Source Ltd v T.U.v Rheinland Holding A.G.
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STAUGHTON,LORD JUSTICE WAITE,LORD JUSTICE ALDOUS |
| Judgment Date | 18 March 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J0318-4 |
| Docket Number | No: QBENI 96/0652/E |
| Court | Court of Appeal (Civil Division) |
| Date | 18 March 1997 |
[1997] EWCA Civ J0318-4
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MR NICHOLAS STRAUSS
(Sitting as a Deputy High Court Judge)
Royal Courts of Justice
Strand
London WC2
Lord Justice Staughton
Lord Justice Waite
and
Lord Justice Aldous
No: QBENI 96/0652/E
MR DAVID DONALDSON QC (instructed by Messrs Norton Rose, London EC3A 7AN) appeared on behalf of the Appellant/Plaintiff
MR JONATHAN GAISMAN QC and MR DAVID EDWARDS (instructed by Messrs Hextall Erskine, London E1 8ER) appeared on behalf of the Respondent/Defendant
In this action the plaintiffs, Source Limited, are an English company. They engaged in the business of acquiring and re-selling to others promotional goods such as the fluffy toy dogs which are used to advertise the toilet rolls sold by Andrex. The three defendants are in fact only two companies, TUV Rheinland Limited Holding AG and German Control Internationale Warenprufung GMBH. They are both establish under the laws of Germany.
The action was brought in August 1994 for reasons which I shall explain later. There was an order for service out of the jurisdiction and then an application under Order 12 rule 8 to set aside the order for service out. That came before Master Turner, who acceded to the application and set aside the proceedings. There was an appeal to Mr Nicholas Strauss QC, who upheld the Master's order in a judgment which I must say is conspicuous by its clarity and diligence. There is now an appeal to this Court from the order of the Deputy Judge.
The facts are that the plaintiffs, Source Limited, used to import some of these promotional goods from China and Taiwan. Evidently there was to be a letter of credit whereby the sellers would be assured of obtaining payment. The letter of credit was to be opened by the National Westminster Bank in Redhill in this country, but no doubt it would enable the sellers, if they chose to do so, to obtain money by presenting the documents at some other bank elsewhere in the world, in particular at the National Westminster Bank, Hong Kong.
In order to operate the letter of credit there had to be a certificate of quality. That was a natural precaution for Source Limited to take, because they would not wish to part with their money or the National Westminster Bank's money without an assurance that the goods were of an appropriate quality.
An arrangement was made that the German companies, or their subsidiaries in China and Taiwan, would inspect the goods and send a report to Source Limited in England. If the report appeared to satisfy the requirements of Source Limited they would send to the sellers in China and Taiwan, or authorise others to do so, a certificate such as would be required by the letter of credit. The transaction would then proceed, National Westminster Bank would pay the overseas sellers, either directly or indirectly, and Source Limited would reimburse National Westminster Bank,unless that was done by a bank credit opened by those who were buying from Source.
In the event it is said that the reports submitted by the German companies or their subsidiaries were inaccurate and were the result of negligence in the inspection of the goods. There were substantial complaints relating to substantial quantities of the goods. Thereupon in these proceedings Source sued the German companies. They allege two separate causes of action. First, they say that there was a breach of a contractual obligation to exercise reasonable skill and care in presenting reports to Source. Secondly, they say that there was a tortious breach of duty for the same reason. As happens not infrequently in English law, there were alternative claims on those two grounds. The second ground in tort was made by an amendment.
The jurisdiction of the English court over the German companies is determined by the Brussels Convention scheduled to the Civil Jurisdiction and Judgments Act 1982, Article 2. Article 2 provides:
"Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts in that State."
So it is open to Source to sue the German companies in Germany, where they are domiciled, on either or both of their causes of action, assuming of course that those causes of action are available in a German court.
There is, however, Article 5, which is in a section dealing with special jurisdiction. It provides:
"A person domiciled in a Contracting State may, in another Contracting State, be sued:
1. in matters relating to a contract, in the courts for the place of performance of the obligation in question…
3. in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred".
Mr Donaldson, who appears for Source, took first the provision in Article 5(1) relating to contracts. It is common ground, as stated in paragraph 7 of his outline argument, that Article 5(1) requires the court to determine the contractual obligation whose breach gives rise to the claim. Where more than one obligation has been breached, jurisdiction under Article 5(1) for the claims in respect of all the breaches of the contract will be determined by the place of performance of the principal obligation breached.
He cites as authority for that Shenavai v Kreischer [1987] ECR 239, Union Transport v Continental Lines [1992] 1 WLR 15. The principle purports to be translated into Latin in the Shenavai case at paragraph 19 of the judgment by a maxim accessorium sequitur principale. I do not know where that maxim came from. I would have understood it if it had said accessio sequitur principale.
The question then that we have to decide is which is the principal obligation in this contract. Mr Gaisman has referred us to some of the documents which arose in the creation and performance of the contracts. There is a letter from Source to the German companies saying:
"Am enclosing copies of faxes which our people have sent to your office in Taiwan regarding imminent, forthcoming inspection requirements.
As this is the first occasion where we have started to put the procedure into action, we have also, as discussed, enclosed copies of these instructions and our actual orders to our suppliers, to yourself. You will see from the orders that despatch, in most cases, is in the very near future.
On the basis that your office in Taiwan can carry out these inspections, we will send immediately a reference sample together with any specific remarks which the inspector should pay particular attention to in each of the above orders."
On the same day there was a message from Source to the subsidiary of the German companies in Taiwan. It said:
"We have five urgent inspections to be carried out in Taiwan and are herewith faxing you copies of the actual orders on our suppliers relating to the above.
Please advise if you are able to arrange Final Random Inspections for these orders and in the case of our order no: 89023 in advance of the FRI inspection we also require a During Production Check (DUPRO) to be conducted immediately. The FRI inspections should...
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