Scottish university’s payment action against student dismissed due to ‘lack of jurisdiction’

Heriot-Watt University raised an action against Christian Schlamp, claiming that the parties had entered into a “contract for the provision of educational services”.

But a sheriff upheld the German business student’s argument that this was a “consumer contract” and that as a “consumer” in terms of EU Regulations he should be “protected” by rules of jurisdiction more favourable to his interests, meaning that the action required to be raised in Germany.

‘Brussels I Recast’

Sheriff Nigel Ross at Edinburgh Sheriff Court heard that the defender enrolled at the pursuer’s Edinburgh Business School in January 2012 on a distance-learning academic study programme for a Doctorate of Business Administration (DBA). 

The defender, who is domiciled in Germany, completed his studies and was awarded a DBA in July 2018, but his fees remained unpaid and the pursuer raised the action demanding payment. 

The defender claimed that he had made part-payment, but intended to defend any action on the basis of alleged failures and delays on the part of the pursuer.

He lodged a preliminary plea challenging the jurisdiction of the court under the Civil Jurisdiction and Judgments Act 1982, which incorporated the 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters (Brussels I).

In terms of amendments to those EU Regulations (Brussels I Recast), the “weaker party” in an insurance, consumer or employment contract “should be protected by rules of jurisdiction more favourable to his interests than the general rules”.

Brussels I Recast also provides that a consumer can elect to bring proceedings either in the domicile of the commercial party or in the consumer’s own domicile, but that choice does not apply the other way round – if a commercial party wants to sue a consumer, they must do so in the courts of consumer’s domicile.

If, however, the contract is for a purpose which can be regarded as being “outside” a party’s trade or profession, then that party is not a consumer and may be sued “in the courts for the place of performance of the obligation in question”.

‘Consumer contract’

For the pursuer, counsel submitted that the onus was on the defender to show there was no jurisdiction.

The pursuer offered to prove that the defender was not acting outside the course of his profession when he enrolled on the course and was therefore not a consumer, meaning that jurisdiction was conferred on Edinburgh Sheriff Court on the basis of “place of performance”.

The pursuer argued that the defender undertook the course for reasons “closely connected” to his self-employment as a consultant in finance and business administration, and that the DBA was a professional qualification for a business purpose, namely the furtherance of his existing career in finance, in which he had worked since 1993.

The pursuer’s position was that there was a contract for services, and that the educational services provided to the defender were not outside the defender’s profession, but were part of those activities.

Accordingly, he did not meet the criteria for a “consumer”, and jurisdiction was therefore constituted in terms of Article 7 of Brussels I Recast.

The defender, on the other hand, claimed that this was a “consumer contract” and that place of performance was therefore not available as a basis for jurisdiction, meaning the pursuer could not sue in the Scottish courts. 

It was argued that the action could only be based on “domicile”, and accordingly only the German courts had jurisdiction and the action must be raised there in terms of the 1982 Act, which replicated the Brussels I Recast rules.

Dismissing the action, the sheriff ruled that there was no onus on the defender to prove that he was a consumer, adding that he had contracted in a “personal capacity” for the provision of educational services, meaning he was in a “weaker bargaining position” and therefore fell into the category of persons protected by the regulations.

‘Lack of jurisdiction’

In a written judgment, Sheriff Ross said: “In terms of Article 17 of Brussels I Recast, if the defender was acting for purpose outside his trade or profession, then he is a consumer and must be sued in the courts of his domicile, namely Germany, and not in the Scottish courts.  In my view, the pursuer’s averments are compatible with the defender acting as a consumer. 

“Taken at their highest, they do not exclude that status. Accordingly, the action falls to be dismissed due to lack of jurisdiction, in respect that on the face of the averments the defender is a consumer.

“A student undertaking an educational course may or may not be a consumer, depending on the purposes and content of the contract for supply of educational services. For a contract to be a consumer contract it has to be one which ‘can be regarded as being outside his trade or profession’.

“When considering the definition of consumer it is a crucial point that the definition is applied by reference to the capacity of the contracting parties. That capacity is assessed according to whether or not they are acting for purposes relating to their trade, business or profession. That criterion corresponds to the idea that the consumer is in a weaker bargaining position.

“Only contracts concluded for the purpose of satisfying an individual’s own needs in terms of private consumption come under the provisions designed to protect the consumer. The specific protective rules enshrined in the rule apply only to contracts concluded outside and independently of any trade or professional activity or purpose, whether present or future.”

The sheriff considered that the pursuer’s averments about the defender’s work history were “irrelevant”, having regard to the content and purpose of the Brussels I Recast Regulations.

Even if the foregoing were wrong and a stateable case had been pled, there was “no basis” to prefer the pursuer’s case over that of the defender. 

Sheriff Ross added: “That would be fatal on normal pleading principles, but particularly so where the case law directs that the onus is on the pursuer to show that the trade purpose was not predominant.

“For these reasons, even were the pursuer to prove all of the averments (and no more), the pursuer’s case on jurisdiction is bound to fail. The action falls to be dismissed for lack of jurisdiction.”