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[1994] 2 BCLC 106

Re Leyland DAF Ltd

COURT OF APPEAL, CIVIL DIVISION

NOURSE, HENRY LJJ AND SIR ROGER PARKER


13, 14, 15, 21 DECEMBER 1993



Administrative receiver - Receivers seeking to recover assets of a company - Whether agreement giving exclusive jurisdiction to Dutch courts - Whether that agreement binding on receivers - Civil Jurisdiction and Judgments Act 1982, s 2 - Insolvency Act 1986, s 234 - Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters 1968, art 17.

Leyland DAF Ltd (Leyland) was placed in administrative receivership. It carried on the business of manufacturing trucks. It did not have its own haulage facilities and for this purpose it used the services of Edcrest Ltd (Edcrest). It had entered into an agreement, referred to as 'the frame agreement', with the Dutch parent of Edcrest and the agreement was also purportedly signed on behalf of Edcrest. The frame agreement contained a jurisdiction clause whereby it was made subject to Dutch law. Edcrest had in its possession trucks of Leyland but it refused to return these until it had been paid the outstanding fees for its services which it claimed it was entitled to do under Dutch law. The receivers sought an order under s 234 of the Insolvency Act 1986 that Edcrest should let it enter its premises and recover the trucks. The judge held that Edcrest was a party to the frame agreement and that Leyland was bound by the jurisdiction clause. He also held that the receivers was bound by it and that their proceedings should be stayed in favour of those in the Dutch court. The receivers appealed.

Held - The judge was correct in finding that Edcrest was a party to the frame agreement. Section 234 of the Insolvency Act 1986 did not entitle the receivers to obtain possession of the vehicles since s 234(2) could not come into operation until it was determined by a Dutch court that Edcrest had no right under Dutch law to retain the vehicles. Accordingly, the appeal would be dismissed.

Case referred to in judgments

London Iron & Steel Co Ltd, Re [1990] BCLC 372.

Cases also cited and referred to in skeleton arguments

AMEC Properties Ltd v Planning Research and Systems plc [1992] BCLC 1149, CA.

Astor Chemicals Ltd v Synthetic Technology Ltd [1990] BCLC 1.

Beswick v Beswick [1967] 2 All ER 1197, [1968] AC 58, [1967] 3 WLR 932, HL.

Bonnin v Neame [1910] 1 Ch 732.

Colzani v RUWA Polstereimaschinen GmbH Case 24/76 [1977] 1 CMLR 345, [1976] ECR 1831, CJEC.

[1994] 2 BCLC 106 at 107

Downsview Nominees Ltd v First City Corp Ltd [1993] 3 All ER 626, [1993] AC 295, PC.

Dresser UK Ltd v Falcongate [1992] 2 All ER 450, [1992] QB 502, CA.

Duijnstee v Goderbauer Case 288/82 [1983] 5 ECR 3663, CJEC.

Forum Craftsman, The [1985] 1 Lloyd's Rep 291, CA.

Freevale Ltd v Metrostore (Holdings) Ltd [1984] BCLC 72, [1984] 1 All ER 495, [1984] Ch 199.

Galeries Segoura Sprl v Firma Rahim Bonakdoarian Case 25/76 [1977] 1 CMLR 361, [1976] ECR 1851, CJEC.

Geneva Finance Ltd, Re (1992) 10 ACLC 668.

Gerling Konzern Seziale Kreditversicherung AG v Amministrazione del Tesoro dello Stato Case 201/82 [1984] 3 CMLR 638, [1983] ECR 2503, CJEC.

Gomba Holdings UK Ltd v Minories Finance Ltd [1989] BCLC 115, [1989] 1 All ER 261, CA.

Harrods (Buenos Aires) Ltd, Re [1991] BCLC 666, [1991] 4 All ER 334, [1992] Ch 72, CA.

Hemsworth v Brian (1845) 1 CB 131, 135 ER 486.

Hill (Edwin) & Partners plc v First National Finance Corp [1989] BCLC 89, [1989] 1 WLR 225.

International Petroleum Refining and Supply Socieded v Brett (Caleb) & Son, The Busiris [1980] 1 Lloyd's Rep 569, CA.

I P Metal Ltd v Ruote OZ SpA [1993] 2 Lloyd's Rep 60.

Iveco Fiat SpA v Van Hool NV Case 313/85 [1988] CMLR 57, [1986] ECR 3337, CJEC.

Johnson (B) & Co (Builders) Ltd, Re [1955] 2 All ER 775, [1955] Ch 634, CA.

Marsh v Wood (1829) 9 B & C 659, 109 ER 245.

Palace Restaurants Ltd, Re [1914] 1 Ch 492, [1914-15] All ER Rep 1193, CA.

Partenreederei MS Tilly Russ v Haven & Vervoebedrijf Nova NV Case 71/83 [1985] QB 931, CJEC.

Robbie (NW) & Co Ltd v Witney Warehouse Co Ltd [1963] 3 All ER 613, [1963] 1 WLR 1324, CA.

Appeal

John Andrew Talbot and Murdoch Land McKillop, the joint administrative receivers of Leyland DAF Ltd, appealed with leave from the decision of Sir Donald Nicholls V-C, given on 28 May 1993 ([1994] 1 BCLC 264) whereby, inter alia, he refused their application to make an order permitting them to enter the premises of the respondent, Edcrest Ltd, (the hauliers), at Leyland, near Preston, Lancashire and Sittingbourne, Kent and remove the vehicles and parts manufactured or supplied by Leyland DAF Ltd and held by the respondent at those premises. The facts are set out in the judgment of Sir Donald Nicholls V-C ([1994] 1 BCLC 264) and in the judgment of Nourse LJ.

Anthony Mann QC and Peter Arden (instructed by Wilde Sapte) for the receivers.

Mark Barnes QC and Fay Stockton (instructed by Barlow Lyde & Gilbert) for the hauliers.

[1994] 2 BCLC 106 at 108

Cur adv vult

21 December 1993. The following judgments were delivered.



NOURSE LJ.

On 28 May 1993 Sir Donald Nicholls V-C ([1994] 1 BCLC 264) made an order staying all further proceedings in an application by the joint administrative receivers (the receivers) of Leyland DAF Ltd (Leyland) against Edcrest Ltd in favour of proceedings in the Netherlands. The basis of the Vice-Chancellor's decision was that Leyland and Edcrest were parties to an agreement containing an exclusive jurisdiction clause within art 17 of the Brussels Convention and that the receivers were bound by it no less than Leyland. In reaching that conclusion the Vice-Chancellor decided a number of questions, including two on the construction of the agreement and one on s 234(2) of the Insolvency Act 1986. The nearly two days of argument we heard last week, mostly on behalf of the appellant receivers, having failed to persuade us either that the questions were not entirely straightforward or that the Vice-Chancellor's decision was not entirely correct, we have taken a little time to be sure of expressing our own views with a brevity that is appropriate.

The facts are fully stated in the judgment of the Vice-Chancellor and need not be repeated. Leyland's ultimate parent is a Dutch company called Van Doorne's Bedrijfswagenfabriek DAF BV (DAF). On 11 October 1991 DAF, Leyland and another Dutch company called GM de Rooy & Zonen International Transport Bedrijf Eindhoven BV (de Rooy) became parties to a written agreement in English headed 'Operations Agreement', which has been referred to in the proceedings as the frame agreement. The first question is whether, as the Vice-Chancellor held, Edcrest, which is a wholly-owned subsidiary of de Rooy, also became a party to the frame agreement.

It starts by stating that it is made between (1) DAF, (2) Leyland, those 'parties' being thereinafter jointly and severally called 'the Company' and (3) de Rooy, thereinafter called 'the Haulier'. There are two recitals, the first stating the business of the company and the second being in these terms:

'The parties hereto wish to enter into a frame agreement regarding transportation by transporter and/or storage of certain vehicles produced by the Company, hereinafter called the "Vehicles", such transportation/storage to be performed by the Haulier and/or its Subsidiaries.'

All that is on p 1. The operative provisions (annexes apart) run from pp 2 to 19. Clause 1, headed 'Subsidiaries', is in two parts. The first sentence of the first part is in these terms:

'Where [in] the following provisions of this Agreement the term "Haulier", "party" or "parties" is used, such term shall unless the context otherwise requires be deemed to include Subsidiaries of the Haulier or as the case may be shall mean the Subsidiary concerned of the Haulier.'

The first sentence of the second part is in these terms:

[1994] 2 BCLC 106 at 109

'The Haulier guarantees the strict and due performance by (any of) its Subsidiaries of the obligations arising out of this Agreement and/or related documents.'

The second sentence of the second part provides that the haulier shall indemnify the company in case of failure by any of the subsidiaries 'To comply with any such obligation'.

I gratefully adopt the Vice-Chancellor's summary of cll 2 to 21 ([1994] 1 BCLC 264 at 267):

'Clause 2 provided for the company to give written instructions to the haulier, which the haulier would accept, for the storage of vehicles or the transport of them by transporter. The agreement was to apply to every such instruction. The company was to pay the haulier for the services provided, at specified rates. The haulier was obliged to inspect the vehicles, to store them in good condition and provide adequate security pending receipt of delivery instructions, to carry out stock care procedures, to provide sufficient vehicles and equipment to fulfil its obligations under the agreement, and so forth. The agreement was to continue for five years from 1 January 1991. The haulier was not permitted to subcontract performance of its obligations without consent.'

The last of the operative provisions (annexes apart) is contained in cl 22, headed 'Governing law':

'This Agreement shall be governed by and construed in accordance with the laws of the Netherlands. All disputes and differences between the Parties arising out of or in connection with this Agreement shall ultimately be referred to and resolved by the court of justice of 's Hertogenbosch, the Netherlands.'

On p 19 we find this:

'THUS made up in triplicate at Eindhoven on 11/10/1991.'

Underneath there are signatures on behalf of DAF and Leyland and the signature of Mr de Rooy on behalf of de Rooy. He also signed on behalf of Edcrest under the words 'For approval'.

The receivers say that Mr De Rooy's signing of the frame agreement 'For approval' on behalf of Edcrest did not make Edcrest a party to it. They have sought, but have failed, to enlighten us as to what other purpose there could have been in it. They simply say that when you look at the terms as a whole you have to conclude that Edcrest was not intended to be a party. For my part, I think that they point to exactly the opposite conclusion.

The second recital contemplates that transportation or storage may be performed not by de Rooy itself but by one or more of its subsidiaries. The first part of cl 1 provides that in the provisions following not only the term 'Haulier', but also the terms 'Party' or 'Parties' shall, unless the context otherwise requires, be deemed to include subsidiaries generally or 'the Subsidiary concerned'. The receivers say that the last two of those definitions,

[1994] 2 BCLC 106 at 110

expressed as they are to apply only to the provisions following, confirm that the parties, expressed as they are on p 1, do not and cannot include subsidiaries.

I disagree I think that the provisions as a whole contemplate that a subsidiary may be or become a party. That appears most clearly from the second part of cl 1, which, in referring to 'obligations', can only mean the obligations of subsidiaries. They are envisaged as 'arising out of this Agreement and/or related documents', for example out of a written instruction by the company to a subsidiary of de Rooy to perform transportation or storage on the terms of the frame agreement, being an instruction accepted by the subsidiary in writing. While it is true that an obligation thus assumed by a subsidiary would normally arise not under the frame agreement, but under a separate agreement between it and the company, it could arise alternatively from a joinder of the subsidiary as a party to the frame agreement. Moreover, and this is the important point for present purposes the inclusion of such a provision in an agreement signed at its inception by a subsidiary 'for approval' shows clearly that the subsidiary was intended to be a party to it.

I see no conflict between this view of Edcrest's status as a party to the frame agreement and the terms in which p 1 of it is expressed. Indeed there is a harmony between them. In my view the structure of the frame agreement is consistent with an intention that DAF, Leyland and de Rooy should be the principal parties to it and the 'Parties' for the purposes, for example, of cl 13 (duration) and cl 14 (termination). Those are matters in which a subsidiary of de Rooy could not have been intended to have a say, the clauses being provisions where 'the context otherwise requires' for the purposes of the definitions in the first part of cl 1. In cl 22, on the other hand, the context does not require that the 'Parties' shall not include a subsidiary, ie Edcrest, which is already a party to the frame agreement.

For these reasons, like the Vice-Chancellor, I hold that Edcrest was a party to the frame agreement and that Leyland and Edcrest thereby agreed that any dispute between them as to Edcrest's right to retain vehicles thereunder should be referred to and resolved by the court at Hertogenbosch, being an agreement within art 17 of the Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters, which was incorporated into English law by s 2 of the Civil Jurisdiction and Judgments Act 1982. So far as material, art 17 provides:

'If the parties, one or more of whom is domiciled in a Contracting State, have agreed that a court or the courts of a Contracting State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have exclusive jurisdiction. Such an agreement conferring jurisdiction shall be either (a) in writing or evidenced in writing ... '

So the question now is whether the receivers are in some way able to say that, unlike Leyland, they are not bound by cl 22 of the frame agreement. If they are so bound, their application for delivery up of the vehicles retained by Edcrest is as much liable to be stayed under art 17 as an application by Leyland itself.

[1994] 2 BCLC 106 at 111

The question depends, at any rate in the first instance, on s 234 of the Insolvency Act 1986, to which the marginal note is 'Getting in the company's property'. Subsections (1) and (2) provide:

'(1) This section applies in the case of a company where (a) an administration order is made in relation to the company, or (b) an administrative receiver is appointed, or (c) the company goes into liquidation, or (d) a provisional liquidator is appointed; and "the office-holder" means the administrator, the administrative receiver, the liquidator or the provisional liquidator, as the case may be.

(2) Where any person has in his possession or control any property, books, papers or records to which the company appears to be entitled, the court may require that person forthwith (or within such period as the court may direct) to pay, deliver, convey, surrender or transfer the property, books, papers or records to the office-holder.'

It is an apparent oddity of s 234 that it nowhere states on whose application an order made by the court under sub-s (2) may be made. That does not matter here, because it is obvious that an application may be made by the office-holder, in this case the receivers. On their behalf it was submitted that a receiver may apply in the interests of the debenture holder who appointed him as much as in the interests of the company.

Assuming that that distinction could have practical consequences of some kind, I nevertheless regard the submission as being entirely beside the point. Either way, the property recoverable under s 234(2) is confined to property 'to which the company appears to be entitled'. Although in Re London Iron & Steel Co Ltd [1990] BCLC 1149 it was held by Warner J that the court has power under the subsection to determine whether the company is entitled to the property or not, it can have no such power where, as here, that question has been referred to the decision of a foreign court. In the present case, unless and until the Dutch court has determined that Edcrest has no right of retention under Dutch law, it cannot be said that Leyland appears to be entitled to the vehicles which it is sought to recover. At present, no relief can be granted to the receivers under s 234(2).

The receivers having elected to proceed under s 234(2), it would seem that that ought to be an end of their resistance to Edcrest's application for a stay in favour of proceedings in the Dutch court. However, assuming that it was not, we listened to much learned argument and citation of authority on their behalf in support of the proposition that the debenture holder, although taking subject to any right of retention enjoyed by Edcrest under Dutch law, none the less had a superior right to reject the exclusive jurisdiction clause, albeit that that clause was part and parcel of the agreement under which the right of retention arose and was, in the words of the Vice-Chancellor, 'another of the terms governing Edcrest's possession and retention of the vehicles'. That proposition, being unsupported by any authority cited and contrary to principle and commonsense, is one which I wholly reject. Like the Vice-Chancellor, I therefore hold that the receivers are as much bound by the exclusive jurisdiction clause as is Leyland.

The only other question is whether the frame agreement applies to spare parts as well as to vehicles. In answering that question in the affirmative, I

[1994] 2 BCLC 106 at 112

gratefully adopt what was said about it by the Vice-Chancellor (see [1994] 1 BCLC 264 at 272). It follows that in granting a stay of the receivers' application the Vice-Chancellor was right to make no distinction between vehicles and spare parts.

I would dismiss this appeal.



HENRY LJ.

I agree. It is a useful working hypothesis, these days perhaps too often ignored, that good law is both simple and produces a result that is sensible, predictable and readily intelligible. The appellant's submissions on each of the three points they raised satisfied neither test.

First, at the time of the negotiations of the frame agreement Edcrest were already doing and were intended to continue to do the United Kingdom haulage and deliveries for Leyland. That agreement detailed the terms on which they were to continue to perform those tasks and required their approval of those terms by signature. That agreement included them in the definition of 'parties' (except where the context otherwise required) and had an exclusive jurisdiction clause for the resolution of disputes between the parties (clearly in context including disputes between Edcrest and Leyland). It would be both curious and disturbing if against that background arcane forensic subtlety made them mere sub-contractors and freed Leyland from the exclusive jurisdiction clause. But the law is not so foolish.

Similarly, if the debenture holder's administrative receiver took free from the Edcrest's right of retention and the concomitant exclusive jurisdiction clause otherwise binding on Leyland simply by what was described in submissions to us as 'a change of hat', I agree with Nourse LJ that both legal principle and common sense would be affronted.

Lastly, Edcrest were carrying Leyland's spares and annex 3 to the agreement detailed the pricing formulae under which they were to continue to do this. Spares were not mentioned in the body of the agreement, and that is the high point of the appellant's submissions. Either the omission of any mention of spares from the body of the agreement or the inclusion of the annex with its detailed prices for the carriage of spares was perhaps a mistake. The factual matrix made it quite clear that the mistake was the omission of specific mention of the spares from the body of the agreement. No other construction would have made sense, but sense made no boundary to the appellant's submissions on this point.

I too would dismiss this appeal.



SIR ROGER PARKER.

I agree with both judgments and I can find nothing which I can usefully add.

Appeal dismissed. Appeal to the House of Lords refused.

Carolyn Toulmin Barrister