Scottish & Newcastle International Ltd v Othon Ghalanos Ltd

For the purposes of article 5.1(b) of the Judgments Regulation, the place where goods were delivered must be identified under the contract and its applicable substantive law. It should reflect performance of the seller’s contractual delivery obligation and provide the close connecting factor required for special jurisdiction.

Under an ordinary CFR or C&F sale governed by English law, where the seller ships goods for carriage to the buyer and does not reserve disposal, delivery is ordinarily effected on shipment. The named destination is not the contractual place of delivery merely because the seller must arrange carriage there. An invoice entry calling the destination the place of delivery will not override the agreed CFR basis unless it forms a genuine contractual term to that effect.

The sellers supplied cider to the Cypriot buyers under a contract governed by English law and expressed as CFR Limassol. The containers were loaded in Hereford and shipped from Liverpool. The buyers had credit until after the vessels’ arrival, but the bills of lading were straight consigned to them and did not reserve the sellers’ right of disposal.

The sellers claimed the price in England. Andrew Smith J, in the Commercial Court, held that England had jurisdiction: [2006] EWHC 1039 (Comm). The buyers appealed, contending that delivery had expressly been agreed in Limassol or, alternatively, that destination was the place of delivery for a CFR sale under article 5.1(b) of the Judgments Regulation.

1. Appeal dismissed. Rix LJ, with whom Waller LJ agreed, upheld the Commercial Court’s conclusion that the English court had jurisdiction under article 5.1(b) of the Judgments Regulation.

2. The phrase “where, under the contract, the goods were delivered or should have been delivered” required identification of the contractual place of delivery under the applicable substantive law. Article 5.1(b) retained the jurisdictional purpose of selecting the place of performance of the characteristic obligation, namely a forum with a close connection to the dispute. It did not substitute the physical destination of the goods where the seller had no contractual duty to effect delivery there.

3. On the proper construction of this contract, the agreed term was CFR Limassol, not an ex ship obligation to deliver in Limassol. The contractual letters, rather than the invoices, supplied the terms. The invoice box describing Limassol as the place of delivery was an administrative entry identifying the final destination. It did not alter the basic CFR allocation of obligations.

4. The sellers had, at latest on shipment, unconditionally appropriated the goods and transferred possession, title and risk to the buyers. They had to procure carriage to Limassol, but had no obligation to ensure physical arrival there. The payment term, calculated from arrival of the vessel, fixed the time for payment and did not make arrival contractual delivery.

5. The court rejected the proposed rule that destination is invariably the article 5.1(b) place of delivery for documentary sales. Such a rule would not reflect obligatory contractual performance or the required connecting factor. Rix LJ added, without deciding the point, that even where a seller retains documents and title until payment, provisional delivery on shipment may be the appropriate solution; that issue did not arise on the facts.

• Court of Appeal (Civil Division) — dismissed the buyers’ appeal and affirmed English jurisdiction: [2006] EWCA Civ 1750.
• Commercial Court — Andrew Smith J rejected the jurisdictional challenge and held that the sellers could sue in England: [2006] EWHC 1039 (Comm).