Claim form - Service - Service out of the jurisdiction
SSL International plc and another v TTK LIG Ltd and others: Court of Appeal, Civil Division (Lords Justice Mummery, Arden and Stanley Burnton): 19 October 2011
The first defendant (TTK) was an Indian joint venture company in which the first claimant (SSL), through a subsidiary (New Bridge), and the third to sixth defendants were shareholders, SSL and those defendants being equal shareholders. The joint venture agreements provided that the joint venture was to be governed by Indian law. TTK was a manufacturer of condoms and was the principal supplier of the same for the claimants.
It was incorporated in India and its manufacturing plants were based there. It had been formed as a joint venture for the manufacture and distribution of condoms in India. The two claimants were part of the same group of companies (RBG). SSL marketed and manufactured condoms, including those under the Durex brand, while the second claimant (LRC) owned the various trademarks. TTK supplied 50% of the worldwide supply of condoms sold by SSL. Of TTK’s operating profit, 80% came from RBG.
In the United Kingdom, SSL had an 83.4% share of the market. LRC was also the company used for transfer pricing, namely, it was invoiced by and paid TTK for the supply of condoms. Under the terms of the joint venture, each side had the right to appoint four nominee directors to the board of TTK. There were controls as to the sort of decision that could and could not be taken without the consent of the joint venture participants. Major decisions required the consent of both sides to the joint venture. TTK distributed condoms in India under a distribution agreement which ended in June 2011.
RBG considered its arrangements and proposed the non-renewal of the distribution agreement with its substitution by new arrangements. The Indian directors were not in favour of the proposals and called a board meeting to take place in India. That was not convenient for two of the claimants’ nominated directors. The claimants proposed that those two directors would cease to be directors and would be substituted by two others nominated by them.
Resignation documents were submitted in respect of the outgoing directors. RBG expected that two new directors would be appointed in accordance with the joint venture arrangements. The resignations were accepted. However, the two new nominees were not voted in. The Indian side of the joint venture voted in two new directors of their own choosing. Although a breach of the joint venture arrangements, it was effective under Indian company law.
With control of TTK, the Indian directors required new arrangements with the claimants, including a new five-year agreement under which TTK would continue to supply. They proposed a large increase in the sums payable to them along with guaranteed minimum purchase requirements. To strengthen their bargaining position, TTK stopped delivering condoms to SSL. SSL did not approve of the amended terms but made an offer, which essentially accepted those terms, and required an immediate resumption of supplies. Despite the acceptance of their proposals, TTK did not resume supplies. Proceedings were commenced in India before the Company Law Board (CLB). Interim orders were made in the CLB proceedings. Those included that there be a resumption in the supply of condoms on the new terms.
Further, New Bridge gave an undertaking as to minimum volumes for a period of three months. TTK did not comply with those orders although they continued to manufacture condoms. Consequently, there was serious disruption to the supply to the claimants and stocks of some products ran out. The TTK supply could not, in the short term, be replaced. The claimants sought injunctive relief against TTK based on breach of contract, that relief being effectively specific performance of what the claimants alleged were supply contracts.
They further claimed damages for breach of contract against TTK and damages against all of the defendants for a range of economic torts, in particular procuring a breach of contract and conspiracy. The day on which the claimants issued their claim form they also issued an application for urgent injunctive relief, including an order requiring TTK to make deliveries to SSL.
The application sought permission to serve all of the defendants out of the jurisdiction. Before the matter came before the court, the claimants served the claim form personally on one of the TTK directors who had been appointed by the claimants, purportedly in accordance with CPR 6.5(3)(b). The application came before the court. The judge accepted, albeit reluctantly, that there had been good service of the claim. However, he refused both injunctive relief and permission to serve the defendants, other than TTK, out of the jurisdiction on the ground that India was the natural and proper place to resolve the claim. TTK failed to file an acknowledgement of service in respect of the personal service upon its director. The claimants issued an application for judgment in default. The application was dismissed.
The judge did not decide whether or not injunctive relief could be granted, but he considered that he was being asked to review the earlier judgment and that it would be wrong for him to sit, effectively, as an appeal judge. The claimants appealed both judgments.
(1) The principal issues on the appeal against refusal of the claimant's application for judgment in default were: (i) whether CPR 6.5(3)(b) permitted service on 'a person holding a senior position within [a] company or corporation' where the company or corporation did not carry on business and was not present within the jurisdiction; if not, (ii) whether TTK had carried on business within the jurisdiction when the proceedings were served; and (iii) where the answer to both questions was in the negative, whether TTK had waived the defect in service.
(2) The principal issues on the appeal against refusal of injunctive relief and permission to serve out of the jurisdiction were: (i) whether the judge had erred in rejecting the claimants' case that the contracts between TTK and SSL were on SSL's standard terms, which included an express choice of English law; (ii) whether the judge had erred in refusing permission to serve the claim form on the defendants out of the jurisdiction; and (iii) if the judge had erred in refusing to grant an interim injunction requiring TTK to deliver up to the claimants the condoms manufactured by it pursuant to the orders submitted by the claimants that it had accepted.
Consideration was given to article 23.1(b) of Council Regulation (EC) 44/2001 (on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters) (the Judgments Regulation), Council Regulation (EC) 591/2008 (on the law applicable to contractual obligations) (Rome I) and section 52 of the Sale of Goods Act 1979. The appeal would be dismissed.
(1) It was implicit in CPR 6.5(3)(b) that it applied to companies within the jurisdiction, that was, carrying on business within the jurisdiction. 'A company or corporation' within that rule meant a company or corporation within the jurisdiction. It was not applicable to a company that was not carrying on business within the jurisdiction (see [63] of the judgment).
There was no good reason to have excluded application of the principle established in The Theodohos in respect of RSC Order 65 rule 3 from the application of the materially identical provision in CPR 6.5(3)(b). For the courts in the instant jurisdiction to exercise their jurisdiction on a person or company that owed no allegiance to the country and was not present in it in any meaningful sense was not to be lightly assumed.
A company served under CPR 6.5(3)(b) had, if it were to avoid default judgment, to incur the burden of coming to the country to apply for the proceedings to be stayed, even if the claim had no connection with the country at all. It was no answer that an individual who had no connection with the jurisdiction might be personally served if he was in the country temporarily. If a director of a foreign company which did not carry on business were to pass through England or Wales, the company was not based in that jurisdiction.
Where a claim had any real connection with the jurisdiction, permission to serve out of the jurisdiction could be sought and would be granted. There was, therefore, no need or rationale for CPR 6.5(3)(b) to apply to foreign companies that had no presence within the jurisdiction (see [49], [56], [58]-[59] of the judgment).
Kuwait Airways Corpn v Iraqi Airways Co [1995] 3 All ER 694 distinguished; Chellaram v Chellaram (No 2) [2002] 3 All ER 17 explained; Okura & Co Ltd v Forsbacka Jernverks Aktiebolag [1914] 1 KB 715 applied; Theodohos, The [1977] 2 Lloyd's Rep 428 applied; Afro Continental Nigeria Ltd v Meridian Shipping Co SA, The Vrontados [1982] 2 Lloyd's Rep 241 applied; Adams v Cape Industries plc [1991] 1 All ER 929 applied; Rolph v Zolan [1993] 4 All ER 202 applied; City & Country Properties Ltd v Kamali [2006] EWCA Civ 1879 applied; Atlantic Star, The, Motor Vessel Atlantic Star (Owners) v Motor Vessel Bona Spes (Owners) [1973] 2 All ER 175 considered.
(2) TTK had not carried on business within the instant jurisdiction at the time when it was purportedly served with the claim form. Consequently, it had not been duly served within the jurisdiction. The holding of occasional board meetings in the jurisdiction did not satisfy the requirement of carrying on business here. In any event, the joint venture had broken down before the claim form had been served and it was obvious that there was no present prospect of future board meetings being held here. That was emphasised by the fact that the claimants alleged that TTK was liable in damages as a co-conspirator of the other defendants. That conclusion was fortified by the fact that the claimants had sought permission to serve out of the jurisdiction (see [66]-[68] of the judgment). Adams v Cape Industries plc [1991] 1 All ER 929 applied.
(3) On the facts of the instant case, there was no basis for holding that TTK had waived any right to assert that it had not been validly served. The claimants had not been entitled to judgment against TTK in default of its filing an acknowledgement of service (see [70]-[71] of the judgment).
(4) The judge at first instance had been correct to find that, on the evidence, there had been no incorporation of the SSL terms and conditions in the contracts for sale of condoms by TTK. There was no documentary evidence consistent with the claimants' assertion. It was not at all odd that contracts between a company and a joint venture company that it treated as a subsidiary, as TTK was by SSL, should not have been the subject of any formal terms and conditions, let alone terms and conditions the wording of which was designed for contracts with third parties.
There was no sufficient basis on the evidence before the court to establish any relevant agreement either in writing or in any other form which included the SSL terms and conditions for the purposes of article 23.1(b) of the Judgments Regulation and no basis for attributing to TTK any acceptance of or agreement to those terms and conditions. Consequently, there was no good arguable case that the contracts with TTK were governed by English law or that TTK agreed to the jurisdiction of the courts of England and Wales. Further, the proper law of the contracts was Indian law pursuant to article 4.1(a) of Rome I (see [74], [76]-[77], [80], [82] of the judgment). Powell Duffryn plc v Petereit: C-214/89 [1992] ECR I-1745 considered.
(5) The judge had been correct to refuse to grant interim injunctive relief. The court was not satisfied that the evidence showed that the condoms that would be subject to an order for specific delivery were ascertained goods. The claimants could not identify which of the manufactured condoms related to which of the four orders that had been placed with TTK, nor could they say whether the condoms that had been manufactured included condoms that had not been the subject of any contract.
There was no evidence that all of the condoms in the possession of TTK were contract goods. The instant case was not one in which one could simply specify the goods to be delivered and make an order that TTK give possession of them to the claimants as it was not known whether they were in a deliverable state.
Furthermore, the claimants had not been able to state which condoms manufactured by TTK were in which of its factories. In addition, the claimants were unable to identify the documents that had to be provided or obtained by TTK in order for the condoms that had been ordered to be lawfully exported from India. Any order made by the court would have had to have been in general terms.
The difficulties that would have been experienced as a consequence of the lack of and failure to identify the documents meant that any order made by the court would have required an unacceptable degree of supervision in a foreign land. Furthermore, the matter was already before the CLB in India and that was a reason to refuse relief so as not to interfere in those proceedings (see [88]-[96] of the judgment). Wait, Re [1926] All ER Rep 433 applied.
Decision of Mann J [2011] All ER (D) 232 (Jun) affirmed. Decision of Peter Smith J [2011] EWHC 2045 (Ch) Affirmed.
Thomas de la Mare and James Segan (instructed by Jones Day) for the claimants; The defendants did not appear and were not represented.
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