NOURSE LJ: On 28 May 1993 Sir Donald Nicholls V-C ([1994] 1 BCLC
264) made an order staying all further proceedings in an application
by the joint administrative receivers (the receivers) of L. Ltd against E.
Ltd in favour of proceedings in the Netherlands. The basis of the Vice-
Chancellor's decision was that L. and E. were parties to an agreement
containing an exclusive jurisdiction clause within art 17 of the Brussels
Convention and that the receivers were bound by it no less than L..
In reaching that conclusion the Vice-Chancellor decided a number of
questions, including two on the construction of the agreement and one on
s 234(2) of the Insolvency Act 1986. The nearly two days of argument we
heard last week, mostly on behalf of the appellant receivers, having failed
to persuade us either that the questions were not entirely straightforward
or that the Vice-Chancellor's decision was not entirely correct, we have
taken a little time to be sure of expressing our own views with a brevity
that is appropriate.
The facts are fully stated in the judgment of the Vice-Chancellor and need
not be repeated. L.'s ultimate parent is a Dutch company called D.. On 11
October 1991 D., L. and another Dutch company called R. became parties
to a written agreement in English headed 'Operations Agreement', which
has been referred to in the proceedings as the frame agreement. The first
question is whether, as the Vice-Chancellor held, E., which is a wholly-
owned subsidiary of de R., also became a party to the frame agreement.
It starts by stating that it is made between (1) D., (2) L., those 'parties'
being thereinafter jointly and severally called 'the Company' and (3) R.,
thereinafter called 'the H.'. There are two recitals, the first stating the
business of the company and the second being in these terms:
'The parties hereto wish to enter into a frame agreement regarding
transportation by transporter and/or storage of certain vehicles produced
by the Company, hereinafter called the "Vehicles", such transportation/
storage to be performed by the H. and/or its Subsidiaries.'
All that is on p 1. The operative provisions (annexes apart) run from pp 2
to 19. Clause 1, headed 'Subsidiaries', is in two parts. The first sentence
of the first part is in these terms:
'Where [in] the following provisions of this Agreement the term "H.",
"party" or "parties" is used, such term shall unless the context otherwise
requires be deemed to include Subsidiaries of the H. or as the case may
be shall mean the Subsidiary concerned of the H..'
The first sentence of the second part is in these terms:
'The H. guarantees the strict and due performance by (any of) its
Subsidiaries of the obligations arising out of this Agreement and/or
related documents.
The second sentence of the second part provides that the h. shall
indemnify the company in case of failure by any of the subsidiaries 'To
comply with any such obligation'.
I gratefully adopt the Vice-Chancellor's summary of cll 2 to 21 ([1994] 1
BCLC 264 at 267):
'Clause 2 provided for the company to give written instructions to
the H., which the H. would accept, for the storage of vehicles or the
transport of them by transporter. The agreement was to apply to every
such instruction. The company was to pay the H. for the services
provided, at specified rates. The H. was obliged to inspect the vehicles,
to store them in good condition and provide adequate security pending
receipt of delivery instructions, to carry out stock care procedures, to
provide sufficient vehicles and equipment to fulfil its obligations under
the agreement, and so forth. The agreement was to continue for five
years from 1 January 1991. The H. was not permitted to subcontract
performance of its obligations without consent.'
The last of the operative provisions (annexes apart) is contained in cl 22,
headed 'Governing law':
'This Agreement shall be governed by and construed in accordance with
the laws of the Netherlands. All disputes and differences between the
Parties arising out of or in connection with this Agreement shall ultimately
be referred to and resolved by the court of justice of 's Hertogenbosch,
the Netherlands.'
On p 19 we find this:
'THUS made up in triplicate at Eindhoven on 11/10/1991.' Underneath
there are signatures on behalf of D. and L. and the signature of Mr R. on
behalf of R.. He also signed on behalf of E. under the words 'For approval'.
The receivers say that Mr R.'s signing of the frame agreement 'For
approval' on behalf of E. did not make E. a party to it. They have sought,
but have failed, to enlighten us as to what other purpose there could have
been in it. They simply say that when you look at the terms as a whole
you have to conclude that E. was not intended to be a party. For my part,
I think that they point to exactly the opposite conclusion.
The second recital contemplates that transportation or storage may be
performed not by R. itself but by one or more of its subsidiaries. The first
part of cl 1 provides that in the provisions following not only the term 'H.',
but also the terms 'Party' or 'Parties' shall, unless the context otherwise
requires, be deemed to include subsidiaries generally or 'the Subsidiary
concerned'. The receivers say that the last two of those definitions,
expressed as they are to apply only to the provisions following, confirm
that the parties, expressed as they are on p 1, do not and cannot include
subsidiaries.
I disagree I think that the provisions as a whole contemplate that a
subsidiary may be or become a party. That appears most clearly from
the second part of cl 1, which, in referring to 'obligations', can only mean
the obligations of subsidiaries. They are envisaged as 'arising out of
this Agreement and/or related documents', for example out of a written
instruction by the company to a subsidiary of R. to perform transportation
or storage on the terms of the frame agreement, being an instruction
accepted by the subsidiary in writing. While it is true that an obligation
thus assumed by a subsidiary would normally arise not under the frame
agreement, but under a separate agreement between it and the company,
it could arise alternatively from a joinder of the subsidiary as a party
to the frame agreement. Moreover, and this is the important point for
present purposes the inclusion of such a provision in an agreement
signed at its inception by a subsidiary 'for approval' shows clearly that the
subsidiary was intended to be a party to it.
I see no conflict between this view of E.'s status as a party to the frame
agreement and the terms in which p 1 of it is expressed. Indeed there
is a harmony between them. In my view the structure of the frame
agreement is consistent with an intention that D., L. and R. should be the
principal parties to it and the 'Parties' for the purposes, for example, of
cl 13 (duration) and cl 14 (termination). Those are matters in which a
subsidiary of R. could not have been intended to have a say, the clauses
being provisions where 'the context otherwise requires' for the purposes
of the definitions in the first part of cl 1. In cl 22, on the other hand, the
context does not require that the 'Parties' shall not include a subsidiary, ie
E., which is already a party to the frame agreement.
For these reasons, like the Vice-Chancellor, I hold that E. was a party
to the frame agreement and that L. and E. thereby agreed that any
dispute between them as to E.'s right to retain vehicles thereunder should
be referred to and resolved by the court at 's Hertogenbosch, being
an agreement within art 17 of the Brussels Convention on Jurisdiction
and Enforcement of Judgments in Civil and Commercial Matters, which
was incorporated into English law by s 2 of the Civil Jurisdiction and
Judgments Act 1982. So far as material, art 17 provides:
'If the parties, one or more of whom is domiciled in a Contracting State,
have agreed that a court or the courts of a Contracting State are to have
jurisdiction to settle any disputes which have arisen or which may arise
in connection with a particular legal relationship, that court or those
courts shall have exclusive jurisdiction. Such an agreement conferring
jurisdiction shall be either (a) in writing or evidenced in writing...'
So the question now is whether the receivers are in some way able to
say that, unlike L., they are not bound by cl 22 of the frame agreement.
If they are so bound, their application for delivery up of the vehicles
retained by E. is as much liable to be stayed under art 17 as an
application by L. itself.
The question depends, at any rate in the first instance, on s 234 of
the Insolvency Act 1986, to which the marginal note is 'Getting in the
company's property'. Subsections (1) and (2) provide:
'(1) This section applies in the case of a company where (a) an
administration order is made in relation to the company, or (b) an
administrative receiver is appointed, or (c) the company goes into
liquidation, or (d) a provisional liquidator is appointed; and "the office-
holder" means the administrator, the administrative receiver, the
liquidator or the provisional liquidator, as the case may be.
(2) Where any person has in his possession or control any property,
books, papers or records to which the company appears to be entitled,
the court may require that person forthwith (or within such period as
the court may direct) to pay, deliver, convey, surrender or transfer the
property, books, papers or records to the office-holder.'
It is an apparent oddity of s 234 that it nowhere states on whose
application an order made by the court under sub-s (2) may be made.
That does not matter here, because it is obvious that an application may
be made by the office-holder, in this case the receivers. On their behalf it
was submitted that a receiver may apply in the interests of the debenture
holder who appointed him as much as in the interests of the company.
Assuming that that distinction could have practical consequences of some
kind, I nevertheless regard the submission as being entirely beside the
point. Either way, the property recoverable under s 234(2) is confined
to property 'to which the company appears to be entitled'. Although in
Re London Iron & Steel Co Ltd [1990] BCLC 1149 it was held by Warner
J that the court has power under the subsection to determine whether
the company is entitled to the property or not, it can have no such power
where, as here, that question has been referred to the decision of a
foreign court. In the present case, unless and until the Dutch court has
determined that E. has no right of retention under Dutch law, it cannot
be said that L. appears to be entitled to the vehicles which it is sought
to recover. At present, no relief can be granted to the receivers under s
234(2).
The receivers having elected to proceed under s 234(2), it would seem
that that ought to be an end of their resistance to E.'s application for
a stay in favour of proceedings in the Dutch court. However, assuming
that it was not, we listened to much learned argument and citation of
authority on their behalf in support of the proposition that the debenture
holder, although taking subject to any right of retention enjoyed by E.
under Dutch law, none the less had a superior right to reject the exclusive
jurisdiction clause, albeit that that clause was part and parcel of the
agreement under which the right of retention arose and was, in the words
of the Vice-Chancellor, 'another of the terms governing E.'s possession
and retention of the vehicles'. That proposition, being unsupported by any
authority cited and contrary to principle and commonsense, is one which I
wholly reject. Like the Vice-Chancellor, I therefore hold that the receivers
are as much bound by the exclusive jurisdiction clause as is L..
The only other question is whether the frame agreement applies to spare
parts as well as to vehicles. In answering that question in the affirmative,
I gratefully adopt what was said about it by the Vice-Chancellor (see
[1994] 1 BCLC 264 at 272). It follows that in granting a stay of the
receivers' application the Vice-Chancellor was right to make no distinction
between vehicles and spare parts.
I would dismiss this appeal.
HENRY LJ: I agree. It is a useful working hypothesis, these days perhaps
too often ignored, that good law is both simple and produces a result that
is sensible, predictable and readily intelligible. The appellant's submissions
on each of the three points they raised satisfied neither test.
First, at the time of the negotiations of the frame agreement E. were
already doing and were intended to continue to do the United Kingdom
haulage and deliveries for L.. That agreement detailed the terms on
which they were to continue to perform those tasks and required their
approval of those terms by signature. That agreement included them in
the definition of 'parties' (except where the context otherwise required)
and had an exclusive jurisdiction clause for the resolution of disputes
between the parties (clearly in context including disputes between E. and
L.). It would be both curious and disturbing if against that background
arcane forensic subtlety made them mere sub-contractors and freed L.
from the exclusive jurisdiction clause. But the law is not so foolish.
Similarly, if the debenture holder's administrative receiver took free from
the E.'s right of retention and the concomitant exclusive jurisdiction
clause otherwise binding on L. simply by what was described in
submissions to us as 'a change of hat', I agree with Nourse LJ that both
legal principle and common sense would be affronted.
Lastly, E. were carrying L.'s spares and annex 3 to the agreement detailed
the pricing formulae under which they were to continue to do this. Spares
were not mentioned in the body of the agreement, and that is the high
point of the appellant's submissions. Either the omission of any mention
of spares from the body of the agreement or the inclusion of the annex
with its detailed prices for the carriage of spares was perhaps a mistake.
The factual matrix made it quite clear that the mistake was the omission
of specific mention of the spares from the body of the agreement. No
other construction would have made sense, but sense made no boundary
to the appellant's submissions on this point.
I too would dismiss this appeal.