Australia: “Execution” - Reference To Signature Or Performance Of Contract? (Italian Bottle Case No 2)

Last Updated: 22 April 2009
Article by Jocelyn Kellam

Vetreria Etrusca SRL v Kingston Estate Wines Pty Ltd [2008] SASC 75

  • Order refusing stay confirmed when wording of jurisdiction clause giving foreign court jurisdiction was ambiguous.

In these proceedings, an Italian bottle manufacturer appealed a decision by the SA District Court to stay proceedings .

Kingston claimed damages against the appellant for breach of contract by reason of the supply of faulty products. Vetreria sought to stay those proceedings on the basis of a jurisdiction clause. At issue in this judgment was what meaning should be given to the word "execution" in a jurisdiction clause. The appellant, Vetreria, submitted that this term referred to the performance of the contract and not the formal signing or adoption of it.

Kingston, a South Australian winemaker, entered into an agreement with Vetreria whereby the appellant agreed to supply wine bottles of a specified type. Vetreria supplied the bottles but, according to Kingston, they were faulty and were prone to crack on the production line during the bottling process. Vetreria in turn commenced proceedings against Kingston in the Court of Florence claiming the sum of $173,000 allegedly owed for the supply of bottles.

Vetreria said that a jurisdiction clause in a translated document gave an Italian court jurisdiction in disputes "arising from the interpretation, execution or application" of the contract. The question before the court was whether "execution" was intended to mean "performance", which would mean that the dispute was within scope of jurisdiction clause. The contract also provided that, in the event of dispute as to the wording of the contract, the original Italian document which included the jurisdiction clause was to prevail. However, the original Italian document was not in evidence.

The SA District Court refused to grant the stay. It thought that there was nothing in the contract which would necessarily require that the word "execution" to refer to performance. The clause was ambiguously worded. The judge at first instance noted the parties had not chosen the Court of Florence as the court for all disputes arising from particular and specific aspects of their contract, although it would have been easy for them to do so. Rather they had chosen particular and specific aspects of their contract which they agreed, if there is a dispute, would be decided by the Court of Florence. Therefore, they may well be said to have made a positive choice to limit disputes which were to be heard by the Court of Florence, allowing or envisaging disputes arising otherwise to be heard by courts situated elsewhere.

On appeal, Justice Duggan noted that the ascertainment of the scope of the clause was a question of the construction of a contract. Its meaning was to be determined by what a reasonable person in the position of the parties would have understood it to mean, having regard to the text, surrounding circumstances, purpose and object of the transaction.

The contract also provided that "The present document is an accurate translation of the original document written in Italian. For any controversy, the original Italian document prevails."

The original Italian document, however, was not before either court. In those circumstances, the court could not say on a proper construction of the Sales Agreement, whether the parties had chosen a particular forum or jurisdiction in which the dispute of the plaintiff's claim is to be resolved. The clause is ambiguous. However, there was nothing in the contract which would necessarily require that the word "execution" should be understood as referring to performance.

The Supreme Court noted that the application for a stay required it to consider the agreement between the parties. Justice Duggan thought that the District Court was entitled to have regard to the fact that the clause was ambiguously worded and that the original Italian document was not before the court. In the result the District Court's decision was upheld.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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