1 In this application, the third defendant seeks an order under Part 11 of
the Civil Procedure Rules that the Court does not have jurisdiction to try
the claims brought by the claimant against the third defendant, and for an
order that the claim, form and service thereof upon the third defendant be
set aside.
2 A. D. Limited (ADL) is an English company which was for many years
well known at the top end of the market for its branded cigarettes,
cigarette-lighters, pipes, and other smokers' products but it has, in recent
years, expanded its business into the sale of luxury goods of many kinds,
including travel goods, with which this action is concerned.
3 In June 1998, ADL entered into a contract with the first and/or second
defendants, who are part of the French group of companies, Group
G., for the manufacture and supply of travel goods to be sold under
the A. D. label. That contract provided, by clause 14, that disputes
should be referred to the exclusive jurisdiction of the English courts.
It was further provided by clause 8 ("subcontracting") that, subject to
the prior written consent of ADL, G. might obtain raw materials and
components from third party suppliers or subcontract in whole or in part,
or engage out-workers for the manufacture and supply of the products,
subject to certain conditions set out, including that G. should remain fully
responsible for noncompliance with the terms of the contract.
4 The third defendant, L., is an Italian company which manufacturers
fabrics and other materials. In the course of 1998 and 1999,
arrangements were made whereby L. was to provide the fabrics to G. for
the production of various items of luggage to be supplied to ADL under
the contract, to be sold as part of its "London Traveller" range.
5 Purchase orders were sent by ADL to G. concerning the items in
question, and orders for the fabric were placed by G. with L.. ADL claims
that items of luggage produced for test purposes, pursuant to the
contract, proved that they were not fit for their purpose in so far as the
"seamont" fabric supplied by L. was insufficiently strong and, in particular,
appeared to have been made of cotton rather than a cotton/polyester or
polyamide mix. The orders were cancelled. The fabric was ordered from
another supplier and ADL now sues for its alleged financial loss.
6 Originally, ADL's claim against L. included a claim for rescission of the
contract which was said to have been made between ADL and L. on the
basis that, in contracting with L. for the supply of "seamont" fabric, G.
had acted as agents on behalf of ADL, a plea which was adopted and
repeated by G. in its particulars of defence. The claim for rescission was
founded on a number of alleged misrepresentations. ADL's particulars
of claim have been subject to amendments and it now claims against
L. solely damages for misrepresentation under the Misrepresentation
Actand alternatively at common law on the basis of the assertion that
L. negligently and falsely represented to ADL that its "seamont" fabric
was fit for the purpose of being used for the manufacture of the "London
Traveller" range of luggage, and that it was a mix of cotton and polyester,
in reliance upon which, it is said, ADL instructed G. to obtain its fabric
from L..
7 L. has not yet pleaded to the claim against it, but it has raised a
preliminary objection to the jurisdiction of this Court in accordance with
the Brussels Convention 1968, claiming: first, that the prima facie rule
contained in Article 2 of the Convention, to the effect that a defendant can
only be sued in the country of his domicile, has not been displaced and
should be applied.
8 Secondly, that ADL's claim against it is in substance a matter relating
to a contract under Article 5(1), under which any action could only be
brought in Italy or France, being the place where it is said the relevant
contract, if it existed, was to be performed.
9 Thirdly, that ADL's claim does not fall within Article 5(3) as a "matter
relating to a tort", but that, if it does, the harmful events occurred in Italy
where the originating events, being the alleged misrepresentations, for
the most part took place, or in France where the damage alleged to have
been suffered by ADL occurred.
10 The relevant provisions of the Brussels Convention can be stated very
shortly: Article 2 provides:
Subject to the provisions of this Convention, persons domiciled in a
Contracting State shall, whatever their nationality, be sued in the courts
of that State.
11 Article 5 , which is under Section 2, headed "Special Jurisdiction",
states:
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 court for the
place where the harmful event occurred.
12 In relation to the issue of jurisdiction, there are thus two main
questions which fall to be answered, namely:
(1) Is ADL's claim against L. in whole or in part a matter relating to a
contract under Article 5(1); or
(2) Is it a matter relating to tort under Article 5(3) and, if so, did the
harmful event occur in England?
13 L. raises a preliminary objection to ADL's claim to the extent that it is
founded on an alleged contract between ADL and L., contending that ADL
has not made out a sufficient good arguable case for the existence of such
a contractual relationship. So far as this objection is concerned, ADL's
evidence at this stage may seem to be a bit "thin", but as Mr Gruder Q.C.,
for ADL, points out, its particulars of claim have been verified on behalf of
ADL as being true, and G. has pleaded in its particulars of defence what
is an arguable case that the relevant contract was made, not between
ADL and G., but between ADL and L. through the agency of G.. This must
presumably be on the basis that the procedure envisaged by Article 8 of
the contract between ADL and G. was not followed in the present case,
in so far as all the negotiations were carried out direct between ADL and
L., following which G. was instructed by ADL to contract with L. rather
than choosing L. as its subcontractor or third party supplier and obtaining
ADL's approval.
14 At this stage, I do not have to weigh the balance of probabilities on the
limited evidence available and, in the absence of G., it would be wrong
for me to express even a preliminary view on the prospects of the plea
succeeding. I conclude that there is a sufficient issue to be tried.
15 It may also be observed that on the present evidence the assertion
that the alleged misrepresentations became incorporated into the contract
as contractual terms also seems to be a little flimsy. However, ADL now
concedes that it cannot pursue any contractual claim against L. in England
and the assertion is, therefore, not a necessary part of ADL's presently
pleaded case against L.. ADL has also sought to amend its particulars
of claim by deleting that part of the prayer which seeks an order for
rescission of the alleged contract between ADL and L.. Its application
to amend is not opposed if the case against the third defendant is to
continue.
16 However, Mr Onions Q.C., for L., submits that the case presently
advanced against it is "artificial" and points to the fact that, despite the
amendments to the prayer, there remains an allegation in the body of the
pleading that the contract has been rescinded. But, again, this is not a
necessary part of ADL's case and, in the context of the amended pleading,
seems to me simply to represent part of the history.
17 Mr Onions suggests that this is, in reality, a straightforward "sale of
goods" case. So far as ADL's claims against G. are concerned, that may be
so, but so far as its claim against L. is concerned, this is at best an over-
simplification. Indeed, approaching the case on the basis of the amended
pleading, which seems to me to be the right approach, it is an inaccurate
description.
18 I turn to the issues.
Both parties in their oral submissions chose to deal first with Article 5(3)
of the Convention on the assumption that the matter was properly to
be regarded as one relating to tort or delict. Mr Onions referred me to
a number of cases decided by the European Court of Justice, and the
principle clearly stated in those cases that the primary rule was that
stated in Article 2, namely that a defendant must be sued in the place of
his own domicile, and that the provisions of Article 5 were in derogation
of that primary rule and should therefore be regarded as exceptions
and construed restrictively--in particular, a court should lean against a
construction which would have the effect that the claimant could choose
to sue in the place of his domicile. But he conceded that the question was
essentially one of construing and applying the relevant subsections of
Article 5 to the facts, and that this was not a matter upon which the Court
enjoys any discretion.
19 Second, he relies on the principle stated in these cases to the
effect that the provisions of Article 5 should be construed as being
"autonomous" or "independent" and should not be construed or applied by
reference to special rules of national law relating to particular causes of
action. These principles were, I think, not in dispute.
20 Although Article 5(3) refers to "the harmful event", from which it
would prima facie appear that a court seeking to apply a subsection
should be looking for a single event, the subsection has been construed
by the European court in the case of Handelskwekerij G.J.Bier BV v. Mines
de Potasse d'Alsace SA, as having two limbs, either one of which the
claimant at his option can seek to satisfy. These are:
(1) the place where the event which gives rise to the harm of which the
claimant claims occurred; and
(2) the place where the damage in respect of which the claimant claims
occurred.
I refer in particular to paragraphs 19, 24 and 25 of the judgment, which
state as follows:
19. Thus the meaning of the expression 'place where the harmful
event occurred' in Article 5(3) must be established in such a way as to
acknowledge that the plaintiff has an option to commence proceedings
either at the place where the damage occurred or the place of the event
giving rise to it.
24. Thus it should be answered that where the place of the happening
of the event which may give rise to liability in tort, delict or quasi-delict
and the place where that event results in damage are not identical, the
expression 'place where the harmful event occurred', in Article 5(3) of
the Convention, must be understood as being intended to cover both the
place where the damage occurred and the place of the event giving rise to
it.
25. The result is that the defendant may be sued, at the option of the
plaintiff, either in the courts for the place where the damage occurred or
in the courts for the place of the event which gives rise to and is at the
origin of that damage.
21 I, therefore, ask: where did the originating event, giving rise to
the damage, occur in the present case? ADL pleads that a number of
misrepresentations were made: the first, orally, at a face-to-face meeting
in Italy; one in the course of a telephone call made by a representative of
L. while in Paris to ADL in London; and the others either by fax or letter
from Italy to London or in the course of telephone calls made from Italy to
London.
22 Mr Gruder submits that all these misrepresentations were effectively
made in England where they were received. He does not so much rely
on technical English "posting" rules, but rather on a general proposition
that a representation cannot be regarded as having been made unless
and until it is communicated to the representee. Mr Onions relies on a
number of European cases and, in particular, the case of Shevill v. Presse
Alliance S.A., a case in which the European Court held that the originating
event in the case of a libel printed in the Paris Soir newspaper occurred
in the place of publication, namely France, even though the damage may
have been caused to the claimants in the country or countries in which
the newspapers were sold and read.
23 I refer in particular to paragraphs 24, 28, 29 and 30 of the judgment,
reading as follows:
24. In the case of a libel by a newspaper article distributed in several
Contracting States, the place of the event giving rise to the damage,
within the meaning of those judgments, can only be the place where the
publisher of the newspaper in question is established, since that is the
place where the harmful event originated and from which the libel was
issued and put into circulation.
28 The place where the damage occurred is the place where the event
giving rise to the damage, entailing tortious, delictual or quasi-delictual
liability, produced its harmful effects on the victim.
29. In the case of an international libel through the press, the injury
caused by a defamatory publication to the honour, reputation and
good name of a natural or legal person occurs in the places where the
publication is distributed, when the victim is known in those places.
30. It follows that the courts of each Contracting State in which the
defamatory publication was distributed and in which the victim claims
to have suffered injury to his reputation have jurisdiction to rule on the
injury caused in that state to the victim's reputation.
24 Mr Onions also particularly relies on a decision in this court by Rix J.,
as he then was, in Domicrest Ltd v. Swiss Bank Corporation. This was the
case in which the plaintiff, an English company which exported electrical
consumer goods, sued the Swiss Bank Corporation for damages for
alleged negligent misstatement. It claimed that the Bank had represented
that the transmission by the Bank to the plaintiff of a copy payment
order constituted an assurance that payment would be made, and that
payment was effectively guaranteed by the Bank, as a result of which the
plaintiff agreed to, and did, release goods to the Bank's customers before
payment had been received, and thereby suffering loss.
25 The alleged misrepresentation was made in the course of a telephone
conversation from a Bank employee in Switzerland to the plaintiff
company in London. Rix J. stayed the proceedings on the application of
the defendant, on the basis that, in the case of a negligent misstatement,
the place where the harmful event giving rise to the damage occurred
was, by analogy with the tort of defamation, where the misstatement
was made rather than where it was received, and that for this purpose
there was no difference between a written document and an oral or other
instantaneous communication.
26 In a characteristically detailed judgment, Rix J. referred to a number
of decisions of the European court, including Dumez France and Tracoba
v. Hessiche Landesbank, Shevill, to which I have just referred, and
Marinari v. Lloyds Bank Plc, to which I shall refer later. He also considered
a judgment of Steyn J., as he then was, in Minster Investments Ltd
v. Hyundai Heavy Industry Co. Ltd, in which a French classification
society had been sued for providing to the plaintiffs in England inspection
certificates which negligently described containers as being fit, which they
were not, in reliance upon which Minister released payment for these
containers to Hyundai in Korea.
27 Despite the decision of the European court in the Bier case, to which
I have referred, Steyn J. adopted what might be described as a "broad
brush" approach, asking the question which in his view "common sense
and policy considerations require", namely where, in substance, the cause
of action in tort has arisen and with what place was the tort most closely
connected.
28 At page 24 of the report, he said:
Approaching the matter in this way, it seems to me that the plaintiffs are
alleging against the defendants the making of neglect misstatements or
the giving of negligent advice by virtue of the certificates sent to England,
reliance on those misstatements of wrong advice in England, and the
decision in England to authorise payment to the first defendants in Korea.
29 After referring to Hedley Byrne and the essence of the cause of the
action he continued:
The event which caused harm to the plaintiffs in this case was the
receipt in England of the negligently produced certificates of the second
defendants which the plaintiffs were intended to rely on and did rely on. If
that view is right, it follows on a realistic appraisal of the plaintiffs' cause
of action against the second defandants that the place where the harmful
event occurred, within the meaning of Article 5(3), was England.
30 Rix J. rejected that approach, concluding that in the light of
subsequent decisions of the European court he was not free to adopt
the "broad brush" test adopted by Steyn J., but must limit himself to the
more structured formula adopted and applied in those European court
decisions. He concluded that, applying the formula stated in the Bier case,
the place where the harmful event giving rise to the damage occurred
was where the misstatement originated. As the learned judge observed, it
was there that the negligence, if not every element of the tort, was likely
to have taken place and for that and other reasons the place from which
the misstatement was put into circulation was as good a place to found
jurisdiction as the place where the misstatement was acted on, even if
receipt and reliance were essential parts of the tort.
31 I would respectfully go further and conclude that it is a better place,
if one is seeking to identify the place of the event which is the origin
of the damage as it was described in the Biercase, and if one puts to
one side, as one is required to do, the rules of national law which define
the necessary elements of the commission of the tort in question. It is
true that in the course of his judgment, Steyn J. had identified as the
event causing harm in the case before him the receipt of the negligently
produced certificates in England rather than their production and dispatch.
But, in so far as there is a conflict between the judgment of Rix J. and
Steyn J. on this point, as well as on the question of which is the right
approach, I prefer the judgment of Rix J.
32 Accordingly, I conclude that in the present case ADL has not satisfied
the first limb of Article 5(3) in accordance with the test laid down in
Bier: England was not the place of the event which was the origin of the
damage.
33 I turn to the second limb of the Bier test, upon which Mr Gruder also
seeks to rely, and address the question: Where did the damage occur? On
the facts of the present case, this is not so simple a question as might at
first appear. Although the financial damage pleaded by ADL to have been
suffered in consequence of the alleged misrepresentations is the same
as that said to have been suffered as a result of the alleged breaches of
contract on the part of G. and/or L. (although there is no claim for breach
of contract now pursued against L.) it was acknowledged by Mr Gruder
that such damage could only be recoverable as having been caused by
the alleged misrepresentation if to award such damages would put the
claimant in the financial position in which it would have found itself had
the misrepresentations not been made.
34 In the latest version of the particulars of claim, the alleged loss and
damage is pleaded under two heads, namely:
(1) loss of profits which, in turn, is said to comprise two elements,
namely,
(a) a delay in the launch of the "London Traveller" range of luggage, and
(b) the additional cost of obtaining a substitute fabric, which it was not
possible to pass on to the customer; and
(2) wasted expenditure, such as photocopying finished products, and
printing and distributing promotional material.
35 Neither is quantified in the particulars of claim. In the original,
unamended particulars, the first head was quantified at an estimated
£ 8,239,858, and the latter at £83,617, but these figures have been
deleted. According to the witness statement of ADL's Finance Director, Mr
Dunnett, the damage sustained is put rather differently: he states that
ADL has incurred an estimated £890,000 in fixed costs including wasted
advertising and promotional materials, and he puts the estimated loss
of profit as in the region of £1.5 million, of which only approximately 40
per cent would have been attributed to the claimant, ADL--the balance
apparently being attributed to its subsidiary companies.
36 Details of the former, that is the £890,000 figure, are set out
in a schedule from which it appears that £582,829 is claimed as
order cancellation; £244,769 as "surplus material incurred at G.";
£49,596 "factory labour/down-line costs" paid to G.; and £13,205 "ADL
International A & P lost".
37 These figures were explained in a letter from ADL's solicitors, Messrs
Freshfields of 9 June 2000, from which it is clear that two elements at
least-- that is, the surplus material incurred at G. and the factory labour
and down-line costs reflected payments made to G. in France. Some
guidance as to how one should apply the second limb of the test laid
down in the Biercase is afforded by three decisions of the European
court, namely Dumez France and Marinari and Reunion Europeenne SA v.
Spliethoff's Bevrachtingskantoor BV.
38 In Dumez France the plaintiff's predecessors in title had agreed to
construct buildings in Germany to be financed by a number of German
banks, including the defendants. Problems arose with the financing; the
loans were suspended and, in consequence, building works stopped,
whereby the plaintiffs claimed to have suffered financial loss. They
were a French company and they commenced proceedings before the
Commercial Court in France. The French Cour de Cassation referred the
matter to the European court. The judgment of the Court emphasised
the exceptional nature of Section 2 of the Convention and, in particular,
Article 5(3), and that those exceptions to the general rule established by
Article 2 are "based on the existence of a particularly close connecting
factor between the dispute and the courts other than those of the state of
the defendants' domicile".
39 The judgment stated:
That objective militates against any interpretation of the Convention
which, otherwise than in cases expressly provided for, might lead to
recognition of the jurisdiction of the courts in the plaintiff's domicile and
would enable the plaintiff to determine the competent court by his choice
of domicile.
40 Accordingly, interpreting the second limb of the test in Bier, the
judgment continued:
The expression of the place where the harmful event occurred contained
in Article 5(3) of the Convention, may refer to the place where the
damage occurred. The latter concept can be understood only as indicating
the place where the events giving rise to the damage directly produced its
harmful effects upon the person who is the immediate victim of the event.
41 The Court added:
Moreover, whilst the place where the initial damage manifested itself is
usually closely related to the other components of the liability, in most
cases the domicile of the indirect victim is not so related.
42 Accordingly, the plaintiff was not permitted to bring proceedings in the
courts of the place in which he had suffered consequential damage to his
assets as a result of direct damage which had occurred elsewhere.
43 In Marinari, promissory notes had been lodged by the plaintiff at the
Manchester branch of Lloyds Bank, which were thereafter sequestrated
upon suspicion of their authenticity. The plaintiff sued the bank in Italy
and the case was referred to the European court by the Italian Supreme
Court of Cassation. The Court confirmed the Biertest and went on to state
as follows:
Whilst it is thus recognised that the term 'place where the harmful event
occurred' may cover both the place where the damage occurred and
the place of the event giving rise to it, the terms cannot however be
construed so extensively as to encompass any place where the adverse
consequences of an event which had already caused actual damage
elsewhere can be felt.
44 The Court went on:
Consequently, that term cannot be construed as to include the place
where, as in the present case, the victim claims to have suffered financial
damage consequential on initial damage arising and suffered by him in
another contracting state.
45 Reunion Europeenne concerned a claim for damages by the insurers
of the consignee of goods shipped by sea and delivered damaged. The
defendant was sued as carrier, not being the person who had issued the
relevant Bill of Lading. The claim was thus regarded as one within Article
5(3) as being a matter relating to tort rather than within Article 5(1)--a
matter relating to contract. The goods had been shipped from Australia
to Rotterdam and thence by road to France. The plaintiff, being French,
sued in the French courts, being the place of final delivery or as the place
where the damage was ascertained. The European court referred to
Bier, Dumez France, Shevilland Marinari and reaffirmed that part of the
decision in the last of these cases in which it had been held that the term
"the place where the harmful event occurred" could not be construed so
extensively as to encompass any place where the adverse consequences
can be felt of an event which has already caused damage actually arising
elsewhere.
46 In paragraphs 34 and 35 of the judgment, the Court said:
To allow the consignee to bring the actual maritime carrier before the
courts for the place of final delivery or before those of the place where
the damage was ascertained would, in most cases, mean attributing
jurisdiction to the court of the place of the plaintiff's domicile, whereas
the authors of the Convention demonstrated their opposition to such
attribution of jurisdiction otherwise than in the cases for which it
expressly provides. ... Furthermore, such an interpretation of the
Convention would make the determination of the competent court
dependent on uncertain factors, which would be incompatible with the
objective of the Convention which is to provide for a clear and certain
attribution of jurisdiction. ...
... In those circumstances, the place where the damage arose in the case
of an international transport operation of the kind at issue in the main
proceedings can only be the place where the actual maritime carrier was
to deliver the goods.
47 So far as the English cases are concerned, and in particular in relation
to the application of the above principles to a claim for damages for
misrepresentation or negligent misstatement, some limited guidance is
provided by the Minster Investments and Domicrest decisions, to which
reference has already been made. In Minster Investments Steyn J. did not
apply his mind specifically to the question of where the damage occurred,
although in his analysis of "the true nature of the case" he referred to the
decision in England to authorise the payment to the first defendants in
Korea in reliance on the certificates which had been received in England,
but made no reference to the payment having been made in Korea.
48 In Domicrest, Rix J., while feeling unable to follow Steyn J.'s "broad
brush" approach and, in effect, disagreeing with Steyn J. in concluding
that in the case of negligent misstatement the place where the harmful
event occurs is where the misstatement originates rather than where
it is received, nonetheless he said in relation to the decision in Minster
Investments:
... Moreover, the place where the damage occurred appears in any
event to have been England from where the price of the containers was
released and where at the time loss was felt, so that I do not think that
the ultimate decision can be subject to any question.
49 Nevertheless, in the case before him, while acknowledging in two
passages in his judgment that, in the case of a negligent misstatement,
the place where the damage occurs is "quite likely" to be at the place
where the misstatement is received and relied on, Rix J. concluded that
the damage occurred in Switzerland and Italy where the goods were
released without payment. It is not clear from Rix J.'s judgment why he
came to a different conclusion on the facts of the case before him from
that reached by Steyn J. in Minster Investments where the facts would
not seem to be materially different, in so far as in each case the negligent
misstatement had been received in England and the decision taken in
England in reliance on the misstatement, which was implemented by the
release of, in the one case, goods and, in the other, a payment in another
country.
50 It is possible that, whereas in Minster Investments the plaintiffs had
completed their actions in reliance by giving instructions to someone else
in Korea, in Domicrest the release of the goods in Switzerland and Italy
have been by employees or agents of the plaintiffs. But that would be
pure speculation, and even if it were the case, it would be too narrow a
distinction.
51 In my view, each case must be looked at on its own facts, applying the
principles of interpretation of Article 5(3) stated in the decisions of the
European court to which I have referred. In this case, although it is the
claimant's case that it acted in reliance on the alleged misrepresentations
by taking the decision in London to choose the L. fabric for its "London
Traveller" range of luggage, and implemented that decision by giving
instructions to G. in France to place purchase orders with L., I do not
consider that it can be said that ADL suffered damage at that stage.
52 While Rix J. may be right in observing that it is "quite likely" that
damage will be suffered at the place where the misstatement or
misrepresentation is received and relied upon, he does not suggest that
this will always be the case and, indeed, concluded that in the case before
him damage occurred elsewhere. It is true that damage is a necessary
constituent element in the tort of negligent misstatement under Hedley
Byrne principles, and that, for the purposes of establishing the tort of
fixing the prima facie start of the time clock for limitation purposes,
the time when the plaintiff entered into the contract in reliance on the
misrepresentation may be regarded as the moment when the tort is
complete. However, to apply this reasoning to the construction and
application of Article 5(3) of the Convention would be contrary to the
now well-established principle that the provisions of the Convention are
autonomous or independent and must be construed without reference to
particular rules of national law relating to the establishment of tortious
liability.
53 I do not think that it can be said that in any real sense ADL suffered
damage when they instructed G. to order the fabric from L.. It is not
suggested that the terms of the contract with L., whether it was made
with G. or with ADL through G.'s agency, were particularly onerous.
Indeed, it is pleaded by ADL that the contract incorporated all the
representations that had been made in the course of the negotiations.
Damage did not occur and certainly did not manifest itself (to borrow
the language of the Dumez Francecase) until the samples of fabric were
delivered to G. in France and were examined and manufactured into
luggage which was itself tested, at which point it is said that the fact that
misrepresentations had been made became apparent.
54 Furthermore, it was in France that for the first time ADL began to
suffer the financial loss which makes up its claim for damages. Further,
of the damage claimed to have been suffered by ADL, the major item in
terms of money is the claim for loss of profit which, although ultimately
sustained by ADL in England, appears to have resulted from delays in
the production of the "London Traveller" range in France. Similarly, the
extra cost of obtaining alternative fabric was no doubt incurred in France,
as were the sums claimed to have been paid to G. in respect of order
cancellation, surplus materials, factory labour and down-line expenses.
55 It is clear from the authorities to which I have referred that the fact
that the ultimate financial loss may have been felt by the claimant in his
principal place of business where his bank accounts are located does not
mean that that damage had occurred at that place for the purposes of
Article 5(3)-- otherwise, in most cases of financial loss, the exception
would establish jurisdiction at the place of the domicile of the claimant, a
result which these cases made clear a court should lean against.
56 On analysis, looking at the matter broadly, the only close connecting
factor which links this case to England is that the claimant is located in
England and therefore took all relevant decisions in England and suffered
the ultimate financial loss in England. In my view, that is clearly not
enough to satisfy Article 5(3) of the Convention.
57 In the light of the above conclusions, it is perhaps unnecessary to go
on to consider the further point as to whether the claim against L. in this
case is a matter which falls within Article 5(3) at all, or whether it is, in
truth, a matter relating to a contract within the meaning of Article 5(1),
with the consequence that ADL might sue in the place of performance of
the obligation in question, which was contended on behalf of L., was not
England. Nevertheless, the point was fully argued and in case the matter
goes further I considered the point briefly.
58 It was common ground that, as is clearly established by the authorities
and, in particular, the European court decision in Anthanasios Kalfelis v.
Bankhaus Schroder Munchmyer, Henks & Co.; and the recent House of
Lords decision in Agnew v. Lansforsakringsbolagens A.B., Article 5(1) and
Article 5(3) are mutually exclusive, and to the extent to which the claim
falls within Article 5(1), as a matter relating to a contract, it cannot also
fall within Article 5(3). Unlike the two limbs of Article 5(3) identified in the
Bier case, the claimant in such cases does not have a choice.
59 For the purpose of the argument that this is a matter relating to a
contract covered by Article 5(1), L. seeks to draw a distinction between
the three ways in which ADL puts its case against L., namely:
(1) the claim under section 2(1) of the Misrepresentation Act 1967;
(2) the claim for negligent misrepresentation at common law under
the Hedley Byrne principle, alleging that in reliance on the alleged
misrepresentation ADL contracted with L.; and
(3) the claim for misrepresentation at common law, alleging that in
reliance on the alleged misrepresentations ADL instructed G. to contract
with L., as it did.
60 So far as the third of these is concerned, L. conceded that this would
not be within Article 5(1) on the basis, presumably, that it would not
be part of ADL's case on this alternative basis that there was a contract
between ADL and L.. But this concession, which Mr Onions did not seek to
withdraw, necessarily involves the further concession that the mere fact
that the alleged misrepresentation is said to have induced the making of
any contract does not make the matter one relating to a contract. If this
concession were well-made, it seems to me to present serious difficulties
for L., since I see no difference in principle between a misrepresentation
inducing the representee to enter into a contract with the representor and
one inducing someone else to do so. However, I do not decide the point
on the basis of this concession.
61 The question under Article 5(1) is this: Is a claim for damages for
alleged misrepresentation said to have induced the representee to enter
into a contract with the representor, a matter relating to a contract?
Plainly, in one simple sense, it is, but again the answer is not so simple,
as appears from two recent decisions of the House of Lords which afford
considerable guidance on this particular point of construction.
62 In Kleinwort Benson Ltd v. Glasgow City Council (No. 2), the Court had
before it a claim for restitution on grounds of unjust enrichment of sums
paid under a contract held to have been void ab initio. By a majority of
three to two, their Lordship's House reversed the decision of the majority
in the Court of Appeal and concluded that the claim did not fall within
Article 5(1). Lord Goff of Chievely, who delivered the leading majority
speech, observed that the claim can only fall within Article 5(1) "if it can
properly be said to be based upon a particular contractual obligation, the
place of performance of which is within the jurisdiction of the courts", and
that the principle can have no application in a case where the supposed
contract in question is void ab initio and so never had any legal existence.
63 At page 171D Lord Goff criticised the "thesis", as he called it, of Millett
L.J., as he then was, in the Court of Appeal, that Article 5(1) should be
construed broadly so that any matter relating to a contract should be
held to fall within the Article, and pointed to the fact that the jurisdiction
of the European court revealed an understanding that Article 5(1) had a
more limited purpose, namely that the Court should have regard solely to
the contractual obligation whose performance was sought in the judicial
proceedings.
64 Lord Clyde, after considering the European court decisions, concluded
that it was not enough for the invocation of jurisdiction under Article 5(1)
that some remote connection could be found between the point in dispute
and a contractual relationship. He went on to consider where the line was
to be drawn and concluded that it is not every connection with a contract
however remote or tenuous that was intended. He continued:
The relationship is one whereby the matter is based on a contractual
obligation. In my view it is essential for jurisdiction to lie under Article
5(1) that there should be at the heart of the proceedings a dispute about
the performance of a contractual obligation.
On the following page he said: "There must be an obligation under the
contract."
65 He acknowledged that Article 5(1) would cover the case where one
party was claiming a remedy under the contract and the other was
resisting the claim on the basis that there was no contractual relationship,
but added that if the Court were to reach the conclusion that there was
indeed none, it could go no further.
66 Lord Hutton, who delivered the third majority speech, in essence
agreed that the words "in the courts for the place of performance of the
obligation in question" helped to define the meaning of the words, "in
matters relating to a contract". Since the obligation in question is an
obligation arising under the contract, which the plaintiff is seeking to
enforce, Article 5(1) only applies where a party is seeking to enforce the
performance of an obligation contained in a contract or a relationship
closely akin to a contract.
67 In Agnew, to which reference has already been made, the plaintiff
insurers sought to avoid a series of reinsurance contracts on the
grounds that they had been entered into consequent upon material
misrepresentations or non-disclosure. The House of Lords, again by a
majority but on this occasion dismissing the appeal from a unanimous
Court of Appeal, concluded that the claim did fall within Article 5(1) on the
basis that this provision was wide enough to embrace "pre-contractual"
obligations which included the obligation on a would be reinsured to make
a fair presentation of the risk and to make full disclosure of relevant facts.
68 Lord Woolf delivered the leading majority speech. He observed that
in accordance with the plain and ordinary meaning of the words used in
Article 5(1) the case was plainly within its scope. But in a passage at page
505H to 506A, he acknowledged that Article 5(1) provides an exception
to the general principle embodied in the Convention that a defendant
should be sued in his own place of domicile, and that a restrictive or strict
interpretation of the language is appropriate. He recognised that if there
were no obligation which could be identified, or no place of performance
which could be identified, that would be a strong indication that no part of
Article 5(1) had any application, even though what was in issue might be
literally a matter of relating to a contract.
69 At page 507A-C, Lord Woolf said that there might well be a distinction
between a party relying on non-disclosure or lack of good faith and a
party relying on duress, undue influence or mistake since, even if it would
be appropriate to refer to an obligation not to be guilty of duress or undue
influence or to induce a contract by mistake, there could be no place for
performance of such a negative obligation, whereas in the case of non-
disclosure there was a place which could be identified, namely where the
disclosure should have taken place. In relation to the question whether
the obligation to make full disclosure was a contractual obligation, Lord
Woolf concluded that it was. At page 507E, he said:
An obligation which, if it is not fulfilled, provides a right to set aside
the contract I would regard as being in ordinary parlance a contractual
obligation of, if not also under, the contract.
70 He went on to express the view that it would be inappropriate in the
circumstances to attach any particular significance to the use of the word
"under".
71 Lord Cook, who agreed with Lord Woolf, said: "Patently an action to
avoid a contract is a matter 'relating to a contract'," and agreed that the
obligation to make a fair presentation of the risk or not to misrepresent
it, or to disclose matters material to the risk was an obligation in, if
not under, the contract, and that whether it was one or the other was
"a refinement of linguistics which should be avoided, if possible, in the
interpretation of a modern Convention intended to formulate clear and
broad rules as to the jurisdiction of courts".
72 He concluded: "Suffice it that the obligation is so intimately connected
with the contract that it falls naturally within Article 5(1)."
73 Lord Nicholls agreed with the conclusions of Lord Woolf and Lord
Cook. Lord Hope, while dissenting from the majority together with Lord
Millett on the question of whether or not there was an obligation within
the meaning of Article 5(1), expressed the view that in its context the
word "obligation" meant an obligation which one party had undertaken to
perform to the other under the contract. He referred to the Jenard Report
on the Brussels Convention and said:
It seems to me that these passages indicate first that the phrase ' matters
relating to a contract' should be interpreted as extended to all matters in
which a remedy is sought which can be identified as a contractual remedy.
Clearly, a claim for the performance of an obligation, which was created
by a contract between the parties, will fall within this description, but the
phrase may be capable of being applied to other contractual remedies.
For example, where a party has been induced to enter into a contract by
a misrepresentation that was fraudulent, he has a choice of remedies.
He may decide to sue for damages, in which case his remedy may be
founded in tort or delict. Or he may decide to reduce or to rescind the
contract so that he is no longer bound by it, in which case his remedy
would be contractual.
74 At page 524E-G, he makes an observation in relation to Article 5(3) of
the Convention as follows:
It is reasonably clear that a liability in tort may arise in some
circumstances where there has been a breach of a duty in the formation
of a contract, for example if the breach can be said to have been
fraudulent. In that situation, it will be open to the injured party to claim
damages, and jurisdiction may then be founded on the specual rule
in Article 5(3). But the plaintiff's claim in this case is not and cannot
be a claim to enforce a liability in tort. The duty which is said to have
been breached was not one for the breach of which there is a liability in
damages.
75 These observations were clearly obiter dicta and do not constitute part
of Lord Hope's reasoning on the point in issue, upon which, in any event,
he dissented. But they are, nevertheless, statements to which, in my
view, considerable weight must be given. I respectfully agree with Lord
Hope's observations.
76 I conclude that in this case the claim against L. is not a matter relating
to a contract within the meaning of Article 5(1), and that it falls squarely
within Article 5(3), being a matter relating to tort or delict.
77 Mr Gruder submitted that if and to the extent to which Article 5(1)
did apply, on the hypothesis that there was an obligation not to induce
a contract by misrepresentation, which could properly be regarded as
being within the scope of Article 5(1) by analogy with the obligation in the
contract of reinsurance to make full disclosure (as considered in Agnew),
then similarly that obligation fell to be performed in England where the
representee had his place of business. In the light of my conclusions
above, it is not necessary for me to express any view on what is, in these
circumstances, a hypothetical question, and I do not do so.
78 Having held that the matter falls within Article 5(3), and having further
held that the "harmful event", both in the sense of the event from which
the claimant's damage originated, as well as the initial manifestation of
damage the claimant, both occurred outside England, in France or in Italy,
this Court has no jurisdiction over the claim against the third defendant.
79 Accordingly, and for the reasons which I have set out, I grant the third
defendant's application. In those circumstances, the application to amend
the particulars of claim as against the third defendant, although I have
considered the matter on the assumption that those amendments would
be made if the matter were to continue, becomes redundant.
Application granted.