Judgment of Ms. Justice Finlay Geoghegan delivered on the 28th day of
June 2005.
The proceedings herein were commenced by summary summons issued
on the 1st April, 2004. The plaintiff's claim therein is for the sums of
€345,224.38 and $1,115,948.22, being amounts alleged to be due and
owing by the defendant to the plaintiff in respect of goods sold and
delivered by the plaintiff to the defendant at the request of the defendant
within the last six years.
The plaintiff is a company incorporated in Ireland and carrying on
a manufacturing business in Galway. The defendant is a company
incorporated in Italy and carries on business from Italy.
The plaintiff contends that the Irish courts have jurisdiction to hear and
determine the present proceedings under article 5(1) Council Regulation
E.C./44/2001 of 22 December, 2000 on jurisdiction and the recognition
and enforcement of judgments in civil and commercial matters, O.J.
L012/1 16.1.2001 ("Regulation 44/2001").
The defendant has entered an appearance for the purpose of contesting
the jurisdiction of the Irish courts. It has also brought a motion seeking
an order pursuant to O. 12, r.26 of the Rules of the Superior Courts, 1986
setting aside the service of the Summary Summons on the defendant on
the grounds that the Irish Court does not have jurisdiction to hear and
determine the proceedings.
The issue to be determined in this judgment is whether the Irish courts
have jurisdiction to hear and determine the summary proceedings
pursuant to article 5(1) of the Regulation 44/2001.
Background to present claim
The plaintiff is the manufacturer of high-technology instruments used for
the detection of combustible and/or toxic gas and flame. It is a subsidiary
of G Inc. The defendant appears to have commenced its relationship with
the G Group in 1982. It was then appointed exclusive representative and
distributor for GM products in Italy. As part of these arrangements it was
under an obligation to pay "destination credit" in respect of all sales made
in territories outside of Italy. In 1999 agreement was reached between
GM and the defendant that its status would be changed from an exclusive
representative to a Value Added Reseller (VAR) for GM. The agreed terms
were set out in a letter dated 29th September, 1999, from GM to the
defendant as follows:
"Below are listed the primary guidelines for the new VAR status as agreed
to at our meeting:
1. S will purchase product from GM at our list price (either dollars or
euros) less 20%. There will be no deductions made to your discount for
destination credit to other reps for sales outside of Italy.
2. GM will not appoint a representative in Italy, so your long time
relationship with many customers would not be impacted by another
agent in the territory.
3. GM will not aggressively solicit direct orders from Italian customers.
However, when requested by the customer, we will sell direct to customers
in Italy and S will not be paid a commission for these purchases. The
exception to this will be for spare parts orders for systems previously
supplied by S for which we will refer the customer to S.
4. S will continue to use and promote GM products exclusively worldwide,
such as displaying only GM products at exhibitions, trade shows, etc.
However, when dictated by a customer requirement or specification that
can not be changed, S will be able to substitute competitive products for
specific projects."
The agreement reached in 1999 is referred to in this judgment as the VAR
Agreement.
The defendant thereafter purchased goods from the plaintiff in accordance
with the provisions of para. 1 above. At the date of institution of the
summary proceedings the plaintiff claims that the defendant had
purchased from it goods totalling €345,224.38 and $1,115,948.22
pursuant to a series of individual contracts for the purchase and sale of
goods identified by reference to invoice number and invoice date and
individual amount in the schedule to the summary summons.
The plaintiff does not dispute that it is bound by the 1999 VAR Agreement
with the defendant. The submissions of both parties were based upon
the fact that the plaintiff and the defendant were parties to the VAR
Agreement and to the alleged individual contracts for the purchase and
sale of goods in 2003.
Regulation 44/2001
Regulation 44/2001 replaces the Brussels Convention on jurisdiction
and the enforcement of judgments in civil and commercial matters of
17 September 1968, as amended. Regulation 44/2001 entered into
force on the 1st March 2002 and applies to all proceedings commenced
after that date. As with the Brussels Convention the general rule is that
persons shall be sued in the courts of the member state in which they
are domiciled. Article 5 is an exception to that general rule. Article 5(1)
provides:
"A person domiciled in a Member State may, in another Member State, be
sued:
1. (a) In matters relating to a contract, in the courts for the place of
performance of the obligation in question;
(b) for the purpose of this provision and unless otherwise agreed, the
place of performance of the obligation in question shall be:
- in the case of the sale of goods, the place in a Member State where,
under the contract, the goods were delivered, or should have been
delivered,
- in the case of the provision of services, the place in a Member State
where, under the contract, the services were provided or should have
been provided.
(c) if subparagraph (b) does not apply then subparagraph (a) applies;
Notwithstanding that the present application before the court is brought
by the defendant, as the plaintiff is relying upon what is an exception to
the general rule of jurisdiction, the onus is on the plaintiff to satisfy the
court that the claim may be brought in Ireland pursuant to article 5(1).
The first necessary proof under article 5(1) is that the claim in the
proceedings is a matter "relating to a contract". This was not disputed.
The claim is a claim for the sums due by the defendant to the plaintiff
for goods delivered pursuant to a contract between the plaintiff and the
defendant.
In accordance with article 5(1)(a), as the claim herein relates to a
contract the defendant may be sued "in the courts for the place of
performance of the obligation in question". Article 5(1) of the Brussels
Convention contained a similar provision.
A new provision in article 5(1) of Regulation 44/2001 is the deeming
provision for the place of performance of the obligation in question in
certain circumstances in article 5(1)(b). Its proper meaning and its
application to the facts at issue herein are the subject of the primary
dispute between the parties.
Article 5(1) of the Brussels Convention was the subject of much litigation
before the Court of Justice. The amendment made by the addition of para.
1(b) in article 5 of Regulation 44/2001 must be construed in the context
of that caselaw. In accordance with such caselaw the terms used in article
5 of the Brussels Convention are to have an autonomous meaning. The
same principle must apply to Article 5(1) of Regulation 44/2001.
With the exception of employment contracts, in accordance with the
caselaw of the Court of Justice the "obligation in question" when used
in article 5(1) of the Brussels Convention is "the contractual obligation
forming the basis of the legal proceedings" or "that which corresponds
to the contractual right on which the claimants action is based". See
Ets.A.Bloos, S.P.R.L. v. Société en Commandite par actions Bouyer (Case
14/76) [1976] E.C.R.. 1497 and Hassan Shenavai v. Klaus Kreischer
(Case 266/85) [1987] E.C.R. 239. The amendment made does not alter
this definition which will continue to apply to article 5(1) of Regulation
44/2001.
Determination of the place of performance of the obligation in question
under article 5(1) of the Brussels Convention is in accordance with the
law governing the contract according to the national rules of private
international law of the court seised, Industrie Tessili Italiana Como v.
Dunlop AG (Case 12/76) [1976] E.C.R. 1473.
In Leathertex Divisione Sintetici SpA v. Bodetex BVBA (Case C-420/97)
[1999] E.C.R. I-6747 the Court of Justice considered the issue of multiple
obligations of equal rank arising under or in connection with the same
contract. It concluded at para. 40 of its judgment:
"The same court does not therefore have jurisdiction to hear the whole of
an action founded on two obligations of equal rank arising from the same
contract when, according to the conflict rules of the State where the court
is situated, one of those obligations is to be performed in that State and
the other in another Contracting State".
In the same judgment the court recognised the disadvantages of this
approach.
The reason offered by the Commission for the amendment to article 5(1)
of the Brussels Convention to what is now article 5(1)(b) for Regulation
44/2001 in its Explanatory Memorandum of the proposal for a Council
Regulation (EC) on jurisdiction and the recognition and enforcement of
judgments in civil and commercial matters COM/99/0348 final, O.J. C 376
E, 28th December 1999 was:
"Article 5
The Brussels Convention rule regarding contractual obligations is
maintained. But to remedy the shortcomings of applying the rules of
private internation law in the State whose courts are seised[9] the second
subparagraph of Article 5(1) gives an autonomous definition of the place
for enforcement of "the obligation in question" in two specific situations.
For the sale of goods, it will be the place where, under the contract, the
goods were or should have been delivered. In the case of the provision of
services, it will be the place where, still under the contract, the services
were or should have been provided. This pragmatic determination of the
place of enforcement applies regardless of the obligation in question, even
where this obligation is the payment of the financial consideration for the
contract. It also applies where the claim relates to several obligations. The
rule may, however, be "displaced" by an explicit agreement on the place
of performance.
It is to be noted that in article 5(1)(a) of Regulation 44/2001 the Council
has continued to rely upon the place of the "obligation in question" as
being the matter which determines jurisdiction. Insofar as article 5 (1)
(b) introduces a deeming provision it is only in relation to the place of
performance of that obligation. It therefore appears that the obligation
in question must be linked to the circumstances in which article 5(1)(b)
applies, which on the facts herein is potentially "in the case of the sale of
goods".
The difficult question is what is intended to be covered by the phrase "in
the case of the sale of goods". The obligation in question must be "in the
case of the sale of goods". Even where there is only one obligation in
question in the proceedings (or multiple obligations of the same nature) it
may be intended to include:
i. claims where the obligation in question relates to a transaction which
is the sale of goods irrespective of the characterisation of the contract
between the parties
or
ii. claims when the obligation in question arises under a contract which is
a contract for the sale of goods between the parties.
In claims with multiple obligations in question of a different nature there
are possibly further questions as to how the relevant contract should be
characterised. However this does not arise on the facts herein.
It is unnecessary for the purposes of these proceedings to determine
which of the above is the proper approach to its construction as I have
concluded on the facts of this case that on either basis, article 5(1)(b)
applies. My reasons for so concluding are as follows.
On the facts, I have concluded that there are multiple individual
obligations in question in these proceedings. They are the obligations
to pay the agreed price for goods sold by the plaintiff to the defendant.
Hence the obligations in question relate to transactions which are the
sales of goods if the first interpretation suggested applies.
If, on the contrary, the court should look at the relevant contract between
the parties, then it appears the question to be considered is what is
the contract between the parties of which the obligation in question
forms part. In these proceedings there are 22 separate obligations in
question, namely, the obligation to pay the individual amount due on each
of 22 invoices set out in the schedule to the summary summons. Each
obligation in question is of the same nature to pay for goods sold by the
plaintiff to the defendant at its request and specified in such invoice. The
invoices record the terms of the agreements reached by the orders and
acceptance of orders.
The defendant submitted that the VAR Agreement of 1999 was the
relevant contract between the parties and that this was not a contract for
the sale of goods but rather a contract for the supply of services. The VAR
Agreement as appears from the terms set out above does not include any
agreement to purchase specified goods or even a minimum quantity of
identified goods. The VAR Agreement does not impose on the defendant
the obligation to pay any of the sums claimed in the summary summons.
It cannot therefore be considered that any of the obligations in question
at issue in these proceedings arise under a contract which consists
exclusively of the VAR Agreement. The obligation on the defendant to
pay to the plaintiff any of the amounts claimed in the proceedings did
not arise until after the conclusion between the parties of an agreement
that the plaintiff would sell to the defendant goods specified in an order
from the defendant. The individual contracts for the purchase and sale
of specified goods were entered into by the parties pursuant to the VAR
Agreement. The price to be paid under the individual contracts was fixed
by the terms of the VAR Agreement. Even assuming that certain terms
of the VAR Agreement may be implied in the individual contracts for
purchase and sale ( and I am not so finding ) that fact does not alter the
conclusion that the obligations in question in these proceedings only came
into existence as part of a contract for the purchase and sale of individual
goods specified in an order and subsequently, in the relevant invoice.
Further, the obligation to pay the sums now claimed came into existence
at different times as different contracts to purchase and sell specified
goods were concluded between the parties.
Accordingly, I have concluded on the facts of this case that the obligations
in question in the proceedings arise under or form part of individual
contracts for the sale of the goods specified in the relevant invoices.
Applying, as I must do an autonomous meaning to a contract for the sale
of goods in article (5)(1)(b) of Regulation 44/2001, I am satisfied that
the individual contracts for the sale of the goods specified in the invoices
come with that meaning. The subject matter of each contract was the sale
and purchase of goods.
The final issue is therefore where the goods were delivered or should have
been delivered under the terms of each contract for the sale of goods. Mr.
C in the affidavit sworn on the 5th October, 2004, on behalf of the plaintiff
states that the goods were delivered by the plaintiff to the defendant
in Galway by delivering them to the defendant's forwarding agent. He
states that the defendant has arranged and paid for shipments of goods
from the plaintiff's factory in Galway for over fifteen years. Further, that
in December, 2001 the defendant nominated ICS as its new forwarding
agent and that the plaintiff notified ICS that when goods were ready for
collection on behalf of the defendant. Lastly, it is stated that the plaintiff
has no contractual relationship with ICS whose services were for the
account of the defendant.
Mr. C exhibits invoices which confirm that dispatches were "via ICS ex-
works". He also exhibits an order acknowledgment which, as does the
invoice, contains an instruction to "deliver to" the defendant at its address
in Milan. Mr. C explains this is to specify the ultimate destination of the
goods in Italy.
None of these facts are disputed in the subsequent affidavits sworn by
Mr. B on behalf of the defendant. I have concluded on these facts that
the delivery of the goods under the contracts for the sale of same took
place in Ireland. Hence in accordance with article 5 (1)(b) of Regulation
44/2001 the place of performance of the obligations in question in these
proceedings is Ireland and accordingly under article 5(1)(a) the defendant
may be sued in the courts of Ireland. There will be an order dismissing
the defendant's application to set aside the service of the proceedings
herein.