Scottish Court of Session Decisions

The pursuer in this action resides in Scotland where he carries on business as a commercial importer and distributor under the trading name of Ian Eddie Enterprises. The first defenders are an Italian company which has its place of business in Altamura, near Bari, in Italy. They make and supply furniture. The second defender is an individual who also carries on business as a manufacturer of furniture in Altamura under the style of Alpa Salotti di Altamura Paola.

The summons has two substantive conclusions seeking payment by the defenders jointly and severally of two sums of money, namely £68,346.10 and £3,007.32 respectively. The former is claimed as damages for alleged breaches of contracts on the part of both defenders. The latter is a sum which is sought as repetition of money overpaid by the pursuer to the first defender.

In addition to contesting the merits of the pursuer's claims both defenders plead that this Court has no jurisdiction to entertain the claims and when the case was argued on procedure roll counsel were agreed that the discussion, at this stage, be restricted to the single issue whether the pursuer had relevantly averred a proper basis of jurisdiction.

Both defenders being domiciled in Italy the only ground of jurisdiction invoked by the pursuer is Article 5(1) of the Brussels Convention - that is, the Convention on Jurisdiction and the Enforcement of Judgements in Civil and Commercial Matters signed at Brussels on 27 September 1968, as amended by the three accession conventions referred to in Section 1 of the Civil Jurisdiction and Judgements Act 1982, as amended. The relevant provisions of Article 5 are as follows:

By the conclusion of the argument before me it was apparent that no material issue arose concerning the proper interpretation of the provisions of Article 5(1) of the Brussels Convention. Both counsel accepted that where, as here, damages are sought for breach of contract the obligation relevant for the purposes of Article 5(1) was the obligation under the contract which had allegedly been breached (Case 14/76 Etablissements de Bloos SPRL v Société Bouyer [1976] ECR 1497, para. 14). In determining the location or situation of the place of performance it was necessary, in construing the contract, to apply the proper law of the contract, that law being ascertained in accordance with the private international law rules of the lex fori (Case 12/76 Industrie Tessili Italiana Como v Dunlop AG [1976] ECR 1473). If an action were founded on a number of different obligations all arising under the same contract a court might identify the principal obligation in issue, which would determine its jurisdiction, any subsidiary obligation being governed by the maxim accessorium sequitur principale - Case 266/85 Shenavai v Kreischer [1987] ECR 239, para. 19. However if the separate obligations were of equal importance and the one was not clearly ancillary to another, principal obligation, jurisdiction existed only in respect of a claim based on the obligation whose place of performance lay within the territorial jurisdiction of the Court seised - Case C-420/97 Leathertex Divisione Sintetici SpA v Bodetex BVBA, 5 October 1999, as yet unreported. It was also accepted by both counsel that since the provisions of Article 5 constituted a derogation from the basic leading provision of the Convention that a defender be sued in the Courts of his domicile, its provisions fell to be construed restrictively.

In light of counsel's acceptance of those principles of construction of Article 5(1) the principal issue between the parties at debate - as regards the first conclusion - came to be whether the pursuer had relevantly averred that the alleged breaches of the contracts upon which the claims for damages were based were in each instance a breach of a contractual obligation which fell to be performed within Scotland.

The pleadings made on behalf of the pursuer are perhaps not distinguished by clarity or conciseness and indeed an element of the criticism advanced by counsel by the defenders was directed to the apparent lack of specification and the conflicting nature of some of what was averred, directly or by way of incorporation of documents.

However endeavouring to distil and summarise the material averments made on behalf of the pursuer it appears that in July 1993 the pursuer and the second defender had discussions about a business relationship which resulted in an understanding that the pursuer would import furniture produced by the second defender and distribute it to retailers in the United Kingdom and Ireland. The pursuer incorporates into the pleadings a letter of 26 July 1993 from the second defender to the pursuer (13/1 of process). It is evident from the terms of the letter, and indeed the averments of what happened subsequently, that the pursuer was not to act as agent stricto sensu for the second defender but that any goods supplied would be the subject of separate contracts of sale between the pursuer and the second defender, the pursuer being then able to sell on to customers in the United Kingdom or Ireland or elsewhere. In March 1994 the pursuer was advised that future orders should be placed with the first defenders. It is averred by the pursuer (closed record, page 9E) that:

It is convenient to interpose at this point the observation that at certain points in the pleadings for the pursuer it is suggested that the contracts of sale fell to be performed pursuant to what is described as the distribution agreement namely the understanding evidenced by the letter of 26 July 1993 to which reference has already been made and that accordingly all of the seller's obligations under the separate contracts of sale were to be performed in Scotland. Those suggestions are to be found, for example, in the closed record at page 6B-C, 31C, 37B-C. Counsel for the pursuer did not seek to develop those suggestions in any way. In my view he was right not do so and I think those averments fall to be seen as effectively archaeological remains of an earlier era in the life of the pleadings in this case.

Within the rather slender and incomplete framework of the "distribution agreement", the principal term potentially relevant for present purposes being the allowance to the pursuer of a period of seventy five days for the payment of the goods bought by him, the pursuer bought furniture from the defenders. I use the term "defenders" because for the limited purposes of the debate on jurisdiction counsel were agreed that the distinction between the two defenders was not material.

In addressing the question of the place of performance of the obligation in question it was accepted by counsel for the pursuer that, at least until the Spring of 1995, it was not disputable that all of the contracts of sale placed by the pursuer with the defenders were "ex works" in Altamura and no question could arise of the seller having to perform any obligation in Scotland. However, it is averred - and in many respects not disputed by the defenders - that, put generally, in early 1995 arrangements were altered. The background averred by the defenders is to the effect that the pursuer had not made payment for goods previously supplied and had neglected to co-operate in supplying information to the defenders' credit insurers. While these averments are not admitted as such, the pursuer avers that "the defenders were unhappy at [sic] delivering the goods to the pursuer before receiving payment for them". It is then averred on behalf of the pursuer (closed record 19E):

The letters to which reference is made appear to be Nos.21/8 and 21/9 of process which reflect an anxiety on the part of the defenders concerning unpaid prior contracts of sale and a desire to retain the right of disposal until payment is made against the bills of lading, except in the case of one container for which they were content to allow 30 days' credit.

It appears that thereafter goods were shipped from Italy and the bills of lading were passed through the defenders' bankers to the pursuer's bankers and delivered, against payment, to the pursuer's bank in Glasgow. The pursuer goes on to aver (closed record page 22C) that the defenders "did not intend, and did not, part with the property in the goods covered by the bills of lading until the pursuer paid the price. Accordingly property in the goods did not pass until the goods were delivered to the pursuer after payment of the price. Delivery of the goods covered by the said bills of lading occurred in Scotland when the bills were delivered to the pursuer's banking agent at Bank of Scotland, St Vincent Street, Glasgow after full settlement of the relevant invoices". It is also to be noted that it is admitted by the pursuer that the freight and insurance of the goods were paid by him.

Turning next to the breaches of contract which are averred by the pursuer it may be observed at the outset that claims are made in respect of a number of different orders for the purchase of furniture. As respects most, but not all, of the transactions in respect of which complaint is made it is averred that the "new" arrangements applied. Without entering into detail the pursuer's complaints may be summarised as being:

• A failure by the defenders to ship certain of the items of furniture which had been ordered, as a result of which the pursuer had to re-order at higher cost (£1,539.80).
• A failure by the defenders to ship certain items within a reasonable time, as a consequence of which the pursuer's customers cancelled their orders to him resulting in his suffering a loss of profit (£4,057.36).
• A failure to supply goods with the stipulated type of upholstery and a failure to supply goods in a reasonable time as a result of which the pursuer gave compensatory discounts to his customers (£610.55).
• A failure to pack certain items adequately, as a result of which repairs required to be undertaken to them (£200.00).
• Shipping items with a wide variety of cosmetic, mechanical and other defects thereby provoking customer complaints in dealing with which the pursuer required to spend money by way of repairs, credit notes, compensation and other costs (£16,194.08).

It is also averred that as a result of the foregoing breaches of contract two named retailers ceased trading with the pursuer in respect of the defenders' products thereby causing the pursuer to suffer a loss of profit in respect of future business in the defenders' products, which loss is claimed at an annual continuing rate of £43,244.30. (In arithmetical terms the summation of that figure of £43, 244.30 and the other figures just mentioned totals the sum for which payment is sought in the first conclusion.)

In the course of his submissions in support of his motion for dismissal of the action for want of jurisdiction counsel for the defenders, Mr Forsyth, pointed out that in effect all of the alleged breaches of contractual obligation related to the state of goods on delivery or the timing of delivery and accordingly the contractual obligation in issue was the seller's obligation to deliver timeously goods of the quantity, description and quality required by the particular contract of sale in question. Thus the location of the place of delivery of the particular goods in question required by the terms of the contract was the relevant test of jurisdiction. The pursuer had not relevantly averred that location to be in Scotland.

Neither party having pled that Italian law applied and produced different legal results, it was submitted by Mr Forsyth, under reference to Section 29 of the Sale of Goods Act 1979, that while the place of delivery was a question depending on the express or implied terms of the contract the presumption - in sub-section (2) of Section 29 - was in favour of the seller's place of business. Delivery to a carrier, whether named by the buyer or not, for the purposes of transmission to the buyer was prima facie deemed to be a delivery of the goods to the buyer (s.32). The fact that a seller had delivered goods to a carrier or shipping company for carriage to the buyer's place of business did not prevent the seller from retaining a right of disposal of the goods (Section 19(1)) and where goods were shipped under a bill of lading deliverable to a seller or his agent there was a prima facie assumption of a reservation of a right of disposal. Thus, in Mitsui Ltd v Flota Mercante S.A. [1988] 1 W.L.R. 1145 the placing by the seller of the goods f.o.b. constituted performance of the obligation to deliver albeit that by taking a bill of lading the seller had reserved his right of disposal. Counsel further referred to Benjamin on Sale of Goods at inter alia para. 8-001, 8-002, 19-008 and 19-063. It was incumbent upon the pursuer to set out clearly the contractual terms which it was contended made delivery of the goods an obligation which the defenders had to perform in Scotland. The invoices, which the pursuer had incorporated into the pleadings, all stated that the contract was "ex works". It was admitted by the pursuer that he had paid the freight and insurance. The alteration of the terms of payment to cash against documents, averred by the pursuer, did not mean that the place of performance of the obligation to deliver the goods transferred to Scotland. The term "documentary sale" employed by the pursuers at p.19E of the closed record as the description of the new arrangements was a term which usually meant a c.i.f contract - see for example Benjamin, para. 19-008. But even in a documentary sale of that kind the obligation to deliver the goods and the obligation to deliver the documents were wholly distinct in regard to the location of the place of performance, the former being performed by putting the goods into the possession of the ship or the carrier - see Johnson v Taylor Brothers & Company Limited [1920] A.C. 144; Kwei Tek Chao v British Traders & Shippers Limited [1954] 2 Q.B. 459. The proposition that because there may be an obligation to deliver a bill of lading in Scotland against cash meant that the place of delivery of the goods themselves was in Scotland was accordingly wrong. It was therefore not possible to find a relevant basis whereon the contractual obligations said to have been breached fell to be performed in Scotland.

As already mentioned, in his response Mr Mure for the pursuer did not dispute that prior to April 1995 all the contracts of sale were plainly "ex works" and that no obligation fell to be performed by the sellers in Scotland. He contended however that the alterations of April 1995 whereby the defenders, instead of allowing the pursuer credit, insisted on "cash against the documents" altered the position. There was then an obligation to be performed in Scotland, namely the delivery of the bills of lading in exchange for payment. There was thus symbolic delivery of the goods in Scotland. The bills of lading were made out to the consignee and so the prima facie assumption in Section 19(2) of the Sale of Goods Act 1979 did not apply. It might possibly be that the defenders, in altering the payment terms, chose not simply to retain the property in the goods but also to assume an obligation to deliver the goods in Scotland. Although the pursuer had made payment of the freight and insurance in respect of the goods this was in order that he obtain real delivery in Liverpool of the furniture after the bills of lading had been delivered to him in Glasgow on payment. The decision in Johnson was concerned with a discretionary rule of the English Courts concerning service outwith the jurisdiction. It was at all events not binding on a Scottish Court.

The pursuer was, said counsel, in dubiety as to the precise arrangements operating after April 1995. While counsel accepted that the defenders no doubt insisted in cash against documents because of their concern over the pursuer's ability to pay, there was he said a persisting dubiety; there was a Scottish attaching factor in that the bills of lading were delivered against payment in Scotland; and at perhaps highest for the pursuer it might be said that there was symbolical delivery of the goods in Scotland. Since the pursuer was in dubiety as to the arrangements it would in the circumstances be appropriate to allow a proof before answer.

In my opinion what is averred on behalf of the pursuer does not relevantly set forth a proper basis upon which this Court may assume jurisdiction respecting the claims for damages for breaches of contract collectively ingathered in the sum sought in the first conclusion.

I leave aside the fact that some of the contracts alleged to have been breached were contracts of sale which preceded the new arrangements of documentary sale averred by the pursuer. As respects those contracts, in which the pursuer was granted a specified period of time for payment, counsel for the pursuer accepted, rightly, that there could be no question of the place of performance of the obligation of delivery of the goods being in Scotland. The new arrangements averred involved an alteration in terms of payment to what is described as a "documentary sale". However that alteration to a documentary sale does not, in my view, mean that the place of delivery of the goods thereby acquires a location in Scotland.

While the case of Johnson v Taylor Brothers was no doubt concerned with an English rule of court concerning service, the particular provision of the rule in question adopted performance of a contract within the jurisdiction as its criterion for permitting service of a summons on someone outwith the jurisdiction. The particular question in that case was whether, in a c.i.f. contract between a Swedish seller and an English purchaser, the seller's obligation to deliver the goods fell to be performed in England by virtue simply of the documents' being deliverable to the purchaser in England. In his speech the Lord Chancellor (Birkenhead), at 149, said this:

The Lord Chancellor went on subsequently to state that the obligation of the shipper in that case to ship goods of the contractual description was not a contract which according to its terms ought to have been performed within the jurisdiction of the English Courts. The attempt by the English purchaser to constitute jurisdiction as respects that breach by founding on a failure of the seller to tender bills of lading in England did not succeed, the two obligations being distinct.

The distinction between the obligation to deliver the goods and that of delivering the relative bill of lading or other documents was expressed thus by Devlin J. in Kwei Tek Chao at p.480-481:

It accordingly appears to me that in a c.i.f. contract the fact that the place of delivery of the bill of lading to the seller is within the jurisdiction of the court seised does not mean that the location of the contractual place of delivery of the goods also falls within that territorial jurisdiction.

It is true of course that in the present case the pursuer does not in terms aver c.i.f. contracts. The new arrangements relied upon the pursuer did not involve the seller in payment primo loco of freight and insurance. These were paid initially and ultimately by the purchaser, that is to say the pursuer, as was the case in the "old" contracts which were accepted as involving delivery to the pursuer in the form of the carrier in Italy. But in my view that divergence from standard c.i.f. terms in no way assists the pursuer in contending for jurisdiction in this court. In my opinion counsel for the defenders was correct in indicating that proper c.i.f. terms were a fortiori the "new" arrangements in the sense that, were they applicable, they would be more in the pursuer's favour than what has been averred in the present case.

In view of the clear distinction in a documentary sale between the obligation to make delivery of the goods, conform to contract, and the obligation to tender the documents and hence the distinction in the location of the respective places of performance of those obligations I do not consider that the pursuer's endeavour to invoke jurisdiction by reliance on symbolic delivery by means of the bill of lading is well founded. It is also to be observed that although the obligation to deliver the bill of lading is the obligation relied upon as providing the attaching factor, that obligation is not averred to have been breached. Accordingly, as regards the claims for damages for breach of contracts to which the first conclusion relates I conclude on analysis of what is being said on behalf of the pursuer that a relevant basis of jurisdiction has not been averred.

I add that while, as I understood him, counsel for the pursuer accepted that the obligation to deliver the bill of lading in Scotland was the basis for contending that jurisdiction existed in Scotland, he also submitted that since the pursuer was unclear as to the terms of his contract and because there was, as he put it, some dubiety about matters a proof before answer should be allowed. It seemed to me that this submission was advanced effectively in the hope that something might emerge in the course of such a proof which would assist. In my view a pursuer seeking to rely on the special and derogative provisions of Article 5(1) of the Brussels Convention should be able to set out, in averment, a sufficient exposition of contractual terms wherefrom it can be seen that there is an intelligible and stateable basis for maintaining that the location of the place of performance of the contractual obligation in issue is within the territorial jurisdiction of the court before which the action has been brought. There may, of course, be cases where the factual accuracy of what is clearly and relevantly averred is disputed and an inquiry may be necessary. But a pursuer ostensibly in doubt as to his contractual situation and as to whether he is able to aver the existence of Article 5(1) jurisdiction always has available to him the primary ground of jurisdiction, namely domicile under Article 2 and it appears to me that an inquiry would be appropriate only where a pursuer relying upon the special jurisdiction has set forth a prima facie relevant case that the obligation at the base of the action required to be performed within the territorial jurisdiction of the court before which the action has been brought. In my view the pursuer in the present action has not done so as regards the breaches of contract to which the first conclusion refers.

In addition to those breaches, Article 9 of condescendence advances a claim that the defenders breached the distribution agreement - now, by amendment, averred to be an exclusive distributorship agreement - in respect that the defenders supplied goods directly to a company in Wembley, England in February and December 1994. It is unclear to me how the loss claimed in respect of this alleged breach of contract fits with the sum claimed in the first conclusion. Be that as it may, I understood counsel for the pursuer to accept that the obligation upon which this claim was founded was an obligation to refrain from supplying directly to the customer in Wembley and that the obligation so to refrain arose under a separate contract from the contracts of sale said to have been breached elsewhere in the pleadings. Counsel was unable to say that there was any evidence, let alone averment, of the vendors' having made deliveries directly to customers in Scotland.

In these circumstances it appears to me to be clear that the obligation upon which this head of claim is based is an obligation which fell to be performed in England. Further, since it arises out of a separate contract from the contracts of sale to which the first conclusion appears to relate I find it difficult to see how it could be said to be covered by the maxim accessorium sequitur principale, to which the Court of Justice of the European Communities referred in the context of different obligations arising under the same contract. But in any event since I have held that jurisdiction does not exist as respects the claims for breach of the contracts of sale the concept of accession is of no help to the pursuer in this instance.

There remains the second conclusion seeking payment of £3007.32. The plea-in-law in support of this conclusion is in these terms:

Although the averments made respecting this matter are couched rather in terms of a breach of contract it is, I think, plain that this head of claim truly seeks restitution of money paid in error. Counsel for the pursuer accepted that this was a claim for restitution based on unjustified enrichment and was not a contractual obligation as such. In so accepting he agreed with the analysis put forward by counsel for the defender who referred to Strathaird Farms Limited v G. A. Chattaway & Co 1993 S.L.T. (Sheriff Court) 36 and Kleinwort Benson Limited v Glasgow City Council [1999] 1 AC 153. In the latter of those cases the issue whether quasi-contractual claims for restitution of money on the basis of unjustified enrichment might fall within the special grounds of jurisdiction in Article 5(1) was the subject of an extensive review of the Community Law jurisprudence by the members of the Judicial Committee of the House of Lords. The majority held that a claim for restitution of monies paid under a void contract did not fall within Article 5(1) of Schedule 4 to the Civil Jurisdiction and Judgments Act 1982 [the "intra-UK provisions"], such a claim not being a claim based on contract. Counsel for the pursuer accepted both that this decision, if not binding, was highly authoritative and persuasive and that it was difficult to find any grounds for distinguishing it from the claim advanced as respects the second conclusions in this action. Accordingly, I consider that no relevant ground of jurisdiction has been averred as respects the claim advanced in Article 11 of condescendence and the second conclusion.

In the overall result I reach the decision that no relevant basis of jurisdiction has been advanced and that the action must therefore be dismissed for want of jurisdiction as respect all of its branches. I shall therefore uphold the first plea-in-law for each of the defenders and, to the extent to which it relates to jurisdiction, the second plea-in-law for each of those defenders.