HAVELOCK-ALLAN:
1. Before the Court there are three applications by the defendant
designed to enable it to mount a challenge to the Court's jurisdiction
under CPR Part 11. There is a further application by the claimant to
change the name of the defendant from J & BS., as it appears in the claim
form, to J & B. OHG. That application is not opposed.
2. The claim is for a sum of about DM. 906,000, said to represent the
unpaid balance of invoices in respect of supplies of slate by the claimant
to the defendant from various quarries in Spain. The claimant is a
Luxembourg company but is part of a group of companies whose business
is the selling of Spanish slate. The administrative headquarters of the
group is at Park Royal in London. The Park Royal address is that of Slate
International Ltd. The business was founded in 1984 by a company called
Slate Ltd. That company has an agency or branch office registered in
Spain, which processes orders for slate placed with other com-panies in
the group and deals with the local quarries.
3. The defendant is a German corporate entity, which has no exact
equivalent in English company law. It trades under the name of J. & BS.
("S" means "Slates"): but the company's proper name is J & B. OHG. It
is a family run company. The owner and principal director is Mr. JJ.. His
daughter-in-law, Mrs. AJ., works as his assistant.
4. The defendant first started buying slate from the Slate group in 1993.
Initially supplies were ordered from Slate International Ltd. Then, in
April, 1996, trading within the group was reorganized and all invoices
to the defendant thereafter were sent in the name of the claimant. The
chairman of the group, Mr. E., who is also chairman of the claimant,
has filed a statement in which he says that the defendant was notified
in writing on Mar. 26, 1996 of the impending change in identity of the
contracting company within the Slate group. Nevertheless the defendant
does not accept that the claimant is necessarily the proper party to these
proceedings.
5. Whichever company was the true seller, there is no dispute that the
defendant has purchased substantial quantities of slate from the Slate
group in the past eight years. The balance of account claimed in this
action relates to invoices of the claimant dated between January, 1999
and October, 2000. They amount in total to a sum of DM 13,462,389. This
is well in excess of £ 4 m. Later in this judgment, I must examine the
evidence as to how each order was placed. For the present, the important
point to record is that the claimant maintains that each transaction
incorporated its standard terms of business. Those terms included an
express clause (cl. 10.4) as follows:
These Conditions shall be read and construed in accordance with the
Laws of England and any dispute or difference which may arise between
the parties hereto relating to the Conditions or any Contract shall be
determined by the English Courts.
6. The defendant says that, even if it did contract with the claimant in
respect of the relevant orders, the claimant's terms of business were
not incorporated. So the claimant must bring its action in the Courts of
Germany because the defendant is domiciled in Germany. This is the nub
of the dispute between the parties as to this Court's jurisdiction. Two
provisions of the Brussels Convention, 1968 (as enacted in English law by
the Civil Jurisdiction and Judgments Act, 1982) are relevant here. Article 2
of the Convention provides:
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.
Article 17 of the Convention, so far as is material, is in the following
terms:
If the parties, one or more of whom is domiciled in a Contracting State,
have agreed that a court or the courts of a Contracting State are to have
jurisdiction to settle any disputes which have arisen or which may arise
in connection with a particular legal relationship, that court or those
courts shall have exclusive jurisdiction. Such an agreement conferring
jurisdiction shall be either – (a) in writing or evidenced in writing, or (b)
in a form which accords with practices which the parties have established
between themselves, or (c) in international trade or commerce, in a form
which accords with a usage of which the parties are or ought to have
been aware and which in such trade or commerce is widely known to,
and regularly observed by, parties to contracts of the type involved in the
particular trade or commerce concerned.
7. Subject to certain arguments to which I shall come to presently, the
claimant accepts that it must sue the defendant in Germany if its terms of
business were not incorporated into each of the transactions to which the
invoices listed in the claim form relate. Conversely, the defendant accepts
that this Court has jurisdiction to determine the claim if, by reason of the
incorporation of the claimant's terms of business into each transaction,
there was an agreement conferring jurisdiction on the English Courts
within art. 17.
8. The applications made by the defendant with a view to challenging
the jurisdiction of this Court are threefold. It should be remembered
that an application is made, and an acknowledgment of service or a
defence is filed, when it is received by the Court, not when it is posted or
despatched (CPR Part 23.5 and 10.4.1). The defendant's first application
was received by the Court on July 24, 2001. The second application was
received by the Court on Aug. 21, 2001 and the third application was
received on Sept. 24, 2001. In order to challenge the jurisdiction of the
Court, a defendant must apply for an order declaring that the Court has
no jurisdiction (CPR Part 11(1)(a)). A defendant who wishes to make such
an application must first file an acknowledgment of service in response
to the claim form (Part 11(2)). Part 11(4) provides that an application
under Part 11(1) must "be made within the period for filing a defence".
The period for filing a defence where, as here, the claim form was served
in the European territory of another Contracting State (i.e. a party to the
Brussels Convention) is 35 days after service of the particulars of claim if
an acknowledgment of service is filed (Part 6.23(2)(b)). The claim form
was served on the defendant in Germany on Mar. 12, 2001. Thus the
period for filing a defence, and therefore the period for applying for an
order declaring that this Court has no jurisdiction, expired on Apr. 16,
2001. All three of the defendant's applications were made well outside
that time limit, unless it is the case that the time limit was extended or is
to be extended. CPR Part 11(5) provides:
If the defendant – (a) files an acknowledgment of service; and (b) does
not make such an application within the period for filing a defence, he is
to be treated as having accepted that the court has jurisdiction to try the
claim.
Extension of time
10. The defendant's primary submission is that no extension of time is
required. (...)
11. R.S.C., O. 12, r. 8 provided:
(1) A defendant who wishes to dispute the jurisdiction of the court in the
proceedings (...) shall give notice of intention to defend the proceedings
and shall, within the time limited for service of a defence, apply to the
Court for-
(a) an order setting aside the writ or service of the writ on him, (...)
12. CPR Part 11 provides:
(1) A defendant who wishes to – (a) dispute the court's jurisdiction to try
the claim; (...) may apply to the court for an order declaring that it has no
jurisdiction (...)
(2) A defendant who wishes to make such an application must first file an
acknowledgment of service in accordance with Part 10.
(...)
(4) An application under this rule must – (a) be made within the period
for filing a defence; and (b) be supported by evidence.
(Rule 15.4 sets out the period for filing a defence.)(...)
If "the time limited for service of a defence" in Ord. 12 r. 8 means "the
time limited by Ord. 18 r. 2 as extended by any order of the court or
agreement in writing between the parties," then the proposition noted
above must follow. If, on the other hand, it means "the period prescribed
by Ord. 18 r. 2," I do not think it would follow. (...)
(...)In my judgment, it is plain from rule 15.4(2) that what rule 15.4(1)
means by calling it a general rule is that it is not an exclusive rule, but is
subject to certain exceptions, and the exceptions are actually specified
in paragraph (a), (b), (c) and (d) of rule 15.4(2), that relevant in the
present case being that referred to in 15.4(2)(a), namely rule 6.23, which
specifies how a period for filing a defence is calculated where the claim
form is served out of the jurisdiction.
In my judgment the terms of rule 15.4 do not contemplate any extension
of the period ascertained in accordance with that rule. Of course it is true
that other rules do, in particular rule 15.5 which provides for extension
by agreement, and rule 3.1(2) which provides for extension by the court.
But in my judgment the parenthesis in rule 11(4), with its reference
to rule 15.4 setting out the period for filing a defence, does, as I have
said, make it clear that what the rule makers had in mind by referring
rule 11.4(a) to the period for filing a defence was the period for filing a
defence ascertainable from order 15.4 itself. That seems to me to be the
purpose of the reference to rule 15.4. (...)
18. When that decision came to the attention of Mr. Howd in September,
2001, he immediately caused the defendant's solicitors to make the third
application, on Sep. 21, 2001, which was for an extension of time to
validate the making of the defendant's second application dated Aug. 15,
2001. Although both applications were first made a long time after the
period for service of a defence (ignoring extensions) had expired, there is
no dispute that the Court has power under CPR Part 3.1(2)(a) to extend
time if it is appropriate to do so. (...)
20. When interpreting the new Civil Procedure Rules, one must treat with
caution decisions made on different wording in the former Rules of the
Supreme Court. The decision of the Court of Appeal in Lawson v. Midland
Travellers Ltd. should therefore be approached with care. Of the three
reasons given by Lord Justice Stuart-Smith for holding in that case (at
p. 741D-G) that, in order to obtain an extension of time for applying to
challenge the jurisdiction of the Court under R.S.C., O. 12, r. 8 it was
sufficient to obtain an extension of time for service of the defence, the
third reason remains as valid under the CPR as it did under the R.S.C.
post 1983 because the policy of Part 11 is the same as that of the former
O. 12, r. 8(1) (as amended by S.I. 1983 No. 1181) in not obliging a
defendant to file a defence, or to make an application to challenge the
jurisdiction, until after the particulars of claim have been served. But
the first two of his reasons need re-examining in the light of the words
in brackets in r. 11(4), namely, "(Rule 15.4 sets out the period for filing
a defence)". This wording points to the period in r. 15.4 and not to that
period as extended. That interpretation is reinforced by the fact that CPR
Part 15 contains a separate provision governing agreed extensions of
time for service of a defence (r. 15.5). Rule 15.4 makes no reference to
r. 15.5, or to the fact that the period may be extended by order of the
Court under Part 3.1(2)(a). Whilst the former R.S.C., O. 18, r. 2 also did
not refer to the power of the Court to extend time or to the right of the
parties to extend time by consent under R.S.C., O. 3, r. 5, the former
O. 12, r. 8(1) required applications disputing the jurisdiction to be made
"within the time limited for service of a defence" without identifying that
time as being the time specified in any particular rule.
21. I recognize that the use of cross-references in brackets is a novel
feature of the Civil Procedure Rules. It is plain from the context and the
words used that some of these cross-references are intended purely as
guidance, for example, the bracketed statements in r. 12.1 or r. 17.4.
But some of the statements in brackets in the CPR appear to define the
obligation imposed. In my judgment, the statement in brackets in r. 11(4)
has that character. (...)
23. Accordingly, I hold that the extension of time for service of a defence
contained in the order of District Judge Bird did not extend the period for
making an application to challenge the jurisdiction. The defendant needs
an extension of time until July 24 or Aug. 15, 2001 in order to validate
the challenge to the jurisdiction contained in its first, alternatively its
second, application. The application for an extension of time for service of
a defence, which was contained in the defendant's first application, is not
appropriate as a means of obtaining an extension of time for the making
of an application to challenge the jurisdiction. The appropriate application
for an extension of time was not made until the defendant filed its third
application on Sep. 21, 2001.
24. Whether I should now treat the defendant as having submitted to
the jurisdiction by virtue of CPR Part 11(5)(b) depends on whether I
grant the defendant's third application and extend time. An extension
of time is opposed by the claimant on three grounds: (1) The extension
required is substantial (Apr. 16 to July 24 at the least). The application
for an extension was not made until well after the prescribed period had
expired, and no or no adequate explanation has been given for the delay.
(2) Insofar as the blame for this state of affairs lies at the door of the
defendant's legal advisers, the remedy lies in any action the defendant
can take against its legal advisers. It does not justify the grant of an
extension of time. (3) There is no point granting an extension of time
because the defendant, by its conduct, has submitted to the jurisdiction
and/or has waived its right to challenge the jurisdiction. (...)
27. It seems to me that the culpable delay in this case was incurred when
the defendant's German lawyer had the conduct of the matter. While his
failure to enlist the help of an English solicitor much sooner than he did
is a legitimate subject of criticism, I do not consider, having regard to
all the circumstances, that I should decline to exercise my discretion to
extend time on that account. I bear in mind the overriding objective in
CPR Part 1.1. This is a not insubstantial claim in terms of the amount
of money involved. It raises an important issue of jurisdiction under
art. 17 of the Brussels Convention and it is a case where, in the initial
stages, the parties were not on an equal footing. The claimant, although
incorporated in Luxembourg, had group headquarters in London and
English solicitors, whereas the defendant was based in Germany and
had no English solicitors. Subject therefore to the third objection raised
by the claimant (that there has been a submission to the jurisdiction or
a waiver), I am in principle prepared to grant the necessary extension
of time so as to validate the defendant's second application made on
Aug. 15, 2001. However I propose to determine the claimant's third
point before deciding finally whether to extend time. If there has indeed
been a submission to the jurisdiction or waiver of the right to contest the
jurisdiction, any extension of time will be otiose.
Submission to the jurisdiction
28. The principle that the right to contest the jurisdiction may be waived
by the taking of a step inconsistent with that right is a familiar one in
English common law. (...)
31. It is common ground that what is contemplated by the phrase "enters
an appearance" in the first sentence of art. 18 [Brussels Convention] is
some step whereby the defendant expressly or by necessary implication
acknowledges that the Court has power to entertain the merits of the
claim. For myself I doubt that this concept is any different from that
which underlies waiver in English common law. Mr. Howd submits that the
approach under art. 18 and the approach of the common law to waiver of
objections to jurisdiction ought to be the same. He only emphasizes that
there is a potential distinction between the two lest I should be tempted,
on the authority of Sage v. Double A Hydraulics Ltd., to apply a less
stringent test than that justified by art. 18. I do not feel tempted to do
so and do not consider that the facts of the present case afford any scope
for holding that there was a waiver, albeit no entering of an appearance in
the sense of art. 18.
32. The leading authority in the jurisprudence of the European Court of
Justice on art. 18 is Elefanten Schuh G.m.b.H. v. Jacqmain, [1981] E.C.R.
1671. The case concerned a claim by Mr. Jacqmain for wrongful dismissal
from his employment with Elefanten Schuh. Mr. Jacqmain's contract
of employment contained a clause conferring exclusive jurisdiction on
the Court at Kleve in the Federal Republic of Germany. Mr. Jacqmain
brought his claim against Elefanten Schuh and its Belgian associate
company, Elefant N.V., in the Labour Tribunal in Antwerp. The defendants
appeared and in their first set of submissions presented a detailed
defence contesting the substance of the claim. It was not until nine
months later that they filed a further submission challenging the Antwerp
Court's jurisdiction and relying on the exclusive jurisdiction clause. The
matter went to appeal in Belgium and the appeal Court referred a number
of questions to the European Court for a preliminary ruling. The first
question, in three parts, was as follows:
1(a) Is Article 18 of the Convention (...) applicable if parties have agreed
to confer jurisdiction on a court within the meaning of Article 17?
(b) Is the rule on jurisdiction contained in Article 18 applicable if the
defendant has not only contested jurisdictions but has in addition made
submissions on the action itself?
(c) If it is, must jurisdiction then be contested in limine litis [i.e. at the
outset of the proceedings]?
33. The European Court answered Question 1(a) in the affirmative. It
then answered Questions 1(b) and 1(c) in the following terms:
12. The second and third parts of the question envisage the case in which
the defendant has appeared before a court within the meaning of Article
18 but contests the jurisdiction of that court.
13. The Hof van Cassatie first asks if Article 18 has application where the
defendant makes submissions as to the jurisdiction of the court as well as
on the substance of the action.
14. Although differences between the different language versions of
Article 18 of the Convention appear when it is sought to determine
whether, in order to exclude the jurisdiction of the court seized, a
defendant must confine himself to contesting that jurisdiction, or whether
he may on the contrary still achieve the same purpose by contesting the
jurisdiction of the court as well as the substance of the claim, the second
interpretation is more in keeping with the objectives and spirit of the
Convention. In fact under the law of civil procedure of certain Contracting
States a defendant who raises the issue of jurisdiction and no other might
be barred from making his submissions as to the substance if the court
rejects his plea that it has no jurisdiction. An interpretation of Article 18
which enabled such a result to be arrived at would be contrary to the right
of the defendant to defend himself in the original proceedings, which is
one of the aims of the Convention.
15. However, the challenge to jurisdiction may have the result attributed
to it by Article 18 only if the plaintiff and the court seized of the matter
are able to ascertain from the time of the defendant's first defence that it
is intended to contest the jurisdiction of the court. (...)
17. Therefore the answer to the second and third parts of Question
1 should be that Article 18 of the Convention must be interpreted as
meaning that the rule on jurisdiction which that provision lays down does
not apply where the defendant not only contests the court's jurisdiction
but also makes submissions on the substance of the action, provided
that, if the challenge to jurisdiction is not preliminary to any defence as
to the substance, it does not occur after the making of the submissions
which under national procedural law are considered to be the first defence
addressed to the court seized. (...)
34. The principal act of submission on which the claimant relies in this
case is not the service by the defendant of a defence on the merits but
the pleading of a counterclaim. Aside from the ruling in Elefanten Schuh
that the pleading of a defence on the merits is not to be regarded as
a submission if it is accompanied by a challenge to the jurisdiction (as
the defence here was), it would be wrong in my judgment to treat the
defendant's defence as amounting to a submission to the jurisdiction
given the circumstances in which it came to be drafted and served.
Although I consider that an application to have the default judgment set
aside might have succeeded by raising the issue of jurisdiction alone, I
am not inclined to quarrel with the view of the defendant's legal advisers
that it was prudent to demonstrate to the District Judge that there was a
defence on the merits as well. Hence the preparation of the defence and
counterclaim exhibited in draft to the statement of Mr. H. in support of the
application to set aside the judgment. (...)
36. It should be remembered that service of the defence took place
against the background, not only of the challenge to the jurisdiction raised
in the first and second applications, but also of the defendant's stated
intention, in the acknowledgment of service, to contest the jurisdiction.
These features distinguish the facts of the present case from those
in Sage v. Double A Hydraulics Ltd. It should also be noted that the
challenge to the jurisdiction was repeated in pars. 1 to 3 of the defence
itself. In the circumstances, I am unable to find that the service of the
defence amounted to a submission to the jurisdiction by the defendant.
37. What about the counterclaim? The service of a counterclaim invokes
the jurisdiction of the Court to deal with that counterclaim and will
normally be regarded as a submission by the defendant to the jurisdiction
of the Court in respect of the litigation as a whole. The defendant says
that its counterclaim is, in reality, no more than a defence. Although in
quantum it exceeds the amount of the claim by a small sum, it arises
out of part of the same subject matter as the claim and to that extent
gives rise to a set-off. I do not think that this is a complete answer. The
claimant's claim is for sums invoiced in respect of supplies of slate from
several Spanish quarries, including Del Carmen slate from the C. quarry.
The counterclaim is for damages for breach of an alleged contract to
supply Del Carmen slate from that quarry in a specified quantity each
month and/or for misrepresentation as to the rate at which that slate
would be delivered. The counterclaim does not give rise to a legal set-off,
but probably would give rise to a set-off in equity if it were established. It
appears arguable that the counterclaim affords a defence of "transaction
set-off" at least against that part of the claim which relates to supplies of
Del Carmen slate from the C. quarry and maybe even against the balance
of the claim because it arises out of the same course of dealing (for the
distinction between transaction set-off and independent set-off: see Lord
Justice Hoffmann in Aectra Refining and Manufacturing Inc. v. Exmar
N.V., [1995] 1 Lloyd's Rep. 191 at pp. 199, col. 2-200, col. 1; [1994] 1
W.L.R. 1634 at pp. 1648H-1649C). Nevertheless the cross-claim has been
pleaded as a counterclaim, and not just as a defence, for good reason. Its
status as a set-off is not entirely free from doubt and it has the potential
to exceed the quantum of the claim. Therefore I do not think that the
defendant can excuse the counterclaim by saying that it is really no more
than a defence.
38. The question is whether, by the additional step of pleading a
counterclaim as well as a defence, it is no longer possible for the claimant
and the Court "to ascertain from the time of the defendant's first defence
that it is intended to contest the jurisdiction of the court" (cf. par. 15 of
the judgment in Elefanten Schuh). There must always be a greater risk
in pleading a counterclaim rather than a simple defence that an initial
protest to the jurisdiction will be obscured or will be assumed to have
been withdrawn. In this case, however, the defendant's objection to the
jurisdiction was persistent and unmistakeable. I bear in mind:
(1) that the draft defence and counterclaim was exhibited to a statement
made in support of an application by the defendant (the first application)
not only to have the default judgment set aside, but to have the claim
form set aside on the ground that the Court had no jurisdiction;
(2) that service of the counterclaim followed only two days after the
defendant's second application was made, which again challenged the
jurisdiction;
(3) that the defence and counterclaim expressly states in par. 3 that "The
Defence and Counterclaim herein are pleaded without prejudice to the
contention of J&B that this Honourable Court has no jurisdiction to hear
this claim".
39. Against this background, I do not consider that the claimant can
ever have been in any doubt that the defendant was intent on pursuing
its challenge to the jurisdiction notwithstanding service of the defence
and counterclaim on Aug. 17. There was no unconditional entry of an
appearance or unequivocal conduct which would be interpreted by
a disinterested bystander as amounting to an abandonment of the
jurisdictional objections which the defendant had raised all along. There
was no submission to the jurisdiction by the service of the defence
and counterclaim. It follows that, in response to the defendant's third
application, I grant an extension of time from Apr. 16 to Aug. 15, 2001 so
as to validate the application made on the second of those dates under
CPR Part 11.
The substantive issue of jurisdiction
40. The issue is whether the parties made an agreement conferring
exclusive jurisdiction on the Courts in England which satisfies the terms of
art. 17. This boils down to whether (a) the contracts which are the subject
of the claim were between the defendant and the claimant rather than
between the defendant and another company in the Slate group, and (b)
whether the claimant's standard terms and conditions were incorporated
into the subject contracts in such a fashion that the defendant's consent
to cl. 10.4 can be sufficiently demonstrated.
41. Mr. Howd made two important concessions at the outset of this part
of the argument. First he accepted that the standard of proof which the
Court should apply on an application under Part 11 is that of "a good
arguable case". Second he conceded that the evidence before the Court
disclosed a good arguable case that the contracts in question were made
between the claimant and the defendant.
42. In my judgment both of these concessions were rightly made, (...)
43. The sole issue, therefore, is whether the claimant has a good arguable
case that the defendant was party to an agreement for the prorogation
of jurisdiction which satisfies art. 17, by virtue of the incorporation of
its terms of business into each of the relevant transactions. Mr. Howd
submits that, even if the terms of business were incorporated, there
is no evidence which would support an agreement under art. 17. He
makes the point, which I accept as correct, that whatever may suffice
at common law to establish the incorporation of standard terms into a
contract by course of dealing may not suffice in European law as it has
been developed in the context of art. 17.
44. At common law it is well settled that standard terms may be held to
be incorporated into a contract by prior course of dealing, either where
that course of dealing consists of repeated transactions in which the
contract is concluded by a written acceptance of an oral or written offer
made subject to the offeree's standard terms or the contract is concluded
orally and confirmed by a document containing the standard terms in
question, and in either case those terms are not objected to by the other
party. In such circumstances an English Court will readily infer that the
buyer placed his orders subsequent to the first order on the basis and
with the knowledge that the seller's acceptance would be based on the
standard terms set out in the confirmation note (see e.g. Lord Morris
of Borth-y-Gest in Hardwick Game Farm v. Suffolk Agricultural Poultry
Producers Association, [1968] 1 Lloyd's Rep. 547 at pp. 571-572; [1969]
2 A.C. 31 at p. 90A-E).
45. The jurisprudence under art. 17 of the Brussels Convention,
indeed the wording of art. 17 itself, has evolved incrementally in this
connection. Article 17 originally acknowledged only those agreements
as to jurisdiction which were in writing or evidenced in writing (now art.
17(a)). When a strict interpretation of this requirement by the European
Court (in particular in Estasis Salotti di Colzani Aimo e Gianmario Colzani
v. RUWA Polstereimaschinen G.m.b.H. [1976] E.C.R. 1831 and Galeries
Segoura Sprl v. Rahim Bonakdarian [1976] E.C.R. 1851) did not meet
the needs of international commerce where standard trading conditions
were often sought to be incorporated into contracts by reference or by
course of dealing, art. 17 was amended. Following the 1978 Accession
Convention art. 17 was re-worded so as also to admit jurisdiction
agreements in international trade or commerce "in a form which accords
with practices in that trade or commerce of which the parties are or ought
to have been aware" (now art. 17(c)). This wording was still felt to be
inadequate separately to identify incorporation of terms by general trade
practice and incorporation of terms as a result of a course of dealing
peculiar to the parties. So art. 17 was further amended by the 1989
Accession Convention to recognize jurisdiction agreements "in a form
which accords with practices which the parties have established between
themselves" (art. 17(b)).
46. The claimant here relies on art. 17(b) but not art. 17(c). No evidence
of trade practice is before the Court. Although I am told that there has
been no decision of the European Court on art. 17(b), Mr. Howd submits
that the decisions in the Salotti and Segoura cases (addressing the
wording of what is now art. 17(a)) illustrate a principle which underpins
the European law approach to all of the heads of art. 17, namely, that
there should be clear evidence of the consent of the defendant to the
term or terms said to constitute the agreement on jurisdiction.
47. In Estasis Salotti v. RUWA, a contract was entered into between
Salotti and RUWA which was written on RUWA's commercial notepaper
on the reverse of which were printed RUWA's general conditions of sale.
By the express terms of the contract Salotti agreed to order certain
machinery from RUWA which RUWA had offered for sale in a letter sent
to Salotti the previous month. That letter had in turn expressly offered
the machinery for sale subject to RUWA's general conditions of sale which
were printed on the back of the letter. However the contract itself had not
referred to the general conditions of sale other than indirectly by referring
to the letter. The European Court held as follows:
7. The first question asks whether a clause conferring jurisdiction, which
is included among the general conditions of sale printed on the back of a
contract signed by both parties, fulfils the requirements of a writing under
the first paragraph of Article 17 of the Convention.
8. Taking into account what has been said above, [that "The purpose
of the formal requirements imposed by Article 17 is to ensure that the
consensus between the parties is in fact established"] it should be stated
that the mere fact that a clause conferring jurisdiction is printed among
the general conditions of one of the parties on the reverse of a contract
drawn up on the commercial paper of that party does not of itself satisfy
the requirements of Article 17, since no guarantee is thereby given that
the other party has really consented to the clause waiving the normal
rules of jurisdiction.
9. It is otherwise in the case where the text of the contract signed by both
parties itself contains an express reference to general conditions including
a clause conferring jurisdiction.
10. Thus it should be answered that where a clause conferring jurisdiction
is included among the general conditions of sale of one of the parties,
printed on the back of a contract, the requirement of a writing under
the first paragraph of Article 17 of the Convention is fulfilled only if the
contract signed by both parties contains an express reference to those
general conditions.
48. Galeries Segoura v. Bonakdarian was a case in which the plaintiff,
Galeries Segoura, had orally agreed to buy a consignment of Iranian
carpets from the defendant, Bonakdarian. Segoura then received a
confirmation of order and invoice from Bonakdarian which purported
to confirm the sale subject to certain conditions. On the reverse of the
confirmation were printed Bonakdarian's sales, delivery and payment
conditions which included a jurisdiction clause in favour of the Courts
of Hamburg. Giving its preliminary ruling on two questions designed to
establish whether the jurisdiction clause constituted a valid jurisdiction
agreement under art. 17, the European Court held as follows:
6 (...). the requirements set out in Article 17 governing the validity of
clauses conferring jurisdiction must be strictly construed.
By making such validity subject to the existence of an "agreement"
between the parties, Article 17 imposes upon the court before which
the matter is brought the duty of examining, first, whether the clause
conferring jurisdiction upon it was in fact the subject of a consensus
between the parties, which must be clearly and precisely demonstrated.
7. The first question is whether the requirements of Article 17 of the
Convention are satisfied if, at the oral conclusion of a contract of sale, a
vendor has stated that he wishes to rely on his general conditions of sale
and if he subsequently confirms the contract in writing to the producer
and annexes to this confirmation his general conditions of sale which
contain a clause conferring jurisdiction.
8. In accordance with the foregoing general considerations, it cannot be
presumed that one of the parties waives the advantage of the provisions
of the Convention conferring jurisdiction.
Even if, in an orally concluded contract, the purchaser agrees to abide by
the vendor's general conditions, he is not for that reason to be deemed to
have agreed to any clause conferring jurisdiction which might appear in
those general conditions.
It follows that a confirmation in writing of the contract by the vendor,
accompanied by the text of his general conditions, is without effect, as
regards any clause conferring jurisdiction which it might contain, unless
the purchaser agrees to it in writing.
9. The second question then asks whether Article 17 of the Convention
applies if, in dealings between merchants, the vendor, after the oral
conclusion of a contract of sale, confirms in writing to the purchaser the
conclusion of the contract subject to his general condition of sale and
annexes to this document his conditions of sale which include a clause
conferring jurisdiction and if the purchaser does not challenge this written
confirmation.
10. It emerges from a comparison of the wording of the two questions
and from the explanations given during the proceedings before the Court
that the second of the two questions concerns the hypothetical situation
of a sale being concluded without any reference being made at all to the
existence of general conditions of sale.
In such a case, it is patent that a clause conferring jurisdiction which
might be included in those general conditions did not form part of the
subject-matter of the contract concluded orally between the parties.
Therefore subsequent notification of general conditions containing such
a clause is not capable of altering the terms agreed between the parties,
except if those conditions are expressly accepted in writing by the
purchaser.
11. It follows from the foregoing, in both of the alternative cases
suggested by the Bundesgerichtshof, that a unilateral declaration in
writing such as the one in the present case is not sufficient to constitute
an agreement on jurisdiction by consent.
However, it would be otherwise where an oral agreement forms part
of a continuing trading relationship between the parties, provided also
that it is established that the dealings taken as a whole are governed by
the general conditions of the party giving the confirmation, and these
conditions contain a clause conferring jurisdiction.
Indeed, in such a context, it would be contrary to good faith for the
recipient of the confirmation to deny the existence of the jurisdiction
conferred by consent, even if he had given no acceptance in writing.
12. It is therefore possible to give a single answer to the two questions
referred to the Court as follows: in the case of an orally concluded
contract, the requirements of the first paragraph of Article 17 as to form
are satisfied only if the vendor's confirmation in writing accompanied by
notification of the general conditions of sale has been accepted in writing
by the purchaser.
The fact that the purchaser does not raise any objections against a
confirmation issued unilaterally by the other party does not amount to
acceptance on his part of the clause conferring jurisdiction, unless the
oral agreement comes within the framework of a continuing trading
relationship between the parties which is based on the general conditions
of one of them, and those conditions contain a clause conferring
jurisdiction. (...)
15. In order to decide whether the conditions laid down in Article 17 are
satisfied, it is necessary to consider separately whether the agreement
of the parties to the choice of jurisdiction was expressed in the form of
a written agreement or in the form of an oral agreement evidenced in
writing.
16. In the first place, it must be observed that, where a jurisdiction clause
appears in the conditions printed on a bill of lading signed by the carrier,
the requirements of an "agreement in writing" within the meaning of
Article 17 of the Convention is satisfied only if the shipper has expressed
in writing his consent to the conditions containing that clause, either in
the document in question itself or in a separate document. It must be
added that the mere printing of a jurisdiction clause on the reverse of
the bill of lading does not satisfy the requirements of Article 17 of the
Convention, since such a procedure gives no guarantee that the other
party has actually consented to the clause derogating from the ordinary
jurisdiction rules of the Convention.
17. Secondly, if it was established that the jurisdiction clause contained
in the conditions printed on a bill of lading was the subject of a prior
oral agreement between the parties expressly relating to the jurisdiction
clause and that the bill of lading, signed by the carrier, was regarded
as the written confirmation of that oral agreement, such a clause would
satisfy the conditions laid down in Article 17 of the Convention, even if
it was not signed by the shipper and therefore bore only the signature
of the carrier. In fact, not only is the letter of Article 17, which expressly
provides for the possibility of an oral agreement evidenced in writing,
thereby observed but in addition its function, which is to ensure that the
agreement of the parties is clearly established, is also fulfilled.
18. Finally, such a jurisdiction clause not signed by the shipper may still
satisfy the requirements laid own in Article 17 of the Convention, even
in the absence of a prior oral agreement relating to that clause providing
that the bill of lading comes within the framework of a continuing business
relationship between the shipper and the carrier, insofar as it is thereby
established that that relationship is governed as a whole by general
conditions containing the jurisdiction clause drawn up by the author of
the written confirmation, in this case the carrier (see Segoura's case
[1976] E.C.R. 1851), and provided that the bills of lading are all issued
on pre-printed forms systematically containing such a jurisdiction clause.
In those circumstances, it would be contrary to good faith to deny the
existence of the jurisdiction agreement.
54. The decision in The Tilly Russ has largely been superseded by the
wording of what is now art. 17(c), because the form of a bill of lading is a
matter of trade usage. There is no doubt that the wording of what is now
art. 17(c) was introduced by the 1978 Accession Convention in order to
relax the formal requirements of the original version of art. 17. It is now
clear that where the jurisdiction agreement is in a form which accords
with trade usage, it matters not whether it is consented to in writing
by the defendant or, if not, whether it was the subject of a prior oral
agreement. Consensus is presumed to exist where commercial practices
in the relevant branch of international trade or commerce exist in this
regard of which the parties "are or ought to have been aware" (see the
judgment of the European Court in Mainschiffahrts-Genossenschaft e.G. v.
Les Gravieres Rhenanes S.a.r.l. [1997] Q.B. 731, in particular pars. 14 to
20 at pp. 754-755).
55. The wording of what is now art. 17(c) was added to art. 17 before the
introduction of what is now art. 17(b). If the wording of art. 17(c) was
designed to relax the formalities required to be shown in order to prove
consensus, it is a reasonable inference that the wording of art. 17(b)
was intended to do likewise in cases where the agreement conferring
jurisdiction can be shown to be in a form "which accords with practices
which the parties have established between themselves". Article 17(b)
covers the situation where the parties have established a routine in
their trading relationship whereby it can be shown that the transactions
between them are governed as a whole by one party's standard terms of
business which include, among their provisions, a jurisdiction agreement.
I think it is consistent with the approach taken by the European Court in
par. 18 of its judgment in The Tilly Russ to hold that, under art. 17(b),
it is immaterial whether the jurisdiction agreement was the subject of a
prior oral agreement. It is enough, in order to establish consensus, that
the claimant can show that by virtue of the practices adopted between the
parties during their continuing trading relationship, the terms of business
of one of them govern the relevant transactions and that those terms of
business include an agreement conferring jurisdiction.
56. My understanding is that there is no decision of the European Court
which directly addresses the question of how the claimant goes about
showing that, by virtue of the practices adopted between the parties
during their continuing trading relationship, the terms of business of one
of them govern the relevant transactions. But there are indications in
three of the cases I have referred to of the principles which the European
Court would be likely to bring to bear in deciding that issue. Those
principles, or "threads" as he preferred to call them, are identified by
Mr. Justice Waller (as he then was) in his judgment in I.P. Metal Ltd. v.
Ruote O.Z. S.p.A., [1993] 2 Lloyd's Rep. 60. This case was referred to in
Mr. Lowenstein's skeleton argument for another purpose. The following
passage in the judgment was not cited to me; but I think it is instructive.
Mr. Justice Waller was concerned with a course of trading which had
involved Ruote, an Italian company, placing orders by telephone with
I.P. Metal Ltd., an English company, for the delivery of quantities of
aluminium. There was no discussion in the telephone conversations about
the law or jurisdiction which should govern any disputes arising out of
the orders: nor was every single term of each transaction expressly
agreed over the telephone because some were so obvious as to go
without saying. What happened was that, after the order was placed, I.P.
Metal would send a telex to Ruote confirming the transaction. The telex
routinely included a clause stating, in respect of deliveries made by I.P.
Metal rather than its Italian subsidiary, "English law: competent forum
London". Mr. Justice Waller held (at p. 66) that, once Ruote knew that
the company delivering the aluminium was going to be I.P. Metal, "its
expectation could only legitimately be that at that stage in any event,
English law and London forum would be chosen". He continued in his
judgment as follows:
I use the word legitimately because there are threads running through the
decisions of the European Court, to which I have referred, to the following
effect:
(i) There is an expectation that a party will exercise reasonable care (see
Ruwa p. 1842 par. 13).
(ii) It is, or can be, contrary to good faith to deny the existence of a
term where for example an oral agreement forms part of a continuing
trading relationship during which a term has been brought expressly to
the attention of one of the parties (see Segoura p. 1862 par. 11).
(iii) There is an expectation that if a document is sent purporting to
confirm an oral agreement, the terms should be objected to within a
reasonable time if those terms are not to apply (see Sir Gordon Slynn
A.G. (as he then was) in his advice in Berghoefer p. 17).
57. In Lafarge (at p. 698), Judge Bowsher accepted that the principle
of "good faith" referred to by the European Court in the Segoura case
was not unlike the English law concept of an estoppel. I agree that it
must certainly include circumstances which in English law would give
rise to an estoppel and, a fortiori, circumstances which would amount to
an impermissible approbation and reprobation of the relevant terms in
the eyes of an English lawyer (as outlined in the example which Judge
Bowsher gave). However, I am not persuaded that the principle of "good
faith" in European law is an exact equivalent of the English law concept of
estoppel. It may well be wider. On the view I take of the evidence in this
case, that is a point I do not have to decide.
58. The evidence consists primarily of the statement of Mr. E. for the
claimant and the statement of Mrs. AJ. for the defendant. The salient
features of their evidence I can summarize quite shortly. According to Mr.
E., the pattern of trading between the claimant and the defendant since
July 1, 1996 in respect of all slate other than Del Carmen slate has been
as follows. The claimant sent a price list to the defendant for each type of
slate (based on the quarry of origin). The price list gave prices effective
from July 1, 1996 and was replaced with an updated price list whenever
the prices changed. Every price list was headed with a statement of the
following terms:
All prices exclude VAT.
The price includes delivery charges in respect of full loads.
All Orders are accepted in accordance with our Standard Conditions of
Sales, which are available on request.
The price can be changed without prior notice.
Payment terms: 90 days from despatch date.
59. Each year, in December or January, Mr. E. would meet a
representative of the defendant and hand over an up-to-date set
of price lists. The prices, and quantities, would be discussed at the
meeting. The prices were either agreed there and then or in subsequent
correspondence. Any price increases notified by the quarries during
the year would be communicated to the defendant in the form of a
revised price list which, if not accepted by the defendant, would be the
subject of negotiation and agreement in correspondence. Orders were
not placed at these annual meetings but later by means of a fax sent by
the defendant to Slate's Spanish office who would process the order by
passing it on to the quarry, arranging transport locally and notifying the
claimant's administrative headquarters in London. The Spanish office did
not acknowledge the defendant's orders. This was done by the claimant
preparing an invoice and sending the white (customer) copy to the
claimant. Each customer copy of the invoice contained the details of the
order on its face, including the product description, quantity, unit price
and delivery address. On the reverse was printed the claimant's terms of
business in full, including cl. 10.4 quoted earlier in this judgment.
60. On the claimant's evidence, the foregoing was the pattern of its
trading with the defendant in non-exclusive slate (i.e. slate for which
the defendant was not the purchaser of the entire annual production
of the quarry) at all material times between July 1, 1996 and October,
2000. Mr. E. says that throughout the same period (indeed, since 1993),
the defendant has purchased from the claimant the entire annual
production of Del Carmen slate. At all material times, therefore, Del
Carmen slate has been exclusive slate. Supplies of Del Carmen slate
have been delivered pursuant to an agreement made in 1993 between
the defendant and Slate International (for whom the claimant is said to
have been substituted after April, 1996) that the defendant would take
delivery of the entire annual production of the quarry where Del Carmen
slate originates at prices to be negotiated and agreed each year for the
forthcoming year. The agreement in 1993 and for each subsequent year
was concluded when the prices were agreed in correspondence, based
on price lists of the kind already described. These likewise referred to
deliveries being subject to the claimant's standard conditions of sales.
Invoices for Del Carmen slate were rendered by the claimant in respect of
each delivery in the same form as the invoices for non-exclusive slate.
61. As I have already recorded, the balance of account claimed in this
action relates only to invoices dated between January and October, 2000.
A tiny number of the invoices listed in the schedule to the particulars
of claim appear to supplement invoices already rendered in respect of
a supply, because they involve small sums. The claim also identifies
credit notes which must have had the effect of cancelling a few invoices.
Nevertheless the schedule identifies no less than 672 invoices in total.
This indicates that a very substantial course of dealing took place over the
period in question, involving a very large number of individual contracts
for the supply of non-exclusive slate and a very large number of individual
deliveries of exclusive (Del Carmen) slate, whatever the precise split
between the two. On the claimant's evidence, prior to 1999, there had
been at least 21/2 years of trading in non-exclusive slate and at least five
years of trading in exclusive slate, using the same contractual procedures.
I do not know if the volume of trading was comparable in this earlier
period; but I infer that it was substantial and, further, that all invoices
rendered in this period have been paid or settled to the claimant's
satisfaction.
62. Mrs. AJ. does not gainsay a good deal of what Mr. E. says about the
routine of the parties' contractual procedures or the duration of their
trading relationship. In the defence and counterclaim it is pleaded that
all of the contracts were concluded orally and confirmed in writing by the
sending of the defendant's fax to the claimant's Spanish office, whereas
it is Mr. E.'s analysis that the contracts were concluded in writing, order
by order in the case of non-exclusive slate and annually in the case of
exclusive slate. I do not consider that this makes any difference, since by
1999 deliveries had been made and paid for under both arrangements for
several years. Whether the contracts were concluded orally or in writing,
deliveries were based on the claimant's current price lists and were
confirmed or charged for by an invoice containing the claimant's terms
of business on the reverse. The significant part of Mrs. AJ.'s statement
is that which is devoted to rebutting any inference that these terms of
business were incorporated into the various transactions. She says:
4 (...). Whilst I cannot deny that at least some of the price lists sent to
us by the London company included a statement referring to "our terms
and conditions of sale" of what was possibly the English or the Spanish
company, I was not conscious of such statement being included at the
time when I would receive the price lists. When receiving such a list I
would simply immediately check that the prices were in accordance with
our oral arrangements with Mr. E. and where necessary I would contact
him if the price was higher than previously agreed. Terms and conditions
were never discussed between us and I would certainly have not agreed
to any clause prorogating jurisdiction and neither I believe would have my
father-in-law. In particular, as far as I can remember the first invoices,
which we received at the outset of our commercial dealings with Slate,
did not have any terms and conditions printed on the back and I believed
that we were purchasing the slate from Slate in Spain on the basis of
the general agreement we reached with Mr. E. following his initial visit
at our company in Germany in 1993. Mr. E. approached us by telephone
and offered to visit our company to present Spanish slate to us. During
a meeting at our company's premises he presented to us the different
quarries in Spain. As he had no samples of the slate with him, we visited
the quarries in Spain and decided then that we wanted to purchase slate
from there.
5. I have now looked in detail at the terms and conditions on the back
of the recent invoices. Although I was able to correspond with Mr. E. in
English, I would have needed translation help to understand the terms
and conditions. The English I learned at school was sufficient for the
general contact with Mr. E., but would not be sufficient to understand
complex legal matters. I must stress here that the contact with the
Spanish company was easier as it was mostly in the German language, as
the secretary of that company spoke German.
63. If one ignores the references in this statement to the fact that the
defendant believed that it was contracting with a Spanish arm of the Slate
group – an issue on which it is conceded that there is an arguable case to
the contrary – the evidence of Mrs. AJ. confirms that the defendant was
aware from the price lists received from the claimant that orders were
only accepted on the claimant's standard conditions of sales. While she
recalls that the invoices received in the early days of trading with Slate
did not have any terms and conditions printed on the back, significantly
she does not deny that all invoices received from the claimant since July,
1996 have had the claimant's terms of business printed on the back. I
discount the possibility that Mrs. AJ. would not have understood these
terms and conditions had she read them. Exhibited to Mr. E.'s statement
is correspondence in the English language between the claimant and
the defendant about quantities and prices which demonstrates that the
defendant's command of English was amply sufficient to be able to read
and comprehend the claimants terms of business, including cl. 10.4. It is
also highly significant that, despite her assertion that the defendant would
never have agreed to a clause "prorogating jurisdiction", Mrs. AJ. does
not say that the defendant ever drew the claimant's attention to this fact
or ever told the claimant that it was not willing that its purchases of slate
should be subject to the claimant's terms of business.
64. I am in no doubt whatever that the evidence before the Court is
more than sufficient to establish a good arguable case in English law that
the subject transactions between the claimant and the defendant were
governed as a whole by the claimant's terms of business, including the
jurisdiction clause. That, however, is not the question. The question is
whether a good arguable case to that effect has been made out under art.
17(b) of the Convention. I think that it has. I consider that the claimant
has a good arguable case for saying that the defendant has traded for a
long period in the knowledge that the claimant was only willing to deliver
supplies on its standard terms of business, and that the defendant knew
the content of those terms and never once objected to them. Applying
the principles identified by Mr. Justice Waller in the jurisprudence of the
European Court (see par. 56 of this judgment), it is certainly arguable that
it would be contrary to the legitimate expectation of the claimant and/or
contrary to good faith for the defendant now to be able to deny that the
claimant's terms of business governed their trading relationship.
65. It follows that I dismiss the defendant's second application and the
first application insofar as it is extant. In my judgment, the Court has
jurisdiction to entertain the claimant's claim.
PROCEDURAL HISTORY
December 17, 2000 – Claim form and particulars of claim issued.
March 12, 2001 – Claim form and particulars of claim served on the
defendant in Germany, with German translations.
April 5, 2001 – The defendant's German lawyer files an acknowledgment
of service in form N9. Under the heading "Tick the appropriate box", he
puts a cross in the box alongside the statement "I intend to defend all of
this claim" and another cross in the box alongside the statement "I intend
to contest jurisdiction". The Court sends notice to the claimant that an
acknowledgment has been filed.
April 12, 2001 – The defendant's German lawyer drafts a defence and
counterclaim in German, which complies with German rules of procedure,
and posts it to the English Court. It is not stamped as having been
received by the English Court until June 4, 2001. The German defence
raises a challenge to the jurisdiction of the English Court.
April 16, 2001 – Time for making an application under Part 11(1) expires.
May 12, 2001 – The claimant enters default judgment against the
defendant in form N30(HC) for a sum of £ 223,337.60 inclusive of interest
and costs.
May 16, 2001 – The default judgment is served on the defendant, with
German translation.
May 28, 2001 – The defendant's German lawyer sends a second copy
of the German defence and counterclaim to the English Court by fax,
together with an application, drafted in accordance with German rules of
procedure, asking that the default judgment be set aside.
June 18, 2001 – The defendant instructs English solicitors (Rollits) who
have in their employ as an assistant solicitor, Ms. Petra Haselier, who is
also a German Advocate (Rechtsanwältin).
July 24, 2001 – The defendant's English solicitors make an application (1)
for the default judgment to be set aside, (2) for an order declaring that
the English Court has no jurisdiction and for the claim form and service of
it to be set aside, alternatively (3) for the period for filing a defence to be
extended ("the first application"). In support of the application is filed a
statement of Petra Haselier, exhibiting a draft defence and counterclaim
prepared by Mr. Howd.
July, 30, 2001 – District Judge Bird deals with the first application on
paper and orders as follows:
1. The judgment dated 11 May 2001 be set aside as the Defendant has
a prospect of success and should not be penalised for inadvertently
breaching the rules.
2. The Defendant do file a defence by 21 August 2001 failing which the
Defendant be debarred from defending the claim and the Claimant be at
liberty to enter judgment.
3. The Defendant do pay abortive execution and judgment costs.
August 13, 2001 – The claimant makes an application to have the Order
of District Judge Bird set aside. (This application is not being pursued until
the outcome of the applications presently before the Court is known.)
August 15, 2001 – The defendant's English solicitors make a further
application for an order declaring that the English Court has no
jurisdiction and for the claim form and service of it to be set aside ("the
second application").
August 17, 2001 – The defendant serves the defence and counterclaim
which was exhibited in draft to Ms. Haselier's Statement.
September 21, 2001 – The defendant's English solicitors make an
application that the time for filing an application under CPR Part 11 be
extended until after the date on which the defendant's second application
was received ("the third application").
October 5, 2001 – District Judge Stuart-Brown refers the defendant's
applications to the Bristol Mercantile Court.
November 8, 2001 – The defendant's applications are heard in the Bristol
Mercantile Court and the action is transferred into the Mercantile List.