JUDGMENT
NICHOLLS L.J.:
[
[2] The writ, endorsed with a statement of claim, was issued on 3
December 1987. The plaintiff is an English company. It carries on
business in London, as an importer and distributor of shoes. The first
defendant is a supplier of shoes. The second defendant ('the bank') is
a bank. Both defendants carry on business in the Federal Republic of
Germany, and neither has a seat in England or Wales.
[3] The writ was served out of the jurisdiction on the bank. The
proceedings were not served on the first defendant. Leave of the court
to serve out of the jurisdiction was not necessary, because this is a
'Convention Case.' The writ was endorsed with the statement under
R.S.C.Order 6, rule 7(1)(b), and served out of the jurisdiction pursuant
to Order 11 rule 2(a). The bank acknowledged service, gave notice of
intention to defend the proceedings and applied to have the writ and
service of it set aside under Order 12, rule 8. The ground relied on was
that the proceedings ought to have been brought in the Federal Republic
of Germany, and that the High Court of Justice in England and Wales has
no jurisdiction to hear and determine the claims made against the bank.
Master Turner acceded to that application. On appeal Rougier J. upheld
the Master's decision. The plaintiff has now appealed to this court with the
leave of the judge.
The claims in the action
[4] The statement of claim is a short document. It refers to a meeting
held in Freiburg on 29 July 1987. At the meeting were Mr. M., managing
director of the plaintiff, Herr S. and Herr H., managing director and sales
manager respectively of the first defendant, and Herr G., who is an
officer of the bank. It is alleged that at the meeting the defendants acting
through their respective officers offered to sell to the plaintiff a quantity
of shoes owned by the first defendant or by the bank or owned by the
first defendant and charged to the bank. A confirmatory letter was written
to the plaintiff by the first defendant on the same day. It was signed by
Herr S.. The letter reads (I have added the numbers (1) to (5) for ease of
reference):--
'Dear Mr. M.,
It was a pleasure to meet you today in our office...
Hereafter we recapitulate our offer:
(1) Shoes with white sole) 34,800 pairs, price: 5,00 Pounds)
braun sole))
car shoes))
(2) Children shoes 7,000 pairs, price: 4,00 Pounds)
(3) Shoes 8510-8516-8531-)
8541-8517-8596 6,900 pairs, price: 7,000 Pounds)
(4) Winter-shoes 52,600 pairs, price: 12,00 Pounds commission 10 per
cent. 10,00 Pounds without commission, minimum quantity: 2000 pairs
payment: letter of credit 75 days
(5) Moon-Boots: 5,600 pairs price: 2,5/3,00 Pounds
Delivery: without charges and customs clearance free London
We look forward to furitful business relationship with you.'
In the right-hand margin of the letter, bracketed against items (1) to (3),
were the words 'payment: L/C 75 days.'For convenience I shall refer to
the 34,800 pairs of shoes mentioned in items (1) as 'the spring shoes,'
and the 6,900 pairs of shoes mentioned in item (3) as 'the item 3 shoes.'
[5] Paragraph 6 of the statement of claim avers that in a telephone
conversation between Mr. M. and a Mrs. Ba. on behalf of the first
defendant, the plaintiff agreed to buy the 34,800 pairs of spring shoes
at the offered price of £5 per pair, and the 52,600 pairs of winter shoes
(item (4)) at the offered price of £10 per pair without commission. 'In the
premises,' paragraph 7 alleges, a binding agreement was made between
the plaintiff and the first defendant acting on behalf of itself and also on
behalf of the bank.
[6] Paragraphs 8 and 9 refer to two telexes. The first is a telex sent on
4th August to Mr. M. by Herr S.. This reads 'Confirm you that we agree
with your offer.' The telex then refers to the spring shoes, and continues:
'Total: 34,800 pairs for 5 pounds per pair
As stipulated:
--Payment: L/C 75 days
--Delivery: without charges and customs clearance, free London.'
The telex adds regarding the winter shoes:
'Concerning the winter-shoes we note that you propose 10 pounds
without commission.
We must reflect and we give you an answer on Friday.'
[7] The second telex referred to in the statement of claim was sent three
weeks later, again by Herr S. to Mr. M.. It was dated 25 August. This telex
reads:
'We regret but our bank has not accept your offer for the shoes.
The bank requires:
7 pounds for the [spring] shoes and children
13 pounds for the winter shoes.'
[8] The statement of claim then alleges that the first defendant did not
deliver the spring shoes or the winter shoes, and that both defendants are
in breach of contract. Paragraph 11 reads:
'Further or alternatively if which is not admitted the Second Defendants
were not a party to the said agreement, they wrongfully and with intent
to injure the Plaintiffs induced the First Defendants to commit a breach of
their agreement with the Plaintiffs.'
Loss and damage are alleged. Special damage is particularised at £
174,040. It is further said that the plaintiff had re-sold the shoes to its
own customer, and that the plaintiff anticipated that this customer would
bring against the plaintiff a claim for damages for breach of contract.
The relief claimed in the action is damages against both defendants for
breach of contract, and damages against the bank for inducing breach of
contract.
The bank's case
[9] The bank's application to set aside the writ was supported by an
affidavit made by its English solicitor. Apart from formal matters, the
affidavit was confined to exhibiting the opinion of a German lawyer. This
opinion was concerned to establish that, under German law, the facts
alleged against the bank did not give rise to any cause of action for
wrongfully inducing a breach of contract.
[10] The plaintiff produced affidavit evidence in answer. This consisted
principally of an affidavit by Mr. M.. I shall come to that presently. In
addition, the plaintiff produced evidence on German law. The bank then
produced evidence in reply. This comprised further evidence of German
law, plus a formal non-admission of the contents of Mr. M.'s affidavit.
[11] Shortly stated, the bank's case is that the plaintiff has not got over
the threshold which, under the Convention, must be cleared before
an English court has jurisdiction to hear and determine the plaintiff's
claims that the bank is in breach of contract or has committed the tort of
inducing a breach of contract by the first defendant.
[12] Thus the first matter which has to be considered is what is the test
which the English court should apply on this interlocutory application,
when there is a dispute whether the contract alleged was made or the tort
alleged was committed. I turn to the Convention.
[13] The Convention has the force of law in the United Kingdom, by virtue
of section 2(1) of the Civil Jurisdiction and Judgments Act 1982. Section
3(1) of that Act provides that any question as to the meaning or effect
of any provision of the Convention shall, if not referred to the European
Court, be determined in accordance with the principles laid down by and
any relevant decision of the European Court.
[14] Article 2 of the Convention sets out the basic provision regarding
jurisdiction: persons domiciled in a Contracting State shall be sued in the
courts of that state. To this basic provision there are exceptions. Article
3 provides that persons domiciled in a Contracting State may be sued in
the courts of another Contracting State only by virtue of the rules set out
in Articles 5 to 18. In the present case, therefore, the English court has
jurisdiction to hear and determine the claims against the bank, which is
domiciled in the Federal Republic of Germany, only if the case falls within
one or other of Articles 5 to 18.
[15] The plaintiff relies on Article 5. Article 5 identifies a variety of
subject-matters, claims and disputes where a defendant may be sued
in courts other than the court of the Contracting State in which he is
domiciled. For convenience I set out the material parts of Article 5:
'A person domiciled in a Contracting State may, in another Contracting
State, be sued:
(1) in matters relating to a contract, in the courts for the place of
performance of the obligation in question;...
(3) in matters relating to tort, delict or quasi-delict, in the courts for the
place where the harmful event occurred.'
The opening words of Article 5(1) identify the nature of the subject-
matter with which that paragraph is concerned: 'in matters relating to a
contract.'Likewise with the opening words of Article 5(3):the phrase 'in
matters relating to tort, delict, or quasi-delict' defines the type of claim to
which the paragraph applies. The scope of those words, which are words
of classification or categorisation, does not fall to be determined by the
national law of one or other of the Contracting States. In Peters v. Znav
the European Court said regarding Article 5(1):
'...the concept of matters relating to a contract serves as a criterion
to define the scope of one of the rules of special jurisdiction available
to the plaintiff... [this concept] should be regarded as an independent
concept which, for the purpose of the application of the Convention, must
be interpreted by reference chiefly to the system and objectives of the
Convention, in order to ensure that it is fully effective.'
Similarly with Article 5(3). In Kalfelis v. Schröder, Münchmeyer, Hengst &
Co., the European Court said:
'Therefore the concept of matters relating to tort, delict and quasi-delict
must be regarded as an independent concept which, for the purpose
of the application of the Convention, must be interpreted by reference
chiefly to the scheme and objectives of the Convention in order to ensure
that it is fully effective.
In order to ensure a uniform solution in all the member-States, it must
be assumed that the concept of matters relating to "tort, delict and quasi-
delict" relates to any action which seeks to establish a defendant's liability
and which is not related to a "contract" within the meaning of Article
5(1).'
[16] Thus far it is plain sailing. The plaintiff's primary claim against the
bank is a matter relating to a contract. The claim is that the bank entered
into a binding contract to sell the shoes in question to the plaintiff. It did
so, through Herr G. or through the first defendant which was its agent
for this purpose. The plaintiff's alternative claim against the bank is a
matter relating to tort. The claim is that, if the bank did not enter into
any such binding agreement of sale with the plaintiff, the bank wrongfully
induced the first defendant to break its contract with the plaintiff. I can
see no reason to doubt that these two claims fall four-square within the
Community concepts of contract and tort respectively.
The breach of contract claim
[17] Nor is there any doubt that, as to the plaintiff's claim against the
bank for breach of contract, the place for performance of the relevant
obligation was England. The plaintiff's complaint is that the defendants
were in breach of contract in not delivering the shoes. If the parties did
enter into a binding agreement in this case, it is clear that one of its
terms was that the shoes would be delivered in London. The plaintiff
is seeking to enforce its rights flowing from defendants' breach of that
obligation.
[18] In the present case the dispute is over whether any contract was
ever entered into between the plaintiff and the bank. Whether the
existence of a dispute on whether the parties entered into the contract
alleged takes a case outside Article 5(1) was considered by the European
Court in Effer SpA v. Kantner. In that case Effer, an Italian manufacturer
of cranes, distributed cranes in Germany through a German company
known shortly as Hykra. Hykra commissioned Herr Kantner, a German
patent agent, to investigate whether certain equipment developed by
Effer infringed existing patent rights in Germany. Hykra became insolvent.
Herr Kantner brought proceedings in Germany against Effer for payment
of his fees, on the basis that he had been commissioned by Hykra on
behalf of Effer. Effer contended that Hykra had commissioned Herr
Kantner on its own behalf. Effer also contended that, since there was a
dispute over the existence of the contract, the German courts had no
jurisdiction under Article 5(1).The German courts found in favour of Herr
Kantner. The Federal Court of Justice referred the following question to
the European Court for a ruling:
'May the plaintiff invoke the jurisdiction of the courts of the place of
performance in accordance with Article 5(1) of the Convention even when
the existence of the contract on which the claim is based is in dispute
between the parties?'
The European Court gave an affirmative answer to that question. In the
course of its decision, it said:
'It is clear from the provisions of the Convention, and in particular from
the preamble thereto, that its essential aim is to strengthen in the
Community the legal protection of persons therein established. For that
purpose, the Convention provides a collection of rules which are designed
inter alia to avoid the occurrence, in civil and commercial matters, of
concurrent litigation in two or more member-States and which, in the
interests of legal certainty and for the benefit of the parties, confer
jurisdiction upon the national court territorially best qualified to determine
a dispute.
It follows from the provisions of the Convention, and in particular from
those in Section 7 of Title II, that, in the cases provided for in Article 5(1)
of the Convention, the national court's jurisdiction to determine questions
relating to a contract includes the power to consider the existence of
the constituent parts of the contract itself since that is indispensable in
order to enable the national court in which proceedings are brought to
examine whether it has jurisdiction under the Convention. If that were
not the case, Article 5(1) of the Convention would be in danger of being
deprived of its legal effect, since it would be accepted that, in order to
defeat the rule contained in that provision it is sufficient for one of the
parties to claim that the contract does not exist. On the contrary, respect
for the aims and spirit of the Convention demands that that provision
should be construed as meaning that the court called upon to decide a
dispute arising out of a contract may examine, of its own motion even,
the essential preconditions for its jurisdiction, having regard to conclusive
and relevant evidence adduced by the party concerned, establishing the
existence or the inexistence of the contract...' [my underlining]
[19] It is at this point that the first question arising on this appeal
emerges. Mr. Layton fastened onto the words which I have underlined. He
submitted that, for a national court to have jurisdiction by virtue of Article
5(1), that court must be satisfied, by 'conclusive and relevant evidence'
adduced by the plaintiff, of the existence of the contract which is being
asserted and sought to be enforced.
[20] Mr. Layton also relied upon the passage in the report of Professor
Schlosser on the accession convention, admissible as an aid in construing
the provisions of the Convention by virtue of section 3 of the 1982 Act. In
paragraph 22 Professor Schlosser wrote:
'...a court may assume jurisdiction only if it is completely satisfied of all
the facts on which such jurisdiction is based; if it is not so satisfied it can
and must request the parties to provide the necessary evidence, in default
of which the action will be dismissed as inadmissible.'
Mr. Layton submitted that for an English court to have jurisdiction to
hear and determine the claim that the bank is in breach of contract, the
plaintiff must satisfy the English court at the interlocutory stage that, on
the evidence put forward by the plaintiff, and disregarding any conflicting
evidence put forward by the bank, the plaintiff's claims in this action are
well-founded, viz., that they will succeed.
[21] I am not able to accept this formulation. As the European Court
has authoritatively decided in Effer v. Kantner a dispute as to the
existence of a contract does not deprive a national court of jurisdiction
it would otherwise have under Article 5(1).In exercise of the Article 5(1)
jurisdiction, the court may determine the dispute whether a contract
was entered into by the parties. In other words, in a case where the
existence of the contract is in dispute, the court's jurisdiction to hear and
determine a claim under Article 5(1) is not dependent upon the court first
satisfying itself that the contract does exist. That is the subject-matter
of the dispute, and that is a subject-matter which Effer v. Kantner has
established the court has jurisdiction to determine under Article 5(1).As
the European Court observed in Peters v. Znav:
'...respect for the purposes and spirit of the Convention requires an
interpretation of Article 5 which enables the national court to rule on its
own jurisdiction without being compelled to consider the substance of the
case.'
If in due course the court finds that no contract was entered into, it will
dismiss the claim: but it had jurisdiction to determine that issue.
[22] I do not think that the passages in the decision in Effer v. Kantner
emphasised by Mr. Layton can bear the interpretation which he seeks to
place upon them. I do not think that in paragraph 7 of its decision the
European Court was saying more than that, faced with a claim founded
on a contract whose existence is in dispute, the national court has
jurisdiction to consider and determine the existence or not of the contract,
having regard to sufficient and proper evidence adduced by the party
concerned.
A serious question to be tried
[23] This is not to say that the bare assertion of the existence of a
contract is the end of the matter on an interlocutory application such as
this. Far from it. The English court has ample powers of its own to see
that the jurisdiction which it is given by Article 5(1) of the Convention is
not abused. When leave to serve a writ out of the territorial jurisdiction
of the English court is needed under Order 11, rule 1(1), leave is not
granted unless it is made sufficiently to appear to the court that the case
is a proper one for service out of the jurisdiction (see Order 11, rule 4).
To satisfy that requirement a good arguable case must be made out: see
Lord Simonds in Vitkovice v. Korner. Order 11, rule 1(1) does not apply
in the present case. Jurisdiction under the Convention is not a matter of
discretion. Nevertheless, bearing in mind that jurisdiction under Article
5 is an exception to the general rule under Article 2, the English court
will be astute to see the frivolous or vexatious claims for the existence
of a contract are stopped summarily at the outset, either under Order
18, rule 19 or under the inherent jurisdiction of the court. There must
be evidence establishing a genuine and real dispute. The court should
be satisfied that there is a serious question which calls for a trial for its
proper determination.
[24] If at the outset, when the court is considering whether it has
jurisdiction to entertain the claim under Article 5(1) it is apparent that
the claim has no real prospect of succeeding, the court should say so
and decline to permit the action to proceed. In carrying out this exercise
the court should look at all the evidence which has been adduced by the
parties. Whether that evidence establishes that the plaintiff's claim raises
a serious question, which calls for a trial for its proper determination, will
depend on all the circumstances of each case.
[25] Mr. Layton sought to buttress his argument by reference to Article 20
of the Convention. Article 20provides that where a defendant domiciled
in one Contracting State is sued in a court of another Contracting State
and does not enter an appearance the court shall declare of its own
motion that it has no jurisdiction unless its jurisdiction is derived from the
Convention. He pointed out that in 'Convention cases' the plaintiff is not
now entitled to enter judgment, where a defendant fails to give notice of
intention to defend, except with the leave of the court. This is provided
in Order 13, rule 7B. An application for leave to enter judgment must be
supported by an affidavit stating that in the deponent's belief each claim
made by the writ is one which, by virtue of the 1982 Act, the court has
power to hear and determine. The sources and grounds of such belief
are to be stated. Mr. Layton submitted that a defendant who gives notice
of intention to defend and applies to have the writ set aside cannot be
in a worse position than a defendant who gives no notice of intention to
defend.
[26] I do not think that these contentions take the argument any further
forward. The national court has to be satisfied that it has jurisdiction.
For example, if the defendant is sued in the court of a state in which he
is not domiciled and the dispute arises out of the operations of a branch
or agency, the national court must be satisfied as to the place in which
the branch or agency is situated; where the claim is in tort, the court
must be satisfied as to the place where the harmful event occurred; and
where the claim is for a breach of contract, the court must be satisfied
as to the place for performance of the obligation in question. Moreover,
under Article 20,the court must stay the proceedings so long as it is
not shown that the defendant has had sufficient time to enable him to
arrange for his defence. But that does not mean that, in default cases,
the court has also to be satisfied with regard to the substance of the claim
against a defendant. Our attention has been drawn to no provision in
the Convention which imposes upon a national court any requirement in
default cases beyond those I have mentioned, viz., being satisfied as to
its jurisdiction, and that the defendant has had sufficient time to arrange
for his defence.
The plaintiff's evidence
[27] I turn to the affidavit of Mr. M.. In his affidavit Mr. M. has given an
outline of what he says took place at the meeting held on 29 July 1987.
He was shown around the warehouse and the showroom. Herr G., an
officer of the bank, took an active part in the discussions on prices. Mr.
M. asked for an offer in writing to discuss with his colleagues in England.
It was Herr G. who prepared the letter I have mentioned, and he himself
gave the letter to Mr. M. after lunch. Mr. M. took away some samples
of the shoes to England. After discussions with his colleagues, Mr. M.
telephoned Mrs. Ba.. He told her that the plaintiff would be prepared to
pay £ 5 per pair in respect of the 34,800 pairs of spring shoes, £5 per pair
for the 6,900 pairs of item 3 shoes, and £9 per pair without commission
for the 52,600 pairs of winter shoes. Subsequently he telephone Mrs. Ba.
and said that the plaintiff would be prepared to pay £10 per pair without
commission for the winter shoes.
[28] Mr. M. also produced a bundle of telexes. I need not refer to them
all. I have mentioned Herr S.'s telex of 4 August. On 5 August he telexed
again:
'Our offer for the spring shoes 86 per telex NR 932 of 03.08.1987 is only
available if the Finance-Bank (because the goods are proprietorship of the
bank) and the partners of the firm SMT (a partner meeting will be held
tomorrow) give the agreement.
We are awaiting for a decision this weekend and we will give you an
answer Friday.'
In an answering telex Mr. M. stressed the importance of an answer by
Friday, 7 August. Further reminders were sent. On 11 August Mrs. Ba.
telexed a message that she would give Mr. M. an answer as soon as she
heard from Herr S. 'because only Mr. S. can say what the partners and the
bank had decided.' The answer came on 25 August, in the telex of that
date I have already mentioned. This brought an immediate riposte from
the plaintiff: that the first defendant was in breach of its contract with the
plaintiff, made with the bank's full approval.
[29] Mr. Melville-Williams put the plaintiff's case in two ways. First,
he submitted that Mr. M. orally accepted the defendants' written offer
to sell the spring shoes at £5 per pair and, later, he orally accepted
their written offer to sell the winter shoes at £10 per pair. Mr. Melville-
Williams submitted that on its face the letter of 29 July was not an 'all or
nothing'offer, capable of being accepted only in respect of all the shoes,
because a minimum quantity of 2,000 pairs was specified for the winter
shoes. Mr. M.'s statement that the plaintiff would be prepared to pay
£9 for the winter shoes was not a counter-offer which destroyed the
defendant's original offer to sell these shoes at £10 a pair. The bank was
a party to the original offer. The intended mode of communication for
acceptance of the offer, or further negotiations, was with Herr S.; it was
not envisaged that the plaintiff would communicate directly with Herr G..
Alternatively, so far as the spring shoes are concerned, Herr S.'s telex
of 4 August was an acceptance of an oral offer made by Mr. M. over the
telephone to Mrs. Ba..
[30] The plaintiff's case is not without its difficulties, but in my view the
plaintiff has established that there is here a serious question which calls
for a trial for its proper determination, with regard to the spring shoes
and also with regard to the winter shoes. I mention in particular, with
regard to the spring shoes, that the telex of 4 August appears to be a
firm acceptance of an offer for those shoes, with agreed terms as to
payment and delivery. No explanation has been forthcoming from the
bank about the precise ownership of the shoes, or about the extent of
Herr S.'s authority, or on what lay behind the telex of 5 August, by which
date the bank and the first defendant seem to have had second thoughts.
Given the extent of Herr G.'s involvement in the meeting of 29 July and
in the preparation and handing over of the letter, I do not think that it
would be right at this stage, and on this evidence, to conclude against
the plaintiff that Herr S. has no authority from the bank to accept an offer
for the spring shoes at the price negotiated at the meeting of 29 July.
Nor would it be right, at this stage, to draw firm inferences from Mr. M.'s
failure to object at once to the telex message of 5 August.
[31] Mr. Layton placed some reliance on the discrepancies between the
plaintiff's pleaded case and the history as set out in Mr. M.'s affidavit.
I was not impressed by this argument. In the statement of claim the
plaintiff pleads the meeting and the letter of 29 July, a telephone
conversation with Mrs. Ba. and a telex of 4 August. I do not think that the
discrepancies are sufficiently serious to undermine the plaintiff's case.
Article 5(3) and the tort claim
[32] I turn to the plaintiff's alternative claim against the bank, for
inducing a breach of contract by the first defendant. On this I adopt
the same approach to Article 5(3) as to Article 5(1):does the evidence
establish that there is here a serious question, which calls for a trial for
the proper determination, on whether the bank committed against the
plaintiff a tort in respect of which the harmful event occurred in England?
[33] Before us the parties were in dispute on many points, including the
relevance of German law, the effect of German law, and the place where
the harmful event occurred within the meaning of Article 5(3). At the
outset we invited submissions from both parties on whether, leaving aside
all questions of German law, the plaintiff had a seriously arguable case
that the bank has, under ordinary principles of English domestic law,
committed the tort complained of. Having heard such argument we were
of the view that the plaintiff does not have such a case. Accordingly it was
not necessary for us to hear argument on the points which would have
arisen had we come to a different conclusion on this initial point.
[34] When approaching the plaintiff's claim in tort against the bank it is
essential to keep two points in mind. The first is that, on the evidence,
the bank owned or had a charge over the shoes. Thus the bank's refusal
to concur in a sale of the shoes by the first defendant would not, by itself
and without more, give the plaintiff a cause of action against the bank.
The bank's refusal to join in such a sale might render abortive a contract
made by the first defendant alone, but that would be because the first
defendant was not the absolute owner of the shoes, and not because of
any wrongful interference by the bank with the due performance by the
first defendant of its contractual obligations to the plaintiff.
[35] The second point to be borne in mind is that underlying the plaintiff's
claim in tort against the bank are certain assumptions. These are (a)
that the first defendant did enter into a contract with the plaintiff (if no
such contract existed, the bank could not have been guilty of unlawfully
procuring its breach) and (b) that the bank was not a party to that
contract. Thus one has to approach the tort claim on the footing that by
4 August the first defendant had contracted to sell the spring shoes, and
possibly also the winter shoes, to the plaintiff, but that the bank was not a
party to that contract.
[36] It is against this background that one notes that, by 5 August, the
bank apparently was not agreeable to that contract proceeding: see the
telex of that date. It is here, in my view, that the plaintiff's claim in tort
fails to pass the test of being seriously arguable. If there was a contract
made by the first defendant with the consent of the bank, the bank would
appear to be a party to the contract in respect of its interest as owner or
chargee of the shoes. By authorising the first defendant to sell the shoes
to the plaintiff at the agreed price and on the agreed terms, it authorised
the first defendant to act on its behalf. In that event the plaintiff's claim
lies in contract. If, however, the bank did not give its consent in this way
by the time the postulated contract was made by the first defendant
alone, then I can see no sensible basis for thinking that, at some time
after the making of a contract by the first defendant on 4 August or a day
or two earlier but before Herr S. sent the telex of 5 August, the bank gave
its consent which then, on 5 August, it sought to withdraw. This seems to
be an altogether so inherently improbable sequence of events that I do
not think that it passes the test of a seriously arguable claim which calls
for a trial for its proper determination.
Conclusion
[37] In the result therefore I would uphold the decision of the judge on
the tort claim, but set aside his decision on the breach of contract claim.
STOCKER L.J.:
[38] I am obliged for the detailed history of this matter contained in
the judgment of Nicholls L.J., which I have read in draft and I gratefully
adopt. I add comments of my own because we are reversing the
decision of the learned judge. The issue before this Court arises upon an
application by the second defendant to strike out the writ or that service
of it be set aside on the grounds that the court has no jurisdiction. The
summons was brought pursuant to the terms of R.S.C. Order 12, rule 8.
Thus the issue of jurisdiction has been raised by this summons to strike
out as a preliminary point and not as a matter raised at the trial of the
main issue. At the stage in which the matter came before the Court there
were no pleadings served on behalf of either defendant and no discovery
had taken place. It follows that the Court was not, and could not be,
in a position finally to determine the issues and in particular whether a
contract exists at all.
[39] If a contract for the sale of the shoes existed and the place of
performance was England, jurisdiction would be afforded to the Court
pursuant to Article 5(1) of the Convention on Jurisdiction and the
Enforcement of Judgments in Civil and Commercial Matters under Section
2 'Special jurisdiction', which reads:
'A person domiciled in a Contracting State may, in another contracting
State, be sued:
(1) in matters relating to contract in the courts of the place of
performance of the obligation in question.'
This Article thus provides an exception to the general provision regarding
jurisdiction specified in Article 2, which so far as relevant reads:
'Subject to the provisions of this Convention persons domiciled in a
Contracting State shall, whatever their nationality, be sued in the courts
of that State.'
[40] The grounds upon which the second defendants now claim that the
action should be struck out are that the second defendants are domiciled
in the Federal Republic of Germany and that unless the matter falls within
the ambit of Article 5(1) jurisdiction can only be exercised under the
Convention by the courts of that Federal Republic. It is contended that
the plaintiffs have not established jurisdiction in the courts of this country
because there was no binding contract. It is also asserted that, even if
there was, the place of performance was Germany.
[41] The issue which arises is therefore in my view a two fold one.
(1) May the court of this country exercise jurisdiction in a case in which
the existence of the contract itself is in issue provided, if it does exist,
that the place of performance is England?
(2) What standard should be applied in deciding whether or not
jurisdiction is afforded by Article 5(1) in a case in which the existence of a
contract is in issue?
The first question seems to have been conclusively resolved in a number
of cases and in particular in the case of Effer SpA v. Kantner for the
answer provided by the European Court was that the plaintiff may invoke
the jurisdiction of the courts of the place of performance in accordance
with Article 5(1)of the Convention even when the existence of the
contract on which the claim is based is in dispute between the parties.
[42] The problem arises out of certain dicta of the Court, for the Court
said:
'It follows from the provisions of the Convention, and in particular from
those in Section 7 of Title II, that, in the cases provided for in Article 5(1)
of the Convention, the national court's jurisdiction to determine questions
relating to a contract includes the power to consider the existence of
the constituent parts of the contract itself, since that is indispensable in
order to enable the national court in which proceedings are brought to
examine whether it has jurisdiction under the Convention. If that were
not the case, Article 5(1)of the Convention would be in danger of being
deprived of its legal effect, since it would be accepted that, in order to
defeat the rule contained in that provision it is sufficient for one of the
parties to claim that the contract does not exist. On the contrary, respect
for the aims and spirit of the Convention demands that that provision
should be construed as meaning that the court called upon to decide a
dispute arising out of a contract may examine, of its own motion even,
the essential preconditions for its jurisdiction, having regard to conclusive
and relevant evidence adduced by the party concerned, establishing
the existence or the inexistence of the contract. This interpretation is,
moreover, in accordance with that given in the judgment of 14 December
1977 in Case 73/77 (Sanders v. Van der Putte [1977] E.C.R. 2383)...'
This passage seems to me to raise the question: how can a court in
a case in which the existence of the contract is in issue 'consider the
existence of the constituent parts of the contract itself'or 'examine of its
own motion as the essential precondition of its jurisdiction having regard
to convincing and relevant evidence adduced by the party concerned
establishing the existence or inexistence of the contract' without trying
the whole matter and deciding on evidence adduced whether the contract
exists or not, unless the words 'adduced by the party concerned' permit
jurisdiction to be accepted on evidence adduced by one party only?
The nature of the application in English courts requires the question of
jurisdiction to be determined before the trial takes place. In this case no
evidence relating to the contract issue was put before the Court on behalf
of the defendants and no information was therefore available to the Court
with regard to the precise nature of the second defendant's interest in the
shoes or the full relationship of the first and second defendants inter se--
matters which may be crucial to the final determination of the issue. If,
therefore, all evidence is to be adduced before the Court can decide on
jurisdiction this in practice means trying the whole case. In this respect
the second defendants draw attention to, and rely upon, the Schlosser
Report which, after referring to the procedural differences between the
courts in the United Kingdom and those in other Community States says:
'The only essential factor is that uncontested assertions by the parties
should not bind the court. For this reason the following rule is reconcilable
with the 1968 Convention: a court may assume jurisdiction only if it is
completely satisfied of all the facts on which such jurisdiction is based;
if it is not so satisfied it can, and must, request the parties to provide
the necessary evidence, in default of which the action will be dismissed
as inadmissible. In such circumstances the lack of jurisdiction would be
declared by the court of its own motion, and not as a result of a challenge
by one of the parties. Whether a court is itself obliged to investigate the
facts relevant to jurisdiction, or whether it can, or must, place the burden
of proof in this respect on the party interested in the jurisdiction of the
court concerned is determined solely by national law. Indeed some of the
legal systems of the original member-States, for example Germany, do
not require the court itself to undertake factual investigations in a case
of exclusive jurisdiction even though lack of such jurisdiction has to be
considered by the court of its own motion.'
[43] On behalf of the second defendants it is contended inter alia
that the standard required before the court can assume jurisdiction
amounts to proof of the existence of the contract and of the term that
the performance is to be in England, for a party who has entered an
appearance should not be in a less advantageous position than a party
who has not entered an appearance at all and that, therefore, the
provisions of Article 20 are relevant to the determination of this issue.
[44] If in order to decide the question of jurisdiction it is necessary
to determine finally whether a contract exists or not it would seem to
follow that if the conclusion arrived at was that no contract existed then
ex hypothesi the conditions of Article 5(1) would not be met and the
Court would have no jurisdiction. It would seem to follow from that that
the unsuccessful plaintiff can sue again in the court of the defendant's
domicile. I do not read the decision in Effer v. Kantneras having that effect
which would be contrary to the form in which the question posed was
answered in that decision. Moreover, vide the comments cited in Schlosser
and perhaps inferentially from the Effer decision on an interlocutory
application the U.K. court would be bound to decide the jurisdiction issue
as a preliminary one on the information placed before it.
[45] In my view the effect of the Effer v. Kantner decision is that a
court other than a court of the defendant's country of domicile cannot
accept jurisdiction on the mere assertion or pleading of the plaintiff.
There must be evidence adduced from which a conclusion could properly
and genuinely be drawn that a contract existed and that the place of
performance was the country in which the action was brought. Once
jurisdiction can properly be established on this basis then the effect of
Article 5(1) in the light of the Effer v. Kantnerdecision is that the court has
jurisdiction finally to determine the issues between the parties. If after
full trial the conclusion is that no contract existed then since the court had
jurisdiction to try the issue that determination is final and binding upon
the parties.
[46] If these observations are correct then it seems to me that material
was placed before the Court in the form of the statement of claim,
an affidavit on behalf of the plaintiff and the documents from which a
conclusions could be drawn that a contract existed and was breached.
If a contract existed it is manifest that the place of performance was
London from the term 'delivery without charge or customs clearance free
London.' The real issue between the plaintiff and the second defendant
was whether or not the second defendant was party to any such contract
and whether it was liable in contract for its breach.
[47] For the reasons given by my Lord it seems to me at least arguable
that so far as the 34,800 pairs of spring shoes are concerned there was
a valid offer by telex of 4 August, an acceptance of that offer by telex of
the same date, which again repeated the delivery provision set out in the
letter of 29 July.
[48] In my view, therefore, there was evidence of some cogency other
than an assertion by the plaintiff from which the court could conclude
that on trial a reasonably possible outcome could be that a contract
between the plaintiff and the second defendant would be established.
There is, therefore, a serious issue to be tried. If there was a contract
then manifestly its terms required performance in England.
[49] The most appropriate standard by which the matter should be
judged on an application in this form seems to me to be that appropriate
to applications to serve out of the jurisdiction under Order 11--viz., a
good arguable case, and this is so even though the matter is not one of
discretion where service is pursuant to rule 2(a). Applying that standard, I
think the judge was wrong to uphold the master's decision that the court
did not have jurisdiction.
[50] The appeal based on tort was not fully argued, so the interesting
questions of jurisdiction upon that cause of action do not arise.
[51] I would allow the appeal on the contract point.
O'CONNOR L.J.:
[52] I agree.
Appeal allowed in part. Leave to appeal to the House of Lords refused.