J S Swan (printing) Limited V. Kall Kwik Uk Limited
| Jurisdiction | Scotland |
| Judge | Lord Hodge |
| Neutral Citation | [2009] CSOH 99 |
| Date | 08 July 2009 |
| Docket Number | CA164/08 |
| Court | Court of Session |
| Published date | 08 July 2009 |
| OUTER HOUSE, COURT OF SESSION [2009] CSOH 99 | |
| CA164/08 | OPINION OF LORD HODGE in the cause J. S. SWAN (PRINTING ) LIMITED Pursuers; against KALL KWIK UK LIMITED Defenders: ____________ |
Pursuers: Munro; Brodies LLP
Defenders: Fairley; Wright Johnston & Mackenzie LLP
8 July 2009
[1] In this action the pursuers, which carry on a printing business, seek declarator that the defenders, which grant franchises to others to conduct the Kall Kwik business, are in material breach of a franchise agreement dated 18 October 2001. The pursuers are a company registered in Scotland. The defenders are a company registered in England and have their domicile in England. I have heard a debate on the question whether the pursuers have pleaded a relevant case that this court has jurisdiction in terms of paragraph 3(a) of Schedule 4 to the Civil Jurisdiction and Judgments Act 1982 ("the 1982 Act").
[2] This provision, which is part of the Schedule of the 1982 Act governing the allocation of jurisdiction within United Kingdom, is modelled on Article 5 of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters signed at Brussels on 27 September 1968, as amended by the three Accession Conventions referred to in section 1 of the 1982 Act as amended ("the Brussels Convention").
[3] Paragraph 1 of Schedule 4 to the 1982 Act sets out the general rule of jurisdiction, namely that "subject to the rules of this Schedule, persons domiciled in a part of the United Kingdom shall be sued in the courts of that part." Paragraph 3 provides rules of special jurisdiction. For this action the relevant rule is:
"A person domiciled in a part of the United Kingdom may, in another part of the United Kingdom, be sued -
(a) in matters relating to a contract, in the courts for the place of performance of the obligation in question."
[4] Since the enactment of the 1982 Act, EC Regulation 44/2001 of December 2000 on the Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters ("the Regulation") introduced specific rules as to the place of performance unless otherwise agreed in the cases of the sale of goods and the provision of services. The Regulation provides that in relation to a contract for the provision of services, the place of performance, unless otherwise agreed, is the place in the Member State where, under the contract, the services were provided or should have been provided.
[5] Section 16(3) of the 1982 Act provides that the court in determining any question as to the meaning or effect of any provision set out in Schedule 4 shall have regard to any principles laid down by the Court of Justice of the European Communities ("the European Court") in connection with Title II of the Brussels Convention or Chapter II of the Regulation and to any relevant decision of that court as to the meaning and effect of any provision of that Title or that Chapter.
The franchise agreement and the pursuers' averments
[6] In the franchise agreement the defenders gave the pursuers certain rights for a period of ten years. Clause 5 of the agreement imposed certain "initial obligations" on the defenders to assist the pursuers in opening for business and in clause 8 the defenders undertook training obligations. Certain obligations in the sub-clauses in clause 5, such as the provision of assistance in converting premises into a Kall Kwik business and providing a project manager for shopfitting, were by necessary inference to be performed in Scotland. Under clause 8, the defenders were obliged to provide initial training in Texas and in their head office in England and they had a discretion whether to provide other training regionally. Otherwise, neither clause is relevant in this action.
[7] In arguing the special ground of jurisdiction the pursuers found on three sub‑clauses in clause 6 of the agreement which sets out the defenders' continuing obligations. Those sub‑clauses contain the following stipulations:
"The Franchisor shall at all times during the subsistence of this Agreement ....
6.2 provide the Franchisee with reasonable facilities for consultation with the designated officers of the Franchisor in relation to the conduct of the said Business with a view to assisting and enabling the Franchise to maintain the operation of the System
6.3 provide the Franchisee from time to time with advice know‑how and guidance in such areas as management finance marketing and methods of operation to be employed in or about the System
6.4 provide the Franchisee with a continuing service which subject to the provision by the Franchisee to the Franchisor of such information as the Franchisor may require will enable the Franchisor to monitor the performance of the Said Business and to offer guidance to assist in the achievement and maintenance by the Franchisee of standards of operation service and product."
[8] The franchise agreement does not contain any express provision stipulating the place of performance of those obligations. But the pursuers aver in article 7 of condescendence that there is an implied term that the defenders would perform the three continuing obligations quoted in the preceding paragraph in Scotland, where the pursuers, which were the recipients of those services, had their place of business. They aver that it is necessary to imply that term as a matter of business efficacy.
[9] The pursuers aver that they operated what the defenders classified as a "key centre." According to the defenders' "Insite" intranet website, the pursuers should have received at least five business support visits per year. They were also entitled to an annual business planning meeting on site and four cash flow analyses per year, which in the past members of the defenders' staff had carried out on site. The pursuers were also entitled to expect invitations to regional meetings and business development workshops, which in practice took place at regional venues and not at the defenders' head office. In the past the defenders had provided those levels of support.
[10] Even if there were no such implied term, the pursuers aver that it was the intention of the parties in entering the agreement that the defenders would provide the pursuers with operational and technical support and assistance at the pursuers' premises or through regionally-arranged meetings. The manner in which the defenders provided those services in the past demonstrated the close connection between the defenders' obligations and the pursuers' place of business, which is in Scotland. The pursuers quote passages from the defenders' website and franchise sales brochure in which the defenders speak of having field-based business development managers, visits to outlets by the defenders' staff, and a business development consultant, who would get to know every aspect of the franchisee's operation, allocated to each franchisee to provide customised support. They aver that in the past they had received assistance from the defenders' business development managers, IT specialists and marketing specialists but that the defenders had ceased to provide such support. After the pursuers complained about the lack of support, senior employees of the defenders had visited their premises in Scotland infrequently to discuss those complaints.
The relevancy challenge and the pursuers' answer
[11] Mr Fairley on behalf of the defenders submitted that the pursuers' averments as to the place of performance of the relevant obligations were irrelevant. He moved that the action be dismissed as the pursuers had averred no relevant ground of jurisdiction. The essential test in relation to the place of performance ground of jurisdiction, he submitted, was whether the pursuers were contractually entitled to insist that the defenders perform the relevant obligations only in Scotland.
[12] He submitted that the law, in addressing place of performance, looked to what an obligee was entitled to enforce as a contractual right and not to mere expectations of how an obligation might be performed, whether or not those expectations were derived from what the obligor had done in the past. The defenders could choose to perform their obligations under the relevant sub-clauses of clause 6 of the franchise agreement by carrying on the activities set out in paragraphs [9] and [10] above, but the pursuers had no right to demand that the defenders fulfil their obligations in those ways. In any event, the law required that a place of performance of an obligation be exclusively in one jurisdiction in order to confer jurisdiction on the place of performance ground. The pursuers' averment of an implied term that Scotland was exclusively the place of performance of the relevant contractual obligations was irrelevant as such a term was not required to give effect to the...
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