“(…) Mr Justice Lawrence Collins
I The parties
1 The claimants are The B. of T.-M., Ltd. ("BTM") and K. B. NV ("K."). BTM
is a Japanese bank, and K. is a Belgian bank. They have branches in the
City of London.
2 The first defendant ("B. G.") is a Turkish company which was
incorporated on December 7, 1990. B. G. was at the relevant times owned
and controlled by the second to fifth defendants, Ahmet Ba., Cevat Ba.,
Ismet Ba. and Melih Ba., and other members of the Ba. family. By 2001 B.
G. was the world's largest exporter of hazelnuts.
3 The sixth defendant ("A. G") is a Turkish company which was
incorporated in August 1999. Its chairman and 90 per cent shareholder
was Latif A., who had been employed by B. G. as a sales manager with
responsibility for domestic sales.
4 The seventh defendant, I. M. Commodities Ltd ("I.-M."), was
incorporated under the Companies Act 1948 on September 27, 1982. I.-
M. carries on business as a trader of food products. It, and its associated
companies, have made purchases of hazelnuts from B. G. on behalf of
established clients such as Ne. and Kr..
5 The F. group is one of the world's leading confectionery companies. It
has its headquarters in Alba, Italy. The eighth defendant, F. Industrial
Services Ltd ("F. Industrial"), whose registered office is in Alba, was
incorporated as a European Economic Interest Grouping on June 16, 2000
by the F. group in Europe with a view to centralising the purchasing of
hazelnuts and other commodities.
6 Mr Alessio Casale ("Mr Ca.") was at all material times the Deputy
Purchasing Manager of F. Industrial. Mr Alberto Rosa Brunet ("Mr Ro. Br.")
was at all material times the managing director of F. Industrial.
7 The ninth defendant, F. SpA ("F. Italy"), is an Italian company with
its registered office in Alba. The tenth defendant, F. OHGmbH ("F.
Germany"), is a German company. The eleventh defendant, F. France SA
("F. France"), is a French company. I shall refer to the eighth to eleventh
defendants collectively as "the F. Companies".
II B. G.'s business with F. and the Loan Facility from the Banks
8 By 1999 B. G. had become the biggest supplier of hazelnuts to the
F. group and was responsible for 25 per cent of Turkey's exports of
hazelnuts. The Banks' evidence is that approximately two thirds of
its exports went to the F. group…. B. G.'s only other customer of any
significance, Storck (a major German confectionery company), made
purchases of some $10-15 million p.a. …
9 In May 2001, PR. F. Management ("PR."), a financial institution based
in New York, approached the Banks on behalf of B. G. with a view to
obtaining for B. G. a loan facility to enable it to fund the purchase of
hazelnuts from growers and other suppliers.
10 Between July 11 and 13, 2001 there were meetings at B. G.'s main
plant…. The Banks' case is that, during these meetings, the Banks
informed Mr Ca. that they required the active co-operation of the F. group
before they were prepared to contemplate granting a facility to B. G.;
that it was essential that the trading relationship between the F. group
and B. G. be reduced into writing in a Framework Contract; and that B. G.
would have to provide security for the repayment of any loan made by the
Banks.
11 On July 31, 2001 Mr Ca. sent an e-mail to Melih Ba., which consisted
of a letter or e-mail to Mr Byles of BTM. Since a letter in identical
terms was sent to Mr Byles on December 13, 2001, it is likely that the
communication to Mr Byles in the e-mail to Melih Ba. is a draft which was
not sent until December. The full terms of the letter are set out below..
It confirmed that F. had a very close working relationship with B. G., and
that F. relied on B. G.'s ability to provide consistent shipments of the
highest standard on a timely basis.
12 On October 15, 2001, B. G. and F. Industrial ("for itself and on
behalf of each of F. Companies") entered into what was described as
a "Framework of General Terms and Conditions" ("the Framework
Contract").
13 Under the contract the F. Companies did not have any obligation to
purchase. Clause 2 stated that since the centralisation of its purchasing
department in 1999, F. had purchased over 30,000 tons of hazelnuts from
B. G. annually, and expected those trends to continue. …
16 By cl.8: "The governing law of the contracts signed between F. and Ba.
are determined on each of the contract [ sic] signed, which is generally
the governing law of the country the F. Company signing the contract is
located."
17 By cl.9 either party could assign its rights under the contract by way
of security or otherwise, without having to obtain the approval of the
other party. By cl.9(2) any such assignment would be effected by notice
in writing from the assignor, countersigned by the assignee to signify its
acceptance of the obligations under the Framework Contract.
18 On December 14, 2001 the Banks entered into a $35 million pre-
export financing facility agreement with B. G. ("the facility agreement"),
the purpose of which was to provide B. G. with finance to purchase
hazelnuts up to a maximum of the lesser of 90 per cent of sales contract
value and 100 per cent of the purchase price paid by B. G. to cover the
gap between purchase of the hazelnuts from local farmers until payment
was received from buyers. The facility agreement was subject to English
law and English jurisdiction (but the Banks retained the right to sue
elsewhere).
19 The conditions precedent to utilisation of the facility included execution
of Security Documents, and the provision of notices of assignment to B.
G.'s customers (including, of course, F.) and acknowledgements of such
notices: cl.4 and Sch.2.
20 The mechanics for use of the facility were, in summary, as follows:
(a) B. G. would make a utilisation request (which was a request to BTM
to issue a letter of credit: see Sch.3), accompanied by a copy of the
relevant F. purchase order; (b) BTM would issue a letter of credit (cl.5.1);
(c) A.bank TAS, a Turkish bank ("A.bank"), would act as advising and
negotiating bank (clause 5.1(h)); (d) each payment made by BTM under a
letter of credit would be deemed to be an advance (cl.5.4); (e) BTM would
reimburse A.bank for payments made under the letter of credit pursuant
to UCP 500 (Sch.6). …
(b) under the Master Assignment Agreement, B. G. charged to K. the
entirety of its rights benefit and interest in each sale contract (and related
document of title) it entered into in relation to the supply of hazelnuts;
(c) under the Master Pledge Agreement, B. G. agreed that: as security
for payment or discharge of monies due to the Banks under the loan
facility, K. would have a first ranking pledge over hazelnuts acquired with
monies advanced by the Banks under the loan facility; it would transfer
possession of each delivery of hazelnuts to K. or S. G. de S. SA ("SGS"),
a custodian appointed by K. for the purposes of the loan facility, against a
warehouse receipt; and separate pledge agreements would be executed in
respect of each delivery of hazelnuts to a warehouse under the control of
SGS and would be attached to each warehouse receipt issued by SGS;
(d) under the Master Trust Receipt, B. G. agreed that it would hold any
pledged goods released to it by K. pursuant to an express request to that
effect together with the proceeds of sale of such goods on trust for K..
22 The Account Charge, the Master Assignment Agreement and the
Master Trust Receipt all contained express clauses by which they were
to be governed by English law and by which B. G. submitted to the
jurisdiction of the English Courts. The Master Pledge Agreement was
subject to Turkish law.
23 No release of hazelnuts from the warehouse would be permitted
without the written authorisation of K. to SGS. Once released the
hazelnuts were together with their proceeds of sale held on trust by B. G.
pursuant to the terms of the Master Trust Receipt.
24 The Banks' evidence is that on November 15, 2001, the Banks'
solicitors, in anticipation of the execution of the facility agreement
and related Security Documents, circulated a draft Master Assignment
Agreement attached to which was a draft notice of Master Assignment
Agreement and draft acknowledgement of the Master Assignment
Agreement. …
25 On December 6, Mr Ismet Ba. sent to Mr Ca. draft documentation for
F. Industrial and F. France (as a sample for the other F. entities, including
not only the F. Companies, the defendants in these proceedings, but
also the F. companies in Australia and the United States) consisting
of a notification by B. G. that it had agreed to the terms of a working
capital facility with the Banks, and requesting the relevant F. company
to make payment to accounts of B. G. with K.; and acknowledgements
by F. Industrial and F. France, which contained an undertaking to pay
any amounts due under each sales contract dated on or after December
10, 2001 until July 31, 2002 to the K. accounts with A.bank as collecting
agent for B. G..
26 On December 6, 2001, acknowledgements were executed by the
F. Companies. The F. Industrial acknowledgement (which, unlike the
others, contains a heading, "Acknowledgement of Notice of Assignment
of General terms and conditions for sale of hazelnuts") includes a
confirmation of receipt of a notice from B. G. which is said to be attached
(and which is plainly intended to be a reference to a notice of assignment,
although F.'s evidence is that the notice, which was ultimately dated
December 17, was not attached). No assignment in fact took place until
the financing documents were completed on December 14.
27 The acknowledgements were faxed to B. G., which copied them to PR..
The Banks' case is that they received a copy from PR. on December 6 or
(in the case of F. France) December 7, 2001.
28 Each of the acknowledgements had a space for the K. sort codes
and account numbers, but in none of them was the relevant information
included. Each of them contained the following note: "Same account
information will appear on each invoice supplied by B. G." to the relevant
F. company.
29 On December 13, 2001 F. Industrial executed a further
acknowledgement (dated December 17) of a notice of assignment. It
differed from the acknowledgement dated December 8, in that (a) it
referred in terms to the notice of which receipt was acknowledged as
being a notice that Ba. Gida had assigned its rights in the Framework
Contract to K. and (b) it contained the K. and A.bank account numbers.
30 On the same day, December 13, 2001, Mr Ca. wrote to Mr By. of BTM:
"I am writing to confirm our discussion of F.'s experience with Ba. as
a supplier. Our company has been working with B. G. since 1991, and
on a large-scale basis after initial testing since 1993. Hazelnuts are F.'s
single most important source of raw materials, and Ba. has been for
several years our largest single supplier of hazelnuts. We have a very
close working relationship to coordinate the market strategy for this
important commodity, maintaining communication on a daily basis during
the harvest season.
As the Deputy Purchasing Manager for F., I am responsible for
coordinating this relationship and can report no significant difficulties
since we began cooperating with Ba.. Since the centralization of F.'s
purchasing department in 1999, we have purchased over 30,000 tons of
natural hazelnuts from Ba. annually. We expect these trends to continue.
In terms of quality, we rely on Ba.'s ability to provide consistent
shipments of the highest standard on a timely basis. In fact, out of
200,000 tons supplied since 1991, I am aware of only 4 or 5 truckloads
amounting to a total of approximately 100 tons, that F. did not accept
under the standards presented by Ba.. These shipments were simply
regraded and accepted as a less expensive category. We expect these
demanding quality standards to continue on both sides of the relationship.
…."
31 Following execution of the facility agreement on December 14, 2001
Ba. Gida executed a notice of assignment of the Framework Contract,
addressed to F. Industrial and the other F. Companies, which gave notice
that pursuant to the Master Assignment Agreement, B. G. had assigned to
K. all of its rights, benefit and interest in the Framework Contract. B. G.
instructed the F. Companies to make payments of any amounts becoming
due and payable under or in connection with the Framework Contract to
the accounts at K., and account numbers were specified. The notice asked
for an acknowledgement.
32 There are, in addition, notices dated December 19, 2001 (but
apparently sent on December 20, 2001) in which B. G. gives notice to
F. Italy, F. France, and F. Germany of assignment of all their rights in
all sales contracts, and acknowledgements by those companies dated
December 19, 2001 (also apparently sent on December 20, 2001) of the
notices of assignments and undertaking to pay any amounts due by them
under each sale contract dated on or after December 17, 2001 to the
K. accounts. F. says that these are forgeries. The Banks accept that the
signatures of the relevant F. Companies were added to these documents
by photocopying signature portions of earlier documents.
33 On December 21, 2001 Mr Lewis of K. informed each of F. Industrial, F.
Italy, F. Germany and F. France that there was a typographical error in the
account numbers for euro payments in the acknowledgements and gave
the correct account numbers. Mr Lewis asked for an acknowledgement
by the F. Companies, but it would appear that only F. France formally
acknowledged.
34 B. G. drew down over §12822,821,000 under the facility agreement
in 11 tranches between January 3 and February 26, 2002. Only about
§1281,402,000 has been repaid.
III The Italian proceedings
35 Notice of the Banks' claim as assignees was sent to F. Industrial and
F. Italy under cover of letters dated December 20, 2002. In the letter to
F. Industrial, the Banks relied on the acknowledgements by F. Industrial
dated December 6 and December 17, 2001. In the letter to F. Italy, the
Banks relied on the December 6, 2001 acknowledgement of assignment
and on the later acknowledgement signed by F. Industrial, and also stated
that "a notice in similar terms may have been sent to F. [Italy] on 19
December 2001 and acknowledged shortly afterwards". …
37 On January 28, 2003 proceedings were commenced in Alba, Italy
(which is the centre of F.'s operations) against the Banks (and against
B. G.) by F. Industrial and F. Italy, which were served on the Banks on
January 31, 2003.
38 By Art.30(2) of the Council Regulation 44/2001 on jurisdiction and
the enforcement of judgments in civil and commercial matters ("the
Judgments Regulation"), a court is deemed to be seised at the time when
the document to be served is received by the authority responsible for
service, provided that the plaintiff has not subsequently failed to take
the steps he was required to take to have the document lodged with the
court. It is accepted that the Italian court was seised of the proceedings
on January 31, 2003, several months before this action was commenced
in the English court.
39 The plaintiffs are F. Industrial and F. Italy, and the defendants are B.
G. and the Banks. Since K. is a Belgian company, the jurisdiction of the
Italian court will depend on the Judgments Regulation. The Judgments
Regulation does not apply to BTM, which is a Japanese company. The
effect of the Italian Law on Private International Law of 1995 is that the
Italian court will have jurisdiction over BTM if (a) it has a representative
in Italy authorised to take part in legal proceedings; or (b) any of the
jurisdictional rules in the Brussels Convention would (had BTM been
domiciled in a Brussels Convention country) apply.
40 The complaint claims that B. G. is liable for fraud against F. Italy and
F. Industrial. B. G. induced the Banks to agree to the facility and misled
them as to compliance with the conditions imposed by the Banks, and
issued false invoices thus obtaining significant sums from the Banks.
41 The Banks are said to be liable for having made unlawful demands for
payment against F. Italy and F. Industrial. B. G.'s fraudulent project would
not have been successful if the Banks themselves had not been seriously
negligent. …
43 The negligence forms not only the basis for the compensation claim,
but also evidences the foundation for the application that the court should
find that no obligation exists. Once the forgeries are set aside, the Banks
cannot maintain that the plaintiffs are under any obligation to make
payments.
44 Accordingly the plaintiffs invite the court to compensate F. Italy, and
to state and declare that the Master Assignment Agreement cannot be
asserted against F. Italy and F. Industrial due to non-compliance with
cl.9(2) of the Framework Contract, and in all cases to state and declare
that the plaintiffs owe nothing to B. G. or the Banks with respect to the
contracts for the sale of hazelnuts.
45 The F. Italy claim is:
"b) to state and declare that the Master Assignment Agreement signed
by Ba. and K. (acting in its own name and as agent of BTM) cannot be
asserted against F. SpA due to non-compliance with the terms of art.9.2
of said contract entitled "General Terms and Conditions for the Sake of
Hazelnuts (Framework)" dated 15 October 2001 between Ba. and GEIE,
acting in its own name and on behalf of F. SpA, F. OHGmbH, F. France SA,
F. USA Inc. and F. Australasia Manufacturing Pty Ltd.; …
46 On October 14, 2003 the Banks served their defence in the Italian
proceedings. The Banks say that they contest the jurisdiction of the
Alba court, and that any plea on the merits is without prejudice to the
objection to the jurisdiction. …
50 On July 18, 2003 proceedings were issued by the Banks in the High
Court.
(…)
66 The claims are as follows: Against B. G.
67 In breach of cl.5.4 and 12.1 of the facility agreement B. G. has failed
to repay the balance advanced of $12822,821,566 together with interest.
Against the F. Companies under the Assignments …
69 Each of F. Italy, F. Germany and F. France is liable to the Banks as
assignees in respect of deliveries of hazelnuts made to them made by B.
G., and is also liable to the Banks as assignees in respect of deliveries of
hazelnuts made to them by A. G and/or Ba. Yuksel since such deliveries
were made by them as nominees or agents for B. G..
70 On the proper construction of the Framework Contract, F. Industrial
is as the centralised purchasing authority also liable in respect of any
supplies made to the F. Companies at its request. By virtue of the
assignment of the Framework Contract and/or the separate undertakings
given by it in its acknowledgements of December 6, 2001 and/or
December 13, 2001, F. Industrial is liable to pay to the Banks the full
amount due in respect of the supplies made by B. G. and/or A. G and/or
Ba. Yuksel in respect of hazelnuts financed by the Banks.
Conversion
71 If contrary to the Banks' primary case the supply of hazelnuts made
by A. G and/or Ba. Yu. to each of the F. Companies was not made as
nominees or agents for B. G., the Banks contend that, to the extent to
which each of F. Italy, F. Germany and F. France received supplies of
hazelnuts from A. G and/or Ba. Yu. that had been pledged to K. and had
been released subject to the terms of the Master Trust Receipt, they are
liable to pay damages for conversion.
Conspiracy
72 From about November or December 2001, Ahmet Ba., Cevat Ba.,
Ismet Ba., Melih Ba., B. G., A. G and/or I.-M. and/or any two or more of
them wrongfully conspired, combined together and agreed to defeat by
unlawful means the rights of the Banks and other creditors of B. G..
73 F. Industrial acting by Mr Ca. participated in the unlawful means
conspiracy perpetrated by the owners and shareholders of B. G., Ba. Gida,
A. G and/or I.-M. one of the purposes of which was to ensure that B. G.
and/or its nominees received payment for the hazelnuts even though the
right to payment had been assigned to the Banks: …
Knowing receipt of trust property
74 Mr Ca. knew that the hazelnuts used to fulfil the deliveries by Ba. Gida
and/or A. G as well as part of the deliveries made by Ba. Yu. were subject
to the terms of the Master Trust
Receipt in favour of K..
75 The knowledge of Mr Ca. (which includes the knowledge of the F.
employees in Giresun) is to be attributed to F. Industrial and thereby each
of F. Italy, F. Germany and F. France. …
Tracing Claim
77 The Banks have a proprietary claim in respect of the hazelnuts
purchased by F. Industrial, F. Italy, F. Germany and F. France and/or any
monies generated using those hazelnuts.
Damages
78 The Banks claim as damages the value of the hazelnuts subject to
the Banks' security interest which were delivered to the F. Companies
but in respect of which no payment has been made, in the amount of
#12823,955,273.
(…)
103 The F. Companies acknowledged service, and indicated that they
would be seeking to challenge the English court's jurisdiction.
104 Applications have been made:
(a) by F. Germany and F. France for an order that the court decline
jurisdiction over proceedings and set aside service of the claim form
alternatively stay the action because: (a) a related action within the
meaning of Art.28 of the Judgments Regulation was at the time pending
in Italy between the Banks and F. Industrial and F. Italy; (b) in any event
the court has no jurisdiction over any of the claims made in the action.
(b) by F. Industrial and F. Italy on the grounds that:
(i) proceedings involving the same cause of action between inter alia the
Banks and F. Industrial and F. Italy had already been brought within the
meaning of Art.27 of the Judgments Regulation in Italy;
(ii) a related action within the meaning of Art.28 of the Judgments
Regulation was at the time pending in Italy between the Banks and F.
Industrial and F. Italy; …
105 In further support of the conspiracy claim the Banks seek to amend
(1) to allege that the other F. Companies were party to the conspiracy;
(2) to allege that the defendants (including the F. Companies) were
parties to an unlawful means conspiracy to procure advances from the
Banks to Ba. Gida;
(…)
VIII Conclusions
A. Applicable legal principles
172 Service out of the jurisdiction in a case which the court has power
to determine under the Civil Jurisdiction and Judgments Act 1982
(defendants domiciled in Denmark, Norway, Switzerland and Iceland) or
the Judgments Regulation (defendants domiciled in the EC Member States
other than Denmark) is governed by CPR, r.6.19(1) and (1A) respectively.
Service under CPR, r.6.19(1A) may be effected without the permission of
the court …
173 These proceedings are civil or commercial matters within the
meaning of the Judgments Regulation, and each of the F. Companies is
domiciled in a Regulation State. Accordingly, proceedings can be brought
against them in this country only in accordance with the rules set out in
ss.2 to 7 of Chapter II of the Judgments Regulation: Art.3. It follows that,
if the defendant is domiciled in a Regulation State, permission cannot be
sought or obtained under CPR, r.6.20, which is the successor to Order
11, r.1, and which does not apply to defendants domiciled in Regulation
States.
174 In principle the appropriate standard which the claimant must satisfy
to establish the jurisdiction of the English court is a good arguable case.
175 A person domiciled in a Regulation State may be sued in another
Regulation State in matters relating to contract, in the courts for the place
of performance of the obligation in question: Art.5(1)(a).
176 A person domiciled in a Regulation State may be sued in another
Regulation State in matters relating to tort, delict or quasi-delict, in the
courts for the place where the harmful event occurred: Art.5(3). …
178 The place where the harmful event occurs covers both the place
where the damage occurred and the place of the event giving rise to it,
and the defendant may be sued, at the option of the claimant, in the
courts for either of those places. …
180 When determining the place where the damage occurred, account
should not be taken, for the purposes of determining jurisdiction under
Art.5(3), of indirect financial damage, or of the adverse consequences of
an event which has already caused damage elsewhere. If indirect financial
damage qualified, that would give too much weight to the plaintiff's
domicile, and enable a plaintiff to determine the competent court by his
choice of domicile. …
182 In Domicrest Ltd v Swiss Bank Corporation the English claimant
sued a Swiss bank for negligent mis-statement. The mis-statement was
allegedly made in a telephone conversation between an English agent of
the claimant and an officer of the bank in Switzerland, who was said to
have represented that the transmission of a copy payment order by the
bank to the claimant constituted an assurance by the bank that payment
would be made for the amount referred to in the order and that such
payment was guaranteed by the bank. The claimant said that as a result
of those representations, it agreed, contrary to its usual practice, to
release goods on receipt of the copy payment order from the bank rather
than waiting until it had been paid. The bank subsequently refused to
pay on three copy payments orders in respect of goods which had been
released from store in Switzerland and Italy.
183 Rix J said: "It must therefore be a matter of concern that a rule in
relation to negligent mis-statement which emphasises where the mis-
statement is received and acted upon, or where the economic loss is
finally felt, is a rule which over-favours the plaintiff's jurisdiction, contrary
to the essential structure of the Convention as expressed in article 2, and
contrary to the warnings expressed by the European Court....
... it seems to me that the place where the harmful event giving rise to
the damage occurs in a case of negligent mis-statement is, by analogy
with the tort of defamation, where the mis-statement originates. It is
there that the negligence, even if not every element of the tort, is likely
to take place; and for that and other reasons the place from which the
mis-statement is put into circulation is as good a place in which to found
jurisdiction as the place where the mis-statement is acted on, even if
receipt and reliance are essential parts of the tort. For these purposes it
seems to me that there is no difference between a written document and
an oral or other instantaneous communication sufficient to distinguish
between such cases. Although it may be argued that in the case of
instantaneous communications and perhaps especially in the case of
telephone conversations the mis-statement occurs as much where it is
heard as where it is spoken, nevertheless it remains true as it seems to
me that it is the representor's negligent speech rather than the hearer's
receipt of it which best identifies the harmful event which sets the tort in
motion. To prefer receipt and reliance as epitomising the harmful event
giving rise to the damage in the case of negligent mis-statement is, I
think, to ignore the fact that the plaintiff also has the option of suing in
the courts of the place where the damage occurs -- which is quite likely to
be at the place of receipt and reliance.
As for the place where the damage itself occurs, that may, of course, be
elsewhere than the place of the event giving rise to the damage and, as I
have already suggested, is quite likely to be where the mis-statement is
heard and relied on, but in this case I do not think that it was in England.
In my judgment... the damage occurred in Switzerland and Italy, where
the goods were released without prior payment." …
187 By Art.6(1) a person domiciled in a Regulation State may be sued
"where he is one of a number of defendants, in the courts for the place
where any one of them is domiciled, provided the claims are so closely
connected that it is expedient to hear and determine them together
to avoid the risk of irreconcilable judgments resulting from separate
proceedings". The criterion that the claims are so closely connected that
it is expedient to hear and determine them together to avoid the risk
of irreconcilable judgments resulting from separate proceedings is a
codification of the formula in Kalfelis v Bankhaus Schroeder Munchmeyer
Hengst & Co.
188 A broad approach to the determination of the risk of irreconcilable
decisions (including inconsistent findings of fact), rather than one based
on close analysis of the respective claims, is appropriate.
189 By Art.6(3) a person domiciled in a Regulation State may be sued
on a counterclaim arising from the same contract or facts on which
the original claim was based, in the court in which the original claim is
pending. In Canada Maritime Ltd v Oerlikon Aerospace Inc, Tuckey J
indicated (obiter) that Art.6(3) permitted the joining of additional parties
by counterclaim, but in a decision on what is now Art.12(2), a provision
which relates to insurance and is similar in effect to Art.6(3), the House of
Lords held that it does not provide for jurisdiction over an additional party
joined by counterclaim. …
191 The formal requirements of Art.23 are to be strictly construed
because their purpose is to ensure that the parties have consented to a
jurisdiction agreement derogating from the ordinary jurisdictional rules
and that their consent is clearly and precisely demonstrated. An assignee
of a contract may be bound by a jurisdiction clause contained in it: Case
201/82 Gerling v Treasury Administration [1983] ECR 2503. Whether a
dispute falls within the scope of a jurisdiction agreement is a question of
interpretation to be decided by the national court.
192 The first question under Art.23 is whether there has been agreement
or consensus and the second question is whether the formal requirements
have been fulfilled. Whether there has been a sufficient consensus so as
to satisfy Art.23 is predominantly a question of fact for the court seised
and it is to be answered without recourse to rules of national law.
193 The question of the standard of proof required when a defendant
seeks to rely on a foreign jurisdiction agreement in a case where,
apart from the alleged jurisdiction agreement, the English court would
undoubtedly have jurisdiction under the Judgments Regulation, is not
finally settled. Where a claimant seeks to establish the jurisdiction of the
English court, it is settled that the claimant must show a good arguable
case. The good arguable case test is not capable of very precise definition,
but reflects the idea that the claimant must properly satisfy the court
that it is right for the court to take jurisdiction. It suggests that one side
has the better argument on the material available. The court has to be
satisfied or as satisfied as it can be, having regard to the limitations which
an interlocutory process imposes, that factors exist which allow the court
to take jurisdiction. Where the jurisdictional issue (in that case domicile)
is one which will not arise at the trial, it is natural that particular scrutiny
of the material available takes place in the context of the limitations
applied to an interlocutory process. "Good arguable case" is a concept
with some degree of flexibility depending on the issue…
197 It was held in Gubisch v Palumbo that what is now Art.27 applies
where the proceedings in the court first seised are for rescission or
discharge of the contract, or for a declaration that the claimant in those
proceedings is not liable under the contract, and the proceedings in
the court second seised are for damages by the party which is the
defendant in the proceedings for a negative declaration. The European
Court held that the German version did not expressly distinguish between
"object" and "cause of action" ("la meme objet et la meme cause"). The
proceedings were based on the same "cause of action," i.e. the same
contractual relationship, and had the same subject matter when the first
action sought to enforce the contract and the second action sought its
rescission or discharge: "The question whether the contract is binding
therefore lies at the heart of the two actions
198 The reasoning was developed in another case involving a pre-emptive
action for a negative declaration, The Tatry, where the European Court
ruled that the "cause of action" comprised the facts and the rule of law
relied on as the basis of the action, and the "object of the action" meant
the end the action had in view. The cause of action was the same because
the actions were brought on separate but identical contracts, concerning
the same cargo and damaged in the same circumstances. The object of
the action was the same because the issue of liability was central to both
actions, and the fact that one party's pleadings were in negative terms,
and those of the other were in positive terms, did not make the object of
the dispute different. The approach of the European Court to actions for
negative declarations combined with the rigid rules of lis alibi pendens in
Art.27 has encouraged forum shopping by the use of actions for negative
declarations. …
201 The only relevant parties for the purposes of the application under
Art.27 are the Banks and F. Industrial and F. Italy. F. accepts that arguably
the alleged obligation to pay was to be performed in England. Therefore
(but for the issues arising under Arts 23 and 27, and in relation to
assignment), the English court would have jurisdiction over the Banks'
contractual claims for payment against the F. Companies.
202 The Italian court was the court first seised. Whether the Italian court
has jurisdiction is therefore a matter for the Italian court. Consequently,
I indicated that I did not wish counsel for the Banks to develop his
arguments on the jurisdiction of the Italian court. But it is plain that
there are some serious jurisdictional issues for the Court of Cassation
when it comes to hear the jurisdictional objections. In particular (a) as
regards the Italian jurisdiction clauses, it is clearly strongly arguable that
what F. describes as "confirmations" of the purchase orders are to be
free-standing contracts which do not have any jurisdiction clause; (b)
there will a serious question as to whether the issue on the notification
requirement in cl.9(2) of the Framework Contract can give the Italian
court jurisdiction under Art.5(1); (c) the suggestion that the Banks have
counterclaimed and therefore waived the right to object to the jurisdiction
of the Italian court does not appear (in the absence of any apparent
counterclaim) to have any factual foundation; and (d) the argument that
the Italian court has jurisdiction because there is a person in Italy who is
authorised by BTM to take part in legal proceedings seems to have a weak
factual basis, since it is based on the presence of a representative of a
BTM subsidiary, and not of a branch....
207 The "cause of action" in both England and Italy is the same, because
the facts and the rule of law relied on as the basis of the action are
substantially the same. There are obvious differences in formulation,
and differences of detail, but it is plain that both actions are about the
liability of the F. Industrial and F. Italy to pay the Banks as a result of
the assignments and undertakings. In the equivalent of the prayer in
the Italian proceedings F. Industrial and F. Italy invite the court to state
and declare that the Master Assignment Agreement cannot be asserted
against F. Italy and F. Industrial due to non-compliance with cl.9(2) of the
Framework Contract, and to state and declare that F. Italy owes nothing
to B. G. or the Banks for whatever reason with respect to contracts 5093
to 5097, and that F. Industrial owes nothing to Ba. Gida or the Banks for
any reason connected with the contracts for the sale of hazelnuts between
B. G. and F. Italy, F. Germany and F. France. This is the mirror image of
that part of the Banks' assignment claim in the English proceedings which
relies on notice of assignment of the Framework Contract, notice of the
Master Assignment Agreement, and the undertakings of December 6 and
17, 2001.
208 The "object of the action" (the end the action has in view) in both
jurisdictions is essentially the same, even though the claim in Italy is for
a negative declaration. Both actions are about the liability of F. Industrial
and F. Italy on the contracts, the assignments, and the undertakings.
209 Consequently, the English action against F. Industrial and F. Italy
should be stayed under Art.27(1) until the decision of the Court of
Cassation on the jurisdictional objections by the Banks.
210 But I do not consider that there is any basis for the argument that
the tortious claims are within Art.27. No such claims had been asserted
when the Italian proceedings were commenced. The Italian proceedings
were clearly a pre-emptive strike to anticipate the Banks' contractual
claims. It is true that the claim for a negative declaration is a claim that
F. Industrial and F. Italy owe nothing "for whatever reason" with respect
to the contracts with B. G. for the sale of hazelnuts, and that F.'s Italian
lawyer, Mr Benessia, has expressed the view that in Italian law this is
effective to deal not only with contractual claims, but any other ground,
including any alleged tort. But both Mr Benessia and the Banks' lawyer,
Professor Canale, agree that the answer to the question of what claims
are included depends on the intention of the parties, and I am satisfied
that Professor Canale's approach leads to the correct conclusion that
such claims were not envisaged, notwithstanding that it may be that the
background and facts in the English tortious claims are common to the
limited tortious claims made by F. Industrial and F. Italy against the Banks
in the Italian proceedings.
C. Validity of service on F. Italy and F. Industrial
211 Service out of the jurisdiction without the permission of the court
in cases covered by the Judgments Regulation is governed by CPR,
r.6.19(1A). One of the conditions is that, in relation to each claim included
in the claim form, there should be no proceedings between the parties
concerning the same claim in another Regulation State.
212 If I am right on Art.27, then the Banks have not complied with CPR,
r.6.19(1A). CPR, r.6.20 has, in my judgment, no application to cases
which are within the Judgments Regulation, and permission to serve F.
Industrial and F. Italy should not have been sought or granted. But I
do not consider that non-compliance with CPR, r.6.19(1A) in relation to
one cause of action among several should have the effect that service
of the proceedings should necessarily be set aside. That would be an
absurd and inconvenient result, and in my judgment, if the court has
jurisdiction on other causes of action the defect should be cured under
CPR, r.3.10, which gives the court power to rectify matters where there
has been an error of procedure. F. would not have suffered any prejudice
as a result, and justice would be done if service were to stand in respect
of those causes of action in respect of which the court has jurisdiction.
D. Jurisdiction of the English court in relation to the tortious and quasi-
tortious claims and the proposed amendments …
214 In my judgment there is a good arguable case that the English court
has jurisdiction in relation to the tortious claims (other than the claims
arising from the letter of December 13, 2001, with which I deal below) by
virtue of Art.6(1).
215 The Banks have claims in conspiracy against I.-M. and A. G. I.-
M. is domiciled in England, and A. G has submitted to the jurisdiction.
Therefore there will be a trial in England against those companies (and
perhaps also against B. G. and the individual Ba.s).
216 I accept the argument for the Banks that the claims are connected for
the purposes of Art.6(1) because the allegation is that the F. Companies
were party to the same conspiracy as I.-M.. A central issue in the
unamended conspiracy claim against I.-M. and the F. Companies would
be their knowledge of, or participation, in a single conspiracy by which A.
G was used to defeat the rights of the Banks. Since the essence of the
conspiracy was to avoid payment being made to the Banks, on the Banks'
case the participation of each was essential. It is true, as F. says, that
judgments finding I.-M. liable for conspiracy but finding the F. Companies
not liable (or vice versa) would not necessarily be irreconcilable, but there
is a risk (the word in Art.6(1)) that they would be irreconcilable. It is also
true that F. did not necessarily know of I.-M.'s existence (and vice versa),
but this is a matter for determination at trial, and not a factor which
removes the risk of irreconcilability. Nor does it matter that F. may accept
(or may not dispute) that there was a conspiracy between the Ba.s, A. G
and I.-M., since the conspiracy claims against them are being contested
by I.-M..
217 Nor is there any reason to believe that I.-M. has been sued merely
to assume jurisdiction over the F. Companies. The accounts in evidence
(to December 31, 2001) show losses of $181,000 on a turnover of about
$16 million and assets of about $1.4 million. F. said in argument (but not
in evidence) that I.-M. (among the other defendants) did not appear to
be of any substance. I accept the Banks' argument that on the evidence
before the court I.-M. is a genuine defendant in relation to which there is
a substantial argument that it participated in the fraud.
218 The only other possible head of jurisdiction is Art.5(3). As regards
the claims for conversion and knowing receipt/constructive trust, there is
no basis for saying that either the event which gave rise to the damage
(the act of conversion and receipt of the property) or the place where
the damage occurred (the loss of security) took place in England. The
pledged hazelnuts were released in Turkey and delivered to the relevant F.
Companies in Turkey, or in Italy, France and Germany.
219 As for conspiracy, the unamended Particulars rely essentially on
acts which took place in Turkey, but the conspiracy alleged against F.
Industrial is to ensure that B. G. received payment even though the right
to payment had been assigned to the Banks. If Art.6(1) had not been
available as a head of jurisdiction I would have held that those parts of
the claim which alleged a conspiracy to defeat the right of the Banks to
payment would have been within the jurisdiction of the English court on
the basis that the Banks suffered damage in England by not receiving
payment.
220 I will allow the amendments to the conspiracy claim alleging a
conspiracy to procure advances from the Banks. …
221 As regards jurisdiction, the claims would be within Art.6(1), and
also within Art.5(3). As regards Art.6(1), the same considerations as
applied to the unamended conspiracy claim (to defeat the rights of the
Banks) apply to the amended conspiracy claim (to procure the advances).
I do not accept the argument for F. that any damage occurred in Turkey,
where B. G. drew on the letter of credit. The reality of the position is
that money held by the Banks in England was paid out as a result of the
conspiracy. The facility agreement reflected the reality of the position
when it provided in cl.5.4 that a drawing under the letter of credit was
deemed to be an advance by the Banks. The advances would not have
been made but for the conspiracy, and the immediate loss sustained by
the Banks was the reimbursement of A.bank. That loss occurs where the
money is paid out, or where the Banks do not receive the payments under
the assignments, in each case being London.
222 I will allow the amendments to plead deceit and negligent
misrepresentation. …
223 The Banks have a good arguable case that the English court has
jurisdiction under Art.5(3) because the damage occurred in England: it
is pleaded that in reliance on the representations the Banks entered into
the facility agreement and made the advances. It was in England where
the facility agreement was entered into and from where in commercial
terms the advances were made, and from where the Banks' resources
were diminished by their reimbursement of A.bank. It is not therefore
necessary to decide whether the decision in Domicrest applies equally
to fraudulent misrepresentation, or whether it was rightly decided. E.
Application of Article 28 to the contractual claims
224 As I have said, by Art.28, where related actions are pending in the
courts of different Member States, any court other than the court first
seised may stay its proceedings. Actions are deemed to be related where
they are so closely connected that it is expedient to hear and determine
them together to avoid the risk of irreconcilable judgments resulting from
separate proceedings.
225 The question whether the English proceedings (or any part of them)
should be stayed pursuant to Art.28 in relation to the contractual claims
may arise (a) if I am wrong in my conclusion that Art.27 applies to the
contractual claims against F. Industrial and F. Italy; (b) in any event, in
relation to the contractual claims against F. France; (c) in relation to the
contractual claims against F. Germany, if the English court has jurisdiction
notwithstanding the allegation that the F. Germany contracts contain a
Frankfurt jurisdiction agreement.
226 The first question is whether the relevant actions are related. First,
there can be no doubt that if the contractual claims against F. Industrial
and F. Italy were not within Art.27, then they would be related actions for
the purpose of Art.28, and it would be difficult to see any reason why the
discretion to stay the proceedings under Art.28 until the Italian court has
ruled on jurisdiction should not be exercised. Secondly, I am satisfied that
the contractual claims against F. Germany and F. France would be related
to the contractual claims against F. Industrial and F. Italy. The Banks'
claims as assignees are identical as against each of F. Italy, F. Germany
and F. France, except that as regards F. France the Banks also rely on
the acknowledgement by F. France on January 10, 2002 of K.'s letter of
December 21, 2001.
227 I do not consider that it makes any difference that the Banks
are willing to withdraw their claims based on the December 19,
2001 acknowledgements. The effect of the December 6, 8 and 13
acknowledgements would remain as issues in both sets of proceedings.
Nor does it make a difference that some aspects of the assignment claims
against F. France and F. Germany may be governed by the law of France
and Germany respectively, whereas the assignment claims against F.
Industrial and F. Italy may be governed by Italian law. There is no reason
at this stage to believe that there is any relevant difference between the
potentially governing laws, or that any such difference might be central to
the case.
228 I take into account the following factors in the exercise of the
discretion under Art.28 in relation to the contractual claims: (a) the
Italian proceedings were launched pre-emptively for tactical reasons;
(b) since the Italian court was first seised, only the English court has
jurisdiction to stay under Art.28, and the Italian proceedings are bound
to continue at least until the Court of Cassation has ruled on jurisdiction;
(c) it would be anomalous for actions involving the same or similar issues
against different members of the same group to proceed simultaneously
in two different jurisdictions with a clear risk of inconsistent outcomes,
irrespective of the difficult question of whether a decision in Italy might
give rise to some form of estoppel in England; (d) the merits of the
case will not be reached in Italy until the Court of Cassation has ruled
on jurisdiction, and the evidence is that the jurisdictional issue will not
decided in Italy for about one year at least; (e) some of the delay is
attributable to the Banks not having taken action earlier in the Court of
Cassation; (f) there are clearly serious objections to the jurisdiction of the
Italian court both in relation to BTM and to K., but it is not for the English
court to determine them; (g) F. France and F. Germany are not parties to
the Italian action, but the evidence is that they may apply to be joined
or to intervene. Taking all these matters into account, I am satisfied that
the contractual claims against F. Germany and F. France should be stayed
under Art.28 until the outcome of the jurisdictional objection in the Court
of Cassation. F. The alleged exclusive jurisdiction clauses
229 If I am right in my conclusion that Art.27 applies to the claims
against F. Italy, then it would not only be unnecessary to decide whether
there was an effective Italian jurisdiction clause, but it would also be
wrong for the English court to decide what was a matter for the Italian
court. …
231 Article 27 does not apply to the Banks' contractual claims as
assignees against F. Germany, because F. Germany was not a claimant
in the Italian proceedings. Consequently, only Art.28 can apply to those
claims, but if there is an effective German jurisdiction agreement, the
German courts would have exclusive jurisdiction. …
233 All of the contract/confirmation documents are B. G. headed
documents and are signed on behalf of (or envisage signature on behalf
of) F. Italy and B. G.. The September/October documents are unsigned,
but all of the December documents are signed by both parties, and
are headed with B. G.'s contract number, and (in the case of all of the
December documents) with F.'s order number.
234 If it had been necessary to decide, on the material before me, which
side had the better of the argument on the Italian jurisdiction clause
(which, on the basis of my conclusion on Art.27, is a matter for the
Italian court) I would have decided (given the emphasis placed by the
European Court on the importance of establishing consensus between the
parties) that, in the light of the Framework Contract and the contract/
confirmations, which contain no jurisdiction clause, the Banks have the
better of the argument, and that the jurisdiction of the English court is
not excluded. But if I am right on Art.27, it is not necessary for me to
decide that question, and I am sure that the Italian court, when it comes
to consider it, will take its own view.
235 F. Germany originally conceded in its application that the English
court had jurisdiction over the contractual claims, but now relies on
a course of dealing in which (it says) purchase orders were sent by F.
Germany to B. G., which contained on their face a reference to the terms
and conditions on the back, and those terms and conditions provided for
the jurisdiction of the Frankfurt courts.
236 There is no document in relation to the contracts involved in these
proceedings available to either of the parties which contains a German
jurisdiction clause. F. has copies of the front of the purchase order, but
says that the originals (containing the jurisdiction clause on the back)
were sent to B. G..
237 F.'s evidence of the course of dealing is that: (a) a representative
of B. G. negotiated with Mr Ca. regarding the proposed terms of an
order by F. Germany, following which a document was drawn up with the
heading, e.g., Contract 5072 which was signed on behalf of Ba. Gida, and
then transmitted by Mr Ca. to F. Germany for signature, usually by Mr
Bolowich; and (b) subsequently F. Germany sent the purchase order. The
purchase orders contain a reference to the printed conditions on the back.
238 The contracts/confirmations are signed on behalf of F. Germany and
(in most cases) B. G.. None of them contains a jurisdiction clause. …
239 …If I am right in my conclusion that the contractual claim against F.
Germany should be stayed under Art.28, then the question of the effect of
the jurisdiction clause will only be of practical importance if (a) the Italian
court decides that it has no jurisdiction over the contractual claims against
the Banks; and (b) F. takes the view (which would have no commercial
sense) that the contractual claim against F. Germany should proceed in
Germany, while the contractual claims against the other F. Companies,
and all of the tortious claims, proceed in England. But my conclusion
on the jurisdiction clause would be the same as that in relation to F.
Italy: the combined effect of the Framework Contract and the contract/
confirmation documents is that the jurisdiction clause in the purchase
orders was not incorporated. G. Application of Article 28 to the tortious
and quasi-tortious claims
240 I have already given my reasons for concluding that the Italian
proceedings do not cover the Banks' tortious and quasi-tortious claims
against F. Italy and F. Industrial.
241 Nor do I consider that the contractual claims in Italy and the tortious
and quasi-tortious claims against F. Industrial and F. Italy in England are
"related actions." The contractual and tortious claims do not raise any
common issues, and there are no grounds for suggesting that they are
so closely connected that it is expedient to hear and determine them
together to avoid the risk of irreconcilable judgments. It follows also that
the Italian proceedings are not "related actions" so far as the Banks'
claims against F. Germany and F. France for conversion, knowing receipt
and in tracing are concerned.
242 Even if they were related actions, since the proceedings against (in
particular) I.-M. would be on foot in England, it would be plainly more
appropriate for the claims against the F. Companies to continue in these
proceedings than to await the outcome of the jurisdictional issues in Italy,
and (if the Court of Cassation finds in favour of jurisdiction) the outcome
of the Italian proceedings on the merits. H. Overall conclusions
243 Consequently:
(a) As regards the contractual claims against F. Italy and F. Industrial,
Art.27 applies, and the English proceedings should be stayed until the
Court of Cassation has ruled on the jurisdiction of the Italian court to hear
those claims.
(b) As regards the contractual claims against F. France and F. Germany,
the English court has jurisdiction to hear them under Art.5(1), and
as regards F. Germany that jurisdiction is not ousted by the alleged
jurisdiction clause.
(c) Article 28 applies to the contractual claims against F. Germany and F.
France, and those claims should be stayed until the outcome of the Italian
jurisdictional challenge in the proceedings by F. Italy and F. Industrial.
(d) Neither Arts 27 nor 28 apply to the tortious claims.
(e) As regards the tortious claims against the F. Companies, the
amendments will be allowed, and the English court has jurisdiction to hear
the claims primarily under Art.6(1) (other than the deceit/mis-statement
claims), but also (in part) under Art.5(3), and as regards the deceit/mis-
statement claims, under Art.5(3).
244 To split the actions in this way is by no means satisfactory, but I am
satisfied that the decisions of the European Court on actions for negative
declarations in the present context dictate this result. If the Court of
Cassation decides that the Alba court has no jurisdiction, then effective
case management may result in the totality of the dispute being decided
in England within a reasonable timeframe. (…)”