RSA & Exel v. MK Digital

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Note: the decision in this case has been overruled by the Court of Appeal. For a note on the Court of Appeal decision, click here.

Royal & Sun Alliance Insurance Plc and Exel Logistique SA v (1)MK Digital SZE (Cyprus) Ltd, (2) Hi-Tec Electronics A/S and Others
English Commercial Court: Aikens J.: [2005] EWHC 1408 (Comm): 21 June 2005
Stephen Kenny, instructed by Hill Dickinson, for the claimants Exel and their insurers
Charles Graham QC, instructed by Hassan Khan & Co, for the second defendants, Hi-Tec
The question whether or not the CMR Convention governed the contract in this case was fundamental to the dispute between the parties; it also affected which court had jurisdiction. In such circumstances, the court has to be careful not to pre-judge issues that can only be decided at trial. The appropriate test at this stage was whether there was a good arguable case that the Convention applied. The judge held that there was.

DMC Category Rating: Developed

This case note is based on an Article in the August 2005 Edition of the ‘Marine Bulletin’, published by the Marine team at the international firm of lawyers, DLA Piper Rudnick Gray Cary. DLA Piper is an International Contributor to this website.

The dispute arose out of the theft of 90 pallets of mobile telephones en route from Paris to Calais. The consignment, worth about £3.5 million, was sold by MK Digital, a Cyprus company, to Hi-Tec, a company incorporated in Denmark, to be delivered FOB Larnaca airport, Cyprus on 4 November 2004. MK Digital arranged to fly the goods to France and Hi-Tec engaged Exel Logisitique (a French company) to arrange for onward carriage from Paris. Exel contracted with TRS Univers Lines to provide road transport, but since TRS did not have the right sort of trailer, it was agreed that the job could be sub-contracted to AMS. Exel prepared a consignment note and provided an escort driver.

Unfortunately, this driver was left stranded at a service station on the A1 to Calais with his tyres slashed as the loaded truck disappeared, never to be seen again.

It was a matter of contention whether, under the contract, the ultimate destination of the goods was Italy (as Hi-Tec alleged) or the UK (according to Exel). There was also a dispute over the nature of the contract itself. Exel claimed it was for carriage from Paris to Middlesex, UK, and that the contract was governed by the Convention on the International Carriage of Goods by Road (the CMR).

Hi-Tec, however, said Exel was engaged as a freight forwarder or, in French legal terminology a "Commissionaire de Transport" and the contract was, therefore, outside the CMR. Under French law, a person engaged as a Commissionaire de Transport is responsible for his own actions and as guarantor of the actions of carriers and other intermediaries he uses to carry out the transportation (articles L-132-4 and L-132-6 of the Code of Commerce). There is no limit of liability for a breach of these personal responsibilities.

On 11 November 2004, Exel and its goods in transit liability insurers, Royal & Sun Alliance, issued proceedings in the English court, claiming declarations that the dispute was governed by the CMR as enacted by the Carriage of Goods by Road Act 1965, for declarations of non-liability or limited liability and claiming an indemnity or contribution from TRS and AMS. The claim form contained the statement that "no proceedings involving the same cause of action are pending between the parties in… any other Convention territory of any contracting state…".

On 2 December 2004 (after the English proceedings had been issued but before they were served) Hi-Tec began proceedings in France. Exel objected to the French court hearing the matter on the basis that the English court was the court "first seised" under article 30 of the European Jurisdiction Regulation 44/2001. At the time of this hearing, the French court had not yet given judgment on this point. Meanwhile, the English proceedings were served on Hi-Tec on 4 February 2005 and Hi-Tec issued an application challenging the English court's jurisdiction.

Article 31 of the CMR provides:

"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 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 unless the judgment of the court or tribunal before which the first action was brought is not enforceable in the country in which the fresh proceedings are brought."

Exel argued that the English court had jurisdiction under article 31(1) because the contract was governed by the CMR and the place designated for delivery of the goods was the UK. Article 31(2) did not apply because the English proceedings had been started before the French action. Consequently, the question whether the English or French court should decide on jurisdiction was governed by the Jurisdiction Regulation. Under article 30 of the Regulation, it is the court first seised that determines the issue - in this case, the English court.

Hi-Tec, however maintained that this was not a contract for the international carriage of goods by road, so it was not subject to the jurisdiction regime in article 31 of the CMR. Instead, the court should apply the Brussels Convention on Jurisdiction (because Denmark is not a party to the Jurisdiction Regulation, although the relevant provisions in the Convention and the Regulation are the same). Under the Convention, the English court did not have jurisdiction because Hi-Tec was domiciled in Denmark (article 2) and the place of performance of the contract was France (article 5). Even if it was the court first seised, the English court had to decline jurisdiction because no jurisdiction could be established under the Brussels Convention regime.

If the CMR did apply, Hi-Tec argued, the English court did not have jurisdiction because the place designated for delivery was Italy not the UK. In any event, there was an action "pending" in the French court so the English action should not be permitted to continue. Lastly, if all else failed, the English court was not the appropriate forum for hearing the dispute since the case was centred in France and had hardly any connection with England.

Nature of the contract
Whether or not the CMR applied was a fundamental issue between the parties as it affected not only jurisdiction but also the extent of liability. Since this was a preliminary hearing and evidence was likely to be incomplete, the court had to be careful not to pre-empt any issue that could only finally be decided at trial. The test to be applied, therefore, was whether there was a good arguable case that the CMR applied (Canada Trust v Stolzenburg (No. 2) 1998 1WLR 547, approved by the House of Lords [2002] 1 AC 1.)

In the judge's view, "legal proceeding arising out of carriage "" in article 31(1) was wide enough to encompass a claim for a declaration of non-liability and would include proceedings brought by a goods in transit liability insurer in respect of an alleged loss during international carriage of goods by road.

But was this a contract to which the CMR applied? Various factors should be taken into account, as set out in Aqualon (UK) Ltd v Vallana Shipping [1994] 1 Lloyd's Rep 669. These included:

(a) The terms of the particular contract, including the nature of the instructions given;

(b) Any description used or adopted by the parties in relation to the contracting party's role;

(c) The course of any dealings, including the manner of performance - at least insofar as it throws light on the way in which the parties understood their relationship;

(d) The nature and basis of charging (in particular whether an all-in fee was charged, leaving the contracting party to make such profit as he could from the margin between it and the costs incurred);

(e) The nature and terms of any CMR (consignment) note issued.

Overall, and despite some conflicting and equivocal evidence, the judge was satisfied that there was a good arguable case that this contract was one for the international carriage of goods by road and that Exel sub-contracted the work. He also concluded that the UK, not Italy, had been the designated place for delivery. Article 31(1) applied.

Pending proceedings
But what about article 31(2) and Hi-Tec's argument that the French proceedings were "pending" because they were issued and served before the English proceedings? Hi-Tec maintained that the English proceedings would have become pending only once served (Andrea Merzario Limited v Internationale Spedition Leitner Gesellschaft GmbH [2001] 1 Lloyd's Rep 490).

In the judge's view, article 31(2) did not resolve the problem of concurrent proceedings. The answer lay in the "court first seised" rules under the Jurisdiction Regulation, to which both the UK and France are contracting parties. Under article 27, where proceedings involving the "same cause of action and between the same parties" are brought in the courts of different member states, any court other than the court first seised must stay its action until the jurisdiction of the court first seised is established. The same applies under article 28 to related actions pending in the courts of different member states.

Under article 30, a court is deemed to be seised when the document instituting the proceedings is lodged with the court, provided the plaintiff has not subsequently failed to take the steps he was required to take to have service effected on the defendant.

In this case, the English and the French proceedings involved the same cause of action. They arose out of the same facts and the same rule of law, in the sense that both were concerned to decide the nature of the contractual relationship and its legal consequences. Both had the same end in view, which was to determine the liability, if any, of Exel to Hi-Tec for the loss of the mobile telephones. Article 27, therefore, applied.

Exel had lodged its claim form with the English court before the French proceedings were issued and had not subsequently failed to take steps to serve the English proceedings. Consequently, the English court was the court first seised of the action.

Appropriate forum
If article 31 of the CMR applied, was there any room for the doctrine of appropriate forum? The judge thought the answer was clearly no. In Milor Srl v British Airways Plc [1996] QB 702, a similar question arose in relation to the Warsaw Convention. The Court of Appeal held that the doctrine of appropriate forum was inconsistent with the express jurisdiction provisions in Warsaw, which sets out a definitive choice of forums in which a claimant can bring an action.

The same applied to the CMR. Article 31(1) is an exclusive code as to where proceedings can be brought and leaves no scope for jurisdiction to be challenged under the doctrine of appropriate forum.

In addition, in cases where the Jurisdiction Regulation applies, it has recently been established by the European Court that the domicile rule (that persons domiciled in a member state shall be sued in the courts of that member state) leaves no room for the doctrine of appropriate forum. There can be no derogation from the domicile principle except in cases expressly provided for by the Convention (Owusu v Jackson (trading as Villa Holidays Bal-Inn Villas) and others (case C-281/02).

Applying both the CMR Convention and the Jurisdiction Regulation, the judge was satisfied that the English court had jurisdiction to hear the case.

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