Contracts


Commission - contractual licences - dispute resolution - estoppel - interpretation

Douglas Charles Harper v Interchange Group Ltd: QBD (Comm) (Mr Justice Aikens): 27 July 2007

The court was required to determine preliminary issues arising from a dispute between the claimant (H) and the defendant company (D), concerning the terms of an asset sale agreement.



H had developed a business software company (S) whose products were sold under licence. S had contracts abroad, including specified contracts and some potential new contracts. When S went into administration, D offered to buy it, and over several months negotiations took place that included the terms on which H was to receive payments by way of commission on various contracts. H continued to seek increased levels of commission up to the date of the signing of the asset-sale agreement, which was made as a deed under seal.



Afterwards, he queried commission statements sent to him, but did so outside the contractually allowed period. H inspected D's company records, alleged that additional consideration was due under the agreement, and commissioned an audit of D. The preliminary issues were whether, on a proper interpretation of clause 3 of the agreement H was entitled to further commission from D in respect of the specified contracts; even on H's interpretation, he was still prevented from recovering that commission because of failing to use the contractual means of settling such disputes; even on H's interpretation, he could not recover because post-agreement events had produced an estoppel, or there was an 'account stated' between the parties; on H's interpretation, he could claim rectification of the agreement. H maintained that before signing the agreement, D had effectively agreed to the enhanced terms and argued that a true interpretation of clause 3 of the agreement provided that, for the specified contracts, he was entitled to commission of 7.5% of all defined licence fees, 10% of the defined gross margin, and that he was also entitled to 10% of all recurring income originating from gross margin. H also argued that such an interpretation was correct on an ordinary reading in the context of the agreement as a whole and the factual matrix of its making, and that it accorded with commercial sense in the circumstances; and the dispute resolution provisions applied only to mathematical calculation matters and not to issues of interpretation.



Held, interpretation of the agreement involved the terms, 'licence fees', 'gross margin', 'recurring income' and 'enhancements', but they were all defined in the agreement and there was no scope for considering the negotiations of the parties as an aid to interpretation, Chartbrook Ltd v Persimmon Homes Ltd [2007] EWHC 409 (Ch), [2007] 1 All ER (Comm) 1083 applied. Terms had to be interpreted against the factual background known to both parties. Clause 3 contemplated the possibility of 'recurring income', as defined, from either an existing contract, from any other contracts made by D after completion concerning software, or from the specified contracts. The three classes were intended to be separate. On that interpretation, the agreement dealt with H's entitlement to commission on all types of existing and potential contracts, without any kind of overlap or double commission. That interpretation also made commercial sense. The dispute resolution clauses were comprehensive and binding, but H did not invoke them at any time and was not entitled to bring an action that he was wrongly paid under clause 3, Infiniteland Ltd v Artisan Contracting Ltd [2005] EWCA Civ 758, (2006) 1 BCLC 632, and Gillatt v Sky Television Ltd (formerly Sky Television Plc) (2000) 1 All ER (Comm) 461 considered. On the evidence, there was sufficient mutually manifest conduct between the parties to create an estoppel by convention, but as the agreement was made as a deed under seal, which could be sued on up to 12 years afterwards, it would not be unconscionable for H to rely on estoppel by convention if it were the only point, K Lokumal & Sons (London) Ltd v Lotte Shipping Co Pte Ltd (The August Leonhardt) (1985) 2 Lloyd's Rep 28 considered. The issue of 'account stated' was not pressed by the parties. (Obiter) D could not have succeeded on the issue of rectification as there was not the necessary strong evidence of continuing common intention outwardly expressed with regard to clause 3.



Preliminary issues determined in favour of defendant.



John Davies QC (instructed by Lupton Fawcett (Leeds)) for the claimant; James Corbett QC, Paul Downes (instructed by Coley & Tilley (Birmingham)) for the defendant.





Family



Contact orders - international child abduction - jurisdiction - residence orders - rights of custody - rights of entry and residence

Re A, HA v MB (Brussels ll revised: article (11)7 application): Fam Div (Mr Justice Singer): 24 August 2007
The applicant father (F) applied for orders for his two-year-old son (S) to reside with him in England and for S's mother (M) to return S to England from France for that purpose.



F was aged 44 and was a Palestinian national born in Gaza. M was a French national aged 27. F had come to England on a six-month visitor's visa in 1996. In 2001, he had met M who was then working and living in London. Within a few months, they had married. As a consequence, F obtained a right of residence. F had lost his employment in about April 2004 after his employers discovered that he had assumed a false identity. M had worked until shortly before S was born in May 2005.



Shortly after S's birth, M had taken S to France. She had soon after decided to end the marriage. F, through the International Child Abduction and Access Unit, requested the institution in France of proceedings seeking an order for S's return to England under article 12 of the Hague Convention on the Civil Aspects of International Child Abduction. The French court refused to order S's return on the basis that although wrongful retention in France was established, so was the defence under article13(b) that there was a grave risk that S's return would expose him to physical or psychological harm, or otherwise place him in an intolerable situation.



Following the departure of M and S from the UK, F's right of residence had been revoked. M submitted that a court examining the question of the custody of the child after an article 13 non-return order was limited to examining the question of custody, and whether an order entailing the child's return should be made under article11(7) of regulation 2201/2003. F submitted that an order for contact or staying contact would fall within the scope of what the court could order when it examined the question of custody of the child under article11(7), and that such an order would constitute a judgment that required the return of the child to England for the purposes of article11(8).



Held, the French non-return order set in train the procedures set out in articles 11(6) and 11(7) of regulation 2201/2003. An application for the court 'to examine the question of custody of the child' under article 11(7) was an innovation introduced by the regulation in relation to which neither domestic rules nor consistent practice had yet been established in England. The conventional domestic application made by F under section 8 of the Children Act 1989 for residence, contact and specific issue orders was in some ways inappropriate in an article 11(7) case, and some specific procedure should be set in place for such cases. Under article 10 of the regulation, the English court, as the court of S's habitual residence before his removal to France, continued to have jurisdiction if it became seised. In factual and practical terms, S was resident, and habitually so, in France, and if the English court did not order his return then jurisdiction would pass to France in accordance with article10. Until such an order was issued, F remained able to seise the English court and was entitled to continue to pursue his Children Act applications, notwithstanding that if the court made an order which did not entail S's return to England jurisdiction would pass to France, Leon v Leon [1967] P 275 applied.



It followed that the English court retained power to make contact orders even if it did not order S's return to England. An order for contact in England did not amount to a judgment requiring the return of the child for the purposes of article10. The court would make an order for F to have contact with S in England. The court's order was an order for contact rather than a shared residence order. The court declined to order S's return to England or make an order that he should live in England with either parent. The court rejected the argument that it should make a residence order to strengthen F's immigration position, A (Children) (Care Proceedings: Asylum Seekers), Re [2003] EWHC 1086 (Fam), [2003] 2 FLR 921 considered. The court would make a residence order in favour of M in France. The autonomous meaning that the English court should ascribe to 'judgment' for the purposes of the regulation was a document containing the terms of the judge's order that was issued by the court. Therefore, until that order was drawn up the English court remained seised of the contact and other issues. The court gave guidance, approved by the president of the Family Division, on the appropriate practice to be adopted in such cases, pending the entry into force of the Family Procedure Rules.



Application granted in part.



Marcus Scott-Manderson QC, David Williams (instructed by Gillian Radford and Co) for the applicant father; Michael Nicholls QC, Marie-Claire Sparrow (instructed by Pritchard Joyce & Hinds) for the respondent mother; Kate Branigan QC (instructed by CAFCASS Legal) for the child.



Committal orders - non-molestation orders - sentence length

Iqbal Gull v Khumza Gull: CA (Civ Div) (Lords Justice Tuckey, Wilson, Lawrence Collins): 31 August 2007
The appellant (G) appealed against an order committing him to prison for 21 months for breach of a non-molestation order. G was 33 years old and was of very low intelligence. The order prohibited him from returning to, entering or attempting to enter the house where he had lived with his mother until he was 28.



He had left the house after a violent argument with his mother. She had obtained orders restraining him from using or threatening violence against her and ordering him not to enter the family home. He had also been convicted of common assault against her.



Since that time, several non-molestation orders had been made under the Family Law Act 1996, notwithstanding which G had on several occasions returned to the house in breach of the orders. There had been at least 20 recorded breaches of orders.



The breach that was the subject of the present committal order occurred on the same day he was released from prison for a previous breach of the order. He had telephoned the house to say that he was coming and a short time later knocked at the door asking to be let in. His sister was staying in the house while the mother was away. She called the police, who arrested G. G submitted that the sentence was excessive because he had admitted the breach at the earliest opportunity, his mother was absent from the house, he was not violent on the occasion of the breach, it was a common feature of the breaches that he wanted to be allowed back into the house to live, he did not try to force entry, and the deterrent element had no effect because of his various personality problems. The mother submitted that the chronology demonstrated the range of options which had already been tried, from which it was clear that non-custodial options or short terms of imprisonment had not been successful in moderating G's conduct.



Held, G had a vulnerable personality and was of low intelligence, with learning difficulties which were close to, but did not reach, the threshold of disability. What he had done was to go home, and he did not engage in, or threaten, violence. The sentence, nearly at the two-year maximum, was excessive and a sentence of 12 months was substituted. G had great difficulty in living independently and had never had any permanent accommodation outside his mother's house. He was not entitled to mental health services as a person with a disability. He was entitled to accommodation as a homeless person but had difficulty with accepting the hostel accommodation which might be provided. There was a strong probability that if G's problems were not addressed before he was released, he would be in breach again and the cycle would restart. A plan should be formulated by G's advisers in conjunction with social services to manage G's release into the community.



Appeal allowed.



Ian Miller (instructed by Levi) for the appellant; John Myers (instructed by Switalski's) for the respondent.





Civil Procedure



Securitisation - jurisdiction and discretion to make order for non-party disclosure

Ixis Corporate & Investment Bank (formerly CDC IXIS Capital Markets) v (1) WestLB AG (2) CIBC World Markets Plc (3) Terra Firma Capital Partners Ltd & Calyon, London branch: QBD (Comm) (Mr Justice Aikens): 27 July 2007
The applicant company (R) applied for non-party disclosure against the respondent company (C) under rule 31.17 of the Civil Procedure Rules. R made claims against the joint lead managers of a securitisation in which R had purchased £200 million of loan notes. The securitisation followed the merger of two television rental businesses, the subject of the securitisation being the cash flow of the combined business.



The offering circular had set out a figure for the net present value of equity cash flows of the business. That value had been calculated by a complex, computer-created model that projected future cash flows through an analysis of data relating to the past rate of termination of contracts. The business subsequently experienced serious financial difficulties and R sold the notes for £26 million.



R had learnt that the implementation of one of the key assumptions in the computer model was flawed. R alleged that the effect of the flawed implementation of the assumption was that the net present value figure in the circular was overstated by some £290 million. R claimed against the arrangers in negligence and deceit. C had considered participating in the securitisation as a joint lead manager but decided not to do so after detailed analysis of the computer model. R submitted that there were a number of important documents created or sent by C to the managers of the securitisation that would illuminate the managers' state of knowledge about the effect of the flawed implementation of the assumption.



Held, on the evidence there existed or it was likely that there existed in the possession, custody or power of C three classes of communications, notes or memoranda, hard copy or electronic, relating to the issue of C's work on the model, in particular in relation to the model's projection of terminations of rental contracts and the flawed assumption. Those three different classes of document might well assist R or adversely affect the case of the lead managers in issues relevant in the action. It was necessary to dispose fairly of the claim that an order under rule 31.17 was made. Any concerns of C as to privacy and confidentiality regarding its attitude towards other parties, its commercial strategy, and its internal credit processes that did not have anything to do with the issues in the case, could be dealt with by proper redaction of any documents disclosed. C would be able to recover the reasonable costs of the disclosure exercise.



Application granted.



Andrew Twigger (instructed by Stephenson Harwood) for the applicant; Richard Slade (instructed by White & Case) for the respondent.





Criminal Procedure



Adjournment - conduct - defence disclosure - discretionary powers - failure to disclose

Robinson v Abergavenny Magistrates' Court; Fine v Abergavenny Magistrates' Court DC (Lord Justice Hughes, Mr Justice Treacy): 13 July 2007
The claimants (R and F) applied for judicial review of two decisions of a magistrates' court to adjourn proceedings against them for speeding. The offences arose from speed restrictions imposed by different road traffic orders.



Neither F nor R confirmed the issues that they wished to raise in their defence prior to the hearings. The court, in each case, fixed a trial date, which R and F unsuccessfully sought to vacate.



F, who initially indicated a challenge to the validity of the road traffic order in question, conceded that the order was valid, but later changed his stance. The Crown applied for adjournment in each case, accepting that it had failed to comply with the disclosure provisions under the Criminal Procedure and Investigations Act 1996 and had failed to serve a notice in time pursuant to section 20 of the Road Traffic Offenders Act 1988. The court adjourned R's case on the grounds that there was no real prejudice to R caused by the failure to serve the notice in time, and that the history of the matter should be balanced against the need for speedy summary justice.



In F's case, the court held that F's changing stance in relation to the validity of the road traffic order was an additional reason for adjourning the case. The claimants argued that they were entitled not to confirm the issues that they wished to raise in their defence before the day of the trial, that the Crown was at fault in failing to serve the relevant notices in good time, and that it was those failures that necessitated the adjournment in each case. The claimants argued that the court had wrongly taken into account the matter's history.



Held, the overriding objective of the Criminal Procedure Rules 2005 was that cases be dealt with justly. Each participant in the case had to prepare and conduct the case in accordance with the overriding objective. That included the obligation actively to assist the court in fulfilling its duties, including early identification of the real issues in the case, and co-operating in the progression of the matter. The claimants had lost sight of their responsibilities under those rules. The observation that the Crown should be in a position to deal with whatever defence arose on the day of the trial should not be relied on by defence advocates in those circumstances in magistrates' courts, R (on the application of DPP) v Cheshire Justices [2002] EWHC 466 (Admin), [2002] PNLR 36 considered. While the Crown was at fault in failing to serve section 20 certificates in time, in each case the apparent identification of other issues by the defence shortly before the hearing had deflected the Crown's attention elsewhere. The mere fact of the failure could not be determinative of an application to adjourn. The court was entitled to look at the history of the matter. The court's decisions were within the proper range of its discretion.



Applications refused.



Solicitor-advocate D Sonn (instructed by Sonn MacMillan) for the claimants; no appearance or representation for the defendant.





Sentencing



Company name - confiscation orders - peaceful enjoyment of possessions - benefit obtained through use of prohibited name - proportionate interference

R v Karen Jayne Neuberg: CA (Crim Div) (Lord Justice Leveson, Mr Justice Elias, Mr Justice Griffith Williams): 13 July 2007
The appellant (N) appealed against a confiscation order made pursuant to section 71 of the Criminal Justice Act 1988. N had traded using the name of her husband's former company, which had gone into liquidation.



It had later become unlawful to trade under the name of that company but N had continued to use it for approximately seven months, despite having been warned not to do so. N pleaded guilty to trading under a prohibited name, contrary to the Insolvency Act 1986. As a result, confiscation proceedings were brought against her. The judge found that N had run a lawful business that was carried on through an unlawful vehicle, and that there was a benefit obtained that should be calculated by reference to the turnover for the relevant period. However, on finding that N did not have the assets to pay that sum, he limited the order to the relevant realisable asset. N submitted that the judge erred in concluding that she had gained any benefit from the use of the prohibited name; the calculation of the benefit by reference to the gross turnover was unjust and failed to give credit for the expenditure involved in running the business; there was an overriding principle of the European Convention on Human Rights that any interference with property rights must be proportionate, and accordingly any penalty must be a proportionate interference with the peaceful enjoyment of possessions enshrined in article 1 of protocol 1.



Held, there was no basis for saying that the judge was not entitled to conclude that N had obtained a benefit within the meaning of section 71(4). The purpose of using the name was to benefit from the goodwill attached to it. N had been told on a number of occasions not to use the name and continued to do so. She must have recognised that there was objectively a benefit to her in so doing. The use of the illegal name was one of the causes of the benefits obtained by her. The judge was entitled to take the view that it had that effect. The judge was right to look at turnover and not simply to limit the benefit to profit. The authorities established a clear principle, which the judge applied appropriately, Jennings v CPS [2005] EWCA Civ 746, [2006] 1 WLR 182, and R v Priestley (RW) (No1) [2004] EWCA Crim 2237, (2004) 148 SJLB 1064 considered. The structure of the legislation was such that the confiscation order would ultimately be limited to the realisable assets of a defendant. That of itself required a proportional response. Moreover, it had been held that the assumptions under section 72AA that entitled a court to determine which property was deemed to have been obtained from criminal activity were not incompatible with article 1 of protocol 1, and yet, in some ways, that provision had a more draconian effect than section 71(4) was likely to have, R v Rezvi (Syed) [2002] UKHL 1, [2003] 1 AC 1099 considered.



Appeal dismissed.



Christopher Hotten QC for the appellant; Simon Davis for the Crown.