Jurisdiction clause in terms of trade

Posted on Sep 13, 2018 by Terry Morgan   |   Categories: Building & Construction

A recent decision of the Supreme Court of NSW highlights the difficulty that can be encountered when contracts are signed with suppliers of products or services and those suppliers are located outside of your state or territory.

In the proceedings in question of the four parties to the proceedings, three were Australian entities and carried on business in NSW as well as other states.

There were several documents which had been executed by the various parties to reflect the arrangements that had been entered into.

The documents entered into with one of the parties (the Fourth Party) indicated that, in respect of any claim which may be made against the Fourth Party, the courts in England have exclusive jurisdiction to deal with that dispute.

The relationship between the parties broke down and proceedings were commenced in the Supreme Court of NSW.

The Fourth Party contended that such proceedings which involved the Fourth Party should be dismissed as the agreement entered into by the Fourth Party specifically stated that the courts of England had exclusive jurisdiction. The court repeated the considerations which are to be taken into account when considering clauses in contracts which conferred jurisdiction on particular courts.

The court held that whilst the existence of such a clause conferring jurisdiction on a particular area or courts “is not determinative”, and that other factors may be taken into account, the case law reflects that generally, “parties should be held to their contractual bargains and a resolution of disputes arising from contractual arrangements should occur in a coherent and consistent manner and as expeditiously, effortlessly and efficaciously as possible”.

Whilst such policy considerations would suggest that in any proceedings, the fewest different jurisdictions as possible should be involved in resolving the fewest number of separate proceedings the parties could be held to account in respect of such clauses in contracts.

In this case, the court determined that whilst certain actions could be undertaken in NSW between certain of the parties, other proceedings between any of those parties and the Fourth Party would need to be undertaken in courts of England.

One can readily recognise the additional legal costs that would be incurred in splitting the proceedings in that manner.

The case highlights the importance, particularly when dealing with suppliers of products from other jurisdictions and even more particularly, from overseas jurisdictions, to check the contract carefully to ascertain where proceedings may be commenced in the event of any dispute and which laws will govern the terms of the contract.