House of Lords portcullis
House of Lords
Session 2007 - 08
Publications on the Internet
Judgments
PDF Print Versionpdf icon

Judgments - Scottish & Newcastle International Limited (Respondents) v Othon Ghalanos Limited (a company incorporated in Cyprus) (Appellants)

HOUSE OF LORDS

SESSION 2007-08

[2008] UKHL 11

on appeal from: [2006] EWCA Civ 1750

OPINIONS

OF THE LORDS OF APPEAL

FOR JUDGMENT IN THE CAUSE

Scottish & Newcastle International Limited (Respondents) v Othon Ghalanos Limited (a company incorporated in Cyprus) (Appellants)

Appellate Committee

Lord Bingham of Cornhill

Lord Rodger of Earlsferry

Lord Brown of Eaton-under-Heywood

Lord Mance

Lord Neuberger of Abbotsbury

Counsel

Appellants:

Richard Lord QC

(Instructed by Thomas Eggar LLP)

Respondents:

Michael Bools

(Instructed by Kimbells LLP)

Hearing date:

15 NOVEMBER 2007

ON

WEDNESDAY 20 FEBRUARY 2008

HOUSE OF LORDS

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

Scottish & Newcastle International Limited (Respondents) v Othon Ghalanos Limited (a company incorporated in Cyprus) (Appellants)

[2008] UKHL 11

LORD BINGHAM OF CORNHILL

My Lords,

1.  In this action the seller (Scottish & Newcastle International Limited) seeks to recover the price of goods sold from the buyer (Othon Ghalanos Limited). S&N is a company based in Scotland, Ghalanos a company registered in Cyprus. The contract related to 11 consignments of cider shipped from Liverpool to Limassol in June-July 2004. The question before the House is whether the English court has jurisdiction to entertain the action. The answer to that question turns, by virtue of article 5(1)(b) of Council Regulation (EC) No 44/2001, on whether, as a matter of English law applied to the particular contract made between the parties, the goods were or should have been delivered by S&N to Ghalanos in England. Both Andrew Smith J ([2006] EWHC 1039 (Comm)) and the Court of Appeal (Waller and Rix LJJ: [2006] EWCA Civ 1750, [2007] 1 All ER (Comm) 1027) held in favour of S&N that the English court does have jurisdiction, but Ghalanos challenges the correctness of that conclusion.

2.  The general rule, expressed in article 2(1) of the Regulation referred to, is that persons domiciled in a member state must, irrespective of their nationality, be sued in the courts of their home state. That is the result Ghalanos seeks, and if article 2(1) were applicable, S&N would have to pursue its claim in the Cypriot court. But the general rule in article 2(1) is qualified by a special rule in article 5(1) of the Regulation, which provides:

“A person domiciled in a Member State may, in another Member State, be sued:

(1)(a)  in matters relating to a contract, in the courts for the   place of performance of the obligation in question;

(b)  for the purpose of this provision and unless   otherwise agreed, the place of performance of the   obligation in question shall be:

-  in the case of the sale of goods, the place in a   Member State where, under the contract, the goods   were delivered or should have been delivered,

-  in the case of the provision of services, the place in a   Member State where, under the contract, the   services were provided or should have been   provided,

(c)  if subparagraph (b) does not apply then   subparagraph (a) applies...”

Thus in matters of contract a person domiciled in one member state need not be sued in the courts of that state but may be sued in the courts of another member state if one or other of the conditions in the article is satisfied.

3.  Article 5(1)(a), applying to matters of contract quite generally and therefore very broad in its scope, focuses attention on the particular obligation in question in the particular action and permits a claimant to sue in a member state other than that of the defendant’s domicile if the particular obligation in question was or should have been performed in that other member state. But in subparagraph (b) a more specific rule is laid down, not applicable to the whole field of contract, but only to contracts for the sale of goods or the provision of services. In each of these cases, in the absence of contrary agreement, the place of performance of the obligation in question must be taken to be the place where, under the particular contract between the parties, the goods were or should have been delivered or the services were or should have been provided, as the case may be. If subparagraph (b) does not apply, whether because the contract is not one for the sale of goods or the provision of services or because a contract of that character contains no term as to the place of delivery of goods or the place of provision of services, subparagraph (a) applies.

4.  The sale of goods contract made between S&N and Ghalanos is, as they agree, governed by English law. Thus it is to that contract, interpreted according to the principles of English law, that we must look to ascertain whether, under the contract, the goods were or should have been delivered in England. This is made clear by the decision of the European Court of Justice in (Case 12/76) Industrie Tessili Italiana Como v Dunlop AG [1976] ECR 1473, paras 13-15. Thus (as the parties rightly agree) the Regulation does not purport to impose a uniform concept of delivery on all member states but leaves member states to apply whatever, under their rules of private international law, is the law properly applicable to the particular contract, in this case English law.

5.  I am grateful to my noble and learned friends Lord Rodger of Earlsferry and Lord Mance for their summaries of the terms of the contract upon which this appeal turns, which I need not repeat. The issue is whether, as held by the courts below, the goods were delivered to Ghalanos under the contract in Liverpool.

6.  For reasons given by Lord Mance in paragraph 31 of his opinion, I would reject the primary argument of Ghalanos that Limassol was the contractually agreed place of delivery because that port was entered in box (iv), “Place of delivery", on the invoices. The courts below did not accept that argument, and nor would I.

7.  For reasons given by Lord Rodger in paragraphs 10 to 17 of his opinion and by Lord Mance in paragraphs 36 to 48 of his opinion, I am of opinion that on a proper analysis of this contract in accordance with established principles of English commercial law the contractual agreed place of delivery was Liverpool and the goods were duly delivered there to Ghalanos. It follows that the English court has jurisdiction under article 5(1)(b) of the Regulation to entertain this claim, and Ghalanos’ appeal must be dismissed. Like Lord Rodger, however, I would prefer to reserve my opinion on the points discussed in paragraphs 49 to 55 of Lord Mance’s opinion, which do not arise for decision in this case.

LORD RODGER OF EARLSFERRY

My Lords,

8.  In about April 2004 the appellants (Ghalanos), a company domiciled in Cyprus, agreed to buy 11 container loads of cider from the respondents (S & N), a company having its head office in Scotland. The contract was subject to English law. The cider was shipped at Liverpool and taken by Zim Line vessels to Limassol where Ghalanos took delivery. Ghalanos have not, however, paid for the cider and S & N now sue them for the price. It is common ground that, in terms of article 5(1)(b) of Council Regulation (EC) No 44/2001, the English courts do not have jurisdiction unless, according to English law, the cider was “delivered” in England - more particularly, on shipment at Liverpool.

9.  For the reasons to be given by my noble and learned friend, Lord Mance, I would reject the appellants’ primary argument, that Limassol was the contractually agreed place of delivery, because “Limassol” was written into box (iv), headed “Place of delivery", on the invoices. I concentrate on the appellants’ alternative case.

10.  So far as relevant, section 61(1) of the Sale of Goods Act 1979 (“the Act”) provides that, in the Act, unless the context or subject matter otherwise requires, “delivery” means “voluntary transfer of possession from one person to another". Section 32(1) provides:

“Where, in pursuance of a contract of sale, the seller is authorised or required to send the goods to the buyer, delivery of the goods to a carrier (whether named by the buyer or not) for the purpose of transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer.”

From the definition of “delivery” in section 61(1) it follows that, in cases where section 32(1) applies, by voluntarily transferring possession of the goods to a carrier for the purpose of transmission to the buyer, the seller is prima facie deemed to have voluntarily transferred possession of the goods to the buyer. For purposes of article 5(1)(b) of the Regulation the place where the seller voluntarily transferred possession of the goods to the carrier would therefore be the place where the goods were “delivered” to the purchaser.

11.  S & N say that section 32(1) applies and provides the answer in this case: the goods were delivered under the contract of sale when S & N shipped them on board the Zim Line vessels at Liverpool. Even where goods are delivered to a carrier, however, it does not automatically follow that they are deemed to have been delivered to the buyer. The subsection gives only a prima facie rule, which would have to yield if the terms of the contract between the parties indicated that the seller was to keep, rather than to transfer, possession of the goods. Similarly, it is accepted that where the carrier is the employee or agent of the seller, delivery to the carrier does not constitute delivery to the buyer.

12.  The subsection reflects the position at common law. For example, in the (much discussed) case of Dunlop v Lambert (1839) 6 Cl & F 600, a puncheon of whisky, which merchants in Edinburgh had sold to a customer in England, was lost at sea during a voyage from Leith to Newcastle. The merchants, who had contracted with the carriers, sued them for the loss of the whisky. One of the questions which arose was whether the whisky had been delivered to the purchaser, so that the property or risk had passed to him, by the time it was lost. Lord Cottenham LC observed, at p 620:

“It is no doubt true as a general rule, that the delivery by the consignor to the carrier is a delivery to the consignee, and that the risk is after such delivery the risk of the consignee. This is so if, without designating the particular carrier, the consignee directs that the goods shall be sent by the ordinary conveyance: the delivery to the ordinary carrier is then a delivery to the consignee, and the consignee incurs all the risk of the carriage. And it is still more strongly so if the goods are sent by a carrier specially pointed out by the consignee himself, for such carrier then becomes his special agent.”

He added, at pp 620-621:

“But though the authorities all establish the general inference I have stated, yet that general inference is capable of being varied by the circumstances of any special arrangement between the parties, or of any particular mode of dealing between them.”

(The parallel report of both these extracts is to the same effect, even if the language differs somewhat: Dunlop v Lambert (1839) Macl & Rob 663, 674-675.) The rationale for the approach which the Lord Chancellor outlines must be that, when the consignor delivers the goods to the carrier, the consignee is then in a position to take delivery of them from the carrier at the other end.

13.  In the present case the contract provided for S & N to send the goods to Ghalanos. But Ghalanos designated the carrier to be used: shipment was to be from Liverpool or Felixstowe “per Zim Line vessel as per attached shipping schedule….” In addition, although S & N were to pay the freight, Ghalanos told them that it was to be “at the rate of Stg £275,00 liner terms all in plus BAF (Banker Adjustment Factor) per 20' container as agreed with the Cyprus agents of Zim Line.” In other words, the rate had already been negotiated between Ghalanos and the Cyprus agents of the designated carriers, Zim Line. Having regard to these factors and applying the approach of Lord Cottenham in Dunlop v Lambert, I would hold that the carriers, Zim Line, are properly to be regarded as the agents of Ghalanos for purposes of section 32(1). It follows that, by shipping the containers of cider on board the vessels at Liverpool, S & N are prima facie deemed to have delivered the cider to Ghalanos in Liverpool. The question then is whether there is anything to displace that prima facie conclusion.

14.  Before Andrew Smith J it seems to have been common ground that, since the terms of the contract were CFR, no distinction was to be drawn between it and a CIF contract. In the Court of Appeal Rix LJ observed, however, at para 9, that, although it was expressed to be CFR, the contract contemplated by the parties differed very little from a form of FOB contract. I agree. But I doubt whether it matters, for present purposes, where exactly the parties’ contract stands in the spectrum of possible contracts. What matter are the terms of the arrangement between the parties.

15.  In this case, not only were the sellers to pay the freight, but they were also to obtain the bills of lading from the carriers. This is apparent from the term providing for the documents to be forwarded to Ghalanos immediately after shipment. The bills were, however, to be made out to Ghalanos as consignee and were to be non-negotiable. Nor did S & N reserve the right of disposal of the cider. Plainly, therefore, the property in the cider had passed to Ghalanos and the consignors, S & N, were to have no continuing interest in the cider once it had been shipped. This is confirmed by the requirement that S & N were to forward the documents to Ghalanos immediately, by registered and express mail: the clear intention was that Ghalanos were to have the bills of lading, and so were to be in a position to take delivery of the cider from the carriers, when they were notified that the vessels had reached Limassol. This, again, was consistent with payment of the price only being due 90 days after the vessel arrived there.

16.  In my view, all these factors combine to confirm that, by shipping the containers on board the vessels at Liverpool with the intention that Ghalanos should be in a position to take delivery of them immediately on their arrival at Limassol, under section 32(1) of the Act S & N are deemed to have delivered the cider to Ghalanos at Liverpool.

17.  Another way of putting the same point would be to say that, in these particular circumstances, where the property had passed and S & N had no continuing interest in the cider after shipment, the bills of lading evidenced a bailment, with Zim Line as bailee and the consignee, Ghalanos, as bailor: Borealis AB v Stargas Ltd (The Berge Sisar) [2002] 2 AC 205, 219, para 18, per Lord Hobhouse of Woodborough.

18.  I accordingly agree with Lord Mance that, in terms of article 5(1)(b) of the Regulation, the High Court has jurisdiction in this case. He goes on to indicate that, in his view, the place of shipment would also be the place of delivery for the purposes of article 5(1)(b) in all types of FOB contracts, including those which provide for the seller to retain the bills of lading, for instance, until the buyer has paid for the goods. I readily acknowledge the powerful factors in favour of that view, including the language of article 5(1)(b) - which may be thought to focus on the physical delivery of the goods themselves - and the desirability of having an easily applicable rule for determining jurisdiction.

19.  Nevertheless, I prefer to reserve my opinion on the point. I can explain my reasons very briefly.

20.  A term under which the seller is to retain the bills of lading until payment is, of course, common in both CIF and FOB contracts. Since the bill of lading is the symbol of the goods, under such an arrangement the seller or his agent not only retains possession of the bill of lading but also, thereby, retains the right to possession of the goods until the price is paid. Often, the property in the goods will also be intended to pass only on payment. In such a case, even though the seller ships the goods on board a vessel nominated by the buyer, by doing so, he does not intend to transfer possession of the goods to the buyer. On the contrary, the intention of the parties is that the buyer is not to obtain possession of the bill of lading - and hence of the means to take delivery of the goods from the carrier - unless and until he has paid the price. In that situation it seems to me at least arguable that the prima facie rule in section 32(1) of the Sale of Goods Act would be displaced by the terms of the contract between the parties. So, under the English law of sale, the goods would not have been “delivered” to the buyer by being shipped on the carrier’s vessel. I refer, by way of illustration, to the discussion of the passing of the right to possession of the cargo in the judgments of Brandon J and Roskill LJ in The Albazero [1977] AC 774, 800-801, and 809-812, respectively. Their reasoning was approved by Lord Diplock in this House, at p 840.

21.  Whether, even if the goods had not been “delivered” for the purposes English law, they would none the less have been “delivered” for the purposes of article 5(1)(b) of the Regulation gives rise to other questions which it is also unnecessary to decide on this occasion.

22.  For these reasons I would dismiss the appeal.

LORD BROWN OF EATON-UNDER-HEYWOOD

My Lords,

23.  I have had the advantage of reading in draft the opinion of my noble and learned friend Lord Mance and for the reasons he gives, with which I agree, I too would dismiss this appeal.

LORD MANCE

My Lords,

24.  The question on this appeal is whether the English courts have jurisdiction under article 5(1)(b) of the Judgments Regulation (EC) No 44/2001 over a claim for the price of cider sold and delivered by the respondents, Scottish & Newcastle International Limited (“S&N”) to the appellants, Othon Ghalanos Limited (“Ghalanos”). S&N are a Scottish company based in Edinburgh, where it appears that the price should have been paid. Ghalanos are a Cypriot company, and were until 2004 distributors to S&N (following, it appears, a takeover by S&N of H.P. Bulmer). The termination of their Cypriot distributorship has given rise to separate proceedings in Cyprus. The present proceedings (which S&N started before the Cypriot proceedings) are brought in England solely on the basis that this is “the place….where, under the contract, the goods were delivered….” within the meaning of article 5(1)(b).

25.  Article 5(1)(b) was introduced into the Brussels regime by the Regulation to provide in relation to contracts for the sale of goods and provision of services a single point of reference for the alternative head of contractual jurisdiction permitted by article 5(1). The basic rule contained in article 5(1)(a) is that a person domiciled in a Member State may be sued in another Member State in matters relating to a contract in the courts for the place of performance of the obligation in question. But article 5(1)(b) radically alters the effect of this provision by providing that, for its purpose and unless otherwise agreed, the place of performance of the obligation in question shall be, in the case of sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered. Likewise, in the case of the provision of services, it is now the place where, under the contract, the services were provided or should have been provided.

26.  S&N maintain that the cider was, for the purposes of article 5(1)(b), delivered in Liverpool, where it was shipped for carriage to Cyprus under eleven bills of lading on three different vessels in late June and July 2004. Ghalanos submit that the contract provided, expressly or in effect, for delivery in Limassol, Cyprus, or alternatively that the terms of delivery were CFR Limassol, and in either case that delivery was not in Liverpool. These submissions make it necessary to analyse the nature of the contract.

27.  By letter dated 3rd March 2004 Ghalanos ordered 11 containers of cider. Under the heading “Shipment” the order provided “From Liverpool or Felixstowe per Zim Line vessel as per attached shipping schedule". It stipulated for email notification to Ghalanos when shipment was effected. It gave full details of Zim Line’s Liverpool and Felixstowe agents (Bahr Behrend Agencies Ltd. at Liverpool). Under the head “Delivery", it provided: “CFR Limassol", under “Payment": “90 days….from the date of arrival of the vessel” and under “Freight": “Prepaid at the rate of Stg £275 liner terms all in plus BAF (Banker Adjustment Factor) per 20' container, as agreed with the Cyprus agents of Zim Line". Under “Insurance” it provided “Our care". Proforma invoices were to be provided showing FOB prices, while the final invoices were to show the FOB prices stated in the order, the total FOB value and the freight. The order further provided that there should be a bill of lading “original and copy non negotiable, each in three copies” for each container, stating “Notify Othon Ghalanos Ltd.". Under “Documents", the order provided that separate documents for each container should be issued in the name of and forwarded “immediately after shipment by registered and express mail” to Ghalanos. This last instruction was repeated at the end as one of five important “Notes".

28.  S&N’s response to this order was by letter dated 21st April to raise a number of points, the first of which was that:

“you have mentioned that the terms are CFR Limassol while requesting us to ship on an FOB basis. The pricing which we have on our records shows that you have an FOB price and [we] will therefore treat your order accordingly. Bearing this in mind we have asked your agents, Bahr Behrend in Liverpool, for an FOB quote and are waiting for them to return to us with this information.”

Ghalanos replied on 3 May that

“Our prices are FOB UK port, but as per our agreement you prepay the freight on our behalf, thus making the delivery terms CFR. The delivery terms CFR should be stated on the invoice. The amount of the freight prepaid, should also be stated on the invoice, separately, see attached H. P. Bulmer’s invoice. For the record please note that Bahr Behrend in Liverpool are the agents of Zim Line in the U.K. and are not our agents.

…..

We reconfirm that the agreed freight rate we have with the Cyprus agents of Zim Line is Stg£275 linerterms all in plus BAF (Banker Adjustment Factor) per 20’ container”

29.  On 18th June 2004 S&N wrote forwarding proforma invoices covering the 11 containers, saying that

“Your agreed freight charges will be added to the final invoices which will be sent after the goods have been despatched.

I have contacted our shipping agent in the UK and we're aiming to despatch the first 6 containers next week for shipment on the next available vessel. …..".

All 11 proforma invoices showed the FOB price (as Ghalanos had requested in their original order letter). Two of them stated expressly, in a box with the printed heading “Terms of delivery and payment": “Free on board. Payment due 90 days from date of arrival". The others stated “Cost and Freight Limassol. Payment due 90 days from date of arrival” (or, in three cases, “from date of invoice”), although only the FOB prices were entered on them. After shipment, final invoices were made out, each showing separately the FOB price and the freight incurred at the rate which Ghalanos had agreed with Zim Line’s Cyprus agent. The “Terms of delivery and payment” boxes on these invoices were all completed “Cost and Freight Limassol. Payment due 90 days from date of arrival.”

 
Continue