England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		7th July 1998

MR JUSTICE RIX:

1. In these proceedings an English company sues a Swiss bank for payment under the bank's alleged guarantee of its Swiss customer's obligation in respect of the price of goods sold to the Swiss customer. Central to the claim is a Swiss banking document known as a "payment order-"" or #ordre de paiement-#. The claim is also brought in tort, alleging negligent misrepresentation as to the effect of the payment order and the client's credit. The proceedings are brought in England, in contract on the basis of Article 5(1) of the EFTA JudgmentsConvention (Lugano) 1988 in that it is said that the place of performance of the bank's alleged obligation to pay the price of the goods is in England, and in tort on the basis of Article 5(3) in that it is said that the harmful event of which the plaintiff complains occurred in England. It is common ground that the proper law of any obligation in contract is Swiss law. The alleged representations were made in Switzerland, albeit in the course of telephone conversations with England.
2. The bank challenges jurisdiction in England and submits that neither Article 5(1) nor Article 5(3) can found jurisdiction in this case, and that the bank must be sued in Switzerland, where it is domiciled, under Article 2.
3. Article 5 provides as follows:

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.

4. The EFTA Judgments Convention was made between, among other states, the United Kingdom and Switzerland. It is closely modelled of course on the E.C. Judgments Convention (Brussels) 1968. For present purposes, its provisions are identical to the E.C. Judgments Convention, although by virtue of the Swiss reservation to the EFTA Judgments Convention any judgment based exclusively on jurisdiction under Article 5(1) would not be recognised or enforced in Switzerland. The EFTA Judgments Convention is given the force of law in England by section 3A of the Civil Jurisdiction and Judgments Act 1982, added into the 1982 Act by section (1) of the Civil Jurisdiction and Judgments Act 1991.

The parties and the claim

5. The plaintiff, Domicrest Limited (#Domicrest-#), is an English company based in England which supplies electronic consumer goods. The defendant, Swiss Bank Corporation (#SBC-#), is a Swiss bank, domiciled in Switzerland with its head office in Basel. SBC acted as bankers to three associated Swiss companies, Inter Global AG, M & M Investment and Humptydoo SAGL (together #Interglobal") who maintained accounts with SBC at its Chiasso branch in Switzerland. SBC also maintains a branch in London, where it was served with the writ in this action, but that branch has had no involvement with the underlying transactions. SBC's summons under RSC, Ord. 12, r. 8 also challenged service as improper, but that complaint has not been proceeded with.
6. Domicrest has been a supplier of Interglobal, but has never been a client of SBC. All its banking affairs have been dealt with by NatWest in London. Its principals are Messrs Dilip and Deepak Mirpuri. It began exporting consignments of electronic consumer goods to Interglobal in about May 1994.
7. I state the facts as alleged in Domicrest's points of claim and verified in an affidavit made on its behalf. Those facts, of course, are subject to proof at trial. Domicrest's trading policy was that it was prepared to ship but not to release goods to its customers until it had been paid. Usually confirmation of payment was given by way of a SWIFT (Society for Worldwide Interbank Financial Telecommunication) message. When Domicrest began supplying Interglobal it received from SBC a payment order by fax in respect of the invoiced price.
8. The payment order, and those which followed it, was in the following form. It was addressed to SBC at its Chiasso branch by its customer, there referred to as #136019 Elettronica". It is not clear to what or whom exactly that was a reference, but it has been assumed to be a customer reference code to a person or a company connected with Interglobal. I shall refer to the customer concerned as Interglobal, but it may ultimately be relevant that he or it was not. The payment order also specified the customer's account number, an "Amount", the "Beneficiary"(i.e."Domicrest London"), and the D"etails of Payment". Under the last of those boxes Domicrest's London bankers were specified, often with the London branch's sort code. The relevant invoice was also mentioned, as was the relevant company within the Interglobal group which was acting as purchaser. It was signed on behalf of Interglobal, and initialled on behalf of SBC by its branch assistant manager, Mr Fontana. It sometimes mentioned a value date, but on other occasions the value date was confirmed subsequently or altered by telephone. The critical language of the document was that under the heading "Payment order" was stated "Please pay to the debit of my/our account".
9. What did such a payment order mean? It was common ground before me that such an order is recognised in the Eighteeenth title to the Swiss Federal Code of Obligations (as of 1 January 1984, "CO") to the following effect:

466. The party to whom an order is addressed is authorised to transfer money, securities or other fungibles on account of the party giving the order to another person who is thereby authorised to receive them in his own name.

467. Where the order is intended to discharge a debt of the party who gave the order to the receiving person, the debt is only discharged by payment by the party to whom the order is addressed.

The creditor who is not willing to accept an order received from his debtor is required to notify him thereof immediately and in default is liable for damage.

468. If the party to whom the order is addressed without reserve declares to the receiving person that he accepts the said order, he is bound to make payment to the latter; he can only set up such defences as result from their mutual relations or the terms of the order, but not from his relations with the party who gave the order.

10. It was therefore accepted before me by Mr Dunning, who appeared on behalf of the SBC, that there was at least a good arguable case that, provided it had without reserve declared to Domicrest that it accepted that order, then SBC became a primary debtor of Domicrest to pay Domicrest in accordance with the terms of the order.
11. Domicrest, however, at the time it received the first of such orders, did not have the benefit of evidence of Swiss law concerning article 468 CO which I have enjoyed. Domicrest therefore asked its agent, Mr Yong Park, trading as Park Enterprises of New Malden, Surrey, to contact SBC at Chiasso for an explanation. Mr Park spoke on the telephone to a Mr Soncini. Mr Soncini told him that transmission of a copy payment order by SBC to a beneficiary such as Domicrest was an assurance by SBC that payment would be made as referred to in the order, and meant that the payment referred to was "guaranteed" by SBC; and that it was accordingly safe for Domicrest to release goods to Interglobal upon receipt of such a payment order. Mr Dilip Mirpuri himself telephoned Mr Soncini and received the same explanation, and Mr Soncini further told him that SBC would not be prepared to send a copy payment order to a beneficiary unless payment was assured, and that transmission of a copy payment order to Domicrest was "as good as having money in your account".
12. Even so, Domicrest was not yet ready to release goods upon receipt of the payment order and before SWIFT confirmation, despite pressure from Interglobal to do so. In September 1994, however, Mr Dilip Mirpuri telephoned Mr Soncini again. Mr Soncini repeated his earlier assurances, explaining that it was safe for Domicrest to release goods against copy payment orders from SBC, since payment was guaranteed. In response to a specific question from Mr Mirpuri as to what would happen if there were insufficient funds in Interglobal's account to fund the necessary payment, Mr Soncini replied that in that case he would not be prepared to fax a copy payment order. That allegation is relied on by Mr Dunning on behalf of SBC as undermining Domicrest's allegations of assurances by Mr Soncini in any stronger terms, or of any reliance on such assurances, but it seems to me that it is equally arguable that that matter is neutral. In any event it was not finally disputed that Domicrest has a good arguable case under article 468 CO.
13. Domicrest was persuaded, and from that time on released goods to Interglobal upon receipt of the copy payment orders from SBC. From September 1994 to September 1995 goods of about $5m in value were exported to Interglobal, and Domicrest was paid by SBC for them.
14. In early October 1995 difficulties arose in respect of a copy payment order dated 19 September 1995 which Domicrest had received from SBC and which went unpaid on the value date on 3 October. In a telephone conversation of Friday, 6 October Mr Fontana told Mr Park that the payment could not be honoured because there were insufficient funds in Interglobal's account. In a fax dated Monday, 9 October addressed to Mr Fontana, Mr Deepak Mirpuri wrote:

This statement is not acceptable to us, on the strength of your above payment advice we released the goods to your customer as we have done in several past dealings with you.

We give you formal notice if we do not receive the funds in the next 24 hours in our bank account, we will proceed with legal action ....

Payment was received shortly thereafter.

15. At about the same time in telephone conversation with Mr Mirpuri, Mr Soncini repeated the assurances which had previously been given.
16. Ultimately, three copy payment orders sent to Domicrest by SBC remained unpaid. Two were dated 19 October 1995, and the third was dated 26 October. They were for a combined total of US $307,912. Two of them were initialled for SBC by Mr Fontana, one of the earlier two was not. On 26 October Mr Dilip Mirpuri telephoned Mr Soncini to obtain specific confirmation that the three payment orders would be met. In the course of the conversation Mr Soncini consulted Mr Fontana. Mr Soncini confirmed that the payment orders would be met and again stated that the sending of a copy payment order meant that payment was "guaranteed".
17. Domicrest therefore gave orders for the release of the goods covered by these payment orders, some of which were being held in store in Switzerland, and some in Italy.
18. SBC's refusal to pay these three payment orders has led in due course to these proceedings. Domicrest pleads that in the circumstances SBC is liable to it both in contract and in tort. In contract the claim was at one time put in three ways as a matter of Swiss law: it was said that pursuant to article 468 CO SBC is bound, as a primary debtor, to make the payments specified in the payment orders; alternatively, pursuant to article 111 CO, it is liable as a guarantor; thirdly, it is liable at large for breach of the warranties as to payment made in the various alleged conversations relied upon. It may have been that this third way of putting the claim did not add anything to the first two ways, in that SBC, if liable, is liable either as a primary debtor under article 468, or as a secondary obligor for Interglobal's default under article 111. I have already recited article 468 above. Article 111, which falls within the Third Chapter of the Code of Obligations, under the heading "Obligations Affecting Third Persons", reads as follows:

A party who promises to the other party performance by a third person becomes liable for damages resulting from the non-performance of the obligation by the third person.

Ultimately, however, Domicrest reamended so as to rely exclusively on article 468.

19. So far as tort is concerned, Domicrest pleads that the statements made by Mr Soncini in his various telephone conversations amounted to representations as to the effect of the payment orders, and to an implied representation that there were sufficient funds in Interglobal's account to fund payment. Domicrest alleges in the alternative that those representations were false and misleading and made negligently, in that the sending of the payment orders did not constitute an assurance of payment, nor was payment guaranteed, nor was it safe to release the goods before payment; nor were there sufficient monies in Interglobal's account to fund the payments. It will be observed that the implied representation as to the state of Interglobal's account may be consistent with Domicrest's claim in contract, albeit irrelevant if that claim in contract is a good one; but that the rest of Domicrest's claim in tort is premised upon the failure of the contractual claim.
20. I should add that Domicrest's pleadings have been amended and reamended prior to or in the course of the hearing before me. Its writ did not originally include a claim in debt, only for damages; and its points of claim have been amended to seek to make it clear that the contractual claim is put in debt, as an obligation on SBC to make payment on its own account, and not merely in damages. Moreover, whereas in their original form, Domicrest's pleadings put Domicrest's contractual claim primarily as a matter of English law, and only in the alternative ("If (which is not admitted) the contractual relationship .... is governed by the laws of Switzerland") under Swiss law, the amended points of claim relied solely on Swiss law. The ultimate reamendment was to rely solely on article 468 CO.

SBC's challenge, and evidence of Swiss law

21. Mr Dunning, on behalf of SBC, has very properly eschewed the taking of any formal point as to the introduction of these amendments, some of which may be inchoate even now, while reserving his position as to costs.
22. SBC, in an affidavit made on its behalf by its solicitor, Mr Fine, challenges Domicrest's allegations on the facts root and branch. Thus it says that Mr Fontana, although an assistant manager, deals mainly with retail customers; that Mr Soncini is only a cashier that neither of them was experienced or qualified in matters of international trade finance, or authorised to make the kind of representations or warranties alleged; and that in any event they deny any conversations in the terms alleged or indeed any conversations at all with either Mr Mirpuri.
23. As to the law, however, SBC's position was less clear. Mr Fine said that the proper law of any contractual relationship is Swiss law: on that there is now common ground. But as to the effect of article 468 CO nothing was there said. Reliance was placed on the evidence of Maitre Georg Friedli, a Swiss attorney, to the effect that the place of performance of the obligation in question (for the purposes of Article 5(1)) is Switzerland. That evidence, however, was premised on the hypothesis that the nature of the obligation alleged was solely that of any obligation to ensure that payment was made by SBC's customer. As Mr Fine said:

The reason for this [i.e. Mr Friedli's advice that the place of performance is Switzerland] is that the plaintiff does not allege that the defendant owes the plaintiff a debt of money, but that it was under an obligation to ensure that the payment was made by its customer.

24. Thus Mr Friedli in his first affidavit said nothing about article 468 CO-even though it was SBC's case that the proper law of any contractual relationship is Swiss law, and even though Domicrest's points of claim already at that time raised at least a secondary case under Swiss law and in that context specifically referred to article 468 CO-but merely said of the payment orders:

Such order is usually signed by the customer and marked with the initials by a bank official to indicate the authenticity of the customer's signature. The bank, who is depending on the instructions given by the customer, will carry out the instructions of such customer provided that the customer's account has sufficient funds or a sufficient credit line is in place. Under these circumstances the bank in the ordinary course of its business does normally not enter into any binding commitment with a third party.

Having stated that that was the normal effect of a payment order, Mr Friedli then interpreted the pleaded contract or warranty in the same way, saying that SBC's obligation was-

to ensure that the payment orders were executed, provided that the customer's account had sufficient funds or a sufficient credit line in place ....According to the express or implied agreement of the parties fulfilment of such contractual commitments would have had to have taken place in Switzerland and not in England, because the relevant bank account was in Switzerland and the necessary steps by the defendant would have had to be taken in Switzerland. The case might possibly have been different if it was alleged that the defendant had promised to make payment on its own account, because, for example, it has issued a guarantee.

25. In response, Maitre Oscar Battegay, Domicrest's Swiss attorney, deposed that in his opinion SBC assumed a direct obligation to Domicrest, by virtue of article 468 CO, to make payment on its own account. He said that by signing and sending the payment orders to Domicrest, SBC accepted, or is to be deemed to have accepted, the order without reservation. Alternatively, SBC was liable in damages under article 111 CO. As for the place of performance of SBC's contractual obligation, that was governed by article 74 CO, and there was nothing to displace the ordinary rule there laid down that in the absence of any express or implied agreement to the contrary the place of performance of such pecuniary obligations was the place where the creditor resides. An obligation to ensure payment was made to Domicrest would normally fall to be performed by making payment in England.
26. In his second affidavit Mr Friedli agreed that articles 466 et seq.CO were "potentially relevant" to the present case, but that liability under such articles:

arises only where the bank has accepted the Order .... by sending the payment order to the plaintiff with an intention thereby to create a direct obligation owed by it to the plaintiff on its own account.

He did not explain why, on Domicrest's pleadings, that did not arise in the present case, unless it be that there was no clear claim in debt on the writ and points of claim as they originally stood. But I do not think that so formal a point was in his mind, for he added, in order to dispute any liability even in connection with article 111 CO, that Domicrest "did not guarantee the performance of Interglobal's obligations but only to help and assist to execute the payment orders given by the customer". I find it difficult to understand why Mr Friedli interpreted Domicrest's pleadings, with their references to assurances of payment and to payment being "guaranteed", and to the payment orders being "as good as money" in Domicrest's account, as merely an undertaking to pay if there was money in Interglobal's account.

27. As for the point about place of performance, he answered that by citing textbook authority for the proposition that the place of performance is the place of business of the bank.
28. Mr Battegay in turn responded with a second affidavit, in which he questioned Mr Friedli's interpretation of Domicrest's pleadings. He also cited the recent Swiss case of Company X v. the Swiss Federation Postal and Telephone Services (PTT) and the State of Peru, ATF 122 III 242, where in its judgment of 4 June 1996 the Federal Tribunal said in an obiter passage that a declaration of acceptance of an order for the purposes of article 468 CO could be effected by conduct, for instance where:

the payee could in good faith based on the conduct of the recipient of the order in respect of the declaration assume that the latter intended to bind himself to pay vis-à-vis the former.

29. As for the place of performance, he countered in this and a third affidavit with an explanation of Mr Friedli's textbook citations as being premised on an assumption that the order was to be presented for payment at the counter of the bank accepting the order, unlike the present case where there was no requirement of presentation and payment was to be made under the terms of the orders themselves to Domicrest's bank in London.
30. I shall have to revert below to the textbooks cited by Mr Friedli and Mr Battegay.

Article 5(1), and the "place of performance of the obligation in question".

31. As long as its pleadings, in their original formulation, relied primarily on English law, Domicrest was vulnerable to at any rate the argument that it was at most relying on an obligation under which SBC promised only that it would "see to it" that Interglobal would pay. Thus Mr Dunning reminded me that the typical form of a guarantee under English law was that of a secondary obligation, answerable in damages and not in debt, under which the guarantor would see to it that another person, did something. On that basis, Mr Dunning submitted that the place of performance of that obligation must be where both SBC and it customer Interglobal were, in Switzerland. For these purposes, it did not matter that SBC might be in breach of its obligation to pay, since it was already liable to pay damages upon its failure to ensure that its customer had paid. In this connection Mr Dunning relied by way of analogy on the decision in Union Transport Plc v. Continental Lines S.A. ,[1992] 1 W.L.R. 15, where it was held that the principal obligation in question was that of nominating a vessel and that the subsequent failure to supply a vessel was only the necessary consequence of having failed to nominate in the first place. As the European Court of Justice has said in Case C-266/85 Shenavai v. Kreischer, [1987] ECR 239 :

However, in such a case the court before which the matter is brought will, when determining whether it has jurisdiction, be guided by the maxim accesorium sequitur principale; in other words, where various obligations are in issue, it will be the principal obligation which will determine its jurisdiction.

32. In the event I did not have to decide that point. Nor did I ultimately have to decide a rather different point which arose at an intermediate stage of the argument when it became clear that Domicrest was relying on an interpretation of SBC's obligation, whether under English or Swiss law, in the alternative as a primary obligation in debt or as a secondary obligation in damages. These are true alternatives and thus on such a plea only one interpretation could in the end survive (if either could). It is difficult in such circumstances to view either obligation as taking a primary position vis-à-vis the other. However, that point too was withdrawn from argument when Mr Orr, on behalf of Domicrest, reamended his pleadings so as to rely solely upon article 468 CO.
33. In the end, therefore there remained but a single contractual obligation relied on, under article 468 CO, and the question which has to be determined is whether the place of performance of that obligation was in Switzerland, as SBC alleged, or in England, which was Domicrest's case. That question has to be determined by the law which governs the contract, namely Swiss law. 5
34. The governing provision of Swiss law on this question is article 74 CO, which reads as follows:

74. The place of performance is determined by the express or implied agreement of the parties.

In the absence of stipulations to the contrary, the following provisions shall apply:

1. Pecuniary obligations shall be paid at the creditor's place of residence at the time of payment....

It might have been thought that it was the express or at least the implied agreement of the parties that SBC's obligation to pay Domicrest was to be performed in London, at Domicrest's nominated London branch, the details of which were entered into each payment order; a fortiori in circumstances where that had been the course of conduct for over a year. That, however, was not the view of Mr Freidli, who did not even remark on those facts. Mr Battegay, however, did saying in his second affidavit:

As I explained in my first affidavit, there was on the facts of this case no express or implied agreement of the parties that payment would be made in Switzerland. If anything, the facts point to the parties impliedly agreeing to payment being made in London, which is where the plaintiff's bankers were. In the absence of any express or implied agreement, the defendant's obligation was to be performed by payment at the creditor's place of residence in accordance with article 74(1) CO.

Domicrest is of course resident in England. Mr Friedli's view, however, was that either there was an implied agreement for performance in Switzerland (his first affidavit) or that there was, on the authority of the textbook writers, something which almost amounted to a rule of law that payment by a bank under a payment order for the purposes of article 468 CO was to be made at the bank's place of business, i.e. at SBC's branch at Chiasso (his second and third affidavits).

35. It seems to me that Mr Friedli's first opinion was premised on his undertaking of the alleged obligation as merely one at its highest to ensure that Domicrest was paid by Interglobal: since that "would involve the granting of a credit line to Interglobal", the place of performance would be Switzerland. I do not think that that view survives, or was intended to survive, concentration on article 468 as creating, as it is now admitted and as I find that there is a good arguable case it does create, a primary obligation on SBC to pay on its own account. On this premise, Mr Friedli's second view was founded on the commentaries of Weber, Becker, von Tuhr and Gautschi.
36. For this latter purpose, the commentaries relied on are brief and elliptical. I state them below.

Weber, Berner Commentary states:

In the case of a letter of credit the bank as a rule has to perform at its head office.7 This is the principle usually held in the case of payment orders. 8

Becker, states:

It is to be noted that the order to pay a sum of money gives rise, by its very nature, to a debt to be collected from the debtor at his residence. This arises, with a written order to pay a sum of money, out of the nature of the case. The written order to pay a sum of money, however, forms the rule, and therefore, in case of doubt, the same is true with verbal orders to pay a sum of money.

Von Tuhr, states:

The reason why the creditor can refuse the order that was offered him, while he has to accept payment by a representative of the debtor, is, that the creditor would have to collect the payment at the debtor's address, while according to article 74(1) he could demand that the money is brought to him.

Gautschi, Berner Commentary, has more than one reference to the topic under consideration. The longest reference is at his note 6b thus:

The order instruction under CO not only does not presuppose any accompanying document but is also to be interpreted, from the point of view of the place of performance, according to the will of the parties expressed without adopting any specific written form; ATF 73 II II 46. The will of the parties to create an obligation to collect on the part of the party to whom the order is addressed, must be supposed to exist in fact if the person giving the order hands or forwards to the recipient an order document which the latter is to present to the party to whom the order is addressed ("Pay Mr X Sfr 1,000 against presentation of this order deed"). An order within the meaning of article 466 CO is also deemed to exist if the party giving the orders, orders the party to whom the order is addressed directly to pay a future debt to the recipient instead of to the party giving the order, the intention being that the money which is due should continue to be a debt payable at the domicile of the creditor within the meaning of article 74 II (1) CO even when payment is made to the recipient, ATF 73 II 405.

He later continues at the same passage:

Becker, who has a different opinion in note 13 of his commentary to article 468 CO, describes it as in the nature of the order to pay a sum of money, that the debt has to be collected at the habitual residence of the debtor; this is true for the written order to pay a sum of money which is to be presented according to the BGB [the German Civil Code].

There is also a passage at this note 12d to article 468 itself:

The written payment order, that is given to the recipient represents in general contrary to article 74(1) CO a debt to be collected at the debtor's address ....

37. It appears therefore to be the view of the commentators that in general a payment order will be interpreted as involving an implied agreement, according to the will of the parties, that payment is to be made at the counters of the paying bank, thus ousting the fall-back position of article 74(1). The question then arises: from what is this implied agreement derived? There is no basis for supposing that a rule of law outside article 74 itself exists purely for the purpose of such payment orders. The solution is suggested by Mr Battegay in his second affidavit. The analogy with a letter of credit, perhaps a paradigm case of a payment order accepted by a bank, and a case where typically documents have to be presented to the paying bank, is the clue. That is the analogy utilised by Weber. The need to present the payment order to the acceptor of the order is also the basis of the implication derived by Gautschi in the longest of the excerpts cited from his work. Per contra where the order is not to pay "against presentation", but to pay directly to the recipient: in that case article 74(1) applies and the order will be payable at the creditor's domicile. To the extent that Becker is of a "different opinion in note 13 of his commentary", that is because the order to pay is an order which, as Gautschi observes "is to be presented". That would explain why Becker considers that a payment order is to be collected from the debtor's residence "out of the nature of the case". As Mr Battegay concludes:

The rule relating to the place of payment of letters of credit is based upon a specific term binding upon the parties. In the case of other payment orders, no such rule applies. The place of performance of other payment order obligations is to be determined in accordance with article 74 CO.

38. In his third affidavit Mr Battegay adds the following:

Gautschi's commentary on the Code of Obligations is, in my experience, widely referred to and relied upon by Swiss courts and he is regarded as a leading and authoritative commentator on the Swiss Code of Obligations. I believe that a Swiss court would find his views on the place of performance of the obligation under article 468 CO persuasive and compelling.

I would furthermore note that Gautschi's commentary is much more recent than Becker's, having been published in 1962, whereas Becker's was published in 1934. Becker's text is no longer available, whereas Gautschi's text is generally available in legal bookshops in Switzerland.

In any event, the writings of legal authors do not constitute "authorities" which are binding upon a court under Swiss law. Under Article 1 paragraph 3 of the Swiss Civil Code (pages 9 and 13 of "ONB3"), the judge is to be "guided" by legal doctrine. Where the views of legal authors differ, the judge is not bound to follow any one particular author. In each ease, the judge's overriding obligation is to apply the provisions of the applicable Law (in this case, the Code of Obligations) in accordance with its letter or spirit (see Article 1, paragraph 1 of the Swiss Civil Code).

39. Having considered these matters carefully, I am fully satisfied that Mr Battegay's opinion is to be preferred, and I so find. The contrary opinion, to the effect that there is an implied agreement to perform the obligation (of paying Domicrest at its bankers in London) in Switzerland is to my mind unrealistic.
40. It therefore follows that Domicrest has succeeded in showing that the place of performance of the obligation in question for the purpose of Article 5(1) of the EFTA Judgments Convention in England, and thus that SBC is properly sued in these courts so far at any rate as Domicrest's contractual claim is concerned. It is said by SBC that by reason of Switzerland's reservation to the EFTA Judgments Convention, a judgment exclusively based on jurisdiction under Article 5(1) cannot be enforced against it in Switzerland. It is also said that Swiss banking secrecy laws may prevent SBC from providing full discovery in England. I cannot be influenced by such points.

Article 5(3), and "the place where the harmful event occurred"

41. There was ultimately no dispute that Domicrest had a good arguable case in tort for negligent misrepresentation.
42. If I had held that Domicrest's reliance on Article 5(1) in contract had failed, then I would have to go on to rule upon Mr Dunning's submission that in such circumstances Domicrest's reliance on Article 5(3) in tort must also fail.12 I would merely observe that in the present case not only are Domicrest's claims in contract and in tort not parallel, but the claim in tort is for the most part premised on the very opposite of the position alleged in contract, viz. on the basis that Mr Soncini was wrong, not right, to assure Domicrest that the payment order was as good as cash.
43. As it is, however, the only question which falls to be decided is whether the place where the harmful event occurred was in England. It does not of course follow from the fact that I have held that Domicrest's contractual claim falls within Article 5(1) that therefore Domicrest's tortious claim must likewise fall within Article 5(3). That has to be separately established.
44. It is clear that the expression "the harmful event" refers either to the event giving rise to the damage or to the damage itself 13:

Thus the meaning of the expression "place where the harmful event occurred" in Article 5(3) must be established in such a way that the plaintiff has an option to commence proceedings either at the place where the damage occurred or the place of the event giving rise to it.

45. Three other important decisions of the European Court on Article 5(3) are Case C-220/88, Dumez France and Tracoba v. Hessische Landesbank, Case C-68/93, [1990] ECR I-49, Shevill v. Presse Alliance S.A. ,[1995] ECR I-415, and Case C-364/93, Marinari v. Lloyd's Bank Plc. [1995] ECR I-2719.
46. Dumez France was a case concerned with pure economic loss: French contractors sued a German bank in quasi-delict alleging that it had wrongly withdrawn its financing support from a building project in Germany. The contractors sued in France on the ground that that was where they had suffered loss following the collapse of their subsidiaries in Germany. The Court said:

[17] It is only by way of exception to the general rule whereby jurisdiction is attributed to the courts of the State of the defendant's domicile that Title II, section 2 attributes special jurisdiction in certain cases, including the case envisaged by Article 5(3) of the Convention. As the Court has already held (Mines de Potasse D'Alsace, paragraphs [10] and [11]), those cases of special jurisdiction, the choice of which are a matter for the plaintiff, are based on the existence of a particularly close connecting factor between the dispute and courts other than those of the State of the defendant's domicile, which justifies the attribution of jurisdiction to those courts for reasons relating to the sound administration of justice and the efficacious conduct of proceedings.

[18] In order to meet that objective, which is of fundamental importance in a convention which has essentially to promote the recognition and enforcement of judgments in States other than those in which they were delivered, it is necessary to avoid the multiplication of courts of competent jurisdiction which would heighten the risk of irreconcilable decisions, this being the reason for which recognition or an order for enforcement is withheld by virtue of Article 27(3) of the Convention.

[19] Furthermore, that objective militates against any interpretation of the Convention which, otherwise than in the cases expressly provided for, might lead to recognition of the jurisdiction of the courts of the plaintiff's domicile and would enable a plaintiff to determine the competent court by his choice of domicile.

[20] It follows from the foregoing considerations that although, by virtue of a previous judgment of the Court (in Mines de Potasse D'Alsace, cited above), the expression "place where the harmful event occurred" contained in Article 5(3) of the Convention may refer to the place where the damage occurred, the latter concept can be understood only as indicating the place where the event giving rise to the damage, and entailing tortious, delictual or quasi-delictual liability, directly produced its harmful effects upon the person who is the immediate victim of that event.

47. In Shevill it was held that in the case of a libel published in several Contracting States, the event giving rise to the damage occurred only where the publisher was established, whereas the damage itself was suffered in each state where the publication was distributed. In particular, paragraph [24] of the judgment emphasised that the place where the event giving rise to the damage occurred was to be seen in terms of the origin of the damage, thus:

In the case of a libel by a newspaper article in several Contracting States, the place of the event giving rise to the damage, within the meaning of those judgments, can only be the place where the publisher of the newspaper in question is established, since that is the place where the harmful event originated and from which the libel was issued and put into circulation.

48. In Marinari the question was whether an Italian who had deposited promissory notes in a bank in England, where the notes were sequestrated as being of dubious origin and he was arrested, could sue that bank in Italy for the value of the notes and loss and damage consequent on his arrest, on the basis that he had suffered that damage in Italy. The European Court of Justice held that he could not, and that both the event giving rise to damage and the damage itself had all occurred in England. The Court said:

In those two judgments [Mines de Potasse D'Alsace and Shevill], the court considered that the place of the event giving rise to the damage no less than the place where the damage occurred could constitute a significant connecting factor from the point of view of jurisdiction. It added that to decide in favour only of the place giving rise to the damage would, in an appreciable number of cases, cause confusion between the heads of jurisdiction laid down by Articles 2 and 5(3) of the Convention, so that the latter provision would, to that extent, lose its effectiveness.

[13] The choice thus available to the plaintiff cannot however be extended beyond the particular circumstances which justify it: such an extension would negate the general principle laid down in the first paragraph of Article 2 of the Convention that the courts of the Contracting State where the defendant is domiciled are to have jurisdiction and would lead to recognition, in cases other than those expressly indicated, of the jurisdiction of the courts for the plaintiff's domicile, which the Convention militates against by excluding, in the second paragraph of Article 3, the application of national provisions which make such jurisdiction available for proceedings against defendants domiciled in the territory of a Contracting State.

[14] Whilst it is recognised that the term "place where the harmful event occurred" within the meaning of Article 5(3) of the Convention may cover both the place where the damage occurred and the place of the event giving rise to it, that term cannot, however, be construed so extensively as to encompass any place where the adverse consequences of an event that has already caused actual damage elsewhere can be felt.

[15] Consequently, that term cannot be construed as including the place where, as in the present case, the victim claims to have suffered financial damage consequential on initial damage arising and suffered by him in another Contracting State.

49. In the light of these authorities Mr Orr submitted on behalf of Domicrest that England is both the place where the event giving rise to the damage occurred and the place where the damage itself occurred. As for the former, the relevant event which gave rise to the damage was the receipt by Domicrest in England of the statements and assurances which SBC intented Domicrest to rely upon and which Domicrest did rely upon. As for the damage itself, England was where the economic loss was suffered, for it was where Domicrest maintained its bank account, where it received and acted upon the assurances, and where its commercial operations were based. It was wrong to look to the release of the goods (in Switzerland and Italy) as the place where the damage occurred, because Domicrest's cause of action was not complete upon the release of the goods, but only when damage was actually suffered, i.e. when the monies due in accordance with the payment orders were not paid.
50. Mr Dunning on the other hand submitted on behalf of SBC that the place where the event giving rise to the damage occurred was Switzerland, since that was where the alleged failure to exercise care in the making of the representations and the actual making of the representations themselves took place. As for where damage occurred, that was in Switzerland and Italy, where the goods were released. It was the release of the goods which had caused Domicrest's loss, indeed its damages in tort were pleaded (at least in part) by reference to their value. As for the loss of their price, that had not been caused by the alleged negligence, but by Interglobal's non-payment.
51. It appears that there is no case in which the European Court has had to consider the application of Article 5(3) to a claim based on negligent misstatement. It is of course of the nature of such a claim that the damage is likely to be pure economic loss, and that the effect of the misstatement upon the plaintiff, whether in terms of receiving and acting upon the misstatement or in terms of suffering the loss, is as likely as not to occur in the country from which the plaintiff operates; and that is so whether the misstatement is oral or in writing. It is of course perfectly possible that the plaintiff operates outside the country of his domicile, as did the plaintiffs through their subsidiaries in Dumez France, and thus receives and acts upon the misstatement elsewhere: but in the nature of things those matters are by and large likely to occur in the plaintiff's own country. It must therefore be a matter of concern that a rule in relation to negligent misstatement which emphasises where the misstatement is received and acted upon, or where the economic loss is finally felt, is a rule which over-favours the plaintiff's jurisdiction, contrary to the essential structure of the Convention as expressed in Article 2, and contrary to the warnings expressed by the European Court in the citations above. Nevertheless, Article 5(3) was of course intended to be an exception to Article 2, and if such a rule is properly rooted within the language and rationale of that exception, then there can be no complaint. In particular there can be no complaint that Article 5(3), if properly applied in accordance with its rationale, might in an individual case sanction jurisdiction in a forum which might be said to be a forum non conveniens.
52. Although there are no European Court decisions on the application of Article 5(3) to a case of negligent misstatement, there is an English decision which was strongly relied upon by Mr Orr, and that is Minster Investments v. Hyundai, [1988] 2 Lloyd's Rep. 621, a decision of Steyn J. Minster was an English company which had contracted with Hyundai for the purchase of containers. Also sued was a French classification society with an office in South Korea. That society provided Hyundai with inspection certificates as to the fitness of the containers: Hyundai sent those certificates on to Minster in England, who in reliance on them released payment to Hyundai. The containers were rejected as unfit, and the society was sued for negligent misrepresentation. Jurisdiction was obtained against Hyundai, but the society challenged the claim against it on the ground that the case did not fall within Article 5(3). Steyn J. was conscious of Mines de Potasse D'Alsace, but of course the three other cases of the European Court cited above had not then taken place. He reasoned as follows 24:

One can assert that "the event giving rise to the liability" is the negligent work performed in France and Korea, or with equal conviction that it is the receipt in England by plaintiffs of the negligently produced certificates, reliance thereon, and the instructions given from England to pay the first defendants in Korea. It would, in my judgment, be wrong to treat the language of the European Court of Justice in this case as if it has statutory force and as if it provides comprehensive guidance which will be useful in every single case. Instead, and taking into account the broad approach of the European Court of Justice, I prefer to base my decision on the very words of section 5(3) of the Convention, as enacted in the 1982 legislation.

In my judgment the question is simply what the words "where the harmful event occurred", read in the context of the 1982 Act, signify in relation to the present dispute. Faced with a number of connecting factors with different Member States, in a tort case, I am not attracted by the argument that the decisive connecting factor is always the one which is first in time, even if it can be said to be a condition sine qua non to the commission of the tort. A moment's reflection will show what artificial results would follow from the adoption of such a rigid rule because often an insubstantial connecting factor will then be decisive of the jurisdictional issue. In my judgment, common sense and policy considerations require one to ask where in substance the cause of action in tort arises, or what place the tort is most closely connected with. That is how I intend to approach the question before me.

Now I turn to the nature of the plaintiffs' claim against the second defendants. In my view undue weight was placed on the niceties of the way in which the case against the second defendants has been pleaded, and on the particular descriptions of the claim against the second defendants in the affidavits. One should look at the true nature of the case of the plaintiffs against the second defendants. Approaching the matter in this way, it seems to me that the plaintiffs are alleging against the defendants the making of negligent misstatements, or the giving of negligent advice, by virtue of the certificates sent to England, reliance on those misstatements or wrong advice in England, and the decision in England to authorise payment to the first defendants in Korea. In essence what is alleged is liability within the scope of the doctrine laid down in HedleyByrne & Co. Ltd v. Heller & Partners Ltd, [1963] 1 Lloyd's Rep 485; [1964] AC 465. The essence of that cause of action is a negligent misstatement, or negligent advice, and reliance on it, and not the historical carelessness which led to the misstatement or the wrong advice. The event which caused harm to the plaintiffs in this case was the receipt in England of the negligently produced certificates of the second defendants, which the plaintiffs were intended to rely on and did rely on. If that view is right, it follows, on a realistic appraisal of the plaintiffs' cause of action against the second defendants, that "the place where the harmful event occurred" within the meaning of section 5(3) was England.

53. That reasoning, if I may say so, is undoubtedly attractive; moreover the place where the damage occurred appears in any event to have been England from where the price of the containers was released and where at that time the loss was felt: so that I do not think that the ultimate decision can be subject to any question. Nevertheless, I do not feel confident that Steyn J. would have been able to reason as he did in that judgment if he had had the later decisions of the European Court before him. He rejected the argument that "the decisive connecting factor is always the one which is first in time", and yet Dumez France, Shevill, and Marinari each in its own way emphasises that to look to the later consequences is to run the risk of favouring the forum actoris. They also emphasise that the formula developed by Mines de Potasse D'Alsace is to be strictly applied. Thus in Dumez France the loss was originally experienced in the French contractors' German subsidiaries: it was irrelevant that the real loss was ultimately felt in France. The European Court instead emphasised the place where the harmful effects were directly produced. In Shevill, the Court emphasised the place where the harmful event originated. In Marinari again the Court emphasised that if actual damage has already been experienced in one place, one should not go on to ask where else the financial consequences of that damage were to be found. Ultimately, Steyn J. directed himself by asking "where in substance the cause of action in tort arises, or what place the tort is most closely connected with": but I am concerned that that test does not reflect either the wording or the philosophy of the Convention as laid down in the European Court's decisions. The Convention's philosophy is rather to proceed by means of firm rules, whose rationale lies in the importance of connecting factors to various situations, but the outcome of which may well lead in a particular case to a forum which does not conveniently reflect the substance of the dispute. I refer again to Custom Made.25
54. Moreover, as the decisions of the European Court remind their readers, the special jurisdictions under Articles 5 and 6 are exceptional, and must be interpreted restrictively. 26
55. It is clear that the concept of the "place where the harmful event occurred" must be given an autonomous meaning, not dependent on national law. The current tort jurisdiction under RSC, Ord. 11, r. 1(1)(f) has been amended to reflect the language of the Convention's Article 5(3). Thus there is jurisdiction to serve out where:

the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction.

No decision under this jurisdiction has, however, been relied on before me. Under the previous wording of what was then rule 1(1)(h)-"founded on a tort committed within the jurisdiction"-there were a number of decisions regarding negligent or fraudulent misrepresentation which were cited to Steyn J., but which he regarded as of minimal relevance which is clearly right, because the test is different from the Convention's test. It may be observed how the result in those decisions varied depending on whether the representation was written as distinct from by means of instantaneous transmission such as telephone or telex (and now one would refer as well to fax): in the former case the tort was committed where the writing was put into circulation, in the latter case where it was received and acted upon. That may be said to illustrate the difficulty of deciding where a tort is committed: is it where the defendant acts, or where the harm ensues, or where in substance the cause of action arises? In this context there is a most interesting discussion in Dicey & Morris, The Conflict of Laws. The conclusion is that the modern and best test is the "substance" test. It was that test which Steyn J. applied in Minster Investments v. Hyundai. I have however given my reasons for thinking, albeit with diffidence and in the light of subsequent decisions of the European Court, that I am not free to apply the broad test adopted by Steyn J., but must limit myself to the more structured formula adopted and applied in those decisions.

56. Applying that formula, it seems to me that the place where the harmful event giving rise to the damage occurs in a case of negligent misstatement is, by analogy with the tort of defamation, where the misstatement originates. It is there that the negligence, even if not every element of the tort, is likely to take place; and for that and other reasons the place from which the misstatement is put into circulation is as good a place in which to found jurisdiction as the place where the misstatement is acted on, even if receipt and reliance are essential parts of the tort. For these purposes it seems to me that there is no difference between a written document and an oral or other instantaneous communication sufficient to distinguish between such cases. Although it may be argued that in the case of instantaneous communications and perhaps especially in the case of telephone conversations the misstatement occurs as much where it is heard as where it is spoken, nevertheless it remains true as it seems to me that it is the representor's negligent speech rather than the hearer's receipt of them which best identifies the harmful event which sets the tort in motion. To prefer receipt and reliance as epitomising the harmful event giving rise to the damage in the case of negligent misstatement is, I think, to ignore the fact that the plaintiff also has the option of suing in the courts of the place where the damage occurs-which is quite likely to be at the place of receipt and reliance.
57. As for the place where the damage itself occurs, that may, of course be elsewhere than the place of the event giving rise to the damage and, as I have suggested, is quite likely to be where the misstatement is heard and relied on, but in this case I do not think that it was in England. In my judgment Mr Dunning is right to submit that the damage occurred in Switzerland and Italy, where the goods were released without prior payment. It is by reference to the loss of those goods that the damages are in my view primarily pleaded, even if there is also an alternative plea in sub-paragraph (3) in terms of the unpaid price (a plea which in any event may have been intended for the claim in breach of contract). In truth, even though Domicrest would have suffered no loss if SBC, or Interglobal, had paid the price of those goods, nevertheless it has to be remembered that the remedy in negligent misstatement is not, as it is in contract, to be put in the same position as if the contract had been performed, but depends on the answer to the question: what would have happened if the negligent misstatement had not been made? In that case, the goods would not have been released before payment and thus lost to Domicrest. The essence of the complaint is in any event that the goods were released prior to payment on the strength of SBC's representations and contrary to Domicrest's trading policy. It seems to me that this is consistent with the decision in Marinari.
58. Seeing that the misstatements complained about relate to the status and effect of a Swiss banking account under Swiss law or as to the state of the account of a Swiss bank's Swiss customer, it can hardly be thought that in this case at any rate such an approach has led to an inappropriate forum for that claim.
59. My decision as to the tort claim does of course mean that Domicrest cannot pursue both its contract and its tort claims altogether in one action in England. There is a real detriment in that respect, and one that cuts across another aspect of the philosophy of the Convention. Nevertheless, the answer is that given in Kalfelis and underlined by Lord Goff of Chieveley in his speech in Klienwort Benson Ltd v. Glasgow City Council:

.... while disadvantages may arise from different aspects of the same dispute being adjudicated upon by different courts, the plaintiff is always entitled to bring his action in its entirety before the courts of the defendant's domicile.

Conclusion

60. For these reasons, I conclude that Domicrest is entitled to pursue its contractual claim under the payment orders pursuant to article 468 CO in England, but that SBC's challenge to the jurisdiction of this court over Domicrest's claim in tort must succeed.