[1] In the month of April 1990 the defendant appointed the plaintiff
as exclusive distributor for Ireland of certain hygiene testing systems.
By letter dated 5 March 1992 the defendant purported to terminate
the appointment of the plaintiff as such distributor with effect from 31
March 1992. The present proceedings have been brought by the plaintiff
to enforce its distributorship agreement. The plaintiff claims damages
for breach of contract; an injunction restraining and prohibiting the
defendant, its servants or agents from appointing any third party as
sole distributor in respect of the defendant's products throughout the
Republic of Ireland and Northern Ireland; and specific performance of its
agreement.
[2] The defendant has its registered office in the United Kingdom and
the proceedings were served on the defendant at its registered office
pursuant to the provisions of the Jurisdiction of Courts and Enforcement
of Judgments (European Communities) Act 1988. The defendant has
brought the present application for an order that the Court has no
jurisdiction to hear the proceedings pursuant to the provisions of the
said Act. The Act embodies in its Schedule the Brussels Convention of
27 September 1968. The relevant Articles are Article 2 and Article 5(1).
Article 2 provides that subject to the provisions of this Convention "person
domiciled in a contracting state shall whatever their nationality be sued
in the courts of that state". Article 5(1) provides: "a person domiciled
in a contracting state may, in another contracting state, be sued: (1) In
matters relating to a contract, in the courts of the place of performance of
the obligation in question;..."
[3] The issue raised in the present case is a new one. It raises the
question as to the proper construction of Article 5(1). In De Bloos v.
Bouyer, the facts were similar to those in the present case. A French
manufacturer had granted a Belgian distributor exclusive distribution
rights for its products in Belgium and elsewhere. The manufacturer
terminated the agreement. The distributor sought damages before
the Belgian courts for wrongful termination. The Belgian court refused
jurisdiction upon the basis that the goods were delivered in France and
paid for in France, but referred the matter to the European Court. The
judgment sets out a number of principles to be applied in determining
which court should have jurisdiction. It was held that Article 5(1) could
not be interpreted as referring to any obligation whatever arising under
the contract in question, because, so far as possible, it was intended
that there should only be one court having jurisdiction in relation to
a particular contract. Obligation was held to refer to the contractual
obligation forming the basis of the legal proceedings. Accordingly, for the
purposes of determining the place of performance within the meaning
of Article 5, the obligation to be taken into account was that which
corresponded to the contractual right on which the plaintiff's action was
based, i.e. the contractual right relied upon by the plaintiff in support of
its claim. In the particular type of dispute before the court, the obligation
to be considered for the purposes of applying Article 5(1) is that which the
contract imposes on the defendant and the non-performance of which is
relied upon by the plaintiff in support of its claim. Where the action is for
the payment of damages, it is for the national court to ascertain whether,
under the law applicable to the contract, an independent contractual
obligation or an obligation replacing the unperformed contractual
obligation is involved.
[4] From this decision it can be seen that the obligation to be considered
is that which corresponds to the right which the plaintiff seeks to enforce
and that, where the claim is founded in damages, the fact that damages
are claimed is of no assistance in determining the obligation but rather
the national court must determine the nature of the obligation which has
been broken and for which damages are being claimed.
[5] In a later case Shenavai v. Kreischer, a German architect sued for fees
for work done in Germany for a Dutch client. Under German law, which
was the law applicable, the place of payment was Holland. A number
of further principles emerge from a consideration of the judgment in
this case. The location of the "place of performance" of an obligation is
to be determined pursuant to the law governing the obligation at issue
and in accordance with the Rules of the Conflict of Laws of the Court
before which the matter was brought. De Bloos v. Bouyer was approved.
The Court affirmed the general proposition that Article 5(1) intended
to establish the forum of the place of performance by reference to the
contractual obligation on which the judicial proceedings were actually
based. In doing so, it rejected an argument to confine jurisdiction for
all disputes arising under a contract to one particular forum. It had
been argued that this latter proposition had been established by Ivenel
v. Schwab. The Court rejected this as a general proposition, but did
recognise that contracts of employment with which Ivenel v. Schwab was
concerned had special characteristics which justified such an approach.
The Court recognised that where the proceedings were based upon
more than one obligation, the test as formulated in the case of a claim
based upon one obligation might be difficult to apply. It dealt with that
issue by holding that where various obligations were the subject of
proceedings, it was to be the principal obligation which determined the
court's jurisdiction.
[6] These European cases have been considered in England in Medway
Packaging Limited v. Meurer Maschinen, which again involved an action
for damages for breach of a distributorship agreement. An English
distributor sued a German manufacturer in England. The plaintiff claimed
that the defendant was in breach of the agreement by:
(1) failing to give reasonable notice of termination; and
(2) appointing another distributor in its place.
Dealing with the nature of the obligations alleged to have been broken
and where they had to be performed. Hobhouse J. said:
both these breaches are breaches which take place in the United
Kingdom. The obligation to give notice to the Plaintiffs is an obligation
to be performed in the United Kingdom: the obligation not to supply any
other United Kingdom distributor is an obligation which the Plaintiffs say
has to be performed in England as much as in Germany and they can
rely upon the breaches, or anticipatory breaches, which they have a good
arguable case have been committed within the jurisdiction of this Court.
These are the obligations which correspond to the rights upon which the
Plaintiffs' action is based.
[7] The latter part of this passage identifies the difficulty in fixing the
place of performance of a negative obligation. The defendant has an
obligation not to permit any other distributor to sell its goods within
his jurisdiction. So long as the defendant observes this provision of
the contract, there can be no breach of such term. The obligation is
performed by doing nothing. If he then breaches that obligation, this
may occur in a number of ways. He may sell his goods to another within
this jurisdiction; he may enter into a written agreement with the foreign
parent of an Irish subsidiary. In the former instance, the breach will occur
when the goods are delivered; in the latter case, when the agreement is
executed. But it seems unlikely that the forum for the plaintiff's action
should depend upon the place of such breach. In the latter instance,
suppose the defendant executed a contract in Paris to permit a French
company to sell its goods here through a subsidiary. in competition with
the plaintiff. Would the only forum for the plaintiff's claim be France? It
hardly seems likely.
[8] It seems to me that in the case of negative obligation the court must
look to the right to which such obligation corresponds and upon which
the proceedings are based. The place of performance of such obligation
will be the place where the right which corresponds to it is to be taken.
The definition of "obligation" in the Oxford English Dictionary under the
heading "Law" indicates the correspondence between right and liability
and their equation to obligation. The definition is as follows:
2. Law. An agreement, enforceable by law, whereby a person or persons
become bound to the payment of a sum of money or other performance:
the document containing such an agreement; especially in English law,
a written contract or bound under seal containing a penalty with the
condition annexed. Also, the right created or liability incurred by such an
agreement, document, or bond.
[9] This is not the type of case covered by Ivenel v. Schwab. The
principles laid down in De Bloos v. Bouyer and Shenavai v. Kreischer must
be applied. The first question is to consider the substance of the right
which the plaintiff is seeking to enforce. In so far as it seeks damages,
it is the underlying right giving rise to the right to damages and not the
right to damages which is relevant. In the present case, there are two
rights which the plaintiff seeks to establish: (1) the right to continue as
exclusive distributor of the defendant's products; and (2) the right to
continued supply of these products.
[10] Before considering the place of performance, it is necessary to
determine which of these rights is the principal one. In my view, it is the
former which may be said to be the right which forms the basis of the
proceedings. The principal obligation to which these proceedings relate
is the obligation to continue the exclusive distributorship. Continuation
of supply is necessary for such continuation, but is subsidiary to it.
The question as to jurisdiction therefore depends upon the place of
performance of this principal obligation. In my view it can only be this
jurisdiction.
[11] Counsel for the defendant has submitted that the obligation of the
defendant is to supply the goods, which are then resold by the plaintiff as
a principal. This obligation is performed in Wales because that is where
delivery takes place. If that is so, and if the primary obligation was the
obligation to supply, I would have accepted her submission. Such would
have been the position if the action were one for damages for the supply
of defective goods. However, once there are conflicting claims which might
result in conflicting jurisdictions, it is clear that only the primary claim
governs jurisdiction.
[12] In the circumstances the defendant's application will be refused.
Application dismissed.