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	England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> London Helicopters Ltd v Heliportugal LDA-INAC [2006] EWHC 108 (QB) (09 February 2006) URL: http://www.bailii.org/ew/cases/EWHC/QB/2006/108.html Cite as: [2006] EWHC 108 (QB), [2006] ILPr 28, [2006] 1 CLC 297, [2006] 1 All ER (Comm) 595

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IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		9 February 2006

Mr Justice Simon:

1. This is an application by the Defendant for an order that the Claimant's claim be set aside and/or that the action be stayed.

Background

2. In this action the Claimant (London Helicopters Ltd) seeks to recover damages for negligent misstatement. The relevant statements are said to have been made in a JAA Form One Authorised Release Certificate issued in Portugal and signed on the Defendant's behalf on 3 May 2000 ("the Certificate").
3. The JAA was the acronym for the Joint Aviation Authority which had worked out cooperative arrangements to develop and implement joint aviation requirements (JARs) in the field of aircraft safety. The JAA Form One Certificate was part of a common airworthiness system which was accepted throughout Europe under Council Regulation 3922/91. Maintenance work carried out on an aircraft in one EU Country was recognised in all other EU Countries. The JAA established a common standard and certification system, including JAR 145, with which all maintenance companies had to comply if their work was to be accepted. I use the past tense because, since the events giving rise to this claim, the JAA has been replaced by the European Aviation Safety Agency and the relevant regulations have been subsumed into a new regulatory regime.
4. The facts, in so far as they are established at this stage, are relatively straightforward.
5. The Defendant is a Portuguese Company which carries out aircraft engine maintenance work. It carried out work on a second-hand helicopter engine (serial number CAE833549) and issued the Certificate in respect of such work. The Claimant's case is that the Certificate contained the following statements:

i) The engine was serviceable.

ii) Although it had not tested the engine, the Defendant had carried out work on the engine in accordance with Rolls Royce Alison 10W2 Operations and Maintenance Manual Revision 3 ("the Manual").

iii) The work, save insofar as it had been carried out in accordance with the Manual, had otherwise been carried out in accordance with JAR 145.

iv) In respect of the work carried out by the Defendant, the Engine was considered ready for release for service

6. The Certificate related to the Defendant's sale of the engine under a contract dated 26 April 2000 to an English buyer, Heli Logistics UK. The terms of this contract included an obligation to provide a JAA Form One Certificate and delivery of the engine in England. Heli Logistics UK on-sold the engine to a company named Helicopter Support Ltd, who sold it to the Claimant. The Claimant in turn on-sold it to another English company, Newton Aviation Ltd ("Newton"). In each case the Certificate accompanied the engine.
7. Newton claimed that the engine was neither of satisfactory quality nor reasonably fit for its purpose. It claimed that it was entitled to reject the engine after 4 occasions when warning lights signified an engine defect. Newton began proceedings for breach of contract against the Claimant. The claim was eventually compromised on the terms of a Consent Order dated 13 January 2004.
8. The present claim is based on what are said to be negligent misstatements in the Certificate. In summary the Claimant contends that the statements were made negligently in that, at the time the certificate was issued there were faults and defects in the engine which caused further damage when the engine was operated. The Claimant also contends that, when buying the engine from Helicopter Support Ltd and selling it to Newton, it relied on the truth and accuracy of the Certificate; that it has suffered loss and damage as a consequence of relying on the Certificate. That loss includes the costs of supplying a substitute engine until the engine was repaired, the costs of repair and legal costs paid to both Newton and its own solicitors.
9. Underlying the Claimant's case is the plea in §14 of the Particulars of Claim, that the Certificate was issued under a system and in circumstances where any maintenance company would know that its certificate would be recognised and relied on internationally, and that the Certificate formed part of the maintenance record kept in relation to the engine.
10. The present proceedings were commenced on 9 August 2005. On 23 December the Defendant issued the present Application Form in which it challenged the jurisdiction of the English Court to hear and determine the dispute.

The applicable rules as to jurisdiction

11. Since the Defendant is domiciled in Portugal, the rules as to Jurisdiction are set out in Council Regulation 44/2001 dated 22 December 2000 ("the Regulation"). This provides as follows:

Section 1: General provisions

Article 2

1. Subject to this Regulation, persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State …

Article 3 1. Persons domiciled in a Member State may be sued in the courts of another Member State only by virtue of the rules set out in Sections 2 to 7 of this Chapter …

Section 2: Special Jurisdiction

Article 5 A person domiciled in a Member State may in another Member State, be sued: 1.(a) in matters relating to a contract, in the courts for the place of the obligation in question;

(b) for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be:

- in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered …

3. in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur; …

Article 6
A person domiciled in a Member State may also be sued:


1. where he is one of a number of defendants, in 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 …

12. Since the present claim is a claim in tort, it is common ground that Art 5(3) of the Regulation applies. That common ground is consonant with a number of decisions of the European Court of Justice. In the first of these, Kalfelis v. Bankhaus Shröder, Münchmeyer, Hengst & Co. (Case189/87) [1988] ECR 5565 ECJ §18, the Court of Justice stated that the words 'matters relating to tort, delict or quasi-delict' in Art.5(3)

… must be the regarded as an independent concept covering all actions which seek to establish the liability of a defendant and which are not related to a 'contract' within the meaning of Article 5(1).

13. Where Art.5(3) applies a Defendant may be sued in the courts for 'the place where the harmful event occurred'. The meaning of this phrase was considered by the Court of Justice in Handelskwekerij GJ Bier BV v. Mines de Potasse d'Alsace SA (Case 21/76) [1976] ECR 1735 (ECJ). In that case, a French industrial concern discharged chloride waste into the Rhine. Water from the river was used to irrigate a Dutch Market garden downstream, and the salinity of the water caused damage to the nursery. At §19 the Court stated:

Thus the meaning of the expression 'place where the harmful event occurred' in Article 5(3) must be established in such a way as to acknowledge that the plaintiff has an option to commence proceedings either at the place where the damage occurred or the place of the event giving rise to it.

The Court added at §25,

The result is that the defendant may be sued, at the option of the plaintiff, either in the courts for the place where the damage occurred or in the courts for the place of the event which gives rise to and is at the origin of that damage.

The parties' submissions

14. The grounds of application, elaborated in argument by Mr Barklem, were as follows.

i) The tort of negligent misstatement is a claim under English law. However, no claim in English Law can be made in the circumstances of this case. The governing law of the tort is not English Law, see Morin v. Bonhams & Brooks Ltd [2004] 1 Lloyds Rep 702 (CA); and, even if English Law is the governing law, on the facts of the present case, the claims would fail, see McNaughton Ltd v. Hicks Anderson & Co [1991] 2 QB 113 (CA) and Reeman & Reeman v. Dept of Transport [1997] 2 Lloyds Rep 674 (CA).

ii) Neither the place where the damage occurred nor the place of the event giving rise to the damage was England. In particular, (a) the fact that the Claimant suffered damage and was domiciled in England was not sufficient to establish that England was place where the damage occurred; and (b) the event which gave rise to the damage was the making of the misstatement and that occurred in Portugal and not England.

15. For the Claimant, Mr Dye, submitted:

i) Issues about applicable law and the ambit of the tort of negligent misstatement were matters which might arise in the course of the action if the English Court had jurisdiction, but were not relevant to the present application.

ii) England was the place both where the damage occurred and the place of the event which gave rise to the damage. In particular, (a) England was the only place in which the Claimant suffered loss and the nature of such loss was direct loss; and (b) the event which gave rise to damage was the receipt in England of the negligently produced certificates which the Claimant had relied on.

Conclusions

16. It is convenient to set out some preliminary observations on Art 5 which, in my view, should be borne in mind in any consideration of the matters in issue.

i) The rules on jurisdiction established in the Regulation, and previous embodiments, are to be given autonomous meaning. In other words jurisdictional questions are not to be answered by recourse to local law, but by the use of independent delocalised definitions as established by decisions of the Court of Justice, see Briggs, Civil Jurisdiction and Judgments 4^th Ed (2005) §2.02-4.

ii) This applies with particular force to Art.5(1) and (3), see Fonderie Officine Meccaniche Tacconi SpA v. Heinrich Wagner Sinto Maschinenfabrik GmbH

(Case C-334/00) [2002] ECR 1-7357 at §19

It should be observed at the outset that the Court has held … that the expressions 'matters relating to the contract' and 'matters relations to tort, delict or quasi-delict' in Articles 5(1) and (3) of the Brussels Convention are to be interpreted independently, having regard primarily to the objectives and general scheme of the Convention. Those expressions cannot therefore be taken simple references to the national law of one or the other of the Contracting States concerned.

iii) As is made clear by Art.3, the domiciliary rule in Art.2 is the general principle to be applied when determining jurisdiction. Since Art.5 derogates from this general principle any interpretation must be confined and be such as to enable a reasonably well-informed defendant reasonably to predict before which courts, other than those of his own domicile, he may be sued, see Dumez France v. Hessische Landesbank (Helaba) (Case C-220/88) [1990] ECR I-49 (ECJ) (see below); and Jacob Handte & Co GmbH v. Traitements Mécanochimiques des Surfaces SA (Case C-26/91) [1992] ECR 1 2719 (ECJ) §14 and 18, Marinari v. Lloyds Bank [1995] ECR 1-2719 ECJ at §13, and preamble

(11) of the Regulation.

iv) Despite the frequent observation that Art.5 is to be given a restrictive interpretation, the effect of the decision in the Bier case is clear: the 'jurisdictional generosity to the claimant inherent in the decision is and remains good law', see Briggs (op cit) §2.156.

The place where the damage occurred

17. In the Dumez France case (see above) a German Bank withdrew financial support from a German subsidiary of a French company. The withdrawal of support caused the failure of the German subsidiary; and the French parent company sued the German Bank in France arguing that it had a claim in delict for indirect financial loss and France was the place where the damage occurred. The European Court of Justice rejected the argument. It held that, so far as jurisdiction was concerned, the significant damage was the direct damage to the immediate victim of the withdrawal of support, the German subsidiary. This was so even if the indirect victim might have its own cause of action based on its own loss. The Court expressed itself as follows:

17 It is only by way of exception to the general rule whereby jurisdiction is attributed to the courts of the state of the defendant's domicile that Title II, Section 2, attributes special jurisdiction in certain cases, including the case envisaged by article 5(3) of the Convention. As the court has already held (Mines de Potasse d'Alsace, paragraphs 10 and 11), those cases of special jurisdiction, the choice of which is a matter for the plaintiff, are based on the existence of a particularly close connecting factor between the dispute and courts other than those of the state of the defendant's domicile, which justifies the attribution of jurisdiction to those courts for reasons relating to the sound administration of justice and the efficacious conduct of proceedings.

18 In order to meet that objective, which is of fundamental importance in a convention which has essentially to promote the recognition and enforcement of judgments in states other than those in which they were delivered, it is necessary to avoid the multiplication of courts of competent jurisdiction which would heighten the risk of irreconcilable decisions …

19 Furthermore, that objective militates against any interpretation of the Convention which, otherwise than in the cases expressly provided for, might lead to recognition of the jurisdiction of the courts of the plaintiff's domicile and would enable a plaintiff to determine the competent court by his choice of domicile.

20. It follows from the foregoing considerations that although, by virtue of a previous judgment of the court (in Mines de Potasse d'Alsace, cited above), the expression 'place where the harmful event occurred' contained in article 5(3) of the Convention may refer to the place where the damage occurred, the latter concept can be understood only as indicating the place where the event giving rise to the damage, and entailing tortuous, delictual or quasi-delictual liability, directly produced its harmful effects upon the person who is the immediate victim of that event.

18. In Marinari v. Lloyds Bank [1995] ECR 1-2719 the plaintiff deposited promissory notes in an envelope with the Defendant bank in England. The bank staff, after opening the envelope, refused to return the notes and informed the police of their existence. This led to the plaintiff's arrest and the sequestration of the promissory notes (which had a face value of US $752,500,000). The plaintiff sued in Italy for the value of the notes and the loss and damage consequent on his arrest. This damage was said to be diminution of the value of his estate or patrimony in Italy. The Court of Justice rejected this argument and concluded that Art.5(3) did not cover the place where the plaintiff claimed to have suffered financial damage following upon initial damage arising and suffered by him in another contracting state.
19. In reaching this conclusion the Court held (at §14) that the words 'place where the harmful event took place' in Art.5(3),

… cannot be construed so extensively as to encompass any place where the adverse consequences can be felt of an event which has already caused damage actually arising elsewhere.

15. Consequently, that term cannot be construed as including the place where … the victim claims to have suffered financial damage consequent upon the initial damage arising and suffered by him in another Contracting state.

20. The following points emerge from these cases.

i) In principle, on a given set of facts, the application of the first part of the jurisdictional rule in the Bier case ought to yield the same jurisdictional result wherever the claim is made.

ii) Consequently, the domestic court will not necessarily be assisted by a detailed analysis of the particular cause of action under the national law relied on.

iii) The place where the damage occurred (within the meaning of the first part of the jurisdictional rule in the Bier case) is not the place where a claimant simply suffers financial loss. It is necessary to see where the event giving rise to the damage produced its 'initial', 'direct', 'immediate' or 'physical' harmful effect. For example, in the Bier case, the direct loss was the application of saline waste to the nursery. In the Dumez France case (see §13 of the Judgment) the initial or direct damage was the withdrawal of support to the subsidiary. The harm to the plaintiffs in the Dumez France case was 'merely the indirect consequence of the financial losses initially suffered by their subsidiaries'. In the Marinari case it was the initial or direct act of interference with the notes.

iv) The domestic court should examine with particular care any assertion that the place where the damage occurred was the place where the claimant is domiciled.

21. Applying this approach, I would have found that the initial and direct damage occurred when the certificates were received and relied on by the Claimants in England. This was the place where significant damage was done to the immediate victim of the harmful act; and therefore the place where the damage occurred within the meaning of the first part of the jurisdictional rule in the Bier case. The claim was for more than the adverse consequences of an event which has already caused damage actually arising elsewhere; and the damage was neither indirect nor caused elsewhere. It would follow that England was the place where the event giving rise to liability directly produced its harmful effect on the person who was the victim of the event.
22. There is no English case directly in point; but I was referred to three first instance decisions involving jurisdictional issues relating to claims for negligent misstatement: Minster Investments Ltd v. Hyundai Precision & Industry Co Ltd [1988] 2 Ll. Rep 621 (Steyn J), Domicrest Ltd v. Swiss Bank Corpn [1999] QB 548 (Rix J) and Alfred Dunhill Ltd v. Diffusion Internationale de Maroquinerie de Prestige SARL and others [2002] 1 All ER (Comm) 950 (Mr Kenneth Roskison QC sitting as a Deputy Judge of the High Court).
23. In the Domicrest case it was alleged that a bank in Switzerland had made negligent representations as a result of which the English plaintiff released goods in Switzerland and Italy to another company without securing payment from its customer. When the bank failed to make the expected payment the plaintiff sued the bank in England. One of these claims was for negligent misstatement. The following points are of relevance to the present case.

i) Having reviewed the European Authorities, Rix J noted that there had been no case in which the European Court had considered a claim based on negligent misstatement. The Judge continued (at p.564G-565B)

It is of course of the nature of such a claim that the damage is likely to be pure economic loss, and that the effect of the misstatement upon the plaintiff, whether in terms of receiving and acting upon the misstatement or in terms of suffering the loss, is as likely as not to occur in the country from which the plaintiff operates; and that is so whether the misstatement is oral or in writing … It must therefore be a matter of concern that a rule in relation to negligent misstatement which emphasises where the misstatement is received and acted upon, or where the economic loss is finally felt, is a rule which over-favours the plaintiff's jurisdiction, contrary to the essential structure of the Convention expressed in Art.3, and contrary to the warnings expressed by the European Court in the citations above. Nevertheless, article 5(3) was of course intended to be an exception to article 2, and if such a rule is properly rooted within the language and rationale of that exception, then there can be no complaint

ii) The Judge referred to the earlier decision of Steyn J in the Minster case. That was a case in which the plaintiff, an English company, had agreed to purchase containers from a Korean company. A French Classification Society with an office in South Korea inspected the containers and issued certificates which certified compliance with the contract specification. The Korean company sent the certificates to England where they were received and read by the plaintiff. The plaintiff relied on the certificates by releasing payment in England. The containers were later rejected as unfit and the plaintiff sued the French Classification Society, which then challenged the Jurisdiction. The issue was whether the claim came within what was then s.5(3) of Schedule 1 of the Civil Jurisdiction and Judgments Act 1982 [now Art.5(3)]. Although Rix J (at p.566E) questioned Steyn J's reasoning in the Minster case, he agreed with the result:

… the place where the damage occurred appears in any event to have been England from where the price of the containers was released and where at that time the loss was felt.

In the event Rix J found in the Domicrest case that the place where damage occurred was Switzerland and Italy, where the goods had been released without payment.

24. In the Alfred Dunhill case, the claimant entered into contract with a French manufacturer for the supply of luxury goods to be supplied under the Dunhill label. The French manufacturer arranged for the third Defendant (Limonta) to supply fabric for the range. The claimant rejected the fabric and brought a claim against (among others) Limonta, alleging that misrepresentations had been made as to the fitness of the fabric for its purpose in the manufacture of luggage. Limonta challenged the jurisdiction of the English Court on the basis that the English Court was not the place where the harmful event occurred within the meaning of Art.5(3). On the question of where the damage occurred, the claimant argued that it had suffered damage when it had instructed the French Manufacturer to order the fabric from Limonta and that this occurred in England. The Deputy Judge rejected the claimant's arguments. He found on the facts that the damage did not occur, or manifest itself, until the sample of fabric was delivered in France and incorporated into the luggage, and that it was in France that the claimant began to suffer the financial loss which constituted its claim for damages.
25. In the Domicrest and Alfred Dunhill cases the Court found that neither parts of the jurisdictional test in the Bier case were satisfied, and that the claimants' invocation of the jurisdiction of the English Court failed. However there are observations in both cases which support the limited proposition that it is quite likely that in a case of negligent misstatement the damage will occur at the place where the misstatement is received and relied upon. Furthermore these observations were made largely without reference to particular national rules relating to the establishment of tortious liability, and by reference to the autonomous approach established by the European Court of Justice, see for example the Alfred Dunhill case at p.961e-g.
26. It follows that these cases provide broad support for the conclusion that I had reached without reference to English authority.
27. I therefore find that the Claimant has established, for the purposes of establishing jurisdiction, that the place where the damage occurred was England. The certificate was received and relied upon in England. The Claimant accepted the engine and acquired it in England from Helicopter Support Ltd when it would not otherwise have done so, and sustained loss and incurred expense in England when it was sued by Newton in England.

The place of the event which gives rise to and is at the origin of that damage

28. In view of the conclusion that I have reached on the place where the damage occurred, I can state my conclusions on this issue shortly.
29. In my view the decisions of the European Court of Justice strongly support the proposition that, in the case of a misstatement made in (or put into circulation in) country A and relied on in Country B, the place of the event giving rise to the damage is country A.
30. This was also the view of Rix J in the Domicrest case, see p567H-568C.

… it seems to me that the place where the harmful event giving rise to the damage occurs in a case of negligent mis-statement is, by analogy with the tort of defamation, where the misstatement originates. It is there that the negligence, even if not every element of the tort is likely to take place; and for that and other reasons the place from which the mis-statement is put into circulation is as good a place in which to found jurisdiction as the place where the mis-statement is acted on, even if receipt and reliance are essential parts of the tort … To prefer receipt and reliance as epitomising the harmful event giving rise to the damage in the case of negligent misstatement is, I think, to ignore the fact that the plaintiff also has the option of suing in the courts of the place where the damage occurs – which is quite likely to be at the place of receipt and reliance.

31. The reference to the tort of defamation was a reference to the decision of the Court of Justice in Shevill v. Presse Alliance SA (Case C-68/93) [1995] 2 AC 18 (ECJ). In that case, where a libel was published in several states, it was held that the event giving rise to the damage occurred only in the jurisdiction where the publisher was based.

24. In the case of a libel by a newspaper article distributed in several contracting states, the place of the event giving rise to the damage … can only be the place where the publisher of the newspaper in question is established, since that is the place where the harmful event originated and from which the libel was issued and put into circulation.

32. In the Alfred Dunhill case (at p.957 g-j) the Deputy Judge came to a similar conclusion to that of Rix J in the Domicrest case.

(Rix J) concluded that, applying the formula stated in the Bier case, the place where the harmful event giving rise to the damage occurred was where the statement originated. As the learned judge observed, it was there that the negligence, if not every element of the tort, was likely to have taken place and that for that and other reasons the place from which the misstatement was put into circulation was as good a place to found jurisdiction as the place where the misstatement was acted on, even if receipt and reliance were essential parts of the tort.

I would respectfully go further and conclude that it is a better place, if one is seeking to identify the place of the event which is the origin of the damage as it was described in the Bier case, and if one puts to one side, as one is required to do, the rules of national law which define the necessary elements of the commission of the tort in question.

33. It seems to me that this analysis is correct; and if the reasoning is in conflict with the reasoning of Steyn J in the Minster case, I prefer the reasoning of Rix J and the Deputy Judge, as expressed above.
34. It follows that I do no accept that the event which gave rise to the damage was the receipt of the Certificate or reliance on it.
35. In the present case the certificate was launched into circulation in Portugal; and consequently Portugal was the place of the event which gives rise to and is at the origin of the damage.

Other issues

36. As already indicated, Mr Barklem submitted that the Court must decide two questions before the question of jurisdiction can be addressed: first, what is the applicable law, and secondly, whether there was ever a negligent misstatement?
37. Nothing in this judgment is intended to, or could, inhibit the deployment of a later application either that the applicable law is Portuguese law or that the cause of action in negligent misstatement will fail on the facts as pleaded. However, in my judgment Mr Dye is correct in his submission that these questions only arise once the Court has decided the issue of jurisdiction, and are not questions which must be answered before the jurisdictional questions are addressed. Jurisdictional questions are decided on an autonomous basis and not on the basis of national law.
38. For present purposes it is sufficient to note that, on the facts alleged, the Claimants have made out a good arguable case that the England is the appropriate jurisdiction, see Canada Trust Co v. Stolzenberg (No.2) [1998] 1 All ER 318 at 326f-g and 331a.

Summary

39. For these reasons the Defendant's application is dismissed