Commercial Marine Piling Ltd v Pierse Contracting Ltd [2009] EWHC 2241 (TCC)

[2009] EWHC 2241 (TCC)Case No HT-09-193
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 11/09/2009
Before
THE HON.MR.JUSTICE RAMSEY
Between
COMMERCIAL MARINE PILING LIMITEDClaimantPIERSE CONTRACTING LIMITEDDefendant
Simon Lofthouse QC (instructed by Speechly Bircham LLP) for ClaimantAlexander Robson (instructed by Hill Dickinson) for Defendant
Judgment
[1]This is an application by which the Defendant Irish Company, Pierse Contracting Limited (“Pierse Ireland”), challenges the jurisdiction of these courts in relation to a claim brought by the Claimant, Commercial Marine & Piling Limited (“CMP”), in relation to a guarantee.

Background

[2]In February 2007, Pierse Contracting Limited (“Pierse UK”), an English company with the same name as the Defendant Irish company, was retained as main contractor by Belfast Harbour Commissioners to construct a new ferry terminal in the Port of Belfast. The project included piling work.[3]Pierse UK instructed CMP to submit a quotation for the piling work which CMP subsequently provided. Following discussions Pierse commenced piling work in March 2007.[4]By letter dated 20 March 2007 Pierse Ireland provided CMP with a “Parent Company Guarantee” (“the Guarantee”) signed by Mr Fearghal O’Nolan, the finance director of Pierse Ireland. The Guarantee was in the following terms:
“In consideration of Commercial Marine & Piling Limited undertaking to trade with Pierse Contracting Limited (UK), we, Pierse Contracting Limited hereby guarantee to pay such money as may be due to Commercial Marine & Piling Limited from Pierse Contracting Limited (UK) if there should by [sic] any default by Pierse Contracting Limited (UK) in payment of such money to Commercial Marine & Piling Limited.”
[5]A dispute arose between Pierse UK and CMP over the balance of sums due to CMP for the piling work. On 30 October 2008 CMP commenced proceedings (“the first action”) in the Technology and Construction Court against Pierse UK claiming a sum of £759,554 on a quantum meruit on the basis that there was no concluded sub-contract; alternatively £937,270.03 if there was a sub-contract.[6]Also on 30 October 2008 Campbell Hooper, CMP’s solicitors at the time, sent a letter to Pierse Ireland enclosing a copy of the claim in the first action. They referred to the Guarantee and put Pierse Ireland on notice that if Pierse UK failed to satisfy any sums due to CMP, CMP would look to Pierse Ireland to fulfil their obligations to CMP.[7]In the first action directions were given on 19 December 2008 leading to a trial date in November 2009. Pleadings were exchanged but on 13 May 2009 CMP was informed that the directors of Pierse UK had decided to take steps to place the company into creditors’ voluntary liquidation. In due course, Pierse UK failed to comply with an Unless Order in the first action and by Order dated 17 July 2009 Pierse UK’s defence and counterclaim was struck out and judgment was entered against them for £862,005.43.[8]In the meantime on 30 April 2009 Campbell Hooper wrote to Pierse Ireland noting that Pierse UK’s Solicitors had come off the record. They said that, given the current situation, CMP intended to call on the Guarantee and that they were preparing to issue legal proceedings against Pierse Ireland:
“for the purpose of 1) determining your liability for the unpaid sum of £759,554, plus statutory interest; and 2) an order for a declaration by the High Court that under the above guarantee, you will be required to pay such sum.”
[9]They asked Pierse Ireland to inform them whether they would be instructing solicitors “in this jurisdiction”, that is England and Wales, to accept service of the proposed proceedings.[10]There was no response and on 11 May 2009 Campbell Hooper wrote again to Pierse Ireland saying that they had instructions to issue proceedings and asked whether Pierse Ireland had instructed lawyers to accept service.[11]On 15 May 2009 A&L Goodbody, Irish Solicitors, wrote to Campbell Hooper and asked them to provide details regarding the alleged default of payment by Pierse UK. They confirmed they had authority to accept Irish High Court proceedings under the Guarantee.[12]On 21 May 2009 Campbell Hooper issued the Claim Form against Pierse Ireland in these proceedings in the Technology and Construction Court (“the second action”) in which they sought sums due under the Guarantee. The Claim Form was served on Pierse Ireland and by application dated 26 June 2009 Pierse Ireland sought a declaration that the Courts of England and Wales do not have jurisdiction to hear the claim in the second action.

The Application

[13]On this application Alexander Robson, on behalf of Pierse Ireland, submitted that this court does not have jurisdiction and that:(1) The presumption under Article 1 of Council Regulation 44/2001 (“the Jurisdiction Regulation”) is that persons domiciled in a Member State shall, whatever their nationality, be sued in the Courts of that Member State. In this case the presumption was that Pierse Ireland would be sued in Ireland.(2) Article 5(1) of the Jurisdiction Regulation, relied upon by CMP, provided that in matters relating to a contract, a person may be sued in the place of performance of the obligation in question, this not being a contract for the sale of goods or provision of services.(3) The “obligation in question” is the obligation on Pierse Ireland to pay CMP under the Guarantee and the place of performance of that obligation is to be decided in accordance with the law governing that obligation according to the conflict of law rules of the court seized, that is this court.(4) The proper law had to be determined by the Contracts (Applicable Law) Act 1990, enacting the Rome Convention which provides at Article 4(1) that the contract shall be governed by the law of the country with which it is most closely connected.(5) Under Article 4(2) there is a presumption that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract of the contract has its central administration. For Pierse Ireland that is Ireland as the characteristic performance is that of the guarantor under a guarantee and Pierse Ireland’s central administration is in Dublin. The proper law is therefore Irish law.(6) Under Irish Law there is authority for the place of performance being the creditor’s location in relation to a contract for the sale of goods: Unidare plc and Unidare Cables Ltd v. James Scott [1991] IR 88. In this case it is submitted that the place of performance of the obligation under the Guarantee is Ireland.(7) Accordingly, under the relevant applicable Irish law the place of performance is Ireland so that under Arts 1 and 5(1) of the Jurisdiction regulation, the place where Pierse Ireland may be sued is Ireland.[14]In response Mr Simon Lofthouse QC, on behalf of CMP, submitted that(1) Under Article 5(1)(a) of the Jurisdiction Regulation Pierse Ireland may be sued in England and Wales because that is the “place of performance of the obligation in question”.(2) The Guarantee included two obligations: an obligation on CMP to trade with Pierse UK and an obligation on Pierse Ireland to pay monies that may be due in default of payment by Pierse UK.(3) The former obligation has no connection with Ireland and was to be performed in England.(4) The place of performance of the second obligation was also in England. Under English law he referred to The Eider [1893] P119 at 136; Agnew v Länsförsäkringsbolagens AB [1990] SLT 584 and Dicey & Morris on the Conflicts of Laws(14th edition) at 11-203.(5) That under Irish law the position was the same as set out in the Unidare case and there was no need therefore to decide whether English or Irish law applied.(6) To the extent that it was necessary to decide whether English or Irish law applied, English Law applied because under Article 4(5) the presumption relied on by Mr Robson under Article 4(2) was to be disregarded “if it appears from the circumstances as a whole that the contract is more closely connected with another country” and in this case the contract was more closely connected with England and he relied on Samcrete Egypt Engineers and Contractors SAE v. Land Rover Exports Ltd [2001] EWCA Civ 2019.[15]In reply, Mr Robson referred to the decision by Peter Leaver QC in Britten Norman Ltd v. State Ownership Fund of Romania (6 July 2000) in which he had to decide the place of performance of a guarantee and held that the liability was to make payment at the place where the demand was made and where the liability crystallised, and that the demand was made to the bank in England.[16]In relation to the application of Article 4(5) of Schedule 1 to the Contracts (Applicable Law) Act 1990, I was also referred to the decision of the Court of Appeal in Ennstone Building Products Ltd v Stanger Ltd [2002] EWCA Civ 916.[17]I now turn to consider those arguments.

The Jurisdiction Regulation

[18]Article 2 of the Jurisdiction Regulation provides “subject to this regulation, that persons domiciled in a Member State shall, whatever their nationality, be sued in the Courts of that Member State.” Applying the provisions of Article 60 to the domicile of Pierse Ireland this would mean that Pierse Ireland was to be sued in Ireland.[19]Article 5(1)(a) of that regulation also provides that “A person domiciled in a Member state may in another Member state, be sued … in matters relating to a contract, in the Courts for the place of performance of the obligation in question.”[20]In this case there is a contract in the form of the Guarantee so that Pierse Ireland can be sued in the Court for the place of performance of the obligation in question. What is that place of performance?[21]The place of performance of the obligation in question is to be decided in accordance with the law governing that obligation according to the conflict of laws rule of the court seized: see Industrie Tessili Italiana v Dunlop AG (Case 12/76) [1976] ECR 1473.[22]The law governing an obligation is to be determined under the Contracts (Applicable Law) Act 1990 (“the 1990 Act”) which gives effect to the Rome Convention. The Convention provides at Article 4(1) that the law applicable to a contract shall be governed by the law of the country with which it is most closely connected. The question in this case is whether the Guarantee is to be governed by Article 4(2) which gives rise to a presumption or whether Art 4(5) applies because “it appears from the circumstances as a whole that the contract is more closely connected with another country”, so that the presumption is the Article 4(2) is to be disregarded.[23]The presumption is that “the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, his habitual residence, or, in the case of a body corporate or unincorporate its central administration. As set out in the Giuliano Lagarde Report on the Convention at p 20-21, to which the Court is directed by s.3(3)(a) of the 1990 Act, it is provided that: “For each category of contract it is the characteristic performance that is in principle the relevant factor is applying the presumption for determining the applicable law, even in situations peculiar to certain contracts, as for example in the contract of guarantee where the characteristic performance is always that of the guarantor, whether in relation to the principal debtor or the creditor”.[24]As Potter LJ said in Samcrete v Land Rover at [88]:
“Under a contract of guarantee, there is no room for doubt that the obligation characteristic of the performance is the payment of money by the guarantor….”
[25]Therefore, in this case, the performance which is characteristic of the contract is the performance of Pierse Ireland as Guarantor and at the time of the contract, I accept that Pierse Ireland had its central administration in Dublin, Ireland[26]As a result, if the presumption were to apply, I accept Pierse Ireland’s submission that Irish Law would be the applicable law to determine the place of performance of the obligation to pay under the Guarantee.[27]Is this a case where under Article 4(5) the circumstances as a whole show that the contract is more closely connected with another country?[28]In relation to a guarantee the Court of Appeal considered this question in Samcrete v Land Rover where the guarantee was in this form:
“In consideration of your continuing to supply our subsidiary, the Distributor, with Land Rover Group products, we, Samcrete… do hereby guarantee without set off or counterclaim the payment on demand of all sums not paid on due date by Samcrete in respect of invoices raised on Samcrete with regard to the purchase of Rover Group products under any agreement from time to time in force between Rover Group Limited, or any of its associated companies including [Land Rover] and [Samcrete] for the supply of the products.”
[29]Potter LJ said at [37]:
“The approach of the English courts to the application of Article 4 has been essentially a two stage process i.e first to identify the characteristic performance of the contract and the country of the party who is to effect it and then to ascertain what factors, if any might, should lead the court to disregard the presumption under 4(5), the burden of proof in that respect lying upon the party who asserts that the presumption in Article 4(2) should be disregarded: see the Credit Lyonnais case and Bank of Baroda v Vysya Bank Limited [1994] 2 Lloyds Law Rep 87, in which (at p.93) Mance J quoted and applied the comment in Dicey & Morris (12th Ed) at pp 1137-1138: ‘Inevitably the solution of individual cases will depend on the facts, but in principle it is submitted that the presumption may be most easily rebutted in those cases where the place of performance differs from the place of business of the party whose performance is characteristic of the contract.’ ” ‘Inevitably the solution of individual cases will depend on the facts, but in principle it is submitted that the presumption may be most easily rebutted in those cases where the place of performance differs from the place of business of the party whose performance is characteristic of the contract.’ ”
[30]At [41] he added:
“While a straight reading of the words of Article 4 renders the presumption ‘formally very weak’ (per Hobhouse LJ in the Credit Lyonnais case at p.5), unless Article 4(2) is regarded as a rule of thumb which requires a preponderance of contrary connecting factors to be established before that presumption can be disregarded, the intention of the Convention is likely to be subverted. At the same time, as the Guiliano and Lagarde Report appears to acknowledge at p.22, because the overall rule is intended to apply across a wide range of types of contract, it is essential to leave a measure of discretion to the court to be exercised on a basis which takes into account the nature and circumstances of the particular contract in question. To date, the high point of the jurisprudence justifying the decisive application of the presumption in all but the most exceptional of cases is Societé Nouvelle des Papétieries de l’Aa in which the court stated: ‘… it follows both from the wording and the structure of art 4, as well as from the uniformity in the application of the law which has been intended with the Convention, that this exception to the main rule has to be applied restrictively, to the effect that the main rule should be disregarded only if, in the special circumstances of the case, the place of business of the party who is to effect the characteristic performance has no real significance as a connecting factor.’ ” ‘… it follows both from the wording and the structure of art 4, as well as from the uniformity in the application of the law which has been intended with the Convention, that this exception to the main rule has to be applied restrictively, to the effect that the main rule should be disregarded only if, in the special circumstances of the case, the place of business of the party who is to effect the characteristic performance has no real significance as a connecting factor.’ ”
[31]At [47] to [49] Potter LJ identified the factors which he considered were of relevance to the question under Art 4(5). He said: “47. The facts identified by the judge which appear to me to be of greater significance in connecting the contract with England are that the obligation of payment under the guarantee was to be performed in England so that any breach of the guarantee by failure to pay in accordance with a valid demand would similarly take place in England and there give rise to the cause of action under the guarantee. It has been argued by Mr Tolley that, in an international trading contract of this kind, the place of payment is a technical accounting matter rather than one of commercial significance. Nonetheless, from the point of view of the enforcement of the guarantee, it is a matter of considerable importance to the creditor.[48]In addition, although this matter was not the subject of argument before the judge, it seems to me pertinent to have regard to the consideration stated in the guarantee namely the obligation of Land Rover to continue to supply Rover Group products to Samcrete under the distributorship agreement. Reference to the agreement for the purpose of elucidating the place for performance of that obligation shows that such supply was ‘delivery ex UK works’ and payable in Sterling unless otherwise specified by Land Rover. Thus, not only was Samcrete’s obligation that of payment in England under the guarantee without set off or counterclaim, but Land Rover’s obligation to supply the product for which payment was to be made was similarly to be performed in England. Accordingly, if looked at autonomously, what might be called the centre of gravity of the guarantee was located squarely in England.[49]In those circumstances, it seems to me that, viewing the contract of guarantee autonomously and without regard to the provisions of the underlying contract save for the purpose of identifying the location of Land Rover’s obligations under the guarantee, there is sufficient material before the court to justify disregard of the Article 4(2) presumption. It is therefore not necessary to decide whether and to what extent the existence of a choice of law clause in a contract the subject of a guarantee, if ineffective to give rise to a tacit choice of law under Article 3 in respect of the guarantee itself, may nonetheless, be regarded as a connecting factor in the sense required by Article 4….”[32]As a result in Samcrete v Land Rover it was held that in respect of the guarantee in that case, the presumptions contained in Art 4(2) should be disregarded pursuant to the proviso in Art 4(5).[33]In the present case, as in Samcrete v Land Rover I consider that relevant considerations are the place of payment under the Guarantee and the place of performance of CMP’s obligation.[34]Under the Guarantee there is no express statement as to where Pierse Ireland’s contractual obligation to make payment is to be performed. However, for reasons set out in more detail below, I consider that payment was to be made in England. In addition CMP’s obligation under the Guarantee was to trade with Pierse UK and that would generally be under contracts or other arrangements made in England.[35]The relationship under the Guarantee had, in my judgment, a geographical centre of gravity in England. The only connection with Ireland was that it was an Irish Company which was providing the Guarantee but it was doing so in relation to the English company. This is a case which has certain similarities with the facts in Samcrete v Land Rover. It is one in which, to use the words of Keene, LJ in Ennstone v Stanger at [41]the presumption must be taken to apply “except where the evidence clearly shows that the contract is more closely connected with another country” or as was said in Societé Nouvelle des Papétieries de l’Aathe presumption should be disregarded only if “the place of business of the party who is to effect the characteristic performance has no real significance as a connecting factor. ”. I consider that both those tests are satisfied in this case and justify the presumption being disregarded.[36]In the circumstances I have come to the conclusion that this is a case where the presumption under Art 4(2) is displaced because, viewing matters as a whole, the Guarantee is more closely concerned with England.[37]I therefore find that English Law is the applicable law under the 1990 Act.

The Place of Performance under English Law

[38]There was no statement in the Guarantee of where payment had to be made. In such a case the general rule in English law is that set out by Bowen LJ in The Eider (1893) P 119 at 136-127:
“The general rule is that where no place of payment is specified, either expressly, or by implication, the debtor must seek his creditor.”
[39]In Agnew v Länsförsäkringsbolagens AB [2001] 1 AC 223 at 250 dealing with the obligation to make payment under a guarantee, Lord Hope of Craighead said this:
“As for article 5(1), if the initial question as to whether the claim is a matter “relating to a contract” is answered in the affirmative, a second requirement must then be satisfied. The place of performance of “the obligation in question” must be identified. … In Bank of Scotland v Seitz [1990] SLT 584 , on the other hand, it was the second requirement only that was in issue. The claim was brought for payment under two letters of guarantee. No express provision had been made in the letters of guarantee as to the place where any payments due under them was to be made. There was no dispute that the claim raised "matters relating to a contract", nor was it disputed that the obligation to make payment was an "obligation" within the meaning of article 5(1). The dispute was as to whether the place of performance of that obligation was in Scotland. In Industrie Tessili Italiana Como v Dunlop AG (Case 12/76) [1976] ECR 1473, 1485, paras 13-14 the Court of Justice stated that the place of performance was to be determined by national law. So the Court of Session applied the legal implication under the law of Scotland that the debtor was bound to tender payment to his creditor at the creditor's residence or place of business.”
[40]In Bank of Scotland v Seitz the Court of Session applied that legal implication on the basis that the general rule in English law which derived from The Eider and other authorities was the same as in Scots law.[41]However in Britten Norman the judge held that the principle in The Eider did not apply to the guarantee which had no place of payment. Under the guarantee in that case the bank agreed to pay the guaranteed sum on the defendant’s first written demand. It was submitted that the demand had to be made to the bank in England, the address of which was given on the letter of guarantee and that the payment had to be made by an English bank under a contract governed by English law with the English courts having jurisdiction. In analysing the position the Judge said:
“Until a demand was made, Barclays was under no actual liability to SOF. Its liability was only a potential liability. When the demand was made, in conformity the terms of the Letter of Guarantee, Barclay’s potential liability crystallised into an actual liability. That Liability, absent any contractual terms as to the place of payment, was to make payment at the place where the demand was made and where the liability crystallised. The fact that SOF, in its demand, requested that payment should be made into a stipulated account at a Romanian Bank was simply an administrative, or mechanical, request, and not a contractual requirement. It would have been perfectly possible for SOF to have stipulated for payment in Romania but it did not do so. While it is true that, in English law, a debtor is under an obligation to seek out his creditor in order to make payment of his debt, so that Barclays was under an obligation to seek out SOF, that obligation has little to do with the place of payment under a document such as the Letter of Guarantee. In my judgment, therefore, Miss Andrews’s submission is correct, and the place of payment under the Letter of Guarantee was England.”
[42]In Britten Norman there was the need for a demand which the judge said had crystallised the bank’s liability and required payment to be made where the demand was made and where the liability crystallised. In Samcrete v Land Rover the report does not make it clear whether there was an express provision as to the place of payment. There is a statement that the place of payment was England: see the citation from the judgment at first instance at [16] and [17] of the judgment of Potter LJ at [47]. The terms of the guarantee cited at [8] contain no express place of payment. If there was no express provision for payment in Samcrete v Land Rover then the decision in Britten Norman would be inconsistent with the later Court of Appeal decision as both cases had express provisions for a demand.[43]In Bank of Scotland v Seitz the guarantee was in terms that guaranteed “full and final payment on demand of all sums and obligations due and to become due…”. It was therefore a Scottish case where a demand was necessary and where, relying on the English law principle in The Eider it was held that payment under the guarantee had to be made at the creditor’s place of business. As stated above, that decision was referred to in Agnew and is cited in Dicey & Morris at para 11-203 and footnote 38 alongside the citation of the general rule in The Eider.[44]In the present case the obligation on Pierse Ireland is to guarantee to pay such sum of money as may be due to CMP from Pierse UK. That obligation to pay is, in my judgment, one which is not dependant on a demand but merely on the default of Pierse UK. The general rule under The Eider, in the absence of any provision as to payment, would be that the payment should be made to CMP in England. In my judgment, particularly in the absence of any provision for a demand under the Guarantee, I should follow the reasoning in Bank of Scotland v Seitz which, I consider, is consistent with general principles of English Law derived from The Eider.[45]Accordingly in this case I find that the obligation to make payment under English law is an obligation to make payment in England.[46]If, however, I had decided that Irish law applied then the only authority to which I was referred was to the Unidare case. That was a case regarding payment in the context of sale of goods. At 92, Finlay CJ said that “payment in respect of the goods fell to be performed where he creditor was, namely Ireland”. That, in my judgment, indicates that under Irish law similar principles to those in The Eider apply to the question of the place of payment and, for the reasons set out above, I consider that such principles in the absence of any other authority in Irish law, would control the place of payment under the Guarantees which, in this case would be payment to CMP in England.

Conclusion

[47]It follows from the above analysis that, in my judgment, the place of performance of Pierse Ireland’s obligations under the Guarantee is in England. That applies, whether, as I have held, the Guarantee is governed by English Law, or even if this is governed by Irish law.[48]As a result the place of performance of the obligation in question in the Guarantee is England and under Art 5(1)(a) of the Jurisdiction Regulation Pierse Ireland domiciled in Ireland, may be sued in England.[49]Accordingly Pierse Ireland’s application for a declaration that this court does not have jurisdiction is dismissed.

Cited in 3 later judgments