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Scottish Court Highlights Need to Check for English Law and Jurisdiction Clauses

Posted: 8th March 2016

Brent Haywood, Partner in Lindsays’ Dispute Resolution and Litigation team explains how the dispute in a recent, non isolated case meant an issue arising in a ‘Scottish’ transaction had to be determined by an English court. It all depends on what the ‘standard terms’ say, if indeed they apply.

Let’s suppose that a Scottish based company makes a commercial or consumer transaction with a fellow Scottish business. In the event of litigation, you would naturally assume the case would go to a Scottish court. Correct? Not necessarily. For hidden away in the ‘standard terms’ of the transaction may be some surprises.

A recent Scottish case illustrates the pitfalls of failing to check the standard terms, and highlights the importance of understanding applicable law and jurisdiction clauses.

In Bank of Ireland (UK) PLC v Knight Frank LLP, the bank raised an action in Scotland claiming that a report prepared by the surveyor had substantially overstated the value of a property. The bank’s case was that the surveyor had been negligent. The surveyor was based in Scotland as was the bank branch and the property involved, therefore the bank took the case to a Scottish court. However, as part of its defence, the surveyor claimed that the Bank could not pursue its claim in a Scottish court. This was because its ‘standard terms’ stated that disputes had to come before an English court.

The surveyor told the court that in a 12-year period leading up to the case, it had contracted with the bank over 400 times, using the former’s ‘standard terms’. In the transaction in question, the bank instructed the report but neither read or acknowledged the standard terms that were sent alongside it. The judge decided that the bank was not entitled to accept the survey report but to reject what the ‘standard terms’ said. The ‘standard terms’ therefore applied, and the dispute had to be dealt with by an English court. The Scottish court had no jurisdiction and the bank’s case against the surveyor failed.

Nobody even knows if there was a good case in negligence or not!

Brent Haywood comments: “The issue of whether Scottish or English courts have jurisdiction over a case can turn out to be highly complicated for businesses and individuals – even when the circumstances appear straightforward. Scottish courts can sometimes hear cases that are subject to English law, but they cannot hear cases when the ‘standard terms’ say only English courts can rule on disputes. Finding this out too late can cause great angst and wasted expense. So, pay attention to the ‘standard terms’, take advice, and don’t make assumptions about what law will apply.”

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