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

IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		1st February 2001

KENNETH ROKISON QC: In this application, the 3rd defendant seeks an order under Part 11 of the Civil Procedure Rules that the court does not have jurisdiction to try the claims brought by the claimant against the 3rd defendant, and for an order that the claim, form and service thereof upon the 3rd defendant be set aside.

Alfred Dunhill Limited (ADL) is an English company which was for many years well-known at the top end of the market for its branded cigarettes, cigarette-lighters, pipes, and other smokers' products but it has, in recent years, expanded its business into the sale of luxury goods of many kinds, including travel goods, with which this action is concerned.

In June 1998, ADL entered into a contract with the 1st and/or 2nd defendants, who are part of the French group of companies, Group Guene, for the manufacture and supply of travel goods to be sold under the Alfred Dunhill label. That contract provided, by Clause 14, that disputes should be referred to the exclusive jurisdiction of the English courts. It was further provided by Clause 8 ("Subcontracting") that, subject to the prior written consent of ADL, Guene might obtain raw materials and components from third party suppliers or subcontract in whole or in part, or engage out-workers for the manufacture and supply of the products, subject to certain conditions set out, including that Guene should remain fully responsible for noncompliance with the terms of the contract.

The 3rd defendant, Limonta, is an Italian company which manufactures fabrics and other materials. In the course of 1998 and 1999, arrangements were made whereby Limonta was to provide the fabrics to Guene for the production of various items of luggage to be supplied to ADL under the contract, to be sold as part of its "London Traveller" range.

Purchase orders were sent by ADL to Guene concerning the items in question, and orders for the fabric were placed by Guene with Limonta. ADL claims that items of luggage produced for test purposes, pursuant the contract, proved that they were not fit for their purpose in so far as the "Seamont" fabric supplied by Limonta was insufficiently strong and, in particular, appeared to have been made of cotton rather than a cotton/polyester or polyamide mix. The orders were cancelled. The fabric was ordered from another supplier and ADL now sues for its alleged financial loss.

Originally, ADL's claim against Limonta included a claim for rescision of the contract which was said to have been made between ADL and Limonta on the basis that, in contracting with Limonta for the supply of "Seamont" fabric, Guene had acted as agents on behalf of ADL, a plea which was adopted and repeated by Guene in its Particulars of Defence. The claim for rescision was founded on a number of alleged misrepresentations. ADL's Particulars of Claim have been subject to amendments and it now claims against Limonta solely damages for misrepresentation under the Misrepresentation Act and alternatively at common law on the basis of the assertion that Limonta negligently and falsely represented to ADL that its "Seamont" fabric was fit for the purpose of being used for the manufacture of the "London Traveller" range of luggage, and that it was a mix of cotton and polyester, in reliance upon which, it is said, ADL instructed Guene to obtain its fabric from Limonta.

Limonta has not yet pleaded to the claim against it, but it has raised a preliminary objection to the jurisdiction of this court in accordance with the Brussels Convention, 1968, claiming: First, that the prima facie rule contained in Article 2 of the Convention, to the effect that a defendant can only be sued in the country of his domicile, has not been displaced and should be applied.

Second, that ADL's claim against it is in substance a matter relating to a contract under Article 5.1, under which any action could only be brought in Italy or France, being the place where it is said the relevant contract, if it existed, was to be performed.

Third, that ADL's claim does not fall within Article 5.3 as a "matter relating to a tort", but that, if it does, the harmful events occurred in Italy where the originating events, being the alleged misrepresentations, for the most part took place, or in France where the damage alleged to have been suffered by ADL occurred.

The relevant provisions of the Brussels Convention can be stated very shortly: Article 2 provides:

"Subject to the provisions of this Convention, persons domiciled in a contracting state shall, whatever their nationality, be sued in the courts of that state".

Article 5, which is under Section 2, headed "Special Jurisdiction," states:

"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 court for the place where the harmful event occurred".

In relation to the issue of jurisdiction, there are thus two main questions which fall to be answered, namely: (1) Is ADL's claim against Limonta in whole or in part a matter relating to a contract under Article 5.1; or (2) Is it a matter relating to tort under Article 5.3 and, if so, did the harmful event occur in England?

Limonta raises a preliminary objection to ADL's claim to the extent that it is founded on an alleged contract between ADL and Limonta, contending that ADL has not made out a sufficient good arguable case for the existence of such a contractual relationship. So far as this objection is concerned, ADL's evidence at this stage may seem to be a bit "thin", but as Mr Gruder QC, for ADL, points out, its Particulars of Claim have been verified on behalf of ADL as being true, and Guene has pleaded in its Particulars of Defence what is an arguable case that the relevant contract was made, not between ADL and Guene, but between ADL and Limonta through the agency of Guene. This must presumably be on the basis that the procedure envisaged by Article 8 of the contract between ADL and Guene was not followed in the present case, in so far as all the negotiations were carried out direct between ADL and Limonta, following which Guene was instructed by ADL to contract with Limonta rather than choosing Limonta as its subcontractor or 3rd party supplier and obtaining ADL's approval.

At this stage, I do not have to weigh the balance of probabilities on the limited evidence available and, in the absence of Guene, it would be wrong for me to express even a preliminary view on the prospects of the plea succeeding. I conclude that there is a sufficient issue to be tried.

It may also be observed that on the present evidence the assertion that the alleged misrepresentations became incorporated into the contract as contractual terms also seems to be a little flimsy. However, ADL now concedes that it cannot pursue any contractual claim against Limonta in England and the assertion is, therefore, not a necessary part of ADL's presently pleaded case against Limonta. ADL has also sought to amend its Particulars of Claim by deleting that part of the prayer which seeks an order for rescision of the alleged contract between ADL and Limonta. Its application to amend is not opposed if the case against the 3rd defendant is to continue.

However, Mr Onions QC, for Limonta, submits that the case presently advanced against it is "artificial" and points to the fact that, despite the amendments to the prayer, there remains an allegation in the body of the pleading that the contract has been rescinded. But, again, this is not a necessary part of ADL's case and, in the context of the amended pleading, seems to me simply to represent part of the history.

Mr Onions suggests that this is, in reality, a straightforward "sale of goods" case. So far as ADL's claims against Guene are concerned, that may be so, but so far as its claim against Limonta is concerned, this is at best an over-simplification. Indeed, approaching the case on the basis of the amended pleading, which seems to me to be the right approach, it is an inaccurate description.

I turn to the issues.

Both parties in their oral submissions chose to deal first with Article 5.3 of the Convention on the assumption that the matter was properly to be regarded as one relating to tort or delict. Mr Onions referred me to a number of cases decided by the European Court, and the principle clearly stated in those cases that the primary rule was that stated in Article 2, namely that a defendant must be sued in the place of his own domicile, and that the provisions of Article 5 were in derogation of that primary rule and should therefore be regarded as exceptions and construed restrictively - in particular, a court should lean against a construction which would have the effect that the claimant could choose to sue in the place of his domicile. But he conceded that the question was essentially one of construing and applying the relevant subsections of Article 5 to the facts, and that this was not a matter upon which the court enjoys any discretion.

Second, he relies on the principle stated in these cases to the effect that the provisions of Article 5 should be construed as being "autonomous" or "independent" and should not be construed or applied by reference to special rules of national law relating to particular causes of action. These principles were, I think, not in dispute.

Although Article 5.3 refers to "the harmful event", from which it would prima facie appear that a court seeking to apply a subsection should be looking for a single event, the subsection has been construed by the European Court in the case of Handelskwekerij G.J.Bier B.V. -v- Mines de Potasse d'Alsace S.A. (Case 21/76) [1978] 1Q.B. 708, as having two limbs, either one of which the claimant at his option can seek to satisfy. These are: (1) the place where the event which gives rise to the harm in respect of which the claimant claims occurred; and (2) the place where the damage in respect of which the claimant claims occurred. I refer in particular to paragraphs 19, 24 and 25 of the judgment, which state as follows:

"19. Thus the meaning of the expression 'place where the harmful event occurred' in article 5 (3) must be established in such a way as to acknowledge 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.

"24. Thus it should be answered that where the place of the happening of the event which may give rise to liability in tort, delict or quasi-delict and the place where that event results in damage are not identical, the expression 'place where the harmful event occurred,' in article 5 (3) of the Convention, must be understood as being intended to cover both the place where the damage occurred and the place of the event giving rise to it.

"25. The result is that the defendant may be sued, at the option of the plaintiff, either in the courts for the place where the damage occurred or in the courts for the place of the event which gives rise to and is at the origin of that damage."

I, therefore, ask: where did the originating event, giving rise to the damage, occur in the present case? ADL pleads that a number of misrepresentations were made: the first, orally, at a face-to-face meeting in Italy; one in the course of a telephone call made by a representative of Limonta while in Paris to ADL in London; and the others either by fax or letter from Italy to London or in the course of telephone calls made from Italy to London.

Mr Gruder submits that all these misrepresentations were effectively made in England where they were received. He does not so much rely on technical English "posting" rules, but rather on a general proposition that a representation cannot be regarded as having been made unless and until it is communicated to the representee. Mr Onions relies on a number of European cases and, in particular, the case of Shevill and Others -v- Presse Alliance SA [1995] 2 AC 18, a case in which the European Court held that the originating event in the case of a libel printed in the "Paris Soir" Newspaper occurred in the place of publication, namely France, even though the damage may have been caused to the claimants in the country or countries in which the newspapers were sold and read.

I refer in particular to paragraphs 24, 28, 29 and 30 of the judgment, reading as follows:

"24. In the case of a libel by a newspaper article distributed 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.

"28. The place where the damage occurred is the place where the event giving rise to the damage, entailing tortious, delictual or quasi-delictual liability, produced its harmful effects on the victim.

"29. In the case of an international libel through the press, the injury caused by a defamatory publication to the honour, reputation and good name of a natural or legal person occurs in the places where the publication is distributed, when the victim is known in those places.

"30. It follows that the courts of each contracting state in which the defamatory publication was distributed and in which the victim claims to have suffered injury to his reputation have jurisdiction to rule on the injury caused in that state to the victim's reputation."

Mr Onions also particularly relies on a decision in this court by Rix J, as he then was, in Domicrest Ltd -v- Swiss Bank Corporation [1999] QB 548. This was a case in which the plaintiff, an English company which exported electrical consumer goods, sued the Swiss Bank Corporation for damages for alleged negligent misstatement. It claimed that the Bank had represented that the transmission by the Bank to the plaintiff of a copy payment order constituted an assurance that payment would be made, and that payment was effectively guaranteed by the Bank, as a result of which the plaintiff agreed to, and did, release goods to the Bank's customers before payment had been received, and thereby suffering loss.

The alleged misrepresentation was made in the course of a telephone conversation from a Bank employee in Switzerland to the plaintiff company in London. Rix J stayed the proceedings on the application of the defendant, on the basis that, in the case of a negligent misstatement, the place where the harmful event giving rise to the damage occurred was, by analogy with the tort of defamation, where the misstatement was made rather than where it was received, and that for this purpose there was no difference between a written document and an oral or other instantaneous communication.

In a characteristically detailed judgment, Rix J referred to a number of decisions of the European Court, including Dumez France and Tracoba -v- Hessiche Landesbank [1990] ECR 1-49, Shevill, to which I have just referred, and Marinari -v- Lloyds Bank plc [1996] QB 217, to which I shall refer later. He also considered a judgment of Steyn J, as he then was, in Minster Investments Ltd and Others -v- Hyundai Heavy Industry Co Ltd & Another [1988] 2 Lloyds Rep. 621, in which a French classification society had been sued for providing to the plaintiffs in England inspection certificates which negligently described containers as being fit, which they were not, in reliance upon which Minster released payment for these containers to Hyundai in Korea.

Despite the decision of the European court in the Bier case, to which I have referred, Steyn J adopted what might be described as a "broad brush" approach, asking the question which in his view "common sense and policy considerations require", namely where, in substance, the cause of action in tort has arisen and with what place was the tort most closely connected.

At page 24 of the report, he said:

"Approaching the matter in this way, it seems to me that the plaintiffs are alleging against the defendants the making of neglect 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".

After referring to Hedley Byrne and the essence of the cause of the action he continued:

"The event which caused harm to the plaintiffs in this case was the receipt in England of the negligently produced certificates of the 2nd 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 2nd defendants that the place where the harmful event occurred, within the meaning of section 5.3, was England."

Rix J rejected that approach, concluding that in the light of subsequent decisions of the European Court he was not free to adopt the "broad brush" test adopted by Steyn J, but must limit himself to the more structured formula adopted and applied in those European Court decisions. He concluded that, applying the formula stated in the Bier case, the place where the harmful event giving rise to the damage occurred was where the misstatement originated. As the learned Judge observed, it was there that the negligence, if not every element of the tort, was likely to have taken place and for that and other reasons the place from which the misstatement was put into circulation was as good a place to found jurisdiction as the place where the misstatement was acted on, even if receipt and reliance were essential parts of the tort.

I would respectfully go further and conclude that it is a better place, if one is seeking to identify the place of the event which is the origin of the damage as it was described in the Bier case, and if one puts to one side, as one is required to do, the rules of national law which define the necessary elements of the commission of the tort in question. It is true that in the course of his judgment, Steyn J had identified as the event causing harm in the case before him the receipt of the negligently produced certificates in England rather than their production and dispatch. But, in so far as there is a conflict between the judgment of Rix J and Steyn J on this point, as well as on the question of which is the right approach, I prefer the judgment of Rix J.

Accordingly, I conclude that in the present case ADL has not satisfied the first limb of Article 5.3 in accordance with the test laid down in Bier: England was not the place of the event which was the origin of the damage.

I turn to the second limb of the Bier test, upon which Mr Gruder also seeks to rely, and address the question: Where did the damage occur? On the facts of the present case, this is not so simple a question as might at first appear. Although the financial damage pleaded by ADL to have been suffered in consequence of the alleged misrepresentations is the same as that said to have been suffered as a result of the alleged breaches of contract on the part of Guene and/or Limonta (although there is no claim for breach of contract now pursued against Limonta) it was acknowledged by Mr Gruder that such damage could only be recoverable as having been caused by the alleged misrepresentation if to award such damages would put the claimant in the financial position in which it would have found itself had the misrepresentations not been made.

In the latest version of the Particulars of Claim, the alleged loss and damage is pleaded under two heads, namely: (1) loss of profits which, in turn, is said to comprise two elements, namely, (a) delay in the launch of the "London Traveller" range of luggage, and (b) the additional cost of obtaining a substitute fabric, which it was not possible to pass onto the customer; and (2) wasted expenditure, such as photocopying finished products, and printing and distributing promotional material.

Neither is quantified in the Particulars of Claim. In the original, unamended Particulars, the first head was quantified at an estimated £8,239,858, and the latter at £83,617, but these figures have been deleted. According to the witness statement of ADL's Finance Director, Mr Dunnett, the damage sustained is put rather differently: he states that ADL has incurred an estimated £890,000 in fixed costs including wasted advertising and promotional materials, and he puts the estimated loss of profit as in the region of £1.5m, of which only approximately 40 per cent would have been attributed to the claimant, ADL - the balance apparently being attributed to its subsidiary companies.

Details of the former, that is the £890,000 figure, are set out in a schedule from which it appears that £582,829 is claimed as order cancellation; £244,769 as "surplus material incurred at Guene"; £49,596 "factory labour/down-line costs" paid to Guene; and £13,205 "ADL International A & P lost".

These figures were explained in a letter from ADL's solicitors, Messrs Freshfields of 9th June 2000, from which it is clear that two elements at least - that is, the surplus material incurred at Guene and the factory labour and down-line costs reflected payments made to Guene in France. Some guidance as to how one should apply the second limb of the test laid down in the Bier case is afforded by three decisions of the European Court, namely Dumez France and Marinari (to which reference has already been made) and Reunion Europeenne S.A. -v- Spliethoff's Bevrachtingskantoor B.V. [1998] ECR 1 6511.

In Dumez France the plaintiff's predecessors in title had agreed to construct buildings in Germany to be financed by a number of German banks, including the defendants. Problems arose with the financing; the loans were suspended and, in consequence, building works stopped, whereby the plaintiffs claimed to have suffered financial loss. They were a French company and they commenced proceedings before the Commercial Court in France. The French Cour de Cassation referred the matter to the European Court. The judgment of the Court emphasised the exceptional nature of Section 2 of the Convention and, in particular, Article 5.3, and that those exceptions to the general rule established by Article 2 are "based on the existence of a particularly close connecting factor between the dispute and the courts other than those of the state of the defendants' domicile".

The judgment stated (at page 180):

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

Accordingly, interpreting the second limb of the test in Bier, the judgment continued:

"The expression of the 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 events giving rise to the damage directly produced its harmful effects upon the person who is the immediate victim of the event".

The Court added (at paragraph 21):

"Moreover, whilst the place where the initial damage manifested itself is usually closely related to the other components of the liability, in most cases the domicile of the indirect victim is not so related".

Accordingly, the plaintiff was not permitted to bring proceedings in the courts of the place in which he had suffered consequential damage to his assets as a result of direct damage which had occurred elsewhere.

In Marinari, promissory notes had been lodged by the plaintiff at the Manchester branch of Lloyds Bank, which were thereafter sequestrated upon suspicion of their authenticity. The plaintiff sued the bank in Italy and the case was referred to the European Court by the Italian Supreme Court of Cassation. The Court confirmed the Bier test and went on to state as follows (paragraph 14):

"Whilst it is thus recognised that the term 'place where the harmful event occurred' may cover both the place where the damage occurred and the place of the event giving rise to it, the terms cannot however be construed so extensively as to encompass any place where the adverse consequences of an event which had already caused actual damage elsewhere can be felt".

The Court went on (at paragraph 15):

"Consequently, that term cannot be construed as to include 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".

Reunion Europeenne concerned a claim for damages by the insurers of the consignee of goods shipped by sea and delivered damaged. The defendant was sued as carrier, not being the person who had issued the relevant bill of lading. The claim was thus regarded as one within Article 5.3 as being a matter relating to tort rather than within Article 5.1 - a matter relating to contract. The goods had been shipped from Australia to Rotterdam and thence by road to France. The plaintiff, being French, sued in the French courts, being the place of final delivery or as the place where the damage was ascertained. The European Court referred to Bier, Dumez France, Shevill and Marinari and reaffirmed that part of the decision in the last of these cases in which it had been held that the term "the place where the harmful event occurred" could not be construed so extensively as to encompass any place where the adverse consequences can be felt of an event which has already caused damage actually arising elsewhere.

In paragraphs 34/35 of the judgment, the Court said:

"To allow the consignee to bring the actual maritime carrier before the courts for the place of final delivery or before those of the place where the damage was ascertained would, in most cases, mean attributing jurisdiction to the court of the place of the plaintiff's domicile, whereas the authors of the Convention demonstrated their opposition to such attribution of jurisdiction otherwise than in the cases for which it expressly provides.... Furthermore, such an interpretation of the Convention would make the determination of the competent court dependent on uncertain factors, which would be incompatible with the objective of the Convention which is to provide for a clear and certain attribution of jurisdiction....

....In those circumstances, the place where the damage arose in the case of an international transport operation of the kind at issue in the main proceedings can only be the place where the actual maritime carrier was to deliver the goods."

So far as the English cases are concerned, and in particular in relation to the application of the above principles to a claim for damages for misrepresentation or negligent misstatement, some limited guidance is provided by the Minster Investments and Domicrest decisions, to which reference has already been made. In Minster Investments Steyn J did not apply his mind specifically to the question of where the damage occurred, although in his analysis of "the true nature of the case" (page 24 of the report) he referred to the decision in England to authorise the payment to the 1st defendants in Korea in reliance on the certificates which had been received in England, but made no reference to the payment having been made in Korea.

In Domicrest, Rix J, while feeling unable to follow Steyn J's "broad brush" approach and, in effect, disagreeing with Steyn J in concluding that in the case of negligent misstatement the place where the harmful event occurs is where the misstatement originates rather than where it is received, nonetheless said (at page 566E) in relation to the decision in Minster Investments:

..."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 the time loss was felt, so that I do not think that the ultimate decision can be subject to any question".

Nevertheless, in the case before him, while acknowledging in two passages in his judgment that, in the case of a negligent misstatement, the place where the damage occurs is "quite likely" to be at the place where the misstatement is received and relied on, Rix J concluded that the damage occurred in Switzerland and Italy where the goods were released without payment. It is not clear from Rix J's judgment why he came to a different conclusion on the facts of the case before him from that reached by Steyn J in Minster Investments where the facts would not seem to be materially different, in so far as in each case the negligent misstatement had been received in England and the decision taken in England in reliance on the misstatement, which was implemented by the release of, in the one case, goods and, in the other, a payment in another country.

It is possible that, whereas in Minster Investments the plaintiffs had completed their actions in reliance by giving instructions to someone else in Korea, in Domicrest the release of the goods in Switzerland and Italy have been by employees or agents of the plaintiffs. But that would be pure speculation, and even if it were the case, it would be too narrow a distinction.

In my view, each case must be looked at on its own facts, applying the principles of interpretation of Article 5.3 stated in the decisions of the European Court to which I have referred. In this case, although it is the claimant's case that it acted in reliance on the alleged misrepresentations by taking the decision in London to chose the Limonta fabric for its "London Traveller" range of luggage, and implemented that decision by giving instructions to Guene in France to place purchase orders with Limonta, I do not consider that it can be said that ADL suffered damage at that stage.

While Rix J may be right in observing that it is "quite likely" that damage will be suffered at the place where the misstatement or misrepresentation is received and relied upon, he does not suggest that this will always be the case and, indeed, concluded that in the case before him damage occurred elsewhere. It is true that damage is a necessary constituent element in the tort of negligent misstatement under Hedley Byrne principles, and that, for the purposes of establishing the tort and fixing the prima facie start of the time clock for limitation purposes, the time when the plaintiff entered into the contract in reliance on the misrepresentation may be regarded as the moment when the tort is complete. However, to apply this reasoning to the construction and application of Article 5.3 of the Convention would be contrary to the now well-established principle that the provisions of the Convention are autonomous or independent and must be construed without reference to particular rules of national law relating to the establishment of tortious liability.

I do not think that it can be said that in any real sense ADL suffered damage when they instructed Guene to order the fabric from Limonta. It is not suggested that the terms of the contract with Limonta, whether it was made with Guene or with ADL through Guene's agency, were particularly onerous. Indeed, it is pleaded by ADL that the contract incorporated all the representations that had been made in the course of the negotiations. Damage did not occur and certainly did not manifest itself (to borrow the language of the Dumez France case) until the samples of fabric were delivered to Guene in France and were examined and manufactured into luggage which was itself tested, at which point it is said that the fact that misrepresentations had been made became apparent.

Furthermore, it was in France that for the first time ADL began to suffer the financial loss which makes up its claim for damages. Further, of the damage claimed to have been suffered by ADL, the major item in terms of money is the claim for loss of profit which, although ultimately sustained by ADL in England, appears to have resulted from delays in the production of the "London Traveller" range in France. Similarly, the extra cost of obtaining alternative fabric was no doubt incurred in France, as were the sums claimed to have been paid to Guene in respect of order cancellation, surplus materials, factory labour and down-line expenses.

It is clear from the authorities to which I have referred that the fact that the ultimate financial loss may have been felt by the claimant in his principal place of business where his bank accounts are located does not mean that that damage had occurred at that place for the purposes of Article 5.3 - otherwise, in most cases of financial loss, the exception would establish jurisdiction at the place of the domicile of the claimant, a result which these cases made clear a court should lean against.

On analysis, looking at the matter broadly, the only close connecting factor which links this case to England is that the claimant is located in England and therefore took all relevant decisions in England and suffered the ultimate financial loss in England. In my view, that is clearly not enough to satisfy Article 5.3 of the Convention.

In the light of the above conclusions, it is perhaps unnecessary to go on to consider the further point as to whether the claim against Limonta in this case is a matter which falls within Article 5.3 at all, or whether it is, in truth, a matter relating to a contract within the meaning of Article 5.1, with the consequence that ADL might sue in the place of performance of the obligation in question, which was contended on behalf of Limonta, was not England. Nevertheless, the point was fully argued and in case the matter goes further I considered the point briefly.

It was common ground that, as is clearly established by the authorities and, in particular, the European Court decision in Anthanasios Kalfelis -v- Bankhaus Schroder Munchmyer, Henks & Co and Others [1988] ECR 5565 (the relevant passage being at page 5585); and the recent House of Lords decision in Agnew -v- Lansforsakringsbolagens AB [2000] 2 WLR 497 (the relevant statement being by Lord Woolf MR at page 510E-F), Article 5.1 and Article 5.3 are mutually exclusive, and to the extent to which the claim falls within Article 5.1, as a matter relating to a contract, it cannot also fall within Article 5.3. Unlike the two limbs of Article 5.3 identified in the Bier case, the claimant in such cases does not have a choice.

For the purpose of the argument that this is a matter relating to a contract covered by Article 5.1, Limonta seeks to draw a distinction between the three ways in which ADL puts its case against Limonta, namely: (1) the claim under Section 2.1 of the Misrepresentation Act 1967; (2) the claim for negligent misrepresentation at common law under the Hedley Byrne principle, alleging that in reliance on the alleged misrepresentation ADL contracted with Limonta; and (3) the claim for misrepresentation at common law, alleging that in reliance on the alleged misrepresentations ADL instructed Guene to contract with Limonta, as it did.

So far as the third of these is concerned, Limonta conceded that this would not be within Article 5.1 on the basis, presumably, that it would not be part of ADL's case on this alternative basis that there was a contract between ADL and Limonta. But this concession, which Mr Onions did not seek to withdraw, necessarily involves the further concession that the mere fact that the alleged misrepresentation is said to have induced the making of any contract does not make the matter one relating to a contract. If this concession were well-made, it seems to me to present serious difficulties for Limonta, since I see no difference in principle between a misrepresentation inducing the representee to enter into a contract with the representor and one inducing someone else to do so. However, I do not decide the point on the basis of this concession.

The question under Article 5.1 is this:

Is a claim for damages for alleged misrepresentation said to have induced the representee to enter into a contract with the representor, a matter relating to a contract? Plainly, in one simple sense, it is, but again the answer is not so simple, as appears from two recent decisions of the House of Lords which afford considerable guidance on this particular point of construction.

In Kleinwort Benson Ltd -v- Glasgow City Council (No. 2) [1999] 1 AC 153, the Court had before it a claim for restitution on grounds of unjust enrichment of sums paid under a contract held to have been void ab initio. By a majority of 3 to 2, their Lordship's House reversed the decision of the majority in the Court of Appeal and concluded that the claim did not fall within Article 5.1. Lord Goff of Chievely, who delivered the leading majority speech, observed (page 167D) that the claim can only fall within Article 5.1 "if it can properly be said to be based upon a particular contractual obligation, the place of performance of which is within the jurisdiction of the Courts", and that the principle can have no application in a case where the supposed contract in question is void ab initio and so never had any legal existence (page 169B-E).

At page 171D Lord Goff criticised the "thesis", as he called it, of Millett LJ, as he then was, in the Court of Appeal, that Article 5.1 should be construed broadly so that any matter relating to a contract should be held to fall within the Article, and pointed to the fact that the jurisdiction of the European Court revealed an understanding that Article 5.1 had a more limited purpose, namely that the Court should have regard solely to the contractual obligation whose performance was sought in the judicial proceedings.

Lord Clyde, after considering the European Court decisions, concluded (at page 180G) that it was not enough for the invocation of jurisdiction under Article 5.1 that some remote connection could be found between the point in dispute and a contractual relationship. He went on to consider where the line was to be drawn and concluded (page 181E-F) that it is not every connection with a contract however remote or tenuous that was intended. He continued:

"The relationship is one whereby the matter is based on a contractual obligation. In my view it is essential for jurisdiction to lie under Article 5.1 that there should be at the heart of the proceedings a dispute about the performance of a contractual obligation."

On the following page he said:

"There must be an obligation under the contract".

He acknowledged (at page 182) that Article 5.1 would cover the case where one party was claiming a remedy under the contract and the other was resisting the claim on the basis that there was no contractual relationship, but added that if the Court were to reach the conclusion that there was indeed none, it could go no further.

Lord Hutton, who delivered the third majority speech, in essence agreed that the words "in the courts for the place of performance of the obligation in question" helped to define the meaning of the words, "in matters relating to a contract". Since the obligation in question is an obligation arising under the contract, which the plaintiff is seeking to enforce, Article 5.1 only applies where a party is seeking to enforce the performance of an obligation contained in a contract or a relationship closely akin to a contract.

In Agnew, to which reference has already been made, the plaintiff insurers sought to avoid a series of reinsurance contracts on the grounds that they had been entered into consequent upon material misrepresentations or non-disclosure. The House of Lords, again by a majority but on this occasion dismissing the appeal from a unanimous Court of Appeal, concluded that the claim did fall within Article 5.1 on the basis that this provision was wide enough to embrace "pre-contractual" obligations which included the obligation on a would-be reinsured to make a fair presentation of the risk and to make full disclosure of relevant facts.

Lord Woolf delivered the leading majority speech. He observed that in accordance with the plain and ordinary meaning of the words used in Article 5.1 the case was plainly within its scope. But in a passage at page 505H to 506A, he acknowledged that Article 5.1 provides an exception to the general principle embodied in the Convention that a defendant should be sued in his own place of domicile, and that a restrictive or strict interpretation of the language is appropriate. He recognised that if there were no obligation which could be identified, or no place of performance which could be identified, that would be a strong indication that no part of Article 5.1 had any application, even though what was in issue might be literally a matter relating to a contract.

At page 507A-C, Lord Woolf said that there might well be a distinction between a party relying on non-disclosure or lack of good faith and a party relying on duress, undue influence or mistake since, even if it would be appropriate to refer to an obligation not to be guilty of duress or undue influence or to induce a contract by mistake, there could be no place for performance of such a negative obligation, whereas in the case of non-disclosure there was a place which could be identified, namely where the disclosure should have taken place. In relation to the question whether the obligation to make full disclosure was a contractual obligation, Lord Woolf concluded that it was. At page 507E, he said:

"An obligation which, if it is not fulfilled, provides a right to set aside the contract I would regard as being in ordinary parlance a contractual obligation of, if not also under, the contract".

He went on to express the view that it would be inappropriate in the circumstances to attach any particular significance to the use of the word "under".

Lord Cook, who agreed with Lord Woolf, said at page 511H:

"Patently an action to avoid a contract is a matter 'relating to a contract,'".

and agreed that the obligation to make a fair presentation of the risk or not to misrepresent it, or to disclose matters material to the risk was an obligation in, if not under, the contract, and that whether it was one or the other was "a refinement of linguistics which should be avoided, if possible, in the interpretation of a modern Convention intended to formulate clear and broad rules as to the jurisdiction of courts".

He concluded:

"Suffice it that the obligation is so intimately connected with the contract that it falls naturally within Article 5.1".

Lord Nicholls agreed with the conclusions of Lord Woolf and Lord Cook. Lord Hope, while dissenting from the majority together with Lord Millett on the question of whether or not there was an obligation within the meaning of Article 5.1, expressed the view that in its context the word "obligation" meant an obligation which one party had undertaken to perform to the other under the contract (see page 519E). He referred to the Jenard Report on the Brussels Convention and said at page 518C-D:

"It seems to me that these passages indicate first that the phrase 'matters relating to a contract' should be interpreted as extended to all matters in which a remedy is sought which can be identified as a contractual remedy. Clearly, a claim for the performance of an obligation, which was created by a contract between the parties, will fall within this description, but the phrase may be capable of being applied to other contractual remedies. For example, where a party has been induced to enter into a contract by a misrepresentation that was fraudulent, he has a choice of remedies. He may decide to sue for damages, in which case his remedy may be founded in tort or delict. Or he may decide to reduce or to rescind the contract so that he is no longer bound by it, in which case his remedy would be contractual."

At page 524E-G, he makes an observation in relation to Article 5.3 of the Convention as follows:

"It is reasonably clear that a liability in tort may arise in some circumstances where there has been a breach of a duty in the formation of a contract, for example if the breach can be said to have been fraudulent. In that situation, it will be open to the injured party to claim damages, and jurisdiction may then be founded on the special rule in Article 5.3. But the plaintiff's claim in this case is not and cannot be a claim to enforce a liability in tort. The duty which is said to have been breached was not one for the breach of which there is a liability in damages."

These observations were clearly obiter dicta and do not constitute part of Lord Hope's reasoning on the point in issue, upon which, in any event, he dissented. But they are, nevertheless, statements to which, in my view, considerable weight must be given. I respectfully agree with Lord Hope's observations.

I conclude that in this case the claim against Limonta is not a matter relating to a contract within the meaning of Article 5.1, and that it falls squarely within Article 5.3, being a matter relating to tort or delict.

Mr Gruder submitted that if and to the extent to which Article 5.1 did apply, on the hypothesis that there was an obligation not to induce a contract by misrepresentation, which could properly be regarded as being within the scope of Article 5.1 by analogy with the obligation in the contract of reinsurance to make full disclosure (as considered in Agnew), then similarly that obligation fell to be performed in England where the representee had his place of business. In the light of my conclusions above, it is not necessary for me to express any view on what is, in these circumstances, a hypothetical question, and I do not do so.

Having held that the matter falls within Article 5.3, and having further held that the "harmful event", both in the sense of the event from which the claimant's damage originated, as well as the initial manifestation of damage to the claimant, both occurred outside England, in France or in Italy, this Court has no jurisdiction over the claim against the 3rd defendant.

Accordingly, and for the reasons which I have set out, I grant the 3rd defendant's application. In those circumstances, the application to amend the Particulars of Claim as against the 3rd defendant, although I have considered the matter on the assumption that those amendments would be made if the matter were to continue, becomes redundant.

(Discussion followed)

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