LORD JUSTICE STAUGHTON: In this action the plaintiffs, S. Limited, are
an English company. They engaged in the business of acquiring and re-
selling to others promotional goods such as the fluffy toy dogs which are
used to advertise the toilet rolls sold by A.. The three defendants are in
fact only two companies, T. Rheinland Limited Holding AG and German
Control I. W. GMBH. They are both establish under the laws of Germany.
The action was brought in August 1994 for reasons which I shall explain
later. There was an order for service out of the jurisdiction and then an
application under Order 12 rule 8 to set aside the order for service out.
That came before Master Turner, who acceded to the application and
set aside the proceedings. There was an appeal to Mr Nicholas Strauss
QC, who upheld the Master's order in a judgment which I must say is
conspicuous by its clarity and diligence. There is now an appeal to this
Court from the order of the Deputy Judge.
The facts are that the plaintiffs, S. Limited, used to import some of
these promotional goods from China and Taiwan. Evidently there was to
be a letter of credit whereby the sellers would be assured of obtaining
payment. The letter of credit was to be opened by the N. W. Bank in
Redhill in this country, but no doubt it would enable the sellers, if they
chose to do so, to obtain money by presenting the documents at some
other bank elsewhere in the world, in particular at the N. W. Bank, Hong
Kong.
In order to operate the letter of credit there had to be a certificate of
quality. That was a natural precaution for S. Limited to take, because
they would not wish to part with their money or the N. W. Bank's money
without an assurance that the goods were of an appropriate quality.
An arrangement was made that the German companies, or their
subsidiaries in China and Taiwan, would inspect the goods and send a
report to S. Limited in England. If the report appeared to satisfy the
requirements of S. Limited they would send to the sellers in China and
Taiwan, or authorise others to do so, a certificate such as would be
required by the letter of credit. The transaction would then proceed, N.
W. Bank would pay the overseas sellers, either directly or indirectly, and
S. Limited would reimburse N. W. Bank, unless that was done by a bank
credit opened by those who were buying from S..
In the event it is said that the reports submitted by the German
companies or their subsidiaries were inaccurate and were the result
of negligence in the inspection of the goods. There were substantial
complaints relating to substantial quantities of the goods. Thereupon
in these proceedings S. sued the German companies. They allege two
separate causes of action. First, they say that there was a breach of a
contractual obligation to exercise reasonable skill and care in presenting
reports to S.. Secondly, they say that there was a tortious breach of duty
for the same reason. As happens not infrequently in English law, there
were alternative claims on those two grounds. The second ground in tort
was made by an amendment.
The jurisdiction of the English court over the German companies is
determined by the Brussels Convention scheduled to the Civil Jurisdiction
and Judgments Act 1982, Article 2. 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 in
that State."
So it is open to S. to sue the German companies in Germany, where they
are domiciled, on either or both of their causes of action, assuming of
course that those causes of action are available in a German court.
There is, however, Article 5, which is in a section dealing with special
jurisdiction. It provides:
"A person domiciled in a Contracting State may, in another Contracting
State, be sued:
1. in matters relating to a contract, in the courts for the place of
performance of the obligation in question...
3. in matters relating to tort, delict or quasi-delict, in the courts for the
place where the harmful event occurred".
Mr Donaldson, who appears for S., took first the provision in Article 5(1)
relating to contracts. It is common ground, as stated in paragraph 7 of
his outline argument, that Article 5(1) requires the court to determine the
contractual obligation whose breach gives rise to the claim. Where more
than one obligation has been breached, jurisdiction under Article 5(1) for
the claims in respect of all the breaches of the contract will be determined
by the place of performance of the principal obligation breached.
He cites as authority for that Shenavai v Kreischer [1987] ECR 239, Union
Transport v Continental Lines [1992] 1 WLR 15. The principle purports
to be translated into Latin in the Shenavai case at paragraph 19 of the
judgment by a maxim accessorium sequitur principale. I do not know
where that maxim came from. I would have understood it if it had said
accessio sequitur principale.
The question then that we have to decide is which is the principal
obligation in this contract. Mr Gaisman has referred us to some of the
documents which arose in the creation and performance of the contracts.
There is a letter from S. to the German companies saying:
"Am enclosing copies of faxes which our people have sent to your office in
Taiwan regarding imminent, forthcoming inspection requirements.
As this is the first occasion where we have started to put the procedure
into action, we have also, as discussed, enclosed copies of these
instructions and our actual orders to our suppliers, to yourself. You will
see from the orders that despatch, in most cases, is in the very near
future.
On the basis that your office in Taiwan can carry out these inspections,
we will send immediately a reference sample together with any specific
remarks which the inspector should pay particular attention to in each of
the above orders."
On the same day there was a message from S. to the subsidiary of the
German companies in Taiwan. It said:
"We have five urgent inspections to be carried out in Taiwan and are
herewith faxing you copies of the actual orders on our suppliers relating
to the above.
Please advise if you are able to arrange Final Random Inspections for
these orders and in the case of our order no: 89023 in advance of the
FRI inspection we also require a During Production Check (DUPRO) to be
conducted immediately. The FRI inspections should be carried out to AQL
level 2.5/4.0 Major/Minors."
It is evident that this inspection was not to be a casual glance, but a
detailed examination applying certain technical tests. What is more, it was
contemplated that if any goods seemed to fail the inspection there was a
possibility that the inspectors would tell the factory and the factory would
put the matter right.
There were of course a number of obligations under the contract: an
obligation to inspect; an obligation to refer defects to the factories; an
obligation to make out a report and to send it to England; and, as it
seems to me, possibly to transmit a certificate to the sellers. But, for my
part, I have no doubt that the principal obligation should be characterised
as the inspection of the goods. One cannot elaborate the point. That was
the principal task for which S. engaged the German companies, in my
view, and the principal obligation for the purposes of Article 5(1).
We were referred to the case of Minster Investments Ltd v Hyundai
Precision & Industry Co Ltd [1988] 2 LLR 621. There the facts were
similar, except that the claim against the second defendants, who lived
in France, was based in tort only and not in contract. Mr Justice Steyn
dealt with that claim at pages 623 and 624. After referring to the decision
in Bier v Mines de Potasse D'Alsace [1978] QB 708, which sets out the
European Court of Justice' interpretation of Article 5(3) in a case of tort,
the judge said this:
"In my judgment, common sense and policy considerations require one
to ask where in substance the cause of action in tort arises, or what place
the tort is most closely connected with. That is how I intend to approach
the question before me."
I pause to say that I do not decide in this case whether that was a correct
approach or not. I leave it on one side. The judge continued:
"The essence of that cause of action is a negligent misstatement, or
negligent advice, and reliance on it, and not the historical carelessness
which led to the misstatment or the wrong advice. 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 defendants, that 'the place where the harmful event occurred'
within the meaning of s. 5(3) was England."
I have nothing to say as to whether that was a proper interpretation of
Article 5(3) for the purpose in question. But it does not seem to me to
follow at all that in a case of contract the principal obligation should be
regarded as the delivery of reports in England. On the facts, as I have
said, it is plain to my mind that the principal obligation was to inspect the
goods in China or Taiwan.
If it be thought that the Minster v Hyundai case does in any way indicate
that in a case of contract the principal obligation is delivery of the report,
then I would not follow it.
That was the first point taken by Mr Donaldson. Secondly, one comes to
Article 5(3), tort. If an action is brought in a situation where there is both
a contractual obligation to use reasonable skill and care, and also grounds
for a claim of breach of duty in the form of a negligent misstatement, the
question arises whether, if the contractual claim cannot be brought in this
country for the reasons that I have given, still the tortious claim can be
brought here. That depends, in my judgment, on the case of Kalfelis v
Bankhaus Schroder Case 189/87 [1988] ECR 5565. There Mr Kalfelis had
claims in contract, unjust enrichment and tort, as he asserted, against
two companies in particular. One was a bank whose main office was in
Germany in Frankfurt am Main, and the other was a subsidiary of that
bank incorporated in Luxembourg.
So far as the claim against the Luxembourg subsidiary was concerned, the
jurisdiction in contract did not lie in Frankfurt. The contractual jurisdiction
under Article 5(1) would have been in Luxembourg. But it was said that
the Luxembourg subsidiary could be sued in tort in Germany.
The European Court had this to say in its judgment at paragraphs 17 to
19:
"17. In order to ensure uniformity in all the Member States, it must be
recognized the concept of 'matters relating to tort, delict and quasi-delict'
covers all actions which seek to establish the liability of a defendant and
which are not related to a 'contract' within the meaning of Article 5(1).
18. It must therefore be stated in reply to the first part of the second
question that the term 'matters relating to tort, delict or quasi-delict'
within the meaning of Article 5(3) of the Convention must be regarded as
an independent concept covering all actions which seek to establish the
liability of a defendant and which are not related to a 'contract' within the
meaning of Article 5(1).
19. With respect to the second part of the question, it must be observed,
as already indicated above, that the 'special jurisdictions' enumerated
in Articles 5 and 6 of the Convention constitute derogations from the
principle that jurisdiction is vested in the courts of the State where the
defendant is domiciled and as such must be interpreted restrictively. It
must therefore be recognised that a court which has jurisdiction under
Article 5(3) over an action in so far as it is based on tort or delict does not
have jurisdiction over that action in so far as it is not so based."
There is no dispute in the present case that, as stated in paragraph 18,
the words "matters relating to tort, delict and quasi-delict" must not
be interpreted by reference to the national laws of the place where suit
is brought or any other national laws. They must be given a European
meaning which is not tied to national law definitions. The object of that is
to ensure uniformity, as stated in paragraph 17.
What then is the European or Convention meaning of "matters relating to
tort, delict and quasi-delict"? It means all actions which seek to establish
the liability of a defendant and which are not related to a contract within
the meaning of Article 5(1). Mr Donaldson has told us that the German
word translated liability, "schadenshaftung", means liability for damage
and is the equivalent of the French word "responsibilite". That would
mean that unjust enrichment is not apparently a cause of action within
the words tort, delict and quasi-delict.
Mr Donaldson accepts that contractual claims are excluded by the
language of paragraph 17, that is to say claims in which a remedy is
pursued under the contract. He goes a little further than that and says
that claims which one would find in the contract books are also excluded.
I would not agree with so narrow a definition. I do not propose to offer a
definition of my own, but only to say that a claim which may be brought
under a contract or independently of a contract on the same facts, save
that the contract does not need to be established, is, in my judgment,
excluded by the words "which are not related to a contract" in paragraph
17. Both the causes of action sued on in the present case, would, in my
judgment, be excluded by those words because they are both related to
a contract. That was the decision of the deputy judge in this case and I
agree with it.
It received support, for example, in the case of Kleinwort Benson Ltd v
Glasgow City Council [1996] QB 678 in the judgment of Millett LJ, who
formed part at any rate of the majority. At page 698 he said:
"It is to be observed that jurisdiction is not allocated according to the
remedy sought. Provided that the matter relates to a contract, the
jurisdiction conferred by article 5(1) is available whether the plaintiff
seeks to enforce the contract, either specifically or by way of damages
for breach, or to escape from it and recover money paid under it. Some
restitutionary claims, at least, fall within article 5(1). Further, jurisdiction
is not allocated by reference to the cause of action. The words 'matters
relating to a contract' are intentionally indefinite. They are designed to
get away from technical classifications of causes of action in national laws,
which may well differ. The expression 'matters relating to a contract' is
not, in my opinion, to be equated with 'contractual causes of action' or
'the enforcement of contractual obligations' or even 'claims based on
contract.'"
There is also support in Dicey and Morris on the Conflict of Laws, 12th
edition, page 362:
"It seems to follow that from this decision" (that is the Kalfelis case) "that
in those cases in English law where a claim may be based alternatively
in contract and in tort, the claim will be regarded for the purposes of the
Conventions as being contractual in nature, and that Clause (3) will not be
available as a head of jurisdiction."
To the same effect Briggs & Rees, in an article in Norton Rose on Civil
Jurisdiction and Judgments, states:
"This definition in terms of the mutual exclusivity of claims stems from the
civilian doctrine against the cumulation of remedies: in French law, if a
claim falls within the area of contract, there will not be a parallel remedy
in delict."
Accordingly, I conclude that since S. cannot bring their claim in contract
in England, it follows likewise that they cannot bring a claim in tort
here. That makes it unnecessary to consider the third point in the case,
whether if the only claim where in tort Article 5(3) would point to English
jurisdiction or to jurisdiction somewhere else. I would dismiss the appeal.
LORD JUSTICE WAITE: I agree.
LORD JUSTICE ALDOUS: I also agree.
Order: Appeal dismissed with costs; leave to appeal refused.