Judgments - Canada Trust Company (Acting In Its Capacity As Trustee of The Chrysler Canada Limited's Benefit Plan, The Chrysler Canada Limited Master Trust Fund, The Chrysler Canada Limited Non-Canadian Master Trust Fund and The Holme Foundry Division Master Trust Fund) and Others v. Stolzenberg and Gambazzi and Others

(back to preceding text)

    Article 6 fulfils a similar function to R.S.C., Ord. 11, r. 1(i)(c) which expressly requires the claim to have been brought against a person "duly served within or out of the jurisdiction" as well as the intended defendant to have been a necessary or proper party. There are, however, significant differences. Under Order 11, r. 1(i)(c) leave must be obtained on an ex parte basis. As Waller L.J. observed "one can see that insistence on service on another defendant prior to obtaining leave may provide some practical safeguard": 568C. By contrast Waller L.J. pointed out that [568D-F]:

    "article 6 does not provide for the service of proceedings on one defendant before the issue and joinder of others, because no practical safeguard would be provided by so insisting. The first time that a court will review the question of whether article 6(1) provides jurisdiction is on an inter partes application contesting that jurisdiction. At that stage sufficient protection is available to a defendant and the order in which defendants have been served or whether one was served before the issue of proceedings against another has no materiality whatever. The proper question at that stage under article 6(1) is simply whether a defendant domiciled within the jurisdiction is a party and a genuine party, and whether the Convention is in any way being abused".

There is therefore no basis for implying a requirement that the anchor defendant must be served first. The submissions of the appellants must be rejected.

The Third Issue: Service on the Non-Convention Appellants

    One of the principal defendants, namely the Third Defendant, has submitted to the jurisdiction and has served a defence. The claims against him involve each of the non-Convention appellants. These are claims to which those appellants are necessary and proper parties. It follows that jurisdiction against the non-Convention appellants can be maintained irrespective of any issue over service on Mr. Stolzenberg. There is therefore no independent argument available to the appellants under this heading.

The relevant standard of proof

    The judge and all members of the Court of Appeal held, contrary to the submissions on behalf of the appellants, that a test of good arguable case is the appropriate standard of proof to apply to the question whether a defendant is domiciled in England on an application under Order 12, r. 8 involving issues arising under Article 6. In their written case, which was not supported by oral argument, the appellants contested the correctness of this ruling. Their Lordships did not call on counsel for the respondents to deal with the issue. In a purely internal English case the test of a good arguable case had been laid down by the House of Lords as applicable also in respect of domicile as a ground of jurisdiction: Seaconsar Far East Ltd. v. Bank Markazi Jomhouri Islami Iran [1994] 1 A.C. 438. The question is whether in the context of Article 6 the more stringent test of a balance of probabilities should apply. The adoption of such a test would sometimes require the trial of an issue or at least cross examination of deponents to affidavits. It would involve great expense and delay. While it is true that the jurisdictional issues under the Conventions are very important, they ought generally to be decided with due despatch without hearing oral evidence. In my view Waller L.J.'s judgment correctly explained on sound principled and pragmatic grounds why the appellants argument is misconceived.

Disposal of the appeal

    For the reasons I have given I would dismiss the appeal.


My Lords,

1. The Issue

    The main issue in this appeal can be shortly stated. Article 2 of the Brussels and Lugano Conventions requires that, subject to exceptions, a person domiciled in a Contracting State should be sued in the courts of that State. Article 6.1 is one such exception. It provides that a person domiciled in a Contracting State may also, when he is one of a number of defendants, be sued in the courts for the place where any one of them is domiciled. At what stage in English civil procedure is a person "sued" for the purposes of Articles 2 and 6? Is it the time when the proceedings are started by the issue of a claim form by the court? (C.P.R. 7.2.(1)). Or is it the time when the claim form is served on the defendant? At which stage does the defendant (or one of them) have to be domiciled in England?

    2. The facts

     The plaintiffs are the trustees of Canadian pension funds. They claim to have been induced by a fraudulent conspiracy to invest £120m. in companies called the Castor group, which collapsed in 1992. Mr Stolzenberg, the President and Chief Executive of the Castor Group, is said to have been the chief conspirator. He lived in a house in Belgravia and was domiciled in England. Three other individuals were alleged to have conspired with him. They lived in Canada and Switzerland.

     The plaintiffs decided to commence proceedings in England, suing Mr Stolzenberg under Article 2 and the other defendants domiciled in Convention countries ("the Convention defendants") under Article 6.1. They also wished to join 33 corporate entities which were alleged to have received some of the money or to have been otherwise involved in the fraud. Most of them were incorporated in various tax havens. None was domiciled in England.

     The plaintiffs proceeded slowly and carefully. The case was complicated. The statement of claim as eventually served, with its schedules and appendices, ran to over 300 pages. On 15 May 1996, before the issue of proceedings, they applied ex parte and in camera to Rimer J. for Mareva injunctions and associated interlocutory relief against various proposed defendants. Rimer J. heard submissions for five days and on 4 June 1996 he made the orders upon an undertaking by the plaintiffs to issue a writ. The writ was issued on 1 August 1996. But neither the writ nor the secretly obtained interlocutory orders were served until March of the following year. Ordinarily a writ has to be served within four months of issue: see R.S.C., Ord. 6, r. 8(1)(c), now C.P.R. 7.5(2). But the court gave the plaintiffs leave to defer service because they wanted to co-ordinate the service of interlocutory relief in other jurisdictions in which some of the defendants were present. In some cases, such as Switzerland, it was necessary to institute criminal proceedings. This took time.

     Meanwhile Mr Stolzenberg got wind of the proceedings. He was the subject of a B.B.C. investigative programme in February 1996. He sold his house in August 1996 and moved to another house nearby. 11 March 1997 was the day for service. But Mr Stolzenberg could not be found. On the following day he caught the Eurostar to Germany. He abandoned his English domicile. Rattee J. made an order for substituted service. On 13 June 1997 he made an order that Mr Stolzenberg had been duly served. But by that time he was no longer domiciled in England.

    3. The proceedings

     The defendants other than Mr Stolzenberg were served on 11 March 1997. The Convention defendants were served without leave under R.S.C., Ord. 11, r. 1(2). The defendants domiciled in states which were not parties to either of the Conventions ("the non-Convention defendants") were served by leave granted under Ord. 11(1)(c) on the ground that they were necessary and proper parties to a claim brought against other persons duly served within or out of the jurisdiction.

     This appeal arises out of an application under R.S.C., Ord. 12, r. 8 by two Convention defendants domiciled in Switzerland and four non-Convention defendants to set aside service of the writ on the ground that the English court had no jurisdiction over them. The main ground was that for the purposes of Articles 2 and 6, Mr Stolzenberg was not "sued" until the proceedings were served upon him. As he was not then domiciled in England, the court had no jurisdiction. It followed that there was no English defendant for the purpose of founding jurisdiction against the other Convention defendants under Article 6.1 And as they had not been "duly served", leave should not have been given to serve the non-Convention defendants under R.S.C., Ord. 11(1)(c).

     Rattee J. held that a defendant was sued in England for the purposes of the Conventions when the writ was issued. His decision was affirmed by a majority of the Court of Appeal (Nourse and Waller L.JJ., Pill L.J. dissenting). The defendants appeal to your Lordships House.

    4. The Conventions

     The Brussels and Lugano Conventions are for present purposes in identical language. The Brussels Contracting States are members of the European Union and questions on the interpretation of the Convention may be referred to the European Court of Justice. The Lugano Convention includes non-members and the European Court has no jurisdiction over it. Nevertheless, as the two Conventions were intended to establish a single system for the allocation of jurisdiction among Contracting States and the mutual recognition of their judgments,. decisions of the European Court on the Brussels Convention are obviously of great authority for the interpretation of the parallel provisions of the Lugano Convention. As the two Convention defendants in this case are domiciled in Switzerland, the Lugano Convention is the one engaged.

    5. Autonomous and national concepts

     The jurisprudence of the European Court distinguishes between those concepts in the Brussels Convention which have an autonomous or independent meaning, irrespective of their content in the law of any particular national system, and those which require the national court to give content to the Convention concept in accordance with its domestic law. So, for example, the expression "consumer" in Articles 13 and 14 has been given an autonomous meaning: see Benincasa v. Dentalkit Srl (Case C-269/95) [1998] All E.R. (E.C.) 135. On the other hand, in Tessili v. Dunlop [1976] E.C.R. 1473 the Court decided that "place of performance" of a contract in Article 5.1 should be determined according to whatever the national court's conflict rules regarded as the proper law of the contract.

     The Conventions contain numerous references to the commencement of proceedings. Thus Articles 2, 3, 5, 6, 8, 9 and 20 speak of a person being "sued", articles 6.2 and 20 of proceedings being "instituted", Articles 10, 11, 14, 21 and 22 of proceedings being "brought" and Articles 21, 22 and 23 of courts becoming "seised" of actions. In Zelger v. Salinitri (Case 129/83) [1984] E.C.R. 2397 the Court of Justice had to decide whether the concept of a court being "first seised" for the purposes of Article 21, which, as Advocate General Mancini said (at p. 2413), "presupposes a definition of the moment at which proceedings are initiated", should receive an autonomous or a national meaning. The court decided, at p. 2408, para.15, that it referred to the moment when the proceedings had been "definitively brought" but that the content to be given to that concept - whether it happened when proceedings were lodged with or issued by the court or upon notification to the defendant - was a matter for national law:

    "Since the object of the Convention is not to unify those formalities, which are closely linked to the organization of judicial procedure in the various States, the question as to the moment at which the conditions for definitive seisin for the purposes of Article 21 are met must be appraised and resolved, in the case of each court, according to the rules of its own national law."

    In Dresser U.K. Ltd v. Falcongate Freight Management Ltd [1992] Q.B. 502 the Court of Appeal applied these instructions and characterised the time of service of proceedings as the moment when the English court was "definitively seised" for the purposes of Article 21.

    6. Zelger v. Salinitri

    The appellants submit that if service is the moment when proceedings are initiated for the purposes of Article 21, it should also be the moment when the defendant is "sued" for the purposes of Articles 2 and 6. If the court is seised when the proceedings are definitively brought, why should it have jurisdiction when they have been less than definitively brought?

    For this purpose it is necessary to examine the reasoning in Zelger v. Salinitri [1984] E.C.R. 2397. The plaintiff's argument turned upon a play on words in the German language. He had sued the Italian defendant in Munich on the ground that it was the place of performance of the contract upon which he was suing. When this appeared likely to be in issue, he sued him in Italy as well. The German proceedings had been lodged with the court before those in Italy but were served later. The Munich court declined jurisdiction on the ground that the Italian court was first seised when its proceedings were served. The Munich Court of Appeal referred the question of whether this was a correct interpretation of Article 21 to the European Court.

    German procedural law has three technical expressions which can be translated into English as pending. When the claim form (Klageschrift) is lodged with the court, the proceedings become anhängig. This has certain legal consequences: for example, the limitation period stops running. When the claim form has been served, the proceedings have been erhoben, literally, raised (there is a parallel with Scottish terminology). This has other procedural consequences. Germany also has a domestic lis pendens rule, by which a defendant can object to the jurisdiction on the ground that proceedings between the same parties raising the same issue are pending in another court. Proceedings pending in this sense are said to be rechtshängig and German proceedings become rechtshängig when they have been erhoben and not when they are merely anhängig.

    The plaintiff's argument in Zelger v. Salinitri therefore started with the initial handicap that the Munich proceedings would not have been regarded as rechtshängig in German domestic law at the time when the Italian proceedings were served. Nevertheless, he argued that the terms of Article 21 showed that for Convention purposes a court should be treated as seised when the claim form was lodged. This turned upon the German language version of Article 21:

    "Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Contracting States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.

    Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court."

    In the German version, "proceedings...are brought" was rendered as "Klagen [werden] anhängig gemacht". This is a perfectly ordinary German expression for bringing proceedings, without necessarily any technical connotation about the stage they have reached. But the plaintiff argued that the use of the term anhängig meant that, contrary to German domestic law, a court in a Convention country was seised when the proceedings were issued. He contrasted the German version of Article 22, which rendered "actions are brought" as "Klagen werden erhoben" and said this showed that the draftsman was using different words to refer to different concepts of initiating proceedings.

    The Court, as I have said, rejected the argument that the Convention was intending to adopt a single autonomous concept of the initiation of proceedings, let alone one which was intelligible only to a person having a detailed acquaintance with the technical terms of German civil procedure. The plaintiff was therefore referred to the concept of initiation in German domestic law. But which concept of initiation? German law, as we have seen, has at least two: the stage at which proceedings are anhängig and the stage at which they are erhoben. Advocate General Mancini said that one had to choose the one which applied in the appropriate context. In other words, what step should be characterised as being the initiation of proceedings for the purposes of Article 21? In the ordinary way, it would be that step which the domestic law regarded as initiating proceedings for the purposes of its own lis pendens rule. In German law, this pointed to the moment when the proceedings were erhoben. But, looking outside the original six Contracting States and in particular at England and the Irish Republic, the Advocate General did not consider that a Contracting State should have complete freedom of choice in applying its domestic rules to Article 21. He proposed two limitations: first, that the rule had to be fixed and ascertainable, not discretionary as under the common law forum non conveniens doctrine. Secondly, it should not be a rule which "limited the rights of the defence": p. 2415. He considered that for two reasons the defence would be so limited if one chose a time before service of proceedings. The first was that the defendant might be unaware that he could raise a plea of lis pendens elsewhere. The second was that a defendant might start proceedings elsewhere without realising that they were already barred by a lis pendens in, say, England.

    The Court of Justice, as it seems to me, accepted the Advocate General's general approach. But it said at p. 2408, para. 14 of the judgment:

    "It may properly be inferred from Article 21, read as a whole, that a court's obligation to decline jurisdiction in favour of another court only comes into existence if it is established that proceedings have been definitively brought before a court in another State involving the same cause of action and between the same parties. Beyond that, Article 21 gives no indication of the nature of the procedural formalities which must be taken into account for the purposes of considering whether or not to recognise the existence of such an effect. In particular, it gives no indication as to the answer to the question whether a lis pendens comes into being upon the receipt by a court of an application or upon service or notification of that application on or to the party concerned."

    This seems to me a rejection of the Advocate General's proposal to restrict domestic choice to a time after service of the documents. In so doing, the court may have been conscious of the fact that in some jurisdictions, "service" did not necessarily mean personal service. It could be simply the delivery of the document for service to an official of the court. So a rule which required service in this sense would not necessarily eliminate the defence handicaps mentioned by the Advocate General. On the other hand, the Court did in my opinion accept the Advocate General's opinion that proceedings are initiated and the court is seised for the purposes of Article 21 only when it would be so seised for the purposes of its own domestic lis pendens rule. On this point, however, the language used by the Court requires some explanation. As we have seen, it said in paragraph 14 that Article 21 applies only when proceedings have been "definitively brought" and it answered the question in paragraph 16 by saying:

    "the court 'first seised' is the one before which the requirements for proceedings to become definitively pending are first fulfilled, such requirements to be determined in accordance with the national law of each of the courts concerned."

    In England, the word "definitively" in those two paragraphs of the judgment has proved puzzling. In Dresser U.K. Ltd. v. Falcongate Freight Management Ltd. [1992] Q.B. 502, 519, Bingham L.J. said that the European Court did not use this adverb "by way of mere rhetoric". He thought it was used to express approval of the Advocate General's view that a court in a Contracting State can in no circumstances be seised of proceedings for the purposes of Article 21 unless they have been served. I would respectfully disagree. Paragraph 14 of the judgment is in my opinion a clear rejection of any such rule. But that leaves the question of what "definitively" was intended to mean.

    "Definitively", like "really" and "actually" (compare Charter Reinsurance Co. Ltd. v. Fagan [1997] A.C. 313, 391-392) is what J.L. Austin called a "trouser-word". In Sense and Sensibilia (1962) at p. 70, he said:

    "Next, 'real' is what we may call a trouser-word. It is usually thought, and I daresay usually rightly thought, that what one might call the affirmative use of a term is basic - that, to understand 'x', we need to know what it is to be x, or to be an x, and that knowing this apprises us of what it is not to be x, not to be an x. But with 'real'...it is the negative use which wears the trousers. That is, a definite sense attaches to the assertion that something is real, a real such-and-such, only in the light of a specific way in which it might be, or might have been, not real. 'A real duck' differs from the simple 'a duck' only in that it is used to exclude various ways of not being a real duck - but a dummy, a toy, a picture, a decoy, &c.; and moreover I don't know just how to take the assertion that it is a real duck unless I know just what, on that particular occasion, the speaker has it in mind to exclude."

    What, therefore, did the Court have it mind to exclude when they said that the proceedings must be not merely pending but "definitively pending"? Here it helps to look at the language of the case, which was German. In paragraph 14, "definitively pending" is "endgültig erhoben". And the language in the answer to the question in paragraph 16 is even clearer, where "the requirements for proceedings to become definitively pending" is rendered "die Voraussetzungen für die Annahme einer endgültigen Rechtshängigkeit", that is to say, the proceedings must be rechtshängig, pending for the purposes of the domestic lis pendens rule. By combining endgültig or "definitively" with the technical term of German law which refers to proceedings being pending for the specific purposes of the lis pendens rule, the Court was simply intending to exclude any concept of proceedings being pending which did not satisfy this rule.

    In a different context, the word "definitively" or "endgültig" might have been used to convey an altogether different idea. Thus, in the context of limitation of action, an English lawyer might say that time did not stop running merely because the plaintiff had sent a letter of demand. He must actually (note the word) have commenced proceedings. A German lawyer might say that the proceedings must be endgültig anhängig, or definitively pending in the sense of the claim form having been lodged. It is the excluded concept - in this case, mere preparatory steps - which wears the trousers.

    7. Contextuality

     My Lords, the purpose of subjecting the House to this elaborate analysis of Zelger v. Salinitri is to demonstrate that it provides no support for Miss Gloster's submission that a court cannot have jurisdiction for the purposes of Articles 2 and 6 unless it is seised for the purposes of Article 21. On the contrary, it is authority for two propositions. First, that the concept of initiating proceedings must be characterised according to national law and secondly that it may be characterised differently for different purposes.

     Miss Gloster's alternative submission was that even if there was no logical equivalence between the commencement of proceedings for the purposes of the different articles, many of the reasons given by the Court of Appeal in Dresser U.K. Ltd. v. Falcongate Freight Management Ltd [1992] Q.B. 502 for choosing the time of service for the purpose of Article 21 could equally be applied to Articles 2 and 6.

     The problem which faced the Court of Appeal in Dresser was that the common law has no lis pendens rule. Instead, it has a discretionary doctrine of forum non conveniens in which the existence of a lis pendens is merely one factor to be taken into account. In Contracting States which had a lis pendens rule, Zelger v. Salinitri was no doubt easy enough to apply. German courts had no difficulty in knowing when proceedings were endgültig rechtshängig. The Civil Procedure Code told them that it was when the proceedings were erhoben. But the Court of Appeal in Dresser had to invent a domestic rule solely for the purpose of allowing Article 21 to refer to it. They started with a blank sheet of paper and were in my opinion free to devise whatever rule appeared most suitable. The question was one for pragmatic rather than dogmatic choice.

     The pragmatic nature of the decision was emphasised by Advocate General Mancini in the reasons he gave in Zelger for wanting to rule out any time before service of the proceedings as within the legitimate choice of domestic law. The Court was, as I have said, not willing to go so far. But the reasons given by the Advocate General are weighty and even without the authority of the Court, they deserved the attention which Bingham L.J. gave them in Dresser. On the other hand, Grupo Torras S.A. v. Sheik Fahad Mohammed Al-Sabah [1996] 1 Lloyd's Rep. 7 shows that there are problems about applying a date of service rule to cases involving multiple defendants which the Court of Appeal may not have foreseen. It is not my purpose to comment on whether the Court of Appeal made the right choice in Dresser. The question is not before the House and may in any case be overtaken by a proposed revision of the Conventions.

     The reasons of the Advocate General are of course specific to the lis pendens situation. But other reasons given by the Court of Appeal in Dresser are expressed in more general terms. Thus Bingham L.J. said (at p. 523) that it was -

    "artificial, far-fetched and wrong to hold that the English court is seised of proceedings, or that proceedings are decisively, conclusively, finally or definitively pending before it, upon mere issue of proceedings, when at that stage (1) the court's involvement has been confined to a ministerial act by a relatively junior administrative officer; (2) the plaintiff has an unfettered choice whether to pursue the action and serve the proceedings or not, being in breach of no rule or obligation if he chooses to let the writ expire unserved; (3) the plaintiff's claim may be framed in terms of the utmost generality; (4) the defendant is usually unaware of the issue of proceedings and, if unaware, is unable to call on the plaintiff to serve the writ or discontinue the action and unable to rely on the commencement of the action as a lis alibi pendens if proceedings are begun elsewhere; (5) the defendant is not obliged to respond to the plaintiff's claim in any way, and not entitled to do so save by calling on the plaintiff to serve or discontinue; (6) the court cannot exercise any powers which, on appropriate facts, it could not have exercised before issue; (7) the defendant has not become subject to the jurisdiction of the court."

continue previous