11 September 2019
Deemster Gough recently handed down judgment in Auto-Cycle Union Limited (“ACU”) and another v Stephen James Mercer, in an interesting judgment involving exclusive jurisdiction clauses and forum issues.
Mr Mercer had been a competitor at the 2018 TT motorcycle races when he was involved in a collision with a course car, resulting in personal injuries of a relatively severe nature. He had commenced pre action correspondence with ACU in relation to a claim for personal injury and consequential loss and ACU had admitted liability. However, dispute had arisen in that Mr Mercer sought to issue proceedings in England and Wales, whereas ACU believed the appropriate forum was the Isle of Man. Rather than waiting until proceedings were issued, the advocate for ACU elected to issue a pre-emptive application for a declaration as to the appropriate forum.
The argument for ACU was simply put:
- There was a properly incorporated exclusive jurisdiction clause in favour of the Isle of Man which ought to be applied;
- Even if the court were to find that the jurisdiction clause was not operative, the unique subject matter of the claim and the applicability of Manx law to the claim meant that the Isle of Man was clearly and distinctly the most appropriate forum, applying the Spilliada tests.
By contrast, Mr Mercer’s advocate sought to argue that:
- The court had no jurisdiction under which to make the order for declaratory relief until such time as proceedings were issued and the Defendant acknowledges service;
- The exclusive jurisdiction clause should not be operative because: –
- It had not been properly incorporated into the contract;
- The contract was not a commercial contract and the term was an unfair contract term;
- Mr Mercer was unaware of the jurisdiction clause, the same having not been properly identified to him;
- Even if an exclusive jurisdiction clause was operative, it should not automatically be assumed that the Isle of Man was the appropriate jurisdiction and the clause should be overridden due to a number of other factors, such as the fact that Mr Mercer received his medical treatment in England.
Deemster Gough provides a useful summary of the rules in relation to jurisdiction at paragraph 18 of his judgment:
“(i) The court may make declarations whether or not any other remedy is claimed (Rule 10.21).
(ii) The court may grant interim remedies (Rule 7.16).
(iii) Interim remedies include interim declarations (Rule 7.16 (1) (b)).
(iv) A judge would have to give permission for an application for an interim remedy before a claim form is filed (Rule 7.16 (5)).
(v) An order for an interim remedy may be made at any time, including before the proceedings are started, only if the matter is urgent or it is otherwise desirable to do so in the interests of justice.
(vi) Rule 7.16 (2) (c) provides that interim remedies can only be applied for by a defendant before an acknowledgment of service or a defence has been filed if the court specifically orders.”
He went on to conclude (paragraph 21) that “on balance it is in the interests of justice to determine the application here and now”, albeit he accepted the application was not an urgent one. His view was that it was in the interests of justice because:
(i) It was necessary for the matter to progress in a timely manner;
(ii) It is inevitable that forum arguments would become relevant at some future stage, so resolving them now would be the most time and cost effective approach;
(iii) Given the tests for forum in England and the Isle of Man are not materially different, there would be no prejudice to either party.
At paragraphs 26 to 38, he discusses the competing evidence available as to the jurisdiction clause, but ultimately determines (paragraph 48) that Mr Mercer accepted the jurisdiction clause. In reaching this conclusion, he determines that the contract was entered into at the point Mr Mercer signed up for the races, following the rider briefing and having had the opportunity to read on several occasions the content of the Regulations. Therefore, the term could and was properly incorporated into the contract.
Furthermore, the argument that the term was an unfair one held little merit, on the basis that the contract is a commercial one given it involves issues such as prize money, technical specifications and appearance fees. Even if it were not a commercial contract, Deemster Gough believed it could not be deemed to be an unfair contract term; “I cannot see how a jurisdiction clause which adopts Isle of Man Law as the proper law of the contract and gives the Isle of Man courts exclusive jurisdiction over the contract could possibly be an unfair term in circumstances where the contract governed the conditions applicable to the participation of a rider in the Isle of Man TT event.”(para 41)
Ignorance of the contract term was not accepted as being a material factor (para 45). “It is no defence to a claim based on a contract that a party who has signed the contract later alleges that he didn’t read it, although he had every opportunity to do so. Still less is it a defence for him to say that other similar contracting parties did not bother to read the contract either.” It was held that Mr Mercer had more than adequate opportunity to become aware of the clause.
Paragraph 53 provides a useful summary of the court’s stance on overriding exclusive jurisdiction clauses:
“The court has repeatedly refused to override jurisdiction clauses in freely negotiated contracts as the clauses create a strong presumption that the jurisdiction is the correct one. The court is entitled to have regard to all the other circumstances but Mr Molyneux accepts that the general rule is that the parties will be held to their contractual choice unless there are overwhelming or at least very strong reasons for departing from that rule. He accepts also that such overwhelming or very strong reasons do not include factors of convenience that were foreseeable at the time the contract was entered into (save in exceptional circumstances involving the interests of justice).”
Deemster Gough found that the factors relied upon by Mr Mercer in his attempt to displace the clause were either insufficient or reasonably foreseeable at the point of contracting and therefore decided that the exclusive jurisdiction clause should not be displaced and should stand.
Although Deemster Gough found that the exclusive jurisdiction clause was properly incorporated and should be applied, he elected to consider the Spilliada factors in any event, which gave rise to a useful summary of the Spilliada tests at paragraph 65: –
“The tests are the considerations that the court will balance in deciding on an appropriate and most convenient jurisdiction where other factors, such as a contractual term, are absent. The Spiliada tests include:
(a) the forum with the most real and substantial connection to the case in point;
(b) which forum is the most convenient;
(c) which forum would be best in terms of cost;
(d) the availability of witnesses;
(e) the law governing the relevant transaction;
(f) the place where the parties reside or carry on business;
(g) would the parties obtain justice in the other forum.”
It was his opinion that, had he been required to weigh these factors “in the balance I would come down to identifying the Isle of Man as having the most real and substantial connection to the case and being the most convenient forum for the hearing of the causation and quantum issues.” (para 74)
In summary, therefore, it appears that the Manx courts will be prepared to make such pre-proceedings declarations as to forum, provided that it is in the interests of justice to do so. Perhaps we may see a surge in such applications in commercial matters where jurisdiction is plainly an issue, so as to save the wasted costs of issuing in separate jurisdictions and therefore seeking injunctive relief and/or disputing forum?
Author: Emily Johnson