LORD STEYN
My Lords,
This appeal is concerned with the interpretation and application of
provisions of the Lugano Convention, which for present purposes is
in identical terms to the Brussels Convention. English texts of these
Conventions are set out as Schedules to the Civil Jurisdiction and
Judgments Act 1982 as amended. The principal objective of the
earlier Convention, the Brussels Convention, was to facilitate the
enforcement of judgments between Members States of the European
Economic Community. The economic context was the aim of inspiring
business confidence and encouraging the right conditions for trade.
This Convention entered into force in the United Kingdom in 1978. The
purpose of the Lugano Convention was to promote the same purpose
between Members States of the European Communities and Member
States of the European Free Trade Association, viz Austria, Finland,
Iceland, Norway, Sweden and Switzerland. It entered into force in the
United Kingdom in 1992. A major difference between the two Conventions
is that the European Court of Justice has no jurisdiction to rule on
questions of interpretation under the Lugano Convention. Subject to this
qualification the differences are minor. Together the two Conventions not
only facilitate the enforcement of judgments but provide a sophisticated
system of direct jurisdictional rules to which courts in the countries
concerned must adhere. It involves a system of required and prohibited
jurisdiction of courts.
Under both Conventions the primary ground of jurisdiction of those
domiciled in the Contracting State is the domicile of the defendant. In
addition there are special grounds of jurisdiction, in matters in respect
of contract, delict (tort) and quasi-delict, as well as special provisions for
the joinder of defendants, which may displace the general principle. There
are also special provisions dealing with jurisdiction in matters relating
to insurance and consumer contracts. Finally, there are tie-break rules
dealing with the position where proceedings are brought involving the
same cause of action between the same parties, or related actions, in the
courts of different contracting states.
The present case is concerned with Articles 2 and 6 of the Lugano
Convention. Article 2 states the general principle in the following terms:
"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.
Persons who are not nationals of the State in which they are domiciled
shall be governed by the rules of jurisdiction applicable to nationals of
that State."
Article 6 contains a special rule of jurisdiction. It provides, so far as
material, as follows:
"A person domiciled in a Contracting State may also be sued:
1.
where he is one of a number of defendants, in the courts for the place
where any one of them is domiciled. . . ."
The principal question of law before the House is whether the concept
"sued" in Articles 2 and 6, when applied to legal proceedings taken in
England, means the date of issue of the writ (as the plaintiff respondents
contend) or the date of service of the writ (as the appellants contend). At
first instance the judge decided this question against the appellants. They
appealed. By a majority (Nourse L.J. and Waller L.JJ.) the Court of Appeal
ruled that the date of issue of the writ is the critical date:Canada Trust
Co. v. Stolzenberg (No. 2) [1998] 1 WLR 547. The leading judgment was
given by Waller L.J. In a dissenting judgment Pill L.J. came to the opposite
conclusion on this point.
The forensic story in a nutshell
On 1 August 1996 the plaintiffs, Daimler-Chrysler Canada (formerly
called Chrysler Canada Ltd.) and the trustees of certain pension and
other benefit funds established by Daimler-Chrysler Canada Ltd. for
its employees, issued a writ against Wolfgang Otto Stolzenberg as first
defendant and 36 other defendants. Mr. Stolzenberg was the President
and Chief Executive of the Castor Group Companies. The plaintiffs pleaded
case was that Mr. Stolzenberg was principally responsible with others
for inducing the plaintiffs by fraud to make investments amounting to
some 240 million Canadian dollars (equivalent to about £120m.) in a
group of companies called the Castor Group. All those companies are now
insolvent. It is alleged that some of the defendants were implicated in
the fraud perpetrated by Mr. Stolzenberg and other defendants have been
joined in respect of claims tracing assets.
Mr. Stolzenberg was known to have owned and resided in a house in
London until August 1996. He then sold that house. He moved to another
house in London. At that stage he was domiciled in England but on a
date which is not known he departed from England to reside in Germany.
His domicilary position in the period immediately after the issue of the
writ was therefore uncertain. The plaintiffs asserted that at the time
of the issue of the writ, which they contended was the relevant date,
Mr. Stolzenberg was an anchor defendant entitling them to sue other
defendants in England.
The appeal before the House is only concerned with six defendants. The
other defendants are no longer being actively pursued, have submitted
to the jurisdiction or have had judgments entered against them. The six
defendants, who are the appellants on the present appeal, fall into two
categories, namely:
(1)
The second defendant (a Swiss lawyer) and the sixteenth defendant (a
Swiss company) are domiciled in Switzerland. The jurisdiction over them
of the English courts is dependent on the proper construction of Article 2
and Article 6.1 of the Lugano Convention. I will call these defendants "the
Convention appellants."
(2)
The fifth, seventh, tenth and fifteenth defendants (respectively entities
based in Panama, Liechtenstein and Netherlands Antilles) are domiciled
in non-Convention countries. The jurisdiction over them of the English
courts is governed by R.S.C., Ord. 11, r. 1(l)(c). I will call them "the non-
Convention appellants."
After the issue of the writ Mr. Stolzenberg took active steps to avoid
being served in England. On 11 March 1997 there was purported service
of the writ on Mr. Stolzenberg by post and by insertion through a letter
box. On the same day the present appellants were served with the writ.
On 21 March 1997 Mr. Stolzenberg issued proceedings in Germany for
declarations that he was not liable. On 11 April 1997 the appellants
challenged the jurisdiction of the English court over them by issuing a
notice of motion under R.S.C., Ord.12, r. 8.
The decision of Rattee J.
The case came before Rattee J. Three principal legal issues were debated
before the judge. The first was whether a test of more than a good
arguable case had to be applied in deciding the question whether Mr.
Stolzenberg was domiciled in England at the critical time. The second
was whether the domicile of Mr. Stolzenberg had to be established on the
date of the issue of the writ or on the date of service of the writ on the
appellants, the latter being the contention advanced by the appellants.
Thirdly, the appellants contended that Article 6(1) could only be relied on
if Mr. Stolzenberg had already been served before the issue or service of
the proceedings on the co-defendants. In an unreported judgment the
judge ruled against the appellants on all three questions. Central to his
judgment was the conclusion that under Articles 2 and 6 of the Lugano
Convention "sued" in relation to England means the time of the issue of
the writ. The judge observed that Mr. Stolzenberg had not been properly
served with the writ. On 3 June 1997 he made an order for substituted
service on Mr. Stolzenberg. On 13 June 1997 the judge declared that
steps taken by the plaintiffs pursuant to the order for substituted service
constituted good and sufficient service of the writ. The challenge to
jurisdiction before the judge had failed. On 5 February 1998 the German
Court stayed the proceedings to await the outcome of the challenge to
English jurisdiction. On 24 April 1998 final judgment was entered against
Mr. Stolzenberg in England.
The Court of Appeal judgments
The appellants appealed to the Court of Appeal. On 28 to 30 July 1997 the
Court of Appeal heard the appeal against the issues of principle decided
by Rattee J. In its judgment delivered on 29 October 1997 the Court of
Appeal dealt with these matters: [1998] 1 WLR 547. The Court of Appeal
ruled unanimously that the standard of proof which the plaintiffs were
required to satisfy in order to establish jurisdiction was that of a good
arguable case and not the civil standard of a balance of probabilities.
By a majority the Court of Appeal ruled that the date upon which Mr.
Stolzenberg was required to have had an English domicile was the date
of issue of the writ and not the date of service upon him. On this issue
Pill L.J. dissented. The majority ruled further that it was not necessary
under Article 6 of the Convention for Mr. Stolzenberg to have been served
before service upon the Convention defendants. Pill L.J. did not address
this issue. In the light of these rulings the Court of Appeal dismissed the
appellants' appeal. The Court of Appeal found it unnecessary to deal with
a Respondents' Notice which sought affirmation of the judge's order on
the alternative basis that even if the date of service was the critical date,
that date was 11 March 1997 when Mr. Stolzenberg was domiciled in
England. This issue was not before the House.
Subsequently, on 6 May 1998, the Court of Appeal gave a second
judgment dealing with applications to adduce new evidence challenging
the judge's finding of fact. In an unreported judgment the Court of Appeal
dismissed these applications. The correctness of this judgment was not
debated before the House.
The issues
The issues before the House relate only to points of legal principle
considered and decided by the Court of Appeal: [1998] 1 WLR 547. It is
not suggested that in this case there has been an abusive resort to Article
6: see Mölnlycke A. B. v. Proctor & Gamble Ltd. [1992] 1 W.L.R. 1112.
The major question involves the application in English law of the
concept of being "sued" in Articles 2 and 6 of the Lugano Convention.
In considering the position of the six defendants the House must act on
the premise that Mr. Stolzenberg was domiciled in England at the date of
the issue of the writ but may not have been domiciled in England after
that date. I will deal with this question first and then deal later in this
judgment with subsidiary issues.
The approach
The problem inherent in the application of the concepts of the Convention
in national legal systems requires a twofold classificatory enquiry. In the
first place it is necessary to interpret a particular concept used in the
Convention independently by reference to the language, structure, system
and objectives of the Convention. Secondly, recognising that a concept
of the Convention may have a different content in various national legal
systems, it is necessary to apply it to the procedural regime of the
particular legal system: see Shearson Lehman Hutton Inc. v. Treuhand Für
Vermögenswaltung and Betechigungen (TVB) mbH (Case C89/91) [1993]
E.C.R. 1-139 (para.13). The starting point is therefore the ascertainment
of the meaning of the concept of being "sued" in Articles 2 and 6.
The meaning of "sued" in Articles 2 and 6
In examining the problem before the House one can safely proceed from
two premises. First, the word "sued" must bear the same meaning in
Articles 2 and 6. Secondly, in a Convention of which the major purpose
is the attainment, so far as possible, of certainty and uniformity, it is
obvious that the search must be for a single meaning of the concept
"sued" which can apply across the spectrum of national legal systems and
the diversity of procedures potentially involved.
The answer to the central question must be found in the principal sources
of treaty or convention interpretation, viz the text, its context and the
object and purpose of the treaty or convention: see Articles 31 and 32 of
the Vienna Convention on the Law of Treaties; Aust, Modern Treaty Law
and Practice 184-191. I turn first to the language and structure of the
Convention. One can perhaps accept as a general proposition that the
word "sued" as used in Articles 2 and 6 and elsewhere in the Convention
is equally capable as a matter of language of indicating the moment
of initiation of the proceedings or the date of service of the initiating
process. But the Convention also uses the concept that a party may "bring
proceedings" in a number of articles: see Articles 10, 11, 12, 14, 21 and
22. The words "to bring proceedings" in the context of the Convention
appear to point to the initiation of the proceedings. Moreover, as my
noble and learned friend Lord Cooke of Thorndon pointed out during the
argument the point is reinforced by the contextual meaning of Article 14.
It reads as follows:
"A consumer may bring proceedings against the other party to a contract
either in the courts of the Contracting State in which that party is
domiciled or in the courts of the Contracting State in which he is himself
domiciled.
"Proceedings may be brought against a consumer by the other party
to the contract only in the courts of the Contracting State in which the
consumer is domiciled."
Given that consumers are accorded a more favourable regime than
other parties, and are given an option, the sense of Article 14 points
to the date upon which the consumer initiates proceedings. Moreover,
the Convention uses yet other language as pinpointing the time for the
coming into operation of the various rules, viz the concept of "instituting"
legal proceedings: see Articles 6 and 20. Where this language is used
it points tolerably clearly to the initiation of proceedings. Standing
back from this review of the particular provisions of the Convention
one is entitled to make the provisional judgment that the concepts
"sued", "bring proceedings" and "instituted proceedings" have been used
interchangeably. Significantly, that is how the matter was viewed in the
Jenard Report O.J. 5.3 79/No. C59/1, Chapter IV, Section B (Jurisdiction
in matters relating to insurance). If this view is correct , as it appears to
be, it may afford a substantial basis for concluding that "sued" in Articles
2 and 6 refer to the initiation of the proceedings.
But there were arguments to the contrary based on the language of the
Convention. Counsel for the appellants relied positively on a number of
provisions. She referred to Article 20 which reads as follows:
"Where a defendant domiciled in one Contracting State is sued in a court
of another Contracting State and does not enter an appearance, the
court shall declare of its own motion that it has no jurisdiction unless its
jurisdiction is derived from the provisions of this Convention."
Counsel suggested that the reference to entry of appearance involves
prior service. I am not satisfied that this premise is necessarily correct.
In any event, in the scheme of the Convention, this argument (if valid)
cannot outweigh the indications in favour of the date of the initiation of
the proceedings In my view Article 20 does not in the present context
warrant the weight counsel put on it. The next provision called in aid by
the appellants is Article 52. It reads as follows:
"In order to determine whether a party is domiciled in the Contracting
State whose courts are seised of a matter, the court shall apply its
internal law.
"If a party is not domiciled in the State whose courts are seised of the
matter, then, in order to determine whether the party is domiciled in
another Contracting State, the court shall apply the law of that State."
Emphasising the present tense "is" in the second sentence, counsel
submitted that the reference must be to the date of service. This is
literally correct. But if this argument is accepted it would lead to the
absurd consequence that the operative date is variable depending on
fortuitous procedural events. This unacceptable consequence can be
avoided by reading "is" as "was" to further the objective of certainty
of the Convention. Given that the Convention was not drafted with the
precision of a statute, this interpretation can readily be accommodated in
the Convention system.
Counsel for the appellants put in the forefront of her argument in favour
of the date of service the tie-break provisions of Articles 21 and 22 of the
Convention. Article 21 provides as follows:
"Where proceedings involving the same cause of action and between the
same parties are brought in the courts of different Contracting States,
any court other than the court first seised shall of its own motion stay its
proceedings until such time as the jurisdiction of the court first seised is
established.
"Where the jurisdiction of the court first seised is established, any court
other than the court first seised shall decline jurisdiction in favour of that
court."
This article is cast in mandatory terms. By contrast Article 22, which deals
with "related actions", creates a discretionary power to stay proceedings.
It reads as follows:
"Where related actions are brought in the courts of different Contracting
States, any court other than the court first seised may, while the actions
are pending at first instance,stay its proceedings.
"A court other than the court first seised may also, on the application of
one of the parties, decline jurisdiction if the law of that court permits the
consolidation of related actions and the court first seised has jurisdiction
over both actions.
"For the purposes of this Article, actions are deemed to be related where
they are so closely connected that it is expendient to hear and determine
them together to avoid the risk of irreconcilable judgments resulting from
separate proceedings".
Counsel for the appellant relies on three matters. First, in Zelger v.
Salinitri (Case 129/83) [1984] E.C.R. 2397 (at 2408, paras. 14-16), the
European Court of Justice observed that, while there is no uniformity
under national laws as to when a court became seized, the court first
seized "is the one before which the requirements for proceedings to
become definitively pending are first fulfilled, such requirements to be
determined in accordance with the national law of each of the courts
concerned." Secondly, in the Court of Appeal in Dresser U.K. Ltd. v.
Falcongate Freight Management Ltd. [1992] Q.B. 502 in a detailed and
careful judgment Bingham L.J. (now Lord Bingham of Cornhill) held that
under Articles 21 and 22 in England seisin occurred upon service. Subject
to a relatively narrow point, a differently constituted Court of Appeal of
which I was a member in Neste Chemicals S.A. v. D.K. Line S.A. (The
Sargasso) [1994] 3 All. E.R. 180 adopted the reasoning in the Dresser
case as correctly stating the position in English law. This line of authority
states the present practice and law in England: see also Arab Monetary
Fund v. Hashim (No. 4) [1992] 1 W.L.R. 1176. Thirdly, counsel for the
appellants referred in the context of Articles 21 and 22 to the statement
in the Schlosser report (O.J. 5.3.79/No. C59), 71, at para. 182 (at p. 125)
that:
"In the original Member States of the Community a claim becomes
pending when the document instituting the proceedings is served. Filing
with the court is sometimes sufficient".
She also referred your Lordships to the statement in Dicey and Morris,
The Conflict of Laws, 13th ed., (2000), at pp. 410-411, para. 12.050
that: "In some countries (e.g. France, Germany, Italy, Luxembourg and
the Netherlands) an action is considered pending only from the date of
service of proceedings. In others (such as England and Belgium) an action
is, for some purposes at least, regarded as pending once proceedings
are issued." Counsel for the respondents invited your Lordships to hold
that the Dresser case and the Sargasso case were wrongly decided and
that under Articles 21 and 22 the initiation of the proceedings was the
critical time. The strongest point made by counsel for the respondents
is the risk of fragmentation of proceedings in multi-party disputes: see
Grupo Torras S.A. v. Sheikh Fahad Mohammed Al-Sabah [1996] 1 Lloyd's
Rep 7, at 21-22; The Maciej Rataj [1995] 1 Lloyd's Rep. 302. Since the
hearing of the appeal I have also become aware of a detailed academic
critique of the decisions in Dresser and The Sargasso: see Peter Kaye,
The Date upon which an English Court becomes "seised" of proceedings
under the Brussels Convention: Issue or Service of Process?, 1995,
Journal of Business Law 217. It is unnecessary to discuss these issues.
Moreover, it would also not be right to express views on the correctness
of Dresser since your Lordships indicated to counsel for the appellants
that she need not reply on the point. It is essential to keep firmly in mind
that this case is only concerned with the interpretation and application
of Articles 2 and 6. And in my view the contrast between on the one
hand, suing, bringing proceedings and instituting proceedings and, on
the other hand, the stronger concept of a court being first seized and
proceeding becoming "definitively pending", as explained in Zelger,
militates against rather than in favour of the appellants' argument.
Moreover, there is a fundamental difference, reflected in the language of
the Convention, between a jurisdictional rule which determines when a
court has jurisdiction to take cognizance of a case and a tie-break rule
which governs when two courts are in the process of proceeding as if
they had jurisdiction. In my view therefore the arguments based on the
language and structure of the Convention tend to favour the date of
initiation of the proceedings.
It is also necessary to consider the rival arguments from the point of
view of the attainment of the principal objectives of the Convention. The
preamble of the Lugano Convention records the desire "to ensure as
uniform an interpretation as possible of this instrument": see also Protocol
No. 2. on the Uniform Interpretation of the Convention, Articles 1 and 2.
It may be that either interpretation would meet this criterion. Certainly,
the date of initiation of proceedings can meet this criterion in all national
systems albeit that the point may be differently determined in different
countries. The second major aim of the Convention is the achievement
of predictability and certainty at all stages for all concerned, viz at the
time of the conclusion of the transaction, when the dispute has arisen
and when it has to be ruled on. In Mullox IBC Ltd. v. Hendrick Geels
(Case C-125/92) [1993] E.C.R. 1-4075 the European Court of Justice
said (at p. 1-4103, para. 11) of its judgment that the aim is to allow "the
plaintiff easily to identify the court before which he may bring an action
and the defendant reasonably to foresee the court before which he may
be sued." From this perspective there is an advantage in selecting the
time of lodging of the process with the court as the operative time. It
will presumably be a matter of record in all national legal systems. It will
have the advantage of certainty. On the other hand, proof of valid service
depends on evidence. Moreover, even if there are differences between
systems as to how proceedings are initiated, the date of initiation appears
to a readily available point of reference. On balance selecting the time of
initiation of the proceedings as the critical point promotes certainty.
It also seems right to consider on a broader basis the balance of merits
and demerits of the two interpretations. A relevant practical consideration
is that the date of initiation of the proceedings represents the last
opportunity for the plaintiff to check the facts and examine the law on
which the claim is based. There is, however, force in the argument that
a date of issue rule causes substantial inconvenience to a defendant who
bona fide changes his domicile after commencement of the proceedings.
But this factor is outweighed by the consideration that date of service of
process as the operative date will enable some defendants to evade the
service of process when they become aware of the incipient proceedings.
This risk is particularly significant in a claim against a multiplicity of
defendants. The present case is a good example of such evasion of
service by a change of domicile. The majority in the Court of Appeal
rightly regarded this as an important factor. Indeed the idea that the
domicile of Mr. Stolzenberg would have had to be checked upon every
occasion when it was sought to serve a Convention-defendant is singularly
unattractive. Such an outcome of the appellants' argument by itself tends
to cast doubt on its feasibility in the framework of a Convention which
aims at legal certainty.
Looking at the matter in the round I am satisfied that "sued" in Articles
2 and 6 should be interpreted as referring to the initiation of the
proceedings.
The application in England
It is now necessary to apply the Convention concept to English legal
proceedings. This is straightforward. It is trite law that an action is begun
in the High Court when a writ of originating summons is issued. This
requirement was satisfied on 1 August 1996.
The Second Issue: Service on the Convention Appellants
The next question is whether Article 6 requires there to have been prior
service on an anchor defendant domiciled in the state courts in which the
proceedings have been brought. This question arises because the two
Convention appellants were served before Mr. Stolzenberg was served.
The majority in the Court of Appeal ruled that under Article 6 there is no
requirement of prior service upon an anchor defendant.
Article 6 fulfils a similar function to R.S.C., Ord. 11, r. 1(i)(c) which
expressly requires the claim to have been brought against a person
"duly served within or out of the jurisdiction" as well as the intended
defendant to have been a necessary or proper party. There are, however,
significant differences. Under Order 11, r. 1(i)(c) leave must be obtained
on an ex parte basis. As Waller L.J. observed "one can see that insistence
on service on another defendant prior to obtaining leave may provide
some practical safeguard": 568C. By contrast Waller L.J. pointed out that
[568D-F]:
"article 6 does not provide for the service of proceedings on one
defendant before the issue and joinder of others, because no practical
safeguard would be provided by so insisting. The first time that a court
will review the question of whether article 6(1) provides jurisdiction is
on an inter partes application contesting that jurisdiction. At that stage
sufficient protection is available to a defendant and the order in which
defendants have been served or whether one was served before the issue
of proceedings against another has no materiality whatever. The proper
question at that stage under article 6(1) is simply whether a defendant
domiciled within the jurisdiction is a party and a genuine party, and
whether the Convention is in any way being abused".
There is therefore no basis for implying a requirement that the anchor
defendant must be served first. The submissions of the appellants must
be rejected.
The Third Issue: Service on the Non-Convention Appellants
One of the principal defendants, namely the Third Defendant, has
submitted to the jurisdiction and has served a defence. The claims
against him involve each of the non-Convention appellants. These are
claims to which those appellants are necessary and proper parties. It
follows that jurisdiction against the non-Convention appellants can be
maintained irrespective of any issue over service on Mr. Stolzenberg.
There is therefore no independent argument available to the appellants
under this heading.
The relevant standard of proof
The judge and all members of the Court of Appeal held, contrary to the
submissions on behalf of the appellants, that a test of good arguable case
is the appropriate standard of proof to apply to the question whether a
defendant is domiciled in England on an application under Order 12, r. 8
involving issues arising under Article 6. In their written case, which was
not supported by oral argument, the appellants contested the correctness
of this ruling. Their Lordships did not call on counsel for the respondents
to deal with the issue. In a purely internal English case the test of a good
arguable case had been laid down by the House of Lords as applicable
also in respect of domicile as a ground of jurisdiction: Seaconsar Far
East Ltd. v. Bank Markazi Jomhouri Islami Iran [1994] 1 A.C. 438. The
question is whether in the context of Article 6 the more stringent test of
a balance of probabilities should apply. The adoption of such a test would
sometimes require the trial of an issue or at least cross examination
of deponents to affidavits. It would involve great expense and delay.
While it is true that the jurisdictional issues under the Conventions are
very important, they ought generally to be decided with due despatch
without hearing oral evidence. In my view Waller L.J.'s judgment correctly
explained on sound principled and pragmatic grounds why the appellants
argument is misconceived.
Disposal of the appeal
For the reasons I have given I would dismiss the appeal.