Closing doors: a conflict of laws

The decision in Fern Computer Consultancy v Intergraph Cadworx & Analysis Solutions Inc [2014] EWHC 2908 represents a reversal of the old maxim that as one door closes, another opens. Most claimants will generally need to jump hurdles if they wish to sue a party outside the EU. The claimant needs to overcome what effectively amounts to a four-pronged test, including satisfying one of 20 grounds listed in the Practice Direction of CPR 6. Most cases will
easily fall into one of these categories, but not all, as we saw in Fern.

Following the termination
by the defendant US software company of an agreement with Fern for it to obtain orders for the defendant’s software products, Fern claimed that it was a commercial agent for the defendant and, as such, entitled to compensation under the Commercial Agents (Council Directive) Regulations 1993
(as amended).

The regulations provide for minimum notice periods and compensation to be paid in most situations to an agent unless termination results from material breach by the agent.

The parties’ agreement was stated to be governed by Texas law and provided for the courts of Texas to have jurisdiction.

Faced with Fern’s claim, which Master Bragge had permitted to be served out of the jurisdiction, Intergraph applied to set aside the order.

Permission to serve out had been given on the basis that the English courts were the proper place to hear the claim, there was a serious issue to be tried, and the claim satisfied sub-paragraph (6)(c) of the Practice Direction to CPR 6, which provides that ‘a claim is made in respect of a contract where the contract…is governed by English law’.

Non-contractual regulations

In order to pass through this gateway, Fern had relied on the decision of Tugendhat J in Accentuate [2012], which also concerned a claim under the regulations. In considering this earlier judgment, Mann J unhesitatingly highlighted the fact that the regulations are not contractual following on from the obiter of Lord Hoffman
in Lonsdale [2007]. As such, reliance on gateway 6 created ‘an obvious difficulty’.

In a last ditch attempt to overcome Mann J’s position, Fern’s leading counsel argued that a broad interpretation should be given to ‘contract’ so
as to give effect to the Agents Directive (86/653/EC), which the regulations implemented. But,
as Mann J pointed out, the European court’s decision was concerned with the English court assuming jurisdiction and not with how the regulations work.

It followed that the claim did not pass through this gateway.

Paragraph 7 of the Practice Direction concerns a claim in respect of a breach of contract within the jurisdiction. Fern had claimed that there had been a failure to pay monies due under the regulations.

Unsurprisingly, Mann J easily dismissed this argument by pointing out that the failure to pay monies arose under the regulations. The failure was not, however, a breach of contract. As such, again, permission to serve out should not have been given, and with that Mann J closed a door which had stood open since Accentuate.

But he was, in his own words, “not comfortable”. He had every right to be discomforted finding himself between the High Court’s procedural rules and the European Court’s decision in Ingmar GB Limited v Eaton Leonard Inc [2001] 1 All ER 329. Indeed, as Mann J noted, the regulations are plainly intended to have effect.

Squaring the circle

Mann J highlighted the possibility that the defendant’s ‘wrong’ was a tortious breach of statutory duty. He also drew attention to gateway 20, and
in doing so, gave the parties
the opportunity to make submissions on whether Fern should be able to amend the application so as to be able to argue these points.

He then turned to his attention to the issue of whether there was a sale of goods given that Fern was concerned with obtaining orders for software.

He noted that the directive refers to goods without shedding ‘any light on the meaning of goods’.

Having reviewed the authorities, he concluded that where software is supplied on CD, there was a real prospect
of success in arguing that the supply was one of goods. This was even more so where the supply was accompanied by a physical dongle and documents.

And with this a door which had been open for a long time closed. SJ

Stephen Sidkin, pictured, is partner and Evie Meleagros is an associate at Fox Williams