Inner House refuses appeal against decision Scottish courts had jurisdiction over pipeline construction dispute

About this case:

• Citation:
  [2025] CSIH 21
• Judgment:
  External link
• Court:
  Court of Session Inner House
• Judge:
  Lord Malcolm

Caledonia Water Alliance sought damages of £35 million from Electrosteel Castings UK Ltd for alleged breaches of contract that led to the contamination of drinking water carried by the new pipeline. The defender pled that the contracts concerned were subject to the exclusive jurisdiction of the English courts, but a commercial judge found after proof that there could be further procedure in Scotland.

The appeal was heard by the Lord Justice Clerk, Lord Beckett, with Lord Malcolm and Lord Armstrong. Ellis KC and McAndrew, advocate, appeared for the pursuer and respondent and G Walker KC and Broome, advocate, appeared for the defender and reclaimer.

Framework arrangement

In 2015 Caledonia entered into an alliance agreement with Scottish Water under which it would be engaged as a contractor in Scottish Water projects. A term of this agreement obliged Caledonia to obtain plant, materials, and services from suppliers with whom Scottish Water had entered into a framework agreement, including Electrosteel. Over four years, the parties entered into 60 separate contracts for the supply of ductile iron pipe for use in the South Edinburgh Resilience Scheme pipeline project.

The pursuer claimed that deficiencies in Electrosteel’s product had led to contamination of the drinking water carried, resulting in Caledonia being in breach of contract with Scottish Water. It therefore raised an action in the Outer House seeking indemnity from Electrosteel in respect of its liabilities for using defective pipework in the project.

On the jurisdiction issue, Caledonia contended that the contracts were subject to the standard terms and conditions set out in the framework arrangement between Scottish Water and Electrosteel, which provided the Scottish courts with exclusive jurisdiction. Electrosteel argued that its standard terms applied, as they were referred to in the last documents exchanged prior to supply of the product.

The commercial judge, after proof, held that it was clear that supplies would be made in the context of Scottish Water’s framework arrangements. The evidence of both sides’ witnesses was that within the water industry, framework arrangements were designed to ensure consistency in terms and rates, and the parties had a shared understanding that the framework was what governed their relationship.

For the reclaimer it was submitted that there was no sufficient evidential foundation for the finding that the parties’ relationship was regulated by Scottish Water’s terms. This was a traditional “battle of the forms” case, and if a party explicitly referred to its standard terms as being applicable to the contract, this was a high hurdle for anyone arguing otherwise to clear.

Obvious explanation

Lord Malcolm, delivering the opinion of the court, said of the parties’ shared understanding: “The judge held that the parties must be taken to have intended that their 60 separate contracts were governed by the terms and conditions set down in the framework agreement between Scottish Water and Electrosteel. Both parties conducted their affairs in accordance with the framework arrangements. In his view they each decided, or must be taken as having decided, that neither of their standard contract provisions took effect.”

He continued: “The key question is whether this decision was not available to him because of the aforesaid exchanges of documents which each referenced different standard terms and conditions, and which both gave exclusive jurisdiction over this dispute to the English courts. Electrosteel submits that it was not open to him, and this because of the objective offer and acceptance approach to contract formation; thus the terms of Electrosteel’s order confirmations were accepted when the product was supplied and not rejected by Caledonia.”

Considering the approach taken by the commercial judge, Lord Malcolm said: “The judge concluded that the parties’ actual intentions and expectations coincided. However, he was also able to justify the outcome by what an objective analysis of the full circumstances demonstrated as to the parties’ contracts. It showed that a reasonable person with the knowledge of and in the position of the parties would understand that neither was proceeding on the basis that its own standard terms and conditions were part of their bargains.”

He concluded: “The court has identified no error in the judge’s approach and reasoning. There was more than sufficient evidence to justify the conclusion that the parties did not intend either of their standard terms and conditions to apply. It is plain that each would have understood that the other was adopting the framework arrangements. The obvious explanation for the references to their own terms in the contract documentation is that no one thought to interfere with the automatic procurement procedures applied by the parties.”

The reclaiming motion was therefore refused, with the case remitted for further procedure in the Outer House.