Lord Justice Rix :
1. The claimants, Scottish & Newcastle International Limited, sold cider
to the defendants, Othon Ghalanos Limited. The cider was loaded into
containers in Hereford, and shipped at Liverpool for Limassol in Cyprus. I
shall refer to the parties as sellers and buyers respectively. In this court
the sellers are respondents, and the buyers are appellants. Their dispute
at present is as to where the sellers may found jurisdiction for their claim
for the price of the cider. The sellers say that they can found jurisdiction in
England, on the ground that that was where the cider was delivered. The
buyers, who are a Cypriot company, and used to be the sellers' exclusive
distributors in Cyprus, say that they must be sued in Cyprus. This issue
has to be decided under the Judgments Regulation (Regulation (EC) No
44/2001).
2. It is well known that the basic rule of the Judgments Regulation is that
defendants domiciled in a member state must be sued in the courts of
that state (article 2). However, there are alternative bases of "Special
Jurisdiction", such as that found in article 5, which provides, so far as
relevant, as follows:
"A person domiciled in a Member State may, in another Member State, be
sued:
1. (a) in matters relating to a contract, in the courts for the place of
performance of the obligation in question;
(b) for the purpose of this provision and unless otherwise agreed, the
place of performance of the obligation in question shall be:
- in the case of sale of goods, the place in a Member State where, under
the contract, the goods were delivered or should have been delivered,
- in the case of the provision of services, the place in a Member State
where, under the contract, the services were provided or should have
been provided,
(c) if subparagraph (b) does not apply then subparagraph (a) applies."
3. The contract of sale, which it is common ground was governed by
English law, was for CFR (or cost and freight) Limassol. The buyers allege
that that amounted to, or that there was in any event a specific term of
overriding importance for, delivery in Limassol. That is disputed by the
sellers, but it is acknowledged that, were it so, then article 5.1(b), as well
as article 2, would lead to jurisdiction in Cyprus. The buyers also allege
that, even if there was no specific agreement for delivery in Limassol,
the application of article 5.1(b) to the typical case of a C&F, CFR or CIF
contract under English law should lead to the conclusion that the place
where the goods are delivered is at destination. They conclude therefore,
that, on either basis, there is no alternative jurisdiction in this case in
England.
4. The judge, Andrew Smith J, rejected similar (albeit not identical)
submissions, and confirmed jurisdiction for the sellers' claim in England.
The buyers appeal with the permission of the judge.
The contract
5. There was one contract for eleven separate containers, separately
shipped under eleven separate bills of lading. As the judge explained, the
background to the contract was the appointment in 1990 of the buyers,
or of a subsidiary in the buyers' group, as the exclusive importers and
distributors of Bulmers cider in Cyprus. HP Bulmers Limited was acquired
by the Scottish & Newcastle Group, whose headquarters are in Edinburgh.
No formal contract was ever entered into between Bulmers and the
buyers, but matters proceeded informally for many years, although there
is now litigation in Cyprus concerning the sellers' purported termination
of the distributorship by letter dated 29 March 2004. The sale contract
with which we are concerned was entered into at about that time. The
sellers' claim in these proceedings was brought on 12 December 2005.
The buyers' litigation in Cyprus was subsequently commenced in February
2006. In effect, the buyers would prefer all aspects of their disputes
with the sellers to be conducted in Cyprus. If the judge's solution in this
claim is correct this will possibly be another instance of the bifurcation
of litigation caused by the jurisdiction rules contained in the Brussels
Convention or what has now become the Judgments Regulation.
6. The sale contract originated in the buyers' letter to the sellers dated
3 March 2004. The buyers there ordered the cider on terms specified in
their letter, which included the following:
"SHIPMENT
From Liverpool or Felixstowe per Zim Line vessel as per attached shipping
schedule…
DELIVERY
CFR Limassol.
PAYMENT
90 (ninety) days from the date of the arrival of the vessel.
PACKING
…The containers should be stuffed to the maximum and sealed by you
with an one way padlock and a high security bolt seal before delivery to
the carriers.
FREIGHT
Prepaid at the rate of Stg £275,00 liner terms all in plus BAF (Banker
Adjustment Factor) per 20' container, as agreed with the Cyprus agents of
Zim line.
INSURANCE
Our care.
INVOICE
For each container separately…stating…FOB prices as stated below, total
FOB value, freight, container number and container high security bolt seal
number. All copies should be signed.
BILL OF LADING
For each container separately, should state "Notify Othon Galanos Ltd"
and a high security bolt seal number. Original and copy non negotiable,
each in three copies.
DOCUMENTS
For each container separately, should be issued in the name of Othon
Ghalanos Lts and forwarded to us, immediately upon shipment by
registered and express mail."
7. On 21 April 2004 the sellers responded, raising some queries. The
acknowledgment of order forms which they issued at that time showed
their then (ultimately mistaken) understanding that the proposed contract
was to be on FOB terms. These forms stated at their foot the standard
printed term as follows:
"This order shall be governed by Scottish and Newcastle International
Limited's standard Terms and Conditions, or in the event we have a
contractual agreement with you, the terms of said agreement. For
the avoidance of doubt, English law shall apply, and delivery will be in
accordance with INCOterms 2000."
8. The buyers answered by their letter dated 3 May 2004, explaining –
"Our prices are FOB U.K. port, but as per our agreement you prepay the
freight on our behalf, thus making the delivery terms CFR. The delivery
terms CFR should be stated on the invoice. The amount of the freight
prepaid should also be stated on the invoice, separately…"
9. In the circumstances, the contract contemplated by the parties differed
very little from a form of FOB contract, although it was expressed to be
CFR. Clearly, there was to be no opportunity for the sellers to buy the
goods afloat. Even the carriage was arranged by the buyers, albeit the
freight was to be prepaid "on our behalf". See, in general, the discussion
of forms of FOB contract in Benjamin's Sale of Goods, 7th ed, 2006, at
paras 20-001ff.
10. Proforma invoices dated 18 June 2004 were issued. Two of them still
mistakenly referred to "Terms of delivery" as "Free on board"; the other
nine correctly said "Cost and freight Limassol". All of them gave Limassol
both as "Port/airport of discharge" and as "Place of delivery".
11. In the event, the containers were despatched by three vessels: 6
containers left Liverpool on the Britain Star on 26 June 2004, 3 more
on the City of Glasgow on 6 July, and the final 2 on the Westmed II on
16 July. The eleven invoices, issued on 18, 23 and 29 June and 6 July
2004, were in the following form: "Country of destination" was named
as "Cyprus"; "Terms of delivery and payment" stated "Cost and freight
Limassol. PAYMENT DUE 90 DAYS FROM DATE OF ARRIVAL"; "Port/
airport of loading" stated "LIVERPOOL"; "Port/airport of discharge" stated
"Limassol"; and "Place of delivery" was given as "LIMASSOL". The goods
were specified as were their prices, to which was added a separate freight
charge, and a total was then calculated.
12. The bills of lading were not in evidence before the court. The buyers'
order had stipulated that the bills were to be non-negotiable, and the
judge found that the buyers were probably named in them as consignees,
and that title to the goods was not transferred by the bills' indorsement
and delivery. On appeal, those findings were not seriously disputed, save
that it was, in my judgment forlornly, submitted that the expression
"Original and copy non negotiable" meant that at any rate the originals
of the bills were negotiable, viz to order. The bills, I find, were not taken
by the sellers to their order, but straight consigned to the buyers, to
whom credit was extended for 90 days after the arrival of the vessels at
Limassol. In other words, there was no attempt by the sellers to delay the
passing of title until transfer of the bills against payment. It follows, in
my judgment, that risk and title passed on shipment (see further below):
something that Mr Richard Lord QC, counsel on behalf of the buyers, did
not really attempt to dispute.
The submissions
13. The judge did not state precisely what he considered to be the terms
of the contract. On the basis of the submissions advanced to him below,
that would not seem to have mattered: for it was not submitted, as it
was to us by Mr Lord who did not appear below, that both the original
letter's "DELIVERY CFR Limassol" and the invoices' "Place of delivery
LIMASSOL" meant that it was an express term of the contract that the
place of delivery was Limassol. Before the judge, the parties appear to
have treated the contract as a typical C&F contract. Thus he recorded the
parties submissions in these terms:
"7. The [sellers'] case that the English court has jurisdiction is put…First
they say that "the goods were delivered" within the meaning of article 5 in
Liverpool where the goods were shipped…
8. The [buyers] dispute the jurisdiction of the English court, arguing that
the "goods were delivered" for the purposes of article 5 elsewhere than
England. They put forward two alternative candidates for the place "where
the goods were delivered": first where the documents were tendered
under the CFR contract, and secondly in Limassol upon the arrival of the
vessel, and therefore of the goods."
14. Before us, however, Mr Lord adopted a significantly different stance,
at any rate as to his primary case. He submitted, first, that the contract
expressly provided for delivery in Limassol; and secondly, that even if
that were not so and the contract was a typical C&F or CFR contract
with no express term as to delivery save as might be derived from the
provision for CFR Limassol, the purposes of article 5.1(b) were best met
by superseding the intricacies of the English law as to delivery under
international C&F or CIF sales by a simple and certain rule to the effect
that goods under such contracts were delivered where they arrived at
their contractual destination.
15. On behalf of the sellers, however, Mr Michael Bools submitted that the
contract was a classic C&F contract under which the sellers performed all
their obligations at latest on shipment, when delivery occurred; that the
invoices' reference to Limassol as the "Place of delivery" was an erroneous
box entry merely reflecting the fact that there was no further destination
beyond arrival of the ship in Limassol; and that the purpose of article 5.1
was best met by recognising England as the place where all obligations
connected with delivery took place.
International sale of goods under English law
16. Before turning to Mr Lord's primary submission, that this was
effectively an ex ship contract for delivery in Limassol, it is necessary first
to say something about the general rules under English law relating to
delivery under international sales, especially those on C&F and CIF terms.
17. The Sale of Goods Act 1979 contemplates that where, pursuant to
the contract, a seller ships goods for transmission to a buyer, the delivery
to the carrier is prima facie delivery to the buyer; and that risk, title and
possession of the goods are transferred on shipment.
18. Thus under sections 17 and 18 relating to the passing of property,
the general rule is that it passes when intended to pass, that for the
purpose of ascertaining the parties' intention regard shall be had not only
to the terms of the contract but also to the conduct of the parties and the
circumstances of the case, and that the prima facie rule, in the absence
of a different intention, is that property passes when unascertained goods
are unconditionally appropriated to the contract, such as by delivery of
them to a carrier. Thus Rule 5 under section 18 states:
"(1) Where there is a contract for the sale of unascertained or future
goods by description, and goods of that description and in a deliverable
state are unconditionally appropriated to the contract, either by the
seller with the assent of the buyer or by the buyer with the assent of the
seller, the property in the goods then passes to the buyer; and the assent
may be express or implied, and may be given either before or after the
appropriation is made.
(2) Where, in pursuance of the contract, the seller delivers the goods to
the buyer or to a carrier or other bailee or custodier (whether named by
the buyer or not) for the purpose of transmission to the buyer, and does
not reserve the right of disposal, he is to be taken to have unconditionally
appropriated the goods to the contract."
19. Section 19 then deals with the exceptional case (although of course a
frequent case in international sales) where a right of disposal is reserved,
eg by a seller taking a bill of lading to order. That, however, neither
occurred nor was supposed to occur in this case, where the bills of lading
were contracted to be non-negotiable, the buyers were promised 90
days credit from arrival of the vessel, and the cider was unconditionally
appropriated to the contract at earliest when the containers were
stuffed in Hereford and at latest when those containers were shipped at
Liverpool.
20. Section 20 of the Act then provides that risk will normally pass with
property, and that that will occur "whether delivery has been made or
not". Mr Lord relies on the fact that delivery may post-date the transfer of
both risk and title.
21. As for delivery itself, that is defined in section 61 as meaning
"voluntary transfer of possession from one person to another".
The concept is dealt with under Part IV of the Act, which is headed
"Performance of the Contract". Section 27 says that it is the duty of
the seller to deliver the goods, and of the buyer to accept and pay for
them. Section 28 provides that, unless otherwise agreed, these duties
are concurrent conditions. Section 29, headed "Rules about delivery"
states that the default rule is that delivery is to take place at the seller's
place of business, and that otherwise it is a matter for agreement. Section
30 (delivery of wrong quantity) and section 31 (instalment deliveries)
do not concern us. It is section 32, headed "Delivery to carrier", which
deals expressly with the concept in our context, of an international sale of
goods involving carriage by sea, providing:
"(1) Where, in pursuance of a contract of sale, the seller is authorised or
required to send the goods to the buyer, delivery of the goods to a carrier
(whether named by the buyer or not) for the purpose of transmission to
the buyer is deemed to be delivery of the goods to the buyer.
(2) Unless otherwise authorised by the buyer, the seller must make a
contract with the carrier on behalf of the buyer as may be reasonable
having regard to the nature of the goods and the other circumstances
of the case; and if the seller omits to do so, and the goods are lost or
damaged in the course of transit, the buyer may decline to treat the
delivery to the carrier as a delivery to himself or may hold the seller
responsible in damages.
(3) Unless otherwise agreed, where goods are sent by the seller to the
buyer by a route involving sea transit, under circumstances in which it
is usual to insure, the seller must give such notice to the buyer as may
enable him to insure them during their sea transit; and if the seller fails to
do so, the goods are at his risk during such sea transit."
22. A new subsection (4), dealing with consumer contracts, was inserted
by the Sale and Supply of Goods to Consumers Regulations 2002, as
follows:
"(4) In a case where the buyer deals as consumer or, in Scotland,
where there is a consumer contract in which the buyer is a consumer,
subsections (1) to (3) above must be ignored, but if in ignorance of a
contract of sale the seller is authorised or required to send the goods to
the buyer, delivery of the goods to the carrier is not delivery of the goods
to the buyer."
It may be noted, therefore, that in this respect the law merchant that
had developed and then been codified in Chalmers' Sale of Goods Act is
now specifically disapplied from consumer sales. This perhaps reflects a
feeling that a consumer would not expect the goods to be at his risk until
physical delivery had been effected: see Benjamin at para 5-098. If so, it
highlights the difference between what one might call a layperson's view
of delivery as being something essentially physical, and a merchant's or
lawyer's view of it as being more conceptual. It should be noted that the
Judgments Regulation has its own special provisions for consumers in its
section 4.
23. Thus prima facie delivery under the present contract was effected on
shipment, together with the transfer of title and risk: unless, as Mr Lord
submits, the references to CFR Limassol and/or to Limassol as the place
of delivery displace that rule and turn the contract into one for ex ship
delivery in Limassol.
24. For these purposes, Mr Lord submits that a CFR, C&F or CIF sale is
a documentary sale under which different aspects of delivery can and do
take place at different times and places. In this connection he refers to
passages in Benjamin such as the following:
"19-072. Three stages of delivery. In a c.i.f. contract, there are "three
stages of delivery": a "provisional delivery" on shipment; a "symbolical
delivery" on tender of documents; and a "complete delivery of the cargo"
when the goods are handed over to the buyer at the destination. The
duties of the seller so far discussed relate to the first two of these stages;
if the seller performs those duties he is not normally in breach merely
because the third stage is not reached. This follows from the nature of
a c.i.f. contract and from the rules as to risk as they apply to such a
contract. Having shipped proper goods and tendered proper documents,
the seller is not normally concerned with what happens to the goods
in transit: the buyer's remedies (if any) in respect of the failure of the
goods to arrive are against the carrier or the underwriter, not against the
seller…"
25. Benjamin reverts to the three stages of delivery in the context of
considering the buyer's opportunity of examining the goods at destination,
at para 19-157, thus:
"…Although some dicta can be cited in favour of the view that one or
another of these stages is "the" time of delivery, the best view is that,
for the present purpose, there is no single time of delivery. The buyer's
opportunity of examining the documents arises at the second stage, when
the documents are tendered; and his opportunity of examining the goods
arises at the third stage of complete delivery unless the contract expressly
provides that he must examine the goods at the port of shipment. The
buyer is allowed a reasonable time after discharge for examining the
goods and then a further reasonable time for deciding whether he intends
to reject…"
26. Mr Lord also submitted that since goods sold C&F or CIF can be
bought by a seller afloat, it may be impossible to talk of any delivery at
the time of shipment; and that, where a seller takes a bill of lading to
order in order to reserve to himself a right of disposal and to prevent
the passing of title save on payment against tender of documents, the
critical delivery may be the tender of documents. He did not go so far
as to submit, however, that a C&F or CIF sale is a sale of documents
rather than a sale of goods (see the discussion in Benjamin at para
19-008). However, his overall submission was that the uncertainties of
the concept of delivery under an international documentary sale under
English law were such as both to justify an express provision for delivery
only at destination and in any event to lead to the conclusion that, for
the purposes of article 5.1(b), the necessity for clarity and certainty was
in favour of a rule that the third or so-called "complete delivery" stage
should be regarded as "the place…where the goods were delivered or
should have been delivered". He describes such a rule as one of English
law, not as an autonomous meaning required by article 5.1(b) irrespective
of English law.
27. In this connection, he relied, as an example of the complications of
English law, on the following analysis in Fawcett, Harris and Bridge on
International sale of Goods in the Conflict of Laws at para 3.185:
"The essential feature of a CIF contract is that shipping documents are
transferred to the buyer, as a result of which a contractual relationship
is established between the buyer, on the one hand, and the insurer and
carrier on the other hand. Payment of the price of the goods becomes
due when these documents are tendered. Under a CIF contract, the seller
never delivers the goods to the buyer or even to the buyer's agent. Since
the documents stand in for the goods, the place where the goods were
delivered or should have been delivered must refer to the place where the
documents were transferred or should have been transferred. This is so
even though a documentary sale is a sale of goods and not of documents.
There are a number of variants of the CIF contract, such as the C&F (or
CFR) contract and, more rarely, the CIF and C contract, the CIF and E
contract, and the CIF and C and I contract. All of these involve different
obligations from the normal CIF contract, but in none of them is the
parties' agreement as to delivery any different and the position under
Article 5(1)(b) will be the same as that for a CIF contract."
28. Unlike in the court below, where the buyers' primary submission
was, in accordance with that passage, that the article 5.1(b) place of
delivery was in Cyprus where the documents were received by the
buyers, Mr Lord, as I understand his submission, refers to that passage,
not as providing the answer in this case, nor indeed in any case, but
as exemplifying the difficulties to which English law might lead in the
absence of either an overriding term agreed between the parties as to the
place of delivery, or at least a standard and certain English law view as to
the place of delivery under a documentary sale.
29. I therefore turn to consider the two strands of Mr Lord's submissions
in this case.
An express term for delivery in Limassol?
30. As stated above, the judge did not have to determine the question of
where exactly the terms of the contract were to be found, or whether the
invoice reference to Limassol as the place of delivery was a term of the
contract.
31. In my judgment, the terms of the contract are best found in the
exchange of letters between the parties and there is nothing there
to suggest that this was a contract for delivery in Limassol, in other
words an "ex ship" contract. It was not so submitted before the judge.
The invoices are not themselves documents of contract. The formal
"acknowledgments of contract" are contractual documents, even though
the errors in them had to be subsequently superseded. Nevertheless,
I see no reason why the incorporation of Incoterms found in those
acknowledgments should not be regarded as a surviving term of the
contract. It may be observed that the definition of CFR or Cost and Freight
in Incoterms (a set of terms published by the ICC) is –
"The seller delivers the goods when they pass the ship's rail in the port of
shipment and must pay the costs and freight necessary to bring the goods
to the named port of destination. The buyer bears all additional costs and
risks after the goods have been delivered (over the ship's rail at the port
of shipment)."
32. Mr Bools on this appeal did not rely on Incoterms, and so I make
this observation merely in passing and not as leading to my decision
on the construction of this contract. In any event, a specific agreement
for delivery in Limassol may be thought of as overriding such a general
provision. However, this definition would seem to indicate that delivery at
the place of shipment under a documentary sale is an internationally well-
known concept.
33. Turning to the letters between the parties, I note that the critical
term, which comes through into the final invoices, is for "DELIVERY
CFR Limassol". In the invoices this is expressed as "Terms of delivery…
Cost and freight Limassol". In my judgment that means in context, in
accordance with the well-known rules discussed above, that possession
will prima facie be transferred to the buyers on shipment on terms that
the sellers will procure for the buyers a contract of carriage to carry the
goods to Limassol. There is no question here of the goods being bought
afloat. Nor is there any question of title being retained until payment,
or transfer of the documents. Thus risk, title and possession were all
intended to pass on shipment, at latest.
34. The question then arises as to whether the additional reference in
the invoices (and also in the proforma invoices issued shortly prior to the
final invoices) for "Place of delivery LIMASSOL" turned this contract into
an ex ship contract for delivery in Limassol. In my judgment, however,
it did not. I accept Mr Bools' submission that this is an error, a merely
administrative filling in of an extra box on the standard invoice form.
That box was designed to cater for the case where the agreed final
destination might be subsequent to the port of discharge. Its filling in
here simply reflected the fact that the ultimate agreed destination of the
cider under the contract went no further than the port of discharge. It
did not fundamentally change the agreed contractual basis of the sale.
Although it would be theoretically possible to have title and risk pass
before delivery, that would in the circumstances be a most odd contract
to make. It would, as Mr Lord accepted, mean that if delivery never took
place because the goods were lost at sea, the sellers could not be liable
for that loss, and would be entitled to the price despite non-delivery
(and despite the fact that prima facie the price is the quid pro quo for
delivery). In the meantime, the bills of lading, consigned to the buyers,
had on shipment been posted to the buyers, a requirement of the contract
reflecting the fact that the sellers had ceded possession and control over
the goods to the buyers. In such a case, what does it mean for delivery to
be effected only at Limassol? In makes no sense.
35. Thus Mr Lord did not seek to support his primary submission by
reference to the argument, advanced to the judge below, that Limassol
had been impliedly agreed as the place of delivery because of the
contractual term that payment would be 90 days from arrival. As the
judge remarked, that went only to the time of payment and did not
alter the effect of the CFR term. Similarly, Mr Lord did not submit that
reference to payment being due 90 days "after arrival" meant that in
the absence of safe arrival the price was not due. Mr Lord accepted that
risk and title had passed on shipment, and that the buyers had agreed
to look to their contract of carriage and to their insurance in the case of
loss. In such circumstances, if the goods had been lost, payment would
in my opinion have been due 90 days after the vessel arrived (or ought
to have arrived, if it too was lost). The payment term was not 90 days
"after delivery in Limassol" but "after arrival of the vessel" (as stated in
the buyers' original letter), or "from date of arrival" (as expressed on the
invoices).
36. The only authority cited by Mr Lord to exemplify the situation he
contended for was Galbraith & Grant Ltd v. Block [1924] 2 KB 155. That
was the sale of a case of champagne by wine merchants to a licensee. It
was a term of the contract that the champagne should be delivered to the
licensee's premises. The case was lost because it was signed for at those
premises by a rogue. Lush and Greer JJ, on appeal from the county court,
held that good delivery had been effected when it was made to a person
at the buyer's premises apparently authorised to receive the goods. It
seems to me, however, that this case is of no assistance to Mr Lord. That
was the most straightforward of contracts, where unascertained goods are
to be delivered directly to the buyer, at his premises, by the seller. It was
not an international sale. It was not a documentary sale. The agreed place
of delivery was at the buyer's premises. Although a carrier was involved,
he was the seller's agent. It was just as though a department store had
delivered an item which had been bought on the telephone for delivery at
the customer's home, using its own delivery service.
37. Mr Lord sought to support his submission by observing that the
sellers' claim form itself refers to the invoices as being the foundation of
their claim. However, it was natural for a straightforward claim for the
price to be particularised by reference to an invoice. Mr Lord also referred
to a witness statement made on behalf of the sellers, which referred to
"such order and contract being evidenced by the invoices". However, it
was not said that the contract was contained in the invoices, and the self-
same witness statement relied on all the contractual documents, including
the acknowledgment of order forms and their reference to Incoterms.
38. In my judgment, therefore, the buyers' primary submission, that it
was an express term of the contract that delivery was to be effected at
Limassol and not before, fails.
Destination as a characteristic place of delivery for the purposes of article
5.1(b)?
39. The sellers' alternative submission was that the agreed destination
should be adopted as a matter of English law as a characteristic place of
delivery for the purposes of article 5.1(b). In effect the place of "complete
delivery" should be adopted as the "place…where…the goods were
delivered or should have been delivered". Mr Lord did not describe this
as an autonomous meaning to be imposed on all sales under all national
systems of law. He accepted that the answer had to be found under
English law. In that I think he is correct. First, article 5.1(b) stresses that
the solution has to be found on a contract by contract basis ("where,
under the contract, the goods were delivered…"). That necessarily
involves a consideration of the proper law. Secondly, it may be said that
the whole of article 5.1(b) is an autonomous meaning itself, because
it states the conventional rule for the "place of performance of the
obligation in question" for the "case of sale of goods". Thirdly, in Industrie
Tessili Italiana Como v. Dunlop AG [1976] ECR 1473, the European Court
of Justice, speaking of the original article 5 of the Brussels Convention ,
concluded that the "place of performance of the obligation in question"
must be determined by reference to the substantive (national) law
applicable under the conflict of laws rules of the forum court (see at paras
14/15).
40. Mr Lord supported his submission by reference to the purpose of the
Judgments Regulation. In this connection he referred to paragraph 11 of
its preamble, which states:
"(11) The rules of jurisdiction must be highly predictable and founded
on the principle that jurisdiction is generally based on the defendant's
domicile and jurisdiction must always be available on this ground save in
a few well-defined situations in which the subject-matter of the litigation
or the autonomy of the parties warrants a different linking factor."
41. On this basis, Mr Lord submitted that article 5.1(b) must be applied
so as to provide a certain and easily predictable answer to the relevant
jurisdictional question. He also emphasised that article 2, providing
jurisdiction in the defendant's domicile, remained the primary rule. There
was therefore no need to give a special jurisdiction such as was to be
found in article 5.1 any wider latitude than was necessary, since the
country of domicile was a place where the defendant could always be
sued, and it was well recognised that for these reasons such special
jurisdictions should be interpreted restrictively: see Kleinwort Benson Ltd
v. Glasgow City Council [1999] 1 AC 153 at 167B, citing the European
Court of Justice in Kalfelis v. Bankhaus Schröder Münchmeyer Hengst
and Co (Case 189/87) [1988] ECR 556 at paras 19/20. Unless some such
approach was adopted, Mr Lord said, the intricacies and difficulties of the
English law would render article 5.1(b) effectively futile.
42. In my judgment, however, this submission overstates the difficulties.
The ramifications of documentary sales have become well known. In their
essence they can be succinctly expressed, for instance, in this passage of
Benjamin (at para 19-010):
"In general. The duties of a c.i.f. seller are, first to ship (or procure a
shipment of) goods in accordance with the contract and, where necessary,
to appropriate such goods to the contract; secondly to procure or prepare
the proper shipping documents; and thirdly to tender these documents to
the buyer, or as the buyer directs. He is not under any duty to ensure the
actual physical delivery of the goods at the c.i.f. destination; though he is
under a duty not to take active steps to prevent such delivery."
43. Talk of the "three stages of delivery" is an attempt to highlight
different aspects of the contract: but, save where delivery and the
transfer of title are delayed either by the need to purchase goods afloat
or the reservation implicit in the retention of the documents, which is not
this case, everything occurs at latest at shipment. The third stage, albeit
called "complete delivery", essentially reflects only the facts that the
seller might (in theory) wrongly attempt to divert the goods at the last
moment and that the buyer might still have an opportunity to reject the
goods following inspection at the port of arrival. In every other respect,
however, and, most significantly, in the sense that arrival of the goods at
destination is no part of the seller's duty (as Benjamin observes in the
passage just cited), actual physical delivery of the goods at destination
is no part of the seller's obligations in performance of his contract. If,
therefore, any stage of delivery is to be selected for the purposes of
article 5.1(b), it seems to be least likely that it is the third stage.
44. In the court below, counsel then representing the buyers did not
submit that the place where the goods are unloaded from the vessel
would normally be the place where the goods are delivered under a cif
or c&f contract (which is Mr Lord's alternative submission): see Andrew
Smith J at para 21, where he continued:
"He was right not to do so: the only connection between the destination
of the goods and the contract is that the seller is obliged to arrange for
a contract for the carriage of the goods to the agreed destination or to
acquire goods that are to be carried there."
45. In a typical case (albeit not this case), where the bill of lading is
taken to the seller's order and he intends to retain title until he is paid
on tender of the shipping documents, there is, I see, an argument that
the place where the goods are delivered might be said to be not the
place of shipment but the place where the documents are tendered: as
Fawcett, Harris and Bridge have argued (see above at para 27). As to that
argument, however, the judge below said this:
"While acknowledging the respect to be paid to a work of such authorship,
I am unable to accept that the Regulation confers jurisdiction upon the
courts of the place where the documents are transferred. This is not to
question the analysis of the nature of cif and c&f contracts. However,
this view does not seem to me to recognise the purpose of article 5 and
in particular its purpose in relation to sale of goods contracts. There
is simply no reason to suppose that the place where the documents
are transferred will typically be connected with the dispute between
the parties or the action. This can readily be illustrated by considering
how documents are transferred under letter of credit arrangements.
Moreover, this interpretation of the Regulation does not even have
the virtue of clinging to the literal wording of the article, which refers
to the transfer of the goods: the fact that possession of the goods is
transferred symbolically by the delivery of documents affects when they
are transferred or taken to be transferred, but not where they are at that
time: in reality, the goods might well be at sea when the documents are
tendered."
46. The judge later (at para 23) reserved his view as to where goods are
delivered in a case where the seller buys them afloat.
47. I am inclined to agree with the judge about the case where the
transfer of the shipping documents completes at any rate the symbolic
delivery of the goods. What article 5.1(b) looks to is where the goods
are delivered, not where the documents are tendered, however much, in
Bowen LJ's famous phrase the bill of lading is "a key which in the hands of
a rightful owner is intended to unlock the door of the warehouse, floating
or fixed, in which the goods may chance to be" (Sanders v. Maclean
(1883) 11 QBD 327 at 341). Where then are the goods delivered in the
typical case of goods shipped by a seller under a bill of lading taken to the
seller's order? Wherever the goods happen to be at the time of transfer of
the documents? If so, that might be at sea – in which case article 5.1(b)
would provide a merely illusory alternative place of jurisdiction. Or it
might be at destination, if the sea voyage is short and/or there is delay
in transferring the documents. And often the buyer might anticipate the
bill of lading and even obtain actual physical delivery at destination on the
provision to the carrier of a letter of indemnity: in such a case, is article
5.1(b) delivery delayed until the shipping documents are finally tendered
and paid for?
48. These questions are not easily answered, and do not have to be
answered in this case. I would venture the opinion, but no more,
that the solution may be to look to what has been described as the
provisional delivery which takes place at shipment. After all, in the case
of documentary sales what the parties are primarily concerned with is not
actual physical delivery at destination – something which may never take
place even though the seller has fulfilled all his obligations and the buyer
is still obliged to pay the price – but a legal concept of delivery. Moreover,
albeit in such a case title may not be transferred at shipment, risk is, and,
subject to transferring the documents, which the seller is in any event
bound to do against receipt of the price, the goods are delivered, under
the contract, to the carrier for carriage to the buyer.
49. Such a solution would, but I speculate, reflect a broad international
consensus on the effect of documentary sales (see for instance the
Incoterms definition cited above).
50. In this context it is also important to consider what article 5.1(b) is
concerned with: and that is the significance of the place of performance of
contractual obligations as a connecting factor with a particular jurisdiction.
As paragraph (12) of the preamble to the Judgments Regulation states:
"(12) In addition to the defendant's domicile, there should be alternative
grounds of jurisdiction based on a close link between the court and the
action or in order to facilitate the sound administration of justice."
51. In his Jenard Report on the original Brussels Convention (OJ 1979 No
C 59 at p22), Mr Jenard commented on articles 5 and 6 as follows:
"Adoption of the 'special' rules of jurisdiction is also justified by the fact
that there must be a close connecting factor between the dispute and the
court with jurisdiction to resolve it."
52. The same point was made by the ECJ itself in Tessilli (at paras 12/13):
"Article 5 however provides for a number of cases of special jurisdiction
at the option of the plaintiff. This freedom of choice was 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 most
conveniently called upon to take cognizance of the matter."
53. In Shenavai v. Kreischer Case 266/85 [1987] ECT 239 the ECJ said
this (256, at para 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."
See also Custom Made Commercial Ltd v. Stawa Metallbau GmbH [1994]
ECR I-2913, 2955, at para 12.
54. The concept of the "obligation in question" under the Brussels
Convention has given rise to difficulties: see, for instance, in this
jurisdiction Royal & Sun Alliance Insurance plc v. MK Digital FZE (Cyprus)
Ltd [2006] EWCA Civ 629, [2006] 2 All ER (Comm) 145 at paras 92/100.
There has been oscillation between identifying a characteristic obligation
of a contract as being the obligation in question, and, as the ECJ finally
determined, outside the special case of contracts of employment, "the
contractual right on which the plaintiff's action is based" (Custom Made
at para 23). In effect, the Jurisdiction Regulation by its article 5.1(b) (and
5.1(c) in relation to contracts for the provision of services) has reverted
to defining a characteristic obligation as being the definitive obligation
in question. In Briggs & Rees, Civil Jurisdiction and Judgments, 4th ed,
2005, at para 2.123 the learned editors give a characteristically vibrant
account of the historical forces at work in this narrative. They express the
view that the original article 5.1 has been eviscerated ("Apart from the
sale of goods and the supply of services, and remembering that contracts
of individual employment have been removed to the new Section 6 of
Chapter II, what other contracts are there?"). They continue (at p147):
"But sub-paragraph (b) operates within the context of the law which
developed under the original Article 5(1) of the Brussels Convention. It is,
after all, only the identification of the obligation in question which is re-
defined for the purposes of Article 5(1) of the Judgments Regulation."
55. I agree: and that is among the reasons why I would reject Mr Lord's
alternative submission that the place of delivery is the place of physical
delivery to the buyer at destination even in cases where the seller
has already performed all his obligations by shipment. Sub-article (b)
remains an example of the selection of "the place of performance of the
obligation in question" as constituting that close connecting factor which
justifies an alternative jurisdiction in that place. Therefore, the "place…
where, under the contract, the goods were delivered or should have been
delivered" ought to reflect a matter of obligatory performance under the
contract. In a CIF or C&F contract, the seller has no obligation to deliver
to destination, only to procure the shipment of goods for carriage to
destination.
56. The importance of that connecting factor may perhaps be tested by
reference to a number of typical situations where contract of sale of goods
could lead to litigation. Thus, where the claim is a simple one for the
price, it is natural to think that the place of delivery is closely connected
with that obligation (although of course, by agreement, the price might
be payable either in advance or, on credit, after delivery). There seems
no logic, however, to sue for the price at the place of destination, where
that is not the same as the place of contractual delivery. Moreover, since
a buyer is typically quite likely to be found at the country of destination,
an article 5.1(b) which focuses on the place of destination as the place
of delivery would hardly seem to offer an alternative jurisdiction to that
of domicile. Where, moreover, there is a dispute about the price because
of a dispute about the quality of the goods, it will be their quality prima
facie at the point of shipment that will typically be in issue, not their
quality at the place of destination. Similarly, where it is the buyer who
sues, typically he does so on the ground of non-delivery or mis-delivery
or delivery of defective goods. There again, it makes sense to look to
the place where the contractual obligations of the seller mandate such
delivery, rather than at destination where that is different. That remains
the case, even though it may turn out in individual situations, or even
typically, that goods which are defective on arrival at destination are
surveyed there. What, however, remains critical in a typical documentary
sale is the quality of the goods which were shipped. Inspections on
shipment are also frequently carried out in international trade.
57. Thus, although a general rule may not fulfil its function in every
case, an interpretation of article 5.1(b) as referring to the place where
delivery is due under the contract, rather than to the place of the goods'
destination where that differs, would far better fulfil the general purpose
of article 5.1 of putting forward an alternative place of jurisdiction (to
that of domicile) which reflects the place where the typical contractual
obligation of delivery is performed. It is that obligation which is deemed
to be the "obligation in question". A place of destination which differs,
as it typically does in documentary sales, from the contractual place
of delivery where the seller's obligations are generally performed does
not meet the purpose of a jurisdictional rule which is seeking a close
connecting link between place of performance of the obligation in question
and forum.
Conclusion
58. For these reasons, I would dismiss this appeal. Although the
submissions have to some extent changed, my reasons are, I think, very
largely the same as those of the judge.
Lord Justice Waller:
59. I agree.