Finlay C.J.I agree with the judgment to be delivered by Blayney J.
Egan J.
I also agree.
Blayney J.
The plaintiff company, which is the respondent in this appeal, (to which
I shall refer as F.) is the company which made the very well-known
and very successful film "My L. F.". The film was produced for the first
defendant (to which I shall refer as G.) pursuant to a formal written
agreement between G. and F. which is dated the 26 July, 1988.
G. and the second defendant (to which I shall refer as G. International)
are both companies registered and domiciled in England. In this action F.
claims against them a number of different reliefs but it is common case
that essentially the claim is one for damages for breach of contract and
may be treated as such.
The appellants entered an appearance to the plenary summons solely to
contest the jurisdiction of the court to try the case and then brought a
motion to have the case struck out. That motion was dismissed by the
High Court (Carney J.) and the defendants have now appealed against
that dismiss.
The defendants contend that the High Court has no jurisdiction to
entertain this case as neither of the defendants is domiciled within this
jurisdiction. They rely on art. 2 of the Convention on Jurisdiction and
the Enforcement of Judgments in Civil and Commercial Matters, 1968,
(to which I shall refer as the Convention) which became part of our law
by virtue of s. 3, sub-s. 1 of the Jurisdiction of Courts and Enforcement
of Judgments (European Communities) Act, 1988. Article 2 of the
Convention provides as follows:-
"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."
In cases of contract, however, this general rule is subject to the exception
contained in art. 5, para. 1 of the Convention. Article 5 provides as
follows:-
"5.
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."
The learned trial judge held that F.'s proceedings come within this
exception and on that ground he dismissed the defendants' motion.
The issue on this appeal is whether he was correct in doing so. It is an
extremely net issue, the sole question being whether the proceedings
issued by F. come within art. 5, para. 1 or not.
There was no dispute between the parties as to how the relevant
paragraph should be construed. Counsel for both sides agreed that the
manner in which it should be interpreted was to be found in two decisions
of the Court of Justice of the European Communities: de Bloos v. Bouyer
[1976] E.C.R. 1497 and Shenavai v. Kreischer [1987] E.C.R. 239.
In de Bloos v. Bouyer [1976] E.C.R. 1497 the Court said in its judgment
at p. 1508 (paras. 11 to 14):-
"11.
. . . the word "obligation" in the Article refers to the contractual obligation
forming the basis of the legal proceedings.
12.
This interpretation is, moreover, clearly confirmed by the Italian and
German versions of the Article.
13.
It follows that for the purposes of determining the place of performance
within the meaning of Article 5, quoted above, the obligation to be taken
into account is that which corresponds to the contractual right on which
the plaintiff's action is based.
14.
In a case where the plaintiff asserts the right to be paid damages or seeks
a dissolution of the contract on the ground of the wrongful conduct of the
other party, the obligation referred to in Article 5 (1) is still that which
arises under the contract and the non-performance of which is relied upon
to support such claims."
In Shenavai v. Kreischer [1987] E.C.R. 239 the Court said in its judgment
at p. 256 (paras. 17 to 19):-
"17.
When no such particularities exist, [i.e. the particularities to be found
in contracts of employment] it is neither necessary nor appropriate to
identify the obligation which characterises the contract and to centralise
at the place of performance thereof jurisdiction, based on place of
performance, over disputes concerning 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 principale; in other words, where
various obligations are at issue, it will be the principal obligation which will
determine its jurisdiction."
Counsel for F. also referred to two recent decisions of this Court in which
the relevant paragraph was considered: Unidare plc v. James Scott Ltd.
[1991] 2 IR 88 and Handbridge Ltd. v. British Aerospace Communications
Ltd. [1993] 3 IR 342. It is not my intention to refer to these as the
agreement of the 26 July, 1988, between G. and F. contains a clause
requiring it to be construed in accordance with English law, and while
on this issue there would not appear to be any difference between
English law and Irish law, since what is being applied is Community law,
nonetheless in the particular circumstances the proper approach would
seem to be to rely directly on Community law as expressed in the two
cases I have referred to.
It seems clear from these decisions that what this Court has to do is to
identify the obligation on the breach of which F.'s action is based and, if
there is more than one obligation, to identify the principal obligation, and
then determine where the relevant obligation was to be performed; unless
it was to be performed in Ireland the action does not come within art. 5,
para. 1 of the Convention.
The nature of the obligation, on the breach of which the action is based, is
to be ascertained from the statement of claim delivered by F. but, before
turning to it, it is necessary to look briefly at the agreement of the 26
July, 1988, between G. and F. with a view to seeing what contractual
obligations G. undertook under that agreement.
While the agreement is extremely lengthy, the obligations undertaken by
G. which are relevant to this action may be summarised quite shortly. G.
has the distribution rights of the film for the whole world, excepting the
United Kingdom and Ireland (G.'s distribution area being referred to in the
agreement as the "distribution territory") and one of the main obligations
it undertook was to use all reasonable endeavours to ensure the proper
distribution and exploitation of the film in the distribution territory. In
addition it undertook an obligation in regard to the application of the
gross receipts which are defined in the agreement as being:-
"all sums actually received by the company in the U.K. from the
exploitation of the film in the distribution territory before deduction of any
residuals and including all royalties and advances but expressly excluding
all refunds. Monies subject to refund shall be added back when they
become non-refundable."
Clause 22 of the agreement sets out a series of payments which are to be
made out of the gross receipts and it is then provided that the net profits
are to be divided in certain proportions between G. and F..
Clause 21 (6) of the agreement provides that it was agreed that the
distribution rights in the distribution territory should be assigned by G.
to G. International and all references in the agreement to G. distributing
the film and the application of the gross receipts by G. shall mean the
distribution and the application thereof by G. International. No issue arose
in regard to this clause in the course of the hearing and its only effect
would seem to be that F.'s remedy in regard to any breach of contract
relating to the distribution of the film or the application of the gross
receipts should be against G. International rather than G.. It does not
affect the net issue to be decided on the appeal, namely, what is the
obligation in question for the breach of which the action has been brought
and where was it to be performed.
I turn now to the statement of claim. It starts with a recital of the
relevant terms of the agreement of the 26 July, 1988, and it is then
pleaded in para. 5 that it was an express or in the alternative an implied
term of the agreement that G. would, inter alia:-
"(1)
Use all reasonable endeavours to ensure the proper distribution and
exploitation of the said film throughout the relevant territory.
(2)
Use all reasonable endeavours to maximise the revenue potential of the
said film and the proper application of the proceeds thereof.
(3)
Exercise reasonable care in its collection and distribution of the said
proceeds and accounting therefor."
The main substance of the statement of claim is to be found in paras. 9 to
13 inclusive, and it is necessary to reproduce them in full:-
"9.
By an agreement in writing dated the 13th day of February, 1989, the
defendant, through its agent the second-named defendant, granted
and licensed to a company known as M. Film Corporation, the right to
distribute, exhibit and broadcast the feature length motion picture My
L. F.' in consideration whereof the M. Film Corporation undertook to pay
to the second-named defendant, G. Television International Limited,
the gross receipts received by M. Film Corporation in respect of the
distribution of the said film, less certain sums specified therein. The said
agreement expressly provided that the defendant and M. Film Corporation
would enter into a further and more formal agreement, but no such
agreement was entered into.
10.
By a further agreement in or about the month of February, 1989, M. Film
Corporation granted the right to distribute the said film outside North
America to a company known as S. Pictures.
11.
The first and second-named defendants failed to properly collect the
sums due under the said agreement between it and M. Film Corporation
and were not furnished with and did not seek or secure full and proper
accounts from M. Film Corporation as they were bound to do by entering
into the formal agreement or otherwise.
12.
By a further agreement made orally in or about the month of August,
1991, the defendants, their servants or agents, released M. Film
Corporation from its obligations under the aforementioned agreement of
February 13 1989 to remit the gross receipts from the said film to the
defendants in consideration for a once off payment to the defendants,
their servants or agents of the sum of 1,500,000 U.S. dollars together
with the right to the defendant to collect the proceeds of the distribution
of the said film from S. Pictures after recoupment by them of the advance
already made to M. Film Corporation by them.
13.
The actions of the defendants in entering into or permitting the
aforementioned agreement with M. Film Corporation Limited of 13
February, 1989, of not entering into and implementing a properly drawn
formal agreement, the failure by the defendants to properly collect
the sums due and owing to them in respect of the distribution of the
said film from M. Film Corporation, in entering into and permitting
the aforementioned agreement between the defendants and M. Film
Corporation of August 1991 and the underlying and consequent failure
of the defendants to account for and to deliver to the plaintiff in Ireland
for itself and the private investors the sums properly due and owing to it
under the agreement of July 26 1988 more particularly referred to above,
constituted a breach of contract and breach of duty - including breach of
fiduciary duty - by the defendants and by so doing, the defendant was
negligent."
Particulars, which it is not necessary to set out, are then given of breach
of contract, breach of fiduciary duty and negligence and finally in para.
14 particulars are given of the loss and damage alleged to have been
suffered by F. as a result of the breach of contract:-
"As a result of the inadequacies in the agreement between the defendant
and M. Film Corporation of 13 February, 1989, the defendant was
unable to and failed to collect the full and proper amounts due to it and
ultimately to the plaintiff under the terms of the agreement of June 26
1988. The plaintiff is aware of excessive amounts charged by M. Film
Corporation in respect of distribution and other expenses under the said
agreement in the amount of at least 500,000 U.S. dollars. Following
the effective assignment of all receipts from the film "My L. F." in North
America occasioned by this agreement and the subsequent agreement
with M. Film Corporation of August, 1991, the plaintiff has been precluded
from taking its proper share, and the share to which it was entitled under
its agreement with the defendant, of the proceeds of the distribution of
the said highly successful film in North America. The plaintiff claims as
damages an amount, ascertainable only by full discovery, representing
the difference between the sums it should have received and the sum
actually paid to it had the said transaction not been entered into by the
defendants and M. in August, 1991."
On behalf of the defendants it was submitted that the first allegation of
breach of contract in the statement of claim is in para. 11 and that there
could be no basis for saying that the obligation referred to there could
have been performed in Ireland as it related to the defendants' alleged
failure to collect sums due under the agreement between them and M..
It was submitted that the principal allegations of breach of contract were
to be found in para. 13 and that once again the main obligations alleged
to have been breached were not obligations to be performed in Ireland.
It was pointed out that there was no allegation in the statement of claim
that the appellants had received sums of money which they had failed to
pass on. The main allegations were that the appellants had entered into
an improvident contract with M.; had failed properly to administer the
contract and finally were again in breach of contract in entering into the
further agreement with M. in August, 1991.
On behalf of F. it was submitted that the primary obligation of the
appellants is to pay F. in Ireland the sums due to it under the 1988
agreement. This is pleaded in para. 13 of the statement of claim where
there is reference to "the underlying and consequent failure of the
defendants to account for and to deliver to the plaintiff in Ireland for itself
and the private investors the sum properly due and owing to it under
the agreement of July 26 1988." It was further submitted that inherent
in the obligation of the defendants to pay the sums due under the 1988
agreement was a right of F. to query the correctness of the amounts paid.
In reply to this submission it was pointed out by counsel for the
defendants that the term "gross receipts" is defined in the 1988
agreement as "all sums actually received . . ." by G. in the U.K.; that
there is no plea in the statement of claim of any sums having actually
been received and not properly distributed, and accordingly the obligation
breached was not any obligation to pay in Ireland sums due under the
agreement.
I am satisfied that the defendants' submissions are correct and that they
are entitled to succeed in this appeal. It seems to me to be quite clear
from the statement of claim that the breaches of contract of which F.
principally complains are the following:-
1.
Failing to use all reasonable endeavours to ensure the proper distribution
and exploitation of the film throughout the distribution territory as
evidenced by G. International entering into the agreements of the 13
February, 1989, and August, 1991, with M. Film Corporation; and
2.
Failing properly to collect from M. sums due and owing to the defendants
in respect of the distribution of the film.
The obligation to use all reasonable endeavours to ensure the proper
distribution and exploitation of the film throughout the distribution
territory, which obligation it is alleged the defendants failed to perform, is
in my opinion the "obligation in question" for the purpose of art. 5, para.
1 of the Convention. The main thrust of the statement of claim is that the
defendants failed to perform this obligation adequately and as a result F.
has suffered a loss. And the obligation, since it was concerned with the
distribution and exploitation of the film worldwide, but excluding Ireland
and the United Kingdom, was clearly not to be performed in Ireland. The
courts here are accordingly not the courts for the place of performance
of the obligation in question and it follows that the High Court has no
jurisdiction to entertain the case. For these reasons I would allow the
appeal and strike out the proceedings against the defendants.
Appeal allowed.