Fern Computer Consultancy Ltd v Intergraph Cadworx & Analysis Solutions Inc

Factual and Procedural Background

This opinion concerns an application by the Defendant to set aside an order permitting the Claimant to serve proceedings out of the jurisdiction in Texas. The claim arises under The Commercial Agents (Council Directive) Regulations 1993 ("the Regulations") and includes a secondary claim for unpaid commission. The contract between the parties contains a Texas law and jurisdiction clause, but the Claimant sought permission to serve out on the basis that the contract was governed by English law and/or breached within England, raising tensions between jurisdiction clauses and the Regulations.

The agency relationship began in 1993 under an agreement dated 21 December 2007, appointing the Claimant as a non-exclusive agent to solicit orders for software products throughout Europe, with commissions payable on successful orders. The agreement contained a Texas governing law and jurisdiction clause. The agency agreement was terminated by the Defendant in October 2010. Subsequent proceedings were commenced in Texas by the Defendant seeking declarations supporting the Texas jurisdiction and law, while the Claimant commenced proceedings in England relying on the Regulations.

The Defendant challenges the English court's jurisdiction and the permission to serve out the claim, arguing the contract is governed by Texas law and that the Regulations do not override the jurisdiction clause. The Claimant relies on the Regulations and case law to support the English court's jurisdiction and the applicability of the Regulations despite the Texas law clause.

Legal Issues Presented

1. Whether the Claimant can establish jurisdiction to serve proceedings out of the jurisdiction in England despite a Texas law and jurisdiction clause in the contract.
2. Whether a claim under the Regulations constitutes a claim "in respect of a contract governed by English law" for the purposes of the CPR service out gateways.
3. Whether the breach relied upon by the Claimant amounts to a breach of contract within the jurisdiction.
4. The proper characterization of the subject matter of the agency agreement—whether the supply of software and associated hardware constitutes a "sale of goods" under the Regulations.
5. Whether the Claimant's activities fall within the scope of the Regulations or are "secondary" activities excluded from the Regulations.
6. Whether the English court is the appropriate forum to hear the claim despite the jurisdiction clause.
7. Whether the Claimant's claim for unpaid commission can be served out of the jurisdiction.
8. The applicability and effect of the Regulations on overriding contractual choice of law and jurisdiction clauses.

Arguments of the Parties

Claimant's Arguments

• The Regulations apply to the Claimant's claim and override the contractual Texas law and jurisdiction clause to the extent necessary to protect the Claimant's statutory rights.
• A claim under the Regulations falls within the CPR gateway concerning contracts governed by English law as interpreted in Accentuate Ltd v Asigra Inc, thus permitting service out.
• The supply of software on physical media with accompanying hardware (e.g., dongle) amounts to a sale of goods within the meaning of the Regulations.
• The Claimant's activities are not secondary but form the primary agency relationship within the scope of the Regulations.
• The English court is the appropriate forum because the Defendant does not accept that Texas courts would enforce the Regulations, and the Claimant's witnesses and documents are located in England.
• Permission to serve out is not required under CPR 6.33(3) as the court has jurisdiction under the Regulations.
• The claim for unpaid commission, while unparticularised, is part of the overall claim and should be considered.

Defendant's Arguments

• The contract is expressly governed by Texas law and contains a valid and enforceable Texas jurisdiction clause, which should be upheld.
• The Regulations do not affect the proper law of the contract or override the jurisdiction clause.
• The CPR gateways for service out are not satisfied because the contract is not governed by English law and the breach is not a breach of contract within England.
• The claim under the Regulations is statutory, not contractual, and thus does not fall within the service out gateways premised on contract claims.
• The supply of software is a licence, not a sale of goods, so the Regulations do not apply.
• The Claimant's activities are secondary and therefore excluded from the Regulations.
• The claim for unpaid commission falls squarely within the Texas jurisdiction clause and should not be served out in England.
• The Claimant has not demonstrated that the English court is the proper forum, and the Texas courts are the appropriate venue.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by examining the contractual framework and the clear Texas law and jurisdiction clause. It recognized the tension between this clause and the mandatory provisions of the Regulations, which protect commercial agents and prevent derogation from their terms.

Regarding the first CPR gateway—whether the contract is governed by English law—the court held that the contract is governed by Texas law as chosen by the parties under the Rome Convention. The court rejected the argument that a claim under the Regulations equates to a claim under an English law contract for the purposes of the gateway, distinguishing the statutory nature of the claim under the Regulations from a contractual claim. The court declined to follow the contrary view in Accentuate, reasoning that the gateway requires an English law contract, not merely an English law claim.

On the second gateway—breach of contract committed within the jurisdiction—the court found that the Claimant's claim for unpaid sums arises under the Regulations, which create statutory obligations rather than contractual breaches. Therefore, the breach is not a breach of contract within England, and this gateway is not satisfied.

The court rejected the Claimant's argument that permission to serve out was unnecessary under CPR 6.33(3), finding that the Regulations do not expressly contemplate proceedings against defendants outside the jurisdiction without leave.

The court then considered whether the subject matter of the agency agreement involved a sale of goods under the Regulations. It accepted that while software alone may not constitute goods, the supply of software on physical media accompanied by hardware (such as the Electronic Software Lock dongle) and documentation could amount to a sale of goods, raising a serious question to be tried on the merits.

The court also found that the claim that the transaction was a licence rather than a sale was arguable but did not preclude the claim from raising a serious question to be tried. It noted the Usedsoft decision as supporting an autonomous meaning of "sale" that could include licences granting indefinite use rights.

Regarding whether the Claimant's activities were secondary and thus excluded from the Regulations, the court found this to be a serious question to be tried, noting that unlike the two-contract situation in Crane v Sky In-Home Service Ltd, here there was a single package and agency agreement.

On the territorial scope, the court found that the Claimant's pleaded claim related to activities in Great Britain only, and thus the Defendant's argument that the Regulations do not apply outside Great Britain did not affect the current claim.

In considering the appropriate forum, the court found that although the jurisdiction clause favored Texas courts, the Defendant did not accept that Texas courts would apply the Regulations or recognize foreign judgments based on them. This created an untenable position for the Defendant, justifying the English court as the proper forum and permitting the Claimant to depart from the jurisdiction clause.

Finally, the court distinguished the unpaid commission claim as a contractual claim that falls within the exclusive Texas jurisdiction clause and thus cannot be served out in England.

Given the Claimant's intention to pursue alternative tortious grounds for service out, the court allowed an opportunity for submissions and possible amendment rather than setting aside the permission to serve out in relation to the claim under the Regulations at this stage.

Holding and Implications

The court's final decision was as follows:

• The Claimant has not established that a claim under the Regulations can be brought within any of the currently relied upon CPR service out gateways.
• Had the Claimant been able to invoke one of those gateways, the claim under the Regulations raises a serious question to be tried and passes the merits test for service out.
• The courts of England and Wales are the proper forum to hear the claim under the Regulations, justifying departure from the jurisdiction clause.
• Permission to serve out the claim for unpaid commission (a contractual claim) should be set aside as it falls within the exclusive Texas jurisdiction clause.
• The order granting permission to serve out the claim under the Regulations is not set aside at this stage, pending further submissions on alternative grounds such as tort.

The implications of this decision are that statutory claims under the Regulations may override contractual jurisdiction clauses when the alternative forum will not or is unlikely to give effect to the Regulations, but contractual claims remain subject to exclusive jurisdiction clauses. The decision does not establish new precedent but clarifies the application of existing principles in the context of conflicting jurisdiction clauses and statutory protections for commercial agents.