The defendants in this motion herein dated 3rd September, 2003, seek
an order pursuant to the O. 12 r. 26 of the Rules of the Superior Courts
or alternatively pursuant to the inherent jurisdiction of this court setting
aside the service of these proceedings on the defendant on the grounds
that the contract (if any) on which the plaintiff sues in these proceedings
was the subject of a clause conferring sole and exclusive jurisdiction to
hear disputes howsoever arising between the parties, on the courts of the
canton of Aargau, in Switzerland and as a consequence this Court does
not have a jurisdiction to hear and determine the plaintiffs claim against
the defendant.
The plaintiffs statement of claim which was delivered on the 30th
September, 2003, reveals that the plaintiffs claim that a machine
purchased by the plaintiffs from the defendants and delivered in October,
2000, to the plaintiffs exploded and caught fire on the 4th July, 2001,
when the machine was being cleaned and as a consequence of which
the plaintiffs claim to have suffered very significant losses and damage
which they say were caused by the breach of contract of the defendants
and also the negligence, breach of duty and breach of statutory duty and
negligence misrepresentation of the defendants.
The facts relevant to the issues that arise in this motion are to be found in
the several affidavits sworn herein and are as follows.
The defendants are a limited liability company incorporated in Switzerland
and are a subsidiary of another Swiss company known as Sulzer AG.
The plaintiffs are a limited liability company incorporated in Ireland
and engage in the business of manufacturing orthopaedic implants
incorporating elements made from titanium. These proceedings concern
the design, manufacture and the supply by the defendants to the plaintiff
of a Titanium Arc Spray Coating System (the "machine") for use by the
plaintiffs at its plant in Cork.
Negotiations between the plaintiffs and defendants commenced in January
of 1999 when on the 4th January, a confidentiality agreement was
entered into between these parties. Subsequent to this, the defendants
submitted three quotations, the first being quotation No. S99013-HE,
on the 19th January, 1999. A revised quotation No. SS99013A-He, was
submitted by the defendants on the 30th March, 1999 and the final
quotation bearing No. S 99013C-He, was submitted on the 6th July,
1999. All of these quotations stated that they were to be subject to the
defendants general conditions of contract and these general conditions
were enclosed with the latter two quotations. These general conditions of
the defendants inter alia contained what may be described as an exclusive
jurisdiction clause in the following terms:
" 19. Jurisdiction and Applicable Law
19.1 The place of jurisdiction for both the customer and the supplier shall
be at the registered office of the supplier.
The supplier shall however be entitled to sue the customer at the latter's
registered address.
19.2 The contract shall be governed by Swiss substantive law."
On the 29th September, 1999, the plaintiffs sent the defendants a "Letter
of Intent" which is in the following terms:
"Letter of Intent
Dear Valentin,
This letter confirms our intention to place an order with you for an
automatic inert gas arc wire coating system, generally in accordance with
your offer S99013C-He of July 6th, 1999 and subsequent discussion.
As the completion of the validation work and the preparation of the
detailed purchase conditions will take some more time we would request
that Sulzer Metco commence immediately with the detailed engineering
work and the planning for the delivery of the system.
In case the system for reasons which are not apparent at the moment,
is not purchased by Stryker Ireland Limited, we will reimburse Sulzer
Metco for the engineering and planning work carried out. The amount to
be spent for such engineering and planning work is limited to CHF50,000.
Additional expenses for material purchasing, capacity planning etc. are
explicitly excluded from the scope of this letter of intent."
On the 8th October, 1999, the defendants wrote to the plaintiffs seeking a
formal purchase order so that works could commence in order to achieve
the quoted delivery time of nine months. A further letter of the 5th
November, was sent by the defendants to the plaintiffs again seeking the
purchase order.
On the 11th November, 1999, the plaintiffs faxed to the defendants five
sheets and here the controversy in the case begins. The first of these
sheets was the fax enclosure sheet the second sheet or document was the
purchase order being order No. 030155. This is dated the 10th November,
1999 and it orders one inert gas wire arc coating system as detailed in
attachment 1 for the unit price of SFR1,347,320. On it is inscribed the
following:
"Delivery xworks, Wohlen on August, 10th, 2000."
The order is signed by P. Forrestal with the date of 10th November, 1999,
added to the signature.
The third sheet in this fax communication is a letter dated 11th
November, 1999, from Pat Forrestal, General Manager of the plaintiff to
Valentin Vogt of the defendants, this letter reads as follows:
"Dear Valentin,
Attached herewith for your attention please find purchase order No. 0155
and attachment No.; 1.
If you have any queries please contact me.
Kindest regards,
Yours sincerely,
Pat Forrestal
General Manager."
The next two sheets in the fax communication are what has previously
been described as "Attachment No. 1". As this document is of great
importance to the case, I quote the textual part of it in extenso. It is as
follows:
"Purchase Order No. 0155
Attachment No.: 1
Sulzer Metco Purchase Order - Arc Deposition System
To design, supply, commission and validate an automatic inert gas wire
coating system in accordance with the Sulzer Metco offer S99013C-
HE unless varied below and subsequent discussions with Stryker
representatives.
The system shall be constructed to safely and efficiently coat a range
of Femoral Stems and Acetabular Cups as tabulated below, to meet the
requirements of Stryker Specification IMS0133 for Arc Deposited Titanium
Coating Composition and Thickness and all relevant appearance criteria
advised by Stryker and illustrated by reference samples as provided to
Sulzer Metco .....
The scope of supplies shall include all designs, machinery and equipment,
fixtures, masking, specialist operational and maintenance tools, technical
information and initial consumables necessary to provide Stryker with a
fully validated and operational system.
The design and construction shall be carried out so as to minimise the
noise level from the system during operation, consistent with the open
plan manufacturing floor arrangement of the Cork facility.
Full design drawings (hard-copy and CAD format) and specifications,
operational and maintenance manuals, in the English language shall
be provided at a handover. Sample documentation shall be provided to
Stryker for approval during the course of the project.
The system shall have the capacity to coat a minimum of 100 stems or
125 cups on a single shift, with two trained operators, including masking
and defurring.
The system shall be fully commissioned and validated at the Wohlen
works, and operated for a period of four weeks, two weeks of which shall
be at full production, prior to shipment to Ireland. The system shall be
commissioned in Ireland following which Sulzer Metco personnel shall
supervise the operation of the system by Stryker staff for five working
days of satisfactory performance.
Training of Stryker staff shall be provided by Sulzer Metco at Wohlen
during the initial commissioning and operation of the system.
The Stryker scope of supply associated with the project shall comprise:
1. Reimbursement of the shipping costs of the system from Wohlen to the
Cork facility.
2. Off loading and positioning of the system components under Sulzer
Metco supervision.
3. Provision of mechanical and electrical attendance during reassembly
and re-commissioning.
4. Provision of utilities i.e. gas, electricity, compressed air, water and dust
extractions.
5. Provision of test pieces as necessary to carry out validation and initial
performance testing.
The system shall be ready for shipment following production testing and
disassembly at Wohlen, by August 10th, 2000. Shipment and reassembly
at Cork shall be carried out in the most expeditious manner possible
thereafter.
Detailed engineering design shall be subject to the approval of Stryker.
Total price for the system: SFR1,347,320.
Terms of payment:
10% after order acknowledgement.
20% following design approval.
60% at readiness for dispatch following successful production testing.
10% at final acceptance."
On the same day i.e. the 11th November, 1999, the plaintiffs posted to
the defendants a hard copy of the letter of the 11th November, 1999, as
quoted above, the purchase order as mentioned above, Attachment No.
1 as quoted above and also a copy of the plaintiffs Standard Conditions
which were enclosed behind the purchase order.
The text of the letter of the 11th November, 1999, as posted and of
the purchase order and Attachment no. 1 are identical to those as
faxed on the same date. Thus the material difference between the
posted communication and the fax communication is the inclusion of the
plaintiff's Standard Conditions.
The first term in these conditions is under the heading "Sellers
Acceptance" and is as follows:
"The Sellers acknowledgment of this Order or commencement of work
pursuant to this order, whichever occurs first, shall be deemed an
acceptance of this order. Such acceptance is limited to the express terms
and conditions herein. Any terms and conditions proposed by Seller in
its acceptance that are different or additional to those herein are hereby
objected to and rejected by Buyer. Any terms or conditions proposed
by Seller different or additional to those set forth in this order relating
to the description, quantity, price, or delivery schedule for the goods or
services shall void this order. Any items or conditions proposed by Seller
different or additional to those set forth in this Order, other than those
enumerated above, shall constitute a material alteration, and this Order
will be deemed accepted by Seller without such different or additional
items or conditions."
Upon receipt by the defendants of the fax communication, the defendants
immediately initiated a check of the purchase order and attachment to
ensure that it was in compliance with the quotation of the 6th July, 1999.
It is averred and I would accept that this was completed very quickly and
that work began immediately thereafter on the design and manufacture of
the machine.
The posted communication arrived at the defendants premises but
unfortunately the date of its arrival is not stamped on it or otherwise
recorded. It would appear that this post communication in its entirety
was not drawn to the attention of Mr. Vogt but was simply filed. As a
consequence I accept that the plaintiffs standard conditions enclosed in
this communication were never seen by Mr. Vogt or any other person in a
decision making capacity in the defendant company, that is of course until
after these proceedings were commenced.
Thus the transaction was now blighted by two very significant mishaps,
the first being the failure upon the part of the plaintiffs to have enclosed
its standard conditions with the faxed communication and the second
being the filing by the defendants of the posted communication without it
being seen by Mr. Vogt.
The consequence of this chapter of accidents is that when the Order of
confirmation was sent by the defendants on 25th November, 1999, the
defendants believed that the transaction was proceeding on the basis that
its general conditions, including the exclusive jurisdiction clause, had been
accepted by the plaintiff and because of the absence of any reference in
the confirmation order to the question of general or standard conditions
and in particular to its standard conditions, the plaintiff believed on
receipt of the confirmation order that its Standard Conditions had been
accepted by the defendants.
Thereafter the contract appears to have progressed uneventfully and
the machine was delivered on time and assembled and commissioned
successfully at the plaintiffs premises in Cork.
The defendants case on this motion is that its general conditions governed
the contract including the exclusive jurisdiction clause contained therein.
In making that case the following submissions were made by Mr. Ian
Finlay S.C.
Each of the three quotations given by the defendants to the plaintiff
expressly incorporated the defendants general conditions and the second
and third quotations and in particular the final one of the 6th July,
upon which the agreement was based enclosed a copy of these general
conditions.
At no stage during the course of protracted negotiations did the plaintiffs
make any reference whatsoever to their standard conditions or give any
intimation that they wished the agreement to be based on their standard
conditions rather than the defendants.
The faxed communication of the 11th November, 1999, did not include the
plaintiffs standard conditions nor was there any reference to them either
in the purchase order, or the letter, or the Attachment no. 1. In fact there
was no mention of the plaintiffs standard conditions whatsoever. On the
contrary the first paragraph of Attachment no. 1 expressly contracts on
the basis of the defendants final offer or quotation of the 6th July, unless
that was varied below or subsequently, none of which happened.
Having received the fax communication the defendants had no reason
to think that any posted communication or hard copy would at all vary
from the fax communication, there being no reference whatsoever in the
fax communication to any interest in the plaintiffs standard condition
and thus when the posted communication arrived, it was, in accordance
with normal administrative procedure, simply filed. In the meantime the
defendants had commenced work on the project as was expected of them
by the plaintiffs in order to meet a very ambitious delivery time. Finally
when the work commenced and proceeded and when the confirmation
order issued on 25th November, 1999, the transaction had proceeded in
such a way as to leave no-one in any doubt but that there was agreement
between the parties on the basis of the inclusion of the defendants
general conditions.
In this regard the quotation of the 6th July, 1999, which was the basis
of the contract contained an additional benefit attaching to clause 8.4 of
the defendants general conditions. This benefit was never rejected by the
plaintiffs and became part of the contract, thereby inextricable enmeshing
the defendants general conditions into the contract.
Hence on the basis of the incorporation of general conditions in all of
the quotations and the absence of any objection or counter-proposal of
any description from the plaintiff the requirements for compliance with
Article 17(1) of the Lugano Convention as set out in the case of Salotti
v. Ruwa Polstereinaschinen GmbH [1976] ECR 1831 and the case of
Galerie Segourasprl v. Societe Rahin Bonakdarian [1976] ECR 1851 were
satisfied.
The defendant further submits that the initiation by the plaintiffs of a
procedure in Switzerland to obtain payment on foot of the same claim
made in these proceedings, although not creating a Lis Alibi Pendens was
nonetheless a clear acknowledgment by the plaintiffs that Switzerland was
the jurisdiction in which the plaintiffs claim could only be litigated.
The defendants submitted that in order to succeed in this motion, they
merely had to demonstrate a good arguable case. In this regard reliance
was placed on the case of Canada Trust Company v. Stolzenberg [No. 2]
[2002] 1 A.C. 1 at p. 13.
The plaintiffs resist this motion on the basis, that having regard to the
events as they unfolded as set out above that the parties were never ad
idem on the incorporation of the defendants general conditions including
the exclusive jurisdiction clause. It was submitted by Mr. Hogan S.C.
that the inclusion of the plaintiffs standard conditions with the posted
communication of the 11th November, 1999, clearly indicated that the
plaintiffs were not accepting the defendants general conditions and on the
contrary were proposing to contract on the basis of their own Standard
Conditions, and it was the belief of the plaintiffs that that in fact had
happened when they received the confirmation order which made no
reference to either set of conditions.
They submit that the events as they occurred establish that there was no
agreement between the parties on general conditions and in particular
that the defendants have failed to demonstrate or establish that there
was an agreement on the inclusion of the defendants exclusive jurisdiction
clause and they submit that this is the first and essential requirement for
compliance with Article 17(1) of the Lugano Convention.
They further submit that the formal requirements as set out in Article
17(1) are for evidential purposes only; that the primary requirement is
a demonstration of the existence of an actual agreement between the
parties to the inclusion in their contract of an exclusive jurisdiction clause.
In this respect they too rely upon the authority the above-mentioned
cases.
They submit that the circumstances of this case distinguish it from the
case of Holfield Plastics Limited v. ISAP ONB Group Spa (Unreported, High
Court 19th March, 1999) in which case it was held by Geoghegan J. that
the requirements of Article 17 were met in circumstances were one party
had failed to read general conditions which had been submitted by the
other party and to which there had been a clear reference on the face of
the contract.
It was further submitted that the plaintiffs were entitled to sue in this
jurisdiction placing reliance upon Article 5(1) of the Lugano Convention
which entitled them to bring their suit in the jurisdiction of the place for
the performance of the obligation. They accept or concede that the onus
of establishing that the place of performance for the purposes of Article
5(1) in Ireland, rests upon the plaintiffs in this case.
The plaintiff submits that so far as Article 17 is concerned the onus
of establishing that there was agreement on the defendants exclusive
jurisdiction the clause rests upon the defendant and indeed that is
accepted by the defendants.
The plaintiffs reject the submission by the defendant that in order to
discharge the onus on them of establishing agreement as aforesaid, that
they need only show a good arguable case. In this respect the plaintiffs
contend that because the issue raised in the notice of motion must be
finally determined by this court, that it must be determined on the basis
of the normal standard of proof in civil matters.
As a starting point it is worthwhile to quote the relevant provisions of the
Lugano Convention these are Articles 2, 5(1) and 17(1).
It is to be noted that the Lugano Convention enjoys the force of law in
this State by virtue of s. 18 of the Jurisdiction of Courts and Enforcement
of Judgments Act 1998.
"Article 2:
Subject the provisions of this convention, persons domiciled in a
Contracting State shall, whatever their nationality, be sued in the courts
of that State....."
Article 5 which is in s. 2 of the Convention under the subheading of
"special jurisdiction" is as follows;
"Article 5
A person domiciled in a Contracting State may, in another Contracting
State, be sued:
1. in matters relating to a contract, in the courts for the place of
performance of the obligation in question...;
3. in matters relating to tort, delict or quasi - delict, in the courts for the
place where the harmful event occurred...".
Article 17 which appears in s. 6 of the Convention under the subheading
of Prorogation of Jurisdiction" is as follows:
"Article 17
If the parties, one or more of whom is domiciled in a Contracting State,
have agreed that a court or a courts of a Contracting State are to have
jurisdiction to settle any disputes which have arisen or which may arise
in connection with the particular legal relationship, that court or those
courts shall have exclusive jurisdiction. Such an agreement confirming
jurisdiction shall be either:
(a) in writing or evidenced in writing; or
(b) in a form which accords with practices which the parties have
established between themselves; or
(c) in international trade or commerce, in a form which accords with the
usage of which the parties are or ought to have been aware and which
in such trade or commerce is widely known to, and regularly observed
by parties to contracts of the type involved in the particular trade or
commerce concerned...".
As can be seen from the above quoted passages from the Convention,
Article 2 provides a general rule to the effect that persons are to be sued
in the courts of the State where they are domiciled.
Article 5 is cast in permissive terms and it entitles a party suing to depart
from the general rule in Article 2, to commence an action against a
defendant in the State other than the state of domicile of the defendant, if
the matter in issue relates to a contract, where the jurisdiction selected is
the place of performance of the obligation in question.
Thus in relying upon Article 5 the onus clearly rests on the parties suing
to establish that if the jurisdiction chosen is other than the domicile of the
defendant, that it is the place where the obligation was to be performed.
Article 17 is cast in mandatory terms and where it applies the choice
of jurisdiction made overrides any other potential place of jurisdiction
which might arise from the other provisions of the Convention. Because
of this overriding or overarching nature of Article 17, a consideration of
which provision of the Convention applies so as to determine jurisdiction
necessarily in my view starts with a consideration of whether Article
17 applies and in approaching the issues which arise on this motion,
I propose first to consider whether Article 17 applies, as has been
contended for by the plaintiffs.
Before embarking on such a consideration however I should deal with the
appropriate standard of proof or the particular onus that rests on parties
such as the defendant who asserts that there is an exclusive jurisdiction
clause in existence which attracts the application of Article 17.
It was submitted by Mr. Finlay that the onus which was on him was
merely to show a good arguable case. In that regard he was relying upon
the following passage from the judgment of Lord Steyn in the case of
Canada Trust Company v. Stolzenberg No. 2 [2002] 1 A.C. 1 where the
learned judge said the following at p. 13
"In a purely internal case, the test of a good arguable case has been laid
down by the House of Lords as applicable also in respect of domicile as
a ground of jurisdiction: See Scaconsor Far East Ltd. v. Bank Markazi
Jombouri High Islami Iran [1994] 1 A.C.4 38.
The question is whether in the context of Article 6 (of the Lugano
Convention) the more stringent test of balance of probabilities should
apply. Adoption of such a test would sometimes require the trial of an
issue or at least cross-examination of deponents to affidavits. It would
involve great expense and delay. While it is true that the jurisdictional
issues under the conventions are very important they are generally to be
decided with due dispatch and without oral evidence. In my view Waller
L.J.'s judgment (1998) 1 W.L.R. 502, 553 - 559 correctly explained on
sound principled and pragmatic grounds why the defendants argument is
misconceived."
At issue in that case was Article 6 of the Convention which could be said
to present an issue capable of easier resolution than can arise under
Articles 17 or 5(1). Article 6 provides that where a defendant is one of a
number of defendants he may be sued in the courts of the place where
any one of them is domiciled.
That apart however, I in the course of the hearing raised the question
of what would happen when both sides, as in this case, in my view have
what might fairly be described as a "good arguable case". To say that an
applicant/respondent, on a motion such as this is entitled to the relief
sought, if he simply demonstrates a good arguable case, would in my
view, be to risk a grave injustice against a respondent/plaintiff who
equally might be said to have a good arguable case. In that circumstance
if the applicant were granted the relief simply on that basis there would in
my view be an invidious discrimination against the respondent, contrary
to Article 40.1 of the Constitution of Ireland which guarantees equality
before the law.
I am unable to adopt the reasoning as set out in the above quoted
passage in the judgment of Lord Steyn and am inclined to agree with
the submission of Mr. Hogan which was to the effect that as the issue
raised in the notice of motion must be determined finally by this court
on this application, that the normal standard of proof in civil matters
must apply that is to say, the party who carries the burden, in this case
the defendant, in so far as the issue under Article 17 is concerned, must
prove relevant facts on the balance of probability and so far as legal
issues are concerned must satisfy the court of the correctness of any
submissions made by them.
In order to succeed on this application the defendant must demonstrate
that there was an agreement as to the inclusion of the defendants
exclusive jurisdiction clause into the contract and that the formal
requirements in Article 17 are met. Insofar as these former requirements
are concerned, clearly it is the first of these namely that the agreement
conferring jurisdiction is either in writing or evidenced in writing, that is
the appropriate requirement requiring compliance.
I am satisfied on the evidence that there were no practices in existence
between these parties prior to the contract the subject matter of these
proceedings. I accept the averment in the third affidavit of Juerg Suter
to the effect that contract the subject matter of these proceedings was
the first such contract between the plaintiffs and the defendant company.
There was no evidence at all to suggest that the agreement in this case
accords with a usage which was widely known in their trade or commerce
and regularly observed by parties to contracts of the type which was
involved in this case.
Insofar as compliance with the requirement that the agreement be in
writing or evidence in writing there is no difficulty with regard to this
provision. It is quite clear that the exclusive jurisdiction clause was in
writing in the defendants general conditions to which reference was made
in the three quotations and those general conditions were supplied to the
plaintiffs prior to contract being made.
The real issue here is whether or not there was any agreement in the first
place, to the inclusion of the defendants exclusive jurisdiction clause.
The Salotti and Sagura cases establish in my view clearly the principle
that where an agreement is relied upon to set up an exclusive jurisdiction
clause, Article 17 requires that, in the first place, the agreement must be
strictly construed and it must be established that the clause conferring
jurisdiction was in fact the subject of a consensus between the parties
which is clearly and precisely demonstrated and that the purpose of
the formal requirements imposed by Article 17 is to ensure that the
consensus between the parties is in fact established. The reason for this
approach is that where Article 17 applies, the jurisdiction determined by
the general principle laid down in Article 2 and the special jurisdictions
provided for in Articles 5 and 6 are thereby excluded, which ordinarily
would have very serious consequences for the position of the parties to
the action.
The Salotti case however makes clear that the necessary agreement or
consensus will be inferred where a clause conferring exclusive jurisdiction
is included in general conditions of sale but only if the contract signed by
both parties contains an express reference to those general conditions.
Mr. Finlay has submitted and I agree with him that in ascertaining
whether or not there is agreement or consensus such as to comply with
Article 17, issues as to the existence or otherwise of the agreement must
be tested objectively, but by reference to the commercial context in which
the agreement is alleged to have been made. It is clear in my view from
the Salotti case that the necessary agreement may be inferred even
in the absence of proof of actual agreement where the circumstances
are such as to demonstrate that in the commercial context in which the
agreement exists, the existence of that consensus or agreement is in
those circumstances a probability rather than otherwise. Thus as was
demonstrated in the Holfield case agreement was inferred even though
it was contended that the general conditions had never been read and
hence not agreed to but where these general conditions were expressly
referred to on the face of the contract.
In my view therefore the assessment of the unusual set of facts in this
case, these facts and the inferences to be drawn from them, must be
approached on an objective basis in the context of the commercial
environment in which this arrangement existed.
There is no doubt there was a contract between the plaintiffs and
the defendants for the design manufacture, delivery, installation and
commissioning of this complex piece of machinery. There is no doubt that
the parties were entirely ad idem so far as the substantive parts of this
agreement were concerned.
Can it be said however, looking at the matter objectively that there was
consensus or agreement on the ancillary aspects i.e. the inclusion of
the general conditions of the defendants and in particular the exclusive
jurisdiction clause?
I am satisfied on the evidence that the plaintiffs did send the Standard
Conditions with the posted communication which was sent on 11th
November, 1999 and that this reached the defendants probably not later
than a week after its posting. I am also satisfied from the evidence that
when it reached the defendants it was simply filed and not given any
consideration. It is idle to ascribe blame for this state of affairs. It was
entirely understandable that this could have happened.
However the real question here is what significance objectively is to be
attached to the sending by the plaintiffs of these standard conditions. In
this context it is immaterial what the subjective intention of the plaintiffs
was in sending their standard conditions. The question which should
perhaps be asked is what would an objective bystander who was familiar
with the commercial environment in which the plaintiff and defendant
were working, have concluded as to the state of consensus between the
plaintiff and defendant on the question of whether or not the defendants
general conditions and in particular the exclusive jurisdiction clause were
included in their contract.
I have come to the conclusion that viewed in this objective way, the
conclusion must be that these parties were not ad idem on the inclusion
of the exclusive jurisdiction clause. I have come to that conclusion
because it would seem to me that viewed objectively, the sending by
the plaintiffs of their standard conditions, was consistent only with the
rejection by them of the defendants general conditions and with a desire
to have their own standard conditions included in the contract. The
fact that the effort to have their own standard conditions included was
hopelessly ineffective having regard to the absence of any reference to
them in the other documentation, is immaterial. What is inescapable in
my view is the conclusion that the sending of the standard conditions
by the plaintiff was consistent only with the rejection of the defendants
general conditions including the exclusive jurisdiction clause.
That being so in my view notwithstanding the existence of written
evidence of the exclusive jurisdiction clause as required formally by Article
17, more fundamentally, the defendant has failed to discharge the onus
of demonstrating that there was consensus between the parties on the
inclusion of the defendants exclusive jurisdiction clause. Hence in my view
Article 17 does not apply in this case so as to confer exclusive jurisdiction
on the courts of the canton of Aargau in Switzerland as is claimed by the
defendant.
This brings me then to the next issue in the case and that is whether
or not the plaintiff has discharged the onus resting on them of
demonstrating that the place of the performance of the obligation is
Ireland so as to entitle them, pursuant to Article 5(1) to pursue this action
in this jurisdiction. In this regard I should say that it is quite clear that it
is only Article 5.1 that can apply as having regard to the existence of the
contract in this case Article 5.3 does not apply. Should the plaintiff fail to
discharge this onus then Article 2 would prevail and as it is clear that the
defendants are domiciled in Switzerland the claim in these proceedings
would have to be brought in the appropriate Swiss jurisdiction which
would appear to be the canton of Aargau.
The first question to be confronted here is what is the obligation in
respect of which the claim is made. This question begs the further
question namely, by reference to what law is this to be tested. I have
already concluded that the defendants general conditions and in particular
its jurisdiction clause was not included in the agreement and hence in my
view this question does not fall to be determined by reference to Swiss
law. I am satisfied that in the light of the foregoing that this preliminary
question must be determined in accordance with the jurisprudence of the
community as laid down by the European Court of Justice. In the case
of De Bloos Plr v. Bouyersa [1976] E.C.R. 1497 the European Court of
Justice held that the "obligation" in Article 5(1) was the contractual article
which formed the basis of the legal proceedings.
In this case the plaintiffs in their statement of claim at paragraphs 4, 5,
6, 7 and 8 set out their case in contract against the defendant. These
paragraphs therefore describe the obligation for the purposes of Article
5(1), being the contractual articles or provisions which form the basis of
the legal proceedings in contract.
In approaching the question of the place of the performance of the
obligation for the purposes of Article 5(1) it would seem to me that
I am also bound by the decision of the Supreme Court in the case of
Handbridge Limited v. British Aerospace Communication Limited [1993] 3
I.R. 342 in which Finlay C.J. said the following:
"I am satisfied that certain conclusions of principle arise. They are:
(1) The onus is on the plaintiff who seeks to have his claim tried
in the jurisdiction of a contracting state other than the Contracting
State in which the defendant is domiciled to establish that such claim
unequivocally comes within the relevant exception.
(2) In a case of a claim for breach of contract, therefore, what he must
prove is that the obligation in question in that claim is, by virtue of the
terms of the contract or by some generally applicable principle of Irish
law, an obligation which must be performed in Ireland.
(3) It would follow from this that where the evidence adduced by a
plaintiff seeking to have a claim for breach of contract tried within the
jurisdiction of a Contracting State other than the state of domicile of the
defendant amounts to no greater standard of proof than establishing
that the obligation which it is claimed was breached could have been
performed in such state, he has failed to establish his entitlement to sue
pursuant to Article 5(1), the necessary proof being that the obligation
which it is claimed has been broken by the defendant according to the
contract or according to some general principle of law, must be performed
in the state concerned."
In adopting this principle, I must endeavour to ascertain where the
obligation or obligations in question, must be performed.
It is clear from the contract that certain parts of the contractual
obligations could only have been performed in Wohlen in Switzerland and
certain other parts could only have been performed at the plaintiffs plant
in Cork. Manifestly the design and manufacture and initial commissioning
of the machine could only have been done at the defendants plant in
Wohlen. Clearly also the reassembly and commissioning of the machine
and the training of the plaintiffs staff could only have been done at the
plaintiffs plant in Cork. These are the places where those particular
aspects of the contractual obligations were required to be performed.
The allegations of breach of contract in the statement of claim appear to
me to straddle both places of performance with perhaps a preponderance
of these allegations relating to that part of the contract i.e. design and
manufacture which had to be performed in Wohlen in Switzerland.
In resolving this question, it would seem to me that that there are two
approaches open. The first of these, is as advocated by the defendants,
which is to conclude that the obligation at issue in the proceedings is to
deliver the machine for acceptance, testing and commissioning by the
defendants at its plant in Wohlen Switzerland.
The problem with this approach is that it ignores the entirety of the
obligation which was, that in addition to designing, manufacturing,
and delivering commissioned plant at Wohlen by 10th August, 1999,
also there was the obligation to disassemble the machine transport it
to Ireland, reassemble it and commission it at the defendants plant in
Ireland. As said already some of the allegations of breach of contract
relate to that latter part of the obligation.
In particular paragraph 6(e) would appear to relate to that latter part of
the obligation.
At this stage of the proceeding it is not possible to assess the weight
which each of these allegations might have in causing a breach (if any) of
the overall obligation.
That being so, the approach advocated by the defendants is
unsatisfactory because it leaves open the choice between two places for
the performance of the obligation at a stage in the proceedings when it
is not possible to distinguish which should be given greater primacy or
weight.
The other approach is that which is set out in the judgment of Chaddick
L.J. in the case of Viskase Limited v. Paul Kiefel GmbH [1999] 3 All E.R.
362 where he says the following at p. 376:
"That leads to the question: in what place is that obligation (namely the
contractual obligation in question to be performed? In the absence of
authority I would take the view that there could be only one answer to
that question. That obligation has to be performed at the time when the
machine is supplied. There is no other opportunity to perform it. The
seller has not undertaken an obligation to do whatever is necessary from
time to time to ensure that the machine fulfils the purpose for which
it has been purchased... A subsequent failure of the machine in the
course of commercial production is evidence of the antecedent breach
in supplying a machine which was not fit for such use. If the obligation
has to be performed at the time when the machine is supplied, then the
place at which it has to be performed is the place of delivery under the
contract."
The attraction of this approach is that it identifies an overall obligation
which in that case, as in this, is to supply a machine free from defects
which would render it unfit for its intended purpose. In the overall context
of the obligation the supply of the machine in this case was to be in Cork.
The purpose for which the machine was required was in Cork and not in
Wohlen and whilst there was an additional obligation to have the machine
assembled and commissioned in Wohlen by the 10th August, 1999, in
my view the overriding obligation under the contract was to supply that
machine assembled and commissioned in Cork.
I would respectfully adopt the approach taken in that case and would
follow it.
Thus I have come to the conclusion that the place for the performance
of the obligation for the purposes of Article 5(1) is the plaintiffs plant in
Cork and hence the plaintiffs are entitled under Article 5(1) to sue the
defendants in respect of that obligation in Ireland.
This brings me to the question of whether or not the initiation by the
plaintiffs of a debt collection procedure in Switzerland approximately one
year prior to the commencement of these proceedings, has the effect of
enhancing the defendants case either under Article 17 or under Article 5.1
to the extent that the court should conclude as is urged by the defendant,
that the plaintiffs themselves acknowledged Switzerland as being the
appropriate jurisdiction for the litigation of this claim.
I am satisfied from the expert evidence on affidavit as to the laws
of Switzerland, that the debt collection procedure initiated by the
plaintiffs had a very limited effect and did not amount to the initiation
of substantive litigation. It would appear, and there is very little dispute
between the experts about this, that the procedure initiated which is for
the collection of a debt, if it is resisted, as was the case in this case, then
the procedure becomes nugatory, save that it stops a Statute of imitations
running for a certain period. If the debtor disputes the claimed debt the
debt collection procedure can go no further and it is up to the creditor
at that point to then initiate civil proceedings in the courts to litigate the
claim. In this case the plaintiff additionally requested the defendant to
enter into a waiver of the limitation provisions which they agreed to do
and have repeated this. What this achieves is that from the point of view
of a claimant the limitation period is kept at bay and from the point of
view of a defendant they are not exposed to the potential embarrassment
of the repeated presentation of the payment order which is the debt
collection procedure, which could adversely affect their credit rating.
These procedures are the sum total of what has been done in Switzerland.
It is quite clear from the evidence of the experts on affidavit that these
procedures did not involve the initiation of litigation in Switzerland
claiming a determination on the claims now made in these proceedings
here in Ireland. All these procedures did was to simply keep the Swiss
limitation period at bay so that, if desired, the plaintiff could still initiate
litigation in Switzerland to pursue this claim.
In my view the action taken by the plaintiffs in this regard is to be
seen as merely precautionary and cannot be viewed as amounting to
an acknowledgment by the plaintiffs that the claims made in these
proceedings ought properly to be litigated in Switzerland.
For the reasons set out above I must refuse the relief claimed in the
notice of motion.