JUDGMENT-1:
SAVILLE LJ (giving the first judgment at the invitation of Russell LJ):
Until April 1994 the English company, Lancer B. Group Ltd, was (as part
of a group of companies) engaged in the business of manufacturing and
selling fork-lift trucks as well as associated equipment and spare parts. In
1967 B. France SA was incorporated as a French subsidiary of this English
company for the purpose of importing and distributing its products in
France and thereafter became the sole distributor of those products in
France.
In April 1994 Lancer B. Group Ltd went into administrative receivership.
In the following month, the receivers and others sold the shares in B.
France SA to a M D. for one franc, and other assets of Lancer B. Group Ltd
to another English company, which is now called B. Group Ltd, and which
is owned by a German corporation with its own French distributor.
For a short time after these changes, B. France SA placed orders with B.
Group Ltd, which this company accepted. However, on 22 June 1994 B.
Group Ltd informed B. France SA that it was terminating any arrangement
between these two companies. Soon after, it became apparent not only
that B. Group Ltd was refusing to make any further deliveries to B.
France SA, but also that it had instead, started using its owner's French
distributor in France.
B. France SA took the view that this amounted to a breach of an exclusive
distributorship agreement for France which bound B. Group Ltd, and
on 8 July 1994 commenced proceedings against B. Group Ltd and the
new distributor in the Tribunal de Commerce de Corbeil Essonnes. B.
France SA succeeded in obtaining orders from this court restraining the
new distributor from holding itself out as a distributor of B. equipment,
and requiring B. Group Ltd to continue to supply B. France SA, as well
as ancillary orders penalising any delay in deliveries and setting up an
inquiry into the damages sustained by B. France SA.
B. Group Ltd appealed to the Court of Appeal in Paris, who, in effect,
reversed this decision except in relation to products ordered by B. France
SA before 22 June 1994.
On 28 September 1994 (which was before the matter came before the
Court of Appeal in Paris) B. Group Ltd served an English writ on B. Group
SA in France. In these proceedings, B. Group Ltd claimed the following
relief:
'1. A declaration that the Plaintiff is not, and has at no material time
been, under an obligation to the Defendant to supply and deliver the
Plaintiff's equipment, or any equipment of any third party, upon the terms
previously supplied by Old B. or at all. [The reference in this paragraph to
'Old B.' is a reference to Lancer B. Group Ltd and its English subsidiaries.]
2. A declaration that there is and has been no contract of distributorship,
or any other contract, between the Plaintiff and the Defendant herein
pursuant to which the Defendant is entitled to act as distributor, whether
exclusive or otherwise, of the Plaintiff's machinery in France.
3. Alternatively, a declaration that any contract of distributorship between
the Plaintiff and the Defendant has been lawfully terminated by the
Plaintiff and that the Plaintiff has no liability to the Defendant in respect of
it.
4. A declaration that all and any contracts between the Plaintiff and the
Defendant which have not been lawfully terminated have been fully
performed by the Plaintiff.
5. A declaration that the Plaintiff is entitled to appoint a distributor of its
machinery in France, other than the Defendant herein.'
On 29 November 1994 (and before the Court of Appeal in Paris had
given its judgment) B. France SA issued a summons under RSC Ord 12,
r 8 to set aside or stay these proceedings. By a later amendment to
this summons, B. France SA set out the basis for this application in the
following terms:
'1) The Defendant disputes special jurisdiction under Article 5(1) of
the 1968 Brussels Convention on Jurisdiction and the Enforcement of
Judgments in Civil and Commercial Matters.
2) The claim for a negative declaration represents forum shopping and
declaratory relief should not be granted in such circumstances or in any
event.'
On 21 March 1995 Master Eyre set aside the writ and dismissed the
action. The plaintiff appealed but on 12 April 1995 Garland J dismissed
the appeal. With leave of this court (granted in September 1995) the
matter now comes before us.
The Civil Jurisdiction and Judgments Act 1982 incorporates the amended
Brussels Convention on Jurisdiction and the Enforcement of Judgments
in Civil and Commercial Matters into our law. The convention is set out in
Sch 1. Article 5 of the convention provides as follows:
'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 . . .'
France and this country are, of course, contracting states.
Garland J held that this article could not be invoked by a plaintiff who was
denying the existence of any contractual relationship with the defendant.
He also appeared to decide that, since B. France SA had made no threat
to commence litigation here, since the matters in issue had already
been ventilated in the French courts, and since 'these matters can and
should be resolved in the French courts', he would in the exercise of
his discretion decline to allow proceedings for 'negative declarations' to
continue here. I start by considering the first of these reasons.
Articles 21 to 23 of the convention deal with what is to happen when
proceedings are brought in more than one contracting state. In general
terms, the rule is that the court first seized is to have jurisdiction and
that courts in other contracting states should decline jurisdiction or stay
proceedings brought before them. In the present case, it is important
to note that it is not suggested that the French court was the court first
seized of the matters in issue. It appears from the material put before
us that the proceedings in France were of a provisional kind where the
court did not seek to adjudicate finally upon the substantive merits of
the case, which would, if heard in France, be considered by another court
altogether. Thus, in the present case the question is whether this court
has jurisdiction under art 5(1) and not whether another court was first
seized.
Article 5(1) refers 'to matters relating to a contract', and gives the courts
'for the place of performance of the obligation in question' jurisdiction
over such matters. It is well settled that it is no answer to a claim for
jurisdiction under this article that the respondent is asserting that no
contract ever came into existence (see Effer SpA v Kantner Case 38/81
[1982] ECR 825). In other words, the fact that at the end of the day
the court seized of the matter may conclude that there was indeed no
contract is neither here nor there, provided that at the time when the
court has to decide whether or not it has jurisdiction it is satisfied that
the requirements of the article are met. It follows that the word 'contract'
cannot be read as only including cases where the existence of a contract
is unchallengeable or unchallenged.
To my mind there are 'matters relating to a contract' in the present
case. There is a lively dispute between the parties as to whether there
is a contract between them under which the defendant is the exclusive
distributor for the plaintiff in France. It is true that the plaintiff, who seeks
to sue here, is asserting that no such contract exists, but equally the
defendant is asserting the contrary. In my judgment, the fact that it is
this way round does not make the article inapplicable. Article 5(1) is not
confined to actions to enforce a contract or to obtain recompense for its
breach, but refers generally to 'matters relating to a contract'.
The defendant submits that assertions are not enough, since the court
must be satisfied that the essential prerequisites for jurisdiction exist.
Building on this, it submits that it is incumbent on a plaintiff to satisfy the
court at least that there is a good arguable case that such prerequisites
do exist, and relies on authorities such as New England Reinsurance
Corp v Messoghios Insurance Co SA [1992] 2 Lloyd's Rep 251 for that
proposition. Since the plaintiff is claiming that there was no contract, the
defendant submits that it inevitably follows that the plaintiff cannot fulfil
this requirement.
I agree with the premises on which this argument is based, but to my
mind the conclusion does not follow. The article allows a party to be
sued in matters relating to a contract in the courts for the place of
performance of the obligation in question. That party in the present case
is the defendant company. It seems to me that it is entirely illogical and
wrong for that party to assert that there is a contract and that the plaintiff
has broken it (which is what the defendant has done in France, where it
has itself relied on art 5(1) whilst simultaneously contending the contrary
here in order to avoid the application of art 5(1)). To my mind, in a case
such as the present, the plaintiff establishes a good arguable case that
there is a matter relating to a contract by relying on the fact that this
is what the defendant is contending against it. Unless the defendant
withdraws its contentions (which it has not done), it seems to me that it
cannot challenge the jurisdiction on the basis that it should not be sued
here because there is (contrary to those contentions) no contract. Once
one has removed the self-contradictory stance taken up by the defendant,
it seems to me that it is self-evident that there are matters relating to a
contract between the parties.
The next matter is the place of performance of the obligation in question.
Where there are a number of obligations, the one in question is the
principal obligation in dispute between the parties (see Shenavai v
Kreischer Case 266/85 [1987] ECR 239 and Union Transport Group plc v
Continental Lines SA [1992] 1 All ER 161, [1992] 1 WLR 15).
The obligation in dispute in the present case is that the plaintiff is bound
to supply only the defendant with its products for distribution in France.
There could, perhaps, be said to be two obligations, one to supply the
defendant, and the other not to supply anyone else. However, whichever
way it is put, it seems to me that there is a good arguable case that these
obligations (if they existed at all) fell to be performed in this country. So
far as supply is concerned, it is now common ground that the products
were in the past delivered to the defendant exworks Leighton Bu., and
it is not suggested that the alleged continuing exclusive distributorship
contract contained any different term. Indeed, it would be odd if such
a suggestion were to be made, since it is the defendant's case that the
contract upon which it relies arose through the past course of dealing.
As to what could be described as the negative obligation not to supply
others, I take the view that this is probably performable everywhere,
including both here and France (see Medway Packaging Ltd v Meurer
Maschinen GmbH & Co [1990] 2 Lloyd's Rep 112). At this point I should
note that both parties were content to proceed on the basis that the
Contracts (Applicable Law) Act 1990 did not apply to this case, so that
I have sought to categorise the place of performance on the basis of
common law conflict of law principles. Applying those principles, I take
the view (for the purpose of the question of jurisdiction) that the putative
proper law of the disputed contract is probably English law. However, even
if it is French law, there is nothing to suggest that the obligations are
only performable in France and not here, or that French law differs from
English law in this regard. Indeed, as I have noted, it is common ground
that the alleged obligation to deliver was to do so in England.
The defendant also sought to challenge the jurisdiction of the court on
the grounds that it had never contended that it had made an English law
contract with the plaintiff, but that its rights arose from contractual rights
and obligations existing under French law. Thus, it was submitted for the
defendant, the court should decline jurisdiction on the ground that the
plaintiff was seeking declarations in respect of a matter which was not
in dispute between the parties, relying on such cases as Re Clay, Clay v
Booth, re deed of indemnity [1919] 1 Ch 66, [1918-19] All ER Rep 94
and Midland Bank plc v Laker Airways Ltd [1986] 1 All ER 526, [1986] QB
689.
In my view this argument begs the question, which is whether the proper
law of the alleged contract is English or French law. The plaintiff contends
that it is English, the defendant, that it is French. There is a dispute
between them about this. As I have said, it seems to me that it is well
arguable that the applicable law is English. This does not mean that the
plaintiff is seeking relief in respect of something which the defendant is
not disputing; indeed it means the precise opposite.
I now turn to the second reason given by Garland J for declining
jurisdiction. In my judgment, this contains two errors.
In the first place, the judge appeared to consider that the application of
art 5(1) was a matter for his discretion. This is not the law. If the article
is applicable it is the duty of the court to apply it. Jurisdiction under the
convention is not a matter of discretion, as Nicholls LJ pointed out in
Tesam Distribution Ltd v Schuh Mode Team GmbH [1990] I L Pr 149 at
158.
In the second place, the judge seems to have decided as he did on the
grounds that France was the more convenient forum for the resolution of
the dispute. This again is not the law. The application of the convention
does not depend on considerations of forum conveniens (see Custom
Made Commercial Ltd v Stawa Metallbau GmbH Case C-288/92 [1994]
ECR I-2913 and The Maciej Rataj, Tatry (cargo owners) v Maciej Rataj
(owners) C-Case 406/92 [1995] All ER (EC) 229).
It is of course the case that the English courts look very carefully at
proceedings for negative declarations (see Guaranty Trust Co of New York
v Hannay & Co [1915] 2 KB 536, [1914-15] All ER Rep 24 and Camilla
Cotton Oil Co v Granadex SA, Shawnee Processors Inc v Granadex SA
[1976] 2 Lloyd's Rep 10 at 14 per Lord Wilberforce). This does not,
however, mean that caution in this regard can be used as a substantive
ground for declining jurisdiction under the convention, for this would
derogate from the convention. What it does mean is that the court will
be astute to prevent the article from being used in frivolous or vexatious
cases, just as it is astute to stop summarily cases where the plaintiff
seeking to establish a contract cannot show that there is a serious issue
which calls for a trial for its proper determination (see Tesam Distribution
Ltd v Schuh Mode Team GmbH [1990] I L Pr 149 at 158). In such cases,
the court is simply preventing the party concerned from abusing its
process.
In my judgment the proceedings brought by the plaintiff cannot be
categorised as objectionable on these grounds. The defendant contended
that the plaintiff was indulging in forum shopping and that since art 5(1)
was an exception to the general jurisdictional rule of domicile under art 2,
they should be discouraged from doing so. In my view, this argument lies
ill in the mouth of the defendant and in any event also begs the question.
The defendant itself has attempted to bring substantive proceedings in
France against the plaintiff, relying on art 5(1), notwithstanding that
the domicile of the plaintiff is in this country. In any event, the charge
of forum shopping can only be made good by assuming that a party
which takes advantage of the convention exceptions to the general rule
of domicile is somehow doing something illegitimate; but that assumption
cannot be sustained if in truth one of the exceptions is applicable.
Finally, the defendant submitted that the plaintiff was estopped from
contending that the place of performance was other than in France by the
decision of the Court of Appeal in Paris. In my view, this argument is quite
unsustainable. It is clear from the material before us that the views of
that court were expressed in the context of the provisional proceedings
and are in no way binding in France on any court that might deal there
with the matter on a substantive basis. To my mind it follows that the
requirement of finality is absent, so that no question of estoppel can
arise.
For these reasons I would allow this appeal.
JUDGMENTBY-2: OTTON LJ
JUDGMENT-2:
OTTON LJ: I agree.
JUDGMENTBY-3: RUSSELL LJ
JUDGMENT-3:
RUSSELL LJ: I also agree.
DISPOSITION:
Appeal allowed. Leave to appeal to the House of Lords refused.