Morley v Reiter Engineering GmbH & Co.KG

By this application the Defendant Reiter Engineering GmbH & Co KG challenges the jurisdiction of the courts of England and Wales in a claim by the claimant, Mr Oliver Morley, for damages for breach of contract, the claim form having been served on the defendant out of the jurisdiction at its registered office in Germany. The claim relates to a specially race-prepared Lamborghini Gallardo sold by the defendant to the claimant in early 2008 for use in motor racing in the United Kingdom, specifically the FIA GT3 Championship. In short, the claim is that the car was not fit for purpose due to oil starvation.

The question raised by this application is whether, pursuant to the Judgments Regulation, the claim can be brought in England, or whether, as the defendant asserts, it must be brought in Germany. It is common ground that the answer turns on the application to the facts of Arts.2, 5 and 23 of the Judgments Regulation which provide (so far as is relevant) as follows:

“2.1

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

5.

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

(a)

in matters relating to a contract, in the courts for the place of performance of the obligation in question;

(b)

for the purpose of this provision and unless otherwise agreed the place of performance of the obligation in question shall be;

- in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered,

- in the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided,…

23.1

If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. Such an agreement conferring jurisdiction shall be either:

(a)

in writing or evidenced in writing; or …”

In summary, Art.2 allocates jurisdiction to Germany as the place of the defendant’s place of domicile unless the claimant can establish, the burden being on him, that the car ought to have been delivered in England, in which case Art.5 enables the claimant to sue in England as well, as the place of performance of the obligation in question. But if the defendant can establish (the burden for this purpose being on it) that there exists an exclusive jurisdiction agreement, in writing or evidenced in writing, in favour of Germany then, under Art.23, the English court has no jurisdiction, regardless of the place of performance of the obligation in question.

The burden on the proponent of the jurisdiction under Art.5, and the proponent of exclusive jurisdiction under Art.23, is to establish a good arguable case that the requirements of those articles are satisfied. The trial of preliminary issues about matters going to jurisdiction is strongly to be discouraged, so that the necessary good arguable case must be demonstrated at an interim hearing, upon the basis of written evidence which is neither tested by disclosure or cross-examination, to which the ordinary civil standard of proof on balance of probabilities is therefore inappropriate.

In Konkola Copper Mines plc v Coromin Ltd [2006] EWCA Civ.5 at para 86, Rix LJ said that:

“Thus it is possible that given the flexibility of the ‘good arguable case’ test, the answer could simply be that the applicant should make out a case which is sufficient in the circumstances to render it just to derogate from the established jurisdiction, but which still remains short of proof on the balance of probabilities. If, therefore, in terms of a provisional argument at an interim stage which properly stops short of a trial mode, the applicant fails to make out such a case, then, because he bears the burden of proof, he fails.”

In Canada Trust Co. v Stolzenberg (No.2) [1998] 1WLR 547, at 555, Waller LJ said:

“It is also right to remember that the ‘good arguable case’ test, although obviously applicable to the ex parte stage, becomes of most significance at the inter partes stage where two arguments are being weighed in the interlocutory context, which, as I have stressed, must not become a ‘trial’. ‘Good arguable case’ reflects in that context that one side has a much better argument on the material available. It is the concept which the phrase reflects on which it is important to concentrate, i.e. of the court being satisfied or as satisfied as it can be having regard to the limitations which an interlocutory process imposes that factors exist which allow the court to take jurisdiction.”

In Bols Distilleries BV v Superior Yacht Services Ltd [2007] 1WLR 12, Lord Rodger, giving the judgment of the judicial committee of the Privy Council specifically approved Waller LJ’s formulation and, at para 28, continued:

“In practice, what amounts to a “good arguable case” depends on what requires to be shown in any particular situation in order to establish jurisdiction. In the present case, as the case law of the Court of Justice emphasises, in order to establish that the usual rule in Art.2(1) is ousted by Art.23(1), the claimants must demonstrate “clearly and precisely” that the clause conferring jurisdiction on the court was in fact the subject of consensus between the parties. So, applying the “good arguable case” standard, the claimants must show that they have a much better argument than the defendants that, on the material available at present, the requirements of form in Art.23(1) are met and that it can be established, clearly and precisely, that the clause conferring jurisdiction on the court was the subject of consensus between the parties.”

I was not shown a case where the good arguable test case was specifically applied to a claim for jurisdiction under Art.5. Since that article confers non-exclusive jurisdiction and does not therefore oust the jurisdiction of any other Member State, it might be thought that some slightly less rigorous standard had to be applied. Nonetheless, in Kolmar Group AG v Visen Industries Limited [2009] EWHC 3765 (QB) Flaux J said, at para 5, that the principle stated by Waller LJ in Canada Trust was of general application in relation to all matters going to jurisdiction, not limited to the particular requirements of Art.23. I agree, and I regard that analysis as flowing naturally from Lord Rodger’s observations in the Bols case to which I have referred.

The car which is the subject of the present dispute was, together with a spares kit, sold by the defendant to the claimant following an exchange of emails and (I infer) oral exchanges. It is common ground that after the claimant paid €199,800 for the car and €45,000 for the spares kit, the car was actually delivered in Germany, at the defendant’s premises, and collected by means of a car transporter arranged by the claimant’s agents Tech9 Motorsport Ltd (“Tech9”) and taken to England.

The earliest written communication relied upon by either party consists of an email dated 2 February from a Mr Hubert Thanbichler of the defendant to the claimant, the relevant part of which reads as follows:

“Thanks for your interest in our Gallado GT3 2008.

I send you now the contract, the technical information and also the minimum spare part package.

The delivery date of the new model will be march 2008 and it’s a pleasure for us to meet you in our workshop.

Our next test day is on 18/19 February and if you want you can test there the car. We test in Adria Raceway who is in the near of Bologna.”

The defendant replied as follows, on 4 February:

“We would want to attend the test in february please also need to firm up the loan car for us in march as the 1^st race is before delivery of the new car.. please also forward your bank details for the 30,000 euro deposit.”

The defendant’s first round of evidence exhibited a form of draft contract which, while not identifying the claimant or anyone else as the buyer, or containing any signatures, provided, at clause 4, for the buyer to be responsible for collecting the car, at clause 12.1 for the place of performance of all obligations to be the defendant’s registered office and, at clause 12.3 for the courts of Traunstein, Germany to have exclusive jurisdiction.

The claimant’s evidence was that he could not recall whether the alleged or any draft contract had been attached to the 2 February email, and had been unable to check from his records, having lost his laptop in the sea. Mr Chaisty QC was unable to offer any explanation why the loss of a laptop should disable a person from accessing his email records (being retained no doubt by his email service provider) but the defendant was, despite lodging further evidence, equally unable to produce any metadata or other material proving that the draft contract had indeed been attached, or sent on any other occasion by email. The best that Mr Thanbichler was able to say was that he believed that the draft contract had been posted to the claimant.

On 4 February 2008 the defendant sent a Confirmation of Order to the claimant specifying the price (which I have already identified) and continuing:

“Payment conditions:

First instalment of €30,000 after order,

second instalment of €100,000 after delivery of the chassis to Reiter Engineering and final payment before delivery of the finished race car.

Delivery date:

March 2008”

At the foot of the Confirmation, in very small print and in German, was an expression which, translated into English, reads:

“Court/Place of jurisdiction and place of execution Traunstein.”

In an exchange of emails in German between Mr Thanbichler and Katja Schroëder, the claimant’s German speaking P.A on 20 February, it is recorded by Mr Thanbichler without challenge by Ms Schroëder that the delivery date had already been fixed for 15 March. On 12 March Mr Phil Hindley of Tech9 emailed Mr Thanbichler saying:

“I understand from our previous conversations, that the car will be ready to collect this Saturday 15 March.

My transporter will arrive Saturday morning to collect the vehicle.

It is imperative that this deadline is met, as we have testing booked and our first race of the Championship the following Friday (21 March).

Please confirm that is all OK”

In related proceedings in the Aylesbury County Court between the same parties, it was pleaded on Mr Morley’s behalf (above a statement of truth) that the car had indeed been delivered on or about 15 March 2008.

The surviving documentary evidence thus suggests:

The claimant’s evidence about the arrangements for the time and place of delivery of the car was very different. It is best to quote the relevant paragraph of his witness statement in full:

“I note that Mr McFadyen refers in paragraph 15 to the car being collected by me/my agent’s from Germany. I understood from my agent, Tech9 Motorsport Limited (“Tech9”) that it was agreed that the Defendant was to deliver a rented car and the car I purchased to England in advance for the first round of 2 races of the British GT championship at Oulton Park in Cheshire (the “Race”) which was to take place on 24 March 2008. The rented car was to be driven by my racing colleague and I was to drive the purchased car at the Race. The rented car was delivered to England but my car was not completed so could not be delivered at the same time as the rented car. As a result, an engineer from Tech9 went to the factory in Germany and spent four days putting pressure on the factory to complete my car in advance of the Race. I was then advised by Tech9 that the car could not be delivered for another week which would mean that I would not have the car in time to compete in the Race. I arranged for a truck to be sent to Germany to collect the car which was delivered to me just in time for the Race.”

Mr Chaisty submitted that, notwithstanding its numerous and obvious points of conflict with the surviving contemporary correspondence, the claimant’s evidence demonstrated a good arguable case that the car should have been delivered in England, sufficient to satisfy Art.5.1, and that the court could not properly go behind the claimant’s evidence without cross-examination, unless satisfied in accordance with the standards commonly applied on summary judgment applications that it was incredible.

I disagree. The question is whether, the burden being on him, the claimant has, on the available materials, a much better argument than the defendant as to the question whether the car should have been delivered in England rather than Germany. In my judgment the defendant has the much better argument on this issue. My reasons follow.

I place no reliance upon the provisions of the draft contract to which I have referred, providing for the buyer to have the obligation to collect the car in Germany. This is because the evidence that the written form of unsigned contract governed the parties’ relationship falls well short of being persuasive. Rather, it seems to me that the surviving correspondence demonstrates that, whatever may have been discussed originally, the parties were, before the end of February, ad idem that delivery should take place on 15 March and, by 12 March at the very latest, agreed that this should be achieved by the claimant’s agent collecting it from the defendant’s works. The very fact that the car was in fact delivered in Germany, without any apparent complaint of breach of contract in that respect for more than three years, strongly suggests that this is what had by then been agreed: see 7E Communications Ltd v Vertex & Antennentechnik GmbH [2007] 1 WLR 2175, at para 51.

Were it necessary to do so, I would have concluded that the claimant’s account, based heavily on a supposed threatened delay in delivery which is wholly inconsistent with the contemporary correspondence, is indeed incredible. Mr Chaisty’s submission that it was, unsatisfactorily, met only with a bare denial ignores first that the claimant’s account of how, and between whom, delivery in England was agreed is so devoid of particulars so as to be almost impossible to respond to, and secondly that the contemporaneous correspondence produced by the defendant is telling evidence that the claimant’s account is mistaken.

The claimant has therefore failed, and by a considerable margin, to satisfy the good arguable test case that he is entitled to the jurisdictional benefit of Art.5(1) of the Judgments Regulation. The defendant is therefore entitled to be sued in its place of domicile, namely Germany.

Since the claimant has failed successfully to invoke Art.5, it follows that the question whether the defendant could otherwise have responded by successfully invoking Art.23 does not arise. Had it been necessary for me to do so, I would have concluded that the defendant would in turn have failed the good arguable test case in relation to Art.23. Since a higher court will be as well placed as I am to address that question should it ever arise, I need state my reasons only very briefly. In summary, the evidence fails to establish a good arguable case either that the draft contract was in fact brought to the claimant’s attention before he accepted the defendant’s offer by paying the deposit for the car, still less that any contract incorporating a German jurisdiction clause was either made, or evidenced, in writing.

This application nonetheless succeeds. In order to save a further hearing, the parties have already agreed that costs should follow the event, so that the claimant must pay the defendant’s costs of this application, on the standard basis. Matters of assessment, and, if necessary, payment on account, are to be dealt with upon written submissions if they cannot be agreed.