England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
MR JUSTICE ANDREW SMITH
[2013] EWHC 2131 (QB)

		Royal Courts of Justice Strand, London, WC2A 2LL
		31/07/2014

Lord Justice Aikens :

I. Synopsis.

1. The question that arises on this appeal is whether there is a "good arguable case"^[1] that Anglo American South Africa Limited ("AASA"), a South African company, had its "central administration" in England for the purposes of Article 60 of the Brussels 1 Regulation (Regulation EC 44/2001 – "the Regulation") when the current proceedings were issued on 25 August 2011. If that were so then in the current proceedings AASA could be sued in England pursuant to Article 2 of the Regulation,^[2] and therefore the proceedings could be served on AASA in South Africa without the leave of the court pursuant to CPR Pt 6.33(1). Andrew Smith J held that there was no such "good arguable case". He had to deal with two sets of proceedings, but before the Court of Appeal there was an appeal in only one, that of Jessica Margaret Young, acting by her father and litigation friend, Kenneth Niall Young. The claim is against AASA and Dr Peter Jankowitz ("the Young action"). If the judge was wrong it would mean that Miss Young can bring an action for damages against AASA for alleged medical negligence of various doctors who managed her neo-natal care for whom it is alleged AASA is vicariously liable; and she could also bring an action against Dr Jankowitz, the second defendant. At the relevant time Dr Jankowitz was a paediatrician in independent private practice in Johannesburg, South Africa, although he was not then a consultant. Miss Young was referred to him early in her life and it is said that Dr Jankowitz was negligent in the conduct of those consultations.
2. Miss Young was born on 30 August 1990 at the Jwaneng Mine Hospital in Botswana. She suffered from Phenylketonuria ("PKU"). It is said that four doctors, who worked in the hospital where Miss Young was born and who are defendants in the Young action but who have not been served with the proceedings, did not guard against, detect or diagnose the PKU. AASA has accepted that it is vicariously liable for the acts and omissions of those doctors insofar as they amounted to a breach of duty. AASA itself is also alleged to have been directly responsible for Miss Young's current condition because it failed to have a system at the Jwaneng Mine for routine screening of babies for PKU, as is done in both the UK and the USA.
3. Miss Young was referred to Dr Jankowitz in Johannesburg and was seen by him on 7 February 1991. It is alleged that Dr Jankowitz, in breach of duty, failed to detect or diagnose that Miss Young was or might be suffering from PKU. Dr Jankowitz saw Miss Young again in June 1991. On that occasion he considered there was a problem which needed to be referred to a consultant paediatrician in South Africa and that was done.
4. The current proceedings were served on AASA at its registered office in Johannesburg on 15 December 2011 without the leave of the court. The claimant asserted that AASA had its "central administration" in England, so that it was "domiciled" in England for the purposes of Article 60 of the Regulation. AASA acknowledged service and then on 20 January 2012 applied under CPR Pt 11.1 for a declaration that the English court had no jurisdiction to hear the claim on the basis that AASA was not domiciled in England.
5. Article 60 of the Regulation provides:

"1. For the purpose of this Regulation, a company or other legal person or association of natural or legal persons is domiciled at the place where it has its:

(a) statutory seat; or

(b) central administration; or

(c) principal place of business.

2. For the purposes of the United Kingdom and Ireland, "statutory seat" means the registered office or, where there is no such office anywhere, the place of incorporation or, where there is no such place anywhere, the place under the law of which the formation took place".

6. The claimants have always accepted that AASA's "statutory seat" was not in England. Before Andrew Smith J they also accepted that England was not its "principal place of business". So the only way by which it could be established that AASA was domiciled in England at the relevant time was if the claimants could show that there was a "good arguable case" that its "central administration" was in England.
7. Dr Jankowitz emigrated from South Africa to New Zealand in 1994 and he continued to live there. On 12 January 2012 the claimant applied to the Master, without notice, for permission to serve Dr Jankowitz with the proceedings in the Young action, relying on CPR 6BPD 3.1(3). This provides, in short, that if a claim form has been served on another defendant and there is between the claimant and that defendant "a real issue which it is reasonable for the court to try", then proceedings may be served upon another person, (in this case Dr Jankowitz) who is "a necessary or proper party to that claim". The Master made his order on 9 February 2012 and Dr Jankowitz was served on 22 February 2012. On 29 March 2012 he applied, under CPR Pt 11.1, to set aside the Master's order for service. On behalf of Dr Jankowitz it is accepted that there is a "real issue which it is reasonable for the court to try" as between Miss Young and AASA. So the issue of whether Dr Jankowitz was properly served depends entirely on whether AASA has itself been properly served, which in turn depends on the issue of whether there is a "good arguable case" that AASA had its "central administration" in England as at 25 August 2011, ie. when the proceedings in the Young action were issued.
8. The claimants in both sets of proceedings applied to the court for specific disclosure on the issue of whether AASA was domiciled in England. After a contested hearing before Silber J, he ordered extensive disclosure on 16 July 2012. In his judgment, Silber J concluded that the claimants did not even have an arguable case that AASA had its "principal place of business" in England and that basis for founding jurisdiction under the Regulation was therefore not pursued.
9. Andrew Smith J heard the applications of AASA for a declaration that the English court did not have jurisdiction to hear the claims in the two actions on 1 and 2 May 2013. He handed down judgment on 24 July 2013. By his order of the same date the judge declared that the English court had no jurisdiction to try either action before him and he set aside the claim form against AASA and Dr Jankowitz and set aside the order permitting service of the proceedings in the Young action against Dr Jankowitz in New Zealand.
10. The judge gave limited permission to appeal but that was enlarged by Lewison LJ in an order made on 13 November 2013 following an application on paper.

II. The findings of fact of Andrew Smith J.

11. In order for Andrew Smith J to be able to reach a conclusion on whether there was a "good arguable case" that the "central administration" of AASA was situated in London as at 25 August 2011, he had to make detailed findings of fact about the corporate nature of AASA, how it was run and how it fitted in to the corporate structure of the group to which AASA belonged, which was and is the Anglo-American group, ("the Group"). Andrew Smith J did so partly by reference to conclusions on facts that Silber J had reached in his judgment on the application for specific discovery made by the claimants in the two actions for the purposes of the jurisdiction issue, and partly by reference to all the further evidence which was before him (Andrew Smith J) on the applications before him on the jurisdiction issues.
12. The "head" company of the Group is Anglo-American PLC (AA), an English company incorporated in 1999 with its head office in London and its shares listed principally on the London Stock Exchange. AA was incorporated when the businesses of AASA and Minorco SA, a Luxembourg company with interests in mining companies outside South Africa, were brought together. The London head office of AA has hundreds of staff members who are engaged in issues of administration and finance, engineering and geology and "Group policies". AA has two important committees; one is the Group Management Committee ("GMC") and the other is the Executive Committee ("Exco"). The judge found that when AA was incorporated "…AASA stopped providing services to other companies and that role was taken over by [Anglo Operations Limited – AOL] a company incorporated in South Africa as a wholly-owned subsidiary of AASA".^[3]
13. As for the structure of the Group overall as at August 2011, there was and is no dispute about it and it was set out in diagrammatic form in the outline argument of Mr Alex Layton QC, who represented Miss Young on the appeal. AA at the head of the Group wholly owns Anglo-American Holdings Limited (UK), which in turn wholly owns Anglo-American International SA (Luxembourg), which wholly owns AASA. Thus AA is not directly a shareholder in AASA; the Luxembourg entity is. The judge found that AASA itself was founded in South Africa in 1917 to develop gold mining in the East Rand and became South Africa's leading mining finance house. It is incorporated there and it has its registered office in Johannesburg. AASA in turn wholly owns two companies, Anglo Operations Limited, which is incorporated in South Africa, and Anglo American South Africa Capital (Pty) Limited. AOL in turn wholly owns Anglo Coal Limited, ("Anglo Coal") and Anglo American Africa Capital (Pty) Limited. That last company in turn owns 79.2% of the capital in Anglo Platinum Limited ("Amplats") and 62.54% of the capital in Kumba Iron Ore Limited ("Kumba"). Anglo Coal, Amplats and Kumba are all mine operating companies in South Africa.
14. The judge considered the role of AA and its two committees, the GMC and Exco. He noted that the GMC had delegated to it wide powers of the board of AA, save on certain matters; in particular, the authority to make capital investments over US$250 million remained reserved to the AA board. Under the Group's "Investment Evaluation Guidelines" individual Group companies could only make capital investments on their own initiative up to US$ 10 million; investments between US$10 and 100 million required the authorisation of AA's Investment Committee and investments between US$100 and US$250 million required the authorisation of the GMC. Above US$250 million authorisation of the AA board had to be given.^[4]
15. The judge found that all of the Group's assets in South Africa were held through AASA and, during the years 2008 to 2011, AASA held a sizeable proportion of the total gross assets of the Group. In a press release in April 2010 the Group said that 40% of its operating assets were in South Africa.^[5] The judge further found that AASA not only had an interest in other mining companies in the Group but also provided administrative, financial, technical and engineering services to other Group operating companies through service contracts. AASA did not operate mines itself. But the judge accepted the evidence given in a witness statement of Mr Christopher Griffiths, who had been a director of AASA since 27 May 2010, that AASA "…did not exercise management of the operating mining companies in which it had interests; those companies had their own boards and made their own corporate decisions".^[6] The judge found that AASA had no employees and did not conduct any business of its own.^[7] He accepted Mr Griffiths' evidence that AASA's "vestigial business" was that of holding various shareholdings in predominantly South African companies and in guaranteeing certain financial obligations of those companies. That was done principally in South Africa.^[8]
16. Mr Godfrey Gomwe, a Zimbabwean citizen who lives in South Africa, has been a director of AASA since 2001, was appointed Executive Director of AASA in 2009 and remained so in 2011. He was a member of AA's Exco. AASA had a designated "leadership team" which comprised Mr Gomwe, Mr Christopher Griffiths, who was not only a director of AASA but also the CEO of Kumba, and Mr Norman Mbazima, who is a director of AASA and also CEO of another subsidiary company in the Group called Thermal Coal, whose operations are also principally in South Africa. The members of the AASA "Leadership Team" reported to Ms Cynthia Carroll, who was at the relevant time the CEO of AA and was based in London.^[9] The judge considered that the fact that these AASA directors reported to Ms Carroll was not "an important indicator" of where AASA had its central administration. He held:

"It is unsurprising given their other roles that they should have reported to Ms Carroll and unremarkable that the Group should arrange a reporting line between [AA] and important subsidiaries: it does not indicate either that the subsidiary's central administration is done by the parent or that it is done where reporting takes place".^[10]

17. The judge found that between September 2010 and October 2011 AASA had only three board meetings: on 6 and 23 September 2010 and on 18 April 2011. The meeting on 6 September was held specifically to approve an interim report on the six months to 30 June 2010 because approval was required by the South Africa Reserve Bank. The judge recorded the following important statement, at [34] of his judgment:

"I also accept, and [counsel for AASA] did not dispute, that [AA] is concerned that decisions about AASA's holdings and the Group's South African assets should be taken in accordance with the Group's policies and strategies that it has determined and in accordance with its wishes".

18. The judge noted not only that AASA board meetings were infrequent but also that between September 2010 and October 2011 Mr Medori, a director, did not attend a board meeting at all and that other board members missed meetings. The judge further noted that the attendance of the "Leadership Team" was limited. But he concluded that these facts were not significant, and he was not able to regard them "as an indication that the board meetings of AASA were unimportant or that they were so regarded by its members or AASA".^[11] He accepted that the detailed evidence of the AASA witnesses demonstrated that the board meetings were sufficient for AASA's limited business. AASA's role in the Group and the nature of its business did not call for either frequent or lengthy board meetings.^[12] Furthermore, although no decision to enter into an acquisition or a disposal appeared in AASA's board minutes for recent years, the judge accepted the evidence of Mr Griffiths, director of AASA, that this was because AASA had not, itself, engaged in such activity; it had been done by AASA's own subsidiaries and so the decisions were made by their boards.^[13]
19. The judge found that AASA appointed its own auditors in accordance with the requirements of the South African Companies Act 2008.^[14] He found that AASA and its subsidiaries remained responsible for decisions about tax and if AASA or one of its subsidiaries required "tax advice or support", it looked to a department called "Group Tax" in South Africa (in a department of AOL), who might in turn look elsewhere for further advice if needs be.^[15] Furthermore, decisions about dividends were made by the board of AASA or any subsidiary declaring a dividend, even if advice might be sought from Group Tax.^[16] "Secondary management"^[17] services that AASA required were provided by employees of AOL based in South Africa. This was done under a Master Services Agreement of 4 April 2011.^[18] Thus, the judge accepted that, overall, the role of AASA included: (i) monitoring and reviewing the activities of subsidiaries; (ii) guaranteeing loans and providing other financial support to subsidiaries; (iii) charitable works; and (iv) ancillary business functions such as appointing directors and auditors, setting budgets and dividends, defending litigation and managing business risks.^[19]
20. In respect of the relationship between AA and AASA, the judge concluded that there was no evidence, from what Mr Gomwe had said or elsewhere, that AA did more than "influence" decisions of AASA, "no doubt powerfully…", as opposed to AA "determining" AASA's decisions.^[20] As for the role of Mr Gomwe himself, when he was appointed Executive Director of AASA in December 2009 his job description stated that the purpose of his appointment was "to be [AA's] chief representative in South Africa working together with Anglo American's Business Unit CEOs to deliver the Group strategy in the region". Mr Gomwe was a "frequent visitor" to London.^[21] His position as Executive Director of AASA was only a part of his job. However, the judge concluded that:

"..the fact [of Mr Gomwe's] other roles [does not mean] that, where he undertakes activities for AASA and participates in decisions of AASA, AASA is not acting as a distinct company or that it is acting under the control of another entity in the Group, still less that its activities are undertaken elsewhere than in South Africa".^[22]

Therefore, the fact that Mr Gomwe had a dual role was "no indication of where AASA had its central administration".^[23] However, in stating his conclusions, the judge did note that Mr Guy Philipps QC, counsel for AASA, "did not dispute" that AASA would not make an important decision such as, for example, to dispose of shares in a subsidiary company such as AOL, "otherwise than in accordance with [AA's] wishes".

III. The conclusions of Andrew Smith J on the legal issues and overall.

21. First, the judge held that the claimant had to establish that there was a "good arguable case" that the "central administration" of AASA was in a Member State of the EU in order to fall within Article 60(1)(b). This standard of proof for establishing jurisdiction has now been firmly established as a result of many cases both before and after the leading case, which is the decision of this Court in Canada Trust Co v Stolzenberg (No 2).^[24] The same standard has been adopted in relation to jurisdictional issues under the Regulation.^[25] In this context the expression "good arguable case reflects the notion that one side has "much the better of the argument" on the point. This standard was accepted by both sides on the appeal, although Mr Layton correctly emphasised that issues of law on the jurisdiction issue have to be decided by this court, unless it is a matter of EU law which is not "acte clair", in which case we must refer the matter to the Court of Justice of the European Union ("CJEU").^[26]
22. Secondly, in relation to the proper construction of Article 60(1)(b), in particular the meaning of the words "central administration", the judge considered various language versions of the text of the Regulation, Explanatory Memoranda on it (in English and German) and the Official Report of Professor Fausto Pocar on the revised Lugano Convention (2007) which adopted the same test of "domicile" for legal persons or associations of natural or legal persons as in Article 60 of the Regulation. The judge examined relevant English, German and CJEU decisions to which he was referred. He rejected the formulation of Mr Layton that the test for where a company has its central administration is "where the main entrepreneurial decisions which determine the activity of the company" are taken, whether they be taken by the company, its parent or anyone else. Instead, the judge held that:

"…the question where a company has its central administration clearly depends upon where the company itself carries out its functions, and unless the company can properly be said to act through another person or entity because of agency or delegation or on some other legally recognised basis, the actions of others do not determine the question".^[27]

23. Thirdly, on the facts, the judge concluded that none of the evidence indicated that AASA carried out any function in England; it did all its business in South Africa. Further, "the fact that decisions taken, or policies and strategies adopted by [AA] in England influence, indeed strongly influence, the decision taken by AASA in South Africa does not alter the position".^[28]
24. Fourthly, the judge rejected a subsidiary argument of Mr Layton that the central administration of a subsidiary company will be the domicile of its parent company where the parent could exercise control over, or usurp control from, that subsidiary. To introduce such a test would mean that there would have to be an inquiry in each case as to what control, in law, a parent could exercise over a subsidiary company, which would defeat the whole object of the introduction of the rule in Article 60(1), which was to provide a simple, factual test. Moreover, there was nothing in the cases or commentaries to support such a construction.^[29]
25. Lastly, the judge concluded that the meaning of "the place where [an entity] has its central administration" was clear and so there should not be a reference on the issue of construction of Article 60 to the CJEU. He concluded that: "AASA has its central administration in South Africa and not in England and the claimants do not have an arguable case to the contrary".^[30]

IV. The arguments of the parties on the appeal and the issues for decision.

26. First, Mr Layton attacked the emphasis in the findings of fact of the judge. Mr Layton submitted that the judge had concentrated too much on "who" took the decisions in the Group, rather than "what" decisions were taken and "where" they were taken. AASA's principal function was to hold the shares of the Group's South African companies and to be the vehicle through which AA implemented its strategy within the Southern African region. That was done through the AA board, the GMC and Exco, the GMC Rules and the Group's Investment Evaluation Guidelines. Mr Layton submitted that, effectively, all corporate decision making, by AASA as well as operational companies such as Kumba and Amplats, was in London. It went further than AASA paying the greatest attention to the wishes of AA, he submitted; the board of AASA could, in fact, only do as it was told to do by the institutions of AA, which were all based in London.
27. Secondly, Mr Layton criticised the judge's approach to the construction of Article 60. It was common ground that the phrase "central administration" has to be given an "autonomous" meaning. However, relying on the German language version of the Article, Mr Layton submitted that the three phrases in Article 60(1)(a), (b) and (c) reflected a distinction commonly accepted in German and other civil law systems between the domicile of a legal person being the place of its "statutory seat" (Article 60(1)(a)) or its "real seat" (Article 60(1)(b) and (c)).^[31] Mr Layton submitted that this means that the board meetings and formal decisions of the organs of a company will take place at the "statutory seat" but the principal economic activity of the company will be undertaken at its "principal place of business" or "real seat". Mr Layton pointed to the German language commentary on the text of the Regulation, which equated the concept of "principal place of business" with "real seat": or, in the German, "tatsächlicher Sitz". Mr Layton argued that "central administration" must mean something different from these two concepts and it was intended to be the place where the strategic business decisions were taken, whether or not the "decision makers" are individuals who constitute the "organs" of the relevant company itself. Mr Layton also relied on the commentary of Dr Hans von der Groeben and Dr Jürgen Schwarze^[32] in relation to Article 48EC of the EC Treaty, now Article 54FEU of the Treaty on the Functioning of the European Union ("FEU Treaty")^[33] granting the same "freedom of establishment" to companies and other legal persons as natural persons. Their commentary suggests that "central administration" means "the place where decisions are made and entrepreneurial management effectively takes place", although the commentary also goes on to state that in the case of a group, this will not be the place where group management takes place, but "the place of the bodies of the dependent undertaking which intends to exercise the right of establishment".^[34] This distinction is important.
28. Mr Layton referred to a number of English and European authorities on Article 60. These included the English cases of: King v Crown Energy Trading AG,^[35] Ministry of Defence and Support of the Armed Forces for Iran v Faz Aviation Ltd and Al-Zayat^[36] and Alberta Inc v Katanga Mining Ltd.^[37] He referred to the German Federal Supreme Court (Bundesgerichtshof) judgment of 27 June 2007;^[38] the German Federal Labour Court (Bundesarbeitsgericht) decision 5 AZR 60/07 of 23 January 2008^[39] and the German District Court for Frankfurt am Main decision 2-08 S 25/09 of 3 March 2010. Mr Layton also referred to the decision of the CJEU in Regina v HM Treasury and another ex parte Daily Mail and General Trust PLC,^[40] a case in which Advocate General Damon made comments on the concept of "central management" for the purposes of what is now Article 54FEU.
29. In summary Mr Layton submitted that the judge had erred in two respects. First, the "central administration" of a company, for the purposes of Article 60, was where the policy shaping entrepreneurial business decisions were made, looking at the position overall. That test had to be applied to the facts of this case, which had to take account of the fact that AASA was a part of the Group in which the "parent" company AA was, in reality, the vehicle through which Group decisions were made. Secondly, the judge therefore erred in concluding that AASA's decisions were not made in London. As an alternative, Mr Layton submitted that if the entrepreneurial decisions that were made on behalf of AASA in London could be relevant to a decision on whether the "central administration" was in England, then the meaning of Article 60(1)b) was not acte clair and so the court should make a reference to the CJEU.
30. On behalf of AASA, Mr Guy Philipps QC submitted that the fallacy in the arguments of the appellant lay in their attempt to divorce the actions of individuals from the organs of the company that was responsible for taking decisions. It is the "central administration" of the relevant company that has to be located and the appellant's arguments ran the danger of forgetting that all companies in a group were separate legal entities. The "central administration" of AASA was located where that company, through relevant individuals and organs, took its entrepreneurial decisions, even if AA was the entity which formulated "group strategy" and influenced the decisions of AASA.
31. In the submission of Mr Philipps the meaning of "central administration" is clear. He accepted that the description of "central administration" given in several of the German commentaries, and adopted in the German court decisions referred to above, is correct. This is to the effect that a company's "central administration" is the place where the decisions of the company are made and the entrepreneurial management of the company itself effectively takes place; or where the "policy- shaping" and "actual business management" of the company itself is centred. Mr Philipps submitted that the meaning was clear and there was no need for a reference to the CJEU. The judge carefully considered all the evidence and his conclusion that, in the case of AASA, this location was in South Africa, cannot be faulted.
32. Mr Howard Palmer QC adopted the arguments of Mr Philipps. He also submitted that the characterisation of the meaning of "central administration" by HHJ Chambers QC in King v Crown Energy Trading AG was wrong.
33. There are only three issues that have to be decided on this appeal. The first is whether the judge's interpretation of the words "central administration" in Article 60(1)(b) was correct. The second is whether there is any doubt as to that construction such that we should make a reference of the issue to the CJEU. The third is whether, on the assumption that the judge's construction was correct, his conclusion on the facts that the "central administration" of AASA was in South Africa was correct.

V. The interpretation of the words "central administration" in Article 60(1)(b) of the Regulation.

34. The parties were correct to accept that the wording of Article 60 must be given an "autonomous" meaning, that is a meaning not based on the canons of construction of any particular Member State's system of law. In order to consider the correct interpretation of the wording it is necessary to look at the objectives of the Regulation as a whole, particularly as noted in the Recitals of the Preamble to the Regulation, as well as the context of Article 60 within the Regulation and any relevant official commentary.
35. Paragraph 11 of the preamble of the Regulation states that the "rules of jurisdiction must be highly predictable and founded on the principle that jurisdiction is generally based on the defendant's domicile…". The same paragraph also stipulates that:

"…The domicile of a legal person must be defined autonomously so as to make the common rules more transparent and avoid conflicts of jurisdiction".

36. Article 60 is found in Chapter V of the Regulation, which is headed "General Provisions". It consists of Articles 59-65. Article 59 deals with the "domicile" of a party generally. Article 61 deals with the special situation where a person is facing certain types of criminal charges in one state in which he is not domiciled. Articles 62 – 65 relate to specific circumstances in specific Member States. Article 60 is the sole article to deal with the domicile of "a company or other legal person or association of natural or legal persons". Article 60(2) sets out a specific rule for the UK and Ireland as to what constitutes the "statutory seat" of a legal person. Article 60(3) deals with the domicile of a trust.
37. It is clear that Article 60(1) is drafted so that a company (and the other entities referred to which I will not keep repeating) may have three different locations of domicile for the purposes of the Regulation, because, for that purpose, the domicile of a company may be the place of its "statutory seat" or its "central administration" or its "principal place of business". Thus it is intended to give a claimant a wider choice of where he can sue a company using the general rule in Article 2(1) of the Regulation that "…persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State." This analysis accords with the commentary in paragraph 28 of the official Explanatory Report of Professor Fausto Pocar on the revised Lugano Convention of October 2007. The revised Lugano Convention used the same wording as that of Article 60 of the Regulation. Professor Pocar also points out, at paragraph 30, that the choice of a "broad definition" was made to allow a company to be brought before a court in a state bound by the Convention (or, I would say, the Regulation) "with which [the company] has a significant connection, in the shape of its central administration, its principal place of business or its statutory seat". The adoption of three possible "connecting factors" followed those used in Article 48EC of the EC Treaty for recognising the right of establishment of companies or firms in the territory of the EU.^[41] One connecting factor in Article 48 is the "central administration" of a company.
38. It is, I think, important to note that it is the "central administration" of the company sought to be sued that has to be identified. It is no accident that the wording of Article 60(1) is that "…a company…is domiciled at the place where it has its…(b) central administration. (My emphasis). There is no suggestion in either the Regulation or in Professor Pocar's Explanatory Report or in any commentary that any different approach should apply where a company is a part of a group of companies. I accept that if, on the facts of a particular case, company A in a group has taken over or "usurped" the relevant functions of the organs of company B, which is the company sought to be sued, then it may well be arguable that the "central administration" of company B is where company A makes those decisions on company B's behalf. But Mr Layton did not advance an argument on the facts of this case that AA had "taken over" or "usurped" the decision making process of AASA. He accepted that the search in this case was for the location of the "central administration" of AASA itself.
39. What then is the correct interpretation of the words "central administration" in Article 60(1)(b), bearing in mind that it is one of three alternative possible "domiciles" of a company for the purposes of the Regulation. Article 60 contemplates the possibility that a company's "statutory seat", its "central administration" and its "principal place of business" could be in the same or in different locations. In my view the draftsman of Article 60 also plainly contemplated that the three attributes of the company set out in Article 60(1)(a), (b) and (c) were to be differentiated. Thus the first is the domicile for the purpose of the internal laws of the state where the company is incorporated. It will usually be identified in its Memorandum and Articles of Association or equivalent. The third is the place where the company does its principal "business". Where that is must be a question of fact in each case. The second attribute is different in kind from the other two, although it may be that its location is the same as one or other or both. In all cases, as Professor Pocar pointed out in his commentary on Article 60 in his Official Report on the amendments to the Lugano Convention, the aim is that the "statutory seat", or "central administration" or "principal place of business" will be a location with which the potential defendant company will have a real connection with a Member State at the relevant time, viz. when the proceedings are issued.
40. Given the need to differentiate between the three attributes of a company contemplated by the three phrases used in Article 60(1), I would give the phrase "central administration" the same meaning as that which was given by commentators to the same phrase in what is now Article 54FEU, which grants the same right of freedom of establishment to companies and other legal persons and associations as to natural persons who are nationals of Member States of what is now the EU. Thus I agree with the interpretation given by Dr Ulrich Everling in 1964^[42] to the "central administration" of a company in that context; it is the place where "the company organs take the decisions that are essential for the company's operation". In my view his emphasis that it is only the organs of that company that counted and it was irrelevant "whether the company depends upon the decisions of a parent company which has its domicile outside the Community" is correct. His interpretation is, effectively, the same as that used in the commentary of Dr Hans von der Groeben and Dr Jürgen Schwarze on Article 48EC,^[43] although they also refer to the place where "entrepreneurial management effectively takes place". That amounts to the same thing in my view. The same phraseology is used in two further commentaries which note that the same words are used in both Article 54FEU and Article 60(1) of the Regulation.^[44]
41. Even more persuasively, the German Federal Supreme Court (Bundesgerichtshof) adopted this line of interpretation, citing the work of Professor Dr Kropholler, when it considered Article 60(1)(b) in the context of a jurisdiction dispute concerning a company in its Ruling XII ZB 114/06 of 27 June 2007. The analysis of the German Federal Supreme Court was followed by the German Federal Employment Tribunal (Bundesarbeitsgericht) in its decision 5 AZR 60/07 of 23 January 2008,^[45] which also concerned Article 60. The court drew a distinction between "essential business decisions" and "mere secondary management tasks such as accounting and settling of tax matters", which were irrelevant for the purposes of determining the seat of the "head office". That analysis was in turn followed by the District Court (Landgericht) for Frankfurt am Main in its decision 2-08 S 25/09 of 3 March 2010.
42. The phrase "central administration" in what is now Article 54FEU (then Article 58 of the EEC Treaty) was also considered by the CJEU in R v HM Treasury ex parte Daily Mail and General Trust PLC.^[46] Advocate General Darmon referred with approval to Dr Everling's interpretation of "central administration".^[47] The judgment of the Court itself does not directly comment on those words.
43. As already noted, the interpretation of "central administration" has been the subject of decisions in the English courts. The most recent to which we were referred was that of Tomlinson J in 889457 Alberta Inc v Katanga Mining.^[48] One of the issues in the case was whether the first defendant, which was a company incorporated in Bermuda, resident in Canada for tax purposes and which had its principal office in London and had a 75% interest in a valuable copper and cobalt mine in the Democratic Republic of Congo, was domiciled in England for the purposes of Article 60(1). Tomlinson J held that the company had its "central administration" in London because "those who have the serious responsibilities in the company have their place of work" in London.^[49] With respect to Tomlinson J, who did not have the benefit of the German commentaries or case law for his consideration, I think it does not necessarily follow that the place where those who have serious responsibility in the company work is the place where the "central administration" of the company will be. The correct interpretation of Article 60(1)(b) is to find the place where the essential decisions are taken by the company through its organs for that company's operation and where the company takes its "entrepreneurial" decisions. The place of work of those who have "serious responsibility" for decisions and the place where the essential decisions of the company are made could be different. It is always going to be a question of fact.
44. The older case of The Rewia,^[50] which concerned (amongst other things) an issue of whether the "central management and control" of a company was in England for the purposes of section 42(6) of the Civil Jurisdiction and Judgments Act 1982 and Article 52 of the Brussels Convention, is not helpful on the interpretation of the different wording in Article 60(1)(b) of the Regulation. The suggestion of HHJ Chambers QC at paragraph 12 of his judgment in King v Crown Energy Trading AG^[51] that "administration" has something of the "back office" about it and the statement in paragraph 13 of the judgment that the place of a company's "central administration" can be determined by "a simple listing of those with important responsibilities in the company" is equally unhelpful and, in my view, should be disregarded. In Ministry of Defence and Support of the Armed Forces for the Islamic Republic of Iran v Faz Aviation Ltd^[52] Langley J made no analysis of the meaning or interpretation of the words "central administration" beyond referring to The Rewia and King v Energy Crown Trading AG.
45. Overall, then, I conclude that the correct interpretation of "central administration" in Article 60(1)(b), when applied to a company, is that it is the place where the company concerned, through its relevant organs according to its own constitutional provisions, takes the decisions that are essential for that company's operations. That is, to my mind, the same thing as saying it is the place where the company, through its relevant organs, conducts its entrepreneurial management; for that management must involve making decisions that are essential for that company's operations. As Andrew Smith J pointed out at [71] of his judgment, that location will be where the company (or other entity) has its "central administration" for the purposes of Article 60 and that will therefore be a jurisdiction where, for the purposes of the Regulation, the company has its domicile and so can be sued under the jurisdictional rule of Article 2. Therefore I agree with Andrew Smith J's conclusion on the issue of the interpretation of Article 60(1)(b). .

VI. Is there any doubt about the interpretation of "central administration" in Article 60(1)(b) such that a reference to the CJEU is necessary?

46. In my view the clear answer to this question is "no". The Pocar Report, the German commentaries, the decisions of the German courts and the view of Advocate General Damon in the Daily Mail Trust case all go the same way. In the only relevant English decision that might have a different emphasis, that of Tomlinson J in 8889457 Alberta Inc, the judge did not have the benefit of the German or ECJ jurisprudence. In my view there can be no doubt as to the correct interpretation of the phrase and I would therefore decline to make a reference.

VII. Was the judge's conclusion on the facts that the "central administration" of AASA was in South Africa on 25 August 2011 correct?

47. The judge's task was to assess the evidence he had before him and arrive at a provisional conclusion of fact (ie. whether or not the claimant had a "good arguable case") by reference to a juridical concept, viz. that of the place of the "central administration" of AASA. So the question was simply: did Miss Young have a "good arguable case" that AASA had its "central administration" in England on 25 August 2011 for the purposes of Article 60(1)(b). This court has said, on many occasions, that where the task of the judge is to make an overall assessment of the evidence by reference to a juridical concept, then the Court of Appeal will not interfere with the assessment and conclusion of the judge unless it is manifestly wrong on the basis of the material before him.
48. In this case the judge was correct to concentrate on the factual position relating to AASA itself and to search for the place where AASA itself, through its relevant organs according to its constitutional provisions, made the decisions that were essential for AASA's own business, or where AASA's own "entrepreneurial" decisions were taken. In that way he would arrive at a provisional view on where AASA had its "central administration" at the relevant date. The judge was correct not to be diverted by Mr Layton's ingenious attempt to turn the issue around so as to ask the more impersonal question "where were the main entrepreneurial decisions taken which determined the activity of AASA". That is the wrong question. It removes the focus from where it should be, which is on the decisions of the company itself. It obfuscates matters by looking at other companies in the Group or the Group as a whole. It gets away from the essential question: where does AASA have its "central administration"?
49. Once this point is appreciated, it seems to me that the answer in this case is obvious and it is the answer the judge gave at [72] of his judgment: "None of the evidence indicates that AASA carries out any function in England: it does all its business in South Africa". AA and its organs, based in London, plainly guided and even heavily influenced the decisions taken by the board of AASA. But, as the judge also correctly stated, that "does not alter the position". Nor does the fact that Mr Gomwe had a role that was a "Group" role as well as being the Executive Director of AASA. Nothing that Mr Layton said about the judge's analysis of the facts has persuaded me that his approach or conclusions were even arguably wrong. Not only is there no "good arguable case" that AASA had its "central administration" in England in August 2011, there is no case at all.
50. Mr Layton did briefly resurrect the argument referred to by the judge at [73], ie. if it is shown that AA could exert or usurp control over AASA, then that would be enough to establish a good arguable case that AASA's "central administration" is in England. I respectfully agree with the answer the judge gave to that argument. Article 60(1)(b) is not dealing with possibilities but with actualities. If it were dealing with what a parent company had the power to do ("could do") then that might lead to arguments about the powers of parent companies over subsidiary companies in the context of a group. That, in turn, would lead to arguments concerning the correct interpretation of the constitutional provisions of parent and subsidiary companies, perhaps with their "statutory seat" in different countries, thus possibly involving the internal company law provisions of more than one state. The whole aim of Article 60(1) was, as Professor Pocar pointed out at paragraphs 27 and 28 of his Explanatory Report, to cut out such possible complications. So I would reject this alternative argument.

VIII. Disposal

51. For these reasons I would dismiss the appeal and uphold the order of Andrew Smith J dated 24 July 2013.

Dame Janet Smith:

52. I agree.

The Master of the Rolls:

53. I also agree.

Note 1   The reason for the “good arguable case” test is explained in [21] below.    [Back]

Note 2   This provides: “…persons domiciled in a Member State shall whatever their nationality be sued in the courts of that Member State”; the Member State being, in this case, the UK.     [Back]

Note 3   [32] of Andrew Smith J’s judgment.     [Back]

Note 4   [47] of Andrew Smith J’s judgment.    [Back]

Note 5   [34] of Andrew Smith J’s judgment.     [Back]

Note 6   See[31] of the judgment of Andrew Smith J.     [Back]

Note 7   [33] of the judgment of Andrew Smith J.    [Back]

Note 8   It was on that basis that the claimants in the two actions were prepared to accept that AASA did not have its “principal place of business” in England for the purposes of Article 60 of the Regulation (See: [33] of the judgment. Of course, whether AASA had its “central administration” in England in August 2011 remains a separate issue.     [Back]

Note 9   There were two further directors of AASA: Mr Rene Medori and Mr Neville Nicolau.    [Back]

Note 10   [36]    [Back]

Note 11   [36 (ii)].     [Back]

Note 12   [37], referring to the decision of Park J in Holden v Wood [2005] EWHC 547 (Ch) at [25].     [Back]

Note 13   [48].    [Back]

Note 14   [51(i)].    [Back]

Note 15   [51(iii)]    [Back]

Note 16   [51(iii)]    [Back]

Note 17   Andrew Smith J’s phrase at [64]    [Back]

Note 18   [61]    [Back]

Note 19   [64]    [Back]

Note 20   [38].    [Back]

Note 21   [39]    [Back]

Note 22   [40]    [Back]

Note 23   [40]    [Back]

Note 24    [1998] 1 WLR 547 at 555 per Waller LJ with whom the other two judges agreed.     [Back]

Note 25   See eg: Bols Distilleries BV v Superior Yacht Services Ltd [2007] 1 WLR 12 at [23]-[28] in the judgment of Lord Rodger of Earlsferry giving the Advice of the Board.     [Back]

Note 26   I will use this expression to include the European Court of Justice, the name of the CJEU until it changed after the Lisbon Treaty.     [Back]

Note 27   [71].    [Back]

Note 28   [72].    [Back]

Note 29   [74]    [Back]

Note 30   [75].    [Back]

Note 31   In the German language version the word for “principal place of business is “Hauptniederlassung”, which Mr Layton translated literally as “principal establishment”, which he equated with “tatsächlicher Sitz” which he translated as “real seat”.     [Back]

Note 32   Commentary on the Treaties on European Union and establishing the European Community: 6th Ed 2003.     [Back]

Note 33   This provides: “Companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community shall, for the purposes of this chapter, be treated in the same way as natural persons who are nationals of Member States”.     [Back]

Note 34   Commentary on the Treaties of the European Union and establishing the European Community: 6th Ed (2003) Art 48 margin 9. A similar comment is made by Dr Ulrich Everling in The Right of Establishment in the Common Market (1964) para 314 and other commentators.    [Back]

Note 35   [2003] 2 CLC 540, a decision of HHJ Chambers QC.    [Back]

Note 36   [2008] 1 All Er (Comm) 372, a decision of Langley J.     [Back]

Note 37   [2009] 1 BCLC 189, a decision of Tomlinson J.     [Back]

Note 38   NJW-RR 2008 551.     [Back]

Note 39   [2008] NJW 2797     [Back]

Note 40   [1989] 1 QB 446.    [Back]

Note 41   See para 31 of Prof Pocar’s Explanatory Report.     [Back]

Note 42   The Right of Establishment in the Common Market: para 314 (1964).     [Back]

Note 43   Commentary on the Treaties on European Union and establishing the European Community: 6th Ed 2003.     [Back]

Note 44   European Civil Procedure Law Commentary by Prof Dr Reinhold Geimer and Prof Dr Rolf A Schütze: 2nd Ed 2004; European Civil Procedure law by Prof Dr Jan Kropholler: 8th Ed 2005.     [Back]

Note 45   [2008] NJW 2797.    [Back]

Note 46   [1989] 1 QB 446.    [Back]

Note 47   See page 453C.    [Back]

Note 48   [2009] 1 BCLC 189    [Back]

Note 49   See [23] of the judgment, adopting a suggestion of Prof. Adrian Briggs in para 2.115 of the 4th (then current) edition of Civil Jurisdiction and Judgments. The same suggestion is repeated at para 2.138 of the current 5th edition. There is no reference to the German commentary or cases.     [Back]

Note 50   [1991] 2 Lloyd’s Rep 325    [Back]

Note 51   [2003] 2 CLC 540    [Back]

Note 52    [2008] 1 All ER (Comm) 372.    [Back]