SCOTTISH WATER BUSINESS STREAM LIMINTED against DEODAT CHATAROO
SHERIFFDOM OF LOTHIAN AND BORDERS
2015SCEDIN60
Case Number: SA978/14
Judgment by
SHERIFF PRINCIPAL MHAIRI M STEPHEN QC
in appeals
in the cause
SCOTTISH WATER BUSINESS STREAM LIMITED
Pursuers and Cross-Appellants
against
MR DEODAT CHATAROO
Defender and Appellant
Act: Dean of Faculty instructed by Brodies LLP
Alt: Party
Amicus Curiae: D Thomson, Advocate
EDINBURGH, 28 August 2015
The Sheriff Principal, having resumed consideration of the appeal, answers the first question of law in the stated case in the affirmative and the second question in the negative, allows the appeal by the defender and refuses the pursuers' cross-appeal, recalls the sheriff's interlocutor of 9 December 2014 and assoilzies the defender from the claim; finds the pursuers liable to the defender in the expenses of the principal action in the sum of £150 and in the expenses of the appeal procedure in the sum of £250.
NOTE:
1. In this stated case the pursuers are Scottish Water Business Stream Limited who are providers of water and sewerage services, licensed to do so in terms of section 6 of the Water Services (Scotland) Act 2005 ("the 2005 Act"). The pursuers are a separate undertaking to Scottish Water with whom it contracts for the supply of such services and facilities to non-domestic customers. It supplies water, drainage and sewerage services to "eligible premises" as defined in section 27 of the 2005 Act.
2. The defender, Mr Chataroo, is a newsagent who trades from premises in Coatbridge, Lanarkshire. He has occupied the shop premises at 159 Old Monkland Road in Coatbridge since 2005 as the tenant and sole occupier. In April 2014 the pursuers raised small claims proceedings in this court for recovery of the sum of £1,514.93 said to be outstanding in respect of invoices for water, waste water and drainage services provided to the defender's shop since 1 April 2005. The pursuers also seek £70 as late payment compensation in terms of section 5A of the Late Payment of Commercial Debts (Interest) Act 1998. It is averred by the pursuers that the parties entered into a commercial contract for the supply of water and sewerage services to the defender's premises.
3. The defender intimated his intention to defend the action stating that he has no contract with the pursuers and therefore disputes liability to pay the amounts claimed. The sheriff has noted this to be the issue for proof and also notes the defender's intention to counter-claim for the sum of £1,000.
4. The unpaid invoices issued to the defender are in respect of water, waste water and drainage. Scrutiny of the invoices confirms that charges are made and payment demanded under six headings all as set out by the sheriff in the fourth finding in fact. There are both fixed and variable charges for the water supply, waste water drainage and external drainage to the public waste system. The variable charges reflect actual usage which in the case of the water supply is metered. In the invoice this is described as the "volumetric" water or waste water charges. In general, the waste water charge is a percentage (95%) of the metered water usage. The sheriff finds that the shop premises occupied by the defender are served by a water supply and a waste drain. "The supply comprises the piped supply from the water mains to a sink, and the waste drain comprises the drain from the sink to the external drain." The defender has never used or permitted the use of the sink and never wanted to be supplied with these water services. (3) That, in the main, appears to be borne out by the invoices which indicate minimal, if any, volumetric water usage unless that usage has been estimated or consistent with a leak. On the other hand, the charge for property and road drainage is accepted by the defender. (finding in fact 4) Accordingly, the defender in making part payment accepts partial liability but only for the drainage charges. Although the defender did not consent to the water supply or enjoy any benefit from that supply the sheriff finds that he could have water at any time by turning on the tap and those services provided by the pursuers were and continue to be available to the defender for instant use. (finding in fact 5)
5. Against that background, the defender in his appeal challenges the sheriff's finding in fact and law 2 which concludes that the pursuers are entitled to charge the defender for water and waste water services supplied to the premises (being "premises" in terms of the 2005 Act). The defender requested that the pursuers remove the supply, however that involved disconnection works being required for which there would be a cost which the defender was unwilling to pay. He was, however, prepared to share the cost with the pursuers. Either due to lack of agreement as to splitting the cost or misunderstanding no disconnection took place. Therefore, as the defender has not brought the supply arrangements to an end he is liable for the charges set out in the statement of account (5/1 of process). This is the statutory basis for the pursuers' claim. Further, the defender challenges the sheriff's decision to assume jurisdiction in this action. The defender challenged the jurisdiction of the court on the basis that there was no contract between him and the pursuers which would entitle the pursuers to found jurisdiction in the place where payment of the sums due by the defender ought to have been made namely the defender's registered office in Edinburgh. Neither the pursuers nor the sheriff were entitled to assume that this court had jurisdiction.
6. The pursuers have cross-appealed against the sheriff's findings in fact and law 1 and 3. They argue that the sheriff erred in finding that there was no contract express or implied between the parties which would entitle the pursuers to claim payment in terms of the contract at this court.
Defender's Appeal
7. Mr Chataroo appeared on his own behalf without legal representation. He presented four arguments:- firstly, that there was no contract between the parties. No written contract has been produced because no contract exists. The necessary agreement or consensus was lacking and could not, on the facts, be implied. Secondly, there was no basis at all for the charges made by the pursuers in respect of water and waste water. No water had been used and therefore there was no basis for either charge in respect of water and waste water. The pursuers had not proved that the water pipes were even connected. Thirdly, the sheriff failed to deal with jurisdiction. Jurisdiction had been an issue from the outset and the defender had addressed the matter of jurisdiction with the sheriff prior to proof. If there was no contract this court had no jurisdiction. The sheriff therefore erred. Neither the pursuers nor the sheriff had followed the law on jurisdiction. The domicile of the defender must be taken as the proper and correct place of jurisdiction. There was no contract that would allow special jurisdiction in Edinburgh Sheriff Court. The sheriff was wrong to say that the defender had submitted to the jurisdiction of the court by his appearance and the sheriff erred in applying exclusive jurisdiction. If there was any ground of action against him, which is disputed, the action should have been raised in his local sheriff court at Airdrie. Fourthly, the appellant's Article 6 and 16 rights under the European Convention of Human Rights had been infringed. Finally, the defender contended that if the pursuers considered they had a proper basis upon which to charge the defender and knowing that the charges were disputed there ought to have been a referral to a panel in terms of section 16 of the 2005 Act for the purpose of setting any terms and conditions.
Submissions on behalf of Scottish Water Business Stream Limited
8. The Dean of Faculty, on behalf of Scottish Water Business Stream Limited, replied to the defender's appeal and then made submissions in support of the cross-appeal by the pursuers as to the sheriff's findings in fact and in law relating to the contractual basis of the claim for payment (1 and 3).
9. As a preface to his submissions the Dean of Faculty pointed out that this was but one of a not insignificant number of debt recovery cases raised by the pursuers in this court. As this case is special on its facts evidence in other cases may well differ materially and there was therefore no agreement that this was a "test" case.
10. Against the factual background of the defender being the sole occupier of the premises since 2005 and payment of the invoices in full up to 2009, the Dean of Faculty addressed me as to the statutory basis for charging non-domestic customers for the supply of water, waste water and drainage services. The key provision is section 6 of the 2005 Act which authorises a person (being a licence provider) to do a number of things in connection with that licence. Section 6 (1) is of particular importance to the supply of water. The licence provider is authorised to make arrangements with the occupier of any eligible premises for or in relation to the supply of water to the premises through the public water supply system and to fix and recover charges for that supply "to any premises in respect of which the person has made such arrangements". In the course of submissions I was referred to the case of Daymond v South West Water Authority [1976] AC 609. The meaning of the expression "make arrangements" is important. The case of Daymond was concerned with the meaning of section 30 of the Water Act 1973, an English Statute. The House of Lords considered the apparent wide powers of charge under the statute and concluded that the Water Authority is entitled to charge those receiving services. In the case of Anglian Water Authority v Castle 1983 W.L. 216 784 no contract existed for the supply of water or any other service. Although the court found that there was no room for implying a contract the Water Authority were entitled to recover their charges or charge the persons for whom the services are performed, facilities provided or rights made available. Section 35 of the Water Industry (Scotland) Act 2002 imposes liability on the occupier of premises and if the premises are unoccupied section 6(5) of the 2005 Act states that "the occupier" and "owner" are interchangeable in the event of the premises being unoccupied.
11. If the statutory provisions are applied to the facts and circumstances of the present case it leads to the conclusion that the sheriff was correct to hold that the pursuers had a proper statutory basis for charging the defender. The appellant is the occupier of premises; there is a supply of water to the premises; there are fixed charges in respect of water, waste water and drainage and simply because the defender chooses not to draw water he does not avoid liability to pay for these services being provided.
12. The right to charge is predicated on "arrangements" being made. The term arrangements should not be equiperated with a contract. The term "arrangements" is a broader and wider concept and some assistance can be derived from consideration of the case re British Slag Limited Application [1965] 1WLR 727 and the OFT v Lloyds TSB Bank decisions where the court considered the use and meaning of the term "arrangements" in the context of the Consumer Credit Act 1974. My attention was also drawn to a statutory provision of the 2005 Act not yet in force (section 20A) which would give a complete answer to the question of the statutory basis of charge. This section is headed "Deemed Contracts" and in circumstances where water is supplied to eligible premises other than in pursuance of arrangements between the provider and the occupier then the relevant parties are deemed to have made arrangements with each other for the provision to the premises of water services. Allowing for that statutory provision not yet being in force the sheriff was correct to hold that there was a statutory basis for the pursuers to charge Mr Chataroo for the water services provided and it mattered not that he chose not to make use of the services supplied.
13. Turning to the pursuers' appeal (cross-appeal). Does a contract exist between the parties which would form an additional or alternative basis for charging the defender? I was addressed firstly as to the legal propositions underpinning formation of a contract. In determining the matter of whether a binding contract exists between parties much will depend on the words which pass between the parties together with their conduct. The parties’ subjective intentions are irrelevant and indeed conduct alone may, objectively assessed, be sufficient to hold that a contract has been formed. There appeared to be common ground between the Dean of Faculty and the amicus curiae that these propositions were sound and applicable in the present case.
14. The pursuers' case as to formation of the contract can be found in paragraph 3 of the adjusted statement of claim. It is to the effect that the defender is deemed to have entered into a contract with the pursuers for the provision of services by entering into occupation of the premises supplied by the pursuers. There are, however, other important facts which are indicative of the existence of contractual obligations. In particular, services have been provided by the pursuers to the defender. Performance of a core obligation under the contract is important. Invoices have been rendered and paid by the defender. Where there has been performance it would be unrealistic not to infer intention to enter into contractual relations. As authority for the importance of conduct or execution of obligations I was referred to McBryde on the Law of Contract of Scotland (3rd Ed) Ch 5 (5-16 to 5-18); and Ch 6 (6.11) and the decision of the court in of G.P. Trentham Limited v Archital Luxfer Limited [1993] 1 Lloyds Rep. 25.
15. The Dean of Faculty and amicus curiae agreed that the question of whether it is "necessary" to imply a contract is an important one. Reliance was placed on dicta of Mance L.J. in Baird Textile Holdings v Marks and Spencer PLC [2001] CLC 999 and Dillon L.J. in Anglian Water Authority v Castle (supra). The latter case might be thought to be against the pursuers' argument, nevertheless, it is an important authority and deals with the inter-relation between the statutory and contractual bases for charge. An objective analysis of the facts of the present case point to there being a contract and also point to there being factors which can properly differentiate the present case from Anglian Water. In the present case an analysis of the actual supply of services; invoices tendered and regularly paid point to this being truly a contract which failing a situation where it is necessary to imply a contract. Essentially, the pursuers rely on the same features of this case to support the statutory and the contractual claim. There is de facto supply of water and services; the pursuers know which premises are being supplied and similarly the defender is aware of the supplier by virtue of the invoices. Payment of invoices supports the pursuers' case as to both statutory and contractual liability. “Arrangements” appear to have been made.
16. Both the Dean of Faculty and Amicus took issue with the sheriff's analysis of the statutory case at paragraph 13 of the stated case. The pursuers argue that the sheriff was wrong to characterise the arrangements in the manner he does but clearly the pursuers agree with the sheriff's conclusion as to the statutory basis for charging the defender. The contractual basis for liability should be revisited in light of the submissions as to formation of a contract advanced and appeal. Insufficient weight has been placed on performance of the principal obligations under the contract namely, the supply of services and payment for these services.
Jurisdiction
17. Essentially, the pursuers' argument as to jurisdiction is that the sheriff was correct. It is too late to challenge the jurisdiction of the court at proof. Entering appearance confers jurisdiction on this court.
18. Alternatively, rule 2 of Sch 8 to The Civil Jurisdiction and Judgments Act 1982 ("the 1982 Act") confers jurisdiction on this court based on contract. Accordingly, if the sheriff is correct in finding that the pursuers have only a statutory basis to charge the defender then the court has no jurisdiction. In these circumstances the action should be dismissed as the defender should be sued in the court of his place of domicile. However, the decision of the Lord Ordinary in Stewart v Trafalgar House Steamship Company Limited [2013] CSOH 37 is authority for the proposition that once jurisdiction has been established at the time proceedings are raised then, by virtue of the principle perpetuatio fori, it could not be lost. The pursuers draw support from that case.
19. The next issue to be determined in the event that there is a contractual basis for charge is the nature of any contract. If this is a consumer contract then the court does not have jurisdiction (see Sch 8 rule 3 to the 1982 Act). If this is a commercial contract (as the pursuers say it is) then this court does have jurisdiction by virtue of the exception to the general rule. (rule 2, Sch 8). In determining whether a contract is a consumer or a commercial contract much depends on the nature of the contract and whether the consumer requires it for the purpose of his business or for his own needs. I was referred to the case of Sporitelna European Court of Justice 14.3.2013 (opinion of Advocate General Sharpston) There is a requirement to consider whether the quality of "consumer" is present. Applying such considerations to this case, if there is a contract, it is for the supply of non-domestic water and waste water which tends to the view that such supply would not be independent of the defender's trade as a newsagent. It is non-domestic and therefore not a consumer contract.
20. In conclusion, the facts in the present case point to this not being a consumer contract but a commercial contract: Although the principles in the Anglian Water case may appear to be similar the facts differ to such an extent that the case can be distinguished. The facts and circumstances of this case disclose a close interaction between the statutory and the contractual case. Accordingly, the sheriff was correct to conclude that there was a proper statutory basis for charging the defender for the water supply etc. Nevertheless, the sheriff ought also to have found that a contract could be implied due to the substantial performance by both parties of the essential obligations under a supply contract. The court has jurisdiction from the outset and, in any event, this being a commercial as opposed to a consumer contract this court has jurisdiction by virtue of the pursuers having a place of business in Edinburgh at which payment is due. I was asked to refuse the defender's appeal and allow the cross-appeal for the pursuers.
Discussion
21. This action is for payment of non-domestic water and waste water charges which the pursuers bring against the defender, Mr Chataroo, a newsagent in Coatbridge. The sheriff, following proof, awarded the sum of £1,514.93 in favour of the pursuers. He refused to award the sum claimed under the Late Payment of Commercial Debts (Interest) Act 1988 as he was not satisfied that there was a contract between the parties far less a commercial contract which would attract late payment compensation. The sheriff's decision is based on his acceptance that there was a statutory basis for charging the defender for the supply of water services in terms of section 6 and 7 of the Water Services Etc (Scotland) Act 2005.
22. The defender, Mr Chataroo, has represented his own interests without legal assistance throughout these proceedings. He denies liability to make payment of the invoices in respect of water and waste water charges. He has never disputed his liability to pay for drainage charges ie drainage from the roof and property into the public drains. At proof the defender, for entirely understandable reasons, was unable to subject the pursuers' legal submissions to scrutiny as the sheriff records or present legal submissions or authority for his case. At the request of the sheriff the court has now appointed an amicus curiae who made submissions to the court which I have found helpful in resolving the questions of law raised by this appeal and cross-appeal including the question of jurisdiction.
23. Essentially there are three questions of law for determination in this appeal.
(1) On the facts, was the sheriff entitled to find the defender liable to the pursuers for payment of the water and waste water charges as invoiced based upon the Water etc (Scotland) Act 2005?
(2) On the facts found, was the sheriff correct to repel the pursuers' submission to the effect that the defender had any contractual liability, independent of statute, to pay the said charges?
(3) Did the sheriff err in repelling the defender's challenge to this court having jurisdiction to hear the case?
The statutory basis for charge
24. In respect of non-domestic water supply and charges there is a suite of legislation underpinning the provision of such services and the framework for charging for such services. The Water (Scotland) Act 1980 has provisions which regulate the supply of water for non-domestic purposes. The Water Industry (Scotland) Act 2002 established Scottish Water; the Water Industry Commission and the Drinking Water Quality Regulator. The Water Services Etc (Scotland) Act 2005 introduces competition and makes provision for the licensing of services to eligible premises. Section 6 allows the Commission to grant a licence (Water Services Licence) and the person who holds such a licence is a Water Services Provider. The licence authorises that person:-
"(a) to –
(i) make arrangements with the occupier of any eligible premises for or in relation to the supply of water to the premises through the public water supply system; and
(ii) fix, demand and recover charges for or in relation to the supply of water to any premises in respect of which the person has made such arrangements;" (my emphasis)
25. The pursuers' case based on the 2005 Act can be read from paragraph 2 onwards of the adjusted statement of claim. The pursuers have provided the defender with water services in accordance with the licence - these services have been provided since on or around 1 April 2005. Copies of the pursuers' water and sewerage services licences have been produced and are nos. 5/36 and 5/37 of process both dated 11 January 2008, reflected in the sheriff's first finding in fact. The pursuers, however, make averments in their adjusted statement of claim that the company are not only the providers but the default provider of non-domestic water and sewerage services in Scotland as from 1 April 2008, some three years after the defender became the tenant of the premises. This underscores straight away that there is a gap between the commencement of the defender's occupation of the premises in 2005 and the pursuers' licence. Secondly, focus falls on the requirement in terms of section 6.1(a)(i) to "make arrangements with the occupier of any eligible premises for and in relation to the supply of water". If the pursuers' licence commenced in 2008 the question must arise as to what are these arrangements? The finding in fact which addresses that matter is finding in fact 3 which has been the subject of scrutiny and criticism in the submissions and which appears to deal with both the statutory and the contractual basis of charge. It is in the following terms:-
"3 The defender has never entered into any agreement with the pursuers, or any other person or body, for the provision of water or waste services. The defender has never used or permitted the use of the sink. The defender has never wanted the supply of such services. The services were present on the premises when he first became tenant, in about 2005, following an arrangement (of unproven detail) between the pursuers or their statutory predecessors and the defender's landlord (of unproven identity)."
The pursuers' submissions to the sheriff as to statutory liability may be found in paragraphs 12 to 14 of the stated case. It is fair to draw the conclusion from that section that the sheriff was invited to make a finding in terms of finding in fact 3. The matter of "arrangements" appears to be a very loose concept that pre-dated both the defender's occupation of the premises and the pursuers' licence. An alternative construction which echoes the pursuers’ averments is that the "arrangements" follow the occupation of the premises if the supply is in place until that supply is disconnected. In the event the sheriff finds the first alternative preferable namely, that the arrangement which might have been in place prior to the defender's occupation in 2005 would appear to continue despite the pursuers having no licence to operate as a water provider and therefore to charge any occupier until some three years later.
26. The term “arrangements” has been considered in the OFT cases in the context of debtor – creditor – supplier agreements under the Consumer Credit Act 1974. As with the 2005 Act there is no definition of what the term “arrangements” means in the Consumer Credit Act. In the OFT cases it was decided that arrangements did exist. However, these cases involved participation on the part of suppliers by accepting credit cards in exchange for the purchase of goods. In the OFT cases the court considered the case of Re British Basic Slag [1965] 1 WLR 727. In particular the dicta of Diplock L.J. and Willmer L.J. was approved. The court considered that the Parliamentary draftsmen deliberately used broad loose language and the term could be contrasted with the narrower concept of “agreement”. In the British Slag case the court decided that the term should be given its ordinary and popular meaning. It connotes mutuality. Nevertheless section 6 of the 2005 Act authorises the licence provider to “make arrangements”. In my opinion the sheriff’s findings in this case leave open the question of whether the pursuers “made arrangements” with the defender as occupier of the premises in Coatbridge. The sheriff’s findings indicate that arrangements were already in place at the time the defender began occupation of the premises in 2005. That arrangement could not have been with the pursuers as they were not licensed to supply water services until 2008. Had Parliament intended authorising that a licence provider could unilaterally adopt previous arrangements or transfer automatically to itself existing arrangements I would expect that to be stated explicitly. It would then be easier to overlook the absence of steps taken by the licence provider to fulfil the requirement that "arrangements" be made which of course is a necessary precursor to charging. That requirement appears to me to connote that something be done with a service consumer to put their relationship in some sort of order. This may simply be correspondence from the new licence provider setting out details of the provider, tariffs, rights, etc with a view to offering to carry on with the supply of water. It therefore appears to me that in the absence of such arrangements by the current pursuers as licence provider the question of whether the pursuers have made arrangements with the defender is unanswered. The terms of findings in fact 1 and 3 read with the averment:-
“in accordance with the licence granted to it by the Water Industry Commission for Scotland in terms of section 6(1) of the 2005 Act, the pursuer has provided the defender with water services and sewerage services (“the services”) at the property since on or around 1 April 2005. He continues to do so”
is in conflict with the earlier averments in paragraph 2 with regard to the date when the pursuers became licensed water services providers. The pursuers are a new statutory body by virtue of the 2005 Act; the licences are that granted to them by the Water Industry Commissioner in 2008. They derive their powers from that Act. I was not referred to any provision which confers on the pursuers the same powers as its predecessor Scottish Water enjoyed. Indeed the sheriff makes a finding in fact to the effect that the pursuers operate separately from Scottish Water from whom it purchases services. Section 20A of the 2005 Act is of no assistance to the pursuers. It is not yet in force. It deems arrangements to have been made in certain circumstances where water is supplied by Scottish Water. It serves to confirm that the making of arrangements is an important element in the supply and charging regime. Section 6 of the 2005 Act imposes duties and confers powers on the water services provider. Accordingly, I take the view that the sheriff’s findings in fact, particularly the terms of No 3, are incapable of supporting the pursuer’s averments as to the statutory basis for their claim which state in relation to the section 6(1)(a)(i) requirement "By the defender entering into occupation of the property, the parties made arrangements for the pursuer to provide the services and the defender to pay the pursuer's charges fixed and demanded by the pursuer". Such an arrangement is more akin to a tax, such as council tax, and ignores that the duty lies with the pursuers as provider to "make arrangements" and which appears to me to be the prerequisite to charging and recovery. There is no finding that supports this averment.
27. I turn to the question of whether the pursuers would be entitled to demand and recover charges in relation to the supply of water from the defender, had arrangements been made. I derive considerable assistance from the submissions made in relation to the English authorities of Daymond and Anglian Water (supra). Daymond was concerned with section 30 of the Water Act 1973 (as enacted). In Daymond the plaintiff's property was neither connected to the main drainage system nor to the sewer. Having received a demand for payment by the local council on behalf of the water authority he argued that they had no power to charge except for services actually performed or provided. Section 30 ex facie confers very wide powers on the water authority to “fix, demand and recover such charges for the services performed… as they think fit”. The House of Lords read into that provision a requirement to limit the class of persons liable to pay the charges to those for whom the services are performed, facilities provided and rights made available. In other words the persons to pay are the persons who would benefit. Viscount Dilhorne decided that the natural inference to be drawn from this provision is that it “can charge only those who avail themselves of its services, facilities and rights”. Daymond was discussed in the subsequent case of Anglian Water Authority v Castle (supra). By that time the 1973 Act had been amended to give effect to the decision in Daymond. Mr Castle derived no benefit from the water supply which passed through his land. Other properties were supplied with water but not Mr Castle. This case has interesting resonance with the current appeal. Indeed the Water Authority in that case also sought to argue a contractual as well as a statutory basis for charge though the parties to the original arrangement had not altered. Dillon L.J. concluded that water charges are to be recovered from the persons for whom the services are performed, facilities provided or rights made available following Daymond. These cases are of assistance in construing the statutory basis for charging the defender in this case. In Anglian Water, Dillon L.J. at page 3 states:
“beyond a peradventure a facility is provided to Mr Castle in the sense that, there being a metered supply and a pipe in his land from that supply, he could draw water from that pipe either to the existing trough and by the existing standpipe in his field or by putting in other connections and drawing off water for other agricultural buildings or whatever he was entitled to construct on his land. But the water for which he is being charged, on the finding that none of it has been used by himself, is water actually used by other people and not water which is within the facilities provided for him or the rights made available to him. It is water passing to others which he has no right to cut off but does not use himself”.
The result being that Mr Castle was liable to pay the appropriate minimum or fixed charge but was not liable to pay for the water supplied to others. Although the Anglian Water case is concerned with a pipe passing through land supplying others the principles nevertheless apply equally in the present case. The question is whether water is supplied by the pursuers as it is available to be used by the occupier. Accordingly, in my opinion, had the pursuers satisfied the requirement to make arrangements with the occupier then they had a good statutory basis for charging for the supply of water which the defender could draw upon even though he chose not to do so. It follows that the sheriff is correct to take the view that the defender's argument that he had not asked for and did not want the water/waste water services did not amount to a complete defence. Nevertheless, the conclusion I draw is that the pursuers' averments and the sheriff’s findings in fact do not support the statutory case. I come to that conclusion whether the correct interpretation of section 6 means that the person who can be charged is the “occupier” or the person for whom the services are performed, facilities provided or rights made available as in Daymond and Anglian Water Authority v Castle. Accordingly, the defender’s first ground of appeal has merit and I answer the final question of law in the Stated Case in the negative.
The contractual basis for charging the defender
28. The cross appeal by the pursuers relates to the sheriff’s findings in fact and Law 1 and 3 which conclude that there is no contract, express or implied, between the pursuers and the defender. There has been no voluntary act by the defender which would give rise to such a relationship. The third finding follows from that and denies the sum claimed as late payment compensation in terms of section 5(A) of the 1998 Act (£70) there being no commercial contract.
29. It is accepted that there is no written contract. The sheriff’s conclusion is underpinned by his third finding in fact which has already been considered. I do not propose to repeat its content. Albeit the finding appeared to satisfy the sheriff as to the statutory basis for charge, it likewise provides the factual basis for the sheriff rejecting the submission made to him in support of there being a contractual basis for the pursuers to charge the defender. The sheriff analyses the argument made on behalf of the pursuers at paragraphs 10 and 11 of the stated case. It appears that the legal argument presented to the sheriff was flimsy compared to the careful argument presented on appeal. I was favoured with submissions by the amicus curiae. As the sheriff observes the proposition that a written contract is not required to establish contractual obligations is not a controversial one.
30. The legal propositions advanced on behalf of the pursuers as to formation of contract are sound in law. The Supreme Court in RTS Flexible Systems Limited v Molkerai Alois Muller GmBH and Co [2010] 1WLR753 considered these principles and propositions and at paragraph 45 Lord Clarke of Stone–Cum – Ebony states:-
“45 The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations”.
Therefore, the words, conduct of the parties, are of significance whereas subjective intentions are irrelevant. Performance of core obligations under the contract assumes importance. In this case water is supplied (although not used); invoices rendered for the supply have been paid up to 2009. In this regard the remaining findings of the sheriff are of importance to the submissions made on behalf of the pursuers. G. Percy Trentham Limited v Archital Luxfer Limited and Others [1993] 63 BLR 44 is advanced as authority for the importance of performance of obligations. In that case where the window subcontractor had fully performed his work on a building contract he could not then argue that there was no contract between him and the main contractors, in a dispute about damages for breach of contract. If both parties act as if the contract is completed then both are bound by that as if it were a completed contract. In Ballantine v Stevenson (1881) 8 R 959 Lord Craighill at page 976 states:-
“Where one of the parties takes benefits from the proposed contract, and where another party has fulfilled some obligation which was incumbent upon him only if the contract were a completed contract; and if this last is done with the knowledge and presumably with the consent of the other party to the contract then both are bound”.
31. Another principle accepted to be of importance by the pursuers and the amicus curiae which must be considered in this appeal is the question of whether it is “necessary” to imply a contract between the parties. Baird Textile Holdings Limited v Marks and Spencer PLC (supra) provides assistance. The Court of Appeal having decided that the first instance judge was correct to find that a contract would only be implied from conduct if that implication was necessary. Lord Mance in the M&S case (at 1014) confirms that it is for the party asserting such a contract to show the necessity for implying it.
32. The parties' conduct in this case is summarised by the sheriff at pages 9-10 of the stated case:-
"In the present case, there was no evidence of any consent, express or implied, at any time, by the defender, in relation to the water/waste water services. He did not want the supply. He had not asked for the supply ( - the arrangements with his landlord went unexplored, but it was never suggested the supply was not already in situ when the defender took entry). He did not use the supply. He had paid the invoices (which might, in some circumstances, amount to acceptance or personal bar) but I accepted that he had done so because he had not considered he had any alternative. As such, he was acting reluctantly and without intention to create or further a contractual relationship. Apart from anything else, payment of an invoice might be equally referable to another quite different obligation, namely (i) the obligation arising as a result of statutory, not contractual, liability and (ii) the obligation to make part payment to cover drainage, liability for which the defender has always accepted liability. I was unable to infer, from the limited evidence led, that there had ever been a voluntary act on his part capable of amounting to consent to, or acceptance of, or enjoyment of, the water/waste water charges, or any fair inference of the same. I was unable to accept the pursuer's agent's attempt to analyse the foregoing facts as amounting to a contract, or triggering contractual liability, between the parties."
That, of course, may amount to partial performance of obligations under contract. However, careful consideration of the sheriff’s conclusions highlight the dilemma which this case has in common with the Anglian Water case namely that payment of the invoices (up to 2009) might equally be referable to a separate obligation namely the obligation arising due to statutory liability. The sheriff is clear that there was no evidence of an intention on the part of the defender to contract with the pursuers. Indeed, the evidence points in the opposite direction.
33. Accordingly, the question remains whether the pursuers have shown that it is necessary in this case to imply a contract? Leaving aside the question of whether there has indeed been proper performance of the contractual obligations it is clear that in this case, as with the Anglian Water case, there is an alternative basis for charging and that is based upon the powers given to the pursuers by the 2005 Act. Dillon L.J in the Anglian Water case presents, as the amicus curiae observed, the hostile view as to implying a contract in circumstances where there was also a statutory basis for charge. At page 3 he deals with the alternative contractual basis for charge:
“Mr Grove, therefore, sought to put the case on a rather different basis, that the supply to Mr Castle is a contractual supply. It was, he says, in its inception a contractual supply between the former owner of the estate as a whole and the Norman Cross Rural District Council, and as parties have changed there is an implied contractual novation so that each owner for the time being has become contractually bound to take the supply of water for all the properties served through the service pipe from the water authority for the time being. This is not a way of putting the case which is explored at all in the pleadings or in the evidence. For my part, I have considerable difficulty in concluding that there was any contractual novation or new contract made when a statutory water authority supplied water and the charges which it rendered were paid by Mr Castle when he received the bills. It seems to me that the notions of consensus ad idem and intent to create contractual arrangements are hardly present in such circumstances. It is accepted by the water authority that Mr Castle never himself signed any written agreement with the water authority or its predecessor, because that was not the practice of the water authority until very recently indeed”.
34. In this case the notions of consensus ad idem and intention to create legal relations are strikingly absent. Lack of consensus formed part of Mr Chataroo’s own submissions. I have found that there is a statutory basis for charging in terms of the 2005 Act. Accordingly, it would strain language indeed to accept that the pursuers have shown that it is "necessary" to imply a contract in the circumstances of this case. It is questionable whether the apparent performance of certain core contractual obligations are truly indicators of contract standing the prima facie statutory basis which exists to charge the defender for water and waste water. I am of the view that the sheriff was entitled to reject the pursuer’s propositions as to contractual liability. The first question of law is in the following terms:-
“on the facts found, was I correct to repel the pursuer’s submission to the effect that the defender had any contractual liability, independent of statue, to pay the charges?”
I answer that question in the affirmative.
Jurisdiction
35. Although no question of law is posed in the stated case as to the court’s jurisdiction, the issue of jurisdiction is raised in the written note of appeal for the defender and in his case for the defence dated 4 November 2014. I was addressed by all parties on the question – whether Edinburgh Sheriff Court has jurisdiction over a defender domiciled in another Sheriffdom in this debt recovery small claim? Jurisdiction is a matter for the court to determine.
36. In this case the parties are at one in the proposition that, absent a contract, this court does not have jurisdiction. The secondary proposition is this. Even if there is a contract between the parties, if the contract is a consumer contract, the court having jurisdiction is the court of the defender’s domicile which on the facts of this case would be Airdrie Sheriff Court.
37. The question arises was the sheriff correct to conclude at paragraph 19 of the stated case “any lack of jurisdiction was in any event cured by the defender’s appearance, amounting to submission to the jurisdiction of this court” and was the sheriff correct to conclude in the same paragraph “it is too late, at proof, to contest jurisdiction”.
38. The relevant rule on jurisdiction in small claims procedure is to be found in rule 6.10:
6.10 –
(1) A person who appears in any claim shall not be entitled to state any objection to the regularity of the execution of service or intimation on him and his appearance shall remedy any defect in such service or intimations.
(2) Nothing in paragraph (1) shall preclude a party pleading that the court has no jurisdiction.
Has the defender pleaded no jurisdiction? In his oral submission Mr Chataroo was clear that he challenged this court’s jurisdiction from the outset. There was no contact and therefore no basis for suing him for payment at this court. The amicus curiae provided an objective analysis of the defender’s response to the summons; the "case for defence" documents and the letter of appeal. They appear to advance a consistent challenge to jurisdiction in line with the defender’s submissions.
39. Accordingly, the sheriff is correct to state that it is too late to challenge jurisdiction at proof (if raised for the first time at that stage). However, the background to this case strongly points to jurisdiction having been an issue from the initial hearing in June 2014. The defender’s response specifically dis-applies any admission of the claim against him (and curiously any counterclaim). It leaves open an intention to dispute the claim; challenge the jurisdiction of the court; state a defence and appear at court, as indeed happened. Prior to the original proof the defender lodges a document with the court titled “case for the defence” which specifically refers to the pursuers’ claim that the parties entered into a commercial contract and goes on to state “this is not true /jurisdiction which was challenged was granted on this assumption”.
40. I am satisfied that this court's jurisdiction has been challenged from the beginning. In these circumstances, Mr Chataroo’s appearance does not confer jurisdiction on the court. Rule 7 of Sch 8 of the Civil Jurisdiction and Judgments Act 1982 (the 1982 Act) states that a court before whom a defender enters appearance shall have jurisdiction. However, this does not apply where a defender contests jurisdiction. Small Claim rule 6.10 guides the court to consider jurisdiction and therefore lack of jurisdiction cannot be cured by a defender appearing who, in addition to stating a defence, pleads no jurisdiction.
41. It is not difficult to understand why 6.10 is required in low value small claims cases frequently used to deal with consumer disputes. Sch 8 of the 1982 Act provides the rules as to jurisdiction in Scotland. The court's jurisdiction can be distinguished from the court's competence. Small claims procedure is only competent in the Sheriff Court. Section 20 of the 1982 Act highlights the distinction and provides that "Schedule 8 has effect to determine in what circumstances a person may be sued in court proceedings in the Court of Session or in a Sheriff Court" (section 20(1)) and section 20(2) states "nothing in schedule 8 affects the competence as respects subject – matter or value of the Court of Session or of the Sheriff Court.". The domestic rules set out in Sch 8 are apt to determine the issue of jurisdiction in this case where both parties are domiciled in Scotland. However, European rules and jurisprudence have their place in determining both domestic and cross-border jurisdiction disputes. The rules set out in Sch 8 have as their purpose the codification of the fundamental rules on jurisdiction and principles of equality and fairness. They also derive from the European Convention on Human Rights and the Brussels 1 Regulation which followed the Brussels Convention on Jurisdiction and Judgments (1968). The fundamental principle actor sequitur forum rei underpins both Scots law and European regulations. This is the rationale behind the general rule on jurisdiction (rule 1 of Sch 8) which upholds the core principle that persons shall be sued in the courts for the place where they are domiciled. The principle is expressed by the authors in "Civil Jurisdiction and the Scottish Courts" (Maher and Rodgers) in the converse namely, "that a defender should not be required to defend an action in the pursuer's own forum." (Chapter 1).
42. Accordingly, in my view the sheriff’s observations as to jurisdiction are incomplete. This may well be as a result of not being addressed fully as to the procedural background and the rules as to jurisdiction. However, the result is that the action ought to have been dismissed due to lack of jurisdiction standing the sheriff’s findings as to the contractual basis for charging the defender, with which I agree.
43. I was referred to Stewart v Trafalgar House Steamship Company Ltd (supra). Stewart deals with an action where jurisdiction in Scotland is established by virtue of the defenders being limited companies one domiciled in Scotland and two in England. The issue of jurisdiction only arose when the action was abandoned against the Scottish company. The challenge by the remaining defenders to jurisdiction at that later stage is rejected on the basis that once established the court's jurisdiction cannot be lost. This is expressed by the principle perpetuatio fori. This case is quite different. Here the defender appears to have taken a plea in limine challenging the court's jurisdiction. That plea remains unresolved and therefore jurisdiction is neither established nor decided in this case until the stage of appeal.
44. I now turn to the secondary proposition as to the nature of the contract between the parties had a contract existed between the parties. If the contract is a consumer contract rule 3 of Sch 8 applies and ensures that the consumer, as the weaker party, is sued in the place of his domicile or home forum. In this case the pursuers seek to argue that the existence of a contract would allow them to rely on rule 2 of Sch 8 which provides grounds of special jurisdiction which derogates from the usual rule of defender's domicile. Rule 2(b) provides that the person may be sued "in matters relating to a contract in the courts for the place of performance of the obligation in question.". The claim relates to payment of unpaid invoices. The adjusted statement of claim paragraph 1 simply states "in terms of the parties' contract, payment of the sums due by the defender ought to have been made to the pursuer at the pursuer's place of business within the Sheriffdom at…Edinburgh". It therefore appears that the pursuers by implication are making this averment based on the doctrine that a debtor is bound to make payment to a creditor at the creditor's place of business.
45. Rule 3 of Sch 8 provides the rules for actions concerning consumer contracts. The question is whether the contract was concluded by a person (the consumer) for a purpose which can be regarded as outside his trade or profession. If there was a contract it would be for the supply of water and waste water services. The sheriff finds that the defender neither requires nor uses water and therefore the need to drain or take away any water. The defender trades as a newsagent. Water or the use of water does not appear to be integral to that business given that the defender apparently has no need for water in his newsagent's premises.
46. The case of Sporitelna and the Opinion of Advocate General Sharpston analyse the guarantee issued by a company in favour of Mr Sporitelna in the context of the Company Director challenging jurisdiction by arguing that as a consumer he should be sued in his home forum. That opinion and the judgment of the court restates the case law of the European Court of Justice that the special rules on consumer contracts serve to ensure adequate protection for the consumer as the party deemed to be economically weaker and less experienced in legal matters than the other commercial party to the contract. To satisfy these rules designed to protect the consumer only contracts concluded outside or independent of any trade or activity or purpose are covered. Sporitelna emphasises that the court must consider whether the quality of consumer is present standing the circumstances of the defender. In Sporitelna the promissory note was issued in support of a credit facility for a business. Here, albeit the water supply is a non-domestic supply that describes to the premises rather than the person or his trade. It appears to me that the purpose of the supply has nothing to do with his business as a newsagent. The defender does not require a water supply to operate as a newsagent. Accepting entirely that the defender's status as an individual small trader does not, in itself, confer the quality of "consumer" it nevertheless appears to me, on the basis of the information available, that in the event a contract exists it is likely to be a consumer contract. The supply of water has little bearing on or connection with the defender's business or trade. The fact that the premises are not domestic premises and are premises from which the defender trades does not determine the nature of the contract. Instead it is necessary to look at the purpose of the contract and whether that purpose can be regarded as outside the defender's trade. It appears to me that any water contract is independent of his trade and is a consumer contract.
47. Finally, as no argument was advanced to me on appeal I do not propose to deal with the matter of the defender's proposed counterclaim. The sheriff records that no evidence or submissions were presented in support of the counterclaim at proof (paragraph 23 of the stated case).
Decision
48. For the reasons given above I allow the appeal by the defender and refuse the cross-appeal by the pursuers. I will recall the decree of 9 December 2014 and assoilzie the defender.
49. All matters of expenses were left open pending my determination of the appeal. Standing my decision on the appeal the issue of expenses should not be controversial as expenses would normally follow success. I will dispose of expenses by finding that the pursuers should be liable to the defender in the expenses of the action including the appeal. I will fix the level of these expenses at £150 for the action to proof and £250 for the appeal.