In another case where leading counsel from Quadrant Chambers acted for all parties, the Court of Appeal has today handed down judgment in Kaefer Aislamientos SA v. AMS Drilling Mexico SA & Ors [2019] EWCA Civ (TBC). The decision is essential reading for anyone seeking to establish or challenge jurisdiction in the High Court. It reconciles the various strands of authority on what is the test of ‘good arguable case’ and provides guidance on the approach to be taken in any dispute over jurisdiction particularly disputes where the evidence before the court is incomplete.

The dispute over jurisdiction arose in circumstances where the appellant repairer sought to recover sums alleged to be due under a contract for works to a rig. The appellant issued proceedings against four defendants including the respondents, the Singaporean owner of the rig and its holding company. In order to establish that the respondents were party to the contract and to the jurisdiction agreement contained in it, the appellant had to show that the respondents were undisclosed principals to the contract. It was common ground that there was no direct evidence on this issue. The appellant alleged that the evidence was such that the court could infer that the respondents were party to the contract.

Both at first instance and on appeal, there was a dispute as to the elements of the test to be met by the appellant if it was to establish that the High Court had jurisdiction under Art. 25 of the Recast Brussels Regulation. That dispute focussed on the substantive meaning of the phrases ‘good arguable case’ and ‘much the better argument’ and on whether the test for jurisdiction has two discrete parts or one part with composite ingredients.

At first instance, the judge treated the test as having two discrete parts, namely a claimant has to establish that it has a good arguable case and that it has much the better argument. On the evidence, he held that the appellant could establish a good arguable case against the rig owner but failed to show that it had the better argument. He held the appellant failed in both respects in its attempt to establish jurisdiction against the holding company. In assessing the evidence, the judge rejected an argument from the respondents that the terms of the contract were such as to exclude the possibility of undisclosed principals or were at least strongly indicative that the respondents were not party to the contract.

On appeal, the appellant sought to argue that the question of who had the ‘better argument’ was an unjustified gloss on the good arguable case test, which should not in any event be applied where the evidence was incomplete or contradictory. The appellant also argued that the judge had erred in his evaluation of the evidence. The respondents challenged the judge’s approach to the significance of the contract terms and in particular the entire agreement clause in those terms.

The Court of Appeal dismissed the appeal. In doing so, the court considered and applied the judgments of the Supreme Court in Brownlie (2017) and Goldman Sachs (2018).

The Court emphasised that disputes over jurisdiction should be determined with dispatch and should not become a distraction from the main event. It recognised that courts have nevertheless struggled to find a test, which encapsulates in readily workable language what the test is and how it should be applied.

Having considered the authorities, the Court held that the test for jurisdiction is now the three-limbed test described by Lord Sumption in Goldman Sachs. A claimant asserting jurisdiction must establish:

  1. A plausible evidential basis for the application of a relevant jurisdictional gateway;
  2. 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;
  3. If the nature of the issue and the limitations of the material available at the interlocutory stage is such that no reliable assessment can be made, there will be a good arguable case for the application of the gateway if there is a plausible (albeit contested) evidential basis for it.

This three-limbed test is a confirmation of the relative test in Canada Trust requiring a claimant to show that it has the better argument based on plausible evidence. The burden of proof remains on a claimant but the test is context specific and flexible. A court must be astute not to express any view on the ultimate merits of the case. The word ‘much’ has now been laid to rest.

In relation to limb (ii) of the test, the Court has expressly acknowledged that it is an instruction to courts to seek to overcome evidential difficulties and arrive at a conclusion if they reliably can. A court is to use judicial common sense and pragmatism. Attempts by claimants to seek extensive disclosure and then rely on a defendant’s refusal to give such disclosure as evidence of an uncooperative attitude were deprecated. Limb (iii) of the test addresses the situation where it is not possible for a court to assess the relative merits of each party’s case at an early interlocutory stage. A claimant still has to establish a sufficiently plausible evidential basis for the application of a jurisdictional gateway.

In considering the test, the Court also made a number of other findings on matters which commonly arise in jurisdictional disputes.

In relation to Art. 25 of the Recast Brussels Regulation, the test is the same regardless of the domicile of the parties and requires a claimant to demonstrate consensus over a jurisdiction agreement clearly and precisely.

Former case law on service abroad being an exercise of an exorbitant jurisdiction no longer applies to raise the bar for establishing jurisdiction.

An appellate court should be reticent in interfering with a judge’s evaluation of the evidence particularly where a judge has addressed complex facts in close detail.

The Court of Appeal differed from the judge on the weight to be given to the contract’s express terms. Where the contract terms identified the parties to the contract and contained an entire agreement clause, those are relevant factors to be taken into account when assessing jurisdiction and were strongly indicative that the alleged agents did not intend to act on behalf of undisclosed principals when entering the contract.

The Court dismissed the appeal with costs.

A copy of the judgment is available here.