MR. JUSTICE AIKENS
The Claimant is a water treatment and waste company incorporated
and resident in England. It specialises in continuous micro filtration
techniques. The Defendant is a company incorporated and resident in
Belgium. It carries on a business selling products for water purification by
reverse osmosis techniques. Mr H is the sole director of the Defendant.
3. The Claim Form is dated 18 July 2000. It was endorsed with the
statement that the High Court has the power to hear the claim under the
Civil Jurisdiction and Judgments Act 1982 (the CJJA) and that there are
no other proceedings pending between the parties in the UK or any other
Brussels or Lugano Convention country. The Claim Form was served on
the Defendant in Brussels on 26 July 2000.
4. The Particulars of Claim were served on 13 September 2000. They
recite the history of the relationship between the parties. Since 1992
the Defendant has acted as the agent in Belgium for the Claimant
(or its predecessor company). It is pleaded by the Claimant that this
arrangement has always been informal and never the subject of agreed
contract terms, despite the fact that both sides proposed contract
terms at various times between 1994 and 1997. In paragraph 14 of the
Particulars of Claim it is stated that: Those negotiations came to nothing
and did not conclude with a binding contract appointing [the Defendant]
the agent [of the Claimant] in Belgium.
5. The Particulars of Claim invite the court to make a Declaration that:
(1) there is no contractual relationship of any kind between the parties;
alternatively
(2) there is no contractual relationship between the parties pursuant to
which the Defendant is (either in Belgium or elsewhere):
(a) the exclusive distributor of the Claimant's products; or
(b) the exclusive agent for the sale of the Claimant's products;
alternatively
(3) there is no relationship of exclusivity of any kind between the parties
pursuant to which the Defendant has the right to compel the Claimant
to deal with it exclusively for the sale or supply or distribution of the
Claimant's products, whether in Belgium or anywhere else. 6. The action
and the form of the declarations sought had been prompted by two letters
that had been sent by the Belgian lawyers acting for the Defendant, V.
The first letter was sent on 27 June 2000 when V. had written to L., the
lawyers acting for the Claimant. V. asked L. to confirm within 24 hours
that the Claimant would continue the exclusive distributorship of the
Defendant and the existing scale of agent's commission. The letter stated
that if this confirmation was not received within 24 hours then our clients
instruct us to start judicial proceedings without further warning.
7. The second letter was sent by V. on 4 July 2000, in response to a fax
that L. had sent on 28 June. In their letter V. stated that the Defendant
had always been the exclusive agent for the Claimant in Belgium and that
fact had never been denied by the Claimant. The letter continued:
The withdrawal of the exclusivity constitutes a breach of contract.
Our client considers the relation between [the Defendant] and [the
Claimant] to be terminated by the serious misconduct (unilateral change
of cooperation terms,) of your client and reserves the right to claim
compensation for the damages incurred as a consequence of [the
Claimant's] behaviour.
[The Defendant] instructs us to start judicial proceedings in order to
obtain remediation (sic).
8. In a further letter of 24 July 2000 to L., V. stated:
Your client has acted and continues to act in breach of our client's, as
agent as well as distributor, exclusivity, which has always existed since
the beginning of the relation between your client and our client. In this
respect we refer to our fax of 4 July 2000.
Our client instructs us to start judicial proceedings to claim a.o. (sic)
compensation for the damages incurred as a consequence of your client's
behaviour
9. In response to that letter the Claimant issued the current proceedings
for the declarations that I have set out above. Effectively the action is one
for negative declarations.
10. The Defendant filed an Acknowledgement of Service on 16 August
2000. The form had been sent with the Claim Form and some manuscript
alterations had been made by L. to the paragraphs that set out the time
limits within which the Defendant had to serve a defence to the claim, or
else contest jurisdiction. Instead of the printed period, which is 28 days,
someone has put in manuscript 35 days. So the second paragraph, which
deals with a challenge to the jurisdiction, reads in its altered form:
if you do not file an application to contest the jurisdiction within 35 days
of the date of service of Particulars of Claim it will be assumed that you
accept the court's jurisdiction and judgment may be entered against you.
11. As I have said, the Particulars of Claim were served on 13 September
2000. On 25 September, that is well within the 35 day period referred
to on the Acknowledgment of Service form, the Defendant issued its
Application Notice contesting the Court's jurisdiction to hear this claim,
alternatively to stay the claim.
12. On 24 November 2000 the Defendant issued a Writ of Summons in
the Commercial Court in Brussels. In those proceedings the Defendant
alleged (amongst other things) that:
(1) between 1992 and 1998 it had been the exclusive agent of the
Claimant in Belgium for an indefinite term;
(2) as from 1998 the Defendant had become the exclusive agent and
exclusive distributor of the Claimant in Belgium;
(3) in 1999 it became clear that the Claimant was going to terminate
its relationship with the Defendant. It was further alleged that in May
2000 the Claimant unilaterally and unlawfully breached the exclusive
distribution agreement that it had with the Defendant;
4) in October 2000 there was a unilateral and unlawful breach of the
exclusive agency agreement by the Claimants in respect of a particular
project. As a consequence the Defendant started the Belgian proceedings;
(5) the facts ... show that [the Claimant] has violated its contractual
obligations and has unilaterally terminated the exclusive distribution
agreement without any motivation or notice. For this termination the
Defendant claimed a termination indemnity and a complimentary
indemnity;
(6) the facts showed that the Claimant had violated its contractual
obligations and has unilaterally terminated the agency agreement without
any notice. Indemnification for this termination was also sought.
13. The Issues
At the hearing before me on Friday 12 January 2001 there was argument
on four points:
(1) whether the Application Notice had been issued within the time limits
prescribed in the CPR and the Commercial Court Guide (if relevant);
(2) if the Application Notice was out of time, whether the Court should
extend time under CPR Part 3.2(2)(a);
(3) assuming the Application Notice was effective, whether the Claimant
could found jurisdiction in the English Court relying on Article 5(1) of the
Brussels Convention as scheduled to the CJJA. 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
(4) whether, even if the Claimant could found jurisdiction under
Article 5(1) of the Convention, the court should nevertheless stay the
proceedings on the ground that they were an abuse of the court's
process.
After argument I reserved judgment.
14. Was the Defendant's Application Notice issued in time?
Miss Bingham, who appeared for the Defendant, submitted that the
Application Notice was issued in time. This was because CPR Part 11(1)
(4)(a) provided that a Defendant had to issue an application challenging
jurisdiction within the period for filing a defence. Since the Claimant
had purported to serve the Claim Form out of the jurisdiction under
CPR Part 6.19, then the period for filing a defence was if the defendant
files an acknowledgment of service, 35 days after the service of the
particulars of claim. CPR Part 6.23(2)(b). Miss Bingham submitted that
the practice in the Commercial Court is no different: see the Commercial
Court Guide para C3.2; Appendix 17 para 6(f) and & (c)(iii). Therefore
as the particulars of claim had been served on 13 September 2000, the
Defendant had until 18 October 2000 in which to serve the Application
Notice challenging the jurisdiction. So by issuing the Notice on 25
September 2000 it was well in time.
15. Mr Millett, who appeared for the Claimant, accepted that if just
the CPR applied, then the Application Notice would have been in time.
However he submitted that some confusion had been introduced as a
result of commentary in the October 1999 edition of the Civil Procedure
Rules, as set out in the Spring 2000 edition of the White Book. That
suggested that time for issuing an Application challenging the jurisdiction
of the court in a Convention case should run from the date of the service
of the Claim Form and should be 21 days after the service of the Claim
Form. He said that this confusion was compounded by statements in the
Commercial Court Guide. He referred in particular to paragraphs B 7.2;
C 2.3 and Appendix 17(c)(iii). If those were taken into account the time
for service of a challenge to the jurisdiction was 21 days after service
of the Claim Form on 26 July 2000, ie. by 16 August 2000 at the latest.
As the Application Notice was only served on 25 September 2000 it was
therefore more than one month out of time.
16. I have concluded that the Application Notice was issued in time. The
CPR is clear. Part 11(4) provides that a defendant has to challenge the
jurisdiction within the period for filing a defence. CPR Part 6.23(2)(b)
states that when there has been service of a Claim Form on a Convention
state in Europe and the defendant files an acknowledgement of service,
then a defence has to be filed within 35 days of the service of the
particulars of claim. Although past editions of the White Book had a
misleading note, there is nothing in the Commercial Guide, as applied to
the new CPR Part 6.19 and 6.23 (as opposed to the old RSC Order 11)
that contradicts the provisions of the CPR as far as the Commercial Court
is concerned. The new Commercial Court Guide 2001 Part 11, is clear. A
defendant wishing to challenge the jurisdiction of the court must issue its
application within the period for filing a defence.
17. Extension of Time
Even if I had held that the Application had been made out of time, I would
have extended time under CPR Part 3.1(2)(a). The Claimant's lawyers
had changed the time on the Acknowledgement of Service form to 35
days, thus giving the impression that the Defendant had 35 days from
the service of the particulars of claim in which to issue any application to
challenge the jurisdiction. Moreover the Claimant could not point to any
prejudice that it might have suffered as a result of the alleged delay in
serving the Application.
18. Can the Claimant found jurisdiction under Article 5(1) of the
Convention?
It is accepted by Mr Millett (for the Claimant) that the general rule under
the Brussels Convention is that a defendant domiciled in a Contracting
State should be sued in the courts of that state: Article 2. He also accepts
that the European Court has stated in several cases that Article 5 of
the Convention is a derogation from the general rule of domicile, so its
provisions are to be construed restrictively: see eg. Kalfelis v Bankhaus
Schroder, Munchmeyer Hengs & Co. For her part Miss Bingham accepted
that a claimant could invoke Article 5 in a case where the existence of the
contract was in dispute between the parties. This was established by the
European Court in Effer SpA v Kantner.
19. Both counsel accepted that the issue in this case is: for the purposes
of Article 5(1), where is the place of performance of the obligation in
question? Both counsel agreed that where there are several obligations
under the contract in issue, then the relevant obligation (and its place of
performance) to be considered is the one on which the claimant's action is
based: De Bloos v Bouyer.
20. The problem that arises in this case is that the Claimant asserts
the right to a negative declaration that no contract exists between the
parties. Mr Millett submits that in this circumstance jurisdiction can be
founded by identifying the disputed obligation which gave rise to the claim
for a negative declaration in the first place. He says that the Defendant
had been asserting (eg. in its lawyers' letters of 24 June; 4 and 24 July
2000) that there was a contract of exclusive agency and distributorship
between the parties. He says that the Claimant's action is directed against
the Defendant's assertion that (i) there is a contract and (ii) there is a
contract of exclusivity between the parties. Mr Millett submits that the
Claimant's action is concerned with the issue of exclusivity as much as
it is with the issue of whether there is any contract at all between the
parties. He says that there is at least a good arguable case that the
obligation of exclusivity is one would have to be performed in England,
although he accepts that it would also have to be performed in Belgium.
For that proposition Mr Millett relies on Boss Group v Boss France SA.
21. Miss Bingham accepted that if the relevant obligation in question
was the obligation of exclusivity, then that would be something that (at
least in part) would be performed in England. Therefore jurisdiction under
Article 5(1) could be founded. However she submits that the obligation of
exclusivity is not the obligation in question. Miss Bingham submits that
it is artificial for the court to determine what is the obligation in question
by reference to what the Claimant thought was the key issue between the
parties before it issued proceedings in England for a negative declaration.
The court should approach the issue by looking at what the Defendant
has actually identified as the relevant obligation in its proceedings
in the Commercial Court in Brussels. Miss Bingham submits that it is
clear from the Writ of Summons in the Belgian proceedings that the
Defendant is claiming an indemnity because of the Claimant's violation
of contractual obligations and because it has unilaterally terminated
the exclusive distribution agreement without any motivation or notice.
Therefore the key or principal element in the Defendant's case in the
Brussels proceedings is not the Claimant's breach of the exclusivity
obligation. In fact it is that the Claimant unilaterally terminated the
exclusive distribution/agency agreement with the Defendant and failed to
give proper notice of termination.
22. Miss Bingham submitted (and Mr Millett did not demur) that the place
of performance of the obligation to give notice of termination is the place
of business of the party that has to receive the notice. In this case that
would be the Defendant and the place where it should receive the notice
would be Brussels. Miss Bingham relied on the analysis of the Court of
Appeal in: Medway Packaging Ltd v Meurer Maschinen GmbH & Co KG.
23. So the issue is: which is the relevant obligation in question? In my
view the correct answer is: the exclusivity obligation. I have reached this
conclusion for the following reasons:
(1) The proceedings in which the jurisdiction of the English Court is in
question are those started by the Claimant by its Claim Form dated
18 July 2000. In the Particulars of Claim that have been served by the
Claimant in those proceedings it has set out the basis for its claim for
a negative declaration and the obligation that is in dispute between the
parties.
(2) The European Court cases establish that, for the purposes of Article
5(1), the obligation in question has to be the obligation that is the basis of
the claim by the Claimant. Here the Claimant seeks a negative declaration
that there is no contractual relationship with the Defendants for the
exclusive distribution or agency for the sale of the Claimant's products.
So those are the obligations that are in issue in the proceedings where
jurisdiction is under consideration. That is the obligation that is in issue
at the time that the Claimant's proceedings were served on 26 July 2000,
which is the time when the English Court became seized of this matter.
(3) Although Miss Bingham argued that the Defendant itself had
terminated the contract with the Claimant by virtue of the letter of
4 July 2000, this does not assist her case. First I am not convinced
that the letter, properly construed, does state that the Defendant is
giving notice of termination. It says that the Defendant considers
the relationship between the parties to be terminated by the serious
misconduct (unilateral change of cooperation terms) of your client.
Secondly it is clear from that letter and the letter of 24 July that the issue
of exclusivity is one that continues to concern the Defendant. So that was
the position just before the Claim Form was served on 26 July, which is
the moment the English Court became seized of the matter.
(4) Although in the Brussels proceedings the Defendant has concentrated
on its claim for an indemnity for the alleged failure of the Claimant to
give proper notice of terminating the contract of distributorship/agency
with the Defendant, the Defendant has not foresworn its contention that
the contract was one with an exclusivity obligation. That is clear from the
way that the Belgian Writ of Summons is drafted. The exclusivity issue is
referred to on pages 5, 9 and 10 of the Writ of Summons.
(5) As it is common ground that the obligation of exclusivity is to be
performed in England as well as Belgium, then the Claimant can found
jurisdiction for the action relying on Article 5(1).
(6) So at the very least there is a good arguable case that the obligation
in question is the exclusivity issue. It is clear from the judgment of Saville
LJ in the Boss Group case that the standard to be achieved by a Claimant
asserting jurisdiction under an article of the Convention is whether there
is a good arguable case that the Claimant can found jurisdiction on the
particular Article relied upon.
24. The Application for a stay of the English proceedings
It was accepted by Miss Bingham for the Defendant that if the Claimant
could properly found jurisdiction in the English Court under Article 5(1),
then the only basis on which the action could be stayed would be that
the action is an abuse of the process of the court. Miss Bingham also
accepted that if I held that the English Court had jurisdiction by virtue of
Article 5(1) then a stay could only be granted if I was convinced that the
action for a negative declaration did not serve any useful purpose. She
relied upon statements of Lord Woolf MR in Messier Dowty Ltd v Sabena
SA that the English Courts still exercise caution in permitting the use of
proceedings for obtaining a negative declaration and if necessary the
Court will stay proceedings for negative declarations that do not serve any
useful purpose.
25. Miss Bingham submitted that these proceedings did not serve any
useful purpose because: (i) the Claimant was securing an illegitimate
procedural advantage; and (ii) the proceedings are now addressing the
wrong issue, ie. exclusivity, whereas the dispute is about whether proper
notice of termination was given.
26. The first argument is, with respect, misconceived. If, as I have held,
the Claimant can rely on Article 5(1) to found jurisdiction under the
Convention, then there can be no question of the Court then staying the
case on discretionary grounds, on the basis that the invocation of Article
5(1) conferred an illegitimate procedural advantage on the Claimant.
If the only ground was the use of Article 5(1), then a stay would be
inconsistent with the jurisdiction regime of the Convention and thus
contrary to section 49 of the CJJA. (Different considerations may arise
where a Brussels Convention jurisdiction is used for the sole purpose of
harassing a defendant who is already a party to legitimate proceedings
in another Convention country: Turner v Grovit. That cannot be said here
when the English proceedings were started first and I have held that use
of Article 5(1) is legitimate).
27. As to the second argument, I am not convinced that the Defendant
has abandoned its case that there were exclusive contracts of agency and
distribution with the Claimant. It appears to be maintaining them in the
Writ of Summons in the Brussels proceedings in which it claims indemnity
for failing to give notice of termination. Therefore it seems to me that the
Claimant's proceedings for a negative declaration that there is no contract
between the parties, let alone any contract of exclusivity, do serve a
useful purpose. In my view it is quite legitimate for the Claimant to seek a
declaration that it is under no obligation of exclusivity to the Defendant; if
it obtains that relief then it will be free to organise its business in Belgium
as it wishes without further issues being raised by the Defendant.
28. Moreover Miss Bingham accepted that the Defendant could
counterclaim for the indemnity that it sought in the Belgian proceedings.
Therefore all disputes between the parties could be tried in the English
Court.
29. Accordingly I reject the submission that even if the Claimant
established jurisdiction under Article 5(1), the Court should stay the
proceedings or decline to exercise any jurisdiction it is found to have. I
should add that Miss Bingham did not pursue an argument (foreshadowed
in the Application Notice but not in her Outline Argument) that there
should be a stay because the dispute concerned an agency agreement in
Belgium which was impliedly governed by Belgian law.
30. Conclusions
My conclusions are:
(1) That the CPR Part 11 Application Notice of the Defendant was issued
in time;
(2) Even if I had held that it had not been issued in time, I would have
extended time under CPR Part 3.2(a);
(3) The Court has jurisdiction to hear the Claimant's claim for a negative
declaration under Article 5(1) of the Brussels Convention as scheduled to
the CJJA;
(4) The action by the Claimant is not an abuse of the process; it does
serve a useful purpose and so there will be no stay of the action.
31. Accordingly the Defendant's Application Notice dated 25 September
2000 will be dismissed.