ON APPEAL FROM BIRMINGHAM DISTRICT REGISTRY
HIS HONOUR JUDGE SIMON BROWN QC
CASE NO: 8BM40028
Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
LORD JUSTICE RIX
LORD JUSTICE JACOB
and
LORD JUSTICE LAWRENCE COLLINS
Between :
(1) EMMERICH HATZL (2) LEOPOLD BAUMGARTNER | Respondents/ Claimants |
- and - | |
XL INSURANCE COMPANY LIMITED | Appellant/ Defendant |
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Mr Paul Toms (instructed by XL Services UK Limited) for the Appellant
Mr John Kimbell (instructed by Cobbetts LLP) for the Respondents
Hearing date: February 24, 2009
Judgment
Lord Justice Lawrence Collins:
I Introduction
In 1967 the United Kingdom acceded to the Convention on the Contract for the International Carriage of Goods by Road (“the CMR”), which was signed at Geneva in 1956. The CMR is given the force of law in the United Kingdom by virtue of section 1 of the Carriage of Goods By Road Act 1965 (“the 1965 Act”), which came into force in October 1967.
Article 31 contains an exclusive code of jurisdictional provisions for claims under the CMR (other than claims between carriers, which are dealt with by Article 39(2)) . The question on this appeal is whether the provisions apply only to those who are the natural defendants in a CMR claim, such as the carrier, the consignee and the consignor, or whether they also have the effect that a carrier may bring an action for a declaration that it is not liable in the courts of the residence or principal place of business of an insurer who has taken an assignment of the claims of the consignor and consignee. It is another in a long line of cases in which an action for a negative declaration has been used as a tool for forum-shopping.
In late May/early June 2007 37 boxes of women’s clothing were in transit by road from the premises of the first defendant, Triumph International AG (“Triumph Austria”, an Austrian company) in Wiener Neustadt, Austria, to the premises of the second defendant, Triumph International Rome SpA (“Triumph Italy”, an Italian company) in Trescore Balneario, near Bergamo, Italy. Triumph Austria and Triumph Italy are both part of the Triumph International Group, whose business includes the manufacture and sale of women’s clothing. XL Insurance Company Limited (“XL”), which is incorporated under the Companies Act 1985 with its registered office in England, is the insurer of Triumph Austria and Triumph Italy.
Mr Emmerich Hatzl, the first claimant, is an Austrian individual operating a road haulage business under the name Emmerich Hatzl Internationale Transporte (“Hatzl”). The second claimant, Mr Baumgartner, an Austrian, was the driver. I shall refer to them together as “the claimants.” Hatzl contracted with Triumph Austria to carry the goods by road. In the CMR consignment note the sender is named as Triumph Austria and the consignee is Triumph Italy. Some of the goods were stolen while the driver was asleep at a parking place on a motorway in Italy. Hatzl as carrier is liable to the sender and/or consignee of the goods (Triumph Austria and Triumph Italy) under Article 17 of the CMR for the loss of the goods.
By letters of assignment dated December 23, 2007 and May 28, 2008 respectively, Triumph Italy and Triumph Austria assigned to XL “all our rights in respect of loss and/or damage to the above mentioned consignment, including all rights of claim against [Hatzl] and third parties or others.” On January 29, 2008 XL sought payment from Hatzl’s brokers of €137,000 euros, consisting of the amount paid to the insured and (it seems) the excess which the insured carried.
II The CMR Convention and the judgment below
Article 31 of the CMR provides for the courts in which claims in respect of proceedings arising out of road carriage under the CMR may be brought:
“1. In legal proceedings arising out of carriage under this Convention, the plaintiff may bring an action in any court or tribunal of a contracting country designated by agreement between the parties and, in addition, in the courts or tribunals of a country within whose territory
(a) the defendant is ordinarily resident, or has his principal place of business, or the branch or agency through which the contract of carriage was made, or
(b) the place where the goods were taken over by the carrier or the place designated for delivery is situated,
and in no other courts or tribunals.
2. Where in respect of a claim referred to in paragraph 1 of this article an action is pending before a court or tribunal competent under that paragraph … no new action shall be started between the same parties on the same grounds. ..”
Article 34 of the CMR provides that successive road carriers become parties to the contract of carriage under the terms of the consignment note by reason of acceptance of the goods and the consignment note. Article 39(2) provides that a carrier who wishes to enforce his right of recovery against other carriers may make a claim in the courts of the country in which one of the carriers concerned is ordinarily resident, or has his principal place of business or the branch or agency through which the contract of carriage was made; and all the carriers concerned may be made defendants in the same action.
By section 1 of the 1965 Act, the provisions of the CMR, as set out in the Schedule, are to have the force of law in the United Kingdom so far as they relate to the rights and liabilitiesof “persons concerned in the carriage of goods under a contract to which the Convention applies.”By section 14(2) those persons are (a) the sender; (b) the consignee; (c) any carrier who, in accordance with Article 34 or otherwise, is a party to the contract of carriage; (d) any person for whom such a carrier is responsible by Article 3 (agents, servants, sub-contractors etc); and “(e) any person to whom the rights and liabilities of any of the persons referred to in paragraphs (a) to (d) ... have passed (whether by assignment or assignation or by operation of law).”
By a claim form issued on April 1, 2008 the claimants issued proceedings in England against Triumph Austria, Triumph Italy and XL claiming a declaration that the claimants were not liable to the defendants in respect of the alleged loss resulting from the theft. XL has subsequently commenced proceedings in Austria but this court was not given any information about that action.
All defendants contested the jurisdiction of the English court. XL’s position was that the CMR did not give the English court jurisdiction simply because it was sued in England and was resident or had its principal place of business in England. It argued that Article 31(1)(a) did not apply to a defendant which was sued purely as assignee of the rights of the consignor or consignee. The claimants’ position was that the plain meaning of Article 31(1)(a) led to the conclusion that the English court had jurisdiction over any defendant (including an assignee) which was resident or had its principal place of business in England. If that were wrong the claimants argued that XL had submitted to the jurisdiction.
On July 2, 2008, HH Judge Simon Brown QC, sitting as a designated Mercantile Judge in the Birmingham District Registry, accepted the argument for the claimants and dismissed XL’s application for a declaration that the English court had no jurisdiction and held that the court had jurisdiction by virtue of Article 31(1)(a). The application by Triumph Austria and Triumph Italy was adjourned generally.
The judge decided that: (a) assignees were among the persons who were persons concerned in the carriage of goods by road (1965 Act, section 14(2)); (b) the expressions “plaintiff” and “defendant” referred to the people who were litigating and were not confined to the parties to the contract of carriage, and included assignees; (c) XL had by assignment stepped into the shoes of the Triumph companies, was ordinarily resident in England, and was under Article 31(1)(a) entitled to be regarded as within the jurisdiction. The judge also rejected the claimants’ argument that XL had submitted to the jurisdiction, but that is not an issue on this appeal.
III The arguments on appeal
A XL’s arguments
XL’s argument is as follows. On a purposive approach, Article 31(1)(a) should not be interpreted to apply to a defendant against whom a declaration of non-liability is sought in its capacity as an assignee of the “sender” and the “consignee” within the meaning of the CMR. Article 31(1)(a) does not apply to a party which was neither an original party to the contract of carriage nor is designated by the CMR as being entitled to enforce in its own name rights arising from the contract of carriage.
The natural meaning of Article 31(1)(a) is that the defendant referred to may only be an entity who had been an original party to the contract of carriage. Article 31(1)(a) can only make sense if the words “through which the contract of carriage was made” qualify all references to “the defendant.” The wording is intended to establish that a defendant who was a party to the original contract of carriage can be sued in three places namely where he/it is ordinarily resident, or where it has its principal place of business or the place where it had a branch or agency through which the contract of carriage was made when (implicitly) that is in a jurisdiction different from the jurisdiction where he/it is ordinary resident or has its principal place of business. Article 31(1)(a) is directed only to establishing the jurisdiction for claims by cargo interests against carriers, the latter (unlike cargo interests) being likely to have branches or agencies through which contracts of carriage are entered into in jurisdictions other than the location of their ordinary residence or principal place of business. The same words that are used in Article 31(1)(a) are used in Article 39(2), which is only applicable to establishing the jurisdiction for claims against carriers.
On a consideration of the CMR as a whole, the CMR does not conceive of claims being brought by anyone other than senders and consignees against carriers and by carriers against senders and consignees and by carriers against other carriers. The meaning of the word “defendant” in Article 31(1)(a) has to be interpreted against that background: Frans Maas Logistics (UK) Ltd v CDR Trucking BV [1999] 2 Lloyd’s Rep 179, 183.
The application of a purposive approach to the interpretation of the Article leads to the conclusion that Article 31(1)(a) should not be interpreted as permitting assignees to be sued in the courts where they have their principal place of business. The purpose of provisions such as Article 31 is to exclude jurisdictions likely to be inappropriate and to limit the number of possible jurisdictions which are competent to hear the dispute. If the word “defendant” in Article 31(1)(a) is to be understood as including an assignee of an original contracting party then those purposes would be frustrated.
XL is sued as an assignee of the rights of Triumph Austria and Triumph Italy, who had a right or entitlement to sue and to be sued only in Austria or Italy. An assignee of a contract takes on the same conditions as those on which the assignor held a contract, and XL has the same right or entitlement as Triumph Austria and Triumph Italy in respect of jurisdictions in which it may be sued.
B The claimants’ arguments
The claimants say that the natural meaning for which XL contends does not do justice to the language, and none of the commentaries on the CMR supports XL’s interpretation. There is no basis for reading “carrier” for “defendant” in Article 31. The CMR uses transporteur/carrier throughout the preceding sections of the CMR whenever that is what is meant. The word carrier is used in Article 31(1) to qualify the fifth permissible jurisdiction (place where goods were taken over by the carrier or place designated for delivery). If the intention was to limit the other heads of jurisdiction to carriers, then that word would have been used there too. The expression “defendant” in Article 31(1)(a) is to be understood in a purely procedural sense as referring to a named defendant against whom a claim may be brought arising out of CMR carriage.
Nor is XL assisted by the arguments based on the structure and purpose of the CMR. The process of assignment (by contract or statute) is well known in all the contracting states to the CMR, and there is no need for the CMR to regulate this. The position in England is put beyond doubt by Section 14(2) of the 1965 Act. There is no good legal or commercial reason for excluding the rights of assignees against carriers from Article 31.
Construing “defendant” in Article 31 so as to include a proper defendant who happens to be the assignee of the original sender, consignee or carrier does not undermine any of the underlying aims of the CMR. Domicile is a recognised legitimate connecting factor.
The accusation of “forum-shopping” has no force under a system, such as the one employed in the CMR (and the Brussels I Regulation, Council Regulation (EC) 44/2001), which combines a list of permitted jurisdictions with a lis alibi pendens means of resolving potential conflicts between competing permissible jurisdictions where more than one jurisdiction has been invoked. If insurers wish to obtain the certainty of one exclusive applicable jurisdiction for CMR claims, then it is open to them to insist as a condition of coverage that the contract of carriage incorporates an arbitration clause, which is permitted by Article 33 of the CMR.
It is not disputed that under any assignment governed by English law, the assignee takes the assignment subject to equities. But a statutory jurisdiction regime is not an equity. It is a mechanism for channelling claims towards certain defined jurisdictions. By choosing to take an assignment a party acquires the benefit of the right to act as a claimant in its own name. That choice, however, carries with it risks and responsibilities. One risk is that the would-be defendant to the assigned claim might seize the initiative by commencing proceedings for a declaration of non-liability. This is all that has occurred here.
IV Discussion and conclusions
In this case: (a) there was no agreement between the parties designating a jurisdiction; (b) the branch or agency through which the contract was made was no doubt in Austria; (c) Triumph Austria and Triumph Italy have their principal places of business in Austria and Italy respectively; (d) XL has its principal place of business in England; (e) the goods were taken over by Hatzl in Austria; (f) the goods were designated for delivery in Italy.
Were it not for the assignment by Triumph Austria and Triumph Italy to XL, plainly the English court would not have had jurisdiction by virtue of Article 31(1) of the CMR, and only Austria and Italy would have been available jurisdictions. The practical problem arises because, by contrast with the usual position in England (where, on an English insurer indemnifying its assured, it becomes subrogated to the assured’s rights and exercises those rights in the name of the assured), in some civil law countries there is an automatic assignment by operation of law to the insurer on payment being made by the insurer; and where there is no automatic assignment nor subrogation, a European insurer will often take an assignment of rights on indemnifying its assured so that it has title to sue in its own name.
Jurisdiction and negative declarations
In cases covered by the jurisdictional provisions of the CMR, the Brussels I Regulation rules on jurisdiction do not apply: Case 148/03 Nürnberger Allegemeine Versicherungs AG v Portbridge Transport International BV [2004] ECR I-10327, [2005] 1 Lloyd’s Rep 592.
Where the CMR applies, the English court has no power to decline, on forum conveniens grounds, to exercise its jurisdiction once established, because a power to stay on forum conveniens grounds is inconsistent with the right conferred on the claimant to choose in which of the competent jurisdictions his action will be tried: Milor Srl v British Airways plc [1996] QB 702, 707 (CA), a case on the Warsaw Convention, applied to the CMR in Royal Sun Alliance v MK Digital FZE (Cyprus) Ltd [2005] EWHC 1408 (Comm), [2005] 2 Lloyd’s Rep 679, at [72], reversed on other grounds [2006] EWCA Civ 629, [2006] 2 Lloyd’s Rep 110.
About 20 years ago Kerr LJ said that claims for negative declarations, in particular, “must be viewed with great caution in all situations involving possible conflicts of jurisdictions, since they obviously lend themselves to improper attempts at forum shopping”: The Volvox Hollandia [1988] 2 Lloyd’s Rep. 361, at 371: see Kolden Holdings Ltd v Rodette Commerce Ltd [2008] EWCA Civ 10, [2008] 1 Lloyd’s Rep 434, at [7]. As I recognised in the latter decision, there is no longer the same hostility to negative declarations in international cases (see Messier Dowty Ltd v Sabena SA [2000] 1 WLR 2040, at [36]), but it remains true that they are a frequent source of blatant forum-shopping. This is true in CMR cases, where courts in several jurisdictions, including England, have sanctioned their use by carriers.
This court was told (and it is not contradicted) that declarations of non-liability are often sought by carriers in CMR cases because it enables them to secure a favourable jurisdiction for the determination of their liability to cargo interests and, in particular, in respect of the issue of wilful misconduct. The significance of wilful misconduct is that by virtue of Article 23 of the CMR, a carrier can limit its liability to 8.33 units of account (the Special Drawing Right as defined by the IMF) per gross kilogram of the goods lost or damaged. If cargo interests can establish (the burden being on them) that the loss or damage was caused by “wilful misconduct or by such default on his part as, in accordance with the law of the court or tribunalseised of the case, is considered as equivalent to wilful misconduct”, then they are entitled by virtue of Article 29 of the CMR to “break limits” and recover the full value of the goods lost or damaged.
In the present case the court was told that the successful proof of wilful misconduct is the difference between cargo interests being able to recover £17,582.88 (the gross weight of the stolen cargo calculated on a pro rata basis as 2574 kilograms) and approximately £108,000, being the value of the goods at the relevant date.
It is generally accepted that it is harder for cargo interests to establish wilful misconduct in England than in other jurisdictions. England is more carrier friendly than other jurisdictions such as France, Germany and Austria. The claimants do not deny that it can be inferred that this is the reason that the claimants are seeking a declaration of non-liability in this jurisdiction as opposed to their home court, and that they anticipate that the claim which XL will inevitably bring by way of counterclaim in response to the claim for a declaration of non-liability will be held to be limited in accordance with Article 23 as cargo interests will be unable to persuade the English court that there has been wilful misconduct.
In England the position established by this court is that where an action is brought for a declaration of non-liability in an Article 31(1) court abroad, then the English court cannot exercise jurisdiction because Article 31(2) has the effect that a second action cannot be started in England: Andrea Merzario Ltd v Internationale Spedition Leitner Gesellschaft GmbH [2001] EWCA Civ 61, [2001] 1 Lloyd’s Rep 490. The court accepted that actions for a negative declaration are commonly brought in other CMR States and held (Sir Andrew Morritt V-C and Chadwick LJ, with Rix LJ dissenting) that it was plain that proceedings for a negative declaration were within the opening words of Article 31(2) (“in respect of a claim referred to in [Article 31(1)] an action is pending ..”) because they were “legal proceedings arising out of carriage under this Convention” for the purposes of Article 31(1): paras [96], [103]-[106]. But it was also held, on the facts, that the action abroad was not pending when the English proceedings were commenced.
A different view of the law was expressed by the German Federal Supreme Court in Re Parallel Proceedings Relating to an International Contract of Carriage of Goods by Road, I ZR 294/02, November 20, 2003 [2004] ILPr 356 on the basis that where an action for a negative declaration is brought in an Article 31(1) jurisdiction, Article 31(2) is not intended to protect a party who brings an action for a negative declaration from being sued elsewhere. This court was informed that the highest civil court in Austria has taken a different view: Oberster Gerichtshof (OGH), February 17, 2006, in 2006 TranspR 257. It would seem to follow, therefore, that XL’s action in Austria will not be allowed to proceed if the English court has jurisdiction.
Interpretation of the CMR
The starting point for the interpretation of international conventions is to consider the natural meaning of the language of the provision in question. But it is necessary to consider the convention as a whole and give it a purposive interpretation. The language of an international convention should be interpreted unconstrained by technical rules of English law, or by English legal precedent, but on broad principles of general acceptation. The court may have regard to the decisions of foreign courts on the convention and the prevailing current of foreign opinion on its application: see, in particular, James Buchanan & Co Ltd v Babco Forwarding and Shipping (UK) Ltd [1978] AC 141, 152-154, 160-161; Fothergill v Monarch Airlines Ltd [1981] AC 251, 272-274, 281-282, 290-291; Re Deep Vein Thrombosis and Air Travel Group Litigation [2005] UKHL 72, [2006] 1 AC 495, at [11] and [54].
As I have said, by section 1 of the 1965 Act, the provisions of the CMR as set out in the Schedule are to have the force of law in the United Kingdom. The Schedule sets out the English text of the CMR. The execution clause of the CMR provides that the English and French texts are equally authentic. Although the execution clause is not reproduced in the Schedule to the 1965 Act, resort to the French text is a legitimate tool in the process of interpretation: cf James Buchanan & Co Ltd v Babco Forwarding and Shipping (UK) Ltd [1978] AC 141, at 152, per Lord Wilberforce and 161, per Lord Salmon; Hill and Messent, CMR: Contracts for the International Carriage of Goods by Road (3rd ed 2000), para 0.15.
The question of construction
The question whether the expression “the defendant” in Article 31(1)(a) of the CMR applies to an assignee of a sender or a consignee is not the subject of any reported authority. None of the English textbooks dealing with the CMR addresses the issue: Clarke, International Carriage of Goods by Road: CMR (4th ed 2003); Clarke and Yates, Contracts of Carriage by Land and Air (2nd ed 2008); Hill and Messent, CMR: Contracts for the International Carriage of Goods by Road (3rd ed 2000). Professor Loewe’s 1975 commentary on the CMR does not deal with it, and there is no reason to believe that there are any travaux préparatoires which are likely to assist.
Provisions such as Article 31 of the CMR provide a self-contained code within which a claimant must found his assertion of jurisdiction: Arctic Electronics Co (UK) Ltd v McGregor Sea & Air Services Limited [1985] 2 Lloyd’s Rep 510, 514 (Hobhouse J) (CMR); Rothmans of Pall Mall (Overseas) Ltd v Saudi Arabian Airlines Corp [1981] QB 368, 385 (CA); Milor Srl v British Airways plc [1996] QB 702, 708 (CA) (Warsaw Convention).
The solution adopted by the judge, and which the claimants support, is that Article 31(1)(a) must be read literally and that this case is plainly within the phrase “the defendant .. has his principal place of business” because XL accepts that its principal place of business is in London.
In my judgment, although I am not able to accept all of XL’s arguments, the interpretation for which it contends is the right one, and the English court does not have jurisdiction.
I do not accept XL’s argument that the literal or natural meaning of Article 31(1)(a) is to restrict its application to actions against carriers. There is no basis for that interpretation in Article 31 or in the CMR as a whole. The passages in the 1975 Commentary on the CMR by Professor Loewe (para 243) and Clarke, International Carriage of Goods by Road: CMR (4th ed 2003), para 1.233, which may be taken to suggest that Article 31(1)(a) is so restricted, are only talking about the normal case of an action against a carrier and are not expressing the view that the jurisdiction is limited to actions against carriers. There are a number of cases under the CMR in which a carrier may have a money or damages claim against the sender (Articles 10, 11(2), 16(1), 22(2)) or 16(1)) or consignee (Article 21), and I accept the argument for the claimants that it make no sense to restrict the meaning of defendant to carriers.
Nor can I accept XL’s purely linguistic analysis based on the words “through which the contract was made.”
It is common ground that something has gone wrong with the grammar or translation of Article 31(1)(a). The French text is:
“… le demandeur peut saisir ….les juridictions du pays sur le territoire duquel: …. Le défendeur a sa résidence habituelle, son siège principal ou la succursale ou l’agence par l’intermédiaire de laquelle le contrat de transport a été conclu…”
It is clear that the word “has” needs to be inserted before “the branch or agency” (or the words “has his” in place of “the”). In the normal case where the carrier is the defendant there is some doubt as to whether this means that the agency must belong to the carrier (Clarke and Yates, para 1.91; Clarke, para 46b(iii)) and also as to whether the branch or agency may be a branch or agency of the consignor (Hill and Messent, para 10.31). Neither of these questions arises in the present case.
The closing words are: “or the branch or agency through which the contract of carriage was made.” In my judgment the words “through which the contract of carriage was made” do not qualify all references to “defendant” in Article 31(1)(a). Both the English text and the French text point strongly to the conclusion that those words qualify “branch or agency”. Consequently, those words themselves do not lend support to the contention that an insurer would not be a “defendant” for the purposes of Article 31(1)(a).
But even if a linguistic analysis of Article 31(1)(a) does not obviously lead to the conclusion that XL is right, I consider that a broad and purposive approach to Article 31(1)(a) does, however, lead to the conclusion that insurers/assignees are not included within the expression “the defendant.” That a purely literal approach is not necessarily the appropriate one is illustrated by the decision at first instance in Arctic Electronics Co (UK) Ltd v McGregor Sea & Air Services Limited [1985] 2 Lloyd’s Rep 510, 514, where Hobhouse J held that Article 39(2) of the CMR provides for a compulsory and exclusive jurisdiction in actions between carriers, even though (a) Article 39(2) provides that a carrier “may” make his claim before the designated courts and (b) Article 39(2) does not contain the phrase “and in no other courts or tribunals” found in Article 31(1))
The context of Article 31(1)(a) and its place within the CMR strongly support the view that it is primarily, and perhaps exclusively, concerned with jurisdiction in actions between the parties to whom the CMR ascribes, or is to be taken to ascribe, rights and/or liabilities.
The persons to whom the CMR primarily ascribes rights and duties are the carrier (including successive carriers) (Articles 2, 3, 5, 7, 8, 10, 11, 12, 13, 14, 16, 17-29, 34-40) and the sender (Articles 5, 7, 8, 10, 11, 12, 15, 21, 22, 26), and (to a lesser extent) the consignee (Articles 12, 13, 15). There can be no doubt that the CMR is primarily concerned with claims by senders and consignees against carriers (and vice versa) and by carriers against carriers: cf Frans Maas Logistics (UK) Ltd v CDR Trucking BV [1999] 2 Lloyd’s Rep 179, 183.
It is true that the CMR’s provisions are not limited to those persons. Articles 7(3), 14(2), and 16(2) refer to “the person entitled to dispose” of the goods. Articles 12(7) and 20(1) (and, by reference, Articles 20(2) and (3)) refer to “the person entitled to make a claim.” Article 15(3) treats as a consignee “another person” to whom the consignee has given instructions for the goods to be delivered. Articles 17 and 23(5) refer to claims by a “claimant” against the carrier. In addition, it is accepted outside the United Kingdom that the person entitled to sue the carrier, in addition to the consignor and consignee, may include the person with the right to dispose of the goods (in Germany, only the person with the right to dispose); and perhaps also in common law countries the owner of the goods (because of a presumption that it is the owner of the goods who has contracted with the carrier) may have a right of action: Clarke and Yates, Contracts of Carriage by Land and Air (2nd ed 2008), paras 1.85-1.86; Clarke, International Carriage of Goods by Road: CMR (4th ed 2003), paras 41-42.
The purpose of Article 31(1) is to confer jurisdiction on the courts of a country which has some relationship with the dispute. In Milor SRL v British Airways plc [1996] QB 702, at 710, Phillips LJ said of the Warsaw Convention: “There is something to be said for a regime which restricts the choice of forum in a manner which excludes those which are likely to be inappropriate, but which does not otherwise permit the plaintiff’s choice to be challenged.” See also Royal & Sun Alliance Insurance plc v MK Digital FZE (Cyprus) Ltd [2005] 2 Lloyd’s Rep 679, at [73], reversed on other grounds [2006] 2 Lloyd’s Rep 110 (CA).
There is no express reference to actions by assignees against carriers. There can be no doubt, of course, that rights of action may be assigned. Section 14(2)(e) of the 1965 Act expressly names assignees among those who are persons concerned in the carriage of goods by road under contract to which the CMR applies. But it does not follow from a right of assignment, or from the fact that the 1965 Act recognises that assignees may be concerned in the carriage, that Article 31(1)(a) confers jurisdiction on the residence or place of business of the assignee.
I accept the argument for XL that if the expression “the defendant” in Article 31(1)(a) were to be understood as including an assignee of an original contracting party then the purpose of Article 31 would be frustrated. England has, apart from being the principal place of business of XL, absolutely no connection with any of the matters in dispute. I also accept XL’s argument that the judge’s interpretation of Article 31(1) raises the possibility that there might be additional available jurisdictions in the same number as there are named cargo interests where the insurers of each are domiciled in different jurisdictions. There is also nothing to stop rights of suit being assigned by cargo interests to a party other than an insurer. That would give rise to the possibility that cargo interests faced with a carrier issuing a claim form for a declaration of non-liability in an unfavourable jurisdiction to them could assign rights of suit to a third party with its principal place of business in a favourable jurisdiction.
Consequently I am therefore unable to accept the claimants’ argument that “the defendant” in Article 31 is to be understood in a purely procedural sense to encompass any person who might be sued (including the case of an action for a negative declaration) in any capacity. There is no doubt, of course, that “defendant” in Article 31(1)(a) will extend to the parties to the contract, and probably also to those other parties to whom the CMR ascribes rights and duties. It is not necessary to consider the precise limits of the expression, because I am satisfied that, however far it goes, it does not extend to an action against an insurer or assignee. In my judgment such a literal interpretation of Article 31(1)(a) would frustrate the object of the provision.
For the sake of completeness I turn to XL’s final argument, which is that it must have, as assignee, the entitlement and right only to be sued in the same places as its assignors and is entitled to exercise that right as against the claimants. XL relies by analogy in this regard with a line of cases which make clear that an insurer who is assigned rights of suit from an assured takes the assigned right with both the benefit and burden of an arbitration clause or an exclusive jurisdiction clause: Detlev von Appen GmbH v Voest Alpine Intertrading GmbH [1997] 2 Lloyd’s Rep 279, 285-286 (CA) (arbitration clause), applied in Glencore International AG v Metro Trading International Inc [1999] 2 Lloyd’s Rep 632, 645 (Moore-Bick J) (jurisdiction clause). Accordingly, according to XL, either: (1) Article 31(1) of the CMR when applied to an assignee must be construed consistently with the fact that assignees are in no better (or different) position than the position of their assignors; or (2) the rights under the contract of carriage subject to the CMR that Triumph Austria and Triumph Italy assigned to XL were subject to an entitlement or right that it could only be sued in those places where Triumph Austria and Triumph Italy could be sued.
The argument can be supported by the fact that it has been said that the provisions of the CMR become terms of the contract: Clarke and Yates, Contracts of Carriage by Land and Air (2nd ed 2008) para 1.4, citing James Buchanan & Co Ltd v Babco Forwarding and Shipping (UK) Ltd [1978] AC 141, 152, where Lord Wilberforce said that “… the contract of carriage seems to have incorporated contractually the English text.” See also Rothmans of Pall Mall (Overseas) Ltd v Saudi Arabian Airlines Corp [1981] QB 368, at 383-384.
There is some force in the argument for the claimants that a statutory jurisdiction regime is not an equity. It is simply a mechanism for directing claims towards certain defined jurisdictions. It may be said that XL’s argument on this point begs the question, and assumes that Article 31(1)(a) does not apply to assignees. Although I incline to the view expressed by Rix LJ and supported by Jacob LJ that XL is right on this point, I prefer to express no concluded view on this part of XL’s argument.
But for the reasons given above, I would allow the appeal.
Lord Justice Jacob:
l also agree that the appeal should be allowed. I agree with the judgment of Lawrence Collins LJ in its principal reasoning though, like Rix LJ, I also think that an assignee is to be treated as simply standing in the shoes of his assignor. He has no different rights to sue or be sued in a particular forum than his assignor. On this point I agree with Rix LJ’s reasoning and add only a little more of my own.
The result is achieved not by the application of the particular doctrine of English law that an assignee takes subject to equities. Rather it is the result of a purposive construction of the CMR. It is trite law that the more absurd a suggested conclusion of construction is, the more the court will lean against that conclusion. That is ordinarily so whether one is construing a contract or a statute. The position is, if possible, a fortiori when one is construing an international convention. This is because, in the nature of things, such a document will not be drawn up with the details of any particular national legal system in mind. Moreover a convention generally lays down rules without condescending to fine detail – leaving the detail to be worked out by courts on a case-by-case basis.
The result contended for here is to my mind so absurd that this principle of construction comes into play. XL and this jurisdiction have no connection whatever with the original contract or the events leading to the claim. XL can only arguably be sued here because it has taken an assignment of the rights of the insured – if instead XL had left the insured’s claim against the carriers where it was so that the claim against the carriers would be pursued in the name of the insured, there would be no question of jurisdiction here. It makes no sense whatever that jurisdiction in this court should arise because of the happenstance of the way the insurer puts itself in a position to pursue the claim. Nor does it make any sense from the point of view of the CMR for jurisdiction to be conferred on the courts of the essentially arbitrary place of residence of an insurer.
So I approach the word “defendant” in Article 31(1)(a) of the CMR with that absurdity in mind. I do not think one can sensibly read it as “any defendant, including an assignee of one of the original party’s rights.” I think it means a “defendant of the sort contemplated by this Convention” – which does not include an assignee. The wider construction, although acontextually permissible and even perhaps the more “natural”, is simply too absurd.
Lord Justice Rix:
I also agree. I would also support the conclusions of Lawrence Collins LJ with two further considerations.
The first takes its starting point from the observation that Article 31(1) sets out six alternative (but exclusive) connecting links to fora where a claimant can proceed: (i) “a contracting country designated by agreement between the parties”; (ii) “a country within whose territory (a) the defendant is ordinarily resident”; (iii) “a country within whose territory (a) the defendant…has his principal place of business; (iv) “a country within whose territory (a) the defendant…[has] the branch or agency through which the contract of carriage was made; (v) “a country within whose territory…(b) the place where the goods were taken over by the carrier…is situated”; and (vi) “a country within whose territory…(b)…the place designated for delivery is situated”.
It may be noted that link (i) proceeds from contract between the parties; that link (iv) depends on where the contract of carriage was made; that link (v) depends on where the goods were taken over by the carrier; and that link (vi) depends on where the goods are, by agreement, to be delivered. In between these links are to be found links (ii) and (iii), which are closely related and with which we are here concerned. The surrounding links (i), (iv) (v) and (vi), however, all emerge out of the contract of carriage itself (subject to the theoretical possibility that a jurisdiction agreement might be made after the event). Moreover, in form links (ii) and (iii) are also closely related to link (iv), because all three links are united within Article 31(1)(a). In the French text they share a single verb (“a”), while in the English text the closeness of the connection is emphasised by the ellipse which has omitted the second “has”. Indeed, the English text can only be rendered grammatical either by understanding a second “has” (“or [has] the branch or agency” etc) or by omitting the comma after “place of business” (just as there is no comma between links (iii) and (iv) in the French text).
I make these points, which may be described as linguistic, semantic or textual points, because it seems to me that they strongly support, and go hand in hand with, the purposive points emphasised by Lawrence Collins LJ, with which I fully agree. Of course, jurisprudence requires that a purposive approach to interpretation of such an international convention should be adopted. In my judgment links (ii) and (iii) are not to be thought of as flying free from the material which surrounds them, but take their colour from them. Consideration of these six links as a whole, therefore, goes a long way to support the purposive interpretation whereby the word “defendant” will extend to the parties to the contract, and probably also to those other parties to whom the CMR ascribes rights and duties, but does not extend to an assignee, even if he is also an insurer.
In this connection, it is worth pausing over link (i), “designated by agreement between the parties”. The natural place to find such an agreement is of course in the contract of carriage itself, and it may be noted that the standard CMR consignment note contains a box, box 19, for special agreements or “Conventions particuliers”. Clarke and Yates, Contract of Carriage by Land or Air (2nd ed 2008), at para 1.188, read this provision as dealing with “agreement between the contracting parties.” Clarke, International Carriage of Goods by Road: CMR (4th ed 2003), at 144, contemplates that such an agreement may be in the consignment note, or it may be the subject of a separate or subsequent agreement. Hill & Messent, CMR: Contracts for the International Carriage of Goods by Road (3rd ed 2000), at 244, also contemplate agreements, at any time, between parties to the contract. It may be emphasised that such agreement cannot restrict the available fora, because Article 31(1) states that the remaining links are “in addition”. The question therefore arises whether “parties” in the phrase “designated by agreement between the parties” is restricted to parties to the contract of carriage. I do not think it necessarily is. In context it is speaking of parties to the litigation: see also Article 31(2)’s “no new action shall be started between the same parties”. On this basis, an agreement for a contracting country’s forum between a carrier and a consignee would found a legitimate jurisdiction (but not an exclusive one). It is even possible, I suppose, that an agreement between a carrier and an assignee/insurer could be within Article 31(1), unless “parties”, like the word “defendant”, were to be confined to parties contemplated by the Convention itself. That said, however, the primary contemplation of such agreements must, as the commentators all understand it, be between the parties to the contract of carriage. That is, after all, the core of the CMR: see Article 1: “This Convention shall apply to every contract for the carriage of goods by road…” etc. Despite the theoretical possibilities which the issue in this case has thrown up, apparently for the first time, I would continue to regard the reference to “agreement between the parties”, because primarily concerned with agreement between the parties to the contract of carriage, as strongly supporting the preferred interpretation.
The second consideration I would mention is that I would for myself be willing to accept Mr Toms’ submission based upon the rights and limitations implicit in assignment. It is not so much a question of an assignee taking subject to equities. It is rather that an assignee has the rights which his assignor had, and is also bound to recognise any limitations on his assignor’s rights, including rights of suit. It is only by virtue of the assignment that XL could have any right to sue on the CMR contract in its own name. As it is, XL does not sue in England but is sued, alongside its assignors, Triumph Austria and Triumph Italy, for a declaration of non-liability. It is odd to think of an assignee being sued at all: save in cases of statutory assignment where the law provides for a novation of liabilities as well as a passing of rights, an assignment involves no liabilities. Be that as it may, the essential doctrine is that, whereas an assignee has no greater rights than his assignor, he does at any rate have the rights of his assignor, and where the contract states that the assignor is entitled to be sued only in designated jurisdictions, I would accept the submission that that is a right upon which the assignee can rely and which it can enforce.
That follows from Detlev von Appen GmbH v Voest Alpine Intertrading GmbH [1997] 2 Lloyd’s Rep 279 (CA) and many other previous decisions. As Hobhouse LJ said (at 286):
“These authorities confirm that the rights which the insurance company has acquired are rights which are subject to the arbitration clause. The insurance company has the right to refer the claim to arbitration, obtain if it can an award in its favour from the arbitrators, and enforce the obligation of the time charterers to pay that award. Likewise, the insurance company is not entitled to assert its claim inconsistently with the terms of the contract. One of the terms of the contract is that, in the event of dispute, the claim must be referred to arbitration. The insurance company is not entitled to enforce its right without also recognising the obligation to arbitrate.”
Thus, if XL had sought to claim against Hatzl by reason of a CMR contract, it would have been limited to the jurisdictions allowed by Article 31(1); but, equally, where XL is sued by Hatzl in respect of a CMR contract, XL is entitled, in my judgment, to say that under the Convention it can be sued only in one of the article 31(1) jurisdictions. That is a right that Triumph Austria and Triumph Italy could have enforced (and they are co-defendants) and it is, it seems to me, a right that their assignee, XL, can equally enforce.
Why is the same not true of the present case? One answer might be that the conventional jurisdiction provided for in Article 31(1) is unlike a contractual agreement and lies entirely outside any assignment. However, I would not accept that explanation. The CMR contract is essentially a statutory contract: within limitations, the parties to it may add to it, for instance they can add to (but they cannot subtract from) the Article 31(1) jurisdictions. As Lord Wilberforce said in James Buchanan & Co Ltd v Babco Forwarding and Shipping (UK) Ltd [1978] AC 141 at 152: “…the contract of carriage seems to have incorporated contractually the English text” sc of the Convention as scheduled to the 1965 Act. As Clarke and Yates, Contracts of Carriage by Land and Sea, comment at para 1.4, referring to Lord Wilberforce’s dictum:
“The CMR apples to certain contracts for the international carriage of goods by road (Article 1), and the provisions of the CMR become terms of those contracts.”
It seems to me therefore that an assignee of the rights of a party to that contract is entitled to say that he can found jurisdiction where his assignor could do so, and equally that he has the right not to have jurisdiction exercised against him where his assignor had that right.
Another answer might possibly be that the incorporation of Article 31(1) in the assignee’s bundle of rights does not answer the question: because the issue will still remain whether he, the assignee, is to be regarded as a “defendant” for the purposes of Article 31(1)(a). However, I am not attracted by that answer either: it assumes that the assignee may incur a new liability, to which his assignor was not himself subject, that is, to be sued in the place where the assignee resides or has his principal place of business but where the assignor could not have been sued. Such a new liability would not be consistent with the essential nature of assignment, which transfers rights, but not liabilities, save for such qualifications of transferred rights as are inherent in the latter. In circumstances where the claimants in these proceedings could not have sued Triumph Austria or Triumph Italy in England prior to the assignment, I would hold that they cannot sue their assignee, XL, here either.
In sum, I agree that this appeal should be allowed.