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Articles | Mon 1st Nov, 2021
We know it’s hard to imagine the team at 1CL as mindless zombies or bloodsucking creatures of the night, but we do love our annual Trick or Treat outing. And this week has seen plenty of Treats for both Claimants and Defendants. On the Claimant side, the Federal Court of Australia found that Carnival’s class action waiver clause was an unfair contract term under Australian law (which is similar to that of England and Wales in this regard), and therefore did not bind its American customers, who will now be able to proceed with their claims in the Ruby Princess Covid-19 litigation ongoing in that jurisdiction. Closer to home, what is thought to be the first ever post-costs budgeting costs capping application has failed, in Thomas v PGI Group Limited [2021] 10 WLUK 227, notwithstanding that the damages sought were much lower than the projected costs of the proceedings. That fact alone, however, did not necessarily mean that the costs would be disproportionately incurred, as the claimants were pursuing their claim for legitimate reasons, only one of which was the prospect of damages, and Cavanagh J went on to comment that it would be extremely unlikely in future that the precondition to making a CCO in CPR 3.19(5)(c) (whether the risk that costs would be disproportionately incurred could be controlled by costs budgeting or by a detailed assessment) would be met, given that costs budgeting is a more sophisticated and nuanced way of setting a costs figure than a CCO.
On the other hand, in Stephen v Stephen [2021] 10 WLUK 273 Cotter J refused a Claimant’s application for an interim payment even though the claim was likely to succeed at trial, and in TRW Limited v Panasonic Industry Europe Gmbh [2021] 10 WLUK 369 the court declined jurisdiction on the basis that signing terms and conditions containing an exclusive jurisdiction clause bound the Claimant, who had argued ambitiously that it had merely signed to acknowledge the terms’ existence.
A mixed bag, then, rather like finding the dreaded Healthy Snack in your Halloween haul of sweets and chocs.
The Portal: What does it mean to ‘direct activities’ to the UK for the purposes of jurisdiction in consumer contracts?
Jurisdictional challenges are now a common feature of even modest travel-related claims. The explosion of internet bookings has seen a shift away from using traditional tour operators, towards consumers contracting directly with overseas hoteliers and property owners. Those consumers are, in turn, often surprised by the difficulties they face in persuading an English court to accept jurisdiction when their holiday goes wrong.
The recent decision of Michael Kent QC (sitting as a Deputy High Court Judge) in Bitar v Banque Libano-Francaise S.A.L. [2021] EWHC 2787 (QB) addresses the “consumer contract” jurisdictional gateway, previously contained in Articles 17-19 of Regulation (EU) No.1215/2012 of the European Parliament and of the Council (“Brussels I”). The decision clarifies what is a confusing and confused area of law.
The facts
As it happens, the case has nothing to do with travel and is set against the backdrop of the current Lebanese banking crisis. Mr Bitar, a joint British-Syrian national domiciled in England held a bank account with Banque Libano-Francaise S.A.L., a Lebanese bank headquartered in Beirut (“the Bank”). The account was held jointly with members of his family, domiciled in Lebanon. Mr Bitar wished to withdraw the money from his account (over US$4m) but the Bank would only offer a ‘special form of banker’s cheque’ issued by the Lebanese Central Bank. The result would mean the money being effectively trapped in Lebanon.
Mr Bitar sued the Bank for repayment of the credit balance together with damages for breach of contract. The Bank, in turn, applied under CPR Part 11 for a declaration that the Courts of England and Wales have no jurisdiction to hear the claim.
The issue
The question for the Court was whether Mr Bitar was entitled to bring proceedings against the Bank in this jurisdiction by virtue of s.15B(2)(b) of the Civil Jurisdiction and Judgments Act 1982. Sections 15A to 15E inclusive of that Act reproduce as part of the UK statute what had previously been contained in Articles 17-19 of Brussels I and were inserted, with effect from 31st December 2020 by the Civil Jurisdiction and Judgments (Amendment) (EU Exit) Regulations 2019). They override any exclusive jurisdiction clause in a contract.
Section 15B(2)(b) provides as follows:
15B.— Jurisdiction in relation to consumer contracts
(2) The consumer may bring proceedings against the other party to the consumer contract—
…
(b) in the courts for the place where the consumer is domiciled (regardless of the domicile of the other party to the consumer contract).
There was no dispute as to the Claimant’s domicile. The central question was whether the banking agreement, which was the subject of the claim, constituted a ‘consumer contract’. More specifically, whether the Bank had ‘directed commercial or professional activities’ to England and the agreement fell within the scope of those activities – s.15E(1)(c).
The law
The Court reviewed the authorities and the relevant legal principles can be summarised as follows:
I The jurisdiction test
The approach to be adopted at this (interim) stage in deciding whether to accept jurisdiction is as set out by Lord Sumption JSC in Goldman Sachs International v Novo Banco SA [2018] UKSC 34 at [9]:
“For the purpose of determining an issue about jurisdiction, the traditional test has been whether the claimant had ‘the better of the argument’ on the facts going to jurisdiction. In Brownlie v Four Seasons Holdings Inc [2018] 1 WLR 192, para 7, this court reformulated the effect of that test as follows:
‘(i) that the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway; (ii) that if there is an issue of fact about it, or some other reason for doubting whether it applies, the court must take a view on the material available if it can reliably do so; but (iii) the nature of the issue and the limitations of the material available at the interlocutory stage may be such that no reliable assessment can be made, in which case there is a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it.’
It is common ground that the test must be satisfied on the evidence relating to the position as at the date when the proceedings were commenced.”
The claimant bears a ‘burden of persuasion’ but not strictly, a ‘burden of proof’. The Court has ‘to attempt to form a view as to which side has the better argument as to the disputed facts. The effect of the burden being on the claimant is therefore only that in a finely balanced case the default position may be that the defendant’s argument is preferred.’
The correct approach to the test, and what is meant by “plausible” and its relation to a “good arguable case” test is set out by the Court of Appeal in Kaefer Aislamientos SA de CV v AMS Drilling Mexico SA [2019] EWCA Civ 10:
In limb (i) the test is plausibility alone: Green LJ at [73]. A plausible case is not one where the claimant has to show it has the better argument but “it is not significant whether one wraps up the three-limbed test under the heading ‘good arguable case'” [74].
Limb (ii) is an instruction to the court to seek to overcome evidential difficulties and arrive at a conclusion if it reliably can and “to use judicial common sense and pragmatism”[78].
Limb (iii) is intended to address the case where the court is unable to form a decided conclusion on the evidence before it and is unable to say who has the better argument. The court must ask “whether the claimant’s case had “sufficient strength” to allow the court to take jurisdiction…To an extent it moves away from a relative test and, in its place, introduces a test combining good arguable case and plausibility of evidence… [T]his is a more flexible test which is not necessarily conditional upon relative merits.” [80]
II What it means to ‘direct’ activities
The commercial or professional activities need not be directed to consumers “domiciled” in the relevant state. It is enough if they are directed towards consumers merely living there. Marketing targeting expats in the UK for instance, would suffice.
Whether a trader “targets” its activities to a particular state is an objective, not subjective test: Provided the trader’s statements of conduct (objectively) manifests an intention to direct its activities to a relevant state, it is irrelevant whether or not the trader actually (subjectively) intended to direct its activities there (see Merck KGaA v Merck Sharp & Dohme Corp & Or’s [2017] EWCA Civ 1834).
The materials that make such an intention manifest must however, in some way be the responsibility of, or endorsed by, the trader rather than a third party.
There is no requirement of a causal connection between the consumer’s entry into the contract with the trader and the marketing materials which manifested the trader’s intention to do business in the consumer’s place of domicile (see Emrek v Sabranovic (Case C-218/12) [2014] Bus LR): ‘The court is looking solely at the matter from the point of view of the trader’s activities’.
III What evidence might demonstrate the ‘direction’ of activities?
In Pammer v Reederei Karl Schlüter GmbH & Co KG; Hotel Alpenhof GesmbH v Heller (Joined cases C-585/08 and C-144/09) the CJEU held that mention on a website of the trader’s e-mail address or geographical address, or of its telephone number without an international code would not amount to such evidence ([77]) but “clear expressions of the intention to solicit the custom of that state’s consumers” would ([80]). These include mention that it is offering its services or its goods in one or more member states designated by name or expenditure on an internet referencing service to facilitate access to the trader’s website in the consumer’s state ([81]).
In [83] the Court gives a non-exhaustive list of features of the case which alone or in combination might be capable of demonstrating the existence of an activity ‘directed to’ the member state of the consumer’s domicile:
“[T]he international nature of the activity at issue, such as certain tourist activities; mention of telephone numbers with the international code; use of a top-level domain name other than that of the member state in which the trader is established, for example ‘.de’, or use of neutral top-level domain names such as ‘.com’ or ‘.eu’; the description of itineraries from one or more other member states to the place where the service is provided; and mention of an international clientele composed of customers domiciled in various member states, in particular by presentation of accounts written by such customers.”
In [84] the Court states: “If… the website permits consumers to use a different language or a different currency, the language and/or currency can be taken into consideration and constitute evidence from which it may be concluded that the trader’s activity is directed to other member states.”
The Court’s decision on the facts
The Court concluded that, whilst ‘many if not all of the points relied on by the Claimant…if taken in isolation, would not amount to evidence that the Bank was targeting or directing its commercial activities to the United Kingdom’, he had nevertheless supplied a “plausible evidential basis for the application of a relevant jurisdictional gateway”.
The use of international dialling codes and a ‘high level website domain’ in particular, were of no probative value and simply evidenced an intention to do business outside of Lebanon. Likewise, a ‘visit to London by a senior director to attend a meeting of the International Institute of Finance’ ‘says nothing about where the Bank’s customers who might need to use such services are based’. Of some value were the ‘use of the English language in the marketing materials, the dropdown menu of options for those contacting the Bank which includes the United Kingdom and the evidence that there are some customers of the Bank who live in the United Kingdom. More important still was ‘references to a strategy to target Europe through the Bank’s subsidiaries LFF and SBA and the Bank’s 2014 annual report referring to its residential mortgage business with private banking clients in Paris and London.’
Comment
The decision explains:
(i) precisely what it means to ‘direct’ professional or commercial activities under section 15E(1)(c) of the 1982 Act;
(ii) what evidence is relevant to that issue; and
(iii) the threshold the evidence must meet;
and is therefore essential reading for all travel practitioners.
It shows, perhaps surprisingly, that jurisdiction can be established even where the activities are not directed towards those domiciled in the relevant state, where the trader did not ‘intend’ to do business in that state and where the activities had no effect on the claimants decision to enter into the contract. It is therefore likely to be of considerable assistance to claimants reliant on the ‘consumer contract’ gateway to found jurisdiction for their claims.
About the Author
Called in 2010, Tom Collins is ranked in the Legal 500 as a specialist in Travel Law. He has considerable experience across a wide range of travel and private international law disputes and has advised claimants and defendants in multi-party actions.
The Ryanair Witch Project: On the Beach v Ryanair
As the travel industry continues to lick its Covid inflicted wounds, it’s perhaps unsurprising that actors on the business side, under siege from litigation brought by consumers with unrefunded ticket stubs in hand, should turn on each other and head to the courts as protagonists in their own legal horror stories. And so this week saw travel agents On the Beach initiating proceedings in the High Court against Ryanair alleging inter alia the competition law infringement of abuse of a dominant position, and the esoteric tort of causing loss by unlawful means.
The underpinning grievance centres on the operation of the Ryanair website, and the airline’s alleged practices of blocking credit card numbers used by On the Beach, thus preventing the travel agent’s customers from creating accounts and managing bookings online. Thrown into the mix is a complaint that On the Beach has found itself out of pocket to the tune of almost £50 million refunding customers to whom it has sold packages containing Ryanair flights cancelled because of the pandemic, without seeing the refunds for those flights coming into its own accounts from the airline. These latest proceedings are another episode in a long-running series of skirmishes between agent and airline, with Michael O’Leary having previously called online travel agents ‘scam artists’, and with his company having brought proceedings in the opposite direction in Ireland in 2013, alleging ‘screen-scraping’ of data from its website in breach of its Terms of Use.
The instant case will likely offer up a veritable smorgasbord of pickings for a lawyer interested in private international law. The competition law elements of the case seemingly arise out of facts arising both before and after the end of the Brexit Transition Period, meaning that certain provisions from the EU Treaties (e.g. Article 102 TFEU) will apply (the interpretation of which remains the domain of the Court of Justice of the European Union under the terms of the Withdrawal Agreement) to any deleterious effects on cross-border trade, as well as Chapter II of the Competition Act 1998 for distorting effects only in the UK market from 1st January 2021. There might even be a jurisdictional challenge to at least certain elements of the claim, testing the infancy of the post-Brexit forum regime.
The second head of the claim, the economic tort of causing loss by unlawful means, may be fresh in practitioners’ minds from a recent exploration by the Supreme Court in Secretary of State for Health v Servier Laboratories Ltd [2021] UKSC 24. There the tort was reaffirmed as requiring “acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant.” Importantly that case established beyond doubt that the unlawful means needs to have affected the third party’s freedom to deal with the claimant in order for the tort to be made out. Accordingly On the Beach will be attempting to show:
(i) that Ryanair have acted unlawfully towards consumers (the third parties);
(ii) this has affected consumers’ freedom to deal with On the Beach; and
(iii) consequently On the Beach has suffered loss. On the face of it, none of those three necessary elements looks particularly easy to prove.
Ryanair has Jarndyce form for dragging competition cases up and down and all around with its attempted takeover of Aer Lingus occupying domestic and EU courts from 2006 to 2015. It is therefore unlikely that those consumers whose victimhood is being invoked as part of On the Beach’s claim will see any catharsis (one way or the other) for a long time yet.
About the Author
Tom Yarrow was called in 2018. Before joining chambers Tom was a civil servant working in various government departments, including as a policy advisor on the UK-EU Withdrawal Agreement at the Department for Exiting the European Union. During pupillage he worked with the Government Legal Department, practising in public law in the fields of public international law, justice and security, human rights and immigration. He has regularly appeared in judicial review proceedings for the Secretary of State for the Home Department, and as a member of the Attorney General’s ‘junior junior’ scheme, he is able to take instructions directly from government clients. He now practises in all of chambers’ practice areas and is an enthusiastic and valued member of the travel team.
…And Finally…IT
In a speech which is bound to strike fear and horror into anyone who has ever had dealings with the court system or with government IT procurement, speaking at a City of London Corporation seminar ‘Online Justice after the pandemic’, Sir Geoffrey Vos spoke of the development of a digital triage portal for all civil justice claims, in order, he said, to enable the transition to online dispute resolution. Highlighting the need for civil justice to become “even more agile and streamlined”, the Master of the Rolls said that the first layer of such a structure would be a website regulated by a new online rules committee, to which any potential claimant can go. The second agile and streamlined procedural horror would comprise a series of online pre-action protocols aimed at resolving disputes of various types without court-based litigation. Given the difficulties the court service is currently experiencing in listing cases, which have brought many judges (and practitioners) we know to the brink of homicidal insanity, we at 1CL await with interest the rollout of this exciting project. After all, what could possibly go wrong with a fully automated system conducted in the absence of a judiciary?
