Echosense Jersey Limited v Eric Lawrence Schleelein & Ors

A jurisdiction clause covering disputes arising from investment agreements does not ordinarily extend to tortious claims against individuals for pre-contract misrepresentations which induced those agreements, unless clear language shows that intention.

Service out under Civil Procedure Rules 1998, rule 6.33(2B)(b), is valid only for claims falling within the contractual jurisdiction term. Invalid service of some claims does not necessarily invalidate service of the remainder.

Negative declarations require a real and present dispute and practical utility. Where the defendant has affirmed the contract, pursues only personal tort claims, and undertakes not to claim against the claimant, declarations concerning the claimant’s residual liability may be abusive or hypothetical.

Echosense Jersey Limited sought declarations concerning five investment agreements made with investors resident in the United States and Japan. The agreements contained English governing-law and jurisdiction clauses.

The investors had threatened and later commenced proceedings in Israel against other defendants, alleging personal fraudulent and negligent misstatements. They did not sue Echosense. Echosense nevertheless sought declarations that the individuals had no liability and that Echosense had no liability to refund the investments or pay damages.

The investors challenged jurisdiction, service out of the jurisdiction, and the genuineness and utility of the declaratory claims. The central issues were whether the tort claims fell within the jurisdiction clause and whether the remaining negative declarations constituted an abuse of process.

1. Scope of the jurisdiction clause. The clause was to be construed broadly, purposively and commercially, but its scope had to be assessed prospectively at the date of contracting. It covered commercial disputes arising from the investment agreements, not personal tort claims against non-contracting individuals based on conduct preceding and inducing the agreements. The choice between rescinding the agreements and suing in tort did not alter that conclusion.
2. The later indemnity given by Echosense to the individual defendants did not affect the scope of the clause. It was entered into after the threatened litigation and was not within the parties’ contemplation when the investment agreements were made.
3. Service out. Because the third-party claims in paragraphs 26(1) and (3) of the Particulars of Claim fell outside the jurisdiction clause, there was no good arguable case under Civil Procedure Rules 1998, rule 6.33(2B)(b). Service was therefore set aside and those claims were struck out. The defect did not require the whole claim to be struck out. No retrospective permission could properly be granted on the material before the court, and no case had been made that England and Wales was the proper forum for the tort disputes proceeding in Israel.
4. Negative declarations. The court’s power to grant negative declarations was not in doubt, but the remedy required practical utility, fairness, and generally a real and present dispute concerning a legal right. The Echosense Jersey claims appeared artificial and largely hypothetical. The investors had affirmed the investment agreements, consistently maintained that their claims were against the individuals personally, and offered an undertaking not to rescind, terminate, or seek repayment or damages from Echosense in connection with the alleged inducement.
5. The court provisionally concluded that the Echosense Jersey claims should be stayed or struck out as abusive. It nevertheless invited the parties to consider narrowing the declarations to the allegations and Israeli proceedings and to agree an order finally disposing of the proceedings. The parties were given 14 days to agree an order or identify their disagreement, with written costs submissions.

First-instance decision. The judgment records no earlier appellate decision.