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

(back to preceding text)

     "If there is a genuine dispute as to the legal effect of an apparent contract which falls within the scope of sub-par. (d)(i)--(iii) it is just as desirable in principle that the Court should have the power in an appropriate case to give leave for service out of the jurisdiction as it is in the case where there is a dispute whether a contract originally valid and effective has been discharged by frustration or rescission. . . .

     "I respectfully agree with both Mr. Justice Saville and Mr. Justice Hobhouse that the policy which underlies Ord. 11, r. 1(1)(d) is to enable all disputes about the existence or effect of contractual rights and liabilities falling within the scope of sub-pars. (d)(i)--(iii) to be brought before the English Courts. In my view an unduly technical approach to the construction of the rule is liable to frustrate its purpose. Without seeking to define the precise limits of sub-par. (d) for all purposes, I for my part accept Mr. Crane's submission that the word 'contract' in this context should be construed widely enough to include agreements such as those between the parties in this case which were clearly entered into with intent to create legal relations. Lawyers commonly speak of a 'contract' being rendered void by reason of illegality or other matters and I see no reason why the language of Ord. 11, r. 1(1)(d) should be construed with any greater technicality so as to exclude cases such as the present."

      However the wording of Order 11 Rule 1(1)(d) differs from the wording of Article 5(1) and does not contain the words "in the courts for the place of performance of the obligation in question."

      Mr. Pollock further relied on the judgment of the European Court in Arcado v. Haviland [1988] E.C.R. 1539 where the court stated at pp. 1554, 1555:

     "The concept of 'matters relating to a contract' is to be regarded as an independent concept which, for the purpose of the application of the Convention, must be interpreted by reference principally to the system and objectives of the Convention in order to ensure that it is fully effective.

     "There is no doubt that a claim for the payment of commission due under an independent commercial agency agreement finds its very basis in that agreement and consequently constitutes a matter relating to a contract within the meaning of Article 5(1) of the Convention.

     "The same view must be taken of a claim for compensation for the wrongful repudiation of such an agreement as the basis for such compensation is the failure to comply with a contractual obligation. . . .

     "In addition, Article 10 of the Convention on the Law Applicable to Contractual Obligations of 19 June 1980 (Official Journal 1980, L 266, p. 1) confirms the contractual nature of judicial proceedings such as those in point inasmuch as it provides that the law applicable to a contract governs the consequences of a total or partial failure to comply with obligations arising under it and consequently the contractual liability of the party responsible for such breach."

      To the same effect was the earlier judgment of the European Court in Effer v. Kantner [1982] E.C.R. 825 where the question referred to the Court was:

     "May the plaintiff invoke the jurisdiction of the courts of the place of performance in accordance with Article 5(1) of the Convention even where the existence of the contract on which the claim is based is in dispute between the parties?"

      In its judgment the Court stated at page 834:

     "It follows from the provisions of the Convention, and in particular from those in Section 7 of Title II, that, in the cases provided for in Article 5(1) of the Convention, the national court's jurisdiction to determine questions relating to a contract includes the power to consider the existence of the constituent parts of the contract itself, since that is indispensable in order to enable the national court in which proceedings are brought to examine whether it has jurisdiction under the Convention. If that were not the case, Article 5(1) of the Convention would be in danger of being deprived of its legal effect, since it would be accepted that, in order to defeat the rule contained in that provision it is sufficient for one of the parties to claim that the contract does not exist. On the contrary, respect for the aims and spirit of the Convention demands that that provision should be construed as meaning that the court called upon to decide a dispute arising out of a contract may examine, of its own motion even, the essential preconditions for its jurisdiction, having regard to conclusive and relevant evidence adduced by the party concerned, establishing the existence or the inexistence of the contract."

      Therefore the European Court has held that the national court has jurisdiction under Article 5(1) to decide a dispute relating to the repudiation of a contract or a dispute as to the existence or non-existence of a contract.

      In Tesam Distribution Ltd. v. Schuh Mode Team GmbH [1990] I.L.Pr. 149, where the defendants claimed that no contract had been entered into, the Court of Appeal applied the decision of the European Court in Effer v. Kantner and held:

     "The court may determine a dispute whether a contract was entered into by the parties in exercise of its Article 5 (1) jurisdiction. Where the existence of the contract is in dispute, the court's jurisdiction to hear and determine a claim under Article 5(1) does not depend upon the court first satisfying itself that the contract does exist. That is the subject matter of the dispute."

In his judgment Stocker L.J. recognised that if it were clear that no contract had existed a court would not have jurisdiction under Article 5(1) and stated at page 165:

     "If in order to decide the question of jurisdiction it is necessary to determine finally whether a contract exists or not it would seem to follow that if the conclusion arrived at was that no contract existed then ex hypothesi the conditions of Article 5(1) would not be met and the Court would have no jurisdiction."

The learned Lord Justice later stated at page 165:

     "In my view the effect of the Effer v. Kantner decision is that a court other than a court of the defendant's country of domicile cannot accept jurisdiction on the mere assertion or pleading of the plaintiff. There must be evidence adduced from which a conclusion could properly and genuinely be drawn that a contract existed and that the place of performance was the country in which the action was brought. Once jurisdiction can properly be established on this basis then the effect of Article 5(1) in the light of the Effer v. Kantner decision is that the court has jurisdiction finally to determine the issues between the parties. If after full trial the conclusion is that no contract existed then since the court had jurisdiction to try the issue that determination is final and binding upon the parties."

      Therefore, whilst as a matter of legal analysis there may be fine distinctions between a contract which is void and a contractwhich is voidable or unenforceable, there is nevertheless in my opinion for the purposes of Article 5(1) a distinction, which is not difficult to apply in practice, between a case where one party claims that the contract is, or was, in existence and the other party claims that the contract never existed or has ceased to exist, and a case such as the present one where both parties accepted before the commencement of the action that the contract was void ab initio.

      Accordingly, in my opinion, the judgments of the European Court give guidance in three respects to a national court considering the ambit of Article 5(1) of the Brussels Convention, and therefore to a court of the United Kingdom considering the ambit of Article 5(1) of Schedule 4 to the 1982 Act. First, the special jurisdiction given by Article 5(1) constitutes a derogation from the general rule contained in Article 2 that jurisdiction is vested in the courts of the State where the defendant is domiciled, and accordingly a wide interpretation of Article 5(1) should be avoided. Secondly, whilst, as in the Peters case, the words "in matters relating to a contract" can apply to a consensual obligation similar to that created by a contract, nevertheless when read with the words "in the courts for the place of performance of the obligation in question," the jurisdiction under Article 5(1) only arises when the claim is to enforce an obligation arising under a contract or a relationship akin to a contract such as membership of an association. Thirdly, the reason for the national court having jurisdiction is that there is a close connecting factor between the dispute giving rise to the claim and that court. Having regard to these considerations, and to the further consideration that in Kalfelis v. Schröder the European Court treated a claim for unjust enrichment as a cause of action separate and distinct from a claim in contract. I consider that the present action for restitution does not come within Article 5(1). Accordingly I am in agreement with the decision of Hirst J. at first instance and the conclusion of Leggatt L.J. in his dissenting judgment in the Court of Appeal. As I consider that the claim must be to enforce an obligation arising under a contract or a relationship akin to a contract I respectfully differ from the view of Roch L.J. that in Article 5(1) the word "contract" embraces a contract that is a nullity, and from the view of Millett L.J. that the word "contract" in Article 5(1) can include "void contract" and that the expression "place of performance of the obligation in question" can mean "intended place of performance of the supposed obligation."

      Kleinwort Benson submitted, in the alternative, that the claim fell within Article 5(3) of Schedule 4. As the claim is one based on unjust enrichment, and not on tort or delict, I consider that it does not come within Article 5(3). In my opinion it would be inappropriate to apply the words "where the harmful event occurred" to a claim for unjust enrichment. I further consider that the judgment of the European Court in Kalfelis v. Schröder operates to strengthen the submission of Glasgow that Article 5 (3) is inapplicable rather than to assist the argument of the respondent. In that case question 2 referred to the court for a preliminary ruling was in these terms:

     "(a) Must the term 'tort' in Article 5(3) of the EEC Convention be construed independently of the Convention or must it be construed according to the law applicable in the individual case (lex causae), which is determined by the private international law of the court applied to?

     "(b) Does Article 5(3) of the EEC Convention confer, in respect of an action based on claims in tort and contract and for unjust enrichment, accessory jurisdiction on account of factual connection even in respect of the claims not based on tort?" (emphasis added)

The court considered that question in paragraphs 14 to 21 of its judgment and answered the question as follows:

     "(a) The term 'matters relating to tort, delict or quasi-delict' used in 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);

     "(b) 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."

I agree with Hirst J. that the word "liability" in answer 2(a) must be interpreted as meaning liability within the scope of Article 5(3), namely, liability in tort, delict or quasi-delict. Accordingly, in my opinion, the court in its answer to question 2(b) is stating 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 an action in so far as it is not based on tort or delict but is based on unjust enrichment.

      Accordingly I consider, for the reasons which I have given, that the decision of Hirst J. was correct and I would allow this appeal.


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