Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2013] CSOH 37
PD903/11	OPINION OF LORD UIST in the cause MARY ADAMSON LORIMER STEWART AND OTHERS Pursuers; against (FIRST) TRAFALGAR HOUSE STEAMSHIP COMPANY LIMITED and BRUCE ALEXANDER MACKAY and DAVID PAUL HUDSON the Liquidators thereof; and (SECOND) BRITISH INDIA STEAM NAVIGATION COMPANY LIMITED Defenders: ________________

Pursuers: A C Forsyth; HBM Sayers (for Charles Hennessy & Co, Solicitors, Glasgow)

Defenders: N McKenzie; Brodies LLP

5 March 2013

The issue

[1] X (consisting of three pursuers) bring an action of damages in the Court of Session in respect of a death caused by mesothelioma against three limited companies, A, B and C. A is domiciled in Scotland. B and C are domiciled in England. Jurisdiction is founded on the domicile of A and the fact that the claims against A, B and C are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments arising from separate proceedings (Regulation (EC) 44/2001, Article 6.1 and the Civil Jurisdiction and Judgments Act 1982, schedule 4, para 5). X subsequently abandon their claim against A and wish to continue the action against B and C. Does the court in these circumstances have jurisdiction in the action against B and C? That is the question which arises for determination in this case.

Procedural history

[2] The three pursuers raised the present action initially against a company known as D P & L Group Limited (D P & L) as first defenders and the two present defenders jointly and severally on 21 April 2011. The pursuers are members of the family of the late James Mailer Stewart, who died of mesothelioma on 25 April 2008. They averred that he contracted mesothelioma as a result of negligent exposure to asbestos while in the employment of each of the three defenders in the merchant navy. They subsequently discovered that D P & L were not the correct company to sue and that the company which should have been sued had been dissolved in 1989 and not restored to the Companies Register. They therefore abandoned their claim against D P & L, who were assoilzied by interlocutor of 11 January 2012. The remaining defenders have now taken a plea to the jurisdiction of the court.

The relevant statutory provisions

[3] Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters ("the Regulation") provides in article 2.1 that, subject to the Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State. Article 6.1 provides that a person domiciled in a Member State may also be sued, where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings. The Regulation applies in civil and commercial matters whatever the nature of the court or tribunal (article 1.1) and is binding and directly applicable (recital 6).

[4] Part II of the Civil Jurisdiction and Judgments Act 1982 deals with jurisdiction (and recognition and enforcement of judgments) within the United Kingdom. Section 16, which deals with allocation within the United Kingdom in certain civil proceedings, provides:

"(1) The provisions set out in Schedule 4 (which contains a modified version of Chapter II of the Regulation) shall have effect for determining, for each part of the United Kingdom, whether the courts of law of that part, or any particular court of law in that part, have or has jurisdiction in proceedings where -

(a) the subject-matter of the proceedings is within the scope of the Regulation as determined by article 1 of the Regulation (whether or not the Regulation has effect in relation to the proceedings); and

(b) the defendant or defender is domiciled in the United Kingdom or the proceedings are of a kind mentioned in article 22 of the Regulation (exclusive jurisdiction regardless of domicile)."

Section 20 deals with the rules as to jurisdiction in Scotland and provides:

"(1) Subject to the Regulation, to Parts I and II and to the following provisions of this Part, Schedule 8 has effect to determine in what circumstances a person may be sued in civil proceedings in the Court of Session or a sheriff court."

Schedule 4 to the Act provides rules for the allocation of jurisdiction within the United Kingdom. Para 5(a) provides:

"A person domiciled in a part of the United Kingdom may, in another part of the United Kingdom, also be sued where he is one of a number of defendants, in the courts for the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings."

Para 2(o)(i) of Schedule 8 repeats the substance of para 5(a) of Schedule 4.

Submission for the defenders

[5] The broad proposition for the defenders was that the pursuers, in order to bring themselves within article 6.1 of the Regulation, had to satisfy the requirement that the claims were so closely connected that it was expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings. Article 6.1 could not apply where the claim against the purported "anchor defenders" (D P & L) was an impossible one. The claim against D P & L was not closely connected to the claim against the defenders because (even on the pursuers' own pleadings) the former was impossible, having been directed against the wrong party. There was a fundamental distinction between, on the one hand, the court being seised of an action and, on the other hand, the court having jurisdiction to deal with the case. D P & L had been sued in error. The company which should have been sued no longer existed when the action was raised, so there was no actual risk of irreconcilable judgments. As D P & L had never employed the deceased recovery against them was impossible. It was a fundamental misconception to equate the court being seised of an action with the court having jurisdiction to hear the action. The provisions of the Regulation had to be interpreted independently by reference to their scheme and purpose: the general principle was that it was the courts of the Member State in which a defender was domiciled which had jurisdiction over him. It was only by way of derogation from that principle that the Regulation provided special rules of jurisdiction, which were exhaustively listed. These special rules required to be strictly interpreted, and it was for the national courts to interpret them having regard to the principle of legal certainty and so that a normally well-informed defender could reasonably foresee in which courts he might be sued. While bad faith was not an issue in the present case, it was for the court to examine whether Article 6.1 was being misused. It was accepted that the application of Article 6.1, and thus para 5(a) of Schedule 4 to the 1982 Act, was not dependent on domestic rules. It was also accepted that jurisdiction did not depend on a material examination of the substance of the case. The risk to be avoided under Article 6.1 was that of irreconcilable judgments, which would not promote legal certainty. Nonetheless, the court required to be satisfied that the risk of irreconcilable judgments was actually present when the action was raised or subsequently. Taking a broad common sense approach in this case, there had never been any risk of irreconcilable judgments where D P & L had been sued in error, the correct party which should have been sued in their place no longer existed and the only two defenders in existence were domiciled in England. In these circumstances there was no basis for an exception to the general rule that jurisdiction was based on the defenders' domicile, which resulted in only the English courts having jurisdiction against the two defenders in this case.

[6] The submission for the defenders then turned to examine the reported cases bearing on the issue.

[7] In Kalfelis v Bankhaus Schroder [1988] ECR 5565 the Fifth Chamber of the European Court of Justice (ECJ) held that for Article 6.1 to apply a connection must exist between the various actions brought by the same plaintiff against different defendants and that that connection, whose nature had to be determined independently, had to be of such a kind that that it was expedient to hear the actions together in order to avoid the risk of irreconcilable judgments resulting from separate proceedings. In its judgment the court stated as follows:

"8. The principle laid down in the Convention is that jurisdiction is vested in the courts of the State of the defendant's domicile and that the jurisdiction provided for in article 6.1 is an exception to that principle. It follows that an exception of that kind must be treated in such a manner that there is no possibility of the very existence of that principle being called in question.

12. The rule laid down in article 6.1 therefore applies where the actions brought against the various defendants are related when the proceedings are instituted, that is to say, where it is expedient to hear and determine them together in order to avoid the risk of irreconcilable judgments resulting from separate proceedings. It is for the national court to verify in each individual case whether that condition is satisfied.

13. It must therefore be stated ... that for article 6.1 of the Regulation to apply there must exist between various actions brought by the same plaintiff against different defendants a connection of such a kind that it is expedient to determine those actions together in order to avoid the risk of irreconcilable judgments resulting from separate proceedings."

[8] Reisch Montage AG v Kiesel Baumaschinen Handels GmbH [2007] I L Pr 10 dealt with how the Regulation should be interpreted and affirmed the approach taken in Kalfelis (paras 21-27). Since the factual context was different from that of the present case it would be unhelpful to read the decision as directly applicable to the present case, in which the action was brought against D P & L on the basis of an error of fact and it would never have been possible for the pursuers to succeed against the true employer of the deceased at the material time. There was a particular misuse of the Regulation in this case because the pursuers had no cause of action against any party domiciled in Scotland at the time the action was raised.

[9] In Compagnie Commercial Andre SA v Artibell Shipping Co Ltd 1999 SLT 1051 Lord Macfadyen dealt with the question of the risk of irreconcilable judgments between p 1057G and p 1058K. He stated at p 1058E "that in most cases the presence or absence of the risk of irreconcilable judgements will be obvious". As the present action was live only against two defenders domiciled in England there was no risk of irreconcilable judgments. That was something which could be discovered only now, but the risk was not present and never had been.

[10] In Painer v Standard Verlags GmbH [2012] ECDR 6 the Third Chamber of the ECJ affirmed (at pps 104-5, paras 72-84) the approach taken in Reisch Montage.

[11] In FKI Engineering Ltd v Stribog Ltd [2011] 1 WLR 3264 Rix LJ stated at p 3295D, para 128, that "the claimant has to find a court with jurisdiction sanctioned by the legislation, without which he cannot get to first base". The pursuers in the present action had failed to get past first base because they had not found a court with jurisdiction sanctioned by the Regulation, the exception in Article 6.1 therefore could not apply and the action should be dismissed for want of jurisdiction.

Submission for the pursuers

[11] The broad proposition on behalf of the pursuers was that the jurisdiction of the Court of Session had been established when the action had been raised and that that jurisdiction remained. It was accepted that there was now no risk of irreconcilable judgments, but there had been a genuine basis for jurisdiction when the action had been raised. Jurisdiction fell to be determined at the time when the action was raised, and only then. For example, if the action in so far as directed against D P & L had been dismissed as irrelevant after debate, the court would not then have considered anew the issue of jurisdiction against the remaining defenders. Jurisdiction had always to be determined at the time of the raising of the action: otherwise the system would be unworkable.

[12] In MacDonald v FIFA 1999 SLT 1129 it was held by the then temporary judge, founding on Kalfelis, that the appropriate time to test jurisdiction was at the raising of the action. At p 1130D-E he quoted a passage from p 5570 in Kalfelis in the following terms:

"... the parties, the various governments and the Commission all agree ... that the rules of jurisdiction should be considered with reference to the position when the matter was brought before the Landgericht ... so that the outcome of the various claims made ... at each stage of the procedure is irrelevant to the application of the rules on jurisdiction."

The temporary judge went on at p 1130H-I to state:

"I hold that I ought to decide the issue of jurisdiction when the action was raised and free from any further procedural steps which may arise after that."

That decision was a fairly clear application of what was stated in para 12 of the judgment in Kalfelis.

[13] In Freeport plc v Arnoldsson [2008] QB 634 the Third Chamber of the ECJ answered a question referred to it by stating in its judgement at p 658D-E, para 54, as follows:

"In those circumstances, the answer to the question referred must be that article 6.1 of Regulation No 44/2001 applies where claims brought against different defendants are connected when the proceedings are instituted, that is to say, where it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings, without there being any further need to establish separately that the claims were not brought with the sole object of ousting the jurisdiction of the courts of the member state where one of the defendants is domiciled."

[14] In Reisch Montage the Second Chamber of the ECJ stated at para 33 of its judgment:

"Article 6.1 of Regulation 44/2001 must be interpreted as meaning that ... that provision may be relied on in the context of an action brought in a Member State against a defendant domiciled in that state and a co-defendant domiciled in another Member State even when that action is regarded under a national provision as inadmissible from the time it is brought in relation to the first defendant."

It was clear from that passage that there was no distinction to be drawn between the court being seised of an action and having jurisdiction to try the action. In that case, as in the present case, the action against the first defender as pleaded could never have succeeded: there were unfinished bankruptcy proceedings against him, which meant that under Austrian law the action against him could never have been competently raised and was always bound to fail. The effect of the ECJ judgment on the present case was that it was irrelevant whether with hindsight the pursuers could ever have succeeded in the case which they pleaded against D P & L, who were genuinely taken to be the correct company to sue as defenders, under the correct designation. The only relevant consideration was whether the terms of Article 6.1 were satisfied as at the raising of the action, taking the averments in the summons pro veritate. Once jurisdiction had been established on the basis of Article 6.1 taking the averments pro veritate at the commencement of proceedings it could not be elided by the later departure of D P & L from the action for whatever reason, whether that be by the fact that it was never competent to sue them, or by dismissal through irrelevancy following debate, or dismissal following a preliminary proof on time-bar, or through abandonment by the pursuers after discovery by them during the proceedings that there were no prospects of success against those defenders, or as in the present circumstances. Once jurisdiction was established in the court first seised of the proceedings it was retained thereafter. The continuance of jurisdiction in Scotland in this case was not compromised by the subsequent absence of D P & L from the proceedings. Such an approach was consistent with European decisions where there was a loss during the action of the original basis of jurisdiction.

[15] In Staubitz-Schreiber [2006] I L Pr 30 the Grand Chamber of the ECJ held that there was no transfer from the original court if a debtor's assets in insolvency proceedings were transferred to another jurisdiction during the action, jurisdiction having been established in the original court at the commencement of proceedings. The court stated at para 29 of its judgment that Article 3.1 of the EC Insolvency Proceedings Regulation "must be interpreted as meaning that the court of the Member State within the territory of which the centre of the debtor's main interests is situated at the time when the debtor lodges the request to open insolvency proceedings retains jurisdiction to open those proceedings if the debtor moves the centre of his main interests to the territory of another Member State after lodging the request but before the proceedings are opened".

[16] In Re Jurisdiction based on the Domicile of the Defendant [2012] I L Pr 12 the German Federal Supreme Court held that the principle of German procedural law under Article 261.3 of the Code of Civil Procedure, to the effect that the jurisdiction of a court, once established, was maintained even if the circumstances which justified the initial assumption of jurisdiction ceased to apply during the course of the litigation (perpetuatio fori), was applicable to international jurisdiction as well, and in particular to the jurisdiction established under Article 2.1 of the Brussels I Regulation. It held (at para 26) that the Appeal Court was correct to accept that international jurisdiction, once established, did not cease to operate subsequently because the defendant moved back to France during the litigation and (at para 27) that the principle of German procedural law to the effect that the jurisdiction of a court, once established, is maintained even if the circumstances which justified the initial assumption of jurisdiction cease to apply during the course of the litigation is considered by the vast majority of courts and academics to be applicable to international jurisdiction as well. At para 29 it stated:

"In line with the jurisprudence of the ECJ, it is to be assumed that the principle applies in relation to Community law provisions on jurisdiction if their objectives of foreseeability, efficiency and legal certainty would otherwise - i.e. in the case of a change of jurisdiction from the court first seised to a court in another Member State - be defeated."

[17] In the recent case of Sibir Energy Ltd v Tchigirinski [2012] I L Pr 52 in the English Commercial Court the law on Article 6.1 was conveniently summarised by Judge Mackie QC. He concluded as follows at para 27:

"From Kalfelis onwards the Court repeats regularly that 6.1 cannot be applied to allow an applicant to claim against a number of defendants with the sole object of ousting one defendant's domicile. That risk is however seen to be avoided by ensuring that the irreconcilability test is met - this is implicit in Kalfelis and Reisch and explicit in Freeport and also in the Advocate General's Opinion in Painer. The starkness of the proposition is illustrated by Reisch, a decision I find difficult to follow unless looked at in a very narrow sense, where the Court permitted article 6.1 to be invoked against the foreign defendant even though the case could not proceed against the anchor defendant - a situation in which there could be no possibility whatsoever of irreconcilable judgments."

At para 31 he went on to say that the court must be able to refuse an application which otherwise meets the requirements of Article 6.1 if there is clear evidence of collusion or abuse.

Discussion

[18] It was never disputed that, assuming that the pursuers had sued the correct party instead of D P & L, the claims against the three defenders would have been so closely connected that it was expedient to hear and determine them together to avoid the risk of irreconcilable judgments. The action is one based on joint and several liability against three successive employers (or their successors) of the deceased for causing his mesothelioma and in these circumstances the claims are self-evidently so closely connected that it is expedient to hear and determine them together in order to avoid the risk of irreconcilable judgments resulting from separate proceedings. The only basis for challenging the applicability of Article 6.1 to the present action was that it could not apply when the claim against D P & L was impossible from the time of the raising of the action, with the consequence that there never was any risk of irreconcilable judgments.

[19] I have no difficulty in reaching the conclusion that the submission for the defenders is an erroneous one. At its heart was the proposition that there was a fundamental distinction between the court being seised of an action and the court having jurisdiction to deal with the case. No authority was referred to which supports such a distinction and I think that is because no such authority exists. In my opinion the fact that the claim against D P & L could never have succeeded is irrelevant to the question of jurisdiction. Such a view is supported by the decisions in Kalfelis, MacDonald v FIFA, Reisch Montage, Staubitz-Schreiber, Freeport plc v Arnoldsson and Re Jurisdiction based on the Domicile of the Defendant. These decisions clearly lay down that jurisdiction is established on the basis of the pleadings in the case at the time that the action is raised, and not at any later time. Moreover, once jurisdiction is established it cannot be lost, whatever may happen in the action. That is known as the principle of perpetuatio fori. It would be quite impracticable for the court to monitor or keep under review the question of jurisdiction throughout the course of an action. It is well established that a plea of no jurisdiction is one which must be taken in limine. The pleadings in this case averred jurisdiction against D P & L. There is no suggestion that the relevant averments were made in bad faith or based on collusion: it is plain that they were made on the basis of a genuine misapprehension on the part of the pursuers. That being so, the court had jurisdiction when the action was raised and that jurisdiction remains although the action was subsequently abandoned against D P & L.

Decision

[24] I shall repel the defenders' plea of no jurisdiction.