|Judgment - Kleinwort Benson Limited v. City of Glasgow District Council continued|
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I have taken the unusual course of quoting these paragraphs in full, because they demonstrate that the Court of Justice has returned to, and indeed has reinforced, the reasoning and conclusion in de Bloos v. Bouyer that the "obligation" in Article 5(1) is the contractual obligation on which the claim is based. It is the courts of the place of performance of that obligation in which jurisdiction is vested under Article 5(1). It is in that sense, if at all, that Article 5(1) is applicable in the present case.
(c) In Kalfelis v. Schröder Case 189/97  E.C.R. 5565, a case concerned with Article 5(3) of the Convention, it was proposed by Advocate General Darmon that, where there are overlapping (concurrent) claims in contract and tort, only Article 5(1) will determine the jurisdiction of the court, since the matters relating to contract will "channel" all the aspects of the dispute. In that connection he stressed the manifest practical advantages of this course, since the court dealing with the contract is best placed to understand the context and the implications as regards legal proceedings: see p. 5577, paras. 25-30. This proposal was however rejected by the Court of Justice, which held (see p. 5585, paras. 18 and 19, and p. 5587) (a) that the term "matters relating to tort, delict or quasi-delict" in Article 5(3) must be regarded as an independent concept covering all actions which seek to establish the liability of a defendant and which are not related to contract under Article 5(1); and (b) that a court which has jurisdiction under Article 5(3) over an action in so far as it is based on tort or delict does not have jurisdiction over that action in so far as it is not so based. In so holding, the Court stressed (see para. 19) that the special jurisdictions in Articles 5 and 6 must be interpreted restrictively; and further stressed (see para. 20) that, while disadvantages may arise from different aspects of the same dispute being adjudicated upon by different courts, the plaintiff is always entitled to bring his action in its entirety before the courts of the defendant's domicile.
The application of the principles in the present case
With these principles in mind, I turn to consider the question in the present case. That question is whether the claim of Kleinwort to restitution of the sums paid by it to Glasgow under a contract accepted to be void ab initio falls within Article 5(1).
I have to confess that I find it very difficult to see how such a claim can fall within Article 5(1). It can only do so if it can properly be said to be based upon a particular contractual obligation, the place of performance of which is within the jurisdiction of the court. Where however, as here, the claim is for the recovery of money paid under a supposed contract which in law never existed, it seems impossible to say that the claim for the recovery of the money is based upon a particular contractual obligation.
In truth, the claim in the present case is simply a claim to restitution, which in English law is based upon the principle of unjust enrichment; and claims of this kind do not per se fall within Article 5(1). It is not necessary for the purposes of the present case to hold that a claim to restitution can never fall within Article 5(1). Very exceptionally, there may be particular circumstances in which it can properly be said, at least in cases arising under the Convention, that the claim in question, although a claim to restitution, is nevertheless based on a contractual obligation and so falls within the Article. This is a point to which I will return at a later stage. But no such circumstances arise in the vast majority of claims to restitution, which are founded simply upon the principle of unjust enrichment. Such is, in my opinion, the present case. No express provision is made in Article 5 in respect of claims for unjust enrichment as such; and it is legitimate to infer that this omission is due to the absence of any close connecting factor consistently linking such claims to any jurisdiction other than the defendant's domicile. Article 2 therefore provides the appropriate jurisdiction for such claims.
The point is very simple. I therefore propose to turn next to the judgments of the majority of the Court of Appeal, and to examine in some detail the reasons for which they held that this simple reasoning should not prevail.
The judgments of the majority in the Court of Appeal
The majority judgments were delivered by Roch and Millett L.JJ. Roch L.J. relied strongly on the Martin Peters case as showing that Article 5(1) applies even where there is no contract according to the national law. In my opinion, however, he sought to derive too much from that case. Certainly, the case shows that the expression "matters relating to a contract" must be construed in such a manner as to give effect to the system and objectives of the Convention, so that an independent or autonomous meaning must be given to the word "contract," which must be read as wide enough to embrace other consensual arrangements even though these may not be regarded as contractual under the national law of the relevant Contracting State. But that decision provides no useful guidance on the question whether, in the context of Article 5(1), the word "contract" is to be construed as including a supposed contract which is void ab initio, so that a claim to recover money paid under such a void contract falls within the Article. Next Roch L.J. invoked Article 10(1) of the Rome Convention, which expressly provides that the law applicable to a contract shall govern in particular "the consequences of nullity of the contract." However, the fact that such express provision is made in the Rome Convention in relation to the governing law provides no guidance on the scope of Article 5(1) forming part of the Brussels Convention which is concerned with jurisdiction and which contains no such provision. It is for that purpose entirely neutral, as was vividly illustrated by the fact that it was relied upon by both parties to the present litigation. Lastly, Roch L.J. asserted that the word "obligation" in Article 5(1) is not confined to contractual obligations. Again, I am unable to agree; it is plain both from de Bloos v. Bouyer and Shenavai v. Kreischer that the word does indeed refer to the contractual obligation on which the claim is based, though such a claim is not limited to a claim for the direct enforcement of the obligation. For these among other reasons, I am unable to accept the reasoning in Roch L.J.'s judgment.
In a most impressive judgment, which it is difficult to summarise in a few words, Millett L.J. developed a thesis which led to the conclusion that the word "contract" in Article 5(1) includes a void contract, i.e. a supposed contract which is void ab initio and so has never had any existence in law, and that the expression "place of performance of the obligation in question" includes the intended place of performance of the supposed obligation under a void contract. He therefore considered that a claim to recover money paid under a "contract" which is ultra vires the recipient is a "matter relating to a contract" within the opening words of Article 5(1). He went on to hold that, provided the matter relates to a contract, the jurisdiction conferred by Article 5(1) is available, and that the expression "matters relating to a contract" is not to be equated with "contractual causes of action" or "the enforcement of contractual obligations" or even "claims based on contract". He concluded that, when parties act pursuant to such a contract, the intended place of performance is no less relevant a connecting factor because the contract is afterwards held to be void.
Impressive though his judgment is, in my opinion Millett L.J.'s thesis founders upon the terms of Article 5(1) as construed in the established jurisprudence of the European Court of Justice. We know from de Bloos v. Bouyer that the reference in Article 5(1) to the "obligation in question" is to "the contractual obligation forming the basis of the legal proceedings", and is that obligation "which corresponds to the contractual right on which the plaintiff's action is based." It was that principle which was reaffirmed by the Court in Shenavai v. Kreischer, where it was stated that uncertainty was avoided "if regard is had solely to the contractual obligation whose performance is sought in the judicial proceedings." Moreover, again in de Bloos v. Bouyer, it was recognised that 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 defendant, 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." With the exception of Ivenel v. Schwab, in no case cited to the Appellate Committee, either from the European Court of Justice or from the courts of this country, has the "obligation in question" been construed to mean anything other than the particular contractual obligation upon which the plaintiff's claim is based, the performance or non-performance of which is relied upon to support the plaintiff's claim. It is in my opinion plain that this principle can have no application in a case where the supposed contract in question is void ab initio and so has never had any legal existence. Furthermore, Article 5(1) specifies in clearly defined terms a particularly close connecting factor between the dispute and the court which will be called on to hear it, i.e. the place of performance of the contractual obligation in question. No such close connecting factor can, in my opinion, exist in a case where the contract is void ab initio and the only question at issue relates to the recovery of money paid under it on the ground of unjust enrichment. Furthermore the approach of Millett L.J. offends, in my opinion, against the fundamental principle that the special jurisdiction in Article 5 is in derogation from the general jurisdiction in Article 2 and so falls to be construed restrictively; on the contrary, Millett L.J.'s approach constitutes an expansion of the special jurisdiction in Article 5(1). Indeed the effect in the present case would be that for the courts of the defendant's domicile are substituted the courts of the plaintiff's domicile; and it is difficult to understand why, in this as in most other cases of unjust enrichment for which no provision is made in Article 5, the courts of the defendant's domicile should not have jurisdiction.
In his judgment, Millett L.J. relied on two matters in particular as providing support for his thesis.
(1) The first matter relied upon by him was that in most cases the validity of the contract will be in issue; and it would not be consistent with the objectives of the Convention if a court having jurisdiction to decide the validity of the contract did not also have jurisdiction to decide the consequences. But there must be serious doubt whether, as a general rule, a court can have jurisdiction under Article 5(1) to rule upon the validity of a contract. True it appears that, in France, the Cour de Cassation has decided that jurisdiction may exist under Article 5(1) in the case of an action for the annulment of a contract (see ISI c. Soc. de Promotion des Centres Privés Audiovisuels 25 January 1983). In that case a German company granted to a French company exclusive rights in respect of a method of teaching shorthand; and the French company, having discovered that the method in question was merely a counterfeit of another, brought an action for the invalidity of the contract on the grounds, essentially, that the object was illegal. The Cour de Cassation held that the Commercial Court of Paris was entitled to exercise jurisdiction in respect of the issue of invalidity under Article 5(1), apparently on the basis that all the contractual duties should be performed in Paris. However, in her commentary on the decision, Professor Gaudemet-Tallon points out that in other cases performance of the contractual duties could well take place in more than one state. She therefore commends the solution of M. Huet, viz. that, in the case of an action for invalidity of contract, Article 5(1) is applicable, the competent court by virtue of the Article being the court of the place of the performance of the characteristic duty of the contract. This solution is, she suggests, necessary "both to avoid a multiplicity of competent courts and to be assured that the judge approached does indeed have a serious connection with the case." In abstract terms, this solution has much to commend it; but, since the decision of the European Court of Justice in Shenevai v. Kreischer Case 266/85  E.C.R. 239, it is as a general rule no longer appropriate to invoke the characteristic obligation of the contract in this context. Moreover it is striking that when, in Effer SpA v. Kantner Case 38/81  E.C.R. 825, the Court of Justice held that a national court could, in a case under Article 5(1), consider the question whether the relevant contract was binding, this was only on the basis that the court could do so as one of the essential preconditions of its jurisdiction to adjudicate on the contractual claim before it. In these circumstances, although the point does not fall to be decided in the present case, there must be serious doubt whether the issue of the validity of a contract alleged to be void ab initio would fall within Article 5(1).
I wish to record in parenthesis at this stage that Professor Gaudemet-Tallon, departing from her previous view in which she favoured "channelling," now considers that Article 5(1) cannot apply to quasi-contracts, favouring instead Article 2: see the Written Observations of the Commission to the Court of Justice in the present case, para. 63, n.80.
(2) The second matter relied upon by Millett L.J. was this. He took the example of a case of breach of contract in which the plaintiff can sue the defendant either for damages for breach of contract or for recovery of money paid to him under the contract, the claim for such recovery being on the basis of failure of consideration. Millett L.J. suggested that, on his thesis, the nature of the remedy chosen by the plaintiff does not prevent the action from being tried in the place of performance of the contractual obligation the breach of which has given rise to the relief claimed. But (although again it is not necessary to decide the point in the present case) it is at least possible that, in cases arising under the Convention, the same result can be achieved on the basis of the established European jurisprudence. It is true that in English law a claim to recover money on the ground of failure of consideration is classified as a claim in restitution, based on unjust enrichment. Nevertheless it was (as I have already recorded) established in de Bloos v. Bouyer Case 14/76  E.C.R. 1497 at p. 1508, para. 14, that the plaintiff's claim to be paid damages or to seek dissolution of a contract on the ground of the defendant's default may fall within Article 5(1), the contractual obligation being the obligation the non-performance of which is relied upon to support the claim. Moreover a claim to recover, on the ground of failure of consideration, money paid under a valid contract is capable of being classified in some systems of law as contractual; and, on the principle recognised in the Martin Peters case, it may be appropriate, at least in cases arising under the Convention, to treat the concept of contractual obligation as being, for the purposes of Article 5(1), broad enough to provide the basis of such a claim. Whether it would be appropriate to do so in cases arising under Schedule 4 to the Act of 1982 is, however, more problematical.
More fundamentally, however, it seems to me that the whole basis of Millett L.J.'s thesis is that Article 5(1) should be construed broadly so that any matter relating to a contract should be held to fall within the Article; and he seeks to justify this on the practical basis that all claims relating to contracts should fall to be considered in the same jurisdiction, viz. the jurisdiction of the courts for the place of performance, or intended performance, of the contract, even where no such contract ever existed. I feel bound to say, however, that the jurisprudence of the European Court of Justice reveals an understanding that Article 5(1) has a more limited purpose, an understanding which is moreover more consistent with the words of the Article. This appears most clearly from the judgment of the Court in Shenevai v. Kreischer, in para.18 (on p. 256) of which the Court recommended that regard should be had "solely to the contractual obligation whose performance is sought in the judicial proceedings." As I have already recorded, the Court continued: "The place in which that obligation is to be performed usually constitutes the closest connecting factor between the dispute and the court having jurisdiction over it, and it is this connecting factor which explains why, in contractual matters, it is the court of the place of performance of the obligation which has jurisdiction." The obligation is, of course, the "obligation in question." The view of the court appears to be that, once this criterion is abandoned, the justification for jurisdiction being vested in the court of the place of performance of the obligation in question is destroyed. If that criterion cannot be fulfilled, it must not be forgotten that (as the court pointed out in a related context--see Kalfelis v. Schröder at para. 20 on p. 5586) "a plaintiff is always entitled to bring his action in its entirety before the courts for the domicile of the defendant."
I have exceptionally subjected the judgment of Millett L.J. to close examination, not out of any desire to disparage his work, but rather out of respect for the formidable thesis which he has propounded and developed.