.M.R.O. refused the bank's application. On 27th May 1988 the bank applied to I.M.R.O. to reconsider the...
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