Sent hameward tae think again - High Court in England has jurisdiction over a claim against a Scottish law firm for work carried out in Scotland

United Kingdom

Should where you are physically working decide where the law says services are being performed? In a claim brought in the High Court in England, a Scottish law firm sought a ruling that the courts of England and Wales did not have jurisdiction to determine a claim against it for breach of fiduciary duty, breach of contract and negligence. The services in issue had been carried out by lawyers working in a Scottish office. The High Court ruled that it did have jurisdiction, by virtue of a related ‘anchor claim’ in England and because the place of performance of the relevant obligation of the law firm, as a matter of law, was England.

Background

The claimant was a director and shareholder of an English company (the Company) that had gone into administration following the alleged mis-selling of an interest rate hedging product by a bank. The bank appointed joint administrators (JAs), one based in England and the other (and his assistant) in Scotland. The JAs instructed a Scottish law firm to advise them on mis-selling claims against the bank. The law firm’s retainer did not stipulate the place of performance of the law firm’s obligations. The work was carried out by lawyers working principally in a Scottish office.

The claimant’s primary allegation was that the relationship between the law firm and the bank was such that the bank had “informal control” over the law firm. The claimant alleged that the law firm had a conflict of interests which should have prevented it from acting for a party pursuing claims against the bank.

The claim against the law firm was issued in the High Court in England on 26 February 2018. On 22 February 2018, the claimant issued an application for permission to make a misfeasance claim against the JAs. The misfeasance claim against the JAs was issued on 8 July 2018.

The law firm sought a declaration from the High Court in England that the courts of England and Wales did not have jurisdiction under the Civil Jurisdiction and Judgments Act 1982 (the Act) over the claim against it. The law firm also argued that it would be more convenient to hear the claim in Scotland than in England.

The law firm was domiciled in Scotland. As a result, Schedule 4 of the Act required the claim against it to be made in Scotland, unless:

  1. the claim fell within “proceedings relating to a company as respects which jurisdiction is conferred on the court having winding up jurisdiction” (rule 1 of Schedule 5 of the Act); and/or
  1. the claim fell within one of the exceptions within Schedule 4, in particular:
    1. that the misfeasance claim against the JAs (in respect of which it was common ground that the High Court in England had jurisdiction) was an ‘anchor claim’ – in other words, a claim so closely connected to the claim against the law firm that it would be expedient to hear and determine them together to avoid the risk of irreconcilable judgments arising from separate proceedings; and/or
    1. that England was the place of performance of the law firm’s obligations.

The claimant also argued that the provisions of the Act were irrelevant to a question about which court had jurisdiction, because proceedings closely related to insolvency proceedings were excluded from the recast Brussels Regulation (1215/2012) and thus from the Act.

The High Court’s decision

The High Court ruled that:

  1. the claim against the law firm was not excluded from the Act by the exclusion in the recast Brussels Regulation. The claim was not closely linked to the administration, because the law firm had a purely advisory role and was not responsible for either the internal management of the administration or the conduct of the JAs;
  1. the claim against the law firm was not caught by the exclusion in rule 1 of Schedule 5 of the Act. That exclusion applied to claims which can be brought in the Insolvency and Companies List (formerly the Companies Court). The claim against the law firm was not such a claim, and it was not sufficient that the claim related to a company that was subject to insolvency procedures;
  1. the misfeasance claim against the JAs was an ‘anchor claim’ sufficient to establish jurisdiction in England for the claim against the law firm. It did not matter that, at the date at which the claim against the law firm was issued (26 February 2018), the misfeasance claim had not yet been issued. The reasons for not including the law firm in the misfeasance claim were purely procedural, and it was desirable to avoid irreconcilable judgments in the two claims.

    In any event, the anchor misfeasance claim had commenced on 22 February 2018 by virtue of the claimant’s application for permission to make that claim;

  1. the English and Welsh courts also had jurisdiction by virtue of the place of performance of the law firm’s obligations. The primary complaint in the claim against the law firm was that the law firm was in breach of its fiduciary duty by continuing to advise and act for the Company, thereby putting the bank’s interests and its interests before those of the Company. The common law rule applied, that an obligation is performed where the “creditor” in the obligation is based rather than where the debtor is based. Even though the natural persons whom the law firm advised were predominantly based in Scotland, they received the law firm’s advice as agents for the Company, which was based in England.The law firm’s obligation was therefore performed in England.

    In addition, the claimant’s allegation that the law firm did not progress the claims against the bank also related to performance of an obligation in England, since those claims arose out of English causes of action, which should have been pursued in England. It did not matter that the lawyers were working principally in Scotland; and

  1. the convenient forum for determination of the claim against the law firm was the courts of England and Wales. There was a very substantial overlap between the legal and factual issues in the claim against the law firm and the misfeasance claim against the JAs, to the extent of giving rise to the possibility of irreconcilable judgments. That was a compelling reason for retaining the claim in England, as were the consequent savings of cost and time that would benefit both parties.

Comment

The High Court’s judgment is perhaps most interesting for what it says about the place of performance of the law firm’s obligation to the Company. Even though the law firm was based in Scotland, and providing advice to joint administrators predominantly based in Scotland, the place of performance was held to be England because the law firm’s advice was received by the Company, which was based in England. In addition, because the claims that the law firm was alleged not to have pursued arose from English causes of action, that too meant that the place of performance of the law firm’s obligation was in England.

In a world where agile working is increasingly the norm, this case serves as example to professionals in Scotland and England who provide advice to clients in the other jurisdiction, or who deal with matters in the other jurisdiction, that they will not necessarily be sued in their own jurisdiction. It also provides a useful reminder that good practice is to determine the jurisdiction of a retainer in a written engagement letter at the outset of a matter.