FR Lurssen Werft GmbH and Company KG v Halle

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeMR JUSTICE SIMON,Mr Justice Simon
Judgment Date29 October 2009
Neutral Citation[2009] EWHC 2607 (Comm)
Docket NumberClaim No: 2009 Folio 264
Date29 October 2009

[2009] EWHC 2607 (Comm)

IN THE HIGH COURT OF JUSTICE

Royal Courts of Justice

strand, London, Wc2a 2ll

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Before:

The Hon Mr Justice Simon

Claim No: 2009 Folio 264

Between
Fr. Lürssen Werft Gmbh & Co Kg
Claimant (respondent)
and
Warren E. Halle
D (applicant)

Mr Andrew Thomas (instructed by Wilmer Hale Llp) for the D/Applicant

Mr David Lewis (instructed by Holman Fenwick Willan) for the Claimant/Respondent

Hearing date: 12 October 2009

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

………………………..

MR JUSTICE SIMON Mr Justice Simon

Mr Justice Simon:

The application

1

This is the hearing of the Defendant's application under CPR Part 11 challenging the jurisdiction of this Court to hear a claim commenced in England by the Claimant in respect of sums said to be due under a Commission Agreement.

2

Three questions arise:

i) whether the Claimant has demonstrated a good arguable case that the agreement is governed by English law;

ii) whether there is a serious issue to be tried; and

iii) whether England is the forum conveniens?

3

The Defendant argues that the answer to each question (applying the requisite legal test) is: no.

The Claimant submits that the answer to each question (again, applying the appropriate legal test) is: yes.

Background to the claim

4

The Claimant is a German shipbuilding company. The Defendant is an American citizen and a resident of the State of Florida.

5

On 15 April 2005 the parties entered into a Vessel Construction Contract ('VCC') for the construction of a 20m Motor Yacht (the 'Nemo') for an adjustable price of Euros 48m. On the same date they entered into a similar contract for a vessel (the 'Shark').

6

It is convenient to focus on the terms of the 'Nemo' contract, in which the Defendant was referred to as the 'Purchaser' and the Claimant as 'the Builder'.

By Clause 1.9 the 'Completion Date' was to be 31 May 2007 and by Clause 1.30 the 'Owner' was to have the same meaning as the 'Purchaser'. In each VCC there were specified staged payments to be made over the course of construction.

Clause 3.2 provided for 50% of the price to be paid at the date the keel was laid (no earlier than 1 January 2006), and a further 20% on the date the hull and superstructure were welded together (no earlier than 1 June 2006).

The Delivery of the 'Nemo' was to take place on 31 May 2007, and the 'Shark' on 31 March 2008.

Clause 8.4 provided that for the purposes of securing payments made and as security for any claims, title was to pass at the date of keel-laying.

7

Of particular relevance in the context of the present application are Clauses 20 and 21.

Clause 20 is comprehensive Arbitration Clause, which provides (subject to various qualifications) that disputes arising out of or in connection with the VCC should be settled under the Rules of Arbitration of the London Maritime Arbitrators Association (the 'LMAA')

Clause 21 was headed 'Law'

This Contract shall be construed in accordance with and shall be governed by English Law, however and always provided that, the stipulations of this Contract shall prevail. With regard to title within Germany, the Pre Delivery Mortgage and the registration with the German shipbuilding register, German Law will be applicable insofar as this law is mandatory (lex rei sitae)'

8

On 8 May 2008 the parties entered into the Commission Agreement dated 8 May 2008. The Commission Agreement provided, amongst other matters, that if the vessel were purchased by a client introduced by the Claimant then a commission of 5% of the sale price would be payable by the Defendant to the Claimant.

9

The Commission Agreement's entire terms were expressed as follows

It has been agreed between [the Claimant] and [the Defendant] that, in the event that the yacht 'Nemo' or 'Shark' is purchased by a client introduced to the yacht and the Owner, by [the Claimant] or one of its representatives, a commission of 5% of the sales price will be payable to [the Claimant] by [the Defendant] no later than 15 days from the sale becoming effective.

Nothing was said about how any dispute was to be resolved, or what system of law governed the agreement.

10

On 28 July 2006 the Defendant granted to the Claimant, for the week beginning on 28 July, the exclusive right to sell the 'Nemo' at a price of €71.5m.

11

In the event a deal was struck whereby the 'Nemo' was sold to a third-party buyer; and there were negotiations between the Claimant and the Defendant, among other matters, about who should pay for certain legal fees. In the course of this negotiation, the Claimant sent an email to the Defendant dated 9 August 2006 which it will be necessary to consider later in this judgment.

12

On 17 August 2006 the parties entered into an agreement to terminate the VCC for the 'Nemo'.

13

The VCC of 15 April 2005 was defined as 'the Original Contract'; and Clause 1.1 provided for the termination of the Original Contract in these terms:

[the Claimant] and [the Defendant] will, by mutual agreement, and without any further liability on either part, other than as contained in this Agreement, terminate the Original Contract with effect from the Date of completion of the closing of this Agreement as set out in Cl.3.2 below (the 'Closing Date')

Clause 7 dealt with Law and Arbitration

This Agreement will be construed in accordance with and be governed by English law and the provisions of Clauses 20.4, 20.5, 20.6 and 20.8 of the Original Contract shall apply to this Contract as if set out in full herein, provided that the words 'with the amount in controversy thought to be more than €25,000' shall be deemed to have been deleted from Clause 20.4 of the Original Contract.

14

In this action the Claimant claims that the vessel was, in due course, sold to a purchaser introduced by the Claimant for a price of €73m; and it makes a claim for 5% of that price: €3,650,000.

15

On 27 February 2009, the Claimant issued a Claim Form making a claim under the Commission Agreement for this sum.

16

Leave to serve the Claim Form out of the jurisdiction was granted by Blair J on the same date, on the basis that claim was made in respect of a contract which was governed by English law, within the meaning of CPR Part 6.36 and CPR PD6B 3.1(6)(c).

17

The application for leave to serve out was supported by a witness statement of Ms Pitroff which contended that there is a good arguable case that the Commission Agreement was governed by English law, noted the Defendant's reliance on Clause 1.1 of the Termination Agreement to support the argument that he was under no further liability, submitted that there was a real issue to be tried between the parties and that the Claimant had a reasonable prospect of success, and asserted that there was no more convenient forum for the determination of the issues.

Those points prefigured the three issues which the Court faces on this application.

18

On 1 July 2009 the Defendant issued the present application seeking an order:

i) Declaring that the Court has no jurisdiction, or alternatively should not exercise its jurisdiction,

ii) setting aside the order of Blair J of 27 February 2009 giving permission to serve the Claim Form out of the jurisdiction,

iii) for costs to be paid by the Claimant.

I turn then to the three issues that have to be decided.

The first issue: whether it can be shown that English law governs the Commission Agreement to the required standard

19

Before considering whether English law governs the relevant contract, there is the logically prior question: to what standard must the Court be satisfied?

20

This is common ground. The Claimant (by Mr David Lewis) accepts that in the present case the Claimant must show that it has much the better of the argument that English law governs the Commission Agreement.

21

In my view the concession was rightly made, in the light of a number of authoritative statements of the law: Canada Trust Co v Stolzenberg (No 2) [1998] 1 WLR 547 (CA) Waller LJ at 555, Bols Distilleries BV (trading as Bols Royal Distilleries) and another v Superior Yacht Services Ltd [2006] UKPC 45 where at [28] the Privy Council endorsed Waller LJ's approach in the Canada Trust case, and Cherney v Deripaska (No 2) [2008] EWHC (Comm) 1530 where Christopher Clarke J considered the authorities at length [13–44].

The governing law

22

The Contracts (Applicable Law) Act 1990 gives effect to the Rome Convention on the Law Applicable to Contractual Obligations. Article 3.1 of the Rome Convention provides,

A contract shall be governed by the law chosen by the parties. The choice must be expressed or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or a part only of the contract

23

In the absence of a choice of law under Article 3 the law governing a contract is determined in accordance with Article 4 of the Rome Convention.

24

It is common ground in the present case that if Article 3 does not apply then the Defendant's application must succeed, since Article 4.1 provides that the contract 'shall be governed by the law of the country with which it is most closely connected', and Mr Lewis accepts that it would be difficult to argue that the Commission Agreement is closely connected with England and Wales, if the parties did not choose English law as the governing law.

25

In the present case there is no 'expressed' choice of law; and so the question for the Court is: whether it is satisfied that the Claimant has much the better of the argument that the parties demonstrated, by the terms of the contract or the circumstances of the case, a...

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