Fern Computer Consultancy Ltd v Intergraph Cadworx & Analysis Solutions Inc

A claim under the Commercial Agents (Council Directive) Regulations 1993 is a statutory claim relating to a contract, not a contractual claim. The Regulations may override inconsistent contractual provisions, but do not alter the contract’s governing law. A service-out gateway requiring an English-law contract therefore cannot be satisfied where the agency agreement is governed by foreign law. The same applies to a gateway requiring breach of contract within the jurisdiction. However, the Regulations claim may raise a serious question to be tried where software is supplied on physical media and with associated hardware, and where a perpetual licence may arguably constitute a sale. The English court may be the proper forum where the contractual forum will not accept jurisdiction over the statutory claim. A separate contractual commission claim remains subject to the exclusive foreign jurisdiction clause.

Fern had acted since 1993 as Intergraph’s agent for software products. The parties’ 2007 agreement contained Texas governing-law and exclusive-jurisdiction clauses. Intergraph terminated the agreement in 2010. Fern subsequently claimed compensation under the Commercial Agents (Council Directive) Regulations 1993 and unpaid commission, obtaining permission to serve proceedings in Texas.

Intergraph applied to set aside that permission and sought a stay in favour of Texas. The issues included whether Fern could satisfy service-out gateways based on an English-law contract or breach of contract in England, whether permission was unnecessary under CPR 6.33(3), whether the Regulations claim had a real prospect of success, and whether England was the proper forum.

1. Service-out gateways. The agreement was governed by Texas law under its express choice-of-law clause and Article 3 of the Rome Convention. The Regulations did not convert the statutory rights into contractual rights or alter the proper law of the contract. A claim under the Regulations may be a claim in respect of a contract, but the gateway required an English-law contract, not merely an English-law claim. The gateway based on an English-law contract therefore failed.
2. The gateway based on breach of contract within the jurisdiction also failed. Non-payment of compensation under regulation 17 would be a breach of statutory obligation, not breach of the agency contract. The reasoning in Accentuate Ltd v Asigra Inc [2010] 2 All ER (Comm) 738 was not followed to the extent that it equated a Regulations claim with a contractual claim.
3. CPR 6.33(3) did not remove the need for permission. Following In re Harrods (Buenos Aires) Ltd [1992] Ch 72, the enactment had to contemplate proceedings involving a foreign defendant or foreign events expressly or in equivalent terms. The Regulations contained no such provision.
4. Merits. The claim passed the real-prospect test. There was a serious question whether software supplied on CDs, with documentation and electronic software locks, constituted goods. The reasoning in St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481 and London Borough of Southwark v IBM UK Ltd [2011] EWHC 549 (TCC) supported that conclusion. There was also a serious question whether a perpetual software licence, or the supply of associated hardware, could amount to a sale. The reasoning in Usedsoft GmbH v Oracle International Corp [2012] 3 CMLR 44 was materially arguable despite arising under a different Directive.
5. The alleged secondary nature of the activities did not defeat the claim at this stage. The relevant focus was the single agency arrangement and the package supplied, rather than an artificial dissection of its components. The pleaded claim was confined to activities in Great Britain. The UMS issue concerned quantum or an unclear separate relationship and did not defeat the cause of action.
6. Forum and outcome. England was the proper forum for the Regulations claim. Intergraph could not rely on Texas as the appropriate forum while maintaining that a Texas court would not enforce the Regulations. The contractual jurisdiction clause was therefore not applied to that claim. It remained applicable to the unpaid commission claim. Permission to serve out was set aside in relation to commission. The Regulations claim was left open for amendment and further argument on alternative gateways, including tort and gateway 20.