Court of Appeal decision confirming the three-limbed test that a claimant asserting jurisdiction must establish.

Factual background

The appellant, Kaefer Aislamientos SA de CV (Kaefer), commenced proceedings against four defendants for sums alleged to be due under a contract of works performed by Kaefer, to a jack-up rig, the “ATLANTIC TIBURON 1”.

The contract was between Kaefer and the first and second defendants and included an exclusive jurisdiction clause and an entire agreement clause.

Kaefer brought the claim against the first and second defendants, as parties to the contract, and also against Atlantic Tiburon 1 Pte Limited (AT1) which was the rig owner and Ezion Holdings Limited (Ezion) which was the holding company of AT1.

At first instance, Kaefer argued that the third and fourth defendants (AT1 and Ezion) were undisclosed principals to the contract and therefore subject to English jurisdiction pursuant to the exclusive jurisdiction clause.

In the first instance decision, the judge applied a two-part test starting with good arguable case, which he equated with the summary judgment test, and then moved on to decide who had ‘much the better argument’. The judge held that the claimant could show that there was a good arguable case that AT1 was an undisclosed principal but that AT1 had the better of the argument. In relation to Ezion, the judge held that the claimant had failed to establish either element. Therefore, the High Court did not have jurisdiction in relation to the third and fourth defendants.

Kaefer appealed the decision on the grounds that having found that the claimant had a good arguable case that AT1 was an undisclosed principal, the judge erred in proceeding to apply a second test based on ‘much the better argument’. Kaefer argued that applying a gloss on the good arguable case test was neither justified in law nor policy but in any event the ‘better argument’ test could not be applicable in a case where the evidence was incomplete and contradictory and where the defendants had failed to make relevant disclosures.

Legal issues

The Court of Appeal dismissed the appeal, in doing so they set out the following tests:

Establishing jurisdiction: Test to be applied

The Court of Appeal agreed that the trial judge had erred by applying a two part test. They recognised that over the years the test had become ‘befuddled by glosses’. As their starting point the Court of Appeal took the two recent judgments of the Supreme Court in Brownlie -v- Four Seasons Holdings Inc [2018] 1 WLR 192 and Goldman Sachs International -v- Novo Banco SA [2018] UKSC 34.

In Brownlie the comments of the Supreme Court were obiter, however an opportunity to clarify the test arose in Goldman Sachs where the court essentially repeated its previous formation and unanimously endorsed the following three-limbed test:

‘Limb (i) That the claimant must supply a plausible evidential basis for the application of a relevant jurisdictional gateway;

Limb (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

Limb (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.’

The Court of Appeal provided an explanation on how to apply the three-limbed test.

Limb (i) This limb was a reference to an evidential basis showing that the claimant had the better argument. The burden of proof remained on the claimant. The standard under limb (i) was not ‘balance of probabilities’; the test was content specific and flexible.

Limb (ii) This limb was an instruction for the court to use judicial common sense to try to ‘overcome evidential difficulties and arrive at a conclusion if it "reliably” could’. Limb (ii) recognised that jurisdictional challenges would likely have gaps in evidence and in such cases judges should use their common sense and pragmatism.

Limb (iii) This limb arose where the court was unable to make a decided conclusion based on the evidence before it. To an extent, it moved away from a relative test and, in its place, introduced a test combining good arguable case and plausibility of evidence. Whilst no doubt there was room for debate as to what this implied for the standard of proof, it could be stated that this was a more flexible test which was not necessarily conditional upon relative merits.

The first instance decision

Having established the test to apply, the Court of Appeal turned to the approach and decision of the first instance trial judge.

Although the first instance decision was handed down before the two Supreme Court cases took place, the Court of Appeal held that the trial judge erred since he was wrong to apply a two part test in the way he did.

However, when in practice, the trial Judge applied the tests, somewhat presciently, the judge ultimately used a test which was very close to that now reflected in the reformulation in Brownlie and in Goldman Sachs.

The Court of Appeal concluded that the judge did err in parts of his thinking but, ultimately, he applied a test which could be said to be consistent with that expressed in the Supreme Court judgments. Therefore, the appellant had failed to meet the test to establish jurisdiction for AT1 and Ezion, and therefore the appeal should be dismissed.

Respondent’s notice

In the respondent’s notice, AT1 and Ezion raised the point that the trial judge was wrong to say that the contract terms were neutral. They argued that the entire agreement clause was evidence that the named contract parties were the only parties with liabilities and therefore they could not be undisclosed principals.

On this aspect, the Court of Appeal held that the trial judge was wrong, the contract terms were not neutral and were relevant. Although the entire agreement clause did not serve to altogether exclude the possibility that there might be undisclosed principals, it was evidence that the named contractual parties were to treat each other, and no one else, as the parties with liabilities and rights under the agreement and hence the persons to sue or be sued under it.

Although the trial judge was incorrect on this point, it was not decisive, and served only to strengthen the conclusion that jurisdiction should be declined.


All the Court of Appeal judges were in agreement that the appeal should be dismissed. Lord Justice Davis, whilst in agreement, considered further the language involved in the jurisdiction test, held that it was sufficiently clear that the ultimate test was one of ‘good arguable case’ and the additional word ‘much’ which was applied in the first instance decision, and had historically been applied by judges, could be considered ‘consigned to the outer darkness”’.

Lord Justice Davis also went on to criticise the approach of both Kaefer and claimants in general, for seeking the widest possible disclosure, by way of a fishing exercise, and then relying on non-disclosure as supporting its claim for a plausible case.

There is policy justification for a clear test to ensure that jurisdiction is established early in a case and prevent unnecessary costs being incurred, arguing over merits in a non-applicable jurisdiction.

The two recent cases from the Supreme Court and the added guidance from the Court of Appeal should bring some clarity to an area which has historically been the cause of much dispute.