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Bio-Medical Research Limited t/a Slendertone v. Delatex S.A. [1999] IEHC 152 (6th May, 1999)

THE HIGH COURT

1998 No 4338p

BETWEEN

BIO-MEDICAL RESEARCH LIMITED T/A SLENDERTONE

PLAINTIFF

AND

DELATEX S.A.

DEFENDANT

JUDGMENT of Mr. Justice McCracken delivered the 6th day of May, 1999.

1. The Plaintiff is an Irish company which produces and markets certain products under the brand name "Slendertone", and the Defendant is a French company which distributes pharmaceutical products in France. The original Slendertone products were produced by the predecessor in title to the Plaintiff, which went into receivership, and these products were distributed in France by the Defendant. In May 1990 the Plaintiff purchased the assets of the previous company excluding all distribution contracts. However, notwithstanding the exclusion of distribution contracts, in fact the Plaintiff continued the production of Slendertone products and continued to have those products distributed in France by the Defendant. Neither the Plaintiff nor its predecessor had any agreement in writing with the Defendant, but in fact the Defendant has been the sole distributor in France of these products since the mid 1980s.

2. In 1997 a dispute arose between the Plaintiff and the Defendant, as a result of which, by letter dated 14th October, 1997 the Plaintiff notified the Defendant that it intended to do business with other distributors in France, and that it intended to commence such business five months from the date of the letter. The Defendant maintains that it is the sole and exclusive distributor of the Plaintiff's products in France and on 7th April, 1998 the Plaintiff issued a Plenary Summons claiming, inter alia,:-

" 1. A declaration that the Plaintiff is not a party to an exclusive distribution agreement with the Defendant in relation to the sale and distribution of slimming products and/or services in France.

2. In the alternative, if any exclusive distribution agreement exists between the parties, which is denied, a declaration that the same was effectively terminated by a letter of termination, dated 14th October, 1997, from the Plaintiff to the Defendant.

4. Damages for breach of contract."

3. The Summons contained the usual certificate that the Court has power under the Jurisdiction of Courts and Enforcement of Judgments (European Community) Act 1988 to hear and determine the claim. On 28th July, 1998 the Defendant entered an appearance to those proceedings for the purpose of contesting jurisdiction. The Defendant has now brought this Motion inviting the Court to decline jurisdiction in respect of the claims at paragraphs 1, 2 and 4 of the Endorsement of Claim.

4. The primary issue in this case is whether the correct forum for these proceedings is in Ireland or in France. The relevant provision is contained at Article 5.1 of the Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters "(the Brussels Convention)" . This Article provides:-

" a person domiciled in a contracting state may in another contracting state, be sued:-

1. In matters relating to a contract, in the Courts of the place of performance of the obligation in question ."

5. There is one further matter which has some bearing on the problem. Every delivery of goods from the Plaintiff to the Defendant was accompanied by an invoice which sets out the terms and conditions of sale. There is no dispute between the parties as to the validity of these terms and conditions, but the Plaintiff strongly relies upon them in support of its argument that the place of performance of the obligation with which the action is concerned was, at least in part, in Ireland. The relevant extracts from the terms and conditions are as follows:-

"2. Price;

All prices shall be payable in the currency quoted.

Unless otherwise agreed in writing by the Seller all prices quoted are ex-factory and exclusive of packaging, freight, insurance, taxes and any other similar charges.

"5. Delivery;

Delivery shall within a time period agreed between the parties take place at the sellers premises at Bunbeg, Letterkenny, County Donegal unless otherwise agreed by the Seller in writing."

"15. Governing Law;

This contract shall be governed by and construed in accordance with the laws of Ireland and the buyer hereby irrevocably submits to the jurisdiction of the Irish Courts in relation to all matters in dispute hereunder."

6. In addition to relying on these terms and conditions as an argument that some or all of the obligation is to be performed in Ireland, the Plaintiff also seeks to amend the certificate on the Plenary Summons so as to add that the Court has power to hear the claim pursuant to Article 17 of the Brussels Convention. I propose to consider this application at the end of the judgment.

7. The Defendant concedes that each delivery of goods is in effect a separate sale, and that the terms and conditions printed on the invoice are the terms and conditions related to that specific sale. However, the Defendant's primary argument is that this is not the contract which is the subject matter of these proceedings, but on the contrary that there is an umbrella agreement whereby the Plaintiff has appointed the Defendant to be its exclusive distributor in France, and the Defendant has agreed to distribute the Plaintiff's goods in France. The Defendant's argument is that this action concerns the umbrella agreement, and not the specific sales agreements, and that the obligation under the umbrella agreement falls to be performed solely in France.

8. The approach to be taken by the Court has been clearly laid down by the European Court of Justice in Etablissements A. de Bloos S.P.R.L v. Etablissements Bouyer S.A. (1977) 1.C.L.R. 60. At page 81 the Courts set out in its judgment:-

"as stated in its preamble, the convention is intended to determine the international jurisdiction of the Courts of the contracting states, to facilitate the recognition and to introduce an expeditious procedure for securing the enforcement of judgments. These objectives imply the need to avoid, so far as possible, creating a situation in which a number of Courts have jurisdiction in respect of one and the same contract. Because of this, Article 5(1) of the Convention cannot be interpreted as referring to any obligation whatsoever arising under the contract in question. On the contrary, the word "obligation" in the article refers to the contractual obligation forming the basis of the legal proceedings. This interpretation is, moreover, clearly confirmed by the Italian and German versions of the Article. It follows that for the purposes of determining the place of performance within the meaning of Article 5, quoted above, the obligation to be taken into account is that which corresponds to the contractual right on which the Plaintiff's action is based. In a case where the Plaintiff asserts the right to be paid damages or seeks a dissolution of the contract on the ground of the wrongful conduct of the other party, the obligation referred to in Article 5(1) is still that which arises under the contract and the non performance of which is relied upon to support such claims."

9. The provisions of Article 5 of the Brussels Convention have been considered in a number of cases in this jurisdiction. The principles established seem to me to be quite clear, and are set out in the judgment of Finlay C.J. in Handbridge Limited -v- British Aerospace Communications Limited (1993) 3.I.R. 345 in which he said at page 358:-

" Applying these principals, as it is necessary to do, to what is the exception provided for in Article 5 of the Convention, and in particular in Article 5(1) which is what is in issue in this case, I am satisfied that certain conclusions of principles arise. They are :-

1. The onus is on the Plaintiff who seeks to have his claim tried in the jurisdiction of a contracting state other than the contracting state in which the Defendant is domiciled to establish that such claim unequivocally comes within the relevant exception.

2. In a case of a claim for breach of contract, therefore, what he must prove is that the obligation in question in that claim is by virtue of the terms of the contract or by some generally applicable principal of Irish law, an obligation which must be performed in Ireland.

3. It would follow from this that where the evidence adduced by a Plaintiff seeking to have a claim for breach of contract tried within the jurisdiction of a contracting state other than the state of domicile of the Defendant amounts to no greater standard of proof than establishing that the obligation which it is claimed was breached could have been performed in such state, he has failed to establish his entitlement to sue pursuant to Article 5(1), the necessary proof being that the obligation which it is claimed has been broken by the Defendant according to the contract or according to some general principal of law, must be performed in the state concerned."

10. While this is not directly a claim by the Plaintiff for a breach of contract, it is a claim primarily for declarations in relation to a contract. The Statement of Claim has been delivered in this case, in which it is asserted at paragraph 5:-

" following the commencement of trading by the Plaintiff in May 1990 , the Plaintiff and Defendant commenced business dealings under which it was agreed that the Plaintiff would sell its own "Slendertone" products to the Defendant who, in turn, would sell them on to the French public. At no stage was it a condition and/or term of these sales that the Defendant was to be the sole and exclusive distributor of the Plaintiff's product in France."

11. The Statement of Claim also contains a claim for damages for monies outstanding in respect goods and services provided by the Plaintiff, but the jurisdiction of this Court to hear that part of the case is not being challenged by the Defendant. What is being challenged are the claims which I have set out in the earlier part of this judgment. Those claims, seek in effect, to have a construction placed on the terms of the agreement which is pleaded in paragraph 5 of the Statement of Claim, which is an agreement that the Defendant will distribute or resell the Plaintiff's goods in France. The agreement may have other obligations, such as to take delivery of the goods in Ireland as set out in the terms and conditions attached to the invoices, but the only obligation with which I am concerned is the nature of the Defendants contractual duty in respect of the distribution of the Plaintiff's goods in France. The question is not whether the entire contract between the Parties was to be performed in France or in Ireland, but whether the obligation which is at issue in these proceedings is to be performed in France.

12. I think the Defendant is perfectly correct in arguing that there is an umbrella agreement, albeit unwritten, governing the overall relationship between the parties, and in particular the nature of the distribution agreement, and in addition there are individuals sales agreements every time an order is given. This is not an uncommon situation in either national or international commerce. An immediate example that springs to mind in the national context is the type of agreement which frequently exists between an oil company and a retail petrol station.

13. Bearing in mind that the onus is clearly on the Plaintiff in these proceedings to establish a jurisdiction in the Irish Courts, I am quite satisfied that, on the claims made by the Plaintiff itself, the obligation which it is sought to have litigated in these proceedings is an alleged obligation on the part of the Defendant to distribute the Plaintiff's products in France, and on the Plaintiffs part, to have those products distributed solely and exclusively by the Defendant in France. The fact that the Plaintiff seeks to establish that there is no such obligation does not alter the approach to be taken by the Courts, because there is an obligation which is "in question" , and if that obligation exists, it is to be performed in France. Accordingly, this Court must decline jurisdiction in respect of the claim set out at paragraphs 1, 2 and 4 of the endorsement of claim on the grounds they do not come within Article 5(1) of the Brussels Convention.

14. The Plaintiff has also sought to amend the certificate on the Plenary Summons to include a claim that the Court has jurisdiction under Article 17 of the Brussels Convention. This article, in effect, permits the parties to contract out of the Brussels Convention if they agreed to grant jurisdiction to the Courts of a particular contracting state. There is no doubt that the terms and conditions of the invoices do contain such a clause but as I have held that the obligation which is in dispute in this case is not an obligation under those terms and conditions, but under the umbrella agreement, the obligation at issue cannot come within Article 17. The terms and conditions on the invoice relate to each specific sale, and not to the overall relationship between the parties. Accordingly, as in my view any amendment to the certificate such as is sought by the Plaintiff would have no effect, I will refuse such amendment.

15. I should add the Defendant also sought to challenge the right of the Plaintiff to amend a certificate under any circumstances. As I am refusing the amendment on other grounds it is not necessary for me to determine whether any right of amendment exists under any circumstances.