Heriott-Watt University wins appeal in payment action against former distance-learning postgraduate student

Heriot-Watt University sought payment of £7,000 from its former student Christian Schlamp, who resided in Germany. He argued that the Scottish courts had no jurisdiction in the action as it was a consumer contract regulated by German law.

The appeal was heard by Sheriff Principal Anwar, sitting with Appeal Sheriff Small and Appeal Sheriff Holligan. The pursuers and appellants were represented by Pugh, advocate, and the defender and respondent by McNairney, advocate.

Previously worked as a consultant

The defender undertook a course of full-time study at Heriot-Watt which led to the award of a doctorate in business administration. The course was undertaken via a distance learning program, with the defender remaining in Germany for the duration of the course. All written submissions, coursework and engagement of supervision was conducted online or by telephone, and the defender’s final thesis examination was conducted by video conference.

The defender self-funded his studies, and averred that he worked occasionally as a self-employed consultant prior to the award of his DBA. Due to the level of his earnings and his being a full-time student, he was exempted from paying taxes in Germany for the duration of his study.

It was averred by the pursuers that the defender has been self-employed in the field of finance and business administration since 2003, and that he completed a masters degree in business administration in Germany in 2009. The defender’s study at Heriot-Watt was closely connected to his self-employment and had a business purpose, namely the furtherance of his career in business administration. As such, the defender was not a ‘consumer’ for the purposes of determining jurisdiction.

The pursuers further averred that the contract under which they provided educational services to the defender was a contract for services, with payment made by the defender at the university premises in Edinburgh. The defender in turn averred that it was a consumer contract, and that the German courts had jurisdiction. At debate, the sheriff sustained the defender’s plea of no jurisdiction and dismissed the action.

The sheriff who heard the case at first instance concluded that the pursuers’ averments were irrelevant, as there was nothing showing the defender had acted in anything other than a personal capacity. Averments regarding the defender’s past career did not inform his current intentions, and his weaker bargaining position put him into the category of persons protected by a 2012 EU Regulation in respect of civil and commercial matters, which was determined to apply to this case by the effects of Brexit-related legislation.

It was submitted for the pursuers that the sheriff ought to have asked whether the connection to the defender’s profession was more than negligible in determining the nature of the contract. Had the sheriff asked the correct question, it would not have been possible to dismiss the action on the pleadings given what the pursuers offer to prove.

Onus on the defender

The opinion of the court was delivered by Appeal Sheriff Holligan. Discussing the effect of EU case law on the present matter, he said: “What we may describe as the consumer jurisdiction in Section 4 of the 2012 Regulation is a derogation from the general rule that a party should be sued in the courts of their domicile and, as such, ‘consumer contract’ must be strictly construed.”

He continued: “In the case of a mixed contract, namely where there is both private use and use as part of a trade or profession, so long as the trade or professional aspect is negligible or marginal then the contract is a consumer contract. [The] burden of proof rests with the party invoking the consumer jurisdiction: the opponent having the right to lead evidence to the contrary.”

Turning to the matter at hand, Sheriff Holligan said: “We have reached the conclusion that in dismissing the action the sheriff has erred. The principal difficulty is the sheriff held that there is no onus upon the defender to establish that he is a consumer. The sheriff approached the issue from the perspective of the adequacy of the pursuers’ averments.”

He continued: “It is clear that there is an onus on a party invoking the special jurisdiction as a consumer to establish that status. In this case that party is the defender. It also follows from the authorities that the pursuers had an opportunity to respond to any material submitted by the defender. It is therefore not correct to approach the issue with regard to the adequacy of the pursuers’ averments.”

Sheriff Holligan concluded: “Although we accept that the matter is not free from doubt, on balance, having regard to weight of authority, we are of the view that the correct test in this matter remains the non-negligible test and not the predominant purpose test. Accordingly, it follows that in applying the latter and not the former the sheriff was in error.”

For these reasons, the appeal was allowed, and the interlocutor of the sheriff withdrawn. The case was ordered to proceed to a preliminary proof on the defender’s first plea in law.