Scottish & Newcastle International Limited (Respondents) v Othon Ghalanos Limited (a company incorporated in Cyprus) (Appellants)

For jurisdiction under article 5(1)(b) of Council Regulation (EC) No 44/2001, the contractual place of delivery is ascertained by interpreting the contract under its applicable law. Under English law, delivery to a carrier for transmission to the buyer is prima facie delivery to the buyer. The inference yields to contrary contractual arrangements.

An international sale must be characterised by its substance rather than its commercial label. Where the buyer specifies the shipment arrangements, property and risk pass on shipment, and the seller retains no possessory interest, delivery occurs at the port of shipment. A destination entered in an invoice's transport box does not establish contractual delivery there when it merely records the end of the arranged carriage.

A Scottish seller sued a Cypriot buyer for the unpaid price of 11 consignments of cider shipped from Liverpool to Limassol. The contract was governed by English law. The buyer had specified the shipping line and freight rate, while the seller prepaid the freight and invoiced it separately.

Andrew Smith J held that the English court had jurisdiction: [2006] EWHC 1039 (Comm). The Court of Appeal dismissed the buyer's appeal: [2006] EWCA Civ 1750, [2007] 1 All ER (Comm) 1027.

The issue before the House was whether the goods were delivered in England within article 5(1)(b) of Council Regulation (EC) No 44/2001. The buyer contended that delivery occurred in Limassol because invoices named it as the place of delivery or because the transaction was expressed to be CFR Limassol.

1. The appeal was dismissed unanimously. Lord Mance delivered the principal opinion. Lord Brown and Lord Neuberger agreed with his reasons. Lord Bingham and Lord Rodger agreed that the goods were delivered in Liverpool on the facts, although they reserved their positions on Lord Mance's wider discussion of other FOB contracts.

2. Per Lord Bingham and Lord Mance, the applicable law must be used to interpret the particular contract and identify where delivery occurred. Industrie Tessili Italiana Como v Dunlop AG [1976] ECR 1473 established that the Regulation did not impose a uniform concept of delivery for this purpose. The parties' contract was governed by English law.

3. Per Lord Mance, Limassol was not made the contractual place of delivery by its entry in the invoices' printed “Place of delivery” box. In context, the entry merely showed that the arranged transport ended at the port of discharge. The buyer's later inspection and the deferred payment date did not alter the place of contractual delivery.

4. Per Lord Mance, the transaction was in all essential respects an FOB contract despite its description as CFR. The buyer specified the ports of shipment, carrier and negotiated freight rate. The seller quoted an FOB price, prepaid freight on the buyer's behalf and invoiced the actual freight separately. Commercial labels were flexible, and the terms of the particular arrangement controlled.

5. Per Lord Rodger and Lord Mance, section 32(1) of the Sale of Goods Act 1979 prima facie treats delivery to a carrier for transmission to the buyer as delivery to the buyer. That inference may be displaced where the contract shows that the seller retained possession or where the carrier acted for the seller. Here the non-negotiable bills named the buyer as consignee and had to be forwarded immediately. Property and risk passed on shipment, and the seller retained no right of disposal or commercial interest. Shipment therefore transferred possession to the carrier for the buyer and constituted delivery in Liverpool.

6. Per Lord Mance, with Lord Brown and Lord Neuberger agreeing, the place of shipment also characterises delivery under article 5(1)(b) for an essentially FOB contract, even on an autonomous approach to the Regulation. Physical shipment supplies an identifiable and foreseeable jurisdictional connecting factor. Lord Bingham and Lord Rodger expressly reserved their opinions on that broader, unnecessary issue, particularly where a seller retains bills of lading pending payment.

1. House of Lords: The buyer's appeal was dismissed unanimously: [2008] UKHL 11.
2. Court of Appeal: The buyer's appeal was dismissed and the English court's jurisdiction upheld: [2006] EWCA Civ 1750, [2007] 1 All ER (Comm) 1027.
3. High Court: Andrew Smith J held that the English court had jurisdiction: [2006] EWHC 1039 (Comm).