Commercial Marine Piling Ltd v Pierse Contracting Ltd [2009] EWHC 224 (TCC)

Marine was engaged by the UK arm of Pierse to perform piling work at the new ferry terminal being constructed at the Port of Belfast. Pierse UK’s parent company, Pierse Ireland, provided Marine with a parent company guarantee. A dispute arose between Marine and Pierse UK and six months later Pierse UK went into creditors’ voluntary liquidation. Marine commenced proceedings against Pierse Ireland seeking the sums due under the guarantee. The guarantee did not contain a choice of law or jurisdiction clause and so Pierse Ireland disputed that the English courts had jurisdiction to hear the claim.

Pierse Ireland argued that following Article 1 of Council Regulation 44/2001 the presumption should be that Pierse should be sued in its country of domicile; i.e. Ireland. Under article 5(1) a person may be sued in the place of performance of the contractual obligation in question, and the obligation here was the defendant’s obligation to pay under the guarantee.

The place of performance was to be decided in accordance with conflict of law rules of the court seized, which is the English court. Article 4(1) of the Rome Convention provides that the contract shall be governed by the law of the country with which it is most closely connected. Further, article 4(2), states that it shall be presumed 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. Here, Pierse Ireland argued this was was Dublin. Therefore Irish law applied.

Marine claimed that the guarantee contained two obligations:

  1. 1. For Marine to trade with Pierse UK;, and
  2. 2. For Pierse Ireland to pay monies due in default of payment by its subsidiary.

Maine said that neither obligation had anything to do with Ireland; the performance of both took place in England. Additionally, article 4(2) should be disregarded by operation of article 4(5) which looks at the “circumstances as a whole” to see if “the contract is more closely connected with another country.” Mr Justice Ramsey agreed with Maine, holding that the contract on the whole was more closely connected with England and Wales than Ireland and that article 4(5) could displace the article 4(2) presumption:

The relationship under the Guarantee had, in my judgment, a geographical centre of gravity in England. The only connection with Ireland was that it was an Irish Company which was providing the Guarantee but it was doing so in relation to the English company.”

Accordingly the laws of England and Wales applied. In deciding the jurisdiction point the Judge followed previous lines of authority dating back to the Victorian era, that stated where an obligation to pay under a guarantee arises under a default of a party (rather than by operation of a written demand from the creditor), the actual location of the operation of the obligation is the key to establishing where payment is to be made. Here, the contractual obligation was to be performed in England.