Viskase Ltd and Another v Paul Kiefel GmbH
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE EVANS,LORD JUSTICE MORRITT,LORD JUSTICE CHADWICK |
| Judgment Date | 19 March 1999 |
| Judgment citation (vLex) | [1999] EWCA Civ J0319-4 |
| Docket Number | QBENI 98/0813/1 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 March 1999 |
[1999] EWCA Civ J0319-4
Lord Justice Evans
Lord Justice Morritt
Lord Justice Chadwick
QBENI 98/0813/1
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
NEWCASTLE UPON TYNE MERCANTILE COURT
(HIS HONOUR JUDGE McGONIGAL
(Sitting as a Deputy High Court Judge))
Royal Courts of Justice
The Strand
London WC2
MR J FAUX QC and MR I ATHERTON (Instructed by Messrs Eversheds, Middlesborough TS1 2PA) appeared on behalf of the Appellant
DR M VITORIA QC and MR T MOODY-STUART (Instructed by Messrs Jacksons, Stockton on Tees TS18 3TN) appeared on behalf of the Respondent
1. The defendants applied to have this action stayed, on two grounds. First, that under the Civil Jurisdiction and Judgment Acts 1952 which gives effect to the Brussels Convention the English court has no jurisdiction to hear it. Secondly, because each of the contracts under which the plaintiffs sue contains an exclusive jurisdiction clause in favour of a court in Germany.
2. The applications were refused by H.H.Judge McGonigal sitting as a Judge of the High Court in the Mercantile Court at Newcastle-upon-Tyne on 29 January 1998. The defendants appeal by leave of Lord Justice Schiemann.
3. The first and/or second plaintiffs (it is not necessary to distinguish between them) are manufacturers of plastic packaging products. Their works are at Salters Lane, Sedgefield, Stockton, in Cleveland. The defendants are manufacturers and suppliers of thermoforming machines which the plaintiffs use in their production processes. The defendants carry on business at Freilassing in Germany.
4. How the machines work was graphically and expertly described to us by Mary Vitoria Q.C., counsel for the plaintiffs. Raw plastic material in what are called 'films' passes through the machines so that it is warmed to the moulding temperature. The temperature must be uniform, or defects will appear in the moulded product. Precise temperatures are maintained by sensitive and sophisticated measuring devices which constantly adjust the heat to which different parts of the material are exposed. Previously, the material used was PVC. The plaintiffs wished to use non-PVC material, specifically a polystyrene known as OPS.
5. It is common ground that between 1989 and 1993 there were eight contracts between the plaintiffs and the defendants for the sale and delivery of eight such machines. The plaintiffs allege that there were express representations made to them by the defendants or their United Kingdom agent, Anchor Plastics Machinery, that the machines would be "suitable for thermoforming OPS on a commercial scale" for the United Kingdom market, the defendants knowing that the machines were to be installed for this purpose at the plaintiffs' factory at Sedgefield (Statement of Claim, paragraphs 3 and following).The plaintiffs further allege that there were express or implied terms to the effect that the machines would be reasonably suitable for use at their factory in Sedgefield producing moulded OPS products on a commercial scale, and that the machines proved not to be "capable of maintaining the temperature of the OPS film sufficiently constant to produce thermoformed OPS products of acceptable finished quality and commercially acceptable production levels and with a commercially acceptable level of controllable scrap material" (Particulars, Statement of Claim para.17).
6. There is evidence that these deficiencies became apparent soon after the machines were installed, but the defendants' initial response was that their machines were not being properly and skilfully used. The plaintiffs commissioned a report from experts at Durham University and their claim is based on the conclusions in that report. These were that the heat control units in the machines were inadequate for the plaintiffs' purposes. They were replaced by closed loop heat control units, and satisfactory production levels were achieved. The damages claimed exceed £3 million.
The contracts
7. The Statement of Claim alleges that the plaintiffs ordered the first machine in September 1989 following a discussion with Anchor Plastics Machinery, the defendants' U.K. agent, in April 1989 which had resulted in a quotation from the defendants. It is alleged that the defendants delivered the machine at Sedgefield and "installed and commissioned the said machine in about January 1990" (paragraph 8). A second machine was contracted for in May/June and likewise delivered, installed and commissioned in September/October (paragraphs. 9–10). Six further machines were contracted for in and between April 1991 and October 1992 (paragraph 13) and delivered at the Sedgefield premises (paragraph 14). But the first of these six further contracts was made at the Birmingham Exhibition Centre where the machine in question was being used by the defendants for demonstration purposes (para. 13(I)).
8. The defendants accept that this machine, which I shall call "the Birmingham machine", has to be regarded separately from the other seven, because it was physically delivered to the plaintiffs in England. The others, they submit, were delivered in Germany, relying upon the standard terms of the defendants' contract documents which were used in every case. In each case, the Confirmation of Order read:- "In accordance with our enclosed terms and conditions we confirm KIEFEL—[machine type] suitable for the processing of thermoplastic roll material…".
9. The terms and conditions included these:-
"Terms of Prices
Our quoted prices are ex works, unpacked, excluding customs clearance, excluding installation and commissioning at customer factory, but including transport insurance.
Time of Delivery: ready for dispatch CW 4/93
Terms of Payment:
1/3 down payment after receipt of order confirmation
1/3 when ready for shipment
1/3 30 days from date of invoice net
Testing material
For testing the machine a sufficient quantity of your original material shall be placed at our disposal free of charge, freight / customs duty paid 6 weeks before the date of machine acceptance……
Acceptance
The technical acceptance will be effected in the presence of your representatives at our works in Freilassing. The purpose of this acceptance is to demonstrate the machine function and the realization of the promised performance date. The results of this acceptance will be recorded in a taking over protocol, to be legally signed by both parties, authorizing the shipment of the machine.
Assembly
If you desire, the assembly of the machine will be carried out by our specialised staff and will be calculated according to our current rates. Please consider that in case of incorrect assembly, caused by yourself or other persons, we will be forced to restrict our conditions of guarantee."
There were invoices which recorded "delivery: ex works incl.. insurance dispatch: BTG Munich". In addition, there were "Terms of Delivery and Payment" which include:-
"II Scope of Delivery
Our written confirmation shall be decisive for the scope of delivery….
III Failing special agreement, all prices cover delivery ex works, excluding packing, freight and insurance."
Finally, the 'Venue' clause relied upon by the defendants in their alternative (contractual) claim reads as follows:-
"XI VENUE
"In all disputes arising out of the contract, provided the buyer is a merchant who has been entered in the Commercial Register, or a public law entity, or a separate estate under public law, action shall be brought at the court having venue over the principal place of the manufacturing works. We shall also be authorized to institute legal proceedings at the buyer's principal place of business. It is herewith agreed that this contract and all future transactions shall be governed by and construed according to the law of the Federal Republic of Germany."
Jurisdiction
10. Three further matters should be noted. First, the plaintiffs placed their orders, not with the defendants (apart possibly from the Birmingham machine), but with the defendants' U.K. agents, Anchor Plastics Machinery (hereinafter "Anchor"), who forwarded them to the defendants in Germany. Similarly, the defendants' Order Confirmations and subsequent invoices were addressed and sent to Anchor and forwarded by them to the plaintiffs. It is common ground, however, that sales contracts incorporating the defendants' Terms and Conditions were made between the plaintiffs and defendants in this way.
11. Secondly, the plaintiffs allege in the Statement of Claim that the machines were installed at the plaintiffs' Sedgefield factory by Anchor as agents for the defendants. The defendants' Terms and Conditions provide that the machines may be installed at the customers premises by their specialised staff (see "Assembly" above). We have no evidence of the contractual arrangements under which this was done, but it is not suggested on behalf of the plaintiffs that the express terms as to delivery ex works in Germany were modified by whatever was agreed.
12. Finally, there is evidence that six of the machines were tested before delivery
at the defendants' works in the presence of representatives of the plaintiffs, who on each of these occasions signed a "Certificate of Satisfaction" as required by the "Acceptance" term. It seems, however, that this is not relevant to the present dispute. The plaintiffs accept that the machines were manufactured to the contractual specification and complied with it. They contend that the machines as delivered were unsuitable for the purpose of...
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