The plaintiff, an Irish registered company, manufactures muscular
electrostimulation products under the brand name, ‘Slendertone’. It
acquired, in 1990, the assets of an earlier Irish company, the original
bearer of its present name. That company was placed in receivership.
Its assets (excluding all distribution contracts) were sold and the plaintiff
acquired them from the purchaser. That earlier company had had a
trading relationship with the defendant, a French registered company. The
latter distributed its products in France.
From 1990, the plaintiff has sold its products to the defendant. It is
common case and the plaintiff accepts that there was an agreement under
which the defendant acted as its distributor in France. The defendant
claims that this was an exclusive distribution agreement, which is denied
by the plaintiff. There is no written distribution agreement.
From about the year 1995, the plaintiff commenced to include with
its invoices a set of printed terms and conditions of sale containing
a jurisdiction clause which is central to the appeal before this Court.
Between 1995 and 1997, there were discussions between the parties
regarding terms of credit and payment and the level of sales. Ultimately,
disputes occurred and the plaintiff wrote a letter to the defendant on 14th
October 1997 as follows:
"Dear Mme Chouchana
The business relationship between Bio-Medical Research and Delatex is
a source of serious dissatisfaction for Bio-Medical Research in terms of
the discrepancy between expected and actual sales results, and Delatex's
refusal to operate within the agreed financial/credit terms of the account
which may require us to take further action. So while continuing to work
with Delatex in the French market Bio-Medical Research intend to also
do business with customers other than Delatex. Bio-Medical Research
intend to commence this activity in five months time, which is the time
necessary in order to carry out the selection process of other distributors.
We look forward to this arrangement working well for both of us in the
future.
Yours sincerely"
The principal bone of contention between the parties is the defendant's
claim to have been appointed exclusive distributor, in respect of which the
defendant commenced proceedings in France, claiming damages from the
plaintiff, before the Tribunal de Commerce (Commercial Court) of Creteil
on 13th August 1998.
The plaintiff, however, had already issued proceedings in Ireland in
respect of the same subject-matter on 7th April 1998. The plaintiff claims
that the Irish courts have jurisdiction pursuant to the provisions of the
Convention. This claim was rejected by Mr Justice McCracken in the High
Court and the plaintiff has appealed.
The general Indorsement of claim on the Plenary Summons is as follows:
"THE PLAINTIFF 'S CLAIM IS FOR: -
1. A declaration that the Plaintiff is not party to an exclusive distribution
agreement with the Defendant in relation to the sale and distribution of
slimming products and/or services in France.
2. In the alternative, if any exclusive distribution agreement existed
between the parties, which is denied, a declaration that same was
effectively terminated by a letter of termination, dated 14th October,
1997, from the Plain' to the Defendant "
3. The sum of FFl,314,607 being the sum outstanding in respect of goods
and services provided by the Plaintiff to the Defendant between 1995 and
1997 under the terms of an agreement entered into by the Plaintiff of the
one part and the Defendant of the other part, which said agreement is
subject to the jurisdiction of this Honourable Court.
4. Damages for breach of contract.
5. Interest pursuant to S22 Courts Act, 1981.
6. Further and or other relief.
7. Costs."
The Certificate required by the Rules to found jurisdiction read as follows:
"CERTIFICATE
Pursuant to the Rules of the Superior Courts, 1989 (Statutory Instrument
No. 14 of 1989 (it is hereby certified that the Court has power under
the Jurisdiction of Courts and Enforcement of Judgments (European
Communities) Act, 1988 by virtue of Section 3 thereof and pursuant to
Section 2 Article 5(3) and Article 5(1) of the Convention on Jurisdiction
and Enforcement of Judgments in Civil and Commercial Matters, (Brussels
1968) as set out in the First Schedule to the aforesaid Act, to hear
and determine the claim and it is further certified that no proceedings
involving the same cause of action are pending between the parties in
another contracting state."
It will be noted that Articles 5(3) and 5(1) of the Convention are there
invoked. Article 5(3) relates to jurisdiction in tort and it has not been
argued that it is relevant. On the other hand, the defendant accepts
that the Irish courts have jurisdiction in respect of paragraph 3 of the
Indorsement of Claim, as the obligation to pay is to be performed at the
place of business of the creditor, which is in Ireland.
The defendant entered a Conditional Appearance and issued a Notice
of Motion contesting jurisdiction in respect of paragraphs 1, 2 and 4 of
the Indorsement of Claim on 3rd December 1998. As to the merits, the
defendant claims to have promoted the sales of the plaintiff’s products in
France, to have established a nationwide distribution network. It claims
to have been exclusive distributor for the plaintiff s products in France
for more than ten years and complains of the wrongful termination of
that relationship by the letter of 14th October 1997. It claims specifically
that performance of the exclusive distribution agreement had taken place
exclusively in France and that only the French courts have jurisdiction.
The replying affidavit sworn by Mr Kevin McDonnell on behalf of the
plaintiff takes issue with the defendant on the facts surrounding the
alleged exclusive distribution agreement, pointing out that any such
agreement as might have existed in the 1980's would have to have
been with a different company, even though one bearing the same name
as the plaintiff. Mr McDonnell says that the plaintiff and the defendant
commenced business dealings with the defendant after May 1990 under
terms that the plaintiff would sell its ‘Slendertone’ to the defendants who
would sell them on to the French public but that there was no agreement
that the defendant was to be sole or exclusive distributor.
Mr McDonnell went on to swear that on or about 17th January 1995
the defendant was informed by "FAX MESSAGE" as follows: "A copy
of the BMR invoice no. 1661 (2 pages) is attached. Please note that
the invoices are printed in a new style format." From that time printed
terms and conditions of sale were printed on each of the invoices. The
defendant at no time raised any objection either to the introduction of
there terms and conditions or to their contents. The plaintiff says that
the defendant's continued dealings with the plaintiff on these terms
implicitly acknowledges them. The material term, for present purposes,
is no 15. This is headed: "Governing Law" and reads: "The contract shall
be governed by and construed in accordance with the laws of Ireland and
the Buyer hereby irrevocably submits to the jurisdiction of the Irish Courts
in relation to all matters in dispute hereunder." In fact, the defendant has
not contested the applicability of the printed terms to its dealings with
the plaintiff. It contests only their interpretation: they do not, it says,
extend to the question of the existence of a term making exclusive the
distribution agreement that is agreed to have existed.
In the same affidavit of Mr McDonnell, the plaintiff claimed for the first
time that, by reason of Condition no 15, the provisions of Article 17
of the Convention come into play and the Irish Courts have exclusive
jurisdiction. Consequently, the plaintiff applied to the High Court for leave
to amend the certificate on the Plenary Summons to include a claim for
Irish jurisdiction based on Article 17 of the Convention.
The relevant provisions of the Convention for the issues now before the
court are to be found in Title II on "Jurisdiction." The most important
provision under Section 1 "General Provisions" is in Article 2:
"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 3 provides: "Persons domiciled in a Contracting State may be sued
in the courts of another Contracting State only by virtue of the rules set
out in Sections 2 to 6 of this Title."
Section 2 is headed: "Special Jurisdiction". It includes Article 5, which has
seven sub-heads. Article 5 reads:
"A person domiciled in a Contracting State may, in another Contracting
State, be sued:
1. In matters relating to contract, in the courts for the place of
performance of the obligation in question ...”
The other six sub-heads of article 5 are not directly relevant.
Section 5 is headed "Exclusive Jurisdiction". It contains only Article 16
which deals with a number of specified subject matters of legal action.
Section 6 is headed: "Prorogation of Jurisdiction." It includes Article 17,
which, so far as relevant provides:
"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 in writing or evidenced in writing or,
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."
The plaintiff's claim for Irish jurisdiction, in respect of paragraph 1 of
the Indorsement of Claim, based on Article 5(1) can be shortly disposed
of. That claim concerns whether an exclusivity term exists, not whether
it has been breached. The learned High Court judge correctly identified
the "obligation in question" for the purposes of the Article as being
the obligation (assuming it to exist) of the defendant to distribute the
plaintiff's goods in France and insofar as the plaintiff was concerned and
assuming, for this purpose, the existence of the disputed exclusivity term,
to have those products distributed exclusively by the defendant in France.
The Court of Justice has held that "for the purpose 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" (Case 14/76 De Bloos v Bouyer
[1976] ECR 1497 at paragraph 13). It was quite correctly concluded at
the hearing of the appeal that the obligation relevant to the first heading
of the Indorsement of Claim is one to be performed in France whose
courts accordingly have jurisdiction, although the defendant in those
proceedings, the plaintiff in the present appeal has its seat in and is
domiciled in Ireland. The plaintiff, having been incorporated under Irish
law, has its domicile in Ireland, by virtue of Article 52 and Part III of the
Fifth Schedule to the Convention, as applied by section 13(2) of the Act
of 1988. That is, however, not a matter that needs to be decided by this
court.
Mr Paul Gallagher, S.C., for the plaintiff, nonetheless, contended for Irish
jurisdiction in respect of the second heading of the Indorsement of Claim.
The claim that the agreement was effectively terminated by the letter
of 14th October 1997 should be considered, he said, by reference to the
obligation underlying the justification for termination. He relied on the
dictum, quoted above from De Bloos v Bouyer, and said that the plaintiff’s
action is based on the breach by the defendant of an obligation to make
payments for goods under the actual trading arrangements or distribution
agreement, whatever their nature.
Before reaching a conclusion on this point, I should refer briefly to the
relationship, as it has been described by the Court of Justice and by this
Court, between the general principle of jurisdiction based on domicile of
the defendant and the cases of Special Jurisdiction laid down in Article
5. Section 4 of the Act of 1988 requires the Court to take judicial notice
of "any ruling or decision of, or expression of opinion by, the European
Court" in the matter.
In Handbridge Limited v British Aerospace Communications Ltd [1993]
3 I. R. 343, at 358, Finlay C.J, delivering the unanimous judgment of
the Supreme Court held that the “onus is on the plaintiff who seeks to
have his claim tried in the jurisdiction of a contracting state other than
the contracting state in which the defendant is domiciled to establish that
such claim unequivocally comes within the relevant exception.”. The cases
of Special Jurisdiction constitute, nonetheless important independent
bases of jurisdiction. The derogations were introduced "in view of the
existence in certain well-defined cases of a particularly close relationship
between a dispute and the court which may be called upon to take
cognisance of the matter, with a view to the effective organisation of
the proceedings." (Case C-106/95 Mainschiffahrts-Genossenschaft eG
(MSG) v Les Gravières Rhénanes SARL [1997] ECR I¬911 paragraph 29
citing case 12/76 Tessili v. Dunlop [19761 ECR 1473, paragraph 13). The
Court stated in a comparatively recent case regarding Article 5(2), Case
C-295/95 Farrell v Long [1997] ECR 1-1683 at paragraph 18 that “each of
the derogations from that rule provided for by Article 5 pursues a specific
objective.” The dictum of Finlay C.J., does not mean, therefore, that the
cases of Special Jurisdiction enjoy any status, where they are applicable,
rendering them inferior to the rule based on Article 2. In those cases, the
plaintiff has an alternative basis for jurisdiction. The Special Jurisdiction
does not oust (prorogate) the domicile basis of jurisdiction as in the case
of Article 17.
The Court of Justice has ruled consistently that "the place of performance
of the obligation in question is to be determined by the law governing
that obligation according to the conflict rules of the court seised." (see
most recently Case C-420/97 Leathertex Divisione Sintetici SpA v Bodetex
BVBA [1999] ECR I-6747 judgment 5th October 1999 paragraph 33). In
the present case, as I have said, there is no dispute that the obligation to
pay for goods purchased falls to be performed in Ireland at the plaintiff
s piace of business. For the plaintiff to succeed regarding paragraph 2 of
the Indorsement of Claim, the claim made in that paragraph has to relate
to that obligation i.e. the obligation to pay. As I read the dictum from
Leathertex, the piace of performance of the obligation is a matter for this
Court to decide. As I will now explain, I do not think that is the relevant
obligation for the purposes of jurisdiction in respect of paragraph 2 of the
Indorsement of Claim.
What the letter purports to do is by notice to terminate the exclusivity of
the distribution agreement. Miss Finlay cited an English authority, Medway
Packaging v. Meurer [1990] 2 Lloyd's Law Reports 112, for the proposition
that the notice of termination should be given at the place of business
of the distributor. The Court of Appeal in that case was interpreting the
terms of a particular contract in accordance with English law. On one view
the question in this case might have to be determined according to French
Law. However, it is the plaintiff s case that condition 15 requires the
distribution agreement to be interpreted in accordance with Irish law and
the issue of jurisdiction has to be decided on the basis of that contention.
Medway is strongly persuasive authority, with which I agree, to the effect
that if the matter were to be decided according to Irish law, the place of
performance of the obligation to give notice is France. The claim made at
paragraph 2 of the Indorsement of Claim depends on the performance of
that obligation.
The letter of 14th October goes on, it is true, to express dissatisfaction
with the level of sales and this also relates to an obligation to be
performed by the defendant in France. It then continues: "and Delatex's
refusal to operate within the agreed financial/credit terms of the account
which may require us to take further action." This letter does not support
the plaintiff s contention that paragraph 2 of the Indorsement of Claim
relates to an obligation (timely payment of debts) which corresponds to
a contractual right upon which, to that extent, the action is based for the
purposes of the dictum from De Bloos v Bouyer. The letter, at most, claims
an implicit right to give notice so as to terminate the exclusivity clause by
reason of dissatisfaction with the business relationship. Nowhere does it
suggest that the notice is justified by any contractual term. In any event,
I believe that such a notice had to be given in France. Thus the claim that
the exclusivity clause has been validly terminated, which is the essence of
paragraph 2, is not based on and does not correspond to an obligation to
be performed in Ireland.
The plaintiff also seeks leave from this Court to amend the certificate
on the Indorsement of Claim so as to be able to rely on Article 17 of
the Convention. The defendant objects, inter alia, on technical grounds
such as that it is not in accordance with the Rules of the Superior Courts
to allow amendment of the Certificate after the issue of the Summons.
I propose, however, to look, in the first instance at the objective
justification for reliance on Article 17 in this case. If that does not exist,
there is no need to permit the amendment.
Article 17, where it applies, confers exclusive jurisdiction on the courts of
the Contracting State upon which the parties have agreed. The parties are
agreed in this case that the printed terms and conditions were effectively
introduced into their trading relationship, which is one occurring "in
international trade or commerce" and, furthermore, "in a form which
accords with practices in that trade or commerce of which the parties are
or ought to have been aware." To that extent the requirements of Article
17 may be assumed to have been met. In view of the conclusion I reach
on the scope of the printed terms it is not necessary to consider this issue
further.
The plaintiff argues that Condition 15 should be interpreted as applying
to the entire trading relationship between the parties and, therefore, the
distribution agreement (exclusive or otherwise). The defendant says that
it covers only the individual sales effected from time to time which were
the subject of the invoices on which these terms and conditions were
printed. This issue, it is agreed, is one of interpretation of the agreement.
It is, thus, a matter of national law for this court to decide in accordance
with the decision in Leathertex cited above. This is made easier by the
fact that the clause itself is, in its own terms, to be governed by Irish law.
The plaintiff relies on the MSG case cited above. However, that case
establishes only what is not disputed, namely, that printed terms
included, as here, with the invoices, may, depending on the proof of a
practice to that effect to the satisfaction of the national court, become
binding. More relevant to the nub of the present issue is the plaintiff
s reliance on the judgment of McGuinness J in the High Court in an
unreported case, Clare Taverns trading as Durty Nelly's v Charles Gill
trading as Universal Business Systems, TEC (UK) Limited and others
Third Parties) (Judgment 16 November 1999) and an English decision,
Continental Bank NA v Aeokos Cia Naviera SA & others [1994] 2 All ER
540.
In the Clare Taverns case, the goods which were alleged by the plaintiff
to be defective in an action against the defendant had been supplied
pursuant to contract terms by the English Third party which applied to
set aside the service of the proceedings in reliance on a printed term
conferring jurisdiction on the English Courts. The defendant advanced
an alternative basis for Irish jurisdiction by making a claim in negligence
and misrepresentation. McGuinness held that the jurisdiction clause was
effective to confer jurisdiction on the English courts and also ruled:
"The Defendant's claims of negligence, of misrepresentation, and
indemnity are "closely knitted" to the contractual claim, and indeed it
appears that very much the same evidence would be used in support of
all the claims. If, as I have held, the contractual claim falls to be decided
by the English Courts under clause 19, it would be extremely difficult and
costly to pursue separate proceedings in tort before the Irish Courts. In
my view all these inter-related claims must be tried together."
In the Continental case, which is cited in the Clare Taverns judgment, an
American bank had granted loans to a number of one-ship companies
managed by a Greek shipping company in Athens. The loan agreements
were to be governed by English law and each of the borrowers
"irrevocably submits to the jurisdiction of the English courts." Competing
proceedings were issued, in Greece seeking damages from the bank for
exercising its rights under the agreement contrary to Greek law, and in
England seeking an injunction to restrain continuance of the Greek action
as being in breach of the exclusive jurisdiction clause. The justification for
the Greek proceedings was an article of the Greek Civil Code providing
for reparation for damages for intentional violation of the "commands of
morality".
Mr Gallagher pointed to the view of the Court of Appeal that the answer
was to be found, not "in the niceties of language" but "in a common
sense view of the purpose of the clause." It decided that this approach
meant that disputes in connection with the loans were submitted to the
jurisdiction of the English courts.
The attempt in the Continental case to avail of a special provision of the
Greek Civil Code would, more or less directly, have negated the effect
of the jurisdiction clause. In Clare Taverns, the High Court judge was, in
fact, construing a term governed by English law and the two claims were
so closely connected that they could not realistically be tried separately.
The negligence alleged was merely a restatement of the contract claim.
In deciding whether these cases govern the present case, it must be
borne in mind that the Court of Justice has consistently required that
national courts carefully scrutinise the effects of contract terms of this
type. In Case 24/76 Estasis Salotti di Colzani Aimo and another v RUWA
Polstereimaschinen GmbH [1976] ECR 1831 the Court made a statement,
repeated in later cases, at paragraph 7:
"The way in which that provision is to be applied must be interpreted in
the light of the effect of the conferment of jurisdiction by consent, which
is to exclude both the jurisdiction determined by the general principle laid
down in Article 2 and the special jurisdiction provided for in Articles 5 and
6 of the Convention.
In view of the consequences that such an option may have on the
position of the parties to the action, 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 on 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.
The purpose of the formal requirements imposed by Article 17 is to
ensure that the consensus between the parties is in fact established."
It is accepted in the present case that the requirement of consensus
(more recently explained in Case C 159/97 Castelletti v. Trumpy [1999]
ECR 1-1597, paragraph 17 to 21) is satisfied, but the requirement that
the application of Article 17 be "strictly construed" also applies to the
interpretation of the jurisdiction clause. It is unnecessary to set out
in full the terms of the printed conditions. None of them contains any
reference to distribution, exclusive or otherwise, or even to the fact
that the goods are being sold for resale in France. They have all the
appearance of standard conditions regarding the sale of goods and
nothing more. It would require a very strained interpretation to apply
them to the question of the exclusivity of an agreement for distribution
of goods sold in another Member State of the European Community. This
is, as agreed, a matter of Irish law. The two cases cited in the course of
argument are helpful but readily distinguishable. I do not think that the
common-sense approach recommended in those cases at all requires
that the Condition be interpreted as requested by the plaintiff. There is
no purpose, therefore, in granting the amendment sought. The issue of
jurisdiction must be determined at this stage.
I would dismiss the appeal.