RIX J:
This is an application under RSC, O 12, r 8 for an order setting aside
service of the writ in these proceedings and for a declaration that the
Court has no jurisdiction over the defendant in respect of the subject
matter of the plaintiffs' claims. The application raises issues under
arts 5(1) and 17 of the Brussels Convention on Jurisdiction and the
Enforcement of Judgments in Civil and Commercial Matters as enacted by
the Civil Jurisdiction and Judgments Act, 1982.
The four plaintiffs are Liberian shipowning (or ex-shipowning) companies.
The defendant is a German bank operating out of Hamburg and domiciled
for the purposes of the Convention in Germany. The proceedings are
concerned with civil and commercial matters. In the circumstances it
is common ground that under art 2 of the Convention the defendant
must be sued in the Courts of Germany, unless the plaintiffs can bring
themselves within any of the exceptions laid down by the Convention. The
exceptions upon which they rely are those contained in art 5(1) and art
17. Article 5(1) provides:
A person domiciled in a Contracting State may, in another Contracting
State, be sued --
1. In matters relating to a contract, in the courts for the place of
performance of the obligation in question . . .
Article 17 provides:
If the parties, one or more of whom is domiciled in a Contracting State,
have agreed that a court or the courts of a Contracting State are to have
jurisdiction to settle any disputes which have arisen or which may arise
in connection with a particular legal relationship, that court or those
courts shall have exclusive jurisdiction. Such an agreement conferring
jurisdiction shall be either -- (a) in writing or evidenced in writing . . .
If an agreement conferring jurisdiction was concluded for the benefit
of only one of the parties, that party shall retain the right to bring
proceedings in any other court which has jurisdiction by virtue of this
Convention.
Before turning to the claims set out in the writ and points of claim it
may be convenient if I first deal in narrative form with the background
to the plaintiffs' complaints. The first three plaintiffs, Ocarina, Damaris
and Verena entered into loan agreements with the defendant in October,
1991, all in essentially identical form, under which the defendant provided
the respective plaintiffs with loan facilities to be applied to finance the
purchase of three separate vessels. It was an obligation under and a
condition precedent to the effectiveness of the loan agreements that
these plaintiffs would execute and provide to the defendant inter alia
assignments of earnings of the relevant vessels (the "assignments"),
deeds of charge upon the retention accounts in which the vessels'
earnings would be placed (the "charges") and deeds of pledge of shares
in the plaintiff companies (the "pledges"). The loan agreements called for
the opening of loan accounts and retention accounts with the defendant.
The retention accounts would be credited with the earnings of each vessel
and debited with repayments and interest payments on appropriate dates.
Each loan agreement provided for English law and jurisdiction, the latter
in the following terms:
25. Jurisdiction
(A) The Borrower hereby irrevocably agrees for the benefit of the Bank
that the courts of England shall have jurisdiction to hear and determine
any suit, action or proceeding, and to settle any disputes which may
arise out of or in connection with this Agreement and for such purposes
irrevocably submits to the jurisdiction of such courts . . .
(D) The submission to the jurisdiction of the Courts referred to in Sub-
Clause (A) shall not (and shall not be construed so as to) limit the right
of the Bank to take proceedings against the Borrower in any other court
of competent jurisdiction nor shall the taking of proceedings in any one
or more jurisdiction preclude the taking of proceedings in any other
jurisdiction, whether concurrently or not.
The assignments contain the following clause concerning "Assignment of
Earnings":
The Owner as beneficial owner hereby assigns to the Lender all its right,
title and interest in and to the Earnings and all and any proceeds thereof
provided that upon payment to the Lender of all monies due and to
become due from the Owner under or pursuant to the Loan Agreement
and the Security documents therein referred to and when the Owner
shall be under no further actual or contingent liability under the Loan
Agreement or the Security Documents therein referred to, the Lender
will, at the request and cost of the Owner, reassign without recourse or
warranty as to the subject matter of such assignment, the Earnings to the
Owner or to whomever the Lender shall reasonably believe to be entitled
thereto.
The assignments also provide for English law and jurisdiction, the latter in
the following terms:
11. Jurisdiction
(A) For the benefit of the Lender, the parties hereto irrevocably agree
that the Courts of England are to have jurisdiction to settle any disputes
which may arise out of or in connection with this Agreement and that
accordingly any suit, action or proceedings (together in this Clause
referred to as "Proceedings") arising out of or in connection with this
Agreement may be brought in such Courts . . .
(D) Nothing contained in this Clause shall limit the right of the Lender
to take proceedings against the Owner in any other Court of competent
jurisdiction; nor shall the taking of proceedings in one or more
jurisdictions preclude the taking of proceedings in any other jurisdiction
whether concurrently or not.
The charges contain the following clause:
8.1 This Agreement shall be governed by and construed in accordance
with English Law and the parties irrevocably agree for the exclusive
benefit of the lenders that the courts of England are to have jurisdiction
to settle any disputes which may arise out of or in connection with this
Assignment and that accordingly any suit action or proceeding arising out
of or in connection with this Agreement (in this Clause 8 referred to as
"Proceedings") may be brought in such courts and the Company hereby
irrevocably submit to the jurisdiction of such courts.
8.2 Nothing contained in this Clause 8 shall limit the right of the
Lender to take proceedings against the Company in any other court of
competent jurisdiction, nor shall the taking of proceedings in one or more
jurisdictions preclude the taking of proceedings in any other jurisdiction,
whether concurrently or not.
By May, 1992 financial difficulties on the part of the Multifleet Group, one
of whose companies, BCSL US Med Line, was the bareboat charterer of
the first three plaintiffs' vessels, led to a series of meetings in Hamburg
and London culminating on May 16, 1992. The plaintiffs allege that a
restructuring was then agreed as follows: that the bareboat charters
would be terminated; that three other vessels operated by Multifleet
would be sold to the interests behind the first three plaintiffs acting
through three further Liberian companies to be nominated; that the
purchase monies would be advanced 100 per cent by the defendant
and used to discharge Multifleet's obligations to the defendant; that a
new management company would be set up to manage all six vessels
and would be provided with a credit line of US$1m by the defendant;
that the defendant would provide further finance and guarantees to the
six shipowning companies, to be secured by additional mortgages, to
satisfy outstanding claims of third party creditors of Multifleet against the
vessels; and that there would be an interest holiday of one year in respect
of all existent and future loans.
The plaintiffs allege that this agreement although reached orally, was to
be documented in exactly the same way as the earlier loan agreements,
and that it was also expressly agreed that English law and jurisdiction
would apply. It is not clear what the defendant's attitude in general is to
the allegations concerning the meeting of May 16, but it is denied that
any oral agreement was concluded for English law and jurisdiction. At
any rate, the plaintiffs allege that pursuant to the oral arrangements the
Multifleet charters were terminated, the three Multifleet vessels were
bought, one of them, namely Europe Trader, by the fourth plaintiff, with
money advanced on mortgage by the defendants, that a new managing
company, Hedera Marine Ltd, was incorporated in England to act for
the six vessels; and that the defendant made 22 payments on behalf of
Hedera or the owning companies to various creditors.
The plaintiffs next allege that on May 26, 1992 at a further meeting, in
Cologne, the defendant stated that it was unwilling to provide the further
finance agreed upon, in the absence of additional security over and
above the vessels themselves. The plaintiffs accepted that statement as
a repudiation or renunciation of the oral agreement of May 16, 1992. At
a further meeting held in London on May 29, 1992 the parties agreed, so
the plaintiffs allege, a further restructuring, indeed a complete unwinding
of the loan facilities provided by the defendant to these four plaintiffs and
to the two other Liberian shipowning companies who are not, I have not
been told why, party to these proceedings, whereby the six vessels were
then and there sold to the defendant at prices intended to discharge all
possible outstanding liabilities to the defendant under the various loan
and security agreements.
Against this background, the plaintiffs identify the following five claims in
their points of claim against the defendant:
(i) a claim by the first three plaintiffs pursuant to their respective loan
agreements to be reimbursed the sums standing in their respective
retention accounts, or damages for breach of those agreements, on the
basis that all liabilities under those agreements have been discharged: the
total sum involved is alleged to be at least US$1,574,103.79;
(ii) the identical claim, pursuant to the assignments and charges;
(iii) a claim for the return of various share certificates lodged with the
defendant pursuant to the pledges, or damages for breach of the loan
agreements, upon the same basis, that all liabilities to the defendant have
been discharged;
(iv) a claim for damages for repudiation of the oral agreement of May 16,
1992: such damages have not been quantified, but in principle they would
reflect any profits that might have been earned by the fleet of six vessels
which were to have been managed by Hedera;
(v) a claim for damages for breach of the agreement of May 29, 1992,
on the basis that the defendant had failed to credit the plaintiffs with
the agreed proceeds of the sale of the vessels or to treat the plaintiffs'
obligations under their respective loan and security agreements as
discharged.
It will be observed that these five claims fall into essentially two parts.
The first, second and third are claims made by the first three plaintiffs
by reference to the written agreements entered into in October, 1991.
The fourth and fifth claims, however, arise out of the oral agreements of
May, 1992, and the fourth plaintiff is alleged to be party to them. It is not
clear exactly on what basis the fourth plaintiff is included as a claimant at
any rate in respect of the agreement of May 16, 1992: possibly by way of
novation on the basis of a company to be nominated. There is also a claim
for an account by all four plaintiffs.
The writ does not cover the identical ground in quite the same way. There
is no express mention of the assignments or charges, although there are
claims for reimbursement of the retained earnings --
. . . under the additional Loan Agreement and/or as varied or otherwise.
There is a separate claim for breach of an oral loan agreement between
the fourth plaintiff and the defendant made on or after May 16, 1992 in
respect of which it is said that the defendant has failed to remit monies
properly owing to the fourth plaintiff. This claim does not appear to have
been advanced in the points of claim.
In these circumstances Mr Schaff, on behalf of the plaintiffs, accepts the
burden of showing that the plaintiffs' claims fall within the exceptions
to art 2 of the Convention. He seeks first of all to support the claims in
respect of the written loan documentation of October, 1991, relying on
art 17 of the Convention, the relevant terms of which I have already
set out. He submits that the three claims concerned all "arise out of or
in connection with" the relevant contracts, and that these contracts all
contain agreements in writing by the parties to submit such disputes to
the English Courts.
On behalf of the defendant Mr Lockey contends otherwise. He points
out that in October, 1991 and again in May, 1992 the plaintiffs opened
accounts with the defendant pursuant to application forms which stated
that:
All business with the bank shall be governed by your General Business
Conditions . . .
and that the conditions contain a German jurisdiction clause in the
following form:
26.(1) The premises of the bank's office keeping the account are the place
of performance for both parties, provided the customer is a businessman
who does not fall under the definition of Section 4 of the German
Commercial Code (Handelsgesetzbuch) or if the customer is a public-
law body corporate or a state-operated special fund or if his residence is
outside the Federal Republic of Germany. All legal relationships between
the customer and the bank are subject to the law prevailing at the place
of performance, even in the event of a lawsuit being conducted abroad.
(2) If the customer is a businessman who does not fall under
the definition of Section 4 of the German Commercial Code
(Handelsgesetzbuch) or if the customer is a public-law body corporate
or a state-operated special fund, the bank can be sued only in the court
having jurisdiction at the place of performance.
It is not in dispute that the plaintiffs are, other things being equal,
customers to whom those provisions apply. Mr Lockey next points out that
the wording of cl 25(A) of the loan agreements only states that the --
. . . Borrower agrees . . . and for such purposes irrevocably submits
to . . .
the jurisdiction of the English Courts. That agreement, he says, does not
embrace the defendant, who is free to sue in Germany, as is confirmed by
cl 25(D). The jurisdiction clause should therefore be read as a unilateral
one, only binding on the plaintiffs. As for the defendant bank, the only
agreement as to where it is to be sued is to be found in the last sentence
of cl 26(2) of the general business conditions, which states that it can be
sued:
. . . only in the court having jurisdiction at the place of performance . . .
and that place of performance is defined in the opening words of cl 26(1)
of those conditions as being Hamburg:
The premises of the bank's office keeping the account are the place of
performance for both parties.
As for the assignments and the charges, although the language of their
jurisdiction clauses differs from that of cl 25(A) of the loan agreements in
referring to "parties":
. . . the parties hereto irrevocably agree that the Courts of England are to
have jurisdiction . . .
those agreements must be regarded as only ancillary to the primary
loan agreements, and have to be construed against the background of
cl 26 of the general business conditions. So construed, cl 11(A) of the
assignments and cl 8.1 of the charges have to be read as though "parties"
mean the plaintiffs. In any event the plaintiffs' applications to open fresh
accounts in May, 1992, thereby renewing their allegiance to the terms of
the general business conditions, override any contrary agreement to be
found in the loan agreements or elsewhere. Mr Lockey further submits
that any jurisdiction clause seeking to provide for a jurisdiction other
than the one mandated under art 2 of the Convention must be clear and
precise and be construed restrictively, relying on Owens Bank Ltd v Fulvio
Bracco, [1994] 2 WLR 759 (C 129-92, judgment of the European Court of
Justice delivered Jan 20, 1994).
I approach the construction of these clauses applying English canons
of construction, as I am required to do. The loan agreements, the
assignments and the charges are all governed by English law, and,
although the general business conditions are governed by German law,
the evidence I have received as to their construction under German
law informs me that they can be expressly varied and leaves for my
decision the extent, if any, to which the jurisdiction clauses in the loan
documentation of October, 1991 affect cl 26 of the general business
conditions, and the extent, if any, to which the applications of May, 1992
affect the jurisdiction clauses in the loan documentation. In applying
canons of English construction to the relevant clauses, I think I am
entitled to bear in mind, and I do, that the formal requirements of art
17 of the Convention have been interpreted to mean that consent has
to be clearly and precisely shown, and that any jurisdiction agreed
for the purpose of art 17 may be a derogation from the general rule
contained in art 2. In the case of genuine ambiguity or uncertainty as to
the correct construction of such a jurisdiction clause I therefore consider
that the English Court should resolve such ambiguity or uncertainty in
favour of a construction which leaves the underlying jurisdiction required
by art 2 untouched. Nevertheless, in my judgment the jurisdiction
agreements contained in the loan documentation have to be construed as
requiring the first three plaintiffs not only to submit to English jurisdiction
themselves but also to submit their disputes to the jurisdiction of the
English Courts. As such they are incompatible with cl 26 of the general
business conditions, and have to be taken as varying or even excluding
that clause.
My reasons are as follows. Clause 25(A) begins with an agreement by the
"Borrower" (that is to say by the first three plaintiffs) that the Courts of
England:
. . . shall have jurisdiction to hear and determine any suit.
Prima facie "any suit" means what it says and embraces any suit whether
brought by or against the borrower. There is no express language to
say that the Courts of England are not to have jurisdiction to hear and
determine any suit brought by the borrower. Any such limitation therefore
would have to be implicit, in circumstances where the limitation could
have been easily written in: "to hear and determine any suit brought
against but not by the Borrower". The clause then proceeds to state that
the borrower agrees that the Courts of England shall have jurisdiction
"to settle any disputes". Disputes, unlike suits, are not brought by one
party against the other: they are the result of differences between two
parties. Again the qualification sought by the defendant is not express,
but would have to be introduced by implication. This time the implication
is technically more difficult. To distinguish between disputes which are to
be determined in England and those which are not within that agreement
could not for this purpose be achieved by any qualification as to the
nature of the dispute in question, but has to depend, so the defendant's
argument would have to go, upon who is the initiating litigant. It follows,
therefore, that at the time when a dispute occurred, the parties would
not know whether it was to be litigated in England or not. Moreover,
"any disputes" would have to mean something along the lines of "any
disputes in which the Borrower emerged as defendant". It seems to me
that this is an impossible implication. Then again, cl 25(D) preserves
the defendant bank's right to sue the borrower in any other Court of
competent jurisdiction. Thus cl 25 as a whole says that the bank may sue
the borrower in England or elsewhere where jurisdiction can be properly
founded but apparently, on the defendant's argument, says nothing
whatsoever about where the borrower may sue the bank. This seems to
me to be improbable: possible, of course, should a clause expressly state
that it is dealing with the question of jurisdiction unilaterally; but in the
absence of such express guidance, improbable. It is made none the less
improbable by the express agreement upon English proper law in cl 27.
Although it is perfectly possible to divorce law and jurisdiction, and this
not infrequently occurs, it is not a construction which one would expect to
find in a contract which provides for both English law and jurisdiction --
absent express language, such as is found in cl 25(D). As for the words
"for the benefit of the Bank", Mr Lockey submitted that they mean "at
the election of the Bank"; but in my view they amount to words of art
signifying that this jurisdiction agreement is of a kind, permitted by art
17 (where the words, however, are "for the benefit of only one of the
parties"), which allows one of the parties to bring proceedings "in any
other court which has jurisdiction by virtue of this Convention".
It seems to me that the construction of cl 25(A) which I favour is
confirmed by the analogous clauses in the assignments and charges.
Clause 11(A) of the former begins:
For the benefit of the Lender, the parties hereto agree that the Courts of
England are to have jurisdiction to settle any disputes . . .
In this clause there can be no doubt that the agreement for English
jurisdiction is mutual, albeit there is still a reservation in cl 11(D) to
permit the defendant bank to sue in any other Court of competent
jurisdiction. The opening words "for the benefit of the Lender" in this
context cannot possibly mean "at the election of the Lender", and Mr
Lockey's submission that the word "parties" means the borrower is
equally impossible. The same remarks can be addressed to the language
of cl 8.1 of the charges:
. . . the parties irrevocably agree for the exclusive benefit of the
Lender that the courts of England are to have jurisdiction to settle any
disputes . . .
When one considers the three jurisdiction clauses together, with their
wide language as to the scope of disputes covered by the agreement
as to jurisdiction ("arise out of or in connection with"), it is even harder
to imagine that the parties to these agreements intended that small
differences in wording were to make a critical difference as to where the
plaintiffs were required to bring suit. Otherwise the same dispute which
under the loan agreements would "arise out of or in connection with"
such agreements and, upon the defendant's argument, would have to be
litigated in Germany, could equally "arise out of or in connection with" the
assignments and charges and have to be litigated in England, although in
both cases the claimant was a plaintiff.
The construction of cl 25(A) which I favour is in my judgment also
confirmed by authority. In Continental Bank NA v Aeakos Compania
Naviera SA, [1994] 1 Lloyd's Rep 505; [1994] 1 WLR 588 an American
bank granted a loan facility to a Greek shipowner at the former's Athens
branch. The loan agreement was governed by English law and contained a
jurisdiction clause as follows:
Each of the borrowers . . . hereby irrevocably submits to the jurisdiction
of the English court and hereby irrevocably nominates [A] . . . to receive
service of proceedings in such Courts on its behalf but the bank reserves
the right to proceed under this agreement in the courts of any other
country claiming or having jurisdiction in respect thereof.
The borrowers were the first to commence proceedings against the
bank -- in Greece: in response to service of those proceedings upon
it, the bank sought an injunction in England to restrain the borrowers
from continuing the Greek proceedings in breach of the jurisdiction
agreement. Subsequently the bank commenced a separate action in
England against the borrowers on the merits. The Court of Appeal held
that the jurisdiction clause was an agreement binding the borrowers to
commence proceedings in England.
Lord Justice Steyn delivered the judgment of the Court. At p 508, col 1;
pp 592G-593A he said:
Clause 21.02 is undoubtedly elliptical. It simply provides that the
borrowers and guarantors submit "to the jurisdiction of the English
courts . . ." In our judgment the clause should be read in a transitive
sense: see Austrian Lloyd Steamship Co v Gresham Life Assurance Society
Ltd, [1903] 1 KB 249. It contemplates the submission of disputes to the
English Courts.
At p 509, col 1; p 594B-E Lord Justice Steyn continued:
We have already explained why we interpret cl 21.02 in a transitive
sense as involving an agreement by the defendants to submit disputes in
connection with the loan facility to the jurisdiction of the English Courts.
That does not necessarily mean that cl 21.02 is an exclusive jurisdiction
agreement. Mr Clarke submits that where there is an agreement to
submit disputes to the jurisdiction of a particular country, the parties are
taken to have intended the chosen Court's jurisdiction to be exclusive
unless there are unusual or particular circumstances which indicate
otherwise. He finds some comfort in Austrian Lloyd Steamship Co v
Gresham Life Assurance Society Ltd, [1903] 1 KB 249 at pp 251-252;
Sohio Supply Co v Gatoil (USA) Inc, [1989] 1 Lloyd's Rep 588 and British
Aerospace Plc v Dee Howard Co, [1993] 1 Lloyd's Rep 368. See, however,
Cannon Screen Entertainment v Handmade Films (unreported) July 20,
1989. We find it unnecessary to explore this line of authority or to express
any view on Mr Clarke's submission. We say that because cl 21.02 (the
only jurisdiction agreement that we were asked to consider) does not
contain a submission to English jurisdiction simpliciter. We regard the
concluding words as significant:
but the bank reserves the right to proceed under this agreement in the
courts of any other country claiming or having jurisdiction in respect
thereof.
The juxtaposition of a submission by the defendants to the jurisdiction
of the English Courts and the option reserved in favour of the bank to
sue elsewhere brings into play the expressio unius exclusio alterius
canon of construction. It suggests that a similar option in favour of the
defendants was deliberately omitted. In our judgment cl 21.02 evinces a
clear intention that the defendants, but not the bank, would be obliged to
submit disputes in connection with the loan facility to the English Courts.
I reject the submission that the construction of the jurisdiction clauses
in the loan documentation is affected by cl 26 of the general banking
conditions. Such conditions were intended to cover the defendant's
general banking business, but must be considered to be ousted by the
tailor-made provisions relating to the loan documentation. It is clear
that the provision for German law in cl 26(1) of the conditions and the
provision for English law in the loan documentation cannot exist side
by side: the latter ousts the former. As for the suggestion that a half-
way house position may prevail, whereby German law is supplanted by
English law as the proper law of the agreements, but the provision for suit
against the defendant only in the Courts having jurisdiction at the place
of performance survives, this seems to me to be unrealistic. It would
involve defining the place of performance under an English law contract
with the assistance of a proviso which only makes sense if German law is
the proper law:
. . . provided the customer is a businessman who does not fall under the
definition of Section 4 of the German Commercial Code . . .
It follows that the plaintiffs are bound to submit disputes arising out of
or in connection with the loan agreements, the assignments and the
charges to the English Courts, and art 17 of the Convention applies to
such disputes in derogation from art 2. It is common ground that at
any rate claims (i), (ii) and (iii) identified above are claims or disputes
within such written jurisdiction clauses. Claim (iii) (par 16 of the points
of claim) presents a slight complication in that the pledges under which
the relevant share certificates have been lodged are not in evidence
before me. However, the claim is said to be advanced pursuant to the loan
agreements, and the defendant has addressed no separate argument to
me to the effect that, if I find that art 25 of the loan agreements amounts
to an agreement for English jurisdiction, I should nevertheless find that
claim (iii) lies outside the scope of such agreement. I therefore hold that
the first three plaintiffs have jurisdiction under art 17 of the Convention to
bring claims (i), (ii) and (iii) in England.
I therefore turn to consider the position relating to claims (iv) and (v)
arising out of the alleged May, 1992 restructuring. The plaintiffs rely here
again upon art 17. They say that such claims are also claims or disputes
which "arise out of or in connection with" the loan agreements. I do not
agree. They are claims which arise out of or in connection with a wholly
different restructuring agreement which it is alleged was repudiated. Such
agreement embraced six vessels and not merely three, and the fourth
plaintiff is co-plaintiff in respect of such claims while being absent from
the first series of claims based upon the October, 1991 documentation.
Having said that, and despite the fact that neither Mr Schaff nor Mr
Lockey drew a distinction between claim (iv) and claim (v) but were
both prepared to deal with the latter in the same breath as the former, I
believe that there is a distinction to be made between them. Claim (iv) is
concerned with an entirely new restructuring, and also a new beginning.
The claim is for damages for repudiation of that agreement in the as yet
unspecified amount of profits which it is speculated would have been
obtained by developing a line with the six vessels concerned. Claim (v)
grows out of and reverses that new beginning, and in this sense it belongs
together with claim (iv); it too embraces four (potentially six) claimants,
rather than merely the original three. However, in another sense, the
alleged agreement out of which claim (v) has arisen looks back to the
loan documentation of October, 1991 and was designed, so it is said, to
discharge all of the first three plaintiffs' obligations under those original
arrangements. In that sense, and confining the impact of the May 29,
1992 agreement to the first three plaintiffs, I can visualise the possibility
that certain aspects of that agreement are inextricably bound up with the
subject matter of claims (i), (ii) and (iii). Now, I do not know exactly what
is the nature of the dispute between the parties with respect to claims
(i), (ii) and (iii), other than that the defendant is not disposed to accept
them. The defendant's affidavits are entirely silent on that subject. But
it may well be that those claims and the disputes, whatever they be, to
which they give rise, will inevitably involve some dealing with at any rate
certain aspects of the agreement of May 29, 1992. In that sense and to
that extent it may yet emerge that there are disputes which "arise out
of or in connection with" the loan documentation of October, 1991 which
embrace the subject matter of the May 29 agreement. I am therefore
prepared to rule that claim (v), as currently presented, as well as claim
(iv) are not within the scope of the jurisdiction agreements of the October,
1991 loan documentation. I am not, however, prepared to make a blanket
declaration that the Court has no jurisdiction in respect of the subject
matter of claim (v), being the agreement of May 29, for the reasons that I
have sought to set out above.
Mr Schaff also seeks to reserve the argument that the plaintiffs can rely
on art 17 directly in relation to the May 16, 1992 restructuring (claim (iv))
on the basis that there was an express oral agreement on that day for
English law and jurisdiction, and that, albeit art 17 requires a jurisdiction
agreement to be in writing or evidenced in writing, the defendant cannot
rely on the absence of writing since that was itself a consequence of
the defendant's own repudiatory breach. Mr Schaff invokes Alghussein
Establishment v Eton College, [1988] 1 WLR 587 as a matter of English
substantive law, and the requirement of good faith for the purposes of
the Convention, citing Galeries Segoura Sprl v Firma Rahim Benakdarian,
[1977] 1 CMLR 361, Partenreederei Ms Tilly Russ v Haven & Vervoebedrif
Nova NV, [1985] 1 QB 931, and Berghoefer GmbH & Co KG v ASASA,
[1986] 1 CMLR 13. Suffice it to say that the oral agreement is itself
in dispute upon the affidavits before me, a dispute which Mr Schaff
recognises that I could not at present resolve; and that in any event it
seems to me that the requirement of writing (or one of the other formal
alternatives under art 17) is demanded precisely so that there should be
no, or at any rate severely limited, opportunity to dispute the incidence of
such agreements. It is only when consent between the parties has been
confirmed in accordance with the formal requirements of the article, that
considerations of good faith might prevent one party from disputing the
application of such written confirmation: see par 15 of the judgment of
the European Court of Justice in the Berghoefer case at [1986] 1 CMLR
13 at p 21. If it were otherwise, the formal requirements of art 17 could
become entirely otiose.
The plaintiffs' alternative approach to claim (iv) (repudiation of the May
16, 1992 agreement) was to rely upon art 5(1) of the Convention, on
the basis that the principal obligation which the defendant had failed
to perform in repudiating the agreement was the obligation to provide
finance in the sum of US$1m to the new management company to be set
up to run the fleet of six vessels, and that was an obligation to provide
such finance directly to an account of such company in London. Therefore,
it was submitted, "the place of performance of the obligation in question"
was England.
It was common ground between the parties that, for the purposes of
art 5(1), the Court has to identify the "principal obligation" at the heart
of the claim, or what Lord Goff of Chieveley in Union Transport Plc v
Continental Lines SA, [1992] 1 Lloyd's Rep 229 at p 234, col 2; [1992]
1 WLR 15 at p 23B called "the real ground of complaint". In all other
respects, however, there was disagreement between the parties. The
lynchpin of the plaintiffs' case on this aspect of the argument was the
evidence contained in the affidavit made on their behalf by Louise Krenca,
a solicitor employed by Ince & Co, that it had been agreed that the
defendant would provide the US$1m credit "direct to the account of the
management company in London". In an affidavit in response made on
behalf of the defendant by Peter Flint, a partner in the firm of Watson,
Farley and Williams, he states that no such agreement was concluded. In
a further affidavit from Ms Krenca, she explains how the matter had been
intended to operate. Hedera would open an account with a London bank.
Thereupon --
It was expected that at regular intervals, Hedera would advise the
[defendant] Bank how much of the credit was required in London to meet
its anticipated costs. These monies would then be remitted to Hedera's
London account by the Defendant and debited to the account of Hedera
with Marcard Stein in Hamburg. As the monies were being spent in the
operation of the six vessels, Hedera would account to the Defendant and
advise how much had been applied as against each vessel. The Defendant
would then debit the account of the relevant owning company and credit
the account of Hedera.
Against this background I make the following observations. The points
of claim merely plead that the new management company "would be
provided with a credit line of US$1m by the defendant" (par 8(4) of
the points of claim). Prima facie, such "credit line" would be operated
from Hamburg. Furthermore, this obligation is only part of a series of
obligations under which the defendant was to provide finance to the
plaintiffs: see par 8(5), (6) and (7). There is therefore force in the
defendant's submission that the alleged "principal obligation" is in truth
only one aspect of a more general obligation to provide finance to the
plaintiffs in various forms. Again, prima facie such finance would be
provided in Hamburg. Moreover, on May 19, 1992 Hedera and each of the
plaintiffs opened new current accounts with the defendant in Hamburg,
subject to the defendant's general business conditions. As I understand
the evidence before me, it would seem that the mechanism by which
fresh operating finance was to be provided to the new management
company had not been definitively worked out. Let me assume, however,
in favour of the plaintiffs that it was at any rate clearly agreed that the
new management company would operate from London, that it would
therefore need or wish to pay the vessels' expenses from London, and
that it would therefore have to be provided with the means in London
to draw upon the finance which the defendant was willing to provide.
Nevertheless, the probability is that the finance would be provided
originally by means of some debiting and/or crediting of accounts in
Hamburg: presumably a loan account would be set up in Hamburg upon
which Hedera could draw. Ms Krenca's affidavit itself in my judgment
shows that the essential finance would derive from "the account of Hedera
with Marcard Stein in Hamburg". Once that account became the source
of Hedera's finance, it would naturally be open to Hedera to transfer
such funds wherever it was convenient, and that may well have meant
London. That is not, however, in my judgment to say that the finance
obligation was to be performed in London. On the contrary, it would be
performed in Hamburg. I arrive at that conclusion independently of the
general business conditions whose cl 26(1) stipulates that the place of
performance is where the account is kept; as well as independently of
the general rule in English law which is that a bank's obligation to make
payment out of an account is an obligation to make payment at the
branch where the account is kept: see Richardson v Richardson, [1927]
P 228 at pp 232-233. For these reasons in my judgment the plaintiffs'
reliance on art 5(1) of the Convention to sustain their claim in England for
damages for repudiation of the alleged agreement of May 16, 1992 fails.
In summary, therefore, there is jurisdiction in England under the
Convention in respect of claims (i), (ii) and (iii) by reason of art 17, but
not in respect of claims (iv) and (v). Claims (i), (ii) and (iii) are dealt
with in pars 1-4 and 15-16 of the points of claim; claims (iii) and (iv)
are dealt with in pars 7-14 of the points of claim. However, the matter
is complicated by the lack of overall convergence between the points
of claim and the writ. It is of course the writ with which this application
under O 12, r 8 is primarily concerned, and the points of claim have been
considered only on the basis that they expand and flesh out the claims
set out in the writ. That, however, turns out not to be strictly accurate.
Claim (i) is certainly within the writ: see pars 1-6 of the writ. Claim (ii),
however, is not expressly within the writ, unless the claim pursuant to
(but not for breach of) the assignments and charges are within the words
"or otherwise" to be found in pars 2, 4 and 6 of the writ. Claim (iii) is
within the writ (see par 10), but the claim there is expressed to be a
claim brought by the second, third and fourth plaintiffs, whereas the claim
pleaded in the points of claim (par 16) is expressed to be brought by
the plaintiffs in general, and to include a claim in conversion which is not
mentioned in the writ. Moreover, the claim in par 8 of the writ (damages
for breach of an oral loan agreement between the fourth plaintiff and the
defendant) has not been pursued in the points of claim.
It is in these circumstances that I have to consider how I should proceed.
Should I set aside the whole writ and all subsequent proceedings, or
should I merely strike out of the writ all paragraphs which cannot be
sustained under my decision in respect of art 17 of the Convention? Order
6, r 7(1)(a) and O 11, r 1(2) permit service out of the jurisdiction without
leave of a writ only if "each claim" (emphasis added) made by the writ
is one which by virtue of the 1982 Act the Court has power to hear and
determine. This writ ought not therefore to have been issued without
leave, nor served out of the jurisdiction on the defendant. Nevertheless,
the same situation may arise in an O 11, r 1(1) situation where there is
leave inter partes to proceed in respect of one claim, but not in respect
of another. In the circumstances I feel that I can deal with the present
case by striking out pars 7 and 8 of the writ and striking out reference to
the fourth plaintiffs in par 9 (claiming an account) and par 10 (claiming
the return of share certificates) as well as from the writ as a whole. As
for the points of claim, in my judgment this pleading suffers from the
interweaving of claims which the English Court has jurisdiction to hear
and determine and those which it has not, as well as from the ancillary
problem of advancing claims not within the writ. In my judgment it
cannot usefully survive even in an amended form without embarrassment,
and should be struck out as a whole. However, I give leave to serve
anew points of claim in proper form. The plaintiffs may want to consider
whether the writ requires some amendment before they proceed to plead
anew, but that is a matter for them. I shall also make a declaration that
in the circumstances of the case the Court has no jurisdiction over the
defendant in respect of the subject matter of the claim arising out of the
alleged oral agreement of May 16, 1992.
I rather regret the conclusion to which I have come, because the various
agreements relied upon are in a sense part of a developing situation,
and it may prove inconvenient and expensive to both sides to have to
litigate certain claims in one jurisdiction and other claims elsewhere.
Since, however, the parties have chosen to rely upon their rights, on the
one hand under contract, and on the other hand under the Convention, it
is the Court's duty to uphold them.
DISPOSITION:
Judgment accordingly
SOLICITORS:
Watson, Farley & Williams; Ince & Co