G4s Cash Centres (uk) Limited V. Clydesdale Bank Plc
| Jurisdiction | Scotland |
| Judge | Lord Eassie,Lord Clarke,Lord McEwan |
| Neutral Citation | [2011] CSIH 48 |
| Published date | 22 July 2011 |
| Date | 22 July 2011 |
| Court | Court of Session |
| Docket Number | CA72/10 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Eassie Lord Clarke Lord McEwan | [2011] CSIH 48 CA72/10 OPINION OF THE COURT delivered by LORD CLARKE in the reclaiming motion in the cause G4S CASH CENTRES (UK) LTD Pursuers and Respondents; against CLYDESDALE BANK plc Defenders and Reclaimers: _______ |
Defenders and Reclaimers: Dean of Faculty (R S Keen QC), Duncan; Dundas & Wilson CS LLP
22 July 2011
[1] The parties are in dispute as to the construction to be placed on provisions of a contract whereby the respondents were to supply services to the reclaimers, the provisions in question relating to the consideration to be paid to the respondents by the reclaimers for those services. The agreement, in question, 6/1 of process, was executed on 2 August 2002. It runs to a total of 309 pages. Its draftsmen, no doubt, were at pains to ensure that all possible matters that might arise out of the parties' transaction would be covered in the agreement and yet, in the event, they were, it seems, unable to produce provisions regarding the key question as to what consideration was payable under the agreement, which were capable of being read in an undisputed way by the parties. The services to be provided by the respondents to the reclaimers were described as "a cash processing service". It appears that the services to be provided were of such a nature that there was, at the commencement of the agreement, no established market for their provision. The agreement, which was intended to run for some years, accordingly, sought to have that fact taken into account by providing for contractual means for the consideration to be paid for the services during the subsistence of the agreement, to be re-visited every two years having regard to similar services offered by others in the market or that could, in any event, be obtained by the reclaimers from a third party. That contractual machinery was designed to protect the reclaimers against paying too much for the services in question having regard to the aforementioned factors and for a consequent adjustment downwards of the consideration payable by the reclaimers, in the light of that being justified in accordance with the outcome of employing the agreed contractual procedures. The procedures are described in the agreement as "Benchmarking". That expression is defined in Part 1 of the schedule to the agreement as meaning "the benchmarking of the Services, and the Service Levels and the Service Fees in accordance with Clause 3.11 and part 13 of the schedule."
[2] As well as providing for that machinery the parties agreed that, in any event, the services fees, which were agreed to be payable at the commencement of the agreement, and up until the seventh anniversary of the commencement date, should be reviewed at that date. The dispute between the parties relates to how the fees chargeable after the seventh anniversary of the commencement date of the agreement are to be calculated. The position adopted by the reclaimers to the construction of the relevant provisions is that any increase in the service fees payable after the seventh anniversary date depends on the reclaimers' absolute discretion. The respondents, on the other hand, contend that the provisions do not have that effect. In this commercial action the respondents seek a declarator which seeks to negative the construction placed on the relevant provisions by the reclaimers. It is in the following terms:
"For declarator that, in relation to the determination of the level of Service Fees payable by the defender to the pursuer under the Services Agreement between the pursuer, the defender and Securicor Group Limited dated 2 August 2002 ('the Agreement'), clause 2.2 of the Agreement does not have the effect of making any increase in the Services Fees payable by the defender to the pursuer from the seventh anniversary of the Service Commencement Date, as defined in the Agreement, dependant on the defender's absolute discretion".
[3] The respondents originally sought a further declarator which was in the following terms:
"For declarator that, under reference to the Service Agreement between the pursuer, the defender and Securicor Group Limited dated 2 August 2002 ('the Agreement'), the second last sentence of paragraph 1.3 of part 13 of the schedule to the Agreement does not apply to a benchmarking of the Services Fees undertaken in terms of clause 2.2 of the Agreement for the purposes of determining the Services Fees payable for the Services with effect from the seventh anniversary of the Service Commencement Date".
[4] The respondents, through their counsel, indicated that they would not be moving for that conclusion to be granted.
[5] It is now appropriate to set out the precise terms of the agreement around which the dispute in this case revolves.
[6] They are as follows:
"Interpretation
1.2 In this Agreement ...
1.2.2 headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement: ...
2 Duration
Term
2.1 The Agreement shall commence on the Commencement date and shall continue until the Expiry Date unless and until terminated earlier in accordance with the provisions of clause 2.2, clause 2.3, clause 7.12 or clause 22.
Benchmarking
2.2 No later than the sixth anniversary of the Service Commencement Date, the Bank shall undertake a review of the Services Fees (which may include a bench marking of the Services Fees by the Bank in accordance with part 13 of the Schedule) with a view to determining the Services Fees payable for the Services, with effect from the seventh anniversary of the Service Commencement Date and shall deliver the results thereof to the Supplier. The parties shall negotiate in good faith to agree such Services Fees based on the results of the review (or such benchmarking) and any dispute shall be resolved in accordance with clause 12 (provided that in no circumstances shall the annual Services Fees be reduced by more than 12.5% from the amount of the annual Services Fees payable as at the seventh anniversary of the Service Commencement Date unless the Supplier otherwise agrees). If (a) the Services Fees have not been agreed or determined within four months of notification by the Bank to the Supplier of the results of the review or such benchmarking (or within such longer period as may be agreed between the parties) or, (b) the Bank does not agree the amount of any Services Fees calculated as aforesaid, the Bank may terminate this Agreement with effect from the seventh anniversary of the Service Commencement Date by giving to the Supplier at least three months notice in writing to that effect in which case this Agreement shall terminate on the seventh anniversary of the Service Commencement Date.
....
Payment
Services Fees
4.1 In consideration of the provision of the Services in accordance with the terms of this Agreement, the Bank shall pay to the Supplier the Services Fees calculated in accordance with the terms of Part 5 of the Schedule less any Service Credits payable in accordance with Clause 3.6.
12 Disputes
12.1 Where there is no other dispute or escalation procedure specified in this Agreement for a dispute between the parties arising out of or relating to this Agreement, that dispute shall be referred by either party, first, to the parties Contract Managers.
12.2 In respect of matters of disputes arising out of or relating to this Agreement which cannot be resolved under clause 12.1, the parties shall submit such matter or dispute to review by a Review Board [as defined] which shall act as conciliator in which capacity it may:
12.2.1 conduct the conciliation process in whatever manner it considers to be appropriate;
12.2.2 Issue the Supplier and the Bank its conclusion and/or recommendations in relation to the dispute. Any conclusions and/or recommendations of the Review Board shall not be binding upon the Supplier or the Bank.
....
12.5 Notwithstanding any reference to conciliation before the Review Board of a dispute or matter pursuant to clause 12.2. but subject to clause 12.7, either the Supplier or the Bank may (whether the conciliation subsists or not) refer the said dispute or matter to the courts of Scotland for determination.
....
12.7 Any dispute arising in relation to the Agreement may if the Supplier and the Bank so agree in writing, be referred to and finally determined by:
12.7.1 The Review Board; or
12.7.2 an independent expert agreed between them;
in each case acting as expert and not arbiter and any decision of such expert shall save in the case of fraud or manifest error, be conclusive and binding on the Supplier and the Bank;
12.8 Subject to Clause 12.7 the Supplier and the Bank hereby irrevocably submit to the non-exclusive jurisdiction of the courts of Scotland for the purpose of any dispute or matter arising out of or in relation to this Agreement.
[7] Paragraph 1 of part 5 of the Schedule provides inter alia as follows:
"1 Services Fees
1.1 The Services Fees payable by the Bank under this Agreement shall be the sum of:
1.1.1 from the Service Commencement Date to the Transition Completion Date, £140,250 per Month (or pro rata for any period of less than a Month);
1.1.2 From the Transition Completion Date to the seventh anniversary of the Services Commencement Date, £129,000 per Month, or such other amount as may be determined under paragraph 1.2 (or pro rata for any period of less than a Month) subject indexation adjustment in term of paragraph 1.3.
1.2 The Services Fees payable by the Bank under this Agreement from the seventh anniversary of the Service Commencement Date shall be determined in accordance with clause 2.2.
1.3 If the Indexation Increase in any Year is greater than 4 per cent, the Services Fees for the following Year shall be adjusted by a percentage equal to the Indexation Increase less 4 per...
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