Contracts

Civil evidence – Sport – Acquiescence – Findings of fact

Force India Formula One Team Ltd v (1) Etihad Airways PJSC (2) Aldar Properties PJSC: CA (Civ Div) (Lords Justices Rix, Patten, Sir Mark Waller): 6 October 2010

The appellant sponsors (E) appealed against a decision ([2009] EWHC 2768 (QB)) that they were liable in damages to the respondent Formula One team (F) following their repudiation of the sponsorship contract.

The contract, dated April 2007, provided for a sponsorship period from 2007 to 2009. It provided that E were to be the most prominent brands associated with F and were entitled to have its naming and livery rights. It stipulated that one particular sponsor within E was to be the sole and official airline associated with F. It provided that F would not do anything by way of sponsorship or marketing which could be deemed to be in conflict with the sponsors’ main activities. It also provided that F could source a more profitable sponsor for the 2008 and 2009 seasons, and that in such a situation E could opt either to match the new sponsorship, or to take a back seat to the new sponsor, or to terminate their sponsorship without further obligation. In September 2007, a prominent Indian entrepreneur (M) made a successful bid for F and became its driving force. He was the chairman of one of the largest brewery groups in the world and the group also owned India’s largest airline. M rebranded F, changing its name and creating a strong affiliation with India. In January 2008, E terminated the contract on the basis of material breach. The issue for determination was whether E or F had repudiated the contract. The court found that M’s conduct was not a material breach of the contract and that, as E had been aware of events following M’s acquisition of F and had neither complained about them nor invoked their contractual right to give notice requiring the breaches to be remedied, they were deemed to have waived them. E submitted that the judge below had failed to detect an accumulating series of deliberate breaches and that he had belittled the breaches in pronouncing them remediable. They maintained that once the breaches had occurred, they had done nothing to amount to a clear and unequivocal affirmation of the contract, or waiver of, or ­acquiescence in any breach, and that as F had committed an irremediable repudiatory breach, they had been entitled to accept it under common law without invoking their contractual right to demand that the breaches be remedied.

Held: (1) On the facts and evidence, there had been an accumulation of repeated or continuing breaches, which had been borne of a very real clash of interests and which had ultimately become repudiatory (see paragraphs 87 and 99 of the judgment). The judge below had erred in his analysis of various undisputed facts and had failed to appreciate that, beyond the individual breaches was a strategy that was inconsistent with E’s vital rights (see paragraph 126). He had concluded that M had been entitled to rebrand F without asking himself whether M had been entitled to dispense with E’s names. In determining that the breach was remediable, he had not considered whether F’s team name would actually have been changed back to its original name, had E so requested it, nor had he considered the impact of the new name on the interests of E’s sponsors (see paragraphs 22 and 92). Although there was no express prohibition in the contract regarding the sale of F or the change of its name, it had been a clear, grave and continuing breach of contract for M to impose a deliberate and clearly defined marketing campaign which involved abandoning E’s name and replacing their country connections with a strong and expressly emphasised connection with India (see paragraphs 89-91). Likewise, M had ridden roughshod over all E’s contractual rights and protections of their interests without making any attempt to seek their involvement and cooperation (see paragraphs 95-97). It was clear from the evidence that F had known of E’s concerns about the rebranding and had felt sensitive to those concerns (see paragraph 68).

(2) Unless E had affirmed the ­contract or waived or acquiesced in the breaches, they had been entitled under common law to accept F’s ­repudiation as putting an end to the contract, L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235 HL considered (see paragraphs 100-110). There had been no affirmation, waiver or acquiescence by E (see paragraph 122) nor had there been an election not to terminate the contract for repudiatory breach (see paragraph 120). The terms of E’s letter of ­termination had not prevented them from accepting F’s repudiatory breach (see paragraph 118), Tele2 International Card Co SA v Kub 2 Technology Ltd (Formerly C3 Calling Card Co (Ireland) Ltd) [2009] EWCA Civ 9 and Stocznia Gdanska SA v Latvian Shipping Co (Repudiation) [2002] EWCA Civ 889, [2002] 2 All ER (Comm) 768 ­considered.

(3) Although the instant court had trespassed on the findings of fact of the judge below, its conclusions did not go beyond the legitimate subject matter of the appeal since there were no jurisdictional problems and it was therefore not necessary to be strict about what was fact and what was law. If a challenge of fact could be properly and fairly visited, then it could be reviewed, Assicurazioni Generali SpA v Arab Insurance Group (BSC) [2002] EWCA Civ 1642, [2003] 1 WLR 577 considered (see paragraph 125).

Appeal allowed.

Stephen Auld QC, Eleanor Campbell (instructed by Nabarro) for the appellants; Francis Tregear QC, Edward Knight (instructed by Fladgate) for the respondent.