Apple Computer Inc, a US company registered in California (the Defendant), disputed the jurisdiction of the Court in relation to proceedings which were served out of the jurisdiction on behalf of Apple Corps Ltd (the Claimant), a UK company, after an order under CPR 6.20.
The claim related to the Defendant’s alleged breach of a Trade Mark Agreement (the Agreement), made between the two parties, by launching a Web-based product in America known as iTunes Music Store. This product allowed the public to download songs over the Internet for use on their pcs or portable players, eg the Defendant’s iPod. The Defendant’s Apple mark was clearly associated with this product.
The Claimant put forward an alternative argument that, as the Defendant was attempting to make the product available in 2004 in
The Agreement was signed in October 1991 as part of a settlement to litigation in the English High Court. The Agreement essentially carved up the use of the Apple trade mark between the two parties. The Claimant ‘was entitled to the exclusive worldwide right to use and authorise others to use’ the Apple Corps marks in relation to the record business. The Defendant ‘was entitled to the exclusive worldwide right to use and authorise others to use’, the Apple Computer marks in relation to the computer, data processing and telecommunications business.
On 7 August 2003, Master Moncaster gave the Claimant permission to serve the Defendant outside the jurisdiction under CPR 6.20. This was done on two grounds, that the Agreement was governed by English law and that the contract was made in England.
The Defendant disputed service under CPR 6.20 and maintained that England was not the appropriate forum for the dispute.
Judgment
The judgment involved a detailed analysis of the relevant elements of CPR 6.20 and a discussion of the current law on jurisdiction and governing laws.
Mann J raised the following four questions for consideration in his judgment:
1. Was the contract made in
2. Was the contract governed by English law?
3. Is there a threatened breach of contract within the jurisdiction?
4. If any of those heads are made out, is
Mann J derived these questions from the relevant stems of CPR 6.20:
‘…a claim form may be served out of the jurisdiction with the permission of the court if,
(2) a claim is made for an injunction ordering the defendant to do or refrain from doing an act within the jurisdiction;
.
(5) a claim is made in respect of the contract where the contract:
(a) was made within the jurisdiction;
(b) is governed by English law;
(6) a claim is made in respect of a breach of contract committed within the jurisdiction.’
In addition CPR 6.21(2A) states that the court must be satisfied that
It was agreed between the parties that the burden of proof was on the Claimant to show these elements of CPR 6.20. The judge looked at each of these questions in turn.
Was the contract made in England?
Mann J stated that for the Claimant to prove this stem, it must show a good arguable case. In essence he said that whether a contract was made within the jurisdiction depends on the general contractual principles as set out in Brinkibon Ltd v Stahag Stahl [1983] 2 AC 34. Therefore the starting point for Mann J was an analysis of the general principles of offer and acceptance. This would naturally lead to the conclusion that the country in which acceptance was received would be the country in which the contract was made. This is stated to be the case with instantaneous communications in Entores v Milles Far East Corporation (1955) 2 QB 327 and approved in Brinkibon.
Mann J however discovered several flaws to this traditional analysis in relation to the formation of the Agreement in this case. The Agreement was finally completed by telephone conversation, with one party in
Mann J was very much of the opinion that, in a case such as this where both parties went to extraordinary lengths to make sure that neither country could be easily construed as having jurisdiction, it was a somewhat strained and false exercise to then analyse the final wording to construe jurisdiction. Despite the judgment containing a lengthy analysis of the final mechanisms used for completion, Mann J does not make a definitive decision on this point. For the purposes of CPR 6.20 the Claimant simply had to show that there was a good arguable case that on the facts England was the jurisdiction of the contract. Mann J agreed that in a case such as this, where the analysis was so finely in the balance, the Claimant had to have a good arguable case, although it could clearly not be said that the evidence allowed a clear view to be taken either way.
The Claimant also proposed what Mann J referred to as a ‘largely novel case’. It suggested that the contract may have been made in two places at once. If this could be the case it would have automatically succeeded on the first hurdle of CPR 6.20. This submission was based on the fact that contracts may be made today in ways never envisaged when the traditional laws were laid down. As Mann J found that there was a good arguable case it was not necessary for him to deliberate on this alternative argument. However, on doing so, he concluded that this was a case where this proposition was possible and stated that, ‘the Claimant has a good arguable case for saying that the contract was made both in
As Mann J deliberated on this point he relished the fact that there was no authority directly on the issues. In Brinkibon it was submitted but never deliberated on. Mann J was unable to cite authority which directly supported the proposition. However, he keenly stated that he could find none that barred it. In finding that this was therefore possible in principle, Mann J then went on to ask whether this was the appropriate analysis in this case. In line with his views on the analysis of offer and acceptance being forced and strained in this instance and the fact that the parties in this case clearly intended to give jurisdiction to either party, Mann J found that it was more appropriate in this case to say that there was a good arguable case that the contract was made in both England and California.
Was the contract governed by English law?
As stated above, the Agreement intentionally did not contain any choice of law clause, therefore Mann J was left to consider the Rome Convention, incorporated into English law by the Contracts Applicable Law Act 1990. Article 4 provides the relevant provisions, stating that, ‘the contract shall be governed by the law of the country with which it is most closely connected’. There is a presumption that, ‘the contract is most closely connected with the country where the party, who is to effect the performance which is characteristic of the contract, has..its central administration’. Article 4 also provides that if the characteristic performance cannot be determined then the presumption shall be disregarded if it appears that the contract is more closely connected with another country.
Mann J first went on to determine the characteristic performance under the Agreement. His conclusion was that this was not a case where it was possible to determine the characteristic performance. This in turn meant that the presumption was disregarded and Mann J had to find the country with which the contract was most closely connected. Both parties sought to lay down some rules as to the factors Mann J could take into account in deciding this. The Defendant submitted that the factors must be geographical in nature, meaning connections between the contract and the country not the legal system of the country. Mann J did not agree with this narrow view of the factors. Citing Credit Lyonnais v New Hampshire Insurance Co (1997) 2 CMLR 610, Mann J said that Hobhouse LJ in that case had not intended to limit the factors that could be taken into account when he said, ‘one must look for links with the subject-matter and performance of the contract and their connection with a particular country’. Hobhouse LJ was merely emphasising the geographical element and not attempting any kind of limiting exercise.
In the event Mann J took a broad approach on the question of connection, unlimited by any categorisation of the relevant factors. He looked at the connections with California and then England in turn. In many instances he was happy to neutralize the factors where neither seemed the stronger, for example as he had found the contract could have been made in both places therefore neither had a stronger connection. Again, the two principal places of business were neutral, as was the fact that negotiations took place in both countries. In fact the only area where Mann J could really break the deadlock was the history of the Agreement. In that he said, ‘The.purpose of this Agreement.was to settle existing litigation in England’. This tipped the balance and allowed Mann J to find that England was the country with the closer connection. English law was therefore the governing law.
Is there a threatened breach of contract within the jurisdiction?
In light of his conclusion on the jurisdictional issues Mann J did not need to deliberate on this issue.
If any of the heads are made out – is England the proper place to bring the claim?
Despite having found that England was the correct jurisdiction and that English law was the governing law, there was still a further stem under CPR 6.21 (2A), namely that permission would not be given unless it was satisfied that England and Wales was the proper place to bring the claim. Again the burden was on the Claimant to prove this.
Mann J listed all the contributing factors but particularly gave weight to the fact that the governing law was key and this had been found to be English. Further, the Claimant was a much smaller enterprise and did not have a founding in California meaning that a trial there would be more disruptive to its business and that a trial in California could well be longer and more costly than one in the English Courts. Mann J therefore concluded that the claim would be more appropriately tried in England.
Commentary
In the age of e-commerce and contracts being formed at a distance, the questions of jurisdiction and governing law are questions which may become common-place. This case provides the first real decision supporting the idea that a contract can be made in two places at once and has been hailed as a modern judgment for a modern era. Mann J seemed particularly keen to develop this idea; however it must be recognised that the facts of this case were quite unusual in that the parties specifically tried to avoid any inferences as to the jurisdiction or governing law.
As to whether the principle that a contract may be formed in two places (or arguably more depending on the number of parties) is desirable or not is not yet known. I would submit that it is not. Whereas the law is currently certain, ie a contract is concluded in one place, this new principle would give rise to all sorts of uncertainties, such as the dual nationality of a contract!
This is particularly worrying considering that the place of contract formation is one factor taken into account when deciding the governing law of the contract. This could, by extension, result in a party having to comply with more than one jurisdiction’s laws to ensure it does not fall foul of the law.
Take for example a contract completed between individuals in
It is hoped that the law will not develop in this fashion and that the remarks made by Mann J were such as often occur in jurisdiction questions to add weight to his finding that the English Court had jurisdiction. The Defendant appealed the decision to the Court of Appeal, but the appeal was subsequently withdrawn.
Sarah Wood is a Solicitor in Pinsent Masons’ Outsourcing & Technology Group: sarah.wood@pinsentmasons.com
This article is an edited version of one which first appeared in the Pinsent Masons Computer Law Report.
