THE HONOURABLE MR JUSTICE STEEL
Introduction
On the 27th August 1997 the defendants, who are married and are both
resident in Greece, entered into a written agreement with the claimant
entitled “Terms and Conditions for Foreign Exchange in Precious Metals
Margin Trading” which agreement incorporated the claimant’s standard
terms of business. Pursuant to the agreement the defendants had by 13th
March 1998 entered into twenty-eight transactions of which some twelve
remained open. The transactions were by way of forward purchases of
ECU’s for Greek drachma. On that day the drachma was devalued. The
defendants had earlier deposited US $1.1 million with the claimants (SBL)
and this margin was applied by SBL in settlement of the amount said to
be owed by the defendants on the close out of the remaining positions.
Upon 18th December 1998 the defendants started proceedings against
the claimant in Athens asserting that the claimant’s conduct was unlawful,
arbitrary and in breach of contract. Shortly before service of those
proceedings in December 1999, the claimant commenced proceedings
in this jurisdiction seeking an injunction restraining the defendants from
continuing with the proceedings, which they instituted before the multi-
member first instance court in Athens. The basis of this latter claim was
that the defendants had agreed to submit any claims under the relevant
contract to the exclusive jurisdiction of the English court.
In response to these proceedings the defendants raised four issues:-
a. On a proper construction of the agreement, there was no exclusive
jurisdiction clause and thus Article 17 of the Brussels Convention was
inapplicable.
b. The agreement was a consumer contract within the meaning of Article
13 of the Brussels Convention.
c. The agreement was preceded by advertising and/or specific invitation
addressed to the defendants and thus, as the defendants took the steps
necessary for the conclusion of the agreement in the state of their
domicile, by virtue of Articles 13, 14 and 15 of the Brussels Convention,
the defendants are entitled to bring proceedings against the claimants in
Greece.
d. The jurisdiction agreement was an unfair contract term pursuant to the
Unfair Terms in Consumer Contract Regulations 1994 and/or 1999.
The first two of these issues have been determined by Longmore J in a
judgment handed down on the 19th January 2000. He held (although his
order is subject to appeal):-
a. On a proper construction of the agreement, there was an exclusive
jurisdiction clause and that Article 17 of the Brussels Convention was thus
applicable;
b. However, the agreement was a consumer contract within the meaning
of Article 13 of the Brussels Convention (and the Regulations).
It follows that the two further issues c and d now arise for a decision.
Dramatis personae
S. Bank London Limited (“SBL”), the claimant, is the wholly owned
subsidiary of S. Bank I. Corporation Limited of South Africa. It constitutes
the merchant banking arm of the group. It has both a foreign exchange
desk and a money market desk. On 21st March 1997 the claimant entered
into an Introducing Agreement with EF S.A. (“EF”) whereby EF were to
introduce to SBL clients who might wish to enter into foreign exchange
transactions.
EF was a Greek firm of financial brokers based in Athens. The chairman
was Mr P. K.. He gave evidence at the trial on behalf of the claimant.
Another partner in EF was Mr K. Ka.. Mr Ka. also worked for an insurance
and investment group called Inter American. A colleague of his at Inter
American was Mr A. M.. The defendants were investment clients of Mr M..
The first defendant is a Greek engineer and property developer and the
second defendant is his wife, who is a Greek law lawyer, practising in
family law. In July 1997 Mr M. introduced the first defendant to Mr K..
Both defendants gave evidence and Mr M. was also called on their behalf.
Summary of background.
Mr A. and his wife were well off. Between them they had substantial
deposits in foreign exchange mainly with Ci.bank in London and with BCI
in Geneva. Their overall portfolio was undoubtedly conservative, with
other investments being primarily in bonds and mutual funds.
Mr M. advised the defendants from time to time on their financial affairs
and was anxious to encourage them to place part of their portfolio on a
more speculative basis. He had in mind that something in the region of
20% of their liquid assets should be repositioned in this way. No doubt as
a result of his contact with Mr Ka., Mr M. learnt of the potential for more
speculative financial products that might be available through the offices
of EF and accordingly he arranged for Mr K. to meet Mr A. at the latter’s
office.
In his evidence Mr K. described how EF was contracted as an introducer
of business not only to the claimants, but also to two other financial
institutions, IFX (foreign exchange brokers in London) and C. Bank based
in Geneva. One of the more popular packages made available by these
institutions centred on the difference between the interest rate payable on
the ECU and the rate payable on the Greek Drachma. The investor would
borrow ECUs at the lower rates of interest to buy therewith drachma’s
for deposit. The primary risk associated with this procedure was any
devaluation of the Drachma. Mr K. described that he had a number of
clients who had made such an investment through IFX and a few with C.
Bank.
There was some dispute about even the date of the initial meeting
between Mr K. and Mr A.. There was an even greater difference of
recollection as to what took place at this initial meeting. Since the
resolution of that factual dispute is of considerable significance in the
context of the issues that I have to decide, it is desirable that I set out the
competing accounts in some detail. But for the moment I will merely set
the scene by describing the broad nature of the competing versions of the
story.
It was Mr K.s’ recollection that the initial meeting was relatively short and
introductory in form, that no documents relating to SBL were handed over
and that it was only over a series of subsequent meetings, during which
Mr K. described the kind of financial packages that might be available
from not merely SBL but also C. Bank and IXL, that eventually Mr A.
plumped for SBL.
In contrast the account of Mr A. supported by Mr M. was to the effect that
the first meeting was the only one of substance, that only the financial
products available from SBL were discussed and that all the relevant
documentation was duly handed over to Mr A. at that stage.
Introducing agreement
On being signed up as an “introducer” by the claimant, EF was furnished
with various documents. So far as general documentation was concerned,
EF was provided with copies of the “Report and Accounts” for the claimant
group for the financial year 1996, together with copies of a brochure
entitled “Directory of Services”. It was common ground that the first
defendant was indeed provided with copies of these documents, albeit
there was some controversy as to when. EF was also provided with
blank forms of contract for execution following the introduction of a new
customer. These forms included the following:
a. A standard letter containing the “terms of business” for the conduct
of investment by the claimants. This contained an English exclusive
jurisdiction clause.
b. A standard form document containing the “Terms and conditions of
foreign exchange and precious metals margin trading” which included a
non-exclusive English jurisdiction clause.
c. A “Power of Attorney and Indemnity”.
d. A “Communications Indemnity Agreement”.
All these four documents were for execution by the introduced client.
(There was a further form entitled “Client Questionnaire” which was
intended for completion by EF on the instruction of the introduced client.)
Again there was some dispute as to the stage at which copies of these
forms of agreement were handed to the defendants, but what is not in
issue is that on 27th August 1997 the relevant forms were duly executed
by the defendants and were then forwarded to the claimants by Mr K.
under cover of a letter which read: “Please be advised for the documents
of a new account in the name of E. & S. A.”.
Accompanying these forms was a completed Client Questionnaire. This
contained the various entries by way of indication of the defendants’
wealth e.g.
a. “What is your approximate gross annual income from employment or
pensions?” In respect of which the box “£250,000/£500,000” was ticked.
b. “What is your gross annual income from all investments including
deposits?”
In respect of which the box “more than £100,000” was ticked.
c. “What is the approximate value of your assets (including savings) but
excluding the value of your home?”
Answer “£3 million”.
4. “How much do you invest each year?”
Answer “£400,000”.
As I have already indicated, this document was not signed by the first
defendant, but it was stamped and signed by Mr K. on behalf of EF, the
entries being based on information furnished by the first defendant.
On receipt of the documents in London, a “credit application” was
prepared, setting out some of the details referred to above. The
application appears to have been prepared (and recommended) by Mr
Patrick Chalmers and initialled by three other members of the Bank on
29th August. There is however a later initialled endorsement dated 7th
September to the effect that the maximum term should be three months.
On the 10th September Mr Chalmers wrote a memorandum to the
following effect:
“A. is keen to start trading soon through EF Athens. He is aware that
his account is on hold for the moment, as we are not in a position to
classify him as an expert for SFA purposes. He has said that he would
like to send us a signed declaration along the following lines to give us
the comfort we need: he has traded FX before with Ci.bank assets on an
unmargined basis. He is aware of the risks involved in margined trading
and that the entire amount of his deposit could be at risk. He has traded
in other financial markets (Greek and International Bonds and Equities).
He is prepared to operate through EF Athens and has signed a Power of
Attorney to that effect. He would not hold a bank responsible for losses
incurred on trading decisions made by him or EF on his behalf. Is there
anything else we need to include?”
This memorandum was addressed to another member of the bank, Craig
Greaves-Lord. I believe it to be common ground that the proposed form of
declaration was in fact the work of Mr K.. The very next day, September
11th, Mr K. forwarded to Mr Chalmers “the additional document you
requested”. This was in the form of a letter signed by Mr A. broadly
following the lines of the proposal contained in the earlier memorandum:-
“Dear Sirs, I take this opportunity to inform you that my previous
experience in foreign exchange is with Ci.bank, Athens, involving physical
trading without the use of leverage and I am totally aware of the risks and
rewards involved using leverage in the foreign exchange market.
My areas of experience also involves private banking, meaning physical
trading in Greek and International bonds and also Greek and International
equities through individual hands and/or mutual funds. Taking the above
into consideration, I am happy for EF S.A to manage my account and
enter trades for my account and risk.”
The initial margin call as foreshadowed in the questionnaire was for US
$500,000, which was duly deposited on 15th September 1997. By 30th
October 1997 a total of twenty-eight positions had already been opened
on behalf of the defendant. Some sixteen had been closed, but twelve
remained open to a total of 6.1 million ECU. However by this date the
forward exchange rate as between Drachma ECU of 322 was already
materially lower than the actual rate. In the result the claimants sought
an additional margin payment of $600,000 failing which they threatened
that they would close out the defendants’ remaining positions. The
defendants made the appropriate arrangements and the additional margin
requirement was remitted on 4th November.
However on Sunday 15th March 1998 the Bank of Greece announced a
devaluation of the Drachma and the following day the claimants closed
out the remaining open positions at a rate of 352, a decision that is
challenged by the defendants. As already recorded, proceedings were
instituted on the defendants’ behalf in the first instance court in Athens on
18th December 1998.
The only other document of materiality is a letter dated 12th November
1999 written shortly after the institution of the present English
proceedings. The letter was signed by Mr K., although apparently
drafted by the legal representatives of the claimant in accord with their
understanding of his instructions. The relevant part of the letter reads as
follows:
“I am aware of legal proceedings, which refer to the role of EF in
introducing Dimitrios and Stiliani A. to S. Bank London Ltd (SBL). At all
relevant times, I was a director of EF, representing Mr and Mrs A. in their
relationship with SBL.
I would like to make a number of points in relation to the background of
the proceedings as follows:
1. I have known Mr and Mrs A. for a number of years. Mr A. is a well-
known civil engineer involved in real estate development and Mrs A. is an
experienced Greek lawyer, practising in Athens.
2. Prior to entering into a relationship with SBL, Mr A. was experienced
in Foreign Exchange trading and he understood the risks associated
with leveraged transactions. Mr and Mrs A. had relationships with a
number of Greek and foreign banks and conducted foreign exchange and
other business with them. These other banks included Ci.bank Athens,
Al. Credit Bank and BCI (Suisse) in Zurich, Switzerland. I have also
repeatedly have explained to him the dangers of the GRD market and
specifically the danger of devaluation which is exactly what happened.
I had many conversations with Mr and Mrs A. regarding the proposed
transactions with SBL. They stated that they fully understood the nature
of the proposed transactions including the risks of loss. This is reinforced
by a letter which Mr A. sent to you confirming that he had experience in
trading foreign exchange and fully understood the risks and regards in
using leverage in the foreign exchange market.
3. EF did not advertise nor represent SBL’s business in any way in Greece.
At the request of Mr and Mrs A., I informed them about the execution
services provided by various banks and finance institutions, including SBL.
4. On 27 August 1997, Mr and Mrs A. attended at my office to sign the
SBL documentation. I presented them with the documentation and went
through it with them. They stated that they understood the language.
Their command of English is excellent…
Mr K.s’ evidence
In seeking to reconstruct the manner in which Mr and Mrs A. became
clients, Mr K. made reference to his diary for 1997. This had an entry for
Mr M. on 25th July, an entry for Mr A. on 29th July, an entry for the 30th
July of “prepare A.” and a further reference to Mr A. on the 1st August.
The only other reference to Mr A. was on the 27th August being the date
on which the various contractual documents were signed. Against this
background Mr K. contended that he had met with Mr M. alone on the
25th July. At that meeting. Mr M. had informed him that he had a client
who was interested to meet Mr K. in order to discuss the possibility of
entering into a transaction of the kind described above. Based on his diary
entries, he considered that he met up with both Mr A. and Mr M. on the
29th July.
In his statement Mr K. described the joint meeting in the following way:
“After initial introductions Mr A. mentioned that Mr M. had talked to
him about the type of foreign exchange trades referred to above, and
asked me to elaborate upon the current situation in relation to the Greek
drachma and to explain in more detail about such trades. At the end
of the meeting, A. said he wished to continue our discussions and was
clearly very interested in engaging in the foreign exchange trades. I
left him with copies of certain articles from the Greek Financial Press in
relation to such trades.”
In his oral evidence he put greater emphasis on the meeting having
been entirely introductory and by way of “acquaintance. He rejected the
proposition that the initial meeting with Mr A. descended to detail with
specific discussion of financial products of the claimants, let alone that
he had recommended that Mr A. should invest in any such product. He
denied that he ever suggested to Mr A. that EF were “representatives” of
the claimant. He also denied that the claimant’s directory of services or
balance sheet, or any copies of the draft forms of contract, were handed
over at the meeting.
The only document that he accepted had been handed over at the time
of the meeting on the 29th July was a business card, which as Mr K.
recollected it, simply had EF’s address and telephone number on it. He
accepted that at some earlier stage there had been a business card that
carried the name of both the claimant and C. Bank as well. But it was
his evidence that the claimant, having heard about it, called upon him to
cease using it. He had, he said, obeyed that instruction, and no such card
had been furnished to Mr A..
Again relying upon his diary, Mr K. thought that there was a further
meeting with Mr A. on the 1st August. He suggested that the reference
to “prepare” on the 30th July was consistent with him having prepared
copies of the relevant contracts for presentation to Mr A. at that second
meeting. But it was also his evidence that he had discussed with Mr A. the
possibility of investing in the other two institutions with whom EF had a
relationship and only thereafter, in response to Mr A.’ request for further
information about the claimant, did he furnished their annual report and
directory of services.
The sequence of these events remained unclear. Furthermore Mr K. in his
statement asserted that “I met and spoke with A. several times over the
next month or so”. Consistent with this Mr K. was not minded to accept
that there had been no meetings or even telephone conversations in the
period between the 2nd and 25th August inclusive. However, it emerged
from Mr A.’ diary (which was produced just before the trial) that Mr A. was
on holiday out of Athens during this period (and indeed in Egypt as from
the 15th August).
A further oddity arose from Mr K.s’ second witness statement. Having
been reminded of the discovery in the files of EF of some translations of
the relevant forms, he suggested that copies of the translations had been
delivered to the first defendant at some stage prior “to his departure on
holiday which I recall was some two or three weeks after my first meeting
with Mr A. on the 29th July”. This at least was consistent with the date
of formal certification of the translations on the 11th August. But when
faced with the difficulty of reconciling his account with Mr A.s’ holiday
arrangements, Mr K. could only assert that there would have been no
point in obtaining the translations if he had not in fact given copies to the
defendants.
Mr A.s’ evidence
Both the broad outline and the detail of Mr A.s’ recollection of the
discussions between himself and Mr K. in July and August of 1997 were
very different. He agreed that it was M. who introduced him to Mr K..
Mr M. had been anxious that Mr K. should describe to Mr A. the nature
of a financial package, which he felt, would be of interest. The meeting,
as he remembered it, took place on the 25th July at his office with both
Mr M. and Mr K. present. His recollection was that Mr K. described the
principles of margin or leverage trading in a simple way and elaborated on
how advantage might be taken of the difference between the interest rate
payable on ECU as compared with the interest rate payable on Drachma.
He asserted that Mr K. gave the firm advice that the existing exchange
rate between the Drachma and ECU would be maintained for a minimum
of one year.
He also asserted that Mr K. said in terms that his company, EF,
represented SBL in Greece. By way of apparent confirmation of that Mr A.
said that Mr K. gave him a business card on which was printed the name
of SBL and that thereafter during the course of the discussions handed
over publicity material with reference to SBL. Indeed Mr A.s’ recollection
was that no other bank but SBL was mentioned during the course of this
meeting that lasted something like one and a half-hours. At the end of
the meeting Mr A. said that Mr K. left the standard forms of contract with
him inviting Mr A. and his wife to sign them. Mr A. also said that since
the forms were written in English, he then asked Mr K. to arrange for
translation to be made available which Mr K. agreed to do.
In short, far from being an introductory form of meeting over a short
period of time, it was Mr A.s’ evidence that it was in effect the only
substantive meeting between Mr K. and Mr A., albeit there may have
been subsequent telephone conversations. His office diary confirmed that
the office was closed between the 2nd and 20th August and thus that
no meetings took place there in that period. His own diary confirmed
that he was on holiday until the 25th. On his return he said that Mr K.
telephoned him and urged him to sign the forms that he had been given
on the grounds that it was particularly important to take advantage of the
market situation at that time.
Mr A. and his wife duly signed the forms on 27th August without any
further discussion with Mr K. and then handed them over. Mr A. contended
that at no stage were any translations of the relevant documents afforded
to him. As regards the letter of the 11th September, which was drafted by
Mr K. and executed by Mr A., Mr A. was minded to suggest that he only
signed because he was assured by Mr K. that it was in a standard form.
He had not understood it as he did not speak English and having now
understood what it said, felt that it misrepresented his appreciation of the
nature of the risks involved in the proposed transaction.
Mr M.s’ evidence was broadly corroborative of that of Mr A.. Mrs A. was
also called to give evidence but, having not been involved in any of the
discussions, was obviously unable to assist in the resolution of the issues
between the parties.
Discussion
I turn now to consider which of these two starkly different accounts
is to be preferred. While some of the detail may be misrecollected, I
unhesitatingly prefer the account of Mr A. for the following principal
reasons.
a. There is always a danger in drawing any inference from the demeanour
of a witness, particularly when his evidence is given through an
interpreter. But I have to say that, whilst Mr A. appeared to give his
evidence in a responsive and straightforward way, Mr K. left me with the
distinct impression that, despite understanding English well and thus
having the benefit in effect of the question being put twice, was minded to
disengage himself from making a direct and coherent response when any
difficulties were put to him. Put bluntly, I approach the evidence of Mr K.
with some caution.
b. It seemed to me that a significant pointer to the proper resolution
of the issues was the question of the presentation and content of the
visiting card by Mr K.. As already recorded Mr K. was minded to accept
that he did hand over a visiting card, but asserted that it was a plain card
with EF’s address and telephone number without any reference to SBL.
During the course of the trial, a photocopy of the visiting card as given
to Mr A. was unearthed. (I believe it had been found in the files of Mr
A.s’ Greek lawyer.) This did indeed have upon it the logo and name of the
claimants. It is fair to say that it also had the logo and name of C. Bank
Switzerland Limited. Nonetheless, not only was Mr A.s’ recollection largely
substantiated but the document is entirely consistent with the impression
that Mr A. said he got to the effect that EF were acting as representatives
of SBL. This was an understandable impression which no doubt SBL were
anxious to suppress, given their instruction to Mr K. to destroy the visiting
cards when it was discovered he had been using them.
c. The picture that emerged from the contemporary diaries of the principal
witnesses also afforded some considerable support for Mr A.s’ version of
events. In the first place they certainly confirm that the initial meeting
at Mr A.s’ office did indeed take place on 25th July. Secondly, they
undermine to some considerable extent the picture that Mr K. sought to
paint of a series of meetings and other contacts stretching over the period
between the initial meeting and the time when the contracts were signed
in August, not least because they confirm that Mr A.s’ office was closed
as from 2nd August and that he was on holiday until 25th, only two days
before the contracts were signed.
d. There was another feature of the diaries which was of some
significance. There is a notation in Greek in Mr A.s’ diary for the 28th July
that roughly translates as “Ecu/Drachma 1 year steady”. Whilst this may
have been a concept derived from a conversation over the telephone post
the 25th July meeting, nonetheless it strongly supports Mr A.s’ account
of the extent to which Mr K. was giving strong encouragement to Mr A.
about the medium term steadiness in the rate of exchange between the
two currencies and thus, as Mr A. understood it, on the financial benefits
to be derived from the scheme which Mr K. was recommending. Indeed it
also somewhat undermines something that was put at the forefront of the
claimant’s case namely that Mr A. could not conceivably have been naïve
enough to believe that the exchange rates would remain steady. The entry
clearly demonstrates that Mr K. managed to be totally convincing on this
very topic.
e. Mr A.s’ evidence was to the effect that the meeting on 25th July
focussed entirely upon products of SBL. Whether or not products of
any other bank were ever mentioned, Mr A. maintained that Mr K.
recommended investment in an SBL product. Mr K. in his statement was
at pains to assert that he had not made any recommendation about SBL
and had left it to Mr A. to make a choice between the range of products
and banks being put before him. In fact he was forced to retract that
suggestion in the course of his oral evidence for two reasons. First, in a
witness statement prepared by the claimant’s solicitor for the purpose
of an earlier application for default judgment made in January 2000, he
records being instructed by Mr K. that he had indeed recommended the
claimant. Furthermore, this admission was repeated in points of reply filed
in March 2000. Accordingly I am unable to accept the revised story on
this topic as set out in Mr K.s’ statement of May 2000. Moreover it is not
easy to reconcile such a recommendation being made in the context of
the version of the discussions between Mr A. and Mr K. put forward by Mr
K..
f. The next feature of the case that is worthy of examination is the extent
and timing of the provision of the other documents to the defendants,
apart from the tendering of the visiting card. Mr K. had it that no
documents were provided to Mr A. at the initial meeting but that at some
later stage the Directory of Service and Accounts were provided and at
some yet further stage the draft forms of agreement were furnished. I
have already referred to some of the difficulties of accounting for the
delivery of documents when there were so few opportunities in fact
for meetings between the parties following the initial meeting on the
25th July. Moreover, the entry in Mr K.s’ diary for the 30th July to the
effect that he was “preparing” papers for the A.s’ suggests to me that
the contractual documents referred to above had indeed been furnished
before that time and that what Mr K. was preparing as a consequence
of the discussions he had with Mr A. was in particular a completed
form of questionnaire. It is difficult to see in what respect any other
document needed to be “prepared” since they were all in standard and
un-amendable form (with the possible exception of the schedule to the
margin trading agreement).
g. Any confidence in Mr K.s’ version of events is further undermined
by the fact that in the points of reply the claimants specifically denied
that the directory of services were supplied prior to the conclusion of
the agreement. The pleading goes on to assert that Mr K. supplied this
document at the very earliest at the time of the execution of the terms
of business. “He did not intend the defendants to read the documents at
that time and they did not do so. It was intended for subsequent reading.”
This was wholly unsupported by anything Mr K. said in his statement
or in his oral evidence. To the contrary his statement suggests that this
document was furnished to Mr A. at a very early stage in the discussions.
(It perhaps also indicates a degree of sensitivity as to the significance of
the provision of such a document to Mr A. in the context of the issues of
law arising in this case).
h. There is the strange position vis-à-vis the translations. As already
stated they only emerged at a late stage just prior to the trial. Mr K.
in his second witness statement identified a time for the provision of
these translations to Mr A. that was very difficult to reconcile with Mr
A.s’ holiday arrangements that August. But even more problematical
from Mr K.s’ point of view is the emphasis that he placed in his first
witness statement on the time that he spent time running through each
document, explaining its purpose, during the course of his meetings with
Mr A.. This is entirely in accord with Mr A.s’ version of events that no
translations were furnished. It is wholly inconsistent with the provision
of translations, let alone translations that only came into existence in the
middle of August.
i. The suggestion that translations were provided at any stage whatsoever
is further undermined by the letter, which Mr K. signed in November
1999. Its contents are highly damaging to his credibility. It contained the
suggestion that he had gone through the documentation with Mr and Mrs
A., that Mr and Mrs A. never expressed any reservations about signing
the documents and that “their command of English is excellent”. In fact
there was no possibility of Mr K. running through the documents in August
(and if he had done late in the month, he would have made use of the
translations which were by then available). So far as the 27th August was
concerned, the documents had already been signed by the defendants
before Mr K. ever arrived to collect them. There was no question of any
explanations being furnished to Mrs A. because Mr K. never met her.
Finally, the wholly untruthful assertion that the A.s’ understood English
well is of course only consistent with the fact that no translations were
furnished at any stage.
For all those reasons I prefer the evidence of Mr A. and Mr M. as to the
broad timetable and content of events from 25th July onwards. In brief I
find as follows:
a. The initial meeting took place on 25th July 2000. At that meeting
Mr K. did represent that he acted on behalf of the claimant and made
no mention of any other bank from which investment products were
available.
b. He made a detailed presentation at the first meeting as to the manner
in which advantage could be taken of the disparity between the interest
rates on the Ecu and the Drachma.
c. At the first meeting he extracted sufficient information from Mr A. to
complete the questionnaire.
d. He did assure Mr A. that it was both his opinion, and the conventional
opinion in the market, that the Drachma would not be devalued within the
short or medium term.
e. Accordingly he strongly recommended to Mr A. that he make an
investment with SBL.
f. He sought to give further support to the merit of the claimant
organisation by presenting the Directory of Services and Accounts to Mr
A..
g. By the content of his advice and the provision of the documentation
including a visiting card it was intended by Mr K. to convey, and was
perceived by Mr A. as confirming, that EF acted in some representative
capacity on behalf of SBL.
h. Mr A. asked for translations of the contract forms and none were ever
furnished to him.
Section 4 of the Brussels Convention.
Mr Justice Longmore has already decided the threshold question that
both for the purposes of Article 13 of the Brussels Convention, and for
the purposes of the unfair terms in Consumer Contracts Regulations
1994 (and 1999), the defendants were, in entering into their contracts
with the claimants, doing so for purposes which were outside their trade,
business or profession. Nonetheless in order to rely upon Article 14 which
would enable them, despite the exclusive jurisdiction clause, to bring
proceedings against the claimants in Greece and which would prohibit the
claimant from instituting proceedings against them outside Greece, it is
necessary for them to satisfy another threshold requirement of Article 13
namely that “in the state of the consumer’s domicile, the conclusion of
contract was proceeded by a specific invitation addressed to him or by
advertising”.
This is virgin territory so far as authorities are concerned within this
jurisdiction. The Schlosser Report only provides some very modest
guidance as to the construction of this part of the convention. Having
observed that consumer contracts are “subject to the special provisions
only if there is a sufficiently strong connection with the place where the
consumer is domiciled”, the report refers the reader for further assistance
on the meaning of “a specific invitation” or “advertising” to the Giuliano
and Lagarde Report then being prepared for the purposes of the Rome
Convention.
Only relevant passage in this latter report reads as follows:-
“The first indent relates to situations where the trader has taken steps to
market his goods or services in the country where the consumer resides.
It is intended to cover inter alia mail order and doorstep selling. Thus the
trader must have done certain acts such as advertising in the press, or on
radio or television, or in the cinema or by catalogues aimed specifically
at that country, or he must have made business proposals individually
through a middle man or by canvassing. If, for example a German
makes a contract in response to an advertisement published by a French
company in a German publication, a contract is covered by the special
rule. If, on the other hand, the German replies to an advertisement in
an American publication, even if they are sold in Germany, the rule does
not apply unless the advertisement appeared in special editions of the
publication intended for European countries. In the latter case the seller
would have made a special advertisement intended for the country of the
purchaser.”
It seems to me that the words specific invitation should not be accorded
anything other than a natural and common sense meaning bearing in
mind that the provisions of the Convention must of course be given
uniform application in all Convention countries. It is also clear that the
Convention does not adopt the simple route of excluding all consumer
contracts. Accordingly the exceptions must not be interpreted in such a
manner as to extend them beyond the cases envisaged: see Benincasa -
v- Dentalkit Srl [1997] ECR 1-3767.
Bearing that in mind, and with the guidance of the authoritative
commentaries referred to above, I have come to the conclusion that the
defendants have made good their case that the conclusion of the contract
was “preceded by a specific invitation addressed to them”. My primary
reasons are as follows:-
(a) EF had been appointed by the claimant as an “introducer”. Although
the agreement made it plain as between the parties that EF were not
hereby made agents of SBL, the reality was that EF’s role was to indentify,
engage and introduce specific clients.
(b) EF duly presented the defendants with a business plan or package
available from the claimants, indicating both by word and documentation
that EF represented SBL.
(c) EF recommended the package and recommended the claimants as
promoters of it without reference to any alternative source.
(d) It follows that these proposals were to all outward appearances
marketed in Greece by the claimants through EF or, to put it another way,
the claimant’s business proposals “were made by a middleman to the
defendants”.
(e) The proposals were made individually to the defendants: the fact that
the defendants made the initial approach to EF is irrelevant.
Unfair terms regulations
In summary, it seems to me that any fair perception of the facts viewed
overall results in the case having a strong connection with Greece and
falling well within the embrace of the Article 13. This conclusion makes
it strictly unnecessary to consider the second issue as to whether the
jurisdiction clause falls foul of the regulations as an unfair term. The
matter would only be material if I was wrong as to the applicability of
Article 13 and 14. I will however express my preliminary views upon the
point.
The regulations define an unfair term as meaning “any term which
contrary to the requirement of good faith causes a significant imbalance
in the parties rights and obligations under the contract to the detriment
of the consumer.” The regulations go on in Schedule 2 to give guidance as
to the manner in which the existence or otherwise of good faith should be
assessed as follows:
In making an assessment of good faith, regard should be had to:
(a) the strength of the bargaining positions of the parties;
(b) whether the consumer has an inducement to agree the term;
(c) whether the goods or services were sold or supplied to the special
order of the consumer and;
(d) the extent to which the seller or supplier had dealt fairly and equitably
with the consumer”.
Schedule 3 of the regulations goes on to give some illustrations of the
kind of terms which might be regarded as unfair. The only one with
potential reference to the jurisdiction clause in issue here is (q):
“excluding or hindering the consumer’s rights to take legal action or
exercise any other legal remedy, particularly by requiring the consumer
to take disputes exclusively to arbitration not covered by legal provisions,
unduly restricting the evidence available to him or imposing on him a
burden of proof which according to the applicable law should lie with
another party to the contract.”
The claimants’ contention was that, since for the purposes of this
argument Article 13 and 14 had no application, it could not be said that
to require the defendants to bring proceedings in England was contrary
to good faith firstly because the contract was subject to English law, and
secondly because in the event that the jurisdiction clause was struck
down the provisions of Article 2 and 5 of the Convention would require the
defendants to institute proceedings against the claimants in the claimants’
domicile namely England.
The defendants’ response was to pray-in-aid a passage from Professor
Beale’s contribution to Beatson & Friedman: Good Faith and Fault in
Contract Law (1995) at p.245 cited with approval by the Court of Appeal
in Director General of Fair Trading v. First National Bank plc [2000] 2 WLR
1353 at p.1365:
I suspect that good faith has a double operation. First, it has a procedural
aspect. It will require the supplier to consider the consumer’s interests.
However, a clause which might be unfair if it came as a surprise may be
upheld if the business took steps to bring it to the consumer’s attention
and to explain it. Secondly, it has a substantive content: some clauses
may cause such an imbalance that they should always be treated as
unfair.
Against that background, the defendants submit that jurisdiction clauses
of the kind provided for in the present case are prima facie unfair by
reason of the imbalance of convenience between the parties, bearing
in mind that it is the potential for unfairness rather than the actual
unfairness in the particular case that matters. The degree of imbalance
and consequent unfairness, it was suggested, was exaggerated in the
present case by the alternate jurisdictions made available to the claimant
but not to the defendants. Whilst in some case the unfairness might be
overcome by careful explanation of its meaning and effect, in the present
case no explanation, let alone a translation, was made.
As regards the general objection, the defendants relied upon the decision
in Oceano Groupo Editorial SA -v- Rocio Murciano Quintero (C-240/98).
In the context of a small domestic dispute, the European Court stated as
follows:
“22: A term of this kind, the purpose of which is to confer jurisdiction
in respect of all disputes arising under the contract on the court in the
territorial jurisdiction of which the seller or supplier has its principle place
of business, obliges the consumer to submit to the exclusive jurisdiction
of a court which may be a long way from its domicile. This may make it
difficult for him to enter an appearance. In a case of disputes concerning
limited amounts of money the costs relating to consumers entering
an appearance could be a deterrent and cause him to forego any legal
remedy or defence. Such a term thus falls within the category of terms
which have the object of effect of excluding or hindering the consumer’s
rights to take legal action, a category referred to in sub-paragraph q of
paragraph 1 of the annex to the directive.
23. By contrast the term enables the seller or supplier to deal with all the
litigation relating to his trade, business or profession in the courts in the
jurisdiction of which he has his principal place of business. This makes
it easier for the seller or supplier to arrange to enter an appearance and
makes it less onerous for him to do so.
24. It follows that where a jurisdiction clause is included, without being
individually negotiated, in a contract between a consumer and a seller or
supplier within the meaning of the directive and where it confers exclusive
jurisdiction on a court in the territorial jurisdiction of which the seller or
supplier has its principal place of business, it must be regarded as unfair
within the meaning of Article 3 of the directive in so far as it causes,
contrary to the requirement of good faith, a significant imbalance in the
party’s rights and obligations arising out of the contract, to the detriment
of the consumer.”
The concerns of cost and convenience are enhanced in the present case,
so the defendants contend, by the potential impact of the jurisdiction
clauses as construed by Longmore J. to the effect that, while the
defendants can only sue the claimant in England, the claimant at its
option can sue the defendants in England, in any country where the
defendants have assets or indeed in any other country where the
defendants would be amenable to suit.
It is further submitted on behalf of the defendants that the present case
provided a good example of potentially confusing sets of jurisdiction
clauses calling for translation and careful explanation. On my findings of
fact, such was not forthcoming.
I accept the defendants’ submissions. I recognise that in terms of
a consumer contract the arrangements into which the defendants
entered must be at the “business” end of the scale given the size of
the investments made. Nonetheless the purpose of the regulations is to
protect consumers and it is into that category that they fall. The present
proceedings alone demonstrate the potential cost and inconvenience of
being bound to this jurisdiction, all conducted in a language that they do
not speak. I conclude that the imbalance, which has taken the defendants
by surprise, is contrary to good faith and, accordingly, that the jurisdiction
clause is not binding.