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

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH

		Royal Courts of Justice Strand, London, WC2A 2LL
		22nd March 2010

MR. JUSTICE EADY:

1. The appellant/claimant in these proceedings is Smith's Vitamins and Herbs Limited who seek to set aside an order of Master Leslie made on 23rd April last year in these terms:

(1) That this claim be stayed under articles 28(1) and (3) of the European Community Regulation 44/2001 of 22nd December 2000.

(2) That the claimant do pay the defendant's costs of the application to be assessed, if not agreed, including those reserved under the terms of the order of 30th March 2009 and the claimant do pay £5,000 on account within 14 days.

(3) That time be extended for the claimant to apply to the court for permission to appeal until 29th May 2009.

2. It is most unfortunate that this appeal has taken so long to come on, nearly 11 months. The order was made on the defendant's application of 26th November 2008, which was essentially a jurisdictional challenge. Permission was granted to appeal the master's order by Mr. Justice Sweeney on 12th January of this year.
3. The claimant is an English company which imports and sells vitamins and herbs. The respondent, Ceprodi, is a French company which sells dietetic products in France. The agreement between the parties was dated 22nd January 2007 and provided for the defendant to act as the exclusive distributor of the claimant's products in France. There was specified to be an initial term of five years but the agreement was terminated by the claimant on 20th August 2007 by a letter dated 1st August 2007.
4. Proceedings were issued in France by the defendant on 16th January 2008. The claimant in these proceedings has not yet been served. For the purposes of French law, the French court was seized of the matter on or about 25th March 2008. Those proceedings now seem to be effectively dormant, there having been a series of adjournments in accordance with recognised French practice and procedure.
5. The claimant issued these proceedings on 23rd September 2008 and they were served on 9th October of that year. The claim is for damages in respect of lost profits and also for the cost of obtaining regulatory approval for the claimant's products. These losses are said to flow from the defendant's non-compliance with the contract in various respects, which I need not go into for today's purposes, but they were identified at paragraph 7 of the particulars of claim. There is also a claim in respect of charges for warehousing facilities.
6. The agreement provided that the contract should be governed by English law albeit that it was without giving effect to English law's conflict of laws provisions. The contract recognises that the English and French courts can both have jurisdiction.
7. The relevant law is really as follows and is to be found in articles 27 and 28 of Regulation 44/2001 dated 22nd December 2000. Article 27 provides:

"1. Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the court first seised is established.

2. Where the jurisdiction of the court first seised is established, any court other than the court first seised shall decline jurisdiction in favour of that court."

Article 28 provides as follows:

"1. Where related actions are pending in the courts of different Member States, any court other than the first court first seised may stay its proceedings.

2. Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.

3. For the purposes of this Article, actions are deemed to be related where they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings."

8. My attention was drawn by both counsel this morning to the observations of Lord Saville of Newdigate in the case of Serio v Kuwait Investment Authority [1999] 1 AC 32 as to the proper approach to be taken in determining whether or not actions are related for the purposes of the provisions which I have just read. What he said there was that a broad commonsense approach should be adopted and, needless to say, both counsel rely upon that call to commonsense.
9. Master Leslie determined that the proceedings did not involve the same cause of action and, therefore, the mandatory obligation of the English court to impose a stay was not engaged. He did address the possible distinctions between the meaning of the English translation of the provisions and the original French, but determined that whichever test was applied the circumstances fell outside article 27. That is not a matter which is the subject of a cross-appeal.
10. He turned his attention to article 28 and concluded, first, that article 28.2 had no application to the case before him. He had no sufficient information as to the provisions relating to consolidation in France. He, therefore, focused his attention in particular on article 28.3 and came to the conclusion that in his discretion the English proceedings should be stayed with a view to avoiding the risk of irreconcilable judgments arising from the separate proceedings.
11. What he said was, in effect, that although it had not been pleaded, he would anticipate that the defendant would wish to argue in the English courts that the claimant had failed to deliver goods in accordance with the relevant French regulations; secondly, it was open to the claimant to argue in the French courts that it had not delivered the particular consignment of goods because the French company had failed to make the minimum purchase orders under the agreement. Those were the matters which appear to have given rise in the master's mind to the apprehended risk of irreconcilable judgments.
12. The grounds developed before me today by Mr. Withington on behalf of the claimant are as follows: that the master erred in determining that there was a risk of irreconcilable judgments. In order to determine that there is such a risk the court needs to have confidence as to what the issues are going to be in each set of proceedings; otherwise one cannot define the issues over which the clash might arise.
13. It is said that the master fell into error for two reasons in particular: first of all, he failed to take into account express references in the French claim to this matter. It does not raise any specific breach of the agreement, nor is it in any way concerned with the circumstances in which the agreement was terminated; although obviously both proceedings arise ultimately out of the same contractual relationship. It is submitted by Mr. Withington that the subject matter of the French proceedings is a short readily isolable issue over the return of a specific consignment of goods or, in the alternative, repayment of the amount which the defendant says it has paid in respect of them. He described it I think as a "short delivery up point" which does not give rise to the same issues which the master canvassed.
14. It is the defendant's own case, as emerges from the French claim, that there is no risk of an irreconcilable judgment. First, it is expressly asserted that any arguments that the appellant may wish to raise in the French proceedings can have no bearing on its entitlement on the short delivery up point. Secondly, that the goods which form the subject matter of the French proceedings do not play any role in the English claim instituted by the claimant.
15. The point is made that the master took note of the possibility that the defendant may wish to argue in an English claim the fact that the products did not apparently comply with French regulations. That cannot arise in a claim seeking the specific return of an identified consignment of goods. The master said, "...exactly the same matters will call for decision". Were that so, of course, it would plainly be appropriate to make the order that he did, but I think that premise is not well-founded in the circumstances I have briefly described.
16. It is also submitted on the claimant's behalf that the master's reasoning appears to be based on potential arguments which were or might be open to either of the parties to raise in the proceedings. It is submitted that that is too speculative an approach to take and the court should focus in determining the article 28.3 point upon actual issues rather than speculative or potential issues.
17. The claimant, I am informed, has never stated that it would wish to argue that the non-delivery of the specific assignment of goods was based upon a failure by the defendant to make minimum orders; nor has the claimant stated that it would wish to raise the alleged or any breaches of the agreement by way of counterclaim or set-off within the French proceedings. It is not known whether it would be permitted to do so, but it does not intend to do so. Its position, says Mr. Withington, has been consistent in this respect throughout, namely that it wished to have the issues determined by the English court. An offer of an undertaking has been made to the English court to the effect that it would not raise its claims in the French court so as to give rise to the risk which the master apprehended. I accept that undertaking.
18. The point is made by Mr. Gallagher, on behalf of the defendant, that it would not be enforceable in France. Whether that is so or not, it plainly would be enforceable as an undertaking to the court in England by process of contempt if it became necessary to do so.
19. Mr. Withington's arguments and his grounds of appeal seem to me to be entirely valid and, if I may say so, to accord with the commonsense test laid down by Lord Saville in the Serio case. There is no cross-appeal and, therefore, insofar as the master rejected the defendant's other arguments for a stay, other than those relating to article 28.1 and 28.3, his decision would remain undisturbed.
20. The appeal is, therefore, allowed and the master's order set aside.
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