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|Judgments - Canada Trust Company (Acting In Its Capacity As Trustee of The Chrysler Canada Limited's Benefit Plan, The Chrysler Canada Limited Master Trust Fund, The Chrysler Canada Limited Non-Canadian Master Trust Fund and The Holme Foundry Division Master Trust Fund) and Others v. Stolzenberg and Gambazzi and Others
HOUSE OF LORDS
Lord Steyn Lord Hoffmann Lord Cooke of Thorndon Lord Hope of Craighead Lord Hobhouse of Wood-borough
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT
IN THE CAUSE
CANADA TRUST COMPANY
(ACTING IN ITS CAPACITY AS TRUSTEE OF THE CHRYSLER CANADA LIMITED'S BENEFIT PLAN, THE CHRYSLER CANADA LIMITED MASTER TRUST FUND, THE CHRYSLER CANADA LIMITED NON-CANADIAN MASTER TRUST FUND AND THE HOLME FOUNDRY DIVISION MASTER TRUST FUND) AND OTHERS (RESPONDENTS)
STOLZENBERG AND GAMBAZZI AND OTHERS
ON 12 OCTOBER 2000
This appeal is concerned with the interpretation and application of provisions of the Lugano Convention, which for present purposes is in identical terms to the Brussels Convention. English texts of these Conventions are set out as Schedules to the Civil Jurisdiction and Judgments Act 1982 as amended. The principal objective of the earlier Convention, the Brussels Convention, was to facilitate the enforcement of judgments between Members States of the European Economic Community. The economic context was the aim of inspiring business confidence and encouraging the right conditions for trade. This Convention entered into force in the United Kingdom in 1978. The purpose of the Lugano Convention was to promote the same purpose between Members States of the European Communities and Member States of the European Free Trade Association, viz Austria, Finland, Iceland, Norway, Sweden and Switzerland. It entered into force in the United Kingdom in 1992. A major difference between the two Conventions is that the European Court of Justice has no jurisdiction to rule on questions of interpretation under the Lugano Convention. Subject to this qualification the differences are minor. Together the two Conventions not only facilitate the enforcement of judgments but provide a sophisticated system of direct jurisdictional rules to which courts in the countries concerned must adhere. It involves a system of required and prohibited jurisdiction of courts.
Under both Conventions the primary ground of jurisdiction of those domiciled in the Contracting State is the domicile of the defendant. In addition there are special grounds of jurisdiction, in matters in respect of contract, delict (tort) and quasi-delict, as well as special provisions for the joinder of defendants, which may displace the general principle. There are also special provisions dealing with jurisdiction in matters relating to insurance and consumer contracts. Finally, there are tie-break rules dealing with the position where proceedings are brought involving the same cause of action between the same parties, or related actions, in the courts of different contracting states.
The present case is concerned with Articles 2 and 6 of the Lugano Convention. Article 2 states the general principle in the following terms:
Article 6 contains a special rule of jurisdiction. It provides, so far as material, as follows:
The principal question of law before the House is whether the concept "sued" in Articles 2 and 6, when applied to legal proceedings taken in England, means the date of issue of the writ (as the plaintiff respondents contend) or the date of service of the writ (as the appellants contend). At first instance the judge decided this question against the appellants. They appealed. By a majority (Nourse L.J. and Waller L.JJ.) the Court of Appeal ruled that the date of issue of the writ is the critical date: Canada Trust Co. v. Stolzenberg (No. 2)  1 W.L.R. 547. The leading judgment was given by Waller L.J. In a dissenting judgment Pill L.J. came to the opposite conclusion on this point.
The forensic story in a nutshell
On 1 August 1996 the plaintiffs, Daimler-Chrysler Canada (formerly called Chrysler Canada Ltd.) and the trustees of certain pension and other benefit funds established by Daimler-Chrysler Canada Ltd. for its employees, issued a writ against Wolfgang Otto Stolzenberg as first defendant and 36 other defendants. Mr. Stolzenberg was the President and Chief Executive of the Castor Group Companies. The plaintiffs pleaded case was that Mr. Stolzenberg was principally responsible with others for inducing the plaintiffs by fraud to make investments amounting to some 240 million Canadian dollars (equivalent to about £120m.) in a group of companies called the Castor Group. All those companies are now insolvent. It is alleged that some of the defendants were implicated in the fraud perpetrated by Mr. Stolzenberg and other defendants have been joined in respect of claims tracing assets.
Mr. Stolzenberg was known to have owned and resided in a house in London until August 1996. He then sold that house. He moved to another house in London. At that stage he was domiciled in England but on a date which is not known he departed from England to reside in Germany. His domicilary position in the period immediately after the issue of the writ was therefore uncertain. The plaintiffs asserted that at the time of the issue of the writ, which they contended was the relevant date, Mr. Stolzenberg was an anchor defendant entitling them to sue other defendants in England.
The appeal before the House is only concerned with six defendants. The other defendants are no longer being actively pursued, have submitted to the jurisdiction or have had judgments entered against them. The six defendants, who are the appellants on the present appeal, fall into two categories, namely:(1)
The second defendant (a Swiss lawyer) and the sixteenth defendant (a Swiss company) are domiciled in Switzerland. The jurisdiction over them of the English courts is dependent on the proper construction of Article 2 and Article 6.1 of the Lugano Convention. I will call these defendants "the Convention appellants."(2)
The fifth, seventh, tenth and fifteenth defendants (respectively entities based in Panama, Liechtenstein and Netherlands Antilles) are domiciled in non-Convention countries. The jurisdiction over them of the English courts is governed by R.S.C., Ord. 11, r. 1(l)(c). I will call them "the non-Convention appellants."
After the issue of the writ Mr. Stolzenberg took active steps to avoid being served in England. On 11 March 1997 there was purported service of the writ on Mr. Stolzenberg by post and by insertion through a letter box. On the same day the present appellants were served with the writ. On 21 March 1997 Mr. Stolzenberg issued proceedings in Germany for declarations that he was not liable. On 11 April 1997 the appellants challenged the jurisdiction of the English court over them by issuing a notice of motion under R.S.C., Ord.12, r. 8.
The decision of Rattee J.
The case came before Rattee J. Three principal legal issues were debated before the judge. The first was whether a test of more than a good arguable case had to be applied in deciding the question whether Mr. Stolzenberg was domiciled in England at the critical time. The second was whether the domicile of Mr. Stolzenberg had to be established on the date of the issue of the writ or on the date of service of the writ on the appellants, the latter being the contention advanced by the appellants. Thirdly, the appellants contended that Article 6(1) could only be relied on if Mr. Stolzenberg had already been served before the issue or service of the proceedings on the co-defendants. In an unreported judgment the judge ruled against the appellants on all three questions. Central to his judgment was the conclusion that under Articles 2 and 6 of the Lugano Convention "sued" in relation to England means the time of the issue of the writ. The judge observed that Mr. Stolzenberg had not been properly served with the writ. On 3 June 1997 he made an order for substituted service on Mr. Stolzenberg. On 13 June 1997 the judge declared that steps taken by the plaintiffs pursuant to the order for substituted service constituted good and sufficient service of the writ. The challenge to jurisdiction before the judge had failed. On 5 February 1998 the German Court stayed the proceedings to await the outcome of the challenge to English jurisdiction. On 24 April 1998 final judgment was entered against Mr. Stolzenberg in England.
The Court of Appeal judgments
The appellants appealed to the Court of Appeal. On 28 to 30 July 1997 the Court of Appeal heard the appeal against the issues of principle decided by Rattee J. In its judgment delivered on 29 October 1997 the Court of Appeal dealt with these matters:  1 W.L.R. 547. The Court of Appeal ruled unanimously that the standard of proof which the plaintiffs were required to satisfy in order to establish jurisdiction was that of a good arguable case and not the civil standard of a balance of probabilities. By a majority the Court of Appeal ruled that the date upon which Mr. Stolzenberg was required to have had an English domicile was the date of issue of the writ and not the date of service upon him. On this issue Pill L.J. dissented. The majority ruled further that it was not necessary under Article 6 of the Convention for Mr. Stolzenberg to have been served before service upon the Convention defendants. Pill L.J. did not address this issue. In the light of these rulings the Court of Appeal dismissed the appellants' appeal. The Court of Appeal found it unnecessary to deal with a Respondents' Notice which sought affirmation of the judge's order on the alternative basis that even if the date of service was the critical date, that date was 11 March 1997 when Mr. Stolzenberg was domiciled in England. This issue was not before the House.
Subsequently, on 6 May 1998, the Court of Appeal gave a second judgment dealing with applications to adduce new evidence challenging the judge's finding of fact. In an unreported judgment the Court of Appeal dismissed these applications. The correctness of this judgment was not debated before the House.
The issues before the House relate only to points of legal principle considered and decided by the Court of Appeal:  1 W.L.R. 547. It is not suggested that in this case there has been an abusive resort to Article 6: see Mölnlycke A. B. v. Proctor & Gamble Ltd.  1 W.L.R. 1112.
The major question involves the application in English law of the concept of being "sued" in Articles 2 and 6 of the Lugano Convention. In considering the position of the six defendants the House must act on the premise that Mr. Stolzenberg was domiciled in England at the date of the issue of the writ but may not have been domiciled in England after that date. I will deal with this question first and then deal later in this judgment with subsidiary issues.
The problem inherent in the application of the concepts of the Convention in national legal systems requires a twofold classificatory enquiry. In the first place it is necessary to interpret a particular concept used in the Convention independently by reference to the language, structure, system and objectives of the Convention. Secondly, recognising that a concept of the Convention may have a different content in various national legal systems, it is necessary to apply it to the procedural regime of the particular legal system: see Shearson Lehman Hutton Inc. v. Treuhand Für Vermögenswaltung and Betechigungen (TVB) mbH (Case C89/91)  E.C.R. 1-139 (para.13). The starting point is therefore the ascertainment of the meaning of the concept of being "sued" in Articles 2 and 6.
The meaning of "sued" in Articles 2 and 6
In examining the problem before the House one can safely proceed from two premises. First, the word "sued" must bear the same meaning in Articles 2 and 6. Secondly, in a Convention of which the major purpose is the attainment, so far as possible, of certainty and uniformity, it is obvious that the search must be for a single meaning of the concept "sued" which can apply across the spectrum of national legal systems and the diversity of procedures potentially involved.
The answer to the central question must be found in the principal sources of treaty or convention interpretation, viz the text, its context and the object and purpose of the treaty or convention: see Articles 31 and 32 of the Vienna Convention on the Law of Treaties; Aust, Modern Treaty Law and Practice 184-191. I turn first to the language and structure of the Convention. One can perhaps accept as a general proposition that the word "sued" as used in Articles 2 and 6 and elsewhere in the Convention is equally capable as a matter of language of indicating the moment of initiation of the proceedings or the date of service of the initiating process. But the Convention also uses the concept that a party may "bring proceedings" in a number of articles: see Articles 10, 11, 12, 14, 21 and 22. The words "to bring proceedings" in the context of the Convention appear to point to the initiation of the proceedings. Moreover, as my noble and learned friend Lord Cooke of Thorndon pointed out during the argument the point is reinforced by the contextual meaning of Article 14. It reads as follows:
Given that consumers are accorded a more favourable regime than other parties, and are given an option, the sense of Article 14 points to the date upon which the consumer initiates proceedings. Moreover, the Convention uses yet other language as pinpointing the time for the coming into operation of the various rules, viz the concept of "instituting" legal proceedings: see Articles 6 and 20. Where this language is used it points tolerably clearly to the initiation of proceedings. Standing back from this review of the particular provisions of the Convention one is entitled to make the provisional judgment that the concepts "sued", "bring proceedings" and "instituted proceedings" have been used interchangeably. Significantly, that is how the matter was viewed in the Jenard Report O.J. 5.3 79/No. C59/1, Chapter IV, Section B (Jurisdiction in matters relating to insurance). If this view is correct , as it appears to be, it may afford a substantial basis for concluding that "sued" in Articles 2 and 6 refer to the initiation of the proceedings.
But there were arguments to the contrary based on the language of the Convention. Counsel for the appellants relied positively on a number of provisions. She referred to Article 20 which reads as follows:
Counsel suggested that the reference to entry of appearance involves prior service. I am not satisfied that this premise is necessarily correct. In any event, in the scheme of the Convention, this argument (if valid) cannot outweigh the indications in favour of the date of the initiation of the proceedings In my view Article 20 does not in the present context warrant the weight counsel put on it. The next provision called in aid by the appellants is Article 52. It reads as follows:
Emphasising the present tense "is" in the second sentence, counsel submitted that the reference must be to the date of service. This is literally correct. But if this argument is accepted it would lead to the absurd consequence that the operative date is variable depending on fortuitous procedural events. This unacceptable consequence can be avoided by reading "is" as "was" to further the objective of certainty of the Convention. Given that the Convention was not drafted with the precision of a statute, this interpretation can readily be accommodated in the Convention system.
Counsel for the appellants put in the forefront of her argument in favour of the date of service the tie-break provisions of Articles 21 and 22 of the Convention. Article 21 provides as follows:
This article is cast in mandatory terms. By contrast Article 22, which deals with "related actions", creates a discretionary power to stay proceedings. It reads as follows:
Counsel for the appellant relies on three matters. First, in Zelger v. Salinitri (Case 129/83)  E.C.R. 2397 (at 2408, paras. 14-16), the European Court of Justice observed that, while there is no uniformity under national laws as to when a court became seized, the court first seized "is the one before which the requirements for proceedings to become definitively pending are first fulfilled, such requirements to be determined in accordance with the national law of each of the courts concerned." Secondly, in the Court of Appeal in Dresser U.K. Ltd. v. Falcongate Freight Management Ltd.  Q.B. 502 in a detailed and careful judgment Bingham L.J. (now Lord Bingham of Cornhill) held that under Articles 21 and 22 in England seisin occurred upon service. Subject to a relatively narrow point, a differently constituted Court of Appeal of which I was a member in Neste Chemicals S.A. v. D.K. Line S.A. (The Sargasso)  3 All. E.R. 180 adopted the reasoning in the Dresser case as correctly stating the position in English law. This line of authority states the present practice and law in England: see also Arab Monetary Fund v. Hashim (No. 4)  1 W.L.R. 1176. Thirdly, counsel for the appellants referred in the context of Articles 21 and 22 to the statement in the Schlosser report (O.J. 5.3.79/No. C59), 71, at para. 182 (at p. 125) that:
She also referred your Lordships to the statement in Dicey and Morris, The Conflict of Laws, 13th ed., (2000), at pp. 410-411, para. 12.050 that: "In some countries (e.g. France, Germany, Italy, Luxembourg and the Netherlands) an action is considered pending only from the date of service of proceedings. In others (such as England and Belgium) an action is, for some purposes at least, regarded as pending once proceedings are issued." Counsel for the respondents invited your Lordships to hold that the Dresser case and the Sargasso case were wrongly decided and that under Articles 21 and 22 the initiation of the proceedings was the critical time. The strongest point made by counsel for the respondents is the risk of fragmentation of proceedings in multi-party disputes: see Grupo Torras S.A. v. Sheikh Fahad Mohammed Al-Sabah  1 Lloyd's Rep 7, at 21-22; The Maciej Rataj  1 Lloyd's Rep. 302. Since the hearing of the appeal I have also become aware of a detailed academic critique of the decisions in Dresser and The Sargasso: see Peter Kaye, The Date upon which an English Court becomes "seised" of proceedings under the Brussels Convention: Issue or Service of Process?, 1995, Journal of Business Law 217. It is unnecessary to discuss these issues. Moreover, it would also not be right to express views on the correctness of Dresser since your Lordships indicated to counsel for the appellants that she need not reply on the point. It is essential to keep firmly in mind that this case is only concerned with the interpretation and application of Articles 2 and 6. And in my view the contrast between on the one hand, suing, bringing proceedings and instituting proceedings and, on the other hand, the stronger concept of a court being first seized and proceeding becoming "definitively pending", as explained in Zelger, militates against rather than in favour of the appellants' argument. Moreover, there is a fundamental difference, reflected in the language of the Convention, between a jurisdictional rule which determines when a court has jurisdiction to take cognizance of a case and a tie-break rule which governs when two courts are in the process of proceeding as if they had jurisdiction. In my view therefore the arguments based on the language and structure of the Convention tend to favour the date of initiation of the proceedings.
It is also necessary to consider the rival arguments from the point of view of the attainment of the principal objectives of the Convention. The preamble of the Lugano Convention records the desire "to ensure as uniform an interpretation as possible of this instrument": see also Protocol No. 2. on the Uniform Interpretation of the Convention, Articles 1 and 2. It may be that either interpretation would meet this criterion. Certainly, the date of initiation of proceedings can meet this criterion in all national systems albeit that the point may be differently determined in different countries. The second major aim of the Convention is the achievement of predictability and certainty at all stages for all concerned, viz at the time of the conclusion of the transaction, when the dispute has arisen and when it has to be ruled on. In Mullox IBC Ltd. v. Hendrick Geels (Case C-125/92)  E.C.R. 1-4075 the European Court of Justice said (at p. 1-4103, para. 11) of its judgment that the aim is to allow "the plaintiff easily to identify the court before which he may bring an action and the defendant reasonably to foresee the court before which he may be sued." From this perspective there is an advantage in selecting the time of lodging of the process with the court as the operative time. It will presumably be a matter of record in all national legal systems. It will have the advantage of certainty. On the other hand, proof of valid service depends on evidence. Moreover, even if there are differences between systems as to how proceedings are initiated, the date of initiation appears to a readily available point of reference. On balance selecting the time of initiation of the proceedings as the critical point promotes certainty.
It also seems right to consider on a broader basis the balance of merits and demerits of the two interpretations. A relevant practical consideration is that the date of initiation of the proceedings represents the last opportunity for the plaintiff to check the facts and examine the law on which the claim is based. There is, however, force in the argument that a date of issue rule causes substantial inconvenience to a defendant who bona fide changes his domicile after commencement of the proceedings. But this factor is outweighed by the consideration that date of service of process as the operative date will enable some defendants to evade the service of process when they become aware of the incipient proceedings. This risk is particularly significant in a claim against a multiplicity of defendants. The present case is a good example of such evasion of service by a change of domicile. The majority in the Court of Appeal rightly regarded this as an important factor. Indeed the idea that the domicile of Mr. Stolzenberg would have had to be checked upon every occasion when it was sought to serve a Convention-defendant is singularly unattractive. Such an outcome of the appellants' argument by itself tends to cast doubt on its feasibility in the framework of a Convention which aims at legal certainty.
Looking at the matter in the round I am satisfied that "sued" in Articles 2 and 6 should be interpreted as referring to the initiation of the proceedings.
The application in England
It is now necessary to apply the Convention concept to English legal proceedings. This is straightforward. It is trite law that an action is begun in the High Court when a writ of originating summons is issued. This requirement was satisfied on 1 August 1996.
The Second Issue: Service on the Convention Appellants
The next question is whether Article 6 requires there to have been prior service on an anchor defendant domiciled in the state courts in which the proceedings have been brought. This question arises because the two Convention appellants were served before Mr. Stolzenberg was served. The majority in the Court of Appeal ruled that under Article 6 there is no requirement of prior service upon an anchor defendant.