Viskase Ltd v Paul Kiefel GmbH

For jurisdiction under Article 5(1) of the Brussels Convention, the relevant obligation is the contractual obligation forming the basis of the claim. An obligation to supply machinery reasonably fit for a known purpose is performed at the contractual time and place of delivery. A later failure in use is evidence of an antecedent breach, not a continuing obligation to make the goods perform. A conditional jurisdiction clause has its natural meaning. Where the buyer is not entered in the specified Commercial Register, the clause does not exclude Convention jurisdiction.

The respondents, manufacturers of plastic packaging products in England, contracted with the German appellant for eight thermoforming machines. They alleged that the machines were unsuitable for commercial production of OPS packaging products and claimed damages for breach of an express or implied contractual term. The claim based on misrepresentations was accepted to be no more than a contractual variant.

The High Court refused the appellant’s applications to stay or set aside the proceedings, holding that the place of performance was England. The appeal concerned whether Article 5(1) of the Brussels Convention gave the English courts jurisdiction and whether the contractual venue clause was exclusive under Article 17.

Majority: Morritt and Chadwick LJJ.

1. The court unanimously held that the venue clause was not an exclusive jurisdiction clause under Article 17. The clause applied only where the buyer was entered in the relevant German Commercial Register, or fell within one of the stated public-law categories. The respondents were not entered in that register. The clause was not to be given an extended meaning by reference to an English register or to whether the respondents would have been registrable if they were German entities.
2. Under Article 5(1), the relevant obligation is the contractual obligation on which the claim is based. The majority approached the appeal on the assumption that the pleaded term requiring the machines to be reasonably fit for the known purpose could be established, notwithstanding the contractual choice of German law and the absence of any decision that the Sale of Goods Act 1979 applied.
3. Chadwick LJ held, with Morritt LJ’s agreement, that an obligation to supply a machine reasonably fit for the known purpose is performed once, when the machine is supplied. The seller does not thereby undertake to do whatever is necessary thereafter to ensure continuing performance. A subsequent failure during commercial production is evidence of an antecedent breach. The place of performance is therefore the contractual place of delivery.
4. Delivery occurred in Germany for seven machines and in Birmingham for machine 34.22/153. The English courts accordingly had jurisdiction only in respect of the latter machine. The majority found no separate pleaded or documented guarantee of future performance at the English factory.
5. Chadwick LJ explained that Lexmead (Basingstoke) Ltd v Lewis [1982] AC 225 concerned the scope of the fitness warranty, not a continuing obligation requiring the seller to act after delivery. Cullinane v British “Rema” Manufacturing Co Ltd [1954] 1 QB 292, concerning damages, did not assist.

The appeal was allowed. The proceedings were struck out for want of jurisdiction except in respect of machine 34.22/153. The appellants were awarded 60 per cent of their costs overall. Leave to appeal to the House of Lords was refused.

Dissent: Evans LJ. Evans LJ would have dismissed the appeal. He treated the alleged express undertaking to achieve specified production results at the English factory as the principal obligation, performed or broken where the machines were used. He agreed with the majority on the construction of the venue clause.

1. Court of Appeal: Appeal allowed by a majority. The proceedings were struck out for want of jurisdiction except as to machine 34.22/153.
2. High Court, Queen’s Bench Division, Newcastle-upon-Tyne Mercantile Court: On 29 January 1998, HHJ McGonigal refused the applications to stay or set aside the proceedings, holding that the place of performance was England.