DSG International Sourcing Ltd & Anor v Universal Media Corporation (Slovakia) SRO [2011] EWHC 1116 (Comm)

[2011] EWHC 1116 (Comm)

Case No 2010 FOLIO 1150

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 05/05/2011

Before

MR JUSTICE DAVID STEEL

Between

(1) DSG INTERNATIONAL SOURCING LIMITEDClaimants

(2) DSG RETAIL LIMITEDClaimant

UNIVERSAL MEDIA CORPORATION (SLOVAKIA) S.R.O.Defendant

MR MATTHEW PARKER

(instructed by DLA PIPER UK LLP) for Claimants

MR MICHAEL McPARLAND

(instructed by REYNOLDS PORTER CHAMBERLAIN LLP) for Defendant

Hearing Hearing dates: 8th & 11th April 2011

Judgment

Introduction

[1]The Defendant (‘UMC’) is a Slovakian company which manufactures televisions. The Claimants are members of the Dixons group of companies and sell televisions through their network of high street stores in the UK. It is common ground that between late 2005 and early 2009, UMC supplied very large numbers of televisions to Dixons. The televisions which were supplied fell into two categories: ‘OEM’ televisions (which were essentially Dixons own-brand televisions and included the Logik and TEAC brands) and ‘Branded’ televisions (where the brand was owned or licensed by UMC, including Swisstech, E-Motion and UMC).

[2]There is a substantial dispute as to the precise contractual relationship between the parties. It is the Claimants’ case that: i) supplies of OEM television were made to the First Claimant (‘DSG Sourcing’) under the terms of an ‘umbrella’ agreement called TTOPS, which was signed by UMC on 27 July 2005 and provided to Dixons on 5 August 2005 (referred to as the ‘First Agreement’); and ii) supplies of Branded televisions were made to the Second Claimant (‘DSG Retail’) under the terms of another ‘umbrella’ agreement which contained certain ‘Trading Terms’ and which expressly incorporated further ‘Standard Purchase Terms’ (referred to as the ‘Second Agreement’).

[3]UMC admits that the televisions were supplied but denies the existence of both the First and the Second Agreements. UMC claims that supplies were made under the terms of various purchase orders which referred to different standard terms.

[4]The Claimants’ claim in these proceedings is in large part for a refund of the price paid for televisions which were returned by their own customers and returned, in turn, to UMC. The Claimants also claim damages in respect of othertelevisions that were returned by their own customers and which were not returned to UMC but were subsequently repaired or refurbished by the Claimants for re-sale. The Claimants claim that they are entitled to a contractual refund or alternatively reimbursement by way of damages for breach of contract in respect of all such televisions. The total claim for a contractual refund is in the region of £1.5 million.

[5]UMC accepts that the applicable contractual terms provided for the Claimants to be granted a refund in respect of returned televisions and does not dispute that televisions were returned to it. However, it asserts that the initial returns by the customers were not made within the contractually prescribed period. As regards the smaller claim in respect of overhaul, UMC denies responsibility for making any reimbursement.

[6]The primary question on the present application is whether the English court has jurisdiction in respect of those claims. It is common ground that the Judgments Regulation (Council Regulation EC 44/2001) applies to that question. The Claimants rely: i) on express jurisdiction clauses contained within both the TTOPS manual (in respect of the First Agreement) and the Standard Purchase Terms (in respect of the Second Agreement) on which they claim that they are entitled to rely under Article 23 of the Judgments Regulation; ii) on the agreed fact that delivery of all Branded televisions (which the Claimants say were made under the Second Agreement) were made to the Second Claimant in England and that it is therefore entitled to rely on Article 5(1) of the Judgments Regulation; iii) in respect of the alternative claim for conversion, on the agreed fact that UMC collected in England all the televisions which were returned to it by Dixons and, if the Claimants are not entitled to any contractual credit in respect of those televisions (as UMC claims), UMC converted the televisions and thereby committed a tort within the jurisdiction for the purposes of Article 5(3) of the Judgments Regulation.

[7]The second question that arises on the application relates to various procedural objections raised by UMC in regard to the manner in which the proceedings were issued and served. It seems sensible to deal with the substantive jurisdiction issue first and then turn, if necessary, to the procedural objections.

Evidence

[8]There were a number of witness statements prepared by the parties. The witnesses were:- a) Mr. Aslan Khabliev, a director of UMC. b) Mr. Gary Pinson, sourcing director in the electrical department of DSG Sourcing in Hong Kong. c) Mr. Simon Roe, Managing Director of Sky Media UK, a subsidiary of UMC. All three of these witnesses produced two statements each. They were all highly argumentative and bore all the hallmarks of substantial input from lawyers. Accordingly, they were of somewhat limited value, the more since the trading history went back to 2005. In these circumstances it is necessary to have close regard to the documentary material.

[9]There was of course no dispute about the relevant legal principles. UMC was entitled to be sued in Slovakia unless one of the exceptions to Article 2 of the Regulation was applicable. In this regard the standard of proof is that of a good arguable case in the sense that the claimants must show that they have much the better of the argument on the material presently available: Bols Distilleries v. Superior Yacht Services

[2006] UKPC 45

First Agreement

[10]Accordingly I turn to the alleged first agreement. The starting point here is the TTOPS manual issued in December 2004. This was countersigned by UMC in July 2005. It is the Claimants’ case that this covered all OEM products purchased by them, including the OEM TVs the subject of the present proceedings. If such be well founded, it is accepted that it contained an exclusive English jurisdiction clause.

[11]UMC accept that such an agreement was indeed executed but contends: i) The TTOPS agreement was entered into with another Dixon’s Company, namely OmniSource Limited. ii) It related solely to the sale of OEM Optical Discs. iii) No OEM TVs were sold until 3 years later by which time a new version of the TTOPS agreement had been prepared which was never signed by UMC. iv) In any event, the jurisdiction clause only applies to a discrete section solely relating to what was termed “Timely Delivery Incentive”.

[12]The TTOPS manual is a vast document which was revised from time to time. The edition signed by UMC in July 2005 was Version 7. Version 8 emerged in December 2005 and Version 9 in February 2009. It was entitled an “Omni Source” document. As regards potentially relevant corporate entities, it appears that Omni Source Asia was incorporated in 1996 and changed its name to DSG International Sourcing (the First Claimant) in September 2004. Omni Source UK had meanwhile been incorporated in 2004. This company never traded and was dissolved in 2007. All suppliers of OEM products in fact contracted with Omni Source Asia/DSG Sourcing. Indeed, UMC duly provided a “vendor profile” in regard to Omni Source Asia in July 2005.

[13]There is nothing in the contemporary material in 2005 to suggest that TTOPS agreement only covered optical discs. Indeed, in the acknowledgment to the terms in July 2005, the form executed by UMC expressly covered “deliveries of products ordered by Omni Source Limited”. The manual was divided into a large number of parts or sections, with numerous appendices. Notably Section 6 made provision for evaluation of audio and video products which included as specified in Appendix D disc players, cassette recorders, radios, amplifiers, TVs, and so on.

[14]The important sections for present purposes are Sections 1 and 2. Section 1 was entitled “Purchase Agreement Summary”. It defined the buyer as “Omni Source Asia Limited” to be referred to as “Omni Source” or “Buyer”. The content of the “Agreement” set out the terms and conditions supplementary to the conditions on “the reverse side of our Purchase Order”.

[15]Delivery provisions were set out in clause 7:

“7. Delivery Upon mutual agreement of shipment date, endorsed on the order, between “the Supplier” and “Omni Source” that shipment date becomes binding. If “the supplier” subsequently fails to meet that date (given that “Omni Source” has met with all pre-agreed requirements). Penalty clauses, as laid out in Section 2 will apply.”

Clause 22 provided that the terms and conditions were to be construed in accordance with English law. Upon mutual agreement of shipment date, endorsed on the order, between “the Supplier” and “Omni Source” that shipment date becomes binding. If “the supplier” subsequently fails to meet that date (given that “Omni Source” has met with all pre-agreed requirements). Penalty clauses, as laid out in Section 2 will apply.”

[16]Section 2 was entitled “Timely Delivery Incentive”. Clause 1 provided that deliveries were to be made “in accordance with the date and time scales set out in the supplied purchase order.” Clause 4 was a law and jurisdiction clause:

“This Agreement shall be governed in accordance with English law and the parties submit to the exclusive jurisdiction of the English Courts.”

There was some dispute as to the scope of the jurisdiction clause. UMC were justified in directing attention to the unusual arrangement whereby Section 1 had an English law clause, whilst section 2 had both an English law clause and an English jurisdiction clause.

[17]As regards this last point, it is sufficient to note: a) The TTOPS manual was regularly revised and thus inconsistency in drafting would not be unexpected. b) The jurisdiction clause expressly extends to the “Agreement”: this on the face of it is the contract concluded with the acceptance of each purchase order. c) Indeed, it is difficult to see how claims based on delivery under the Agreement could be subject to differing provisions as to jurisdiction.

[18]There was no discussion regarding the purchase of OEM TVs until a meeting between Mr. Khabliev and Mr. Pinson on 19 October 2007. By March 2008, a new version (Version 8) of TTOPS was sent to Mr. Roe. He responded by asking for a signed copy of the previous version. A copy of the signature sheet was duly forwarded. Mr. Roe then explained that he needed help in getting the 26 attachments to the e-mail forwarding Version 8 in the correct order whereafter he would “get authorisation to sign it”. Although Mr. Roe stated in his e-mail of 14 April 2008 he was expecting to get the new version signed the following week, in the event the new version was not in fact signed before the trading relationship ended in 2009.

[19]Against this background, some points are worth emphasizing: a) No suggestion was made that deliveries of OEM TVs were subject to execution of the new version of TTOPS. b) Although some three years old, there was no suggestion that Version 7 as executed was not applicable to the new orders. c) UMC was not putting forward any competing terms of business.

[20]I conclude that the Claimants have very much the better of the argument that the sale of OEM TVs was effected under the terms of TTOPS, being an agreement between the same parties and in respect of which there was consensus that an exclusive English jurisdiction clause applied.

Second Agreement

[21]It is the Claimants’ case that the Second Agreement relating to Branded TVs was entered into early in January 2007 in the form of an umbrella contract which incorporated DSG Retail’s Trading Terms. Prior to that date it would appear that Branded TVs were being supplied simply on the basis of individual purchase orders. UMC contends that there was no change to that arrangement in 2007 and the proposed umbrella contract was never entered into.

[22]There were a number of versions of the suggested umbrella contract. The essential format was as follows:- “Dear Mr Roe Re: DSG Retail Limited – Mixed Electrical Division Confirmation of Trading Terms I am writing to you to confirm that we have agreed that you will supply the following Goods to us, as and when we place orders with you: Small Screen Television The Contract for those supplies is as set out in our Standard Terms and Conditions of Purchase (“Purchase Terms”). A copy is attached. Our Purchase Terms define certain words and expressions. If I use any of those words and expressions in this letter, they have the same meaning. Through individual negotiations with you, we have also agreed the following commercial terms and conditions in relation to the above Goods (“Trading Terms”) to apply for the period 29 March 2007 to 3 May 2008, which are hereby incorporated into the Contract. If there is any conflict between these Trading Terms and our Purchase Terms, these Trading Terms will take precedence…. Re: DSG Retail Limited – Mixed Electrical Division Confirmation of Trading Terms

Small Screen Television

[23]It concluded:

“Please sign the enclosed duplicate copy of this letter where indicated and return it to me to record your agreement to its contents. Alternatively, if you accept an order after you receive this letter, that will constitute agreement.”

There is some dispute as to whether a copy of the Purchase Terms was in fact attached to the letter. However, it is not in issue that the letter was duly received and no request was forthcoming for production of any missing attachment. I conclude that it is probable that they were duly furnished.

[24]The Claimants contended that Mr. Roe agreed to these terms and indeed that a copy was countersigned by Mr Khabliev. Although the signed copy was not produced it has to be said that Mr Khabliev’s denial of its existence was unconvincing. His initial evidence on this topic was remarkably tentative, only to be strengthened in his second statement. On the material available, there is strong support for the conclusion that the terms were duly signed on 3 April 2007. In any event, it difficult to challenge the assertion that orders were duly placed pursuant to it.

[25]So far as material, the Purchase Terms read as :

“These terms and conditions of purchase (“these Purchase Terms”) govern all purchases of goods and/or services (“Goods”) that We make from You. “We” means DSG Retail…. 2. Our Contract with You 2.1 Our contract with You consists of :- • these Purchase Terms; • any Trading Terms that We agree with You from time to time; • the details specified in Orders accepted by You; • any additional terms attached to or expressly incorporated by these Purchase Terms; and • any additional terms that We specify in writing in relation to an Order that You subsequently accept (together “the Contract”). If there is a conflict between any of these, they will prevail over one another in the order listed above, with the exception that any Trading Terms which expressly state that they will prevail in the event of a conflict with these Purchase Terms will so prevail….. 9.1 Invoices must be submitted and will be processed in accordance with Our Merchandise Supplier Payment Guide. In particular, unless there is express written agreement between You and Us to the contrary, or unless Our Merchandise Supplier Payment Guide states otherwise:- • invoices must be submitted by EDI on, or within 10 Working Days after, the date of delivery; and • once verified by Us, will be paid by BACS within 60 days from the end of the month in which the Goods are received (if ordered by Our Computing and Communications division) or within 60 days of receipt of invoice (if ordered by Our Mixed Electricals or any other division) We may require a discount in return for earlier payment terms. Different payment terms may apply for any Goods You agree to deliver outside the UK or Ireland….. 23. Law and Jurisdiction The Contract and all matters arising from it are governed by English law (without regard to (a) conflict of law principles and (b) the applicability, if any, of the United Nations Convention on Contracts for the International Sale of Goods) and are subject to the non-exclusive jurisdiction of the courts of England and Wales. You hereby waive all and any rights You may have under the law of any jurisdiction to have the Contract written in any language other than English.” • these Purchase Terms; • any Trading Terms that We agree with You from time to time; • the details specified in Orders accepted by You; • any additional terms attached to or expressly incorporated by these Purchase Terms; and • any additional terms that We specify in writing in relation to an Order that You subsequently accept (together “the Contract”). If there is a conflict between any of these, they will prevail over one another in the order listed above, with the exception that any Trading Terms which expressly state that they will prevail in the event of a conflict with these Purchase Terms will so prevail….. • invoices must be submitted by EDI on, or within 10 Working Days after, the date of delivery; and • once verified by Us, will be paid by BACS within 60 days from the end of the month in which the Goods are received (if ordered by Our Computing and Communications division) or within 60 days of receipt of invoice (if ordered by Our Mixed Electricals or any other division) We may require a discount in return for earlier payment terms. Different payment terms may apply for any Goods You agree to deliver outside the UK or Ireland….. The Contract and all matters arising from it are governed by English law (without regard to (a) conflict of law principles and (b) the applicability, if any, of the United Nations Convention on Contracts for the International Sale of Goods) and are subject to the non-exclusive jurisdiction of the courts of England and Wales. You hereby waive all and any rights You may have under the law of any jurisdiction to have the Contract written in any language other than English.”

[26]It would appear that by January 2008 UMC were anxious to obtain written confirmation of an agreed amendment affording 90 day payment terms. In his e-mail of 10 January 2008 Mr. Roe stated:

“Gary, because we never actually received revised terms for 90 days signed by Dixons, UMC did not change the payment terms to 90 days from 60 days. Therefore we need the attached printing/print name and sign etc/faxing to me (and include the date when it changed)…”

Attached was a draft letter to UMC’s factor which recorded the change of payment terms from 60 to 90 days with the relevant date to be filled in.

[27]In the result, Mr. Pinson faxed a further copy of the 3 April letter (albeit undated) under DSG Retail’s letterhead and signed by Mr. Pinson. This contained a further provision amending the payment provision to 90 days (which may in fact have been included in the earlier version). The first invoice based on 90 days was duly issued on 24 January 2008.

[28]I conclude that the claimants have very much the better of the argument that the Branded TVs were sold under the terms of this umbrella agreement which contained a non-exclusive jurisdiction clause.

Article 5

[29]These conclusions make it unnecessary to deal with the alternative bases for jurisdiction relied upon by the Claimants. However I did not understand it to be controversial that the Branded TVs were delivered by UMC in England and that, subject to the procedural issues, jurisdiction was established in that respect. In contrast, as regards the claim in conversion, whilst this on one view fell within the terms of Article 5(3), UMC contended that the claim being “related to a contract” fell exclusively within the scope of Article 5(1) and could not be advanced as a claim in the alternative to the Claimants’ primary case

Procedural objection

[30]The procedural objection taken by UMC centres on the rules for service of a claim form without leave of the court under CPR Part 6.33(2) including in particular the notice of statement of grounds required by CPR Part 6.34. It is accepted that jurisdictional issues are governed by EC Council Regulation 44, Slovakia having acceded to membership of the EU on 1 May 2004. As noted earlier, the Claimants sought to establish jurisdiction under Article 23 and/or Article 5 of the Regulation.

[31]The notice prescribed by CPR Part 6.34 is in Form N510. The Form requires a claimant to tick one of a series boxes “as to your statement of why the claim form can be served out of the jurisdiction without the permission of the Court…”. The options provided include one specific to Article 23 and another suitable for reliance on Article 5. However neither was adopted.

[32]The claimant did file an edited version of Form N510 but “ticked” an inapposite box in that it asserted jurisdiction not under the Regulation at all but under the CivilJurisdiction and Judgment Act 1982 without specifying any relevant article. However this approach was wholly mistaken since the Brussels Convention on which the Act is based now only applies to the French Overseas Territories and the Dutch territory of Aruba.

[33]Put at its highest, Form N510 can be treated as a nullity. In those circumstances, the claim form can only be served either if an appropriate notice is duly filed or the court gives permission to serve nonetheless. No revised notice has been filed. Accordingly, the claim form can only be served with the leave of the court: CPR Part 6.34(2)(6). UMC, as I understand it, accept that such a discretion is available. However, it is submitted that exercise of that discretion is not permissible where a claimant, as here, not only failed to disclose the basis of invoking jurisdiction but has in fact approached the issue of jurisdiction under a complete misconception.

[34]As for disclosure, I do not regard the Claimants’ failure to spell out the basis for invoking jurisdiction in the claim form or the particulars of claim as itself a procedural mistake. There is no such provision in the rules: indeed the requirement for furnishing a notice is the only express obligation. It is itself devoid of any requirement as to further particularity.

[35]UMC relied in this respect on a section of the judgment in The Wadi Sudr

[2009] 1 Lloyd’s Reports 666

dealing with the question of indemnity costs where it had been held the court had no jurisdiction under the Regulation. One reason for awarding indemnity costs was that the claimant’s solicitors lacked of any grounds for believing that the Court had jurisdiction:

“(vi) It is very important in cases said to fall under the Regulation, where this court takes jurisdiction on the basis of a statement in a claim form pursuant (now) to CPR 6.33, and accordingly there is no requirement for the court’s leave to serve the proceedings out of the jurisdiction, that solicitors issuing proceedings take particular care to ensure that they have a reasonable basis for their belief, and that the facts supporting it are stated in a transparent fashion in the claim form.”

This observation does not import, in my judgment, the requirement for a claimant to set out in the claim form itself the specific Articles in the Regulation relied upon and the basis for invoking them.

[36]It is fair to say that the Claimants’ approach to jurisdiction was thoroughly confused. The contracts relied upon in the Particulars of Claim were said to contain an English law clause but no reference was made to any English jurisdiction clause. In his First Statement in support of his application to strike out the claim for want of jurisdiction, Mr. Khabliev drew attention to the uncertainty of the situation albeit he correctly recognised that Article 5 and Article 23 might be pertinent.

[37]In his response, Mr. Pinson made reference to the exclusive jurisdiction clause in the First Agreement and the non-exclusive jurisdiction clause in the Second Agreement and the resulting applicability of Article 23. He also went on, however, to refer to Article 5(1) of the Regulation on the basis that there was an obligation to make a payment in England. This in turn involved a misconception as to the terms of Article 5(1) which had been amended from the equivalent provision in the Brussels Convention as regards sale of goods so that the place of performance is prescribed as the place of delivery and not the place of payment. This was of some significance in regard to the OEM TVs which were sold ex-works in Slovakia.

[38]Despite the defective terms of N510, I am not persuaded that the claimants are unable to rely on the relevant provisions of the Regulation: a) The Regulation is the successor to the Brussels Convention. b) The terms of the Regulation (save as regards part of Article 5) are in all material respects the same as the Brussels Convention. c) In particular, the basis of jurisdiction afforded by Article 23 is the same. d) UMC has sustained no prejudice (other than potential costs’ implications) by reason of the mistaken form: indeed UMC’s complaint was only raised for the first time in their skeleton argument for the hearing. e) The court is afforded a discretion to permit service even in the absence of Form N510. In my judgment, the overriding objective of the Rules taken with case management powers set out in CPR Part 3 leads inexorably to the view that UMC’s challenge on this ground must fail.