Hamlyn & Company v Talisker Distillery
| Jurisdiction | England & Wales |
| Judgment Date | 10 May 1894 |
| Date | 10 May 1894 |
| Docket Number | No. 5. |
| Court | House of Lords |
Ld. Chancellor (Herschell), Lord Watson, Lord Ashbourne, Lord Macnaghten, Lord Morris, Lord Shand.
Contract—Construction—Foreign—Arbitration—Locus solutionis.—
Where a personal contract is entered into between persons residing in different countries where different systems of law prevail, the intention of the parties as expressed or implied in the contract will determine the system by which the whole or any part of the contract is to be interpreted and governed.
A mutual contract between an English and a Scots firm to be implemented in Scotland was signed in London and contained this clause:—‘Should any dispute arise out of this contract, the same to be settled by arbitration by two members of the London Corn Exchange, or their umpire, in the usual way.’
The Scots firm, after using arrestments in Scotland against the English firm to found jurisdiction, raised an action against them for breach of contract.
The defenders pleaded that the action was excluded by the clause of reference.
The First Division held (1) that the validity and effect of the contract fell to be determined by the law of Scotland, the locus solutionis; (2) that the arbitration clause could not be regarded as a separate contract, the locus solutionis of which was in England; and (3) that the reference to unnamed arbiters was by the law of Scotland invalid.
In an appeal held (in rev. the judgment) (1) that the arbitration clause fell to be construed and governed by the law of England, as its terms shewed that that was the intention of the parties; (2) that by the law of England it was valid; and (3) that there was no principle of public policy to prevent the Courts of Scotland from giving it effect.
(In the Court of Session 30th November 1893, reported in the present vol. p. 204.)
By memorandum of agreement, dated 27th January 1892, between Roderick Kemp & Company, of Talisker Distillery, Carbost, Skye (now represented by ‘The Talisker Distillery’), and Hamlyn & Company, merchants, London, Roderick Kemp & Company agreed to sell and Hamlyn & Company agreed to buy all grains made by Kemp & Company at a certain price, and further, to supply and erect at the distillery a patent grain drying machine, which Kemp & Company agreed to keep in proper working order, ‘supplying all steam and labour, &c. necessary for properly drying the grains for the said Hamlyn & Company, and will bag up in the said Hamlyn & Company's sacks and deliver the grains f.o.b. Carbost, to their order.’ The contract was to be in force for ten years from the date of the erection of the machine.
The agreement contained the following clause,—‘Should any dispute arise out of this contract, the same to be settled by arbitration by two members of the London Corn Exchange, or their umpire, in the usual way.’
The memorandum of agreement was signed by the parties in London.
In March 1893 the Talisker Distillery, after having arrested ad fund. jur. some sacks belonging to Hamlyn & Company, raised an action against them concluding for declarator that the defenders were bound to purchase all grains made by the pursuers for ten years from 27th October 1892, and for payment of £3000 for breach of contract, in respect that the defenders had failed to provide a proper drying machine, and that they now sought to repudiate the agreement to purchase the grains made by the pursuers.
The defenders pleaded, inter alia ;—The action is excluded by the clause of reference in the said memorandum of agreement.
The Lord Ordinary (Kyllachy) repelled this plea, and allowed a proof.
On 30th November 1893 the First Division (diss. Lord Kinnear, the Lord President absent) adhered to his interlocutor.
The defenders appealed.
Lord Chancellor.—On the 27th of January 1892 an agreement was entered into between Roderick Kemp & Co. of the Talisker Distillery, Carbost, Isle of Skye, and Hamlyn & Co. of London, under which Hamlyn & Co. were to supply to the distillery a patent drying machine which was to be worked by the distillery company, who were to bag up and deliver to Hamlyn & Co. dried grain free on board at Carbost to their order or otherwise as required. The agreement concludes with a clause in the following terms:—‘Should any dispute arise out of this contract, the same to be settled by arbitration by two members of the London Corn Exchange, or their umpire, in the usual way.’ This agreement was made between the parties in England.
Shortly after the contract was entered into Alexander Grigor Allan became the sole partner in the firm of Roderick Kemp & Co., and the present action was instituted by him in Scotland in respect of an alleged breach of the con-tract. The defenders pleaded that the Court of Session had ‘no jurisdiction,’ and that ‘the action is excluded by the clause of reference in the memorandum of agreement.’ These pleas were repelled by the Lord Ordinary, and his judgment was affirmed by Lord Adam and Lord M'Laren, in the Inner-House, Lord Kinnear dissenting. During the course of the litigation the pursuer died, and is now represented by the respondents.
It is not in controversy that the arbitration clause is, according to the law of England, a valid and binding contract between the parties, nor that according to the law of Scotland it is wholly invalid inasmuch as the arbiters are not named. The view taken by the majority of the Court below is thus expressed by Lord Adam:‘ So far as I see, nothing required to be done in England in implement of the contract. That being so, I am of opinion with the Lord Ordinary that the construction and effect of the agreement, and of all and each of its stipulations, is to be determined by the lex loci solutionis, that is, by the law of Scotland.’
It is not denied that the conclusion thus arrived at renders the arbitration clause wholly inoperative, and thus defeats the expressed intention of the parties, but this is treated as inevitably following from the rule of law that the rights of the parties must be wholly determined by the lex loci solutionis. I am not able altogether to agree with the view taken by the learned Lord that everything required to be done in implement of the contract was to be done in Scotland, inasmuch as it appears to me that the arbitration clause which I have read to your Lordships does not indicate that that part of the contract between the parties was to be implemented by performance in Scotland. That clause is as much a part of the contract as any other clause of the contract, and certainly there is nothing on the face of it to indicate, but quite the contrary, that it was in the contemplation of the parties that it should be implemented in Scotland.
The learned Judges in the Court below treat the lex loci solutionis of the main portion of the contract as conclusively determining that all the rights of the parties under the contract must be governed by the law of that place. I am unable to agree with them in this conclusion. Where a contract is entered into between parties residing in different places, where different systems of law prevail ,it is a question, as it appears to me, in each case, with reference to what law the parties contracted, and according to what law it was their intention that their rights either under the whole or any part of the contract should be determined. In considering what law is to govern, no doubt the lex loci solutionis is a matter of great importance. The lex loci contractus is also of importance. In the present case the place of the contract was different from the place of its performance. It is not necessary to enter upon the inquiry, which was a good deal discussed at the bar, to which of these considerations the greatest weight is to be attributed, namely, the place where the contract was made, or the place where it is to be performed. In my view they are both matters which must be taken into consideration, but neither of them is, of itself, conclusive, and still less is it conclusive, as it appears to me, as to the particular law which was intended to govern particular parts of the contract between the parties. In this case, as in all such cases, the whole of the contract must be looked at and the rights under it must be regulated by the intention of the parties as appearing from the contract. It is perfectly competent to those who, under such circumstances as I have indicated are entering into a contract, to indicate by the terms which they...
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