7E Communications Ltd. v Vertex Antennentechnik GmbH Rev 1

The claimant is a company incorporated in England and Wales. It carries on business as consultant telecommunications engineers and systems integrators. The defendant is a company incorporated in Germany. It carries on business as a manufacturer and supplier of satellite antennae and related equipment. On 24 May 2002, the defendant agreed to sell and the claimant to buy one 2.4 mm quick deploy antenna and two 1.8 mm rugged deploy antennae together with hard cases for Euros 82,325.40 excluding transportation, taxes and other charges. The agreement is contained in the defendant’s quotation and the claimant’s purchase order, both dated 24 May 2002. This was the first contractual dealing between the parties; there was no prior course of dealing.

The antennae were delivered to the claimant in England. The claimant purported to reject them on the grounds that they were defective. The defendant disputed the claimant’s purported rejection. The claimant issued proceedings in the Mercantile List of the Central London County Court claiming damages for breach of contract. The claim is for damages in the sum of Euros 87,987.40, which was the total sum invoiced and paid under the contract, together with a further sum of £16,331.42 which the claimant says that it paid for testing the faulty antennae.

Following service of the proceedings on it in Germany, the defendant applied for a declaration under CPR 11(1) that the English courts had no jurisdiction. The basis for the application was that the defendant’s quotation incorporated its general terms and conditions which included a jurisdiction clause giving exclusive jurisdiction to the court having jurisdiction at the defendant’s headquarters, namely Duisburg.

On 23 September 2005, His Honour Judge Knight QC sitting in the Central London County Court (Mercantile List) made an order pursuant to CPR 11(1) declaring that the English court lacked jurisdiction to try the claimant’s claim against the defendant and setting aside service of the claim form and particulars of claim. The judge refused permission to appeal, but went on to direct “(but only insofar as this Court has jurisdiction to make this order) that any appeal against this order be made to the Court of Appeal” (para 5 of the order). The judge made this direction of his own initiative. He said:

Instead of appealing to the Court of Appeal, the claimant applied to the High Court for permission to appeal to that court, although it also asked the High Court, if it gave permission to appeal, to direct that the appeal be transferred to the Court of Appeal pursuant to CPR 52.14.

On 9 February 2006, Rafferty J granted the claimant permission to appeal, but refused to direct that the appeal be referred to the Court of Appeal. She said that she was not persuaded that the Court of Appeal was the appropriate forum.

The appeal was listed for hearing on 29 March. In its skeleton argument, the defendant submitted that the direction given by Judge Knight was a valid direction pursuant to CPR 52.14(2), so that the High Court did not have jurisdiction either to grant permission or hear the appeal. CPR 52.14 is in these terms:

This rule gives effect to section 57(1) of the Access to Justice Act 1999:

The appeal came before Jack J. He held that the High Court did not have jurisdiction to grant permission to appeal or hear the appeal, and made a declaration accordingly. He went on to determine the substantive appeal in the event that he was wrong on the question of appellate jurisdiction and decided that Judge Knight’s decision on the substantive jurisdiction point was wrong. He granted permission to appeal against his decision on the issue of appellate jurisdiction.

Subject to the views of the court, the parties have reached the following agreement on a number of points arising in the appeal. First, the defendant does not oppose the claimant’s appeal on the appellate jurisdiction issue. Secondly, the defendant does not dispute that the appellate jurisdiction appeal is a first appeal, so that Jack J had the power to grant permission to appeal to the Court of Appeal. Thirdly, if the appeal on the issue of appellate jurisdiction is allowed, Jack J’s decision on the substantive jurisdiction issue, although not embodied in a court order, is a decision itself made on appeal, and thus a decision in respect of which the defendant requires permission to appeal from the Court of Appeal as a second appeal. Fourthly, in the event that the appellate jurisdiction appeal succeeds, the claimant will not oppose the defendant’s application for permission to appeal Jack J’s decision on the substantive jurisdiction issue. Fifthly, in the event that the appellate jurisdiction appeal fails, the defendant will not oppose the claimant’s application for permission to appeal to the Court of Appeal against the order of Judge Knight QC (which would in those circumstances be a first appeal).

This is a sensible agreement. It reflects our view, for reasons that we shall express shortly, that Jack J’s decision on the appellate jurisdiction issue was wrong. It ensures that there is an appeal on the substantive jurisdiction issue without further delay and expense.

Judge Knight purported to direct that an appeal against his order lay to the Court of Appeal. Jack J explained at para 11 of his judgment why he considered that Judge Knight had jurisdiction to invoke rule 52.14 in this case. He said:

We disagree. Having refused permission to appeal, Judge Knight had no jurisdiction to say where an appeal was to be heard, because until permission to appeal was obtained by the claimant, there was and could be no appeal. Since he had refused permission to appeal, he had no power to make a direction under CPR 52.14 that the appeal be transferred to the Court of Appeal. In our view, Jack J was wrong to say that rule 52.14 applies both to appeals for which permission has been obtained and those for which it has not. The rule itself clearly distinguishes between an appeal and an application for permission to appeal. It is only “the appeal” that may be transferred to the Court of Appeal. The heading of the rule correctly states that it is concerned with the assignment of appeals, not applications for permission to appeal. Applications for permission are dealt with in CPR 52. 3

Our view accords with that expressed by Lord Phillips MR in In the Matter of Claims Direct Tests Cases [2002] EWCA Civ 428, para 23:

If, as seems likely, Judge Knight intended to say that a renewed application for permission to appeal should be made to the Court of Appeal, he was wrong to do so. An appeal from a decision of a circuit judge in a claim which has not been allocated to a track and which is not a “final” decision is to a single judge of the High Court: see Table 1 to PD52 para 2A.1. The present claim has not been allocated to a track and the decision on the application under CPR 11.1(1) was not a final decision. Further, in our view it was inappropriate for the judge to make an order or give a direction “only insofar as this court has jurisdiction to do so”.

For the reasons already given, once Judge Knight had refused permission to appeal, the only court that could give permission to appeal was the High Court.

Accordingly, we allow the claimant’s appeal against the decision of Jack J on the appellate jurisdiction issue. The application for permission to appeal against the decision of Judge Knight could only be made to the High Court. Since Rafferty J had given the claimant permission to appeal on the substantive issue of jurisdiction, Jack J should have heard that appeal.

We also grant the defendant permission to appeal against the decision of Jack J on the substantive jurisdiction issue, ie on the question whether the parties agreed that the German courts should have exclusive jurisdiction to determine their dispute.

There are no doubt issues of liability and quantum between the parties but this appeal is not concerned with those issues. The question whether the English court has substantive jurisdiction is governed by the provisions of the Brussels-I Regulation (Council Regulation (EC) 44/2001). It is entitled “Council Regulation on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters”. We will call it the Regulation.

The Regulation provides, so far as relevant, as follows:

in writing or evidenced in writing; or

in a form which accords with practices which the parties have established between themselves; or

in international trade or commerce, in a form which accords with a usage of which the parties are known to, and regularly observed by parties to contracts of the type involved in the particular trade or commerce concerned.”

The claimant’s case is that the English court has jurisdiction under article 5.1(b) on the basis that England was the place where the goods were delivered under the contract. The principal point argued before Jack J on behalf of the defendant was that the parties had agreed that the courts of Germany would have exclusive jurisdiction in respect of a dispute of this kind and that the German courts have exclusive jurisdiction under article 23. The claimant submitted to Jack J and submits to us that there is no exclusive jurisdiction agreement which satisfies article 23 and that the English court has jurisdiction under article 5.1(b). Jack J so held in the circumstances described above. The defendant appeals against that decision. We turn therefore to the question whether article 23 applies.

The facts are not in dispute. By a fax dated 24 May 2002 signed on its behalf by Mr Klaus Duespohl and Mr Christian Rustemeier the defendant offered to sell the antennae described above to the claimant. The fax was addressed to Mr Higgins of the claimant. It described itself as “Quotation 21/02 102” and expressly stated that the defendant was “pleased to offer according to our general terms and conditions” the identified antennae at specific prices. It is common ground that no copy of the general terms and conditions was sent to the claimant.

Mr Higgins replied on behalf of the claimant by a fax sent later the same day, 24 May 2002. The fax is entitled “Purchase Order” and states “Ref Your Quotation 21/02 102”. The goods ordered were precisely those set out in the defendant’s quotation and at the price quoted. It is not in dispute that the contract between the parties was made when that fax was sent to and received by the defendant.

The sole question between the parties is whether they agreed that the courts of Germany were to have jurisdiction to settle any disputes which might arise between them in connection with a particular legal relationship between them within the meaning of article 23 of the Regulation. If they did, it is common ground that such jurisdiction is exclusive because the parties did not agree otherwise. It is not suggested that article 23.1(b) or (c) applies. The question is therefore whether there was such an agreement conferring jurisdiction in writing or evidenced in writing.

The defendant invites an affirmative answer to that question on the basis that the agreement between the parties was contained in or evidenced in writing, namely in or by the quotation and the purchase order, and that in those documents the parties expressly agreed that the contract was subject to the defendant’s general terms and conditions. The defendant says that the quotation was expressly subject to the general terms and conditions and that Mr Higgins on behalf of the claimant expressly signed a purchase order accepting the quotation.

The claimant says that it did not agree, within the meaning of article 23.1(a), to the jurisdiction clause which is contained in the terms and conditions. It relies upon the leading case in the European Court of Justice in this connection, namely Salotti v RUWA Polstereimaschinen GmbH [1976] ECR 1831. It is common ground between the parties that the question for decision is governed by Community law. We therefore turn to Salotti.

In Salotti there was a written contract for the supply by a German undertaking to an Italian undertaking of machines for the manufacture of upholstered furniture. The contract was signed in Milan by both parties on commercial paper bearing the letter head of the German undertaking. General conditions of sale of the German undertaking were printed on the back but were not referred to on the front. The general conditions included a German jurisdiction clause.

The court’s general approach is set out in paragraph 7 of its judgment. The court first observed that the effect of conferring jurisdiction by consent was to exclude the jurisdiction determined both by the general jurisdiction conferred by article 2 and by the special jurisdiction conferred by articles 5 and 6. It held that, in those circumstances, the requirements of article 17 must be strictly construed. It added:

The first question referred to the court was whether a clause conferring jurisdiction, which is included among general conditions of sale printed on the back of a contract signed by both parties, fulfils the requirement of “a writing” under the first paragraph of article 17. Its reasoning is entirely contained in paragraphs 9 and 10 as follows:

On the basis of that reasoning it was held that, although the contract was signed by both parties, the terms on the back were not “a writing” within the meaning of article 17 (now 23) in circumstances where they were not referred to on the front. However, the second part of paragraph 9 and paragraph 10 show that, where the contract signed by both parties expressly refers to general conditions which include a clause conferring jurisdiction, article 17 (now 23) is satisfied. They do not suggest that the general conditions have themselves to form part of the contractual document. An express reference to the general conditions in the contract is enough. There is no suggestion in those paragraphs that in such circumstances there must be an express reference, not only to the general conditions which contain the jurisdiction clause, but also to the jurisdiction clause itself.

The position was clarified by the decision of this court in Credit Suisse Financial Products v Societe Generale d’Entreprises [1997] CLC 168, which (as it happens) was an appeal from the same judge as in the instant case, then His Honour Judge Raymond Jack QC. In that case the contract signed by the parties expressly provided for the application of the terms of a master agreement (to which they were not parties) which contained a jurisdiction clause. After referring to Salotti and quoting the second part of paragraph 9 which we have set out above, Saville LJ, with whom Aldous and Simon Brown LJJ agreed, said at page 172 B-D:

In that passage Saville LJ thus emphasised two points which are of some importance in the instant case. The first is that what the court in Salotti had called in the first part of paragraph 9 a guarantee that the relevant party has “really consented to the clause” exists where there is an express reference to the terms and conditions which include the jurisdiction clause. It is not necessary for there to be a specific reference to the jurisdiction clause itself. The second is that the fact that the relevant party does not have a copy of the terms and conditions or the jurisdiction clause in his possession is not relevant. So, in the Credit Suisse case, although he did not have a copy of the master agreement in his possession or readily available to him, Mr Mossler, by signing the confirmation, was held to have agreed in writing that the terms of the master contract formed part of the contract.

If those principles were applied to this case on the basis that the quotation and the purchase order together form the contract between the parties, it would follow that they agreed that the contract was subject to the defendant’s general terms and conditions and, if there is a German jurisdiction clause in the terms and conditions, that the claimant (as well as the defendant) gave its real consent to the jurisdiction clause and moreover that it did so even though it did not have a copy of the general terms and conditions.

However, the claimant’s case is that this is not a case in which the parties signed a contract, as in Salotti or indeed Credit Suisse. It submits that in these circumstances neither the principles stated by the Court of Justice in answer to the first question in Salotti nor the principles stated by Saville LJ in the passage just quoted apply to the facts in this case. The question is therefore whether the fact that the parties did not sign one but two documents is a critical distinction.

We have reached the clear conclusion that it is not. If both parties had signed the original quotation as evidencing the contract between them, there can be no doubt that the principles stated above would apply and that the quotation would be, in the words of the Court of Justice, “a writing” evidencing a contract on the terms of the defendant’s terms and conditions, including the German jurisdiction clause, and that both parties including the claimant would be bound by the clause, just as Mr Mossler was bound by the clause in Credit Suisse, even though he had not seen and did not have a copy either of the relevant terms or of the jurisdiction clause.

Equally, as it seems to us, if instead of accepting the faxed quotation in a separate fax entitled ‘Purchase Order’, the claimant had simply acknowledged its acceptance of the offer by signing the quotation and faxing it back to the defendant, the position would have been the same. In these circumstances it makes no commercial or other sense to hold that the position is different because, instead of signing the quotation, the claimant accepted the offer by signing the purchase order and sending it back to the defendant. In both cases there would, as Saville LJ put it, be a ‘guarantee’ of real consent on the part of the claimant and, as it was put in paragraph 7 of the judgment in Salotti, the consensus between the parties would in fact be established. In our judgment, no distinction in principle is to be drawn between a case in which a contract is contained in one document signed by both parties and a case in which a contract is contained in or evidenced by two documents, one of which is signed by one party and one by the other, at any rate in a case like this, where an offer is made in writing signed by the offeror and that offer is accepted in writing signed by the offeree.

It follows that, in our judgment, contrary to the conclusion reached by Jack J, there was here an agreement that the relevant courts in Germany had exclusive jurisdiction to settle the dispute which has arisen in connection with the contract between the parties within the meaning of article 23. It further follows that the English court has no jurisdiction.

However, the claimant says that this is not a case of the kind referred to in the first question asked in Salotti but a case of the kind referred to in the second question, which asked whether the requirement of writing under the first paragraph of article 17 is fulfilled if the parties expressly refer in the contract to a prior offer in writing in which reference was made to general conditions of sale including a clause conferring jurisdiction.

The court answered the second question in paragraphs 12 and 13 as follows:

The claimant submits that this is such a case and that article 23 was not satisfied because neither the terms and conditions nor the jurisdiction clause were provided to the claimant when the contract was made. In Credit Suisse Saville LJ said at page 172 H:

Some reliance was placed on the facts of Salotti. The facts were these. As stated above, the signed contract did not expressly refer to the terms and conditions which were on the back. The Advocate General summarised the further facts in this way. The contract stated that that the purchaser was placing an order with the vendor for the ‘machines offered, in accordance with your letter of 18 September 1969’. The letter of 18 September had been sent with seven offers of sale dated 11 September each of which referred to the general conditions of sale printed on the back of the letter but there was no corresponding reference in the letter of 18 September.

After the hearing of the appeal, thanks to the good offices of Adrian Jack, we were shown the decision of the Bundesgerichtshof in Germany, namely Decision of 7 May 1977 case VIII ZR 14/75, when it considered Salotti in the light of the opinion of the Court of Justice. The German court held that it had jurisdiction in accordance with the Court of Justice’s opinion on the second question in circumstances in which the general conditions had in fact been supplied. The German court said this:

The facts of Salotti were thus very different from the facts here. For the reasons already given we are of the opinion that this is an example of the situation identified by the first question in Salotti and not the second question. The contract here, comprising the quotation signed by the defendant, which expressly referred to the terms and conditions including the German jurisdiction clause, and the purchase order accepting the quotation which was signed by the claimant amounts to a writing which complies with article 23.

In these circumstances we leave for consideration in a future case in what (if any) circumstances it might be necessary to show that the terms and conditions were supplied to both parties. For the reasons given by Saville LJ in Credit Suisse, there was no such necessity in the instant case because there was in this case (as he put it at page 172 H on the facts of that case) an express and direct reference to the relevant terms in the written contract itself.

We should add that we were referred to a number of textbooks and English cases. The textbooks included Layton & Mercer on European Civil Practice 2^nd edition, 2004 at page 718, Dicey & Morris on Conflict of Laws 14^th edition at paragraph 12-112 and Briggs & Rees on Civil Jurisdiction and Judgments 4^th edition, 2005 at page 118. They do not all speak with one voice but none of them has persuaded us to reach a different conclusion from that expressed above. The English cases to which were referred included AIG Europe SA v QBE International Insurance Ltd [2001] 2 Lloyd’s Rep 268 and Siboti K/S v BP France SA [2003] 2 Lloyd’s Rep 364, both of which seem to us to be supportive of our conclusion in the instant case. We were also referred to a recent decision of the Privy Council in an appeal from Gibraltar, namely Bols Distilleries BV v Superior Yacht Services Ltd [2007] 1 WLR 12, which follows Salotti.

For these reasons, we conclude that (as stated above) there was here an agreement that the relevant courts in Germany had exclusive jurisdiction to settle the dispute which has arisen in connection with the contract between the parties within the meaning of article 23. It follows that the appeal against Jack J’s decision to the contrary must be allowed. The English court must decline jurisdiction in favour of the relevant court in Germany.

This conclusion makes it unnecessary to consider the further point taken on behalf of the defendant that the English courts do not in any event have jurisdiction under article 5. It was submitted on behalf of the defendant that, although the actual place of performance of the defendant’s obligation was England because the antennae were delivered to the claimant in England, article 5.1(b) provides that the place where the goods “were delivered” is only the place of performance “unless otherwise agreed”. It was submitted that, since the terms and conditions provided for Duisberg as the place of performance under the contract, although the antennae were in fact delivered in England the place of performance was “otherwise agreed”, with the result that the English courts do not have jurisdiction under article 5. If that were correct it would follow that the only courts which would have jurisdiction would be the German courts, under article 2.

Although it is not necessary to determine this issue, we should note that we were referred to the decision of the Court of Justice in Mainschiffahrts-Genossenschaft eG (MSG) v Les Gravières Rhénanes SARL Case C-106/95. The first question considered by the court was whether an oral agreement, which is designed not to determine the place where the person liable is actually to perform the obligations incumbent upon him, but solely to establish that the courts for a particular place have jurisdiction, is valid under article 5.1.

The court said this in paragraph 31:

In the instant case it was never contemplated that Duisberg would be, in the words of the first question, the place where the defendant was actually to perform the contract. Although, in the light of our conclusions under article 23, it is not necessary for us finally to determine the question, this appears to us to be a case in which Duisberg was chosen solely to establish that the courts there had jurisdiction. On that basis it follows that if (contrary to our view) the requirements of article 23 were not satisfied, the defendant would not be able to defeat the claimant’s case that the English court had jurisdiction under article 5.1(b).

In any event it appears to us that the fact that actual delivery took place in England is strong evidence that, whatever the terms and conditions provided, the parties agreed that the place of performance would be in England. It follows that, if we had concluded that the requirements of article 23 were not satisfied, we would have held that the claimant had established jurisdiction in England under article 5.

For the reasons given above we allow the claimant’s appeal against the decision of Jack J on the appellate jurisdiction issue. Since Rafferty J had given the claimant permission to appeal on the substantive jurisdiction issue, Jack J should have heard that appeal. Jack J in fact determined the substantive issue, albeit obiter. He determined that the English court had jurisdiction. He should have held that the requirements of article 23 of the Regulation were satisfied and that the parties had submitted the dispute to the exclusive jurisdiction of the relevant court in Germany. We accordingly allow the defendant’s appeal from that determination and, subject to hearing submissions as to the appropriate form of declaration, we will make a declaration to that effect.