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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> HIT Entertainment Ltd & Ors v Gaffney International Licensing Pty Ltd & Anor [2007] EWHC 1282 (Ch) (09 March 2007) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2007/1282.html Cite as: [2007] EWHC 1282 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand London WC2A 2LL
		9 March 2007

1. SIR DONALD RATTEE: The claimant in this case produces children's programmes featuring well-known characters in the children's entertainment field, such as Thomas the Tank Engine, Bob the Builder and others, and their business (and I take this largely from the helpful summary of the facts set out in Mr Loewenstein's skeleton) included in particular dealing in worldwide merchandising rights in those brands. The second and third claimants are subsidiaries of the first claimant. The third claimant is a company registered in Texas in the United States.
2. The first defendant carries on the business of licensing agent in relation to exploitation rights of such children's programmes and other children's merchandise as are dealt with by the claimant. The first defendant is a company based in Australia and the second defendant is a director and shareholder of the first defendant.
3. Between 1999 and 2005 a series of agreements were entered into between the claimants (or one of them) and the first defendant whereby the first defendant agreed to act as the claimant's licensing agent for intellectual property, exploitation and other rights relating to the children's brands to which I have referred, those rights belonging to the claimant that entered into the particular agreement.
4. By the various agreements the first defendant undertook two quite separate functions. One was that of acting as licensing agent, in the sense that the first defendant's function under such part of such agreements was to identify possible licensees of the exploitation rights belonging to the claimant. The second function was that of managing or overseeing licensing agreements relating to the claimant's intellectual property which were entered into by third party licensees either through the agency of the first defendant or, in some cases, directly between the licensee concerned and one or other of the claimants.
5. These proceedings concern 11 of those agreements between one or other of the claimants and the first defendant. The scope of the first defendant's duties under those agreements was limited in each case to the territory of Australia. On 24 November 2005 the claimants indicated to the first defendant that they were not proposing to renew some of the relevant agreements when they terminated on 31 December 2005.
6. The relevant agreements contained clauses which entitled the claimant concerned to carry out, or have carried out, an audit process at the first defendant's premises in Melbourne, in order to check the operation of the relevant agreement and to keep a check on the defendant's activities pursuant to that agreement. Sometime last year, I think it was about March 2006, the claimants caused an extensive audit to be carried out at the first defendant's premises involving the examination of many thousands of documents.
7. As a result of that audit the claimants started this action against the defendants in which, so far as the claim against the first defendant is concerned, the claimants allege breaches of the various licensing agreements, including unlawful retention of interests, unlawful deduction of payments such as commission payments, miscalculation of commission and various other alleged improprieties in the way in which the first defendant carried out its duties under the agreements. The claims against the second defendant are on a different basis, and that is that he not only was in breach of some of the agreements to which he was a party, but even in those where he was not a party he acted in breach of some fiduciary duty owed to the claimants in respect of the first defendant's performance.
8. Each of the relevant licensing agreements between the claimants (or one of them) and the first defendant contained a clause providing that English law should be the relevant law governing the agreement and providing also for non-exclusive English jurisdiction in these terms:

"This agreement shall be governed by and construed in accordance with English law and the parties hereby submit to the non-exclusive jurisdiction of the English court." [Quotation unchecked.]

9. The defendants now seek a stay of the proceedings brought by the claimants on the grounds of forum non conveniens. They submit that there is an overwhelming case for this action being brought, if at all, in the state of Victoria, Australia, where the first defendant principally carries out its business, rather than in London. For all the activities or omissions complained of by the claimants in the action relate to matters which took place (or in the case of omissions did not take place, but where they should have taken place), according to the allegations, in Australia, in particular Victoria, but throughout Australia generally, and certainly in no sense in this country.
10. According to a mass of evidence that has been put in by the defendants on this application, to enable the defendants properly to defend themselves it will be necessary for them to call 35 to 40 witnesses. These will include, it is said, a large number of witnesses not in the employ or in any sense under the control of the defendants, but witnesses who are employed by third party licensees to whom rights in relation to the claimants' intellectual property have been granted. Such third party witnesses are persons over whom the defendants say they have no control and no power to compel them to come and give evidence at a trial in London.
11. I have to say I have significant doubts about the evidence as to the number of witnesses which it will be necessary for the defendants to call if the action proceeds. But, be that as it may, there is no doubt (and this is accepted on the part of the claimants) that, apart from the effect of the non-exclusive jurisdiction clause in the relevant licensing agreements between the claimants and the first defendant, and apart from any effect there may be of European Council Regulation Number 44 of 2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters, it would be strongly arguable, at least, that the appropriate forum for the determination of the claimants' claims would be the court in Victoria rather than this court in London.
12. The application to stay the proceedings in this court is resisted by the claimants on two grounds. The first is that, by reason of article 23 of the European Council Regulation to which I have just referred and a decision of the European Court reported in [2005] QB at page 801, this court has no power to entertain the application currently before it. Alternatively the claimants submit that the effect of the non-exclusive jurisdiction clause included in the relevant agreements is that at least the first defendant is debarred from relying on the arguments it puts forward except to the extent, if at all, that the first defendant can show it is relying on matters which were not reasonably foreseeable at the date the relevant licensing agreements were entered into. The claimants submit that the defendants have failed to show any such matter.
13. I should refer first to the argument based on article 23 of the European Council regulation. That article provides in paragraph 1 as follows:

"If the parties, one or more of whom is domiciled in a member state, have agreed that a court or the courts of a member 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 jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise."

14. In the case that I have mentioned of Owusu v Jackson the European Court had to consider a question whether the English court had power to entertain an application for a stay based on forum non conveniens having regard to the terms of article 2 of the Brussels Convention, the predecessor of the European Regulation to which I have just referred, which article provides:

"Subject to the provisions of this Convention, persons domiciled in a Contracting State shall, whatever their nationality, be sued in the courts of that State. Persons who are not nationals of the State in which they are domiciled shall be governed by the rules of jurisdiction applicable to nationals of that State."

15. As I have indicated, the European Court decided that an application for a stay on the basis of forum non conveniens was not available to a defendant to whom article 2 of the Convention applied. That article would not have applied to the defendants in the present case, because neither of them is domiciled in a Contracting State within the European legislation. But, as appears from the terms of article 23 of the 2001 Regulation, which I have quoted, that article applies only if one or more of the parties to the litigation is domiciled in a Member State. In the present case the first two claimants, as I understand it, are domiciled in a Member State so that article 23 applies, notwithstanding the fact that neither of the defendants is domiciled in any Member State within the meaning of that regulation.
16. The claimants submit that the decision of the European Court in the Owusu case applies equally (although the court was not considering article 23) to a case within article 23, with the result, according to the claimants, that in the present case this court cannot properly entertain an application by the defendants for a stay on the grounds of forum non conveniens.
17. A similar argument was put to Gloster J in Amtech International Limited v Biosafety USA [2006] EWHC 47 in the Commercial Court. Gloster J heard argument on the point, as indeed I have heard argument on it. She was again considering an application to stay proceedings on the grounds of forum non conveniens in a case where there was a relevant non-exclusive jurisdiction agreement between the parties. She rehearsed some of the arguments on the article 23 point in her judgment, but declined to decide the question of European law, because she decided that it was unnecessary to do so in order to dispose of the matter before her. For she decided that the defendant in that case had in any event not made out a sufficient case for a stay, so that whether the court would have had jurisdiction to entertain the application if a sufficient case on the facts had been made out did not arise for decision and the learned judge that in those circumstances it would be unwise for her to decide the point of European law, particularly bearing in mind that to do so might almost certainly involve a reference to the European Court with all that that might entail. As I said, although she referred to some of the arguments on the question of whether article 23 would have debarred her in any event from granting the stay she was asked for, she found it unnecessary to decide and did not decide the point.
18. In Gloster J's judgment there is a very helpful passage which sets out the principles as she understood them to be, derived from various authorities, which the court ought to apply on the second question, namely, the circumstances in which the court should accede to an application for a stay on the ground of forum non conveniens by a defendant who is a party to a non-exclusive jurisdiction clause giving the English court jurisdiction. That passage is in paragraph 7 of Gloster J's judgment. As I have said, the learned judge there decided that the applicant for the stay had not made out a sufficient case for it and in paragraph 7 she says this:

"In coming to my conclusion, I applied the following legal principles that can be derived from the authorities:

i) The fact that the parties have freely negotiated a contract providing for the non-exclusive jurisdiction of the English courts and English law, creates a strong prima facie case that the English jurisdiction is the correct one. In such circumstances it is appropriate to approach the matter as though the claimant has founded jurisdiction here as of right, even though the clause is non-exclusive; see e.g. per Hobhouse J in S & W Berisford Plc v New Hampshire Insurance Co. [1990] 1 Lloyd's Rep. 454, at 463; per Waller J in British Aerospace Plc v Dee Howard Co [1993] 1 Lloyd's Rep. 368; per Moore-Bick J in Mercury Communications Ltd v Communication Telesystems International [1999] 2 AER 33 at page 41.

ii) Although, in the exercise of its discretion, the court is entitled to have regard to all the circumstances of the case, the general rule is that the parties will be held to their contractual choice of English jurisdiction unless there are overwhelming, or at least very strong, reasons for departing from this rule; see e.g. British Aerospace Plc supra ; Mercury Communications supra at page 41; per Aikens J in Marubeni Hong Kong & South China Ltd v Mongolian Government [2002] 2 AER (Comm) 873 at 891(b) – (f); per Lawrence Collins J in Bas Capital Funding Corporation and others v Medfinco Ltd and Others [2004] 1 Lloyd's Rep 652, at paragraphs 192-195; per Gross J in Import Export Metro Ltd v Compania Sud Americana de Vapores SA [2003] 1 Lloyd's Rep 405.

iii) Such overwhelming or very strong reasons do not include factors of convenience that were foreseeable at the time that the contract was entered into (save in exceptional circumstances involving the interests of justice); and it is not appropriate to embark upon a standard Spiliada balancing exercise. The defendant has to point to some factor which it could not have foreseen at the time the contract was concluded. Even if there is an unforeseeable factor or a party can point to some other reason which, in the interests of justice, points to another forum, this does not automatically lead to the conclusion that the court should exercise its discretion to release a party from its contractual bargain; see cases cited supra. In particular, the fact that the defendant has, or is about, to institute proceedings in another jurisdiction, not contemplated by the non-exclusive jurisdiction clause, is not a strong or compelling reason to relieve a party from his bargain, notwithstanding the undesirability of parallel proceedings. Otherwise a party to a non-exclusive jurisdiction clause could avoid its agreement at will by commencing proceedings in another jurisdiction; see cases cited supra and The El Amria [1981] 2 Lloyd's Rep. 119; Breams Trustees Ltd v Upstream Downstream Simulation Services [2004] EWHC 211 (Ch) per Patten J at paragraphs 27 and 28."

19. With great respect I accept that passage as a very helpful and accurate expression of the principles to be derived from the relevant cases. I only add one further reference to authority on the point and that is Ace Insurance SA-NZ v Zurich Insurance Company [2001] 1 Lloyd's Rep 618 in the Court of Appeal, where, at paragraph 62 of his judgment, with which the other members of the court agreed, Rix LJ said is this:

"As Waller J pointed out in British Aerospace Plc v Dee Howard Co [1993] 1 Lloyd's Rep 368 at 376, speaking of matters of convenience in the context of a non-exclusive jurisdiction clause, it is necessary to point to some factor which could not have been foreseen in order to displace the bargain which has been agreed. In such a case that party must show some good reason or special cause why it should not be held to its agreement to submit to the agreed jurisdiction."

20. However, Rix LJ went on to recognise, as had the court in other cases before, that a party to a non-exclusive jurisdiction clause could escape its effect not only by showing some unforeseeable matter, but also by showing what Rix LJ called in paragraph 62 of his judgment "some matter which lies beyond considerations of convenience and goes to a matter of justice". As in Gloster J's case, so in this case, only if the defendants have satisfied this test does the European law question under article 23 of the 2001 regulation arise. So I shall consider first whether the defendants have indeed shown a good case for a stay quite apart from article 23.
21. Applying the principles, as I understand them, enshrined in the dictum of Waller J, as he then was, approved by the Court of Appeal and restated by Gloster J, I have to see first whether the defendants have shown some objection to this court exercising jurisdiction which was not foreseen and could not have been foreseen when the relevant licensing agreements including the non-exclusive jurisdiction clauses were entered into.
22. The matters relied on by the defendants (and I hope I summarise them accurately) are as follows: (i) the allegations made by the claimants and the claims made in the action, by reason of their extreme width and the number of different agreements to which they relate, require the exploration of masses of documents, all of which are situated in Victoria in Australia and not in this country. (ii) A very large number of witnesses of the order of 40, it is said, will have to be called by the defendants in order properly to defend themselves, all of whom are resident in Australia.
23. (iii) More particularly, in order to enable the defendants to defend the second part of the claim made against them (that is the claim relating to failure to exercise their duties to supervise or manage licensing agreements between the claimants and third parties) it will be necessary for the defendants to adduce evidence from a large number of what they call third party witnesses, as to whom they have no power to compel them to come to give evidence in London, leaving the defendants, if they wish to adduce those witnesses' evidence, with the need to adduce it by having the evidence taken on commission. The defendants submit that this would be significantly less satisfactory to the presentation of their defence than being able to subpoena the relevant witnesses to appear and give viva voce evidence in the courts of Victoria.
24. (iv) The attendance in London, over what may be lengthy periods, in order to deal with the defendants' defence, of the defendants' own employees will put unbearable strains on the ability of the first defendant to carry on its business in Australia in the meantime.
25. I see the considerable force of all those points but, in my judgment, it is plain that all of them were foreseeable by the first defendant when the relevant licensing agreements with the claimants (or one of them) were entered into. It must have been apparent, or at least it certainly should have been apparent, to the defendants that, were there to be (which naturally everybody at the time hoped there would not be) litigation relating to the defendants' proper performance of the agreements, that litigation would involve producing documents, inspecting documents, and calling witnesses, the majority of whom would be likely to be present in Australia rather than in London. So I fail to see how the defendants can possibly say that they are relying on any point that was not foreseeable at the time the agreements were entered into.
26. The defendants seek to escape their inability to overcome that hurdle by, if I may say so, an ingenious attempt to take advantage of the exception from the need to rely on a matter not foreseeable at the time of the relevant agreement, recognised, as I have indicated, by Rix LJ in the Ace Insurance Company case, for matters which, as Rix LJ described them, go beyond considerations of convenience and go to a matter of justice.
27. Mr Loewenstein on behalf of the defendants submitted that the problems which would be faced by the defendants in defending themselves in the present proceedings in a court in this country, particularly problems of adducing evidence from the many third party witnesses that they think they will need to call, are such that the defendants will not, if the proceedings proceed in this court, be able properly to defend themselves against the claims that have been made against them. Such inability, submits Mr Loewenstein, goes way beyond convenience and is a matter of justice in the sense that justice will not be capable of being done between the parties because of the defendants' inability properly to present their defence.
28. I do not accept, despite the attractiveness which Mr Loewenstein put in his argument, that that is a valid argument. It seems to me, that if it were, then it would be an argument open to many defendants seeking a stay of proceedings on commonly relied upon grounds of forum non conveniens. Every such defendant could say that the difficulties posed by proceedings in London, where the subject matter of the action took place in another jurisdiction, and which would involve the calling of witnesses and the production of documents in that jurisdiction, would prejudice the ability of the court to do justice, because it would make the task of a defendant in presenting its Defence more difficult.
29. Mr Loewenstein says that this is an exceptional case. It is an exceptional case, he submits, particularly because of the nature and width of the claims made against his clients, and in particular the nature and width of the second part of the claims made, that is to say the claims made as to breaches of the defendants' obligations in relation to managing or overseeing licensing agreements between the claimants and third parties, which will, as I have already said, according to the defendants' submission, involve the calling of numerous third party witnesses. Given the circumstances and given the extent of the defendants' likely inability to adduce live evidence from those witnesses if they had to come to London in order to give it, the resultant inability of the defendants to present a proper defence to that second part of the claims made against them will be such that it can be said that the defendants will be quite unable to present a proper defence to that part of the claims.
30. I am not satisfied that that brings the matters relied upon by the defendants outside the ambit of what the courts have referred to as matters of convenience and into what the courts have recognised as an exceptional category of matters going beyond convenience and into the matter of justice. It seems to me that the defendants' submission on this point (if right) waned emasculate the principle that has been stated again and again by the court in previous cases that, where there is a non-exclusive jurisdiction clause giving this court jurisdiction, it is not open to a defendant to require the court to enter into a balancing exercise in relation to matters making it more difficult for the defendant concerned to present its case.
31. For in many cases, no doubt, defendants would say that the court has to carry out the process of examining the difficulties which proceedings in London will cause the defendant in order to see to what extent presentation of the defendants' defence is going to be made more difficult, and to see whether the degree of difficulty is going to cross the line which Mr Loewenstein would have me accept exists between matters of convenience and matters of justice. As I say, the defendants' argument really amounts to saying, as I understand it, that it will be so much less convenient for the defendants to present their case in London because of the lack of power to compel the third party witnesses to attend, that it will be impossible for them properly to defend themselves.
32. I do not accept that that proposition is made out even on the facts. It seems to me that the defendants are far from having established in reality that if the case continues in London they will not be in a position to present their defence in due course. Of course it will be more difficult for them to present their defence, but of course it is more difficult for any defendant who would otherwise be entitled to a stay on the grounds of forum non conveniens, but who is barred from so doing by the effect of a non-exclusive jurisdiction clause, to present its defence. That fact does not take the case outside the well established principles that have been recently restated by Gloster J in the passage in her judgment which I have cited.
33. Therefore, like Gloster J, I find myself in the position that the defendants have failed to establish to my satisfaction that there is any reason why they should escape the application of the general principle that, where a party has agreed to the English court having jurisdiction, it must be held to that agreement unless it can show some matter not foreseeable at the time the agreement was entered into or some matter going beyond convenience and into the realms of justice.
34. That being so, again as in the case before Gloster J, the question of the effect of article 23 of the European regulation, if any, does not fall for decision and I certainly do not think it would be appropriate for me to express any view upon it in those circumstances. That must be left to a case in which the effect of article 23 matters. It does not matter in this case. Accordingly, I shall dismiss the application.