Judgment - Kleinwort Benson Limited v. City of Glasgow District Council  continued

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      Where on the other hand there has undoubtedly has been a contract constituted and the Court has jurisdiction under Article 5(1) the Court should be able to deal not only with such issues as whether the obligation is still enforceable or indeed whether the contract is still extant but also with any claims which arise consequentially on the determination of any issue about performance, such as damages or an award quantum meruit. When the defendant challenges the continued existence of the contract and seeks some remedy on the basis that it has terminated, that could procedurally be brought within the scope of Article 6(3) whereby the court of the place of performance is given jurisdiction to entertain a counterclaim arising from the same contract or facts on which the original claim was based. Where the remedy is sought by the plaintiff that should be competent under the principle expressed in the maxim accessorium sequitur principale. That principle was recognised in Shenevai v. Kreischer [1987] E.C.R. 239 as an applicable guide where several obligations arise under the same contract are in issue. That approach was adopted in this House in Union Transport Plc. v. Continental Lines S.A. [1992] 1 W.L.R. 15. But the obligation in such cases will still be the contractual obligation which formed the basis of the proceedings. It will not be any separate obligation, such as an obligation to pay damages or an obligation to make a quantum meruit payment. As was stated in de Bloos at paragraph 14 of the judgment:

     "In a case where the plaintiff asserts the right to be paid damages or seeks a dissolution of the contract on the ground of the wrongful conduct of the other party, the obligation referred to in Article 5(1) is still that which arises under the contract and the non-performance of which is relied upon to support such claims."

      But in order for the Court to entertain the accessory or consequential matters the principal matter must be within the jurisdiction. In a case where there has never been a contract, either after inquiry by the Court or by admission, so that no jurisdiction lies under Article 5(1) for the determination of any dispute about the performance of a contractual obligation, there is nothing to which any relief then claimable can be seen as accessory.

      There are of course attractive arguments in favour of giving one court the power to deal with the whole extent of claims which are in some way related to each other. Certainly it is desirable to avoid an accumulation of different grounds of jurisdiction for associated claims. But the apparent convenience of such a course cannot be allowed to overcome the jurisdictional rules set out in the Act. In Kalfelis the Advocate General put forward a view to the effect that different grounds of claim can all be attracted to Article 5(1) and channelled into it together. But that view was not adopted by the Court. What the Court stated was (para 20):

     "Whilst it is true that disadvantages arise from different aspects of the same dispute being adjudicated upon by different courts, it must be pointed out, on the one hand, that a plaintiff is always entitled to bring his action in its entirety before the courts for the domicile of the defendant and, on the other, that Article 22 of the Convention allows the first court seised, in certain circumstances, to hear the case in its entirety provided that there is a connection between the actions brought before the different courts."

      Two sentences from the judgment in Peters (at p. 1003F) may usefully be quoted here:

     "The provisions of the Convention should therefore be interpreted in such a way that the court seised is not required to declare that it has jurisdiction to adjudicate upon certain applications but has no jurisdiction to hear certain other applications, even though they are closely related. Moreover, respect for the purposes and spirit of the Convention requires an interpretation of Article 5 which enables the national court to rule on its own jurisdiction without being compelled to consider the substance of the case."

      Where the court has jurisdiction on the ground of an acknowledged contractual obligation it should be able to dispose of all the issues raised in the case. If there is a fundamental question about its jurisdiction because there is a dispute whether there has ever been a contractual obligation it may try that issue under Article 5(1) but has no obligation and indeed no power to go further if the attempt to establish the jurisdiction fails.

      In this context the close connecting factor which provides the basis for the special jurisdiction prescribed by Article 5(1) is of importance. It was stated in Peters (p. 1002) that:

     ". . . the designation by Article 5(1) of the Convention of the courts for the place of performance of the obligation in question expresses the concern that, because of the close links created by a contract between the parties thereto, it should be possible for all the difficulties which may arise on the occasion of the performance of a contractual obligation to be brought before the same court: that for the place of performance of the obligation."

      Where there is no contractual obligation and no place for the performance of a contractual obligation there is no close connecting factor and no justification for the invocation of Article 5(1). In addition there must be an identifiable place of performance. In Tessili v. Dunlop [1976] E.C.R. 1473 (at p. 1485) the Court stated that the identification of the place of performance required to be determined by national law adding that "the determination of the place of performance of obligations depends on the contractual context to which these obligations belong." And as Lord Maxwell observed in Bank of Scotland v. I.M.R.O. 1989 S.L.T. 432 at p. 445 in relation to the corresponding provision in Schedule 8 to the Act of 1982: "If they (the petitioners) are unable to identify a place of performance of the obligation in question in my opinion they cannot rely on Rule 2(2)."

      These wider considerations however are not of immediate relevance to the particular issue which arises in the present case. The claim which is being made by the respondent in the present case is simply and solely a claim for restitution. That is not a claim based on a contract but a claim based on the principle of undue enrichment. The remedy of restitution is in a category distinct from that of contractual remedies. That appears to be the position not only in England and Scotland but also in at least a number of the other states in Europe. That the parties purported to enter into a contract which turned out to be void ab initio is matter of background history, too remote from the claim now made to be related to a contract in the sense intended by Article 5(1), even if what is now agreed to be a void contract can properly be called a contract at all. In the present case the plaintiffs do not seek to found on any contract; indeed their claim is one which is pursued in the absence of any contract. There is no contractual obligation forming the basis of their claim. There is no clear place of performance such as can establish the close connection between the dispute and the courts of that place. In my view there is no jurisdiction available under Article 5(1) for the purposes of the present case.

      Counsel for the respondent presented a brief argument upon the possible applicability of Article 5(3) to the present proceedings. This was based on a passage in the opinion of Advocate General Darmon in Shearson Lehman Hutton v. TVB [1993] E.C.R. I-139 at p. 178 where he construed a passage in the judgment of the court in Kalfelis as enabling a claim for unjust enrichment to fall within Article 5(3). It is evident that the argument depends upon an imprecise translation of the passage in Kalfelis and properly understood the judgment does not support the suggested conclusion. The basis for the argument in the present case then disappears.

      For the reasons which I have given I consider that the order granted by Hirst J. was correct and I would allow the appeal.


My Lords,

      Section 16 of the Civil Jurisdiction and Judgments Act 1982 allocates proceedings in civil and commercial matters within the different jurisdictions of the United Kingdom in accordance with Schedule 4 to that Act which contains a modified version of Title II of the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters 1968 (the Brussels Convention).

      Section 16(3) provides:

     "In determining any question as to the meaning or effect of any provision contained in Schedule 4--

      "(a) regard shall be had to any relevant principles laid down by the European Court in connection with Title II of the 1968 Convention and to any relevant decision of that court as to the meaning or effect of any provision of that Title;"

      Article 2 of Schedule 4 provides:

     "Subject to the provisions of this Title, persons domiciled in a part of the United Kingdom shall . . . be sued in the courts of that part."

Article 5 of Schedule 4 provides:

     "A person domiciled in a part of the United Kingdom may, in another part of the United Kingdom, 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 or in the case of a threatened wrong is likely to occur;"

      The appellant, City of Glasgow District Council (Glasgow), is domiciled in Scotland and the first issue for determination on this appeal is whether in the action brought in the High Court of Justice in England by the respondent, Kleinwort Benson Limited (Kleinwort Benson), for restitution of moneys paid under interest rate swap agreements which were void ab initio, Glasgow is being sued pursuant to Article 5(1):

     "in matters relating to a contract, in the courts for the place of performance of the obligation in question."

      The claim of Kleinwort Benson in its writ of summons is for restitution and there is no claim in contract. In English law it is clear that a claim for restitution is a separate and distinct cause of action from a claim in contract. In Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C. 32 at 61 Lord Wright stated:

     "It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generically different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasi-contract or restitution."

      In Westdeutsche Bank v. Islington L.B.C. [1996] A.C. 669, 710E Lord Browne-Wilkinson stated:

     "The common law restitutionary claim is based not on implied contract but on unjust enrichment: in the circumstances the law imposes an obligation to repay rather than implying an entirely fictitious agreement to repay: Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbour Ltd. [1943] A.C. 32, 63-64, per Lord Wright; Pavey & Matthews Pty. Ltd. v. Paul (1987) 162 C.L.R. 221, 227, 255; Lipkin Gorman v. Karpnale Ltd. [1991] 2 A.C. 548, 578C; Woolwich Equitable Building Society v. Inland Revenue Commissioners [1993] A.C. 70. In my judgment, your Lordships should now unequivocally and finally reject the concept that the claim for moneys had and received is based on an implied contract. I would overrule Sinclair v. Brougham on this point."

      Therefore in English law the action brought by Kleinwort Benson against Glasgow is not a claim in contract.

      However, in my opinion, the consideration that the action brought by Kleinwort Benson is not in English law a claim in contract is not decisive, for two reasons, in favour of Glasgow on the question whether, within the meaning of Article 5(1), it is being sued "in matters relating to a contract." First, the words "may . . . be sued in matters relating to a contract" are wider than the words "may be sued on a contract." Secondly, pursuant to section 16(3)(a) the meaning of Article 5(1) is to be determined having regard to "any relevant principles laid down by the European Court in connection with Title II of the 1968 Convention and to any relevant decision of that court as to the meaning or effect of any provision of that Title."

      In the present case the Court of Appeal referred to the European Court for a preliminary ruling the questions arising in the present appeal. The European Court held that it had no jurisdiction to give a preliminary ruling as the provisions of the Brussels Convention which the court was asked to interpret were not directly applicable to the present case, and therefore the court did not have jurisdiction to give replies which were merely advisory and would not have binding effect. But, in my opinion, whilst the European Court has declined to give a ruling for the reason it stated, and notwithstanding the difference in wording between section 16(3)(a) which requires regard to be had to any relevant principles laid down by, and any relevant decisions of, that Court, and section 3(1) of the 1982 Act which requires any question as to the meaning or effect of any provision of the Brussels Convention, if not referred to the European Court, to be determined "in accordance with the principles laid down by and any relevant decision of the European Court", the wording of Section 16(3)(a) does not mean that regard is only to be had to the principles laid down by, and decisions of, the European Court if English law does not provide clear guidance on the meaning of an Article in Schedule 4. Rather I consider that section 16(3)(a) provides that an English court is to seek guidance from any relevant principle laid down by, and any relevant decision of, the European Court, where the English court is construing an article in Schedule 4. Schedule 4 closely follows the wording of Title II of the Brussels Convention and the wording of Article 5(1) of Schedule 4 is identical to the first part of Article 5(1) of the Brussels Convention, save for the substitution of the words "part of the United Kingdom" for the words "Contracting State", and it is clearly desirable that an English court should give the same meaning to Article 5(1) of Schedule 4 as the European Court gives to Article 5(1) of the Brussels Convention.

      The primary submission advanced on behalf of the appellant, Glasgow, by Mr. Burton QC was that as the contract between Glasgow and Kleinwort Benson was void ab initio and as Kleinwort Benson is suing, not in contract, but for restitution, the present action is not one in which Glasgow is being sued "in matters relating to a contract."

      The primary submissions advanced on behalf of Kleinwort Benson by Mr. Pollock QC can be briefly summarised as follows. First, Article 5(1) does not distinguish between contracts which, in accordance with differing domestic systems of law, are treated as valid, voidable, unenforceable or void. Secondly, where two parties have come together for the purpose of entering into a contractual relationship, have fulfilled the requirements of certainty and finality necessary to conclude an agreement, intend to enter into a contract and believe that they have in fact done so, it is intelligible and sensible to treat the resolution of the consequences of their acts, having proved ineffective in law, as falling within the concept of "matters relating to a contract." Thirdly, an important objective of the Brussels Convention is that a national court should be able to rule upon the issue of its own jurisdiction by applying a relatively simple test without being compelled to consider the substance of the case, and that a purposive interpretation of Article 5(1) leads to the conclusion that the present claim arose from "matters relating to a contract."

      My Lords, whilst there is no decision of the European Court directly on the point which arises for decision in this appeal, consideration of the judgments of that Court has led me to the conclusion that the submissions on behalf of Glasgow should be accepted and that its appeal should succeed. The judgments relied on by Mr. Burton which have caused me to form this opinion are the following. In Kalfelis v. Schröder [1988] E.C.R. 5565 the Court treated a claim for unjust enrichment as a cause of action separate and distinct from a cause of action in contract and a cause of action in tort, and the judgment states at page 5581: