Jurisdiction – Claim on guarantee of tenant’s obligations under lease – Defendant guarantor domiciled in France – Articles 2, 5(1)(a) and 22 of EC Regulation 44/2001 – Defendant seeking declaration that English courts lacking jurisdiction to hear claim – Whether principal subject matter of claim relating to rights in rem – Whether lease impliedly specifying England as country for performance of relevant obligation – Application refused
The claimant was the landlord under a lease of a public house for a term of 20 years from 1997. The defendant guaranteed the obligations of the tenant under the lease; the guarantee clause provided that, should the tenant default in the performance or observance of any of the covenants during the term, the defendant would on demand make good all loss, damage, costs and expenses occasioned to the claimant as a result.
At the date of the lease, the parties all resided in England, but the defendant moved to France in around 2003. The rent falling due in March and June 2008 went unpaid and the claimant forfeited the lease by peaceful re-entry in August of that year. The claimant then served a demand on the defendant in France for payment pursuant to the guarantee clause. The demand was not met and the claimant brought proceedings in respect of the unpaid rent, together with insurance, VAT, the administration fee and statutory interest, together with a dilapidations claim of £32,529 on the ground that the premises had, at the date of forfeiture, been in a state of disrepair in breach of the repairing covenants in the lease.
The defendant applied to the court for a declaration that, since he lived in France, the English courts did not have jurisdiction to hear the claim, by virtue of article 2 of EC Regulation 44/2001. Opposing that application, the claimant contended that the English courts had jurisdiction by virtue of: (i) article 22 of the regulation, since the proceedings had as their object rights in rem in immovable property situated in England; and (ii) article 5(1)(a), since the matter related to a contract for which England was the country of performance. The defendant argued that article 22 did not apply because it was concerned with rights in rem and lessees, as opposed to the claimant’s claim for compensatory damages against the defendant as a guarantor. In respect of article 5, it submitted that the alleged obligation had not arisen until the service of a demand, which, having been made in France, gave rise to an obligation for performance in France.
Held: The application was refused.
(1) Proceedings would have “as their object” rights in rem if the principal subject matter of the claim related to such rights: Ashurst v Pollard [2001] Ch 595 applied. A guarantor of the obligations in a lease could avail itself of any defence that would be available to the lessee. In a claim for dilapidations, in particular, expert valuation evidence would normally be required. The matter could not be categorised as being only the assessment of damages. Consequently, the principal subject matter of the claim was the lease.
A purposive interpretation was to be given to article 22. The English court was both the best forum for establishing the factual basis of the claimant’s claim and the only court that could deal with the questions arising under the English law of landlord and tenant. Consequently, it had exclusive jurisdiction under article 22. The declaration sought by the defendant was refused.
(2) Further, in applying article 5(1)(a), the task of the court was to ascertain whether the lease imposed an obligation to pay in England or whether a place was impliedly specified for meeting the obligation: Crédit Agricole Indosuez v Chailease Finance Corporation [2000] 1 All ER (Comm) 399 applied. The lease implied that the place for payment by the tenant’s guarantor, in respect of any liability under the guarantee, was England, that being the country in which all the parties resided when the lease was entered into, where the subject property was located and where the claimant always received the rent payments. That conclusion was unaffected by the fact that the demand for payment had been made in France and that, were the defendant to be found liable to pay anything, he would instigate the method of payment in France.
Jonathan Steinert (instructed by Gosschalks, of Hull) appeared for the claimant; Angus Macpherson (instructed by Ross Green & Crowe, of Dartford) appeared for the defendant.
Sally Dobson, barrister
