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
		15/05/2012

HHJ Mackie QC:

1. This has been the trial of a preliminary issue to determine the applicable law of the commercial agency agreement between the parties which operated from 1994 or 1995 until 2009. Is it English law as claimed by the Claimant or Spanish law as claimed by the Defendant? The answer will apparently greatly affect the size of the compensation for termination to which the Claimant is entitled. The claim under English law is put at some Euro 1.5 million.

Background

2. The Claimant Mr Lawlor is an Irish citizen now apparently based in Andorra. He joined the Defendant as an employed salesman in 1994. After short spells in Germany and in England he moved to Spain at first as an employee but soon as the Defendant's agent in Spain for the sale of mobile screens and crushing equipment. The Claimant has a degree in Spanish and speaks the language well. He was undoubtedly a successful agent. The details of how much time he spent in Spain and elsewhere and when and to what extent his responsibilities extended to other countries are much disputed.
3. The Defendant's predecessor Extec began in a small way in Ireland but soon became remarkably successful, setting up operations in Swadlincote and elsewhere. Its speed of growth was such that some aspects of the business, for example the organisation of agencies for sales overseas and their contractual structure and of what is nowadays called Human Resources, remained informal and unsophisticated. If there was ever an employment contract between the parties it is lost. There was never a written agreement between the parties recording the terms or the applicable law of their agency. As Extec became ever more successful shares were sold to 3i which, with other shareholders, sold the business in 2007 to Sandvik AB a world wide company based in Sweden. In 2006 the Defendant sought to rationalise its agency network and offered existing agents posts as employees. Despite protracted negotiations agreement could not be reached and eventually the Defendant terminated the agency. Although the Claimant's right to compensation was initially disputed the claim is now conceded in principle.

The Legal Issues

4. It is common ground that the Claimant acted as a commercial agent within the meaning of Council Directive 86/653/EEC (the 'Directive') and that he is entitled to the appropriate relief for the termination of his agency. The Directive was implemented into English law by the Commercial Agents (Council Directive) Regulations 1993, SI 1993/3053 (the 'Regulations'). It was also implemented into Spanish law.
5. The Claimant claims that the Regulations apply to his agency because the applicable law of the agency agreement was English law. The Defendant claims that any agency agreement was governed by Spanish law. The preliminary issue for determination by the Court is what was the applicable law of agency agreement.
6. The applicable law of the Claimant's agency agreement is determined in accordance with the Convention on the Law Applicable to Contractual Obligations 1980 (the ' Rome Convention') as incorporated into English law by the Contracts (Applicable Law) Act 1990. It is common ground that the law will be determined under either Article 3 or Article 4 of the Convention which provide in relevant part as follows:

Article 3 Freedom of choice

1

A contract shall be governed by the law chosen by the parties. The choice must be express or demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. By their choice the parties can select the law applicable to the whole or a part only of the contract….

Article 4 Applicable law in the absence of choice

1

To the extent that the law applicable to the contract has not been chosen in accordance with Article 3, the contract shall be governed by the law of the country with which it is most closely connected. Nevertheless, a severable part of the contract which has a closer connection with another country may by way of exception be governed by the law of that other country.

2

Subject to the provisions of paragraph 5 of this Article, it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a body corporate or unincorporate, its central administration. However, if the contract is entered into in the course of that party's trade or profession, that country shall be the country in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated.

5

Paragraph 2 shall not apply if the characteristic performance cannot be determined, and the presumptions in paragraphs 2, 3 and 4 shall be disregarded if it appears from the circumstances as a whole that the contract is more closely connected with another country."

7. The interpretation of these provisions is helpfully explained by Clarke LJ, as he then was, in Iran Continental Shelf Oil v IRI International corp [2002] EWCA Civ 1024 in a passage which, with respect to the admirable submissions of Counsel on the point, is all I need to consider as regards the general approach;

" [10] Section 2(1) of the Contracts (Applicable Law) Act 1990 ("the Act") provides that:

". . . the Conventions shall have the force of law in the United Kingdom."

[11] By s 1 of the Act it is provided that the term "Conventions" in the Act refers to a series of international conventions, including the Rome Convention. As the judge observed, certain provisions of the Rome Convention were excluded from the incorporation of its terms into English law, but these are not relevant for present purposes. Section 3(3) of the Act provides:

"Without prejudice to any practice of the courts as to the matters which may be considered apart from this subsection –

(a) the report on the Rome Convention by Professor Mario Giuliano and Professor Paul Lagarde which is reproduced in the Official Journal of the Communities of 31st October 1980 may be considered in ascertaining the meaning or effect of any provision of that Convention; . . ."

The fundamental principle of interpretation is stated in art 18 of the Convention as follows:

"In the interpretation and application of the preceding uniform rules, regard shall be had to their international character and to the desirability of achieving uniformity in their interpretation and application."

[14] In Samcrete Egypt v Land Rover Exports Ltd [2001] EWCA Civ 2019, Potter LJ (with whom Thorpe LJ agreed) quoted art 18 in para 24 of his judgment and observed, in para 25, that it was suggested at para 32-078 (p 1223) of the 13th edition of Dicey & Morris on the Conflict of Laws:

". . . that the question of interpretation should be looked at from a broad Convention-based approach, not constrained by national rules of construction."

[15] He expressed his agreement and, in para 26, approved my own view expressed in Egon Oldendorff v Libera Corp [1996] 1 Lloyd's Rep 380 at 387, where I said:

"It is indeed appropriate to adopt a purposive approach and not to construe the Convention in a narrow literal way."

Although those views were expressed in the context of article 3, they seem to me to apply equally to article 4: see also to the same effect Plender & Wilderspin on the European Contracts Convention (2001) at para 2-01. I should perhaps stress that in applying article 4 an English court should not be influenced by the old common law approach to the proper law of the contract because the nature of the enquiry under article 4 is fundamentally different: see e.g. Credit Lyonnais v New Hampshire Insurance Co [1997] 2 Lloyd's Rep 1."

8. It is common ground that there was no express choice of law in this case. The Claimant says there was an implied choice but the Defendant disputes that. The Defendant's primary case is that the parties did not choose any particular law to govern the agency agreement and that the applicable law has to be determined under Article 4. In the alternative, if the parties did choose the law applicable to the agency agreement under Article 3 of the Convention, they chose Spanish law and not English law. The Claimant says that if there was no implied choice then English law applies following the application of Article 4.
9. The parties rely on, among things, passages in the Giuliano-Lagarde Report ("the Report") which are best set out in full now rather than cited in bits and pieces when discussing the competing submissions. The Report must be read in context but the particularly relevant passages in the section on Articles 3 and 4 are as follows:

Article 3

"3. The parties' choice must be express or be demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case. This interpretation, which emerges from the second sentence of Article 3 (1), has an important consequence.

The choice of law by the parties will often be express but the Convention recognizes the possibility that the Court may, in the light of all the facts, find that the parties have made a real choice of law although this is not expressly stated in the contract. For example, the contract may be in a standard form which is known to be governed by a particular system of law even though there is no express statement to this effect, such as a Lloyd's policy of marine insurance. In other cases a previous course of dealing between the parties under contracts containing an express choice of law may leave the court in no doubt that the contract in question is to be governed by the law previously chosen where the choice of law clause has been omitted in circumstances which do not indicate a deliberate change of policy by the parties. In some cases the choice of a particular forum may show in no uncertain manner that the parties intend the contract to be governed by the law of that forum, but this must always be subject to the other terms of the contract and all the circumstances of the case. Similarly references in a contract to specific Articles of the French Civil Code may leave the court in no doubt that the parties have deliberately chosen French law, although there is no expressly stated choice of law. Other matters that may impel the court to the conclusion that a real choice of law has been made might include an express choice of law in related transactions between the same parties, or the choice of a place where disputes are to be settled by arbitration in circumstances indicating that the arbitrator should apply the law of that place.

The Article does not permit the court to infer a choice of law that the parties might have made where they had no clear intention of making a choice. Such a situation is governed by Article 4"

"Article 4

2. In order to determine the country with which the contract is most closely connected, it is also possible to take account of factors which supervened after the conclusion of the contract.

3. To counter the possibility of changes in the connecting factor ("conflits mobiles") in the application of paragraph 2, it has been made clear that the country of habitual residence or of the principal place of business of the party providing the characteristic performance is the country in which he is habitually resident or has his central administration or place of business, as appropriate, "at the time of conclusion of the contract".

7. Article 4 (2) does not apply when the characteristic performance connot be determined. The case then falls under paragraph 1, i.e. the contract will be governed by the law of the country with which it is most closely connected.

The first part of Article 4(5) contains precisely that provision.

However, that paragraph also provides for the possibility of disregarding the presumptions in paragraphs 2, 3, and 4 when all the circumstances show the contract to have closer connections with another country. In this case the law of that other country is applied.

The grounds for the latter provision are as follows. Given the entirely general nature of the conflict rule contained in Article 4, the only exemptions to which are certain contracts made by consumers and contracts of employment, it seemed essential to provide for the possibility of applying a law other than those referred to in the presumptions in paragraphs 2, 3 and 4 whenever all the circumstances show the contract to be more closely connected with another country.

Article 4(5) obviously leaves the judge a margin of discretion as to whether a set of circumstances exists in each specific case justifying the non-application of the presumptions in paragraphs 2, 3 and 4. But this is the inevitable counterpart of a general conflict rule intended to apply to almost all types of contract.

9. It should be noted that the presumptions mentioned in paragraphs 2, 3 and 4 of Article 4 are only rebuttable presumptions."

10. There are minor differences of emphasis about the approach to Article 3. Mr Parker for the Defendant emphasises the view in the Report that Article 3 "does not permit the court to infer a choice of law that the parties might have made where they had no clear intention of making a choice. Such a situation is governed by Article 4". The Court should not assume an implied choice from the fact that there are considerations linking a contract with a particular country. He emphasises that the Report gives various examples where the parties' choice of law may have been demonstrated with reasonable certainty but none of these examples is remotely applicable to the present case.
11. Mr Randolph QC for the Claimant seeks to rely on the parties' subsequent conduct as demonstrating a choice of law. The Court may have regard to such conduct, to the extent that they it sheds light on the intention of the parties at the time that the contract was concluded. This is suggested, albeit with some hesitation, in Dicey, Morris and Collins, The Conflict of Laws (14^th edition, 2006), para 32-059. Mr Randolph also relies on commentary in Plender & Wilderspin:

" ... the demonstration of the parties' choice of law, by reference to subsequent conduct, is to be characterised not as a rule of evidence but as part of the freedom conferred by Article 3(1) to demonstrate the chosen law by all the circumstances of the case. Where the parties' post-contractual conduct gives a reasonable indication of their actual intention at the time of the conclusion of their agreement, there is no good reason for excluding it."

12. On the facts of this case I do not detect much difference between the parties on the approach to Article 3. I proceed on the basis that subsequent conduct is admissible to the extent that it sheds light on what if anything the parties impliedly agreed at the time the agency agreement was entered into.

Article 4

13. The Defendant contends that it must be common ground that Mr Lawlor was the party who was to effect the performance which was characteristic of the contract and that he entered into the agency agreement in the course of his trade or profession. Under those circumstances, Article 4(2) creates a presumption that the applicable law of the agreement will be the law of the country in which Mr Lawlor's principal place of business was situated, Spain. Alternatively, if under the terms of the agreement, performance was to be effected through a place of business other than his principal place of business, it is presumed that the applicable law will be that of the country in which that other place of business is situated. Mr Randolph invokes this alternative.
14. The presumption under Article 4(2) arises in relation to the place of business "at the time of conclusion of the contract" and the Report notes that this is to "counter the possibility of changes in the connecting factor … in the application of [Article 4(2)]". Mr Parker emphasises that certainty requires that the governing law of an agreement should be determined at the outset and that it should not be subject to change simply as a result of events which occur after it has been concluded. Thus, if a party later moves his principal place of business that will not bring about a change in the governing law of the agreement. Equally, subsequent events which might have a bearing on the country with which the contract is most closely connected will not have the effect of changing the applicable law of the contract.
15. Mr Randolph emphasises that where there has been no choice of applicable law, the Rome Convention focuses on the country with the closest connection to the contract. When determining which country has the closest connection with the contract in question, the Court is entitled to take into account evidence post-dating the commencement of the agency- see para 2 under Article 4 in the above extracts from the Report.
16. Finally I mention the relationship between Article 4(2) and 4(5) which has recently been explained by the ECJ in Intercontainer Interfrigo v Balkeende [2010] QB 411 and is helpfully summarised by Blair J as follows in British Arab Commercial Bank v Bank of Communications and others [2011] EWHC 28;

[33] The question can now be addressed in the light of Intercontainer Interfrigo SC v Balkenende Oosthuizen BV [2010] QB 411, [2010] 1 All ER (Comm) 613, [2010] All ER (EC) 1 in which art 4 of the Rome Convention was considered by the European Court of Justice for the first time. The ECJ declined to adopt an overly restrictive or strict approach to the application of art 4(5), stating (at 59) that the article was intended to introduce "a certain flexibility". At 64, the court said:

". . . article 4(5) of the Convention must be construed as meaning that, where it is clear from the circumstances as a whole that the contract is more closely connected with a country other than that determined on the basis of one of the criteria set out in article 4(2) to (4) of the Convention, it is for the court to disregard those criteria and apply the law of the country with which the contract is most closely connected."

[34] Both counsel agree, in my view correctly, that the tentative view expressed in Samcrete is overtaken by the reasoning in Intercontainer Interfrigo. The court is not precluded from taking into account any particular type of factor when applying art 4(5), and is not required to look at the contract in question in isolation from other contracts with which it is connected.

Thus there is no presumption in favour of Article 4(2) which must be rebutted before Article 4(5) can come into play. The judge also points out at Paragraph 31 that the burden of proof rests on the party seeking to rely on Article 4(5).

The Trial

17. For the trial I had ten volumes of documents, the majority irrelevant, and assistance from six witnesses. I heard evidence from Mr Lawlor and a former colleague Mr Colin Burns. For the Defendant I heard from Mr Paul Douglas, managing director of Extec from its incorporation until about 2003, Ms Virginia Varela-Eyre, a marketing co-ordinator employed by the Defendant who dealt with sales made by the Claimant between 2004 and 2009, Ms Kimberley Page, a marketing assistant employed by the Defendant group who dealt with sales by the Claimant in 2003 and 2004 and Mr Steve Powell until very recently the Defendant's managing director and now its human resources director. The evidence of witnesses in this case is important because the agency lasted for fifteen years. Mr Lawlor has understandably not kept full personal records (although I would still have expected him to have retained more than he did) and the Defendant and its predecessors had informal and limited systems in the early years. More depends in this case on the quality of recollection of witnesses and their credibility than in many commercial disputes.

Facts agreed or not much in dispute.

18. No copy of Mr Lawlor's contract of employment, if he ever had one, has been retained. It seems likely to have been governed by English law but, given the lack of sophistication in Extec's systems probably did not say so. Mr Lawlor became an agent when he moved to Spain and although, in live evidence, he thought his agency started after 1994 it seems, from his witness statement, and the surrounding circumstances that the year was indeed 1994. Mr Lawlor worked initially with Mr Burns. He worked extremely hard developing customer leads often spending fifteen to eighteen hours a day on the road. As he put it "I probably knew Spain better than I knew Ireland". Mr Lawlor also arranged road shows of Extec's equipment in Spain. Between 1994 and 1998 Mr Lawlor's territory was limited to Spain. Mr Lawlor brought Spanish customers and dealers to England for one or two days a month, on average, to show them the Extec factory and tried to secure sales. Mr Lawlor would spend at most about four weeks a year in England. He recalled that about half of his sales were concluded in England.
19. There was no written agency agreement and no document has survived which evidences its terms.
20. The contracts for the sale of machines by Extec to its customers were all governed by English law. Extec entered into agreements subject to English law whenever it could. An unsurprising exception to this practice was a service contract dated 15^th March 1996 known as the "Melior Contract" setting out the terms on which Extec established an office and business address with a company in Zaragoza. Mr Lawlor made use of the Melior office in Zaragoza throughout his agency. Its address is described in faxes as his "Spanish office" and Mr Lawlor used it for other correspondence. The Melior office address and fax number were included on Mr Lawlor's business cards. Extec paid Mr Lawlor a fixed monthly sum to cover his running expenses.
21. Mr Lawlor had no fixed address between 1994 and, at least, 2003 when he purchased a property in Andorra. He spent most of his time working, staying in hotels while on the road and at his brother's apartment in Valencia. His postal address was his brother's apartment and he had a Spanish mobile telephone. Mr Lawlor has been involved with and has an interest, he suggested as a sleeping partner, in an Irish pub in Valencia run by his brother.
22. Mr Lawlor paid no personal tax in Spain throughout the fifteen years of his agency but it seems he paid no tax anywhere else either. Mr Lawlor has close ties with Ireland where his mother lives and where he has friends one of whom assists with his accounting.
23. There is a dispute about how far Mr Lawlor's territory extended beyond Spain. By some point in 1998 he was also acting as agent in Portugal. Between March 1999 and June 2003 Mr Lawlor sold 134 of Extec's machines of which 115 were in Spain and 18 in Portugal. Mr Lawlor points to some of the Spanish sales as being in Tenerife and other islands. Mr Lawlor says that sales in a new territory do not take place until well after marketing efforts have started and the date of sales should be seen in that light. In a fax of January 2004 which may or may not have been received and considered by the Defendant Mr Lawlor saw himself as having either to "stay in Spain and leave things as they are" or start entering the international market.
24. In June 2005 Mr Lawlor sold a machine in Morocco, his first outside Spain and its islands and Portugal. Between 1999 and 2009 Mr Lawlor sold 442 machines of which 383 were sold in Spain, 27 in Portugal and 27 in other countries. Although details of sales before 1999 are not available those in the ten years after that are clear and not disputed. Similarly there is an agreed travel chronology showing Mr Lawlor's movements in the course of his agency from September 2001 until February 2009. This helpful chronology needs to be read as a whole and in detail but it shows no foreign trips in 2001, two to the UK in 2002, none in 2003, three to the UK in 2004, seven to the UK and seven other trips outside Spain in 2005, seven trips to the UK and fourteen outside Spain in 2006 with the figures being six and four for 2007 and four and eight in 2008. There were no trips in 2009 (but Mr Lawlor met Turkish contacts in Madrid in February).
25. Mr Lawlor received marketing support from an assistant based in Swadlincote. This appears to have been limited in the early years. From about 2004 support was available from Ms Varela-Eyre who spoke good Spanish and was thus a more valuable resource to Mr Lawlor than her predecessors.
26. Mr Lawlor was paid commission in sterling in the early years and later in euros. The markets outside Spain in addition to Portugal visited by Mr Lawlor included Algeria, Morocco, Greece, Romania and Turkey. He also attended trade shows in England, Germany, France and the US. Mr Lawlor bought a property in Andorra in 2003 and had a bank account there from, at the latest, November that year. Mr Lawlor's property is advertised for rental on a website "Rentalia" showing availability from March to August 2012 except from the period from 13^th to 19^th March.
27. After Sandvik had acquired the Extec business it set about rationalising its contractual arrangements. Three agents (in addition to Mr Lawlor) were offered employment contracts to replace their agency arrangements. Mr Lentschig whose territory was Italy but also extended to Greece, Cyprus and Malta accepted a contract of employment which expressly provided for English law to govern. So did Mr O'Gorman who covered some 30 countries outside Europe. After protracted negotiations Mr Lawlor and Extec were unable to reach agreement about the terms of a draft contract which, had it been accepted, would have been expressly subject to English law.

The Evidence

28. Mr Lawlor was, to some extent understandably given the passage of time, vague about when his agency started. Mr Lawlor claimed that he spent five to six weeks a year in England with customers. In a witness statement he suggested that he used to spend about six weeks a year in Ireland and six weeks a year in England. When it was suggested to him this meant that, at least until 2003 he would have spent the remaining 40 weeks a year in Spain he claimed that even in the early period he spent a lot of time in Andorra as a tourist. He claimed that he spent less than six months a year in Spain overall.
29. In a witness statement Mr Lawlor said that when work took him to the Valencia area he would ask his brother, who owned a small flat, if he might spend a few days there but "I never spent more than a couple of days there". In cross-examination he accepted that stays might have lasted for a week or even two before suggesting that seven to ten days was more accurate. In a witness statement he suggested that he spent five to six weeks a year in England with customers. In his evidence Mr Lawlor appeared to claim that he spent, after 1998 much more time on territories beyond Spain and Portugal. As Mr Lawlor put it in a witness statement "I never stayed in one country long enough to become a tax resident. For instance one would have to be resident in Spain for more than 183 days a year to become a tax resident in that country".
30. Mr Lawlor's invoices for commission were submitted from an address in Ireland using an Irish personal tax number. He claimed in the evidence this was done at the insistence of Extec, which the Defendant denies. The Claimant has suggested no reason why Extec should have demanded this. I do not accept what Mr Lawlor says about this.
31. In a witness statement Mr Lawlor claimed that an email from Ms Varela-Eyre of 15^th February 2006 provided a good snapshot of his hectic travelling schedule. This claim does not fit the agreed travel chronology and is denied by Ms Varela-Eyre.
32. Mr Lawlor was undoubtedly a successful agent and is a charming and articulate man held in considerable affection by his former colleagues. However his evidence was neither accurate nor truthful. In closing his Counsel, Mr Randolph described him as a "rough diamond". His recollection of the inception of his agency was vague. His accounts of where and how he lived in Spain were improbable, undocumented and changed in the course of his evidence. His evidence about his occupation of his brother's flat was inconsistent and it is improbable that he could have lived the rootless existence which he claimed.
33. Mr Lawlor lacks integrity in the sense that he paid no personal tax anywhere during the fifteen years of his agency despite knowing that he should have done. It seemed to me obviously untruthful for him to suggest that he had not even thought of tax in the early years because be believed the agency would not last and he might be dismissed. Another sign of lack of candour was his attempt to place responsibility for his tax affairs in Spain on advice from his accountant who then emerged as Mr Bartholomew Kane, a gentleman from Mr Lawlor's home town in Ireland who was a friend, not a qualified professional and who, without fee, prepared commission invoices. Although Mr Lawlor's tax affairs were not directly relevant to identifying the applicable law because the fact that he paid no tax in Spain was offset by the fact that he paid no tax anywhere, his answers to cross-examination on that issue indicated that he was prepared to give untruthful evidence to bolster his case.
34. It is unclear when if at all Mr Lawlor has lived in Andorra. The flat has the appearance, from website photographs, of a holiday let and Mr Lawlor volunteered that it had been offered for rent for the last two years. It seems on balance that this property is an investment and useful address not a real home for Mr Lawlor.
35. Mr Lawlor's claims about the extent to which he spent time in markets other than Spain were not borne out by the undisputed facts about his travelling and about his sales. I accept the truth of his observation that it may take a number of visits to make a sale but over a period of years numbers of sales will be a valuable pointer to the scale of activity in any one place. I conclude therefore that the evidence of other witnesses, none of whom have a personal axe to grind, is likely to be more reliable than that of Mr Lawlor where the two conflict.
36. Mr Colin Burns was called as a witness by Mr Lawlor under a witness summons. The position was unusual. I have not considered how far the witness summons would have compelled the attendance of Mr Burns who lives in Enniskillen. Mr Randolph suggested that Mr Burns was, in some way, not a witness called by Mr Lawlor but was neutral. That was not the case. Indeed Mr Burns explained that he had been paid £1,000 by Mr Lawlor to attend. This had no effect on the truthfulness of Mr Burns' evidence as it was clear to me that he was completely honest and straightforward. However, despite the requests of the Defendant no witness statement or summary had been obtained or sought from Mr Burns with the result that his account of events had not been considered in advance with the usual care and his cross-examination could not be planned as thoroughly as usual. Mr Burns confirmed the background of Mr Lawlor's early years and Extec which I have already set out. Mr Lawlor had been taken on for the Spanish markets but had made at least one visit to Portugal some time in 1994 or 1995. He confirmed the accuracy of the email that he had sent to Mr Lawlor but he accepted that Algeria, Turkey and to some extent Portugal were marginal markets. He also accepted the importance of face-to-face contact in this business where heavy plant cannot be sold, as it were, by email and where demonstrations were often needed. Mr Burns explained the advantages of the demonstration facilities and the Swadlincote factory. Mr Burns was, as I say, a truthful witness doing his best to help but the value of his evidence was limited by the circumstances in which it came to be taken and the time which has elapsed since he last gave careful thought to what he remembered of these events.
37. Mr Paul Douglas was managing director of Extec from when it was first incorporated until he left in 2004 after the shares in the company had been sold to 3i. Until 1992 Mr Douglas' management team included Mr Colin Burns who then struck out on his own as an agent mainly in France, Italy and Spain. Mr Lawlor had started as an employee and remained one until a point in 1994 or 1995 when, after he had already been working with Mr Burns in Spain he became an independent agent. There had been no formal agency agreement. Mr Lawlor brought customers or dealers to the UK on average about once a month for one or two days but he spent most of his time in Spain, particularly in Valencia where Mr Douglas understood that he lived and based his operations. Mr Douglas recalled Mr Lawlor being concerned about his tax position with both the Irish and Spanish authorities and for that reason obtaining an address, if not a property, in Andorra. As Mr Douglas put it "Tim lived and worked in Spain and the vast majority of his sales were made in Spain. That remained the position up until I left Extec in 2004". In cross-examination Mr Douglas broadly accepted as correct that an email that Mr Burns sent to Mr Lawlor after the current dispute had arisen in April 2010 describing Mr Lawlor's activities as including Portugal, Turkey and latterly Algeria and Morocco. That broad acceptance was qualified in that Mr Douglas recalled that "aside from occasional visits to Portugal (Mr Lawlor's work) would have been done almost entirely in Spain throughout the period until I left Extec in 2004".
38. Ms Kimberley Page joined Extec as a marketing assistant and in time provided sales and marketing support to Mr Lawlor's operation in Spain. She found that Mr Lawlor was a very independent agent requiring the bare minimum of actual support. As she saw it Mr Lawlor's work was mainly concerned with looking after the appointed Spanish dealers with whom she often dealt directly. She said that for the year or so she provided support to Mr Lawlor he was "low maintenance".
39. Ms Virginia Varela-Eyre joined Extec as a marketing co-ordinator in March 2004 and, as an Argentine whose first language was Spanish, was soon assigned to look after Mr Lawlor's operation. As a result of her language skills Ms Varela-Eyre was an active marketing co-ordinator speaking regularly to Mr Lawlor. She said that she had a pretty good sense of where Mr Lawlor was and her overall impression was that he spent by far the majority of his time living and working in Spain.
40. As a result of skilful cross-examination Ms Page and to a lesser extent Ms Varela-Eyre were seen to be inaccurate on points of detail but I accept the broad gist of what they had to say. I accept in particular Ms Varela-Eyre's evidence that the travelling details contained in the email of 15^th February 2006 which Mr Lawlor had described as "a good snapshot" were nothing of the kind.
41. Mr Steve Powell became HR director in October 2007 at the time when Extec was acquired by its new parent company Sandvik. At that time the structure and processes of Extec reflected its modest beginnings in the late 1980s and not its role as an international business with a turnover, by 2007 of some £108,000,000. The timing of Mr Powell's arrival and the nature of his job meant that he had little direct evidence to give about the role of Mr Lawlor. He helpfully explained the background to the contractual changes which he oversaw confirming the position which I have already set out. Mr Powell was cross-examined about the significance of what the documents contained but these answers were inevitably of limited relevance to the issues I have to decide.
42. In broad terms I find that the picture of Mr Lawlor's activity as an agent for Extec is that presented by the documented sales, by the travel schedule as described and summarised by Mr Douglas and not that described by Mr Lawlor. In addition to the difficulties I have identified already with Mr Lawlor's evidence he accepted that he is someone very vague about the detail. I am unable to accept his account about where he lived and where he worked during this fifteen year period which is largely unsupported by the documents one would expect to see. Mr Lawlor worked in Spain throughout the period of his agency, making periodic visits to England often with clients for demonstrations and other sales activity. In his last years he branched out and covered other territories to a limited degree, his base and main territory remaining in Spain. As late as 2004 he was wondering whether to stay in Spain and leave things as they were or to branch out.

Was there an Implied Choice of Law?

43. Mr Randolph accepts that there was no express choice but contends that one was implied. The Report points to a previous course of dealing between the parties as an indication of implied choice. It is argued that Mr Lawlor's employment contract with Extec was "in all probability" expressly governed by English law. The Report gives as another example an express choice of law in related transactions between the parties. Mr Randolph cites as a transaction the express choice of law in the draft employment contract produced by Extec for signature by Mr Lawlor. Mr Randolph points out that since Mr Powell gave evidence that the draft employment contract reflected the terms of Mr Lawlor's agency, the Defendant's argument that the draft represented a fundamental change to the nature of the relationship between the parties must fall away. But this is to misunderstand the distinction between the commercial business done by Mr Lawlor and the contractual framework within which it was carried out. Mr Randolph argues that the English law provision in contracts with other former agents and in Extec sales agreements albeit between other parties all point to the agency being a standard form known to be governed by a particular system of law. Mr Randolph submits that the Melior contract is irrelevant essentially because one would not expect an office leasing agreement in Spain to be under anything other than local law. Mr Randolph also suggests that the fact that the Defendant has not produced evidence that Spanish legal advice was sought points to there being an implied choice of English law.
44. Mr Parker argues that the agency was entered into in the most informal manner conceivable. There was no real choice of law and the issue is unlikely ever to have occurred to, or to have been discussed by, the parties. The draft employment contract arose from negotiations started in 2006 twelve years after the agency agreement was made and as a result only of Extec's new policy while seeking to standardise and formalise terms on which sales agents were operating. The draft provides no evidence of what the parties may have agreed in 1994/1995. Further the change was fundamental in that while Mr Lawlor's activities as an agent were largely unchanged the nature of the legal relationship between the parties would have been very different if he had accepted. The employment contracts entered into with other parties are not "related transactions between the same parties"; neither are the English law contracts for the sale of machines to customers. The acceptance by Mr Douglas in evidence that where possible Extec would seek to contract on English law terms was not an admission that an English law governing clause was included in the agency.
45. I accept that if the parties had made a choice it would have been of English law. I accept the evidence of Mr Douglas that in general terms Extec would seek to have its contracts governed by English law. Experience and commonsense indicate that most English companies appointing agents would seek to do the same. Mr Randolph skilfully presents arguments and evidence, including that arising after the agency was entered into, to show that if there had been a choice it would have been of English law. But none of this points to a choice being made. Given the casual and informal circumstances in which the agency took effect it is very unlikely that choice of law was considered, let alone discussed. The court is concerned not with common law perceptions of implied choice but with the Rome Convention. Article 3(1) requires that the choice of the parties be "demonstrated with reasonable certainty by the terms of the contract or the circumstances of the case". The Report, before giving some examples, refers to implied choice in the context of "the possibility that the court may, in the light of all the facts, find that the parties have made a real choice of law although this is not expressly stated in the contract".
46. The Report is of course of less weight than the Convention itself and its guidance has to be seen in context. It points out that a previous course of dealing between the parties under contracts containing express choice of law may

"leave the court in no doubt that the contract in question is to be governed by the law previously chosen where the choice of law clause has been omitted in circumstances which do not indicate a deliberate change of policy by the parties".

The facts in this case do not leave the Court in any such doubt. Similarly an express choice of law in related transactions is relevant only to the extent that it may "impel the court to the conclusion that a real choice of law has been made". Further "this Article does not permit the court to infer a choice of law that the parties might have made where they had no clear intention of making a choice such a situation is governed by Article 4".

47. I accept that evidence coming into existence after the contract between the parties has been entered into is admissible. There is no evidence other than supposition that the original employment contract between the parties was in writing or expressly subject to English law. Given the informality then prevailing at Extec it probably contained no such provision. Evidence of the negotiations with new managers and owners in 2006 seems to me to cast little light on the parties' intentions in 1994 and 1995. Extec was under new management and it would be unsurprising for a new approach to be taken. The issue being considered was an employment contract, although the practical role of the individuals concerned would remain much the same, not an agency agreement. As I have already said, there is no doubt that if agency agreements had been entered into or renewed in 2006 the parties would have sought to make them subject to English law. But that is not what happened twelve years earlier. The agency agreement was informal and unwritten, no consideration being given to the applicable law. In this case, as the Report puts it, the parties "had no clear intention of making a choice" and so the situation is governed by Article 4.

Article 4 (2)

48. Where there has been no choice Article 4(1) provides that the contract shall be governed by the law of the country with which it is most closely connected. It then sets out between Article 4(2) and Article 4(4) a series of presumptions which are to be used to identify the law of the country with which the contract is most closely connected. It is common ground that, under Article 4(2) Mr Lawlor was the person who was to effect the performance which was characteristic of the contract and that because the agreement was entered into in the course of his trade or profession that location is to be the country in which his principal place of business is situated or, if the contract so dictates, the country in which performance is situated.
49. Mr Randolph argues that Mr Lawlor's agency required him to travel regularly to the Swadlincote factory to assist in closing deals. Extec accepted the importance of these visits. Mr Randolph therefore argues that under Article 4(2) his agency required him to effect performance in two countries, Spain and the United Kingdom. He says that the county of the characteristic performance of Mr Lawlor's agency cannot be demonstrated as there were two such places and so the court should move to determine the matter under Article 4(5).
50. Mr Lawlor has an alternative case on Article 4(2). He submits that if Mr Lawlor's principal place of business at the start of his agency was Spain, the characteristic performance of the agency was effected through the Defendant's factory in England so that the applicable law, under Article 4(2) was and remains that of England. All the sales documentation was produced in England and stated on its face that it was made on behalf of the Defendant at the English address and was subject to English law. Mr Randolph relies on the decision of the Court of Appeal Iran Continental.
51. Mr Parker argues that Mr Lawlor's principal place of business and the one through which he effected performance of the agreement was in Spain. Mr Lawlor's business was mainly to visit potential customers in Spain and to generate sales. He spent more than six months of the year in Spain, on his own admission, during the early years of the contract. He stayed in hotels and hostels and had the use of serviced office facilities in Zaragoza. The address and fax details of that office were on Mr Lawlor's cards and faxes and letters came from there.
52. Whatever the importance of the visits with customers to the factory in Swadlincote the agency agreement required Mr Lawlor to effect performance primarily in Spain at the relevant time, which was "at the time of the conclusion of the contract". The correct characteristic performance of the agency was undoubtedly in Spain. Further I do not see the decision of the Court of Appeal in Iran Continental as affecting what, in this case, is a straightforward application of facts to Article 4(2). In Iran Continental the court concluded that the presumption in favour of England, in that case, under 4(2), was not displaced in favour of Texas by the operation of 4(5). On the facts of what Clarke LJ described as "this most unusual case" the contract had connections with Iran, Texas and England. The transaction, as Carnwath LJ pointed out, was for reasons of practical politics, structured as one to be performed by the UK branch in order to comply with the Claimant's concerns not to be seen to be buying goods direct from the United States. It is as I see it clear that Mr Lawlor's principal place of business, and that through which he was to perform his obligations under the agreement, was Spain. The able submissions of Mr Randolph on this point if accepted would distort and make artificial what in this case seems to me a straightforward exercise.

Article 4(5)

53. The presumption in Article 4(2) does not apply if, amongst other things, it appears from the circumstances as a whole that the contract is more closely connected with another country than it is with a country indicated by the presumption. I have referred above to the burden of proof which is on Mr Lawlor and the approach to the issue laid down in Interfrigo.
54. Mr Randolph submits, correctly, that it is permissible when determining the country with which the contract is most closely connected to take account of factors which supervened after the conclusion of the contract. He also points to the broad discretion before the court by reference to the observations of Blair J in British Arab Commercial Bank which I set out earlier, particularly :

"The court is not precluded from taking into account any particular type of factor when applying Article 4(5) and is not required to look at the contract in question in isolation from other contracts with which it is connected."

55. Mr Randolph also points out that Mr Powell accepted that the description of Mr Lawlor's activities in the drafting of the employment contract reflected the position under his agency (albeit Mr Powell had no direct knowledge of what that was). That draft provided that Mr Lawlor would not have a fixed place of work given the peripatetic nature of the role and would be required to work outside the UK in the territories listed in Schedule 1 which extended to Spain, Greece, Turkey, Morocco, Algeria, Tunisia and Bulgaria. Mr Powell's internal note about the position of Mr Lawlor prepared at the time of negotiating his proposed employment contract refers to the fact that the original territory was Spain and Portugal but mentions that "Tim has now taken responsibility for" … and then mentions "Greece, Turkey, Morocco, Algeria, Tunisia and Bulgaria".
56. He also points to other factors which have been identified earlier. He cites the English law nature of many Extec contracts, Mr Lawlor's employment in Spain by Extec being presumably governed by English law, the fact that all the other sales agents working for Extec transferred across to employment contracts which were expressly governed by English law, in turn reflecting their earlier activities carried on as sales agents. He relies on the key link of the factory and demonstration ground at Swadlincote in England to all the various markets represented by Mr Lawlor.
57. Mr Parker argues that if Article 4(5) is to be applied then the agency agreement was most closely connected with Spain. He relies upon the connections with Spain I referred to earlier and makes the same points about the limited involvement which Mr Lawlor had in countries other than Spain. He also points to the fact that Mr Lawlor himself has connections with Ireland and Spain but almost none with England.
58. The presumption in Article 4(2) is to be disregarded if it appears from the circumstances as a whole that the contract is more closely connected with another country. So the question is whether or not Mr Lawlor has shown that the contract is more closely connected with England than with Spain.
59. In reaching a decision I have to refer to some of my earlier conclusions. I have already pointed out that Mr Lawlor was Extec's agent in Spain throughout the agency. He came to England with customers regularly but spent very much less time here than in Spain. Mr Lawlor spent more time in Spain as opposed to Andorra, than he was willing to admit. In time Mr Lawlor came to work in other territories but only to the limited extent which the travel chronology and his sales figures describe. There are no such statistics for the earlier period but these would inevitably have shown less travel outside Spain and all or most sales being made in that country. The connections with England are the factory and demonstration ground at Swadlincote which Mr Lawlor visited from time to time, the express choice of English law for contracts for the sale of machinery, payment of commission in sterling in the early years, the likelihood that if the parties had applied their minds to the matter his agency contract would have been seen to be governed by English law and the other factors referred to by Mr Randolph.
60. At this point the court is concerned with the circumstances as a whole not simply with the pointers to a potential choice of law. The Spanish connection remains much deeper and more extensive than that of England. An examination of the broader circumstances under Article 4(5) following a different exercise produces the same result as the application of the factors under Article 4(2). Spain remains the country with which the contract was most connected.

Conclusion

61. I therefore conclude that the applicable law of the commercial agency agreement between the parties was Spanish, not English law.
62. I shall be grateful if not less than 72 hours before hand down of this judgment Counsel will send to me a list of corrections of the usual kind and a draft order, preferably both agreed, together with a note of any issues they seek to raise at the next hearing.
63. While the Court is not a tax collector, especially on behalf of foreign governments, I am concerned by the fact that Mr Lawlor is in this action seeking compensation for the termination of an agency which earned him substantial sums over many years on which he paid no tax whatever, apparently as a result of failing to declare his income to the Spanish and/or Irish authorities. I am likely at the hand down of this judgment to decline to permit the Claimant to proceed with the claim until he has satisfied the Court that full declarations of this income have been made as required by Spanish and Irish law. It is also unclear to me how far the Defendant has acted properly in the manner in which it has paid commissions to the Claimant, particularly through Andorra. I ask the Defendant for clarification of the position to be provided before or at the next hearing.