Aldous L.J.:
[1] This appeal is concerned with the application of the E.C. Judgments
Convention (Brussels) 1968 (the Brussels Convention). Mr and Mrs B.
sold their business in England in late 1989 and emigrated to Ireland. As a
result of the sale Mr and Mrs B. were assessed for United Kingdom Capital
Gains Tax for the years 1989/1990 in respect of a chargeable gain of
£200,000. In February 1995 the assessed gains were reduced to £95,000
odd, with the result that they were assessed for tax in the sum of about
£33,000.
[2] Until about May 1995 Mr and Mrs B. employed Mr Kenneth Br. and the
P. P. P. as their accountants and tax advisers. However, upon moving to
Ireland they instructed in about May 1994 Mr Y., who was domiciled in
Ireland and a partner in KPMG, to act on their behalf. By summons issued
in February 1998, they started proceedings against Mr Y. for negligence
and breach of contract in respect of his conduct of their tax affairs. I will
come later to the way that their case was pleaded, but put generally they
complained that he failed to secure capital gains tax retirement relief in
respect of the years 1989/1990. They claimed damages of about £33,000
and interest.
[3] On 16 November 1998 Mr Y. gave notice of an application for, amongst
other relief, an order setting aside the summons on the basis that the
courts of England had no jurisdiction over Mr Y. under the Civil Jurisdiction
and Judgments Act 1982. On behalf of Mr Y. it was submitted that that
resulted from the fact that he was domiciled in Ireland and the matters
raised in the particulars of claim did not fall within Article 5(1) of the
Convention which is in these terms:
A person domiciled in a Contracting State may, in another Contracting
State, be sued--
1. In matters relating to a contract, in the courts for the place of
performance of the obligation in question...
There was no dispute that Mr Y. was domiciled in Ireland and therefore
the courts of that State had jurisdiction unless Article 5(1) applied. It was
the contention of Mr Y. that the place of performance of the obligation that
he was alleged to have undertaken on behalf of Mr and Mrs B. was Ireland
and, in those circumstances, it was the courts of that country which had
exclusive jurisdiction over him. The judge realised that the case had been
pleaded both in contract and in tort, but he said:
It is common ground now between counsel, and I am grateful to them
both for concentrating my mind on the issue, that what I have to consider
in deciding whether the Article applies is the place of performance of the
substantive obligation under the contract, or indeed the place where, if
you look at the matter as one of tort, the damage is suffered. If it were
the latter, it would of course be in Ireland, arguably, although that was
not gone into. I was asked to look at the matter essentially on the basis
of the contractual allegation and I have no doubt in a contract of the kind
that is alleged here that is the right approach.
The judge came to consider where was the principal place of performance
of the obligation. His conclusion was set out on page 6 of the transcript.
The accountant in Ireland was working in Ireland and doing everything
from and in Ireland. As a fact, he never either came over to the United
Kingdom as pleaded, or arranged for anyone else to act on his behalf
or on the plaintiff's behalf in the United Kingdom. So he had to look at
everything that was presented to him by the plaintiffs, I infer, and he
did that in Ireland. He had to see what their tax position was, or might
be, under English revenue law. He had to consult with them and take
advice as to how they could best present their position to the revenue
authorities. He had to put together any necessary representations or
forms and other matters that had to be completed and any accompanying
documents, and he had to despatch those to the Inspector.
Until he despatches something or communicates with the Inspector,
all his functions, I infer and find, were probably carried out in Ireland.
The minute he starts communicating, the next issue arises, in terms of
performance of a contract or an activity, as to where communication
occurs. I do not have the slightest doubt, and no authority has been
shown to me to the contrary, that that happens where the communication
is received. You can shout as loud as you like but, if nobody hears you,
you are not communicating.
The judge went on to analyse what had happened, namely that the
Inland Revenue had looked at the information given to them, supplied an
assessment and dealt with an appeal. He continued:
I am sorry if it seems a somewhat oversimplified analysis of the functions
but it seems to me that the overwhelming bulk of Mr Y.'s functions and
obligations under the contract took place in Ireland and that his functions,
in so far as they occurred in England, to put it metaphorically, ceased
when the product of his work in Ireland arrived in England and the
envelope was opened, and thereafter it was not any performance of his
function that occurred; it was the Revenue doing their business. I have
thought about it as best I can, because it seems to me that that is an
overwhelming argument for saying that the principal performance of the
contracting obligations in this case took place outside the jurisdiction and
in the foreign country.
The judge concluded that the complaint made against Mr Y. was not
properly triable in the United Kingdom under the Brussels Convention. He
also refused leave to appeal as he believed the decision turned upon an
issue of fact.
[4] Leave to appeal was subsequently given by Peter Gibson L.J. His
primary reason was:
It is properly arguable that the principal obligation under the agreement
pleaded in paragraph 17 of the amended particulars of claim whereby
the plaintiffs retained the third defendant "to represent, conduct or settle
the tax affairs" of the plaintiffs and in particular to settle the English
tax assessments required performance in England in that it was there
that communications had to be sent, and accordingly special jurisdiction
was conferred on the English courts under Article 5(1) of the Brussels
Convention.
[5] There was no evidence as to the terms upon which Mr Y. was
engaged. Thus it is necessary to look to the particulars of claim to see
what is alleged and from that to determine where was the place of
performance of the principal obligation relied on. The relevant parts of the
pleading are as follows:
17. By an agreement orally or otherwise the first and second plaintiffs
agreed to retain and employ the third defendant for payment as tax
agents and the third defendant accepted such retainer and employment,
inter alia, to represent, conduct and settle the tax affairs of the first and
second plaintiffs.
18. At all material times the third defendant well knew that the first and
second plaintiffs required settlement of the said tax assessment.
19. In the circumstances it was a term of the said retainer or alternatively
it was the duty of the third defendant, whether in contract or negligence,
to exercise all reasonable care and skill as tax agents to represent,
conduct and settle the tax affairs of the first and second plaintiffs.
20. In the purported pursuance of their retainer and employment the third
defendant prepared and submitted an amended tax computation together
with written representations on behalf of the first and second plaintiffs for
the financial year ended 5 April 1990 in respect of the said business on
24 June 1994 which showed tax payable at £5,649. In breach of the said
implied term of their contract of employment and/or by their negligence,
the third defendant failed to ensure attendance and/or representation
at a hearing before the General Commissioners of Inland Revenue on
15 February 1995 causing determination of the said assessment without
regard to any reliefs, allowances or exemptions in the sum of £32,973.
...
23. The particulars of the breach by the third defendant are as follows:--
(a) Failing to correspond with HM Inspector of Taxes after 13 December
1994.
(b) Failing to make adequate representations on behalf of the first and
second plaintiffs as respects the claim for residential liability relief and ill-
health retirement relief.
(c) Failing to notify the first and second plaintiffs of the decision of HM
Inspector of Taxes dated 6 December 1994.
(d) Failing to take any/or adequate instructions from the first and second
plaintiffs.
(e) Failing to make any and/or adequate representations after 6
December 1994 on behalf of the first and second plaintiffs.
(f) Failing to notify the first and second plaintiffs of a hearing scheduled
for 15 February 1995 before the General Commissioners of Inland
Revenue.
(g) Failing to make adequate representations, if at all, in respect of the
said hearing.
(h) Failing to and/or failing to attempt to settle adequately, if at all, with
HM Inspector of Taxes the availability of residential liability relief and/or
ill-health retirement relief and/or annual exemptions in respect of the said
assessment prior to the said hearing.
(i) Failing to ensure representation and/or attendance at the said hearing.
(j) Failing to notify the first and second plaintiffs of the determination by
the General Commissioners of Inland Revenue.
(k) Failing to advise and/or take further instructions from the first and
second plaintiffs following the said determination.
...
25. In consequence of these matters the plaintiffs have suffered loss and
damage.
PARTICULARS
(a) A liability to pay Capital Gains Tax of £32,973 in respect of
1989/1990.
(b) Interest on overdue tax pursuant to section 86 Taxes Management Act
1970.
(c) Loss of ill-health retirement relief.
(d) Loss of residential liability relief.
(e) Loss of the annual redemption of chargeable gains.
[6] Mr David Quest who appeared on behalf of Mr Y. supported the
conclusion reached by the judge. He submitted that the breaches of
contract set out in the particulars could be classified into three types:
first, failing properly to advise, notify or take instructions from Mr and
Mrs B.; secondly, failing to make any or any adequate representations
to the Inland Revenue; thirdly, failing to ensure representation and or
attendance at the hearing before the General Commissioners on 15
February 1995. As to the first class, he submitted that the alleged failures
would inevitably be performed entirely in Ireland and not in England.
As to the second class, he pointed out that Mr Y. was employed to draft
and send correspondence and written representations. Once he had done
his work he placed it in the post. He undertook no contractual duty to
guarantee transmission of his letters to England. To the extent that the
receipt of the correspondence in England was part of the performance
of the obligation, it was a minor part of the obligation having regard
to the obligation when looked at as a whole. As to the third class, Mr
Quest submitted that it could not have been expected that Mr Y. would
personally travel from Cork to Eastbourne. His obligation at most was to
ensure representation either written or by a local agent, or by counsel.
Again, any work which was or should have been done by Mr Y. would have
been done in his office in Cork.
[7] Mr Nicholas Storey who appeared on behalf of Mr and Mrs B. before
us but not below, submitted that the judge had not concentrated on what
was the place of performance of the principal obligation. So far as Mr and
Mrs B. were concerned it was of no concern to them whether Mr Y. wrote
letters to the Inland Revenue from Ireland or from any other part of the
world. What was important was that they reached the Inland Revenue
and had an effect upon them. His obligation was to take appropriate steps
to obtain satisfactory tax relief from the United Kingdom Inland Revenue
which, if not achieved by written representation, had to be achieved
at the hearing before the Commissioners on 15 February 1995. The
pleaded obligation under the contract was that Mr Y. should "represent,
conduct and settle" the appellants' claim for relief. That was the principal
obligation which had to be carried out in the United Kingdom. That he
submitted was the correct test. To support that submission he drew to our
attention the House of Lords decision in Union Transport v. Continental
Lines S.A. (which it seems was not before the judge) and, in particular,
the passages at pages 19C-E and 21 in the speech of Lord Goff. Lord Goff
cited these passages from the decision of the European Court of Justice in
Shenavai v. Kreischer:
16. In that connection it should first be observed that contracts of
employment, like other contracts for work other than on a self-employed
basis, differ from other contracts--even those for the provision of
services--by virtue of certain particularities: they create a lasting
bond which brings the worker to some extent within the organisational
framework of the business of the undertaking or employer, and they are
linked to the place where the activities are pursued, which determines
the application of mandatory rules and collective agreements. It is on
account of those particularities that the court of the place in which the
characteristic obligation of such contracts is to be performed is considered
best suited to resolving the disputes to which one or more obligations
under such contracts may give rise.
17. When no such particularities exist, it is neither necessary nor
appropriate to identify the obligation which characterises the contract and
to centralise at the place of performance thereof all the obligations under
the contract. The variety and multiplicity of contracts as a whole are such
that the above criterion might in those other cases create uncertainty
as to jurisdiction, whereas it is precisely such uncertainty which the
Convention is designed to reduce.
18. On the other hand, no such uncertainty exists for most contracts
if regard is had solely to the contractual obligation whose performance
is sought in the judicial proceedings. The place in which that obligation
is to be performed usually constitutes the closest connecting factor
between the dispute and the court having jurisdiction over it, and it is
this connecting factor which explains why, in contractual matters, it is the
court of the place of performance of the obligation which has jurisdiction.
19. Admittedly, the above rule does not afford a solution in the particular
case of a dispute concerned with a number of obligations arising under
the same contract and forming the basis of the proceedings, commenced
by the plaintiff. However, in such a case the court before which the matter
is brought will, when determining whether it has jurisdiction, be guided
by the maxim accessorium sequitur princip ale; in other words, where
various obligations are at issue, it will be the principal obligation which
will determine its jurisdiction. That complication does not, however,
arise in the case referred to in the question raised by the Landgericht
Kaiserslautern.
[8] I accept that the particulars of breaches set out in paragraph 23
can be broadly categorised in the way suggested by Mr Quest. However
they have to be read as part of the whole pleading and as particulars.
The pleaded retainer was "to represent, conduct and settle the tax
affairs of the first and second plaintiffs". Those were obligations that
had to be performed in England as that was the place where the Inland
Revenue were situated. I accept that the writing of letters formed part
of the obligation, but the important element of that obligation was the
communication of the views expressed in them to the Inland Revenue, as
only in that way could Mr and Mrs B. be represented. Paragraph 20 of the
particulars of claim is also important as it sets out the alleged breach of
contract by Mr Y.. It was held that he:
failed to ensure attendance and/or representation at a hearing before the
General Commissioners of Inland Revenue on 15 February 1995 causing
determination of the said assessment without regard to any reliefs,
allowances or exemptions in the sum of £32,973.
The consequence was according to the appellants the loss and damage
particularised in paragraph 25. Thus the breach alleged was the failure
to provide representation at the hearing on 15 February 1995. The
representation had to be performed in England. If Mr Y. did not engage
the services of another, as he did not, then it was he who had to attend in
person at the hearing.
[9] Retirement relief could only have been obtained in England; ultimately
by making appropriate representations at the hearing before the
Commissioners. The particulars set out in paragraph 23 of the statement
of claim go wider than the pleaded breach in paragraph 20, but they
cannot alter the obligations of the contract nor the alleged breach. The
principal obligation was to represent, conduct and settle the tax affairs
of Mr and Mrs B. and the breach was the failure to attend or to ensure
the appellants were represented at the hearing. In my view that was an
obligation which had to be performed in England.
[10] In view of the conclusion I have reached it is not strictly necessary
for me to deal with the other ground of appeal, but I will shortly state
the reason why it should be rejected. Complaint was made that the judge
had failed to consider separately the allegation of negligence which it was
submitted, fell within Article 5(3) of the Brussels Convention, with the
consequence that Mr and Mrs B.'s case was properly brought in England.
Mr Storey was forced to accept, having considered the judgment of
Staughton L.J. in Source Ltd v. TUV Rheinland Holding AG that the claim
in this case, although pleaded both in contract and tort, was a claim in
a matter "relating to a contract" and therefore Article 5(1) applied, not
Article 5(3).
[11] For the reasons given I would allow the appeal.
Ward L.J.:
[12] It may come as a surprise to Mr Y., whose practice as an accountant
is conducted from Dublin, that he should be liable to be sued in the Lewes
County Court by Mr and Mrs B. who instructed him to act on their behalf
when they were also resident in Ireland. Nevertheless, in my judgment,
he is subject to the jurisdiction of our courts.
[13] The European authorities, to which my Lords have made reference,
compel us to adopt as our test this question, namely: is the principal
obligation which forms the basis of the legal proceedings to be performed
in England or in Ireland? In this case the answer depends upon the
pleadings. Paragraph 17 of the particulars of claim pleads an oral
agreement "to retain and employ (Mr Y.)... as tax agent and (Mr Y.)
accepted such retainer and employment, inter alia, to represent,
conduct and settle the tax affairs of (Mr and Mrs B.)." Paragraph 20
pleads the breach in terms that Mr Y. "failed to ensure attendance and/
or representation at a hearing before the General Commissioners of
Inland Revenue on 15 February 1995 causing determination of the said
assessment without regard to any reliefs, allowances or exemptions in the
sum of £32,973." That sum is claimed as the damage suffered.
[14] An analysis of that arrangement leads ineluctably to a conclusion
that the main task for Mr Y. was to persuade the Inland Revenue that
Mr and Mrs B. were entitled to reliefs, allowances or exemption which
would avoid or at least reduce their liability to tax. Advice given to Mr
and Mrs B. was no doubt given in Dublin but the only way Mr Y. could
achieve the result they required was by making his representations to and
if necessary attending the hearing that was fixed in England. That was the
principal obligation. He could only perform it in England. He is therefore
subject to the jurisdiction of the English court.
[15] So I agree with my Lords whose judgments I have read in draft that
the appeal should be allowed.
Pill L.J.:
[16] Mr Ian Y. ("the defendant") is a chartered accountant domiciled in
Ireland and practising his profession there. He is alleged to be in breach
of a contract of services whereby he agreed to "represent, conduct and
settle the tax affairs" of Mr and Mrs B. ("the plaintiffs"). They instructed
him in about May 1994 when they were resident in Ireland. The main
purpose of the retainer was to secure settlement of a United Kingdom tax
assessment for the year of assessment 1989/90.
[17] Article 2 of the Brussels Convention provides that "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".
The plaintiffs seek to sue the defendant in England by virtue of Article
5(1) of the Brussels Convention which, by way of exception to Article
2, provides that a person domiciled within a Contracting State may, in
another Contracting State, be sued "in matters relating to a contract, in
the courts for the place of performance of the obligation in question".
[18] Aldous L.J. has set out the allegations made against the defendant
in the particulars of claim. On the defendant's behalf it is submitted that
he was instructed to perform professional services in Ireland and he is
sued for an alleged breach of his obligations to perform those services.
On behalf of the plaintiffs, stress is placed upon the defendant's obligation
to deal with an English public authority, the Inland Revenue, and the
allegation that the defendant failed to ensure representation and/or
attendance at a hearing before the General Commissioners of Inland
Revenue in England on 15 February 1995.
[19] In Etablissements A. de Bloos Sprl v. Etablissements Bouyer S.A., the
European Court of Justice stated that "for the purposes of determining the
place of performance within the meaning of Article 5,... the obligation to
be taken into account is that which corresponds to the contractual right
on which the plaintiff's action is based". In Custom Made Commercial Ltd
v. Stawa Metallbau GmbH, the Court stated that:
although the connecting factor is the reason which led to the adoption of
Article 5(1) of the Convention, the criterion employed in that provision
is not the connection with the Court seised but, rather, only the place
of performance of the obligation which forms the basis of the legal
proceedings.
[20] Aldous L.J. has also cited passages from the decision of the Court in
Shenavai v. Kreischer, passages which were cited by Lord Goff in Union
Transport v. Continental Lines S.A. It will be the "principal obligation"
which will determine jurisdiction. By reference to De Bloos, Lord Goff
stated, that "regard must be had to the contractual obligation under
consideration and not to the contract as a whole". I add in fairness to the
judge that he did not receive assistance from counsel upon the authorities
to which we have been referred.
[21] Applying those principles, I have found the decision more difficult
than has Aldous L.J. I cannot accept as a general principle that when a
professional man is instructed to perform services in one jurisdiction he
becomes liable to another Brussels Convention jurisdiction if the services
involve dealing with a public authority in that other jurisdiction. Services
were rendered in Ireland even if they involved correspondence, written
and oral, with an English authority. Most of the allegations of breach
of contract in the particulars of claim concern conduct in Ireland. I do
not accept that because letters are effective only when received by the
Inland Revenue in England that the services of the accountant are thereby
rendered in England. They are rendered in Ireland albeit including an
obligation to communicate from Ireland with English authorities.
[22] However, I note the reference in Shenavai to the "principal
obligation" Moreover, in Custom Made Commercial, the Court stated:
21. It follows that under Article 5(1), in matters relating to a contract, a
defendant may be sued in the courts for the place of performance of the
obligation in question, even where the court thus designated is not that
which has the closest connection with the dispute.
22. It is accordingly necessary to identify the "obligation" referred
to in Article 5(1) of the Convention and to determine its "place of
performance".
23. The Court has ruled that the obligation cannot be interpreted as
referring to any obligation whatsoever arising under the contract in
question, but is rather that which corresponds to the contractual right on
which the plaintiff's action is based (see Case 14/76 De Bloos v. Bouyer
[1976] E.C.R. 1497, paragraphs [10] and [13]).
[23] On the facts as pleaded, I conclude that the "principal obligation"
and the "obligation which forms the basis of the legal proceedings" is the
alleged failure to "ensure attendance and/or representation at a hearing
before the General Commissioners of Inland Revenue on 15 February
1995". The plaintiffs are entitled to say that it is that obligation which
is the "contractual obligation under consideration". The obligation may
have been capable of performance, by agreement between the parties, by
someone other than the defendant appearing at the English hearing but
I agree with Aldous L.J. that England should be regarded as the place of
performance of that obligation.
[24] I reach that conclusion upon the particular facts of this case.
Professional men are not in general, in my view, necessarily suable in
another Brussels Convention jurisdiction because a part of the services
they render involves dealing with public or private authorities in that other
jurisdiction.
[25] For those reasons, I agree that this appeal should be allowed.
Appeal allowed with costs.