Actial Farmaceutica LDA v Professor De Simone & Ors

The appellant (to which I will refer as “Actial”) appeals against the decision of Mr Andrew Hochhauser QC, sitting as a Deputy High Court Judge in the Chancery Division, that the High Court does not have jurisdiction over the Respondents under Article 5(3) of the Judgments Regulation 44/2001 or Article 5(3) of the Lugano Convention 2007. The learned judge gave permission to appeal in respect of the claims against the first respondent (to whom I will refer as “the Professor”) and the second respondent (to which I will refer as “Mendes Italy”) but not the claim against the third respondent.

The factual background to this matter is helpfully summarised by Kitchin LJ in [1] to [17] of his judgment of 1 July 2015 giving permission to the Professor to appeal against an order by the judge granting certain interim interlocutory relief to Actial pending the hearing of the present appeal. We gratefully set out and adopt that summary:

"2.

The Professor, an Italian professor of medicine, has devised a probiotic food product consisting of live freeze dried pure lactic acid bacteria which is called VSL#3 ("the Product"). It is said to contain eight different strains of live bacteria and have a far higher concentration of beneficial bacteria than any other such product available on the market. It is available over the counter and on prescription from the National Health Service. The Professor claims that he is the owner of valuable confidential information concerning the growth, analysis and precise mix of these eight strains.

3.

Some 15 years ago the Professor entered into a joint venture agreement with Paolo and Claudio Cavazza, who were wealthy Italian businessmen. Claudio Cavazza has since died. One of the main purposes of this joint venture agreement was to exploit the Product. The Professor was responsible for its composition and the Cavazza brothers were responsible for its funding, distribution and sale. The Cavazza brothers had considerable experience in the pharmaceutical sector and were, at the material time, majority shareholders in the Sigma Tau group of research based pharmaceutical companies with over 2500 employees across the world.

4.

For reasons which are not material to the present dispute, the Cavazza brothers and the Professor did not want the Product to be sold through the Sigma Tau group so they set up a new joint venture company referred to as "CD Luxembourg". It is owned by various companies which represent the interests of the Cavazza family and the Professor. The Professor's interest was originally held by a Luxembourg company referred to as "Mendes Luxembourg" but that was recently dissolved and its shares in CD Luxembourg were transferred to a company referred to as "Mendes Italy", which is another company controlled by the Professor or other members of his family. CD Luxembourg is itself the owner of three operating companies which it controls through its Italian subsidiary referred to as "CD Italy". These three subsidiaries have been referred to as "VSL", "CD India" and the claimant, Actial. They are each responsible for different territories with Actial responsible for most of Europe including the United Kingdom.

5.

On 29 May 2006 the Professor and Actial entered into an agreement, referred to as the "2006 UK Know-How Agreement". Actial contends that it is clear from the terms of this agreement that it has the sole right to make and sell the Product in the UK. There can be no doubt that Actial is also the owner of the Community trade mark for VSL#3. The Professor accepts that he signed the 2006 UK Know-How Agreement but argues it was a sham and that it was never intended to have contractual effect. Be that as it may, he has not disputed that he has received substantial payments amounting to several million Euros pursuant to its provisions and similar provisions in various other agreements. For some time Actial has obtained the Product by placing purchase orders with an American manufacturer ("Danisco") which since 2011 has been owned by Dupont. Danisco makes the Product from the eight strains of bacteria and then exports it in bulk to Italy and the Netherlands for packaging. In Italy the bulk packaging is carried out by a company referred to as "SIIT" and in the Netherlands by a company referred to as "Sanico". Once packaged, the Product is supplied by Actial through its distributors across Europe.

6.

In June 2006 Actial entered into an exclusive distribution agreement with an English company referred to as "Ferring UK". Under the terms of that agreement Actial agreed to sell or have sold the Product to Ferring UK and Ferring UK agreed to purchase all of its requirements of the Product [as] supplied by Actial through its distributors across Europe.

7.

In these proceedings Actial contends that in or about June or July 2014 the Professor and Mendes Italy embarked on a dishonest scheme unlawfully to wrest control of the manufacture and distribution of the Product from the joint venture with the intention of channelling sales of the Product through a rival business. Moreover, so Actial contends, the Professor embarked on this scheme while he was still a director of Actial. More specifically, it continues, the Professor sought to cut off supplies of the Product to Actial by preventing it from obtaining supplies from Danisco, removing Actial as a designated supplier and so preventing it from fulfilling its obligations to Ferring UK under the distribution agreement.

8.

There is no dispute that by the autumn of 2014 Actial was unable to make further supplies to Ferring UK and as a result Ferring UK became desperately short of stock which it had to ration. Accordingly, and in order to ensure that supplies of the Product to Ferring UK were not unduly disrupted, Actial signed a waiver letter in about November 2014, which permitted Ferring UK to obtain supplies of the Product from its associated company referred to as "Ferring Italy", which in turn obtained them from a Swiss company, referred to as "Mendes Switzerland". Actial maintains that there is compelling evidence that the Professor controls Mendes Switzerland and indeed has appointed that company as the sole authorised distributor of the Product for Europe and Asia. This is disputed by the Professor.

9.

Actial maintains that this waiver letter provided it with little comfort. It says that supplies made pursuant to the waiver did not generate any income at all for Actial or its parent, CD Italy. Accordingly, it refused to countenance a second waiver and on 10 December 2014, and believing that Ferring UK was on the verge of running out of supplies again, sought urgent without notice relief, requiring the Professor to reinstate it as an authorised supplier. This application was granted by Mr Kevin Prosser QC sitting as a deputy judge in the Chancery Division and, at Actial's request, he also directed the Professor to inform Danisco that it was entitled to sell to Actial the actual bacterial strains used in the manufacture of the Product.

10.

A few days later, the Professor instructed English solicitors and counsel, who wrote to the court apologising for the fact that the Professor had not complied with the mandatory injunction and explaining that to do so would result in the irretrievable loss of trade secrets.

11.

On 18 December 2014 the matter came before Norris J who made an order which was designed to hold the ring until the matter could return to court to be fully argued. In broad terms, and upon Actial giving an undertaking to provide security in the sum of 400,000 Euros and not to attempt to clone, reproduce, reverse engineer or otherwise modify the finished Product supplied pursuant to Ferring UK's orders, the order required the Professor to instruct Danisco to supply to the Netherlands and Italian packaging agents (SIIT and Sanico) sufficient Product to enable Actial to fulfil orders placed by Ferring UK which were consistent with its past pattern of trading, including any reasonable growth in such trading. The Professor duly instructed Danisco in those terms and on 8 January 2015 Ferring UK placed an order with Actial for stock worth in excess of 640,000 Euros. This was satisfied by deliveries made in late March 2015.

12.

Two further matters arise from the order made by Norris J which I should mention at this stage. The first is that Actial also gave an undertaking to make and serve an affidavit setting out any steps that it had taken to modify the Product. In compliance with that undertaking, an affidavit was made and served which explained that some reverse engineering had been carried out by CD Italy in June and July 2014 because of a concern that the version of the Product being sold in the market might not contain the ingredients detailed on the product packaging, and as a result of an inspection by the Italian health and safety authorities. The second is that the Professor also complained that there had been a breach of this order in that on 12 January 2015 Actial placed an order with Danisco for bulk Product with a direction that this was to be shipped to an unknown packaging agent called Nutrilinea. Actial responded to this further allegation saying this was not an additional order to the January order to which I have referred but corresponded to it, but in the light of the Professor's concerns, the bulk order to Danisco was re-issued stipulating that Danisco should send the bulk to SIIT.

13.

Actial's application for interim injunctive relief came before Mr Hochhauser QC sitting as a deputy judge of the Chancery Division on the 13th, 14th and 16th January 2015. His reserved judgment was handed down on 31st March 2015. He held that the court had no jurisdiction to hear the claims as presently formulated. However, he explained that if he had found that the court did have jurisdiction he would have been willing to grant interim relief in similar terms to that granted by Norris J until trial or further order, subject to putting in place a mechanism to ensure that it would have worked more smoothly and consideration being given to whether to require further fortification of Actial's cross undertakings in damages.

14.

On 20th April 2015 there was a hearing before the deputy judge to determine various consequential matters. He gave Actial permission to appeal against his ruling on jurisdiction and also gave directions in relation to a late application by Actial for further interim relief pending that appeal. This further application came on for hearing on 7th May 2015 and at its conclusion the deputy judge gave judgment and made the order [to which that appeal related].

15.

In substance the deputy judge made an order requiring the Professor, within 48 hours of his solicitors receiving notice that Actial had increased the security paid into court to 500,000 Euros, to give an instruction to Danisco to supply to one of Actial's two packaging agents, namely SIIT or Sanico, sufficient bulk Product to enable Actial to fulfil an order placed by Ferring UK on 13th April 2015 for supplies of Product with a value in excess of 1.6 million Euros. Actial gave an undertaking that it would not intercept or take samples of bulk Product delivered by Danisco to its packaging agents pursuant to the order and it would not "attempt to clone, reproduce, reverse engineer or otherwise modify the finished [Product] supplied pursuant to Ferring UK's order referred to in [the body of the order]". Very shortly afterwards, the Professor applied in writing to the deputy judge for permission to appeal and for a stay of his order. Both applications were refused by the deputy judge on 14th May 2015.

16.

On the same day, 14th May 2015, Actial's solicitors gave notice that the security had been increased with the result that the May order fell to be complied with by midday on 16th May 2015. Meanwhile, on 15th May 2015, the Professor's solicitors filed an appellant's notice with this court seeking permission to appeal against the May order, a stay pending determination of their application and, if permission was granted, a further stay pending the hearing of the substantive appeal. Four days later, the Professor's solicitors informed Actial's solicitors that the Professor was aware of the May order but was awaiting a decision of this court on the applications for a stay and permission to appeal. The following day, 20 May 2015, Actial issued a committal application against the Professor for failure to comply with the May order.

17.

On 21st May 2015 Actial issued a further application for an order under CPR 6.15(2) deeming service of the committal application on the Professor's solicitors by email and courier as good service on the Professor himself, rather than having to serve him under the provisions of the Hague Convention. That application came before Asplin J on 8th June 2015. She granted the application, made the June order and refused the Professor's application for permission to appeal. She also adjourned the hearing of Actial's committal application to 12th June 2015 in order to give the Professor an opportunity to apply for expedition of his application to this court for a stay of the May order. Then, on 9th June 2015, the Professor's solicitors applied to this court for permission to appeal against the June order and a direction that the application for permission be determined prior to the hearing of the committal application. On 11th June 2015 Ryder LJ made an order on the papers granting a stay of the May order pending an expedited hearing of the Professor's applications for permission to appeal and a continuation of the stay until the outcome of those applications was known.”

Kitchin LJ then gave permission to appeal at a contested hearing on 1 July 2015 and the appeal was heard by this Court (Jackson, Kitchin and Ryder LJJ) on 6 August 2015 and dismissed. There was a further hearing before Mr Hochhauser QC on 5 October 2015 of Actial’s contempt application against Professor and of his application to vary the May order. The judge dismissed the variation application, held the Professor to be in contempt of court and imposed a fine.

Until shortly prior to the hearing of the present appeal, this history of the relief sought by Actial was of some significance as the respondents contended in their Respondent’s Notice that the judge’s judgment should be upheld on the additional ground that there had been material non-disclosure by Actial on the without notice application, which the judge should have held merited the discharge of the order made on the without notice application and the refusal of any further injunctive relief. However, in supplemental written submissions dated 22 November 2016, Actial stated that, in the event of its appeal succeeding, it no longer required any mandatory relief requiring the Professor to notify Danisco that Actial is an authorised supplier. In the circumstances, the matters raised by the original Respondent’s Notice are no longer relevant and do not need to be decided.

The Amended Claim Form issued on 12 December 2014 prior to the return date before Norris J sought (in addition to the injunctive relief no longer pursued) damages sustained by reason of (i) an unlawful means conspiracy whereby the Professor and Mendes Italy sought to take control of the marketing and distribution of VSL#3 with the intention of injuring Actial and (ii) unlawful interference by the Professor and Mendes Italy with Actial’s business. Although no Particulars of Claim have yet been served, from the evidence before the judge he set out at [54] to [63] of his judgment the allegations being made by Actial to support its case of conspiracy and unlawful interference with its business.

In summary, the nature of the conspiracy and the overt acts relied upon by Actial are as follows:

The events thereafter are summarised in the judgment of Kitchin LJ which I have set out at [2] above. In his oral submissions before us on behalf of Actial, Mr John Wardell QC emphasised that the overt acts and the unlawful means did not include breach of the 2006 UK Know-How Agreement, to which, in any event, Mendes Italy were not a party. Rather, the claim against the Professor was firmly rooted in breach of his fiduciary duties owed to Actial as a director.

This analysis was disputed by Mr Andrew Sutcliffe QC. Apart from emphasising that the allegations of conspiracy are hotly disputed by the Professor, Mr Sutcliffe QC took us through the submissions made on behalf of Actial at the without notice hearing before Mr Kevin Prosser QC and in its various skeleton arguments, with a view to demonstrating that not only was Actial relying upon breaches of the 2006 UK Know-How Agreement, but that Agreement was indispensable to Actial’s case. It is fair to say that his submissions in that respect were essentially directed to his alternative case that any claim Actial had related to that Agreement and, accordingly, had to be brought in Italy under the jurisdiction clause in that Agreement and pursuant to Article 23 of the Judgments Regulation, rather than to his case that the judge had correctly decided that the English courts did not have jurisdiction by virtue of Article 5(3) of the Regulation. Since, for reasons set out below, it is not necessary to decide that alternative case, it is equally unnecessary to determine whose analysis of the nature of the claim in conspiracy is correct. For the purposes of this judgment, I proceed on the basis that the claim is one in tort, in relation to which the English courts will only have jurisdiction if Actial can establish that Article 5(3) applies.

At the hearing before us, Actial sought to rely upon new evidence, set out in the thirteenth witness statement of Ms Caroline Mattin, a solicitor with Lipman Karas LLP, Actial’s solicitors. This was evidence that the Professor was now selling in the United Kingdom a rival product to VSL#3, namely Vivomixx, manufactured by Mendes Switzerland which Actial contends is a company ultimately controlled by the Professor and sold in the United Kingdom by Gastropharm UK Limited. The evidence is that Vivomixx is available from any branch of Boots and from various online retailers, including Amazon UK. It has recently received approval for reimbursement on NHS prescription and it is being offered to the NHS at lower prices than VSL#3. Ms Mattin says that the Professor is using the know-how which is wholly owned by Actial pursuant to the 2006 UK Know-How Agreement to produce Vivomixx and sell it in the UK.

Mr Sutcliffe QC did not resist the application to adduce this fresh evidence, provided that the Professor and Mendes Italy had permission to adduce the evidence in response from Mr Primal Laxman of FiTZ Solicitors, their solicitors. Mr Laxman referred to an application which Actial made to the court in Switzerland for an injunction against Mendes Switzerland on 2 December 2014, a week before the present claim was commenced. In those proceedings in Switzerland, Actial’s Swiss lawyers appeared to accept that its only objection was to the possible infringement by Mendes Switzerland of the trademark VSL#3 and stated that if Mendes Switzerland limited itself to distributing a probiotic with the Vivomixx mark without using the VSL#3 trademark, Actial would have no reason for opposing that.

The riposte from Actial in Ms Mattin’s fourteenth witness statement is that the proceedings in Switzerland concerned only the trademark and that the 2006 UK Know-How Agreement had no bearing on that dispute. The Swiss lawyers were not saying that Actial did not object to the Professor and Mendes Switzerland commercialising a rival product in the United Kingdom using know-how that the Professor had transferred to Actial under the 2006 UK Know-How Agreement.

In the event, we gave permission for all this new evidence to be adduced. However, it is of peripheral relevance to the central issue on this appeal, which is whether the judge was correct in concluding that the English courts have no jurisdiction over the present claims under Article 5(3) of the Judgments Regulation or Lugano Convention.

Article 2 of the Judgments Regulation provides:

“Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of the Member State.”

Article 5 provides:

“A person domiciled in a Member State may, in another Member State, be sued:

1 (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question:

…

3 In matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur”.

It is now well-established that Article 5(3) is to be given an autonomous meaning and not interpreted by reference to national law and that the words: “the place where the harmful event occurred” encompass both the place where the event giving rise to the damage occurred and the place where the damage occurred. The defendant may be sued at the option of the claimant in the courts of either place: see Handelskwekerj GJ Bier NV v SA Mines de Potasse d'Alsace (Case 4320/74) [1978] QB 708 at [24]-[25]; AMT Futures Ltd v Marzillier, Dr Meier & Dr Guntner Rechtsanwaltsgesellschaft mbH [2014] EWHC 1085 (Comm); [2015] QB 699 per Popplewell J at [17].

The relevant decisions of the European Court of Justice (now the Court of Justice of the European Union but referred to hereafter as “the ECJ”) were analysed by Christopher Clarke LJ at [17] to [29] of his judgment in AMT Futures Ltd v Marzillier, Dr Meier & Dr Guntner Rechtsanwaltsgesellschaft mbH [2014] EWCA Civ 143; [2015] QB 699. At [30] to [34] he set out the principles which emerge from those authorities:

“30.

Certain key features appear from these authorities. First, the Regulation is to be given a community, not a national, construction.

31.

Second, the ECJ has, for obvious reasons, resolutely set itself against any interpretation of the Regulation which would mean that a claimant would, in practice, always be able to sue in tort in the courts of its own domicile and thus determine the competent court by his choice of domicile. In one sense a corporation may be said to suffer a loss wherever it keeps its accounts, for that is where its loss is ultimately felt. Where claimant and defendant are domiciled in two different States, the adoption of such an approach would lead to a result the exact opposite of that provided for by the basic rule in Article 2 which is that a defendant is to be sued in the courts of his domicile, not that of the claimant.

32.

Third, where harm might be regarded as happening in two different States the search is not for one or more States in which damage has been suffered but, if possible, for the State in which "the harm" has occurred, sometimes referred to as the jurisdictionally significant harm. As Popplewell J put it at [34] (5) (b):

"The search will be for the element of damage which is closest in causal proximity to the harmful event. This is because it is this causal connection which justifies attribution of jurisdiction to the courts of the place where damage occurs: see the Bier case [1978] QB 708 at [16]-[17] and the Dumez France case [1990] ECR I-49 at [20])."

33.

Fourth, the Article 5 exception is designed to cover cases where there is a particularly close connecting factor between the dispute and courts other than those of the State of the defendant's domicile, which "justifies the attribution of jurisdiction to those courts for reasons relating to the sound administration of justice and the efficacious conduct of the proceedings": see the Bier case [1978] QB 708, [11]; the Dumez France case[1990] ECR I-49, [17]; Shevill v Press Alliance SA [1995] 2 AC 18, [19]; the Marinari case [1996] QB 217, [10] and Kronhofer v Maier [2004] All ER (EC) 939,[15]. That is the reason for the exception. It does not mean that the application of Article 5 involves any form of forum conveniens test.

34.

Fifth, one of the aims of the Convention is that there should be foreseeability and certainty as to the State where jurisdiction may lie: see the Réunion Européene case [2000] QB 690, [36]; Kronhoferv Maier, [20].”

At [35] to [37] of his judgment, Christopher Clarke LJ went on to analyse his own judgment in Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening (The Swedish Club) [2009] EWHC 716 (Comm); [2009] 2 Lloyd’s Rep 123, on which Mr Wardell QC placed some reliance:

“35.

None of these cases concerned a situation in which what was complained of was that a tortfeasor had been induced not to do something. Such a situation arose in Dolphin Maritime & Aviation Services Ltd v Sveriges Angfartygs Assurans Forening (The Swedish Club)[2009] EWHC 716 (Comm); [2009] 1 CLC 460. In that case the defendant P & I Club was alleged to have procured a breach of Dolphin's agreement with cargo underwriters, for whom Dolphin was acting, that any payment by the Club would be made in London. The court held that the place where the damage occurred or where the event giving rise to the damage caused injury was England where Dolphin did not receive the money which, if the contract had been performed, it should have received.

36.

In the course of my judgment I said this:

"56.

Accordingly there is, as it seems to me, a well arguable case that, under the terms and conditions, the underwriters were bound to procure that the sums recovered directly from the Club were paid in the first instance to Dolphin. ……

57.

In those circumstances, the arguments on behalf of Dolphin are, in my judgment, to be preferred. Dolphin's essential complaint is that it suffered harm because it did not receive the $8.5 million into its bank account which it should have done because, despite knowledge that this would involve a breach of the underwriters' contract with Dolphin, the Club paid it to their accounts in Turkey. I recognise that the matter must be looked at through European spectacles. But there is nothing insular in recognising that the contract (which is governed and must be interpreted by English law) calls in terms for 'Recoveries and quasi-Recoveries (i.e. sums which would otherwise comprise 'Recoveries') to be received direct by Dolphin and that the complaint in tort is that the Club wrongfully brought about a breach of that obligation.

58.

When, in those circumstances, I ask myself 'where the damage to the direct victim occurred' (see the opinion of Advocate General Darmon in the Dumez France case, [52]) or 'where the event giving rise to the damage, and entailing tortious liability, directly produced its harmful effects upon the person who is the immediate victim of that event' (see the judgment in the Dumez France case, [20]) or 'where the event giving rise to the damage caused injury' (see the opinion of Advocate General Cosmas in the Réunion Européene case, [48]), the answer appears to me that it is in this country, where Dolphin did not receive the money which, if the contract had been performed, it should have received.

59.

Further, if I ask myself what would have been the position if the tort complained of had not taken place, the answer is that payment would have been made to Dolphin in England: and the essence of Dolphin's complaint is that that did not occur. Mr Thomas submitted that an inquiry as to what would have happened if the tort was not committed was no guide to the question - where did the damage occur? If there was no tort, there would have been no damage. In some cases, e.g. in cases of damage to goods or persons, the question may have no great utility. But in others where the claimant has failed to obtain some property or money which he would otherwise have received the answer to the question may be a guide to identifying where the harm in the particular case occurred.

60.

I do not ignore the danger of conflating the place where the damage occurred with the place where the loss was suffered. There is, however, a difference between a case in which the claimant complains that he has lost his money or goods (as in the Domicrest case or Sunderland Marine Mutual Insurance Co. Ltd v Wiseman (The Seaward Quest) [2007] 2 Lloyd’s Rep 308) and a case in which the claimant complains that he has not received a sum which he should have received. In the former case the harm may be regarded as occurring in the place where the goods were lost (Domicrest) or the place from or to which the moneys were paid (The Seaward Quest), although the loss may be said to have been suffered in the claimant's domicile. In the latter case the harm lies in the non-receipt of the money at the place where it ought to have been received, and the damage to him is likely to have occurred in the place where he should have received it. That place may well be the place of his domicile and, therefore, also the place where he has suffered loss. An analogy may be drawn with the non-delivery of cargo at the destination port: see the Réunion Européene case.

61.

There is, in my view, nothing inconsistent with the scheme of the Regulation in that result. In those circumstances the place where the benefit should have been received provides a sufficiently 'close connecting factor with the courts of a Member State other than that in which the defendant is domiciled which satisfies the need for certainty and justifies the attribution of jurisdiction to those courts for reasons relating to the sound administration of justice', particularly where, as here, the contract between Dolphin and the Club was subject to English law and arbitration, and where Dolphin was a provider of services in England (as well as elsewhere).

62.

Accordingly, Dolphin's tortious claims fall, in my judgment, within Article 5(3) of the Regulation. Whilst the argument centred round the claim for inducing breach of contract, I did not understand it to be suggested that, if the inducement claim fell within that Article the claim in conspiracy might not."

37.

Both parties accept that Dolphin was correctly decided. The judge regarded it as supporting his conclusion. Mr Thomas de la Mare QC for AMTF submits that he was entirely right to do so. Mr Hugh Mercer QC for MMGR submits that the decision in Dolphin was correct on its facts but that in the present case the facts require the opposite conclusion.”

The appeal by AMT Futures against the decision of the Court of Appeal in that case that the English courts did not have jurisdiction in respect of its claim under Article 5(3) was heard by the Supreme Court in October 2016. Judgment is awaited, but we were informed by counsel that, at the end of the hearing, the Supreme Court indicated that either the appeal would be dismissed or there would be a reference to the ECJ of a question which is not relevant for present purposes. We were also informed by counsel that during the hearing there was no challenge to the analysis of the relevant legal principles by either Popplewell J at first instance or Christopher Clarke LJ in the Court of Appeal.

Having referred to the applicable legal principles as set out in the judgments of Popplewell J and Christopher Clarke LJ in the AMT Futures case, the judge set out his conclusions on Article 5(3) at [113] of the judgment:

“113.

On the analysis of the authorities, I have reached the conclusion that Actial have failed to satisfy me to the requisite standard that this court has jurisdiction in relation to Actial’s claims in tort by reason of Article 5(3). I do so for the following reasons:

(1)

In cases of economic loss, the search is for the place where the harmful event directly had its effect on the immediate victim, Actial, and where the original damage is manifested (Dumez at [20]-[21]);

(2)

The damage occurs where direct harmful consequences are suffered, not at the place where indirect or remote damage occurs or consequential financial loss is felt which has arisen out of the event which has already caused initial and actual damage elsewhere (Marinari at [14]-[15]).

(3)

One should, insofar as it is possible, identify, a single place for the occurrence of damage, and one which has closest proximity to the harmful event (Bier at [16]-[17]), Dumez [20];

(4)

I accept Mr Mitchell’s submission that here the original damage caused by the alleged conspiracy and wrongful interference with contractual relations is the non-delivery either by Mendes Italy or by Danisco on the Professor’s instructions of the supplies of the Product in bulk to Actial’s packing agents, namely either SIIT in Italy or Sanico in the Netherlands, for onward distribution to all Actial’s distributors in every country in which they supply the Product. Posing the question ‘What would have happened if the alleged tort had not been committed?’, the answer is that SIIT and/or Sanico would have received the Product in the usual way for onward transmission, once packaged, to Actial’s distributors at the instruction of Actial;

(5)

The resultant indirect damage is the inability of Actial to supply Ferring UK, its English distributor, but that is one stage removed. The fact that the UK is Actial’s largest market for the Product it supplies does not, it seems to me, answer the question ‘Where did the original damage occur?’

(6)

The fact that the material agreements may have Delaware, Italian or Portuguese choice of law clauses is irrelevant to the correct question to be answered. Insofar as Mr Mitchell relies on the fact that Italy was the place of the alleged unlawful activities, or the choice of the Court of Rome as the appropriate venue in the 2006 Know-How Agreement, I do not regard these as significant considerations.

(7)

Whilst I accept that Shevill is authority for the proposition that one can rely upon Article 5(3) to bring a claim limited to damage sustained in a particular jurisdiction, and indeed I was initially attracted to this approach in order to accede to Mr Wardell’s submission, it seems to me that Shevill does not in any way displace the need to search for the location of the original damage, as opposed to damage consequential to the initial damage. Embarking on that exercise, I find that the initial damage did not occur in this jurisdiction, but when there was a cessation of supplies of the Product in bulk to the packaging agents in Italy or the Netherlands.”

On behalf of Actial, Mr Wardell QC submitted that the judge’s analysis in relation to Article 5(3) was erroneous in a number of related respects. First, the judge had misunderstood the distinction between direct and indirect damage drawn by the ECJ in the Dumez case and had incorrectly interpreted it as requiring a purely chronological approach in assessing where the harm was felt by the claimant. Second, and following on from his first point, he submitted that what the court should have been looking for was where the jurisdictionally significant harm has occurred, or as Popplewell J put it in the AMT Futures case at [34(5)(b)]: “the element of damage which is closest in causal proximity to the harmful event”. If the judge had engaged in that exercise, he should and would have concluded that the place where the jurisdictionally significant harm had occurred was clearly the United Kingdom, since this country represented Actial’s largest market, with 38% of its total turnover and the principal aim of the conspiracy was to prevent Actial selling VSL#3 in this jurisdiction via its distributor, Ferring UK.

Third, Mr Wardell QC submitted that the judge’s conclusion that the place where the damage occurred for the purposes of Article 5(3) was Italy or the Netherlands, where there was a cessation of supplies of VSL#3 in bulk to Actial’s packaging agents, failed to apply the principles laid down in the jurisprudence of the ECJ of foreseeability and certainty. The judge’s conclusion detracted from those principles, pursuant to which, so far as possible, the court should identify a single place for the occurrence of the damage.

Fourth, he submitted that in relation to the question what the position would have been if the tort had not been committed, the judge had given the wrong answer when he held at [113(4)] that the packaging agents would have received the VSL#3 in the usual way for onward transmission. The packaging agents were no more than a conduit for the supply to the United Kingdom and the correct answer to the question was that, if the tort had not been committed, Actial would have been able to supply Ferring UK in the United Kingdom, hence the place where the damage occurred was the United Kingdom. There was no loss to Actial until it was unable to sell the Product here. Mr Wardell QC submitted that if the Court asked itself the same questions as Christopher Clarke J (as he then was) had posed in his judgment in Dolphin Maritime at [58]-[59], the answers should be that Actial suffered damage by being unable to market the Product here and that, but for the tort, Actial would have gone on selling the Product here.

Fifth, Mr Wardell QC submitted that the judge failed to apply the principle established by Shevill v Press Alliance SA [1995] 2 AC 18. That case concerned a libel in a newspaper article distributed in several contracting states. The ECJ held that the claimant could either bring an action for damages before the courts of the place where the publisher of the defamatory publication was established or before the courts of each of the contracting states in which the publication was distributed and where the claimant claimed to have suffered injury to her reputation, the latter in each case being the place where the damage occurred: see [24], [27] and [33] of the judgment.

Mr Wardell QC submitted that, by parity of reasoning, if the Professor cut off supplies of VSL#3 at source as he allegedly had done in the present case, Actial will suffer damage in each of the markets where it sells the Product so that it can sue in the courts of each of those countries. He relied upon the passage at [9.67] of Fentiman: International Commercial Litigation:

“…where a claimant alleges that a defendant has unlawfully prevented the conclusion of a contract between the claimant and a third party, damage occurs where the contract would have been concluded.”

He submitted that the actions of the Professor and Mendes Italy in cutting off supplies at source had damaged Actial’s commercial relationship with Ferring UK and its reputation here and had exposed it to claims from Ferring UK. This was his sixth criticism of the judgment, that the judge had failed to take into account the closing words of Article 5(3): “the place where the harmful event occurred or may occur”. Those words: “or may occur” emphasised that the search was not just for actual harm but potential harm. The potential harm here, to which the judge had failed to have regard, was the possible distribution by the Professor in the United Kingdom of a rival product, in breach of the 2006 UK Know-How Agreement. It was that potential harm to which the injunctive relief which had been sought was directed.

Mr Wardell QC submitted that the new evidence about the distribution of Vivomixx demonstrated clearly that the potential harm had become actual harm, suffered here in the United Kingdom. Where a claimant advances a claim in tort arising from breach of a contractual term, the damage occurs where the rights conferred by that term were to have been enjoyed: Fentiman [9.68]. Here, the distribution of Vivomixx was a breach of the 2006 UK Know-How Agreement and the rights conferred by that Agreement of exclusive use of the know-how were ones which were to have been enjoyed here, so it was in this jurisdiction that the jurisdictionally significant harm occurred. These sales of rival product were causing Actial harm and they did not involve the packaging agents at all, a further demonstration that the judge’s conclusion that the damage occurred at the location of the packaging agents was wrong.

Mr Andrew Sutcliffe QC on behalf of the Professor and Mendes Italy submitted that the judge was entirely correct in his analysis, at [113] of his judgment, that the direct damage was suffered by Actial when there was non-delivery of the Product in bulk to the packaging agents in Italy or the Netherlands and that the inability of Actial to supply Ferring UK was indirect or remote damage, one step removed. Contrary to Mr Wardell QC’s submissions, the judge had not adopted a purely chronological approach, but had carefully analysed where the harmful event had occurred, in accordance with the European and English authorities.

The non-delivery of VSL#3 to the packaging agents in Italy and the Netherlands was the jurisdictionally significant harm in the sense that, had delivery been made to the packaging agents as requested by Actial, no harm at all would have been suffered. Accordingly, the judge had given the right answer to the question what would have happened if the tort had not occurred.

The judge had been right to conclude that the fact that the United Kingdom was Actial’s largest market for the Product was irrelevant to the question to be asked in determining whether Article 5(3) applies. The Product was sold in a wide range of markets in the European Community and elsewhere and the 2006 UK Know-How Agreement was one of fifteen similar contracts entered into in relation to each territory where Actial owned a trademark. Actial should not be permitted to forum shop by using market share to found jurisdiction.

Mr Sutcliffe QC submitted that if supplies of the Product were cut off as alleged by Actial, then the damage occurred in Italy and the Netherlands where the Product which would otherwise have reached the packaging agents was not received. The fact that, as a consequence of such non-receipt, Actial could not satisfy the orders of Ferring UK for the UK market and might suffer loss as a result, was too remote and could not found jurisdiction in England. This was made good by an examination of the injunctive relief Actial had been seeking: a mandatory injunction requiring the Professor to give instructions to Danisco to supply bulk VSL#3 to one or other of the packaging agents as directed by Actial. Actial’s inability to supply Ferring UK was caused by the cessation of supplies to the packaging agents and, accordingly, was consequential or indirect loss.

Mr Sutcliffe QC submitted that the suggestion that the judge’s conclusion detracted from the principle that the courts should so far as possible identify a single place for the occurrence of the damage was misleading and misconceived. There was a single place where the harmful event occurred or the damage was suffered, the location of whatever packaging agent Actial decided to use to make up the Product.

In relation to the new evidence and the criticism of the judge for not focusing on potential harm, Mr Sutcliffe QC submitted that Actial was seeking to run a new case that it had suffered damage as a consequence of sales of Vivomixx in the United Kingdom, which was not a case which it had argued before the judge and was inconsistent with the position it had adopted in the Swiss proceedings. To the extent that Actial was complaining about a breach by the Professor of the 2006 UK Know-How Agreement, that highlighted that this was essentially an Italian contractual claim dressed up as an English unlawful means conspiracy. This was a submission that Mr Sutcliffe QC developed further in the context of his alternative submission that this case fell within Article 5(1) not Article 5(3).

In considering whether jurisdiction can be established under Article 5(3) it is important to have in mind that it is an exception or derogation from the fundamental principle set out in Article 2 that defendants should be sued in the courts of the place of their domicile and, accordingly, it is to be restrictively interpreted: see per Popplewell J in AMT Futures at [34(1)] and the decisions of the ECJ there cited. It is for that reason that the exercise of the special or exceptional jurisdiction under Article 5(3) is only justified if there is a particularly close connecting factor between a particular dispute and the courts of a member state other than that in which the defendant is domiciled. Hence the search is for the state where the jurisdictionally significant harm has occurred or where damage has occurred which is closest in causal proximity to the harmful event: see per Christopher Clarke LJ in AMT Futures at [31].

In the present case, the harmful event was the alleged conspiracy by which the Professor and Mendes Italy sought to prevent Actial from trading by cutting off supplies to it of VSL#3. In my judgment, the damage which is closest in casual proximity to that harmful event is the non-delivery of VSL#3 in bulk to Actial’s packaging agents in Italy and the Netherlands. That is the jurisdictionally significant harm. The subsequent damage suffered because, as a consequence, Actial was unable to supply its distributors, whether Ferring UK in the UK or another distributor in whatever territories were supplied with the Product is just that, consequential or indirect damage. The judge’s analysis in [113] of his judgment cannot be faulted.

I consider that there is an analogy here with the carriage cases considered by Christopher Clarke J in Dolphin Maritime at [60] which I set out at [17] above. In the Réunion Européene case, a claim was brought in France against the maritime carrier of a consignment of peaches found to be overripe because of a breakdown of the vessel’s cooling system on the voyage. The ECJ held that the place where the harmful event occurred, for the purpose of a claim in tort against the carrier was the place where the carrierwas to deliver the goods, Rotterdam. The Court said at [36]:

“That place meets the requirements of foreseeability and certainty imposed by the Convention and displays a particularly close connecting factor with the dispute in the main proceedings, so that the attribution of jurisdiction to the courts for that place is justified by reason relating to the sound administration of justice and the efficacious conduct of proceedings.”

Mr Wardell QC accepted during the course of argument that the same conclusion, that the place where the harmful event occurred was Rotterdam, would have been reached if the goods had been lost en route or stolen. Indeed, that conclusion seems to me necessarily to follow from the analysis in Dolphin Maritime at [60]. Mr Wardell QC submitted that the present case was different because the Professor was preventing the Product from reaching the distributors in the United Kingdom, although he accepted that the position would be different if the Professor had set out to steal the Product. Then a strict analogy would have to be drawn with the Réunion Européene case. I cannot see that there is anything in this distinction: whether the Professor had stolen the Product or instructed Danisco not to deliver it to the packaging agents, the effect would be the same, he would have prevented the relevant consignment from being delivered to the packaging agents. Accordingly, in my judgment, the same conclusion should be reached, whether the Product was not delivered to the packaging agents because it was stolen or lost or because the Professor had instructed Danisco not to deliver it to the packaging agents. In either event, the jurisdictionally significant harm occurs in the place where the Product is not delivered, Italy or the Netherlands.

Furthermore, if one asks the question posed at [59] of Dolphin Maritime what would the position have been if the alleged torts of unlawful means conspiracy and unlawful interference with contractual relations had not been committed, it seems to me that the answer is clear. The packaging agents would have received the VSL#3 in the usual way for packaging and onward transmission to Actial’s various distributors and no loss would have been suffered. Actial’s case is not assisted by seeking to characterise the packaging agent in each case as a mere conduit. If anything, that would point to the harm occurring at an earlier point, in the United States, when the Professor/Mendes Italy and Danisco agreed to cut off supply to Actial.

I do not consider that there is any force in Mr Wardell QC’s submission that the judge’s conclusion failed to apply the principles laid down in the jurisprudence of the ECJ of foreseeability and certainty. As Mr Sutcliffe QC pointed out, in the case of any given order for VSL#3, there is only one place where the harmful event occurred or the damage was suffered, namely the location of whatever packaging agent Actial decided to use to make up the Product. Accordingly, there is no question of unforeseeability or uncertainty. In any event, the principles are not immutable, the search is for a single place where the harm has occurred “if possible”: see per Christopher Clarke LJ in AMT Futures at [32].

If anything, Actial’s reliance on the Shevill case in support of its submission that because the Professor cut off supplies of VSL#3 at source, Actial will suffer damages in each of the territories where VSL#3 is marketed and sold by Actial and can therefore sue in the courts of each such territory would seem to ignore the principles of foreseeability and certainty. In any event, I do not consider the analogy with Shevill an apt one. In the case of an international libel through the media, as the ECJ held at [29], the injury caused by the defamatory publication occurs in each place where the publication is distributed. Not only is there no prior damage or injury until publication takes place, wherever that is, but the event giving rise to the damage is the publication, so the harmful event and the damage occur simultaneously in the same location. By contrast, in the present case, direct and immediate damage was suffered when VSL#3 was not delivered to the packaging agents and the damage suffered by reason of Actial’s inability to sell to its distributors in the UK or in other territories was indirect or consequential damage.

Nor do I consider that Actial can derive any assistance in relation to whether the case is within Article 5(3) from the new evidence that the Professor is distributing the rival product, Vivomixx, in the United Kingdom. Even assuming that in doing so, he was in breach of the 2006 UK Know-How Agreement and that, as Mr Wardell QC submitted, it was the ultimate aim of the conspiracy to cut off supplies of VSL#3 to Actial and distribute a rival product, that does not change the nature of the damage suffered by Actial as a consequence of the conspiracy and overt acts relied upon as summarised at [6] and [7] above. Any financial loss suffered by Actial as a consequence of loss of sales in the United Kingdom through the distribution and promotion of the rival product is, so far as those matters are concerned, at best indirect or consequential damage. The answers to the questions posed in [58] of Dolphin Maritime remain Italy or the Netherlands, where the VSL#3 in bulk was not delivered to the packaging agents.

For all those reasons, the English courts do not have jurisdiction over the proposed claims under Article 5(3) and the appeal must be dismissed.

In his oral submissions before us, Mr Sutcliffe QC developed an alternative ground upon which the judge’s decision that the English courts did not have jurisdiction was correct, that the judge should have held that Italy was the only forum in which the dispute could be determined because the 2006 UK Know-How Agreement (which contained at clause 3.3, quoted by the judge at [39] of his judgment, a clause providing that the Court of Rome has jurisdiction over any dispute as to the validity, interpretation and enforcement of that Agreement) was indispensable to the resolution of the matters in dispute. This point had been trailed in the court below but not fully argued. We gave Mr Sutcliffe QC permission to amend his Respondent’s Notice to raise this point and he made oral submissions on the point. He relied in particular on the decision of the CJEU in Brogsitter v Fabrication de Montres Normandes [2014] QB 753 and the interpretation and application of that case in the recent decision of the Court of Appeal in Arcadia Petroleum v Bosworth [2016] EWCA Civ 818 and in an earlier decision of Edwards-Stuart J in Iveco SpA v Magna Electronics [2015] EWHC 2887 (TCC); [2016] I.L.Pr 18.

Because this point had not been previously argued, we adjourned the hearing after Mr Sutcliffe QC’s submissions to give Mr Wardell QC an opportunity to consider the point and prepare his response. On the second day of the hearing, Mr Wardell QC made detailed submissions in response to this point. Because we have decided that the appeal must be dismissed on the ground that the judge was correct in his conclusion that the English courts do not have jurisdiction over the present dispute under Article 5(3), it is not necessary to decide this further point and I decline to do so. In this context, I have in mind the salutary observation of Mummery LJ in Housden v The Conservators of Wimbledon and Putney Commons [2008] EWCA Civ 200; [2008] 1 WLR 1172 at [30]:

“It is unnecessary to decide the issue for the purpose of disposing of the appeal. In general, it is unwise to deliver judgments on points that do not have to be decided. There is no point in cluttering up the law reports with obiter dicta, which could, in some cases, embarrass a court having to decide the issue later on.”

In the circumstances, I would dismiss the appeal.

I agree.

I also agree.