Kleinwort Benson Ltd v City of Glasgow District Council
| Jurisdiction | England & Wales |
| Judge | Roch,Millett L JJ.,Leggatt |
| Judgment Date | 25 January 1996 |
| Judgment citation (vLex) | [1996] EWCA Civ J0125-14 |
| Docket Number | QBCMI 92/0340/B |
| Court | Court of Appeal (Civil Division) |
| Date | 25 January 1996 |
[1996] EWCA Civ J0125-14
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Before: Lord Justice Leggatt Lord Justice Roch Lord Justice Millett
QBCMI 92/0340/B
MR. T BEAZLEY AND MR A BRIGGS appeared on behalf of the Plaintiff. (Instructed by Clifford Chance DX606.)
MR M BURTON QC, MR J TECKS AND MR T DYMOND appeared on behalf of the plaintiffs. (Instructed by William Sturgess DX2315.)
25th January 1996
This is the resumption of an appeal by Kleinwort Benson Ltd ("Kleinwort") against the order of Hirst J. Dated 27 February 1992 in favour of the City of Glasgow District Council ("Glasgow") setting aside the writ and service of it on the ground that the Court has no jurisdiction over Glasgow in respect of the subject-matter of the claim. When this matter was last before this Court on 18th May 1993 the facts and the outline of the dispute were stated in the judgment of the Court by Lloyd L.J. Since it is for present purposes undesirable to divagate from them, I shall substantially reproduce them without further acknowledgement.
In 1981 there came into existence a new type of financial transaction know as an interest rate swop contract. Such contracts are of many kinds. But in its simplest form it consists of an agreement between two parties whereby one pays to the other, over a period of months or years, sums calculated by reference to the difference between a fixed rate of interest and the current market rate of interest from time to time. The principal sum is purely notional and exists solely for the purpose of calculating the obligations of the parties to pay differences. The essential feature of the transaction is that it is a futures contract, the financial outcome of which depends on future movements in interest rates. From about 1982 interest rate swop contracts came to be used by a number of local authorities, of which Glasgow was one. In September 1982 Glasgow entered into seven transactions with Kleinwort. In Hazell v Hammersmith & Fulham LBC [1992] 2 A.C. 1 the House of Lords held that all such transactions were void ab initio for lack of capacity to enter into them. There followed many claims in the commercial court, mostly by banks against local authorities. In the first such action Hobhouse J. held in Westdeutsche Landesbank v Islington LBC that the bank was entitled to recover from the local authority the balance standing to the credit of the local authority when the transactions were aborted by the decision of the House of Lords. That decision was upheld in this Court: [1994] 1 W.L.R. 938, but judgment is still awaited in a further appeal to the House of Lords.
The writ in the present action was issued on 6th September 1991. It sought restitution of the sum of £807,230, then standing to the credit of Glasgow under the seven interest swop transactions to which I have referred.
It is a special feature of the action that the respondents are domiciled in Scotland. On 16th October 1991 they issued a summons by which they claimed a declaration that the English courts, and in particular the commercial court in London, have no jurisdiction to hear the claim. They say that the proper place to bring proceedings is in the courts of Scotland. Before us Mr Burton Q.C. for Glasgow has acknowledged that the principal reason for reliance upon that argument is that the period of limitation which is or may be applicable is shorter in Scotland than in England. A reason for preferring the English courts (apart from the convenience of Kleinwort) might be that all the transactions are admittedly governed by English law.
The jurisdiction issue arose under the provisions of Schedule 4 of the Civil Jurisdiction and Judgments Act 1982 ("Schedule 4"). Unless otherwise stated, references in this judgment to Articles are to Articles of Schedule 4. That enacted in relation to countries of the United Kingdom provisions comparable with those in the Brussels Convention in relation to Contracting States.
Founding on the principle of Art. 2 that a person should be sued in the courts of his own domicile, Glasgow asserted their rights to be sued in Scotland. Kleinwort maintained that the English Courts had jurisdiction under the special jurisdictions embodied in Art. 5(1), which concerns matters relating to a contract; in Art. 5(3), which concerns matters relating to tort; in Art. 5(8), which concerns proceedings asserting rights over moveable property; and in Art. 6(1), which concerns one of a number of defendants.
Hirst J. found against Kleinwort on all points. Kleinwort appealed to the Court of Appeal, which ruled against them on the Art. 6(1) point. During the course of the appeal Kleinwort abandoned the Art. 5(8) point. In relation to the remaining points under Art. 5(1) and (3) questions as to the scope and relationship of the parallel provisions of the Brussels Convention were referred to the European Court of Justice for a preliminary ruling on 18th May 1993.
For purposes of this appeal what proves to be determinative is the answer to the question whether national or European law should be applied to the construction of Schedule 4. Because the Convention does not apply to this dispute, nothing in the 1982 Act requires the application of European law. The distinction between the Convention and Sch.4 is important. It is clearly drawn by the Act. Whereas by s.3(1) the meaning and effect of the Convention are to be determined in accordance with the principles laid down by and any relevant decisions of the European Court [emphasis added], s.16 provides that in determining any question as to the meaning and effect of Sch.4 regard shall be had to any relevant principles [emphasis added] and any relevant decisions of the European Court. In the one case the principles and decisions apply: in the other regard is merely to be had to them. In my judgment, therefore, there can be no doubt that national law (whether of England, Scotland or Northern Ireland) is to prevail.
That that is so appears clearly from the judgment of the European Court in this case, reported at [1995] 3 W.L.R. 866. In relation to its jurisdiction the Court said at page 889 -
"14.It is common ground that the purpose of the interpretation which the court is asked to give of the Convention provisions at issue is to enable the national court to decide on the application not of the Convention but of the national law of the contracting state to which that court belongs.
15.Under those circumstances the question arises as to the jurisdiction of the court to give a preliminary ruling on the question submitted by the Court of Appeal.
16.Far from containing a direct and unconditional renvoi to provisions of Community law so as to incorporate them into the domestic legal order, the Act of 1982 takes the Convention as a model only, and does not wholly reproduce the terms thereof.
17.Though certain provisions of the Act of 1982 are taken almost word for word from the Convention, others depart from the wording of the corresponding Convention provision. That is true in particular of article 5(3).
18.Moreover, express provision is made in the Act of 1982 for the authorities of the contracting state in question to adopt modifications "designed to produce divergence" between any provision of Schedule 4 and a corresponding provision of the Convention, as interpreted by the court.
19.Accordingly, the provisions of the Convention which the court is asked to interpret cannot be regarded as having been rendered applicable as such, in cases outwith the scope of the Convention, by the law of the contracting state concerned.
20.The Act of 1982 does not require the courts of the contracting state to decide disputes before them by applying absolutely and unconditionally the interpretation of the Convention provided to them by the court.
21.Indeed, in terms of the Act of 1982, when national courts apply provisions modelled on those of the Convention, they are required only to have regard to the court's case law concerning the interpretation of the corresponding provisions of the Convention. In contrast, when the Convention applies to the dispute, section 3(1) of the Act of 1982 provides that
'Any question as to the meaning or effect of any provision of the Convention shall, if not referred to the European Court in accordance with the 197l Protocol, be determined in accordance with the principles laid down by and any relevant decision of the European Court.'
22.In a case such as that in the main proceedings, where the Convention is not applicable, the court of the contracting state in question is therefore free to decide whether the interpretation given by the court is equally valid for the purposes of the application of the national law based on the Convention."
As the Court acknowledged, the English Court is free to decide whether the interpretation given by the European Court is equally valid for the purposes of the application of English law based on the Convention. In short, it is English law that is to be applied, not European law. It is true that regard is to be had to European law, with the result that English law will, where possible, be so interpreted as not to conflict with it, and in case of doubt about English law so as to correspond with it. But that does not entitle this Court to reach a conclusion at variance with English law in the interests of applying its own view of an uncertain and disputed principle of European law. If Parliament had intended that jurisdictional disputes of this kind should...
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