England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Neutral citation number: [2002] EWHC 739 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		23rd April 2002

Mr Justice David Steel :

Introduction

1. This is the second round of a series of jurisdictional battles between the parties to this action. The outcome of the first round, between the claimant and the second defendant, is to be found in the decision of the Court of Appeal reported in [2002] 1 Lloyd’s Rep. 191. This new bout is between the two defendants themselves and focuses upon a purported claim for contribution made by the first defendant against the second defendant. In brief, the second defendant applies to strike the contribution claim out. The first defendant counters with an application seeking an order for service of the defence.

Background

2. The claimant (“Knauf UK”) and the first defendant (“British Gypsum”) each manufacture plaster board and gypsum building plasters. The second defendant (“Peters”) manufactures and provides paper liner for use in the production of plasterboard.
3. This plasterboard is used to construct the internal walls and ceilings of houses. It is the practice in certain areas of the United Kingdom to apply a skim plaster finish to the exposed surface of plasterboard after installation.
4. Between about October 1997 and September 1998, plaster board manufactured by Knauf UK, using paper liner manufactured and supplied by Peters, was used in the construction of a large number of houses in the UK. The plaster used to skim the exterior surface of the plasterboard included both British Gypsum plaster and Knauf UK’s own plaster.
5. From December 1997, Knauf UK and British Gypsum received complaints that finished plaster board (manufactured by Knauf UK with Peters paper liner and then installed in homes after being skim plastered) was delaminating - that is to say that the skim plaster was shelling off the surface of the plaster board.
6. Claims were made for reimbursement of the cost of the remedial work and other associated costs. It appeared either that the plasterboard or the plaster or both were at fault and, ultimately, either Knauf UK or British Gypsum (or both in some proportion) would be liable to pay compensation to claimants. Knauf UK and British Gypsum were unable to agree where fault lay.
7. In these circumstances, in order to enable compensation to be paid without delay pending resolution of the dispute, Knauf UK and British Gypsum entered into an agreement under the auspices of the Gypsum Products Development Association (the GPDA agreement) to offer to settle claims where de-lamination occurred to plaster board manufactured by Knauf UK and applied with plaster manufactured by British Gypsum on a 50:50 basis without admission of liability and without prejudice to their respective liability (if any) to each other.

The claims

8. In these proceedings, Knauf UK claimed against Peters that Peters paper caused or contributed to the de-lamination of the plaster from Knauf UK plaster board. It was claimed that variable and abnormally high levels of starch on the paper caused the problem. Knauf UK claimed from Peters damages of over £600,000 in respect of de-lamination of Knauf UK plaster from Knauf UK plaster board and some £2.6 million in respect of de-lamination of British Gypsum plaster from Knauf UK plaster board. In respect of these claims, Peters challenged the jurisdiction and sought to set aside Knauf UK’s claim.
9. Knauf UK and British Gypsum claim from each other the whole, or a proportionate part, of sums paid out by them pursuant to the GPDA agreement alleging that delamination was caused or contributed to by the defect in and/or failure of the other’s product. However, notably, no claim is made by Knauf UK against British Gypsum to the extent of the losses suffered by Knauf UK arising from instances of delamination in Knauf UK plaster from Knauf UK plasterboard.
10. In January 2001, British Gypsum served a Part 20 claim for contribution against Peters claiming in essence that, if British Gypsum is held liable to Knauf UK, then Peters is liable to British Gypsum to pay contribution under the Civil Liability (Contribution) Act 1978.
11. Peters does not accept that the English Court has jurisdiction in respect of British Gypsum’s claim for contribution and in April 2001 took steps to join British Gypsum to an action by Peters in Germany brought against Knauf UK (and Knauf Germany) for a declaration of non-liability.
12. As already recorded, British Gypsum has applied for an order that a defence to the contribution claim be served and Peters has applied for an order that the contribution proceedings be struck out, or alternatively stayed. It is these applications on which I am to rule.

The procedural history

13. The claim form was issued on the 11^th July 2000 and served on British Gypsum on the 22^nd July. In the meantime, Knauf UK obtained a without notice order from Aikens J permitting service by an alternative method on Peters, namely by service on Peters’ solicitors in England. This was expressly for the purpose of ensuring that service of these proceedings on Peters should precede any service of German proceedings brought by Peters against Knauf UK.
14. On 22^nd August 2000, proceedings for negative declaratory relief were commenced by Peters in Germany and were served there on both Knauf UK and its parent, Knauf Germany, on 18^th September 2000. In the meantime, Peters had applied to set aside the order of Aikens J and the service effected pursuant to it. They further sought a declaration that the Court had no jurisdiction to entertain the claim because any contract between the claimant and Peters was governed by an exclusive jurisdiction agreement in favour of the German Courts within the meaning of Article 17 of the 1968 Brussels Convention.
15. British Gypsum served a defence and counterclaim in the British proceedings on the 17^th October to which a reply and defence to counter claim was served by Knauf UK on the 21^st November 2000. On the 19^th December 2000, British Gypsum notified Peters that they were intending to serve a contribution notice. They asked whether Peters' solicitors had instructions to accept service. On being informed that the solicitors had no instructions to accept service of proceedings, British Gypsum served a Part 20 contribution claim on Peters in Germany by post, purportedly pursuant to Article 6 of the German / British Convention of the 20^th March 1928. Arrangements were also put in hand for service under the Hague Convention. Copies of the documents were also served on Peters’ English solicitors accompanied by a query as to their entitlement to reject service of the documents while remaining solicitors on the record in the action.
16. On 11^th January 2001, Messrs Fishburn Morgan & Cole, Peters’ solicitors, wrote to Shoosmiths acting for British Gypsum, as follows:

“As we understand it, you purported to serve a Part 20 claim on the second defendant pursuant to Part 20.6 of the Civil Procedure Rules. Please confirm we have correctly interpreted the position.

We did not intend any discourtesy in refusing to accept service of this document….our view is that if we were to accept service of a Part 20 claim under Part 20.6 of the CPR, that could be interpreted as taking a step in the action or accepting that our client was a defendant subject to the jurisdiction of the court which is the very issue we are disputing.

It seems to us that if our challenge to the court’s jurisdiction is upheld, your part 20.6 contribution notice will automatically fail, whilst if the Court has jurisdiction over our clients as the second defendant in the action, then you are entitled to pursue your contribution claim and effect service in the usual way….”

17. Messrs Shoosmith’s response was as follows:

“You are correct that we have served the Part 20 Claim (Contribution Notice) upon your clients pursuant to Part 20.6 of the Civil Procedure Rules.

Part 6.24 of the Civil Procedure Rules confirms that, where a claim form is to be served out of the jurisdiction, it may be served by any method “permitted by the law of the country in which it is to be served”…..Accordingly we believe that service has been properly effected on your clients by post.”

18. On the 24^th April 2001, Peters joined British Gypsum as third defendant to the German proceedings. Matters thereafter lay in limbo pending the outcome of the hearing before the Court of Appeal in July 2001. On 24^th October 2001, the Court of Appeal gave judgment in favour of Peters setting aside Aikens J’s order, albeit not ruling on the Article 17 point. The form of the Order made by the Court of Appeal is of some importance. It reads in part as follows:

“4. All proceedings between the claimant and the second defendant be stayed until such time that the jurisdiction of the courts of Germany in respect of the claimant’s claim against the second defendant is established.

5. In the event that the jurisdiction of the courts of Germany in respect of a claimant’s claim against the second defendant is established

(a) the service of these proceedings on the second defendant pursuant to the Hague Service Convention be set aside,

(b) The High Court of Justice of England and Wales shall decline jurisdiction of the claimant’s claim against the second defendant. ”

19. I understand that the conditional form in which this order was made was to allow for the possibility that Knauf UK might make an application to the German Court pursuant to Article 22 of the Brussels Convention. In the event, it did not. It is true that in December 2001 British Gypsum issued an application in Germany under Article 22 but that only related to the claim advanced against them as third defendant. The prosecution of this application, as I understand it, has been suspended pending the outcome of this application but notably it has no potential impact on the establishment or retention of jurisdiction in Germany in respect of the proceedings as between Peters and Knauf UK.
20. In my judgment, the reality of the position is, therefore, that the service of the proceedings on the second defendant has been set aside and that this court has declined jurisdiction in the claim made by Knauf UK against Peters.

Part 20.6

21. British Gypsum rely upon CPR 20.6 as permitting the making of the contribution claim against Peters. Part 20.6 reads:

“A defendant who has filed an acknowledgement of service or a defence may make a Part 20 claim for contribution or indemnity against another defendant by:

(a) filing a notice containing the nature and grounds of his claim;

(b) serving that notice on the other defendant.”

22. It was British Gypsum’s submission that, since they “served” their contribution notice on Peters at a time when Peters was a named defendant and had served an acknowledgement of service (albeit solely for the purposes of challenging jurisdiction), it followed that the contribution notice was valid and effective. In my judgment, this view is misconceived:-

i) The scope of CPR 20.6 is solely to permit cross claims between defendants. Accordingly the court must have jurisdiction in respect of both defendants. It follows that on its proper construction, the Part 20 claim must be against another “such” defendant, i.e. one who has filed an acknowledgement of service or a defence.

ii) The filing of an acknowledgement of service for the purposes of challenging jurisdiction does not permit service of a contribution notice. In the event of an unsuccessful challenge to the jurisdiction, the defendant concerned must serve a further acknowledgement of service: CPR 11.7. Only then is the defendant deemed to have accepted that the court has jurisdiction.

iii) In any event, the effect of the Order of the Court of Appeal is that service on Peters has been set aside and jurisdiction against them declined. In effect, Peters have ceased to be a defendant as defined i.e. a person against whom a claim is made: CPR 2.3.

iv) Furthermore, a contribution notice is not a claim form: CPR 6.18 (j). The contribution notice thus cannot be served out of the jurisdiction under CPR 6.17. It is merely a document, which must be served within the jurisdiction under CPR part 6.5.

Article 6.2

23. The alternative case argued by British Gypsum was that the Court had jurisdiction to entertain the contribution claim by virtue of Article 6.2 of the Brussels Convention. Article 6.2 reads:

“A person domiciled in a Contracting State may also be sued –

As a third party in an action on a warranty or guarantee or in any other third party proceedings in the court seised of the original proceedings unless these were instituted solely with the object of removing him from the jurisdiction of the court which would be competent in his case."

24. But again this submission is misconceived:-

i) British Gypsum never purported to invoke Article 6.2. Even if it had, it merely affords the prospect of English jurisdiction. In order to invoke that jurisdiction, it would still be necessary to effect proper service by way of a claim form. Furthermore, if leave to serve out were now to be sought, British Gypsum would be faced with the impact of Article 21.

ii) The Article does not impose any obligation on the court to accede to a request to join a third party: Kongress Agentur Hagen GmbH v. Zeehaghe BV [1990] ECR 1-1845. It must be established that it is appropriate to override the third party’s right to be sued in the court of his domicile: Kinnear v. Falconfilms NV [1996] 1 WLR 920.

iii) This would not appear to be an appropriate case. Peters’ liability (if any) to Knauf UK does not arise in the English proceedings. It only arises in the German proceedings. Indeed, the claim is probably governed by German law. To allow the same issue to be raised now in the English proceedings would create rather than avoid the risk of inconsistent decisions.

iv) There is in any event the threshold difficulty as to the underlying basis of any claim to contribution. The claim against British Gypsum by Knauf UK is only in respect of defects for which British Gypsum is responsible. Thus, it is difficult to conceive the basis upon which Peters can be liable to Knauf UK for the same damage as British Gypsum is liable to Knauf UK.

Conclusion

25. For all these reasons, the contribution notice must be struck out and service of the same set aside.