Whitehead Mann Ltd v Cheverny Consulting Ltd [2006] EWCA Civ 1303

Case No A3/2005/2633/CHANF

[2006] EWCA Civ 1303

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM CHANCERY DIVISION

Mr Nicholas Davidson QC (Sitting as a Deputy High Court Judge)

HC04C02512

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date Wednesday 11th October 2006

Before

THE CHANCELLOR OF THE HIGH COURT

LORD JUSTICE CARNWATH

LORD JUSTICE MOSES

Between

WHITEHEAD MANN LIMITEDAppellant

CHEVERNY CONSULTING LIMITEDRespondent

(Transcript of the Handed Down Judgment of

WordWave International Ltd

A Merrill Communications Company

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Mr Andrew Clarke QC and Mr Martyn Barklem (instructed by Clifford Chance LLP) for Appellant

Mr John Wardell QC and Mr Jonathan Evans (instructed by Withers LLP) for Respondent

Judgment

The Chancellor :

Introduction

[1]Whitehead Mann plc (“WMplc”) is a publicly quoted company engaged, by itself and through its subsidiaries, in the executive search industry in the United Kingdom and elsewhere. One of its subsidiaries is the defendant Whitehead Mann Ltd (“WML”). M.Jean-Michel Beigbeder (“M.Beigbeder”) has been engaged in such industry in France for many years, since 1986 though Beigbeder & Partners SA. In the summer 2000 there were negotiations for the acquisition of the business of Beigbeder & Partners SA by the Whitehead Mann Group. The negotiations led to the incorporation or acquisition of two companies and the execution of three agreements.

[2]The two companies were Whitehead Mann SARL (“WMSARL”) and the claimant Cheverny Consulting Ltd (“Cheverny”). WMSARL was incorporated in France to carry on the business of the Whitehead Mann Group in France formerly carried on by a branch office in Paris. Thus it was a member of the Whitehead Mann Group. Cheverny had been incorporated in England in 1999. It was acquired by or on behalf of M.Beigbeder in the summer 2000 but he did not become a director until 3rd November 2000.

[3]The three agreements were:(1) An Acte de Cession de Fonds de Commerce (“the Asset Sale Contract”) made between Beigbeder & Partners SA (1) WMSARL

(2) M.Beigbeder

(3) and Maitre Dubois

(4) whereby the assets of Beigbeder & Partners were sold to WMSARL for a total consideration of Fr.F 5m; (2) A Contrat de Travail (“the Employment Contract”) made between WMSARL (1) and M.Beigbeder (2) whereby, for a basic salary of Fr.F1.2m, the former employed the latter as a senior consultant responsible for developing the business of WMSARL by securing new assignments with new or existing clients and carrying them out; (3) A Consultancy Agreement (“the Consultancy Agreement”) executed by all parties as a deed and made between WML (defined as “the Company”) (1), Cheverny (defined as “the Consultancy”) (2) and M.Beigbeder (3) whereby WML engaged Cheverny as a consultant for the period of three years to provide advice and assistance to WML by means of M.Beigbeder in relation to a consultancy recruitment “in the UK, Europe, the United States of America and any other place in the world but outside France as the Board may require (“the Services”)” for the consideration set out in Clause 3 thereof.

[4]The consideration set out in clause 3 of the Consultancy Agreement comprised the retainer fees prescribed by clauses 3.1 to 3.4 and the stock consideration set out in paragraph 3.5. Clause 3.5 provided, so far as material, that:

“In addition, the Consultancy will be eligible at the end of the Duration to a stock consideration comprised of a certain number of shares in Whitehead Mann Plc payable by the Company. The maximum number of shares that may be granted to the Consultancy is 162,295 shares with a nominal value of 5 pence (“the Stock Consideration”) The number of shares to be granted by WMplc depended on the amount of “Source of Business”

. This phrase was defined, by means of clauses 13.1, 3.6 and 2.1.1, as the fees collected in the relevant period relating to obtaining assignments from new or existing clients of WML further to the Services referred to in paragraph 3(3) rendered “in the UK, Europe, the United States of America and any other place in the world but outside France”.

[5]Clause 12.5 of the Consultancy Agreement provided that:

“This Agreement constitutes the entire agreement between the parties to it with respect to its subject matter and shall have effect to the exclusion of any other memorandum agreement or understanding of any kind between the parties hereto preceding the date of this Agreement and touching or concerning its subject matter.”

[6]During the negotiations to which I have referred consideration was also given to a side letter (“the Side Letter”). It was written on the headed writing paper of WMplc and in French. The agreed translation is as follows:

“Paris, 1 July 2000 Dear Jean-Michel, I refer to the different agreements signed between the Whitehead Mann group, the company Beigbeder & Partners and yourself. I confirm that when the said agreements refer to certain levels of performance to realise in order to give you directly or indirectly certain rights, the amount to consider will be the total amounts directly or indirectly realised by you for the benefit of the Whitehead Mann Group, taken as a whole. Yours sincerely, [Space for signature, in the event unfilled] Gerard Clery-Melin Chief Executive Officer”

It was not signed by Gerard Clery-Melin or any one else. [Space for signature, in the event unfilled] Gerard Clery-Melin Chief Executive Officer”

Gerard Clery-Melin

[7]At the end of the period for which the Consultancy Agreement provided Cheverny claimed to be entitled to all the 162,295 shares in WMplc for which clause 3.5 provided on the footing that the Side Letter had varied the Consultancy Agreement so as to remove the limitation on the relevant services to those performed outside France imposed by clause 2.1. The Whitehead Mann Group did not agree and these proceedings were instituted by Cheverny against WML on 30th July 2004. It sought damages of £501,393 for breach of contract.

[8]The claim was heard by Mr Nicholas Davidson QC, sitting as a deputy High Court judge of the Chancery Division, on 13th, 14th and 15th June 2005. The deputy judge handed down his judgment on 8th November 2005. I shall refer to his findings and conclusions in some detail later. For present purposes it is sufficient to record that he considered (paragraph 98) that it was “....more probable than not that the Side Letter was agreed as part of the arrangements which were to be given written effect, and agreed by [WML] as arrangements to be given written effect, as well as by all other parties. I think that by 28th June there was agreement all round that those concerned, including, when it was able to, the English company in the course of formation for Mr Beigbeder [Cheverny], would enter into four, not three, agreements including the Side Letter. I have found it impossible to arrive at a conclusion which leaves no puzzle unresolved, but I regard my conclusion as very much more probable than anything else.” He held that the entire agreement clause contained in clause 12.5 of the Consultancy Agreement did not operate to preclude the Side Letter having contractual effect. He awarded Cheverny damages in the sum of £501,934 and their costs.

[9]WML appeals with the permission of Latham LJ. It contends that the judge’s conclusion quoted in paragraph 8 above cannot stand as he placed substantial reliance on the written witness statement of a witness for Cheverny, M. Dominique Rongier, which that witness himself materially qualified in his oral evidence. It also contends that the judge’s conclusion that the entire agreement clause did not preclude the Side Letter from contractual effect is untenable in the light of his own conclusion that “there was agreement all round that those concerned....would enter into four, not three, agreements”. (emphasis added) Finally WML contends that the Side Letter, even if signed, could not have effected a variation of clause 2.1 of the Consultancy Agreement because the parties were different. Thus there are three issues:(1) Is the judge’s failure to recognise the nature and extent of the qualifications to his witness statement made by M.Rongier in his oral evidence such as to entitle this court to interfere with the judge’s finding of fact, and if so with what consequence? If not,

(2) Does clause 12.5 of the Consultancy Agreement preclude the Side Letter having any contractual effect? If not

(3) Given the intended parties to and contents of the Side Letter did it vary the provisions of clause 2.1 of the Consultancy Agreement so as to remove the exclusion of France? In due course I shall address each of these questions. First it is necessary to describe the background in greater detail. I shall do so by reference to the contemporary documents as that is the factual framework within which the arguments concerning the evidence of M.Rongier must be considered.

The Facts

[10]M. Gérard Cléry-Melin and M. Beigbeder had known each other since 1974. M. Cléry-Melin had been running the Paris Office of WML when the negotiations with M. Beigbeder started. Shortly thereafter he was appointed the Chief Executive Officer of WML and Mr Jeremy White took over the running of the Paris Office. In the initial stages the negotiations were conducted by M. Cléry-Melin for WML and M. Beigbeder for his firm. On 21st February 2000 WML sent a draft proposal to M. Beigbeder. It envisaged that three consultants from Beigbeder & Partners SA, including M. Beigbeder himself, would work for WML and the business of Beigbeder & Partners SA should be bought by WML for Fr.F 10m but with provision of reduction in the price if the fees earned by WML through the three consultants failed to reach a target figure of Fr.F 10m in the first year and more in subsequent years.

[11]The proposal was broadly acceptable to M. Beigbeder and lawyers were instructed on both sides. M. Beigbeder consulted the French Law Firm of Latournerie Wolform & Associates in the person of M.Pascal de Moidrey. WML retained Clifford Chance through M.Olier and M.Billam in its Paris Office. Also concerned on behalf of WML was M. Rongier. He was an independent financial consultant based in Paris. He had been at business school with M. Cléry-Melin and was asked by him for advice in connection with the acquisition by WML of the business of Beigbeder & Partners SA.

[12]M.Olier contacted M. de Moidrey on 16th March 2000. On 30th March 2000 Clifford Chance sent a draft letter of intent acceptable to WML to Latournerie Wolform & Associates. The proposal at that stage was that the assets of Beigbeder & Partners SA would be bought by WML for Fr.F 5m in cash and that M. Beigbeder would enter into a three year service agreement with WMSARL. Under the service contract M. Beigbeder would be entitled to a salary, bonus and stock grant subject to reduction if the business he generated over the three years of the service agreement was less than Fr.F 15m. Neither the original draft proposal nor the draft letter of intent excluded France as a relevant source of fee income on which the consideration or stock grant depended.

[13]On 4th May 2000 Clifford Chance circulated to M.Rongier a draft proposal which envisaged M. Beigbeder being offered(1) a consultancy agreement between WML and an English Company entitled to supply the services of M. Beigbeder,

(2) an agreement for the sale of the assets by Beigbeder & Partners SA to WMSARL and

(3) an employment contract between M. Beigbeder and WMSARL. The first agreement would be governed by English law the other two by French law. A draft letter included with the proposal introduced for the first time the exclusion of France both from the scope of the consultancy services and from the sums to be taken into account in calculating the stock grant. At about this time M. Beigbeder made a note of the proposals. He recorded that there would be two service contracts, the second of which (he made no note in respect of the first) would be made with a new English entity for the purpose of supplying his services for international activity outside France. Under that contract the remuneration would include a stock grant conditional on Fr.F 5m business being generated over three years.

[14]On 29th May 2000 Clifford Chance sent to Latournerie Wolform & Associates a draft consultancy agreement for the supply of the services of M. Beigbeder outside France. The next substantive communication between the lawyers, probably due to the holidays of M.Olier and M.de Moidrey, occurred on Thursday 22nd June 2000. On that day the former sent the latest drafts of the three contracts to M.de Moidrey, with copies to M.Rongier and M.Billam. On the copy of the covering letter received by M.de Moidrey he noted, in French, that “the side letter is missing”. The following Monday, 26th June, M.Olier sent to M.Rongier and M.Billam the draft side letter for their comments.

[15]On 27th June 2000 M.Olier wrote to M.Rongier, M.de Moidrey and M.Billam setting out the agenda for the meeting the following day at 9am. The English translation states:

“On the agenda for the meeting tomorrow: - finalising the schedules to the Acte de Cession de Fonds; - signature of the Acte de Cession de Fonds and presentation of the cheque to be held in escrow; - signature of the Work Contract; - initialling of the Consultancy Agreement and entrusting this to Clifford Chance until documents are given which satisfactorily prove the existence of the English company; - signature of the side letter. The signatories are expected to arrive at 11:00 am. I will leave it to you to inform the interested parties.”

[16]The meeting took place on 28th June 2000. Those present were Mr White, M.Olier, M. Beigbeder, M.de Moidrey and the escrow agent M.Dubois. Mr White signed the Asset Sale Contract and the Employment Contract on behalf of WMSARL. M. Beigbeder signed the Asset Sale Contract on behalf of himself and Beigbeder & Partners SA and the Employment Contract and the Consultancy Agreement on his own behalf. M.Dubois signed the Asset Sale Contract as the escrow agent.

[17]From 6th July 2000 the business of Beigbeder & Partners SA was carried on as part of WMSARL. On the same date M.Olier wrote to Mr McAvilley of Cheverny enclosing three originals of the Consultancy Agreement for execution of behalf of Cheverny. He asked him to forward the three documents, when executed by Cheverny, to Mr Brassington, a director of WML, for execution on behalf of that Company. On the same day M.Olier wrote to Mr Brassington, with a copy to M.Rongier:

“Side Letter – Beigbeder & Partner Please find enclosed the side letter in two originals for execution by M. Gérard Cléry-Melin. You will also be receiving from Cheverny Consultancy Limited the Consultancy Agreement in 3 originals for execution as a deed by Whitehead Mann Limited (execution by two directors or by a director and the secretary). These documents should be sent back to my attention and I will dispatch them to the relevant parties.”

[18]On or shortly before Monday 17th July 2000 the three originals of the Consultancy Agreement were received in Mr Brassington’s office duly executed by Cheverny. On or shortly before 4th August 2000 they were executed by M. Cléry-Melin and Mr Brassington on behalf of WML and returned to Clifford Chance. With regard to the two originals of the side letter

the judge concluded (paragraph 71):

“..the side letter was apparently unsigned, and physically disappeared, and no signed side letter was returned to Clifford Chance.”

[19]The next documentary reference to these transactions is an inter-office memo of 5th August 2002 from M. Cléry-Melin to Mr Brassington recording his understanding that M.Beigbeder “is also due to receive shares (up to 162,295) at the end of the period depending on his SOB [source of business] over the three years to end June 2003.” M.Beigbeder left the employment of WML in January 2003 but continued as an independent consultant.

[20]On 8th October 2003 Mr Brassington e-mailed M.Beigbeder concerning a conversation he had had with a senior figure in the Whitehead Mann Group, Mr Stephen Lawrence. He wrote:

“I told him [Mr Lawrence] that it is my understanding that there was a "side letter" which included France within the calculation but that I do not have a copy of any such side letter and indeed have never seen such a letter.”

Mr Brassington asked M.Beigbeder for a copy. The latter forwarded the e-mail from Mr Brassington to M. Cléry-Melin and adding:

“I don’t recall anything, perhaps you have a copy?”

As the judge recorded the enquiry did the rounds ending up with M.Olier who faxed M.de Moidrey a copy of the unsigned letter adding:

“we do not have a signed copy.”

[21]On 30th October 2003 M.Beigbeder wrote to another senior figure in the Whitehead Mann Group seeking his support and to M. Cléry-Melin and Mr Brassington. He described the Side Letter as “part of the comprehensive package of 4 Agreements signed between us” and “agreed in good faith as an integral part of the deal relative to the purchase of my practice in Paris”. He sought, but did not get, confirmation that it had been so agreed. The reply from Mr Brassington to M.Beigbeder dated 5th November 2003 stated:

“It seems quite clear from the draft paperwork provided to you by Clifford Chance that we must have been contemplating signing a side letter but as to whether we actually did or not or for what reason we would even have considered signing such a letter. I regret I cannot help.”

The response of M. Cléry-Melin in reporting the request of M.Beigbeder to Mr Lawrence was:

“Firstly, I have been requested by Beigbeder to acknowledge in writing that there is a side letter to the Cheverny agreement extending the calculation of his performed work to include French business. I have no recollection of having suscribed [sic] to the then request of his lawyers, and if the letter was presented to me for signature, I certainly believe that I would not have signed it.”

[22]The claim form in this case was issued on 30th July 2004. In paragraph 2 of the particulars of claim Cheverney averred that the “Consultancy Agreement was varied by and/or subject to” the provisions of the Side Letter. In paragraph 3 of its defence WML admitted that an unsigned Side Letter did exist but denied that any concluded agreement was reached between M.Beigbeder and WML in the terms of the Side Letter or in any like terms. In its reply Cheverny contended that there was a concluded agreement between Cheverny, WML and M.Beigbeder in the terms of the Side Letter as evidenced by the unsigned document. It maintained that even if the Side Letter had not been signed that would not entail that there was no concluded agreement. In addition it relied on the subsequent events I have summarised above as recognition by WML of an agreement in the terms of the Side Letter.

[23]In paragraph 22 of his judgment the Deputy

Judge explained the paucity of the documentary evidence before him in these terms:

“Unfortunately, evidence of the circumstances of the making of the contracts is very limited, especially so evidence of the critical period at the end of June and beginning of July 2000. There are virtually no notes of meetings: the principals disclose almost none, and almost all Mr Rongier's notes have gone missing (and there is a dispute as to whether he or the Defendant last had them). Manuscript notes on documents are undated, and the parties are mostly uncertain as to whether such notes are contemporaneous with the documents in question. An additional problem is that the French lawyers' Code of Ethics is said to prohibit them making any such material as they have available, even with their clients' consent. I was informed that both parties had considered calling their French lawyers to give evidence, but that the Code of Ethics to which they are subject prevents them doing so even with the full consent of their clients. (That being so, there is no question of drawing any inferences based on the absence of such evidence.) Add to all I have mentioned that no one appears to have kept or at least produced any diary of any significance, and that the witnesses were giving evidence about matters which had taken place 5 years earlier, and the parties come before the Court markedly short of detail.”

[24]I have set out the judge’s conclusions in paragraph 8 above. I shall, as necessary, amplify them in connection with the specific issues summarised in paragraph 9 above. The first relates to the evidence of M.Rongier and the judge’s conclusions based on it.

The evidence of M.Rongier and its effect on the Judge’s conclusions

[25]On 25th April 2005 M.Rongier made a witness statement which was adduced at the trial by Cheverny. In paragraphs 3 and 4 he described his professional background and occupation. In paragraphs 5 to 10 he related how M. Cléry-Melin had sought his advice and why he had advised that WML should acquire the assets of, rather than the shares in, Beigbeder & Partners SA so as to limit its exposure to the liabilities of Beigbeder & Partners SA. He covered but in the most general terms his involvement in the negotiations. In paragraphs 11 to 13 he said:

“11. I recall attending a meeting with Gerard and Matthew Brassington where we discussed ways of avoiding French social tax of 40% on the award of shares to Mr Beigbeder at the end of the earn-out period. The solution Mr Brassington proposed was to make the award payable through Whitehead Mann in England where the social charge would not arise. 12. It was also agreed by Gerard and Matthew Brassington at this meeting that Whitehead Mann would prepare a side letter confirming to Mr Beigbeder that for the purposes of determining the award of shares, the basis was total business generated by him whatever the country of origin. There was no question that he would not be rewarded for his services in France. It was accepted that Whitehead Mann were purchasing the fonds de commerce of a French company and Mr Beigbeder would continue to generate predominantly French business. 13. As far as I am aware, Mr Olier of Clifford Chance prepared the first draft of the side letter, which he sent to me for approval. On receipt of the letter, I rang him to let him know that I did not have any comments. As far as I was concerned, the letter reflected exactly what we had agreed at our meeting and its meaning was entirely clear." In paragraphs 14, 15 and 17 he explained that he had had no other relevant involvement in the transaction. In paragraph 16 he expressed his opinion as follows: “I am in no doubt in my mind as to the purpose of the side letter and the reason why it came into existence. Its purpose was to ensure that Mr Beigbeder would be rewarded for business generated inside and outside France, either personally or through the company through which he provided his services. The reason it came into existence was to secure favourable tax treatment for Whitehead Mann.”

[26]M. Rongier gave oral evidence on 13th June 2005. In supplemental evidence in chief he indicated that he could not remember if anyone other than M. Cléry-Melin and Mr Brassington had been present at the meeting he described in paragraph 11 of his witness statement. He said that after the meeting he had given instructions for the preparation of the Side Letter to deal with the problem which had arisen necessitating the exclusion of French business from the Consultancy Agreement. M.Rongier was then cross examined by counsel for WML. In the course of that cross-examination the following exchanges occurred (references are to the pages of the Transcript):(1) “Q. Now, at paragraph 11 of your witness statement you say that you recall the meeting with – and I think you now say you are not sure whether it was either or both; you can’t be certain? A. No.”

(2) “Q. Having read that [paragraphs 6 to 8 of the witness statement of Mr Brassington] and having said as I think you did a moment ago that you can’t be sure who was actually present when the question of the English company was addressed, that you may be mistaken in your suggestion that it was Mr Brassington’s idea. A. It was – what would I say? – what I do remember, it was someone from Clifford Chance. It was during meetings which Clifford Chance that the problem was raised and I do know that they had reports direct with Matthew Brassington, but Matthew Brassington was not at the meetings generally. Q. When is it you say that the question of a side letter was first discussed? A. That was in a meeting at Clifford Chance. The question was raised because the contract itself did not cover part of the deal as it was planned regarding to the basis, the reference of the business. For the second part of the price of the business. The part payable in Whitehead Mann shares, there was a reference to the business.” (3)-48 “Q. The question I asked you is whether you are still saying that this was all discussed at the same meeting? A. To me, paragraphs 11 and 12 [of his own witness statement] not relating – it relates to discussions but not to the same meeting. Q. Let me just ask you to look carefully please at paragraph 11:

“I recall attending a meeting...”

Yes? A. Yes. Q. Then you say what happened at the meeting and then paragraph 12:

“It was also agreed by Gerard and Matthew Brassington at this meeting.”

Well, I don’t understand how that - A. I’m sorry. It’s not “at this meeting”. It was the same process of discussion but not at the same meeting. My mistake. Q. Mr Rongier – A. Because I have no files to know exactly which were the meeting and where are the notes I had on these different meetings or different conversations. Q. But, from the very first draft sent to you on 4 May it was quite clear that the stock consideration – or rather, that the consultancy agreement – would exclude France. That must have been obvious to everybody. A. I’m sorry, but then I cannot explain why different persons, working professionals, agreed on preparing together with the contract a side letter. I don’t see why Jonathan Olier wrote this letter. I don’t see why Mr de Moidrey agreed on this letter if it was not needed. That is all I can recall. Q. Let me ask you this, because you have now told us that it was you who asked for the side letter to be drafted. Were there any discussions – A. When I said, “I”, I suggested among the discussions, well there was a problem. The problem was raised. Okay. “What about the solution like a side letter?” And everybody agreed and the side letter was prepared.” (4) “Q. You see, logically, if what you are saying is right, the need for a side letter must have been obvious from the very first draft of the consultancy agreement. A. To my recollection, no. Q. To your recollection, no. And you never discussed the side letter as I understand it with Mr Beigbeder or with his lawyers? A. No...the side letter was a solution agreed upon by Mr Beigbeder’s lawyers, Jonathan Olier and myself, I would say. That’s for sure. Who was the other participant--? Q. It was agreed between Mr Beigbeder’s lawyers, Jonathan Olier and yourself? A. That it was needed. That is why it was prepared by Jonathan Olier.” (5) “A. In my memory, the problem, the need of the side letter was raised at the time the final draft of the “English contract” was prepared and that was reviewed probably by Marcus Billam at that time who raised the tax question to the attention of Whitehead Mann. Q. But there was not a tax problem from Whitehead Mann’s point of view. A. The key, for me, that the reason that was given to me about the contract. Q. But the contract provided for the stock consideration to be payable only on business generated outside France. All the drafts are clear about that aren’t they? A. Yes. Q. So, from Whitehead Mann’s point of view, I don’t understand what possible tax problem there could be. A. I was not informed of the nature of the problem that was raised. I was just told that there was a problem with the fact that the French business was not included, or excluded, so that’s why.” (6). “Q. And Mr Beigbeder was obviously concerned, correctly, to minimise his tax liabilities. A. Probably. Q. And was that discussed at all in the meetings that you had? A. No. I do remember that the problem raised was concerning the transaction itself and it was a problem raised by the tax adviser on the side of Whitehead Mann saying that there might be a problem, how can we avoid this risk? But that’s all I know. I don’t know technically what it was. Because it was – I would say – a UK problem, not a French taxation problem.” (7) “Q. I just want to clarify because I think it may be that when you made your statement you had not seen these documents, had you? A. That’s right. Q. And certainly when I asked you about the letter from Mr Olier of 26th June you seemed to think it triggered a memory about Mr Billam and so forth. A. Mm-Hm [assent] Q. As I say, Mr Brassington said, “It wasn’t my idea.” And Mr Clery-Melin similarly says that he doesn’t know about how the side letter came into being. Having thought about it do you accept that could well be true? A. That could well be true, that the solution for the side letter was not from them, but they have been – but it has been reported to them when it was prepared.” A. No.” Q. Mr Rongier – Q. It was agreed between Mr Beigbeder’s lawyers, Jonathan Olier and yourself? A. That it was needed. That is why it was prepared by Jonathan Olier.” Q. And was that discussed at all in the meetings that you had?

A. Mm-Hm [assent]

[27]Counsel for Cheverny returned to the topic in re-examination. Mr Rongier confirmed his understanding that it was a member of Clifford Chance who first suggested that France should be excluded from the source of business for the purposes of the Consultancy Agreement and that the suggestion was prompted by tax considerations relevant to Whitehead Mann. At pages 55 and 56 of the transcript the following exchange is recorded:

“Q. Despite the questions that you have been though and the documents that you have been shown this afternoon, or rather after having done that and having gone through the analysis, do you have any doubt in your mind that there was this suggestion that a side letter be prepared? A. Do you mean---? Q. Do you doubt it? Do you remain confident that what you have said in your witness statement about discussions with either Mr Clery-Melin or Mr Brassington or perhaps Clifford Chance took place at which it was agreed that there would be a side letter as a solution to this problem? A. I am sure that, with the people at Clifford Chance in Paris, the decision of doing, preparing the side letter was done. To my knowledge they did report to either Mr Clery-Melin or Matthew Brassington of the going on of the deal and the details of the documents that were prepared for the detail.”

Quite apart from the leading form of the question it did not correctly reflect what M. Rongier had said in his witness statement nor did the answer concur with the question.

A. Do you mean---?

[28]On 15th June 2005 counsel made their closing submissions. Counsel for WML pointed out that M.Rongier departed, to some extent, from what he had said in paragraphs 11 and 12 of his witness statement both with regard to the number meetings and as to the extent that Mr Brassington participated in the negotiations. Later, in the light of a submission from counsel the judge read back his note of the evidence quoted in paragraph 26(4) above and suggested that the other participant was Mr Brassington. When counsel questioned the reference to Mr Brassington, the judge commented that if necessary he could go back to the tape. I do not think that he can have done. It can now be seen from the transcript of a later question and answer that the reference was to Mr Billam, the tax lawyer at Clifford Chance, not Mr Brassington, the director of WML.

[29]The deputy judge referred to the evidence of M.Rongier in his judgment in a number of passages. In paragraph 50 he said:

“Mr Rongier, who claimed to have returned his notes to the Defendant (a claim I think more likely than not to be right: I see no reason to disbelieve this credible witness on this), gave evidence of a meeting which his statement did not date.”

The judge then quoted verbatim and without comment or qualification the whole of paragraphs 12 and 13 of the witness statement of M.Rongier which I have set out in paragraph 25 above. He continued in paragraph 52:

“I considered that Mr Rongier was concentrating when giving his evidence and that he was open with the Court. My assessment of him as he was giving evidence was that he was not very clear on detail but was honest. I am in no sense surprised that a witness giving evidence about events 5 years before, without access to his notes, and about events which had no particular drama to fix them in the memory, should not be very clear on detail.”

[30]In paragraph 58 the judge considered a suggestion that M.Rongier might have given instructions to Clifford Chance for the preparation of the Side Letter without himself having got the requisite authority or instructions from Mr Clery-Melin or Mr Brassington. He continued:

“I dismiss that as unrealistic speculation on my part. I see not the slightest reason to suppose that Mr Rongier acted in that way, still less that he would invent an account of a non-existent meeting, or non-existent part of a meeting, with Mr Clery-Melin and Mr Brassington, who undoubtedly did go to Paris at some stage in the negotiations.”

[31]In paragraph 59 of his judgment

the judge added:

“Nothing in the cross-examination of Mr Rongier caused me to think that his evidence of there being a meeting at which the principle of the side letter was agreed by Mr Clery-Melin and Mr Brassington was wrong. Insofar as anyone was forthcoming about the reason for the side letter, foremost was Mr Rongier.” “What I am clear is that, in every respect down to the time when Mr Clery-Melin received but did not sign the side letter, Mr Rongier's account of the origin of the letter is consistent with what the documents show to have happened. But then, Mr Clery-Melin did not sign.”

[32]Later the judge considered a theory that the Side Letter was not an essential part of the overall deal. He said (paragraph 96):

“I accept that it is in theory possible that the side letter was to be "optional", i.e. that the transaction was to go through either with or without the side letter, at the option of the Defendant, but that would involve my rejecting Mr Rongier's account of the genesis of the letter, and that I am not prepared to do. Whatever the reason for adoption of the side letter technique, I do not consider that the side letter appeared only as an afterthought.”

His ultimate conclusion (paragraph 98) I have already set out in full in paragraph 8 above.

Other relevant evidence

[33]Before I consider the submissions of counsel it is convenient to consider some of the other evidence before the Deputy Judge. Witness statements were provided by, amongst others, Mr Brassington, M. Beigbeder and M. Cléry-Melin. Mr Brassington had moved to Australia by the time of the trial and was not cross-examined. Both M. Beigbeder and M. Cléry-Melin gave oral evidence. For present purposes it is unnecessary to refer to either the witness statement or oral evidence of M. Beigbeder.

[34]M. Cléry-Melin made a witness statement dated 20th April 2005 which was adduced at the trial by WML. In paragraphs 13 to 16 he said:

“13. It was always my intention and understanding that the Consultancy Agreement would reward Jean-Michel [Beigbeder] for work carried out outside France, and the Employment Contract for work carried out inside France. This was expressly recorded in the Consultancy Agreement itself which I saw a number of times between May and July before it was actually signed. As far as I can recall, this provision was consistently included in each draft of the Consultancy Agreement that I was asked to comment on by Clifford Chance. 14. I understand that it is now argued by Jean-Michel that a “Side Letter” was signed at the same time as the Consultancy Agreement, the effect of which was to vary the Source of Business calculation in the Consultancy Agreement to include fees generated in France. This Side Letter was never signed by me, nor (so far as I am aware) by anyone else on behalf of the Defendant, nor did it reflect the terms that had been agreed between the parties. 15. I am not entirely clear how the “Side Letter” came into existence. It certainly was not drawn up on my instructions, nor as far as I am aware, the instructions of anyone else employed by the Defendant. (The only person who would have had authority to contact Clifford Chance and ask them to produce the document was Matthew Brassington, and I know, for the reasons set out below, that he did not instruct Clifford Chance to produce it). 16. The most likely explanation of its existence in my view is that the “Side Letter” was produced on the instructions of either Jean-Michel, or of his business advisors (though I accept that this is speculation on my part). The first time I became aware of the existence of the Side Letter was at some point in June 2000 when Matthew Brassington came into my office waving a bit of paper explaining that Jean-Michel was asking us to “vary” the Consultancy Agreement to include France in the Source of Business calculations. I recall Matthew saying “you’re not going to agree to this are you?”, and I said to him clearly “no”

. Neither Matthew nor I ever had any intention of agreeing to this.” In cross-examination M. Cléry-Melin accepted that M.Beigbeder had sought the agreement of WML to the Side Letter but denied that there was ever any agreement as to its terms.

[35]The deputy judge dealt with the evidence of M. Cléry-Melin in paragraphs 67 and 68 of his judgment. In relation to the episode described by M. Cléry-Melin in paragraph 16 of his witness statement he considered that it must relate to the occasion when Mr Brassington received from M.Olier the letter dated 6th July 2000 to which I have referred in paragraph 17 above. But the deputy judge was sceptical of this description anyway for the detailed reasons given in paragraph 68 of his judgment.

[36]The deputy judge referred to the evidence of both M. Beigbeder and M. Cléry-Melin in paragraph 97 of his judgment. He said:

“I considered the witnesses very carefully as they were giving evidence. This is not a case in which I have reacted on the basis of any particular impression, while the oral evidence was being given, that one of the main protagonists was lying when giving evidence. At one stage Mr Clery-Melin appeared to me stressed while being cross-examined in a manner which was restrained rather than confrontational, but I did not react more strongly to that impression than to take note of it. It was not difficult to imagine Mr Beigbeder and Mr Clery-Melin in happier times enjoying one of their occasional lunches together. But I am afraid that I consider it more likely than not that Mr Clery-Melin's account of the receipt of the side letter in England is untrue, and I have previously indicated that I do not accept that the motivation for the consultancy contract was the one that he put forward. Overall, I do not consider his account of the relevant history of dealings reliable.”

Submissions and conclusion on the first issue

[37]Counsel for WML submits that the deputy judge was faced with two factual questions(1) how did the Side Letter come to be produced?

(2) did the absence of signature show that its terms had not in fact been agreed? He suggests that the judge found that the genesis of the Side Letter was as described by M.Rongier in his witness statement, namely at a meeting held before 4th May 2005 between himself, Mr Brassington and M. Cléry-Melin at which two new elements relating to the Consultancy Agreement were agreed, that is the use of (a) a company incorporated in England as the provider of the services of M.Beigbeder and (b) the Side Letter. Counsel suggests that if this conclusion is not justified by the oral evidence M.Rongier gave then the judgment as a whole cannot stand.

[38]Counsel for WML submits that paragraphs 11 to 13 of the witness statement of M.Rongier highlight five key features, namely(1) a single meeting,

(2) occurring before the first draft of the Consultancy Agreement to which Cheverny was a party,

(3) at which Mr Brassington suggested the use of a company incorporated in England as the vehicle for the provision of the services of M.Beigbeder,

(4) both Mr Brassington and M. Cléry-Melin agreed to the use of a side letter by which to include in the Source of Business calculations under the Consultancy Agreement fees earned in France and

(5) M.Rongier approved the draft of the Side Letter sent to him by M.Olier as reflecting “exactly what we had agreed at our meeting”.

[39]Counsel submits that not one of those key features was born out by the oral evidence of M.Rongier as summarised and quoted in paragraph 216 above. Thus:(a) the suggestion that the use of a company incorporated in England came from Mr Brassington (key feature 3) is contrary to the evidence given by M.Rongier quoted in paragraph 26(2);

(b) there was no single meeting attended by Mr Brassington and M. Cléry-Melin (key feature 1) at which they agreed to use a side letter (key feature 4) as admitted by M.Rongier in his evidence quoted in paragraph 26(2),(3),(4) and (7);

(c) such meeting or meetings as he was referring to were not attended by both Mr Brassington and M. Cléry-Melin (key features 1, 3 and 4) as admitted by M.Rongier in his evidence quoted in paragraph 26(1);

(d) the topic of a side letter was not raised before the first draft of the Consultancy Agreement was produced (key feature 1) but at the time of preparation of the final draft as admitted by M.Rongier in his evidence quoted in paragraph 26(5) above;

(e) it is hard to understand how M.Rongier could have approved the terms of the Side Letter as exactly reflecting what had been agreed (key feature 5) when there had been no meeting as described and he himself knew so little about the problem or its solution as indicated in the passages in his evidence quoted in paragraph 26(3),(5) and (6) above.

[40]Counsel for WML points to the passages from the judgment of the deputy judge I have quoted in paragraphs 30 and 31 above and asks rhetorically how the judge could have come to those conclusions in the light of the scale and importance of the departures of M.Rongier from the material parts of this witness statement. He comments with reference to the part of the judgment quoted in paragraph 32 above that if the evidence of M.Rongier as to the genesis of the Side Letter is rejected then it could well have been an afterthought or ‘try on’ by M.Beigbeder to which WML refused to agree. Counsel for WML suggests that the judge could not properly accept the evidence of M.Rongier without acknowledging and explaining the discrepancies. And without the evidence of M.Rongier, as set out in paragraphs 11 to 13 of his witness statement, the factual edifice supporting the judge’s conclusion collapses.

[41]Counsel for Cheverney accepts that M.Rongier departed from his witness statement when giving oral evidence. He disputes the extent of the disparity and its significance. He took us through the events leading up to the execution of three of the four alleged agreements and the aftermath by reference to the undisputed documents to which I have already referred. The burden of his submissions came at the stage of the completion meeting on 28th June 2000. He submitted that whatever had gone before Clifford Chance must by then have had their clients’ instructions to set up the completion meeting for the execution of the documents referred to in the notice dated 27th June 2000 to which I have referred in paragraph 15 above. He pointed out that all necessary parties then executed the Asset Sale Contract and the Employment Contract and M.Beigbeder executed the Consultancy Agreement. What then remained, namely the execution of the Consultancy Agreement by Cheverny and WML and the signature of M. Cléry-Melin to the Side Letter was, he submitted, unnecessary because execution of one binds that party to execution of all of them. Thus, so he submitted, the execution of the Asset Sale Contract and the Employment Contract by WMSARL obliged WML to procure the signature of M. Cléry-Melin (or presumably some other person authorised to sign on behalf of WMplc). He contended that the failure of WML to procure any such person to sign the Side Letter was immaterial because WML was bound by its terms because of the execution by Mr White on behalf of WMSARL of the Asset Sale Contract and the Employment Contract. This is said to be the conclusion at which the judge arrived in paragraph 98 of his judgment quoted in paragraph 8 above.

[42]Before expressing my conclusions on these submissions it is necessary to deal briefly with some basic propositions relating to the formation of contracts. With exceptions immaterial to this case, it is possible to make a contract orally. But the more complicated the subject matter the more likely the parties are to want to enshrine their contract in some written document to be prepared by their solicitors. This enables them to review all the terms before being committed to any of them. The commonest way of achieving this ability is to stipulate that the negotiations are ‘subject to contract’. In such a case there is no binding contract until the formal written contract has been duly executed, see The Chinnock v Marchioness of Ely 4 De GJ&S 638. But it is not essential that there should have been an express stipulation that the negotiations are to be ‘subject to contract’. As Jessel MR pointed out in relation to negotiations conducted through correspondence in Winn v Bull (1877-78) LR 7 Ch.29, 32:

“When it is not expressly stated to be subject to a formal contract it becomes a question of construction, whether the parties intended that the terms agreed on should merely be put into form, or whether they should be subject to a new agreement the terms of which are not expressed in detail.”

These elementary propositions have been applied in a number of cases involving express stipulations and negotiations conducted by correspondence, see, for example, Von Hatzenfeldt-Wildenburg v Alexander

[1912] 1 Ch 284

; Rossdale v Denny

[1921] 1 Ch. 57

; John Howard & Co (Northern) Ltd v J.P.Knight Ltd [1969] 1 Ll.L.R 364.

[43]In Sociedade Portuguesa de Navios Tanques Limitada v Hvalfangerselskapet Polaris A/S [1952] 1 Ll.L.R 407 the court was concerned with protracted negotiations for a charterparty which one side claimed had resulted in a concluded contract though no formal charterparty had been executed. The other side contended that not all terms had been agreed but even if they had been it was the common intention of the parties that there should be no binding contract unless and until a charterparty had been executed by both sides. All three members of the Court of Appeal upheld the decision of the judge to the effect that not all the essential terms had been agreed with the consequence that the parties were not ad idem. Thus, strictly, the other point did not arise. Nevertheless all three members of the court agreed with the judge that the correspondence showed that the parties did not intend to be bound except by the actual signature of both of them to a charterparty. Somervell LJ recognised (p.417) that in a complicated commercial transaction parties may finally become ad idem “so that their intentions on this point might well take a new turn”.

[44]That case was considered by the Court of Appeal in New Zealand in Concorde Enterprises v Anthony Motors (Hutt) Ltd

[1981] 2 NZLR 385

in which there was a claim for damages for wrongful repudiation of a contract relating to the manufacture and sale of an emulsion-producing gun. The Court of Appeal in New Zealand held on the evidence that the negotiations had been conducted partly between the parties’ solicitors and partly between the parties themselves with a view to the production of a commercial agreement of some complexity to be executed by all parties. It concluded that, in such circumstances, the normal inference in New Zealand is that the parties do not intend to be bound until the written agreement is executed. Cooke J, giving the judgment of the court, said at page 389:

“Unless that inference is displaced the result is that, even though all the terms to be included in the document have been agreed, there is no contract and each party has a locus poenitentiae until at least execution on both sides. It may be that exchange or delivery of documents is also necessary, but that need not now be decided. Cases can arise where, without execution of a document on one side or both, the parties act on it, so that an implied contract arises. Brogden v Metropolitan Railway Co. (1877) 2 App.Cas. 666 is a leading illustration.”

Later he considered ‘the new turn’ to which Somervell LJ had referred in Sociedade Portuguesa de Navios Tanques Limitada v Hvalfangerselskapet Polaris A/S [1952] 1 Ll.L.R 407, 417 and observed that such ‘a new turn’ could not be unilateral and must be identified by an objective test.

[45]Obviously each case depends on its own facts but in my view where, as here, solicitors are involved on both sides, formal written agreements are to be produced and arrangements made for their execution the normal inference will be that the parties are not bound unless and until both of them sign the agreement. In a sense this case is an a fortiori case in that on any view there are at least three agreements to be executed and the respective parties are not the same.

[46]Similar principles apply to the execution of documents as deeds. They may be executed in escrow, the condition being due execution by all the other parties. In such a case the executing party is not bound until the condition is performed. Deeds may be executed unconditionally by some only of the intended parties to them. In such a case equity will relieve the executing parties if non execution by the others substantially alters the obligations assumed by the executing party, see Lady Naas v Westminster Bank Ltd

[1940] AC 366

at pp. 391, 405 and 410. Thus whether one considers the matter prospectively or in retrospect the result is the same, namely, the contractual obligations are not binding unless and until either(1) the contractual documents have been executed by all parties,

(2) it can be objectively ascertained that the continuing intention of the parties changed or

(3) subsequent events have occurred whereby the non-executing party is estopped from relying on his non-execution.

[47]It is in that context that I now return to the submissions of counsel for the parties. There is no doubt that, as counsel for WML submitted, in his oral evidence M.Rongier so qualified and departed from paragraphs 11 to 13 and 16 of his witness statement as to deprive them of any evidential value. I do not consider that it was open to the judge to put any weight on them unless he explained why, notwithstanding all the qualifications and withdrawals, he considered that he could. The judge made no attempt to do so. In my view it follows that the conclusions of the judge based on those paragraphs cannot stand unless they are justified by other evidence. The difficulty is compounded by problems identifying which findings are so contaminated. For example would he have still rejected the account of M. Cléry-Melin in the terms in which he did in paragraphs 67, 68 and 97 of his judgment or at all?

[48]As I have already indicated, counsel for Cheverny submits that the judge’s conclusion is amply justified by the contemporary documents. Thus, by 26th June 2000, at the latest, a draft of the Side Letter had been produced and circulated by M.Olier. The Side Letter clearly envisaged the signature of M. Cléry-Melin on behalf of WMplc. Further on 27th June 2000 M.Olier circulated an agenda for the completion meeting to be held on 28th June 2000. He evidently envisaged that M. Cléry-Melin would attend and sign the Side Letter. Counsel invites us to infer that no reasonably competent solicitor would have done that without having satisfied himself that his client had authorised it. None of this is dependent on the evidence written or oral of M.Rongier.

[49]There is force in this argument. But it presupposes that the judge would still have rejected the evidence of M. Cléry-Melin even if he had appreciated that his reliance on M.Rongier was misplaced. For the moment I will assume that the presupposition is justified. What then? The conclusion at which counsel for Cheverny invites us to arrive is that the signature of Mr White on behalf of WMSARL at the meeting in Paris on 28th June 2000 was effective, without more, to commit WMplc by its authorised signatory to sign the Side Letter. No doubt he would (though in fact he did not) make the same point as at or shortly before 4th August 2000 when WML executed the Consultancy Agreement.

[50]I do not accept that conclusion. The previous history shows clearly that all parties contemplated and intended that the solicitors should draft and approve appropriate written agreements. I see nothing to displace what I consider to be the normal inference in a case such as this that the parties intended to be bound when all documents had been signed or executed by all relevant parties and not before. That never happened because no one signed the Side Letter on behalf of WMplc. It might have been that subsequent events created an estoppel precluding WML relying on the absence of such a signature, but no such an estoppel was pleaded. In any event the findings of the judge would not enable us to deal with such a claim.

[51]It is true that in paragraph 100 of his judgment the deputy

judge said:

“[Counsel for WML] accepted, rightly in my judgment in this case, that if there were four agreements pre-agreed to be signed so far as possible on the same day, it was not open to his clients to decide after the event to sign only some, insisting that they would be binding without the other parts of the arrangement.”

Insofar as that passage might be thought to involve a concession or conclusion of law that mere signature of some documents bound that party to all I am unable to agree with it. For the reasons I have given in paragraphs 42 to 46 above I consider that the true principle is to the opposite effect.

[52]For these reasons I would reject the conclusion to which counsel for Cheverny invites us to arrive. Accordingly, as explained in paragraph 49 above, everything depends on whether in view of his misplaced reliance on the evidence of M.Rongier the deputy judge was right to have rejected the evidence of M. Cléry-Melin. I do not see how this court can answer that question. Nor do I see how, unless it is answered and a proper conclusion can be reached as to what contracts were concluded and when, the other points raised by WML can be properly determined. In the circumstances I see no alternative to allowing the appeal and ordering a new trial.

Conclusion

[53]For all these reasons I would allow the appeal of WML and order a new trial before another judge. I would invite counsel to agree a timetable to enable such a trial to take place as soon as possible.

[54]If the other members of the Court agree that we should order a new trial and such a trial takes place I hope that the judge will be provided with a fuller and more compelling explanation than the deputy judge was at the first trial as to why more contemporary documents were not available. It seems to me to be more likely than not that the files of Clifford Chance, formerly in Paris, contain documents which would show clearly what happened and when. If that is so then the court on a retrial would not be faced with all the uncertainties that the judge had to cope with in the first trial. I do not understand why any question of French Lawyers’ Code of Ethics arises. It would be a case of a company incorporated in England instructing its English solicitors, through whom it is defending this claim, to repatriate the file to England so that it may comply with its disclosure obligations. Nor in the absence of a statement to the court from some one authorised to speak for the professional body responsible for applying the Code of Ethics to lawyers in the positions of M.Olier, M.Billam or M.de Moidrey should he accept that such a professional body can prevent its members providing evidence on behalf of his client at that client’s request. Lord Justice Carnwath:

[55]I gratefully adopt the Chancellor’s account of the factual history, but as will be seen I am in respectful disagreement with his conclusions.

[56]At the outset I observe that the judge was well aware of the many gaps in the material before him: in particular, the shortage of contemporary records, the supposed (but unproven) inhibitions on evidence from the French lawyers (para 22), the apparent reluctance of the parties to disclose in detail the precise reasons behind the complicated form of the agreements (paras. 24, 96), and the lack of any explanation for the failure of M Beigbeder or his advisers to follow-up the side-letter (para 71). He was also constrained by the pleadings. There was no alternative basis of claim, such as estoppel or rectification, which might have provided a welcome escape route from the factual and legal problems raised by the narrow issue of contractual interpretation. We are faced with the same difficulties. However, like the judge, we must take the case as we find it, and as the parties have chosen to present it. We should only interfere if his decision was wrong or procedurally unjust (CPR 52.11(3)).

[57]The dispute in the appeal comes down in essence to two issues:(i) was there by 28th June 2000 agreement between the parties that the side-letter should be included in the package of documents then to be executed? (grounds 1 and 2)

(ii) if so, did that letter have contractual effect, even though (apparently) never signed, and notwithstanding the “entire agreement” clause in the Consultancy Agreement? (ground 3) The first issue is factual; the second is mainly legal. (Ground 4 in the notice of appeal raised a separate point that the side-letter was addressed to M Beigbeder himself, rather than the claimant company. The appellants did not press that point in argument; insofar as I understand it, I think they were right not to do so.)

Was there agreement on the side-letter?

[58]The appellants’ principal criticism relates to the weight placed by the judge on M Rongier’s evidence, particularly in relation to the claim that the side-letter had been agreed by M Clery-Melin and Mr Brassington at a meeting in Paris. For the reasons given by the Chancellor those criticisms seem to me valid. The transcript shows that this aspect of his written evidence was seriously undermined in cross-examination. Although the resulting inconsistencies in his evidence were discussed in closing submissions at the trial, the judgment contains no reference to them. This is an unfortunate omission. But it is not enough by itself to show that his overall conclusion was wrong.

[59]As to that, I do not agree that M Rongier’s evidence was, or needed to be, central to the judge’s overall conclusion that the side-letter was part of the agreed package. As the judge acknowledged, in the absence of any contemporary notes, memories of the nature or content of particular meetings were inevitably unreliable. A case resting on M Rongier’s evidence alone would not have been strong. At best it provided some explanation of how and why the side-letter came into existence.

[60]The judge’s treatment of this evidence must be read in context. It is a small part of a closely reasoned discussion (running to some 50 paragraphs) of all the evidence, oral and written, relating to the existence of the side-letter and its consequences. Central to that reasoning was his analysis of the limited contemporary documents, both in themselves, and in the light of the witnesses’ treatment of them. In my view, that analysis provided ample support for his overall conclusion, with or without M Rongier’s evidence.

[61]I would start from the agenda for the meeting on 28th June 2000, circulated by M Olier of Clifford Chance on the previous day. He was acting for all the WML parties, and as such was responsible for the execution process. In the absence of evidence to the contrary, we are entitled to assume that he had obtained the necessary instructions for what he was doing. The sole purpose of the meeting, as appears from his prepared agenda, was to secure the execution of the contractual documents making up the agreed package. The only outstanding issue of substance mentioned in the letter, for which special provision was made, was proof of the existence of the English company. Apart from that, there is no suggestion that there was anything left to be agreed. The side-letter was referred to, like the other contractual documents, as a matter simply for “signature”. M Olier’s agenda letter, in my view, is reliable and unambiguous contemporary evidence that the agreed package, as accepted by his clients, included the side-letter.

[62]That evidence is corroborated by what happened at the meeting and immediately thereafter. The completion meeting was attended by representatives of both sides, who started the process of executing the necessary documents. The judge found that both the Asset Sale Contract and the Employment Contract were probably executed at that meeting, even though both are expressed to have been made on 1st July. I note from the transcript (14.6.05 p 38-9) that M Beigbeder explained the choice of 1st July, rather than 28th June, as having been made for accountancy reasons. He also considered it likely that M Beigbeder himself signed the Consultancy Agreement at the same meeting, although the signatures of the other parties were added later (judgment para 6). We are entitled to assume that those present, on both sides, were aware of the agenda, and that they signed on the understanding that the side-letter was also part of the package. There is no evidence of any dissent from that position.

[63]That process was continued by M Olier’s letter to Mr Brassington on 6th July. That enclosed two originals of the side letter for execution by M Clery Martin, and also explained the remaining steps necessary to complete the consultancy agreement. The side-letter was referred to in the letter without either comment or invitation to comment. The only possible inference, in my view, is that M Olier saw the letter as dealing purely with the mechanics of finalising the documentation, of which the side-letter was an agreed part. That was the judge’s view (para 66), and I agree with him.

[64]None of this depends on M Rongier’s evidence. The source is WML’s own legal representative, who was orchestrating the arrangements, and therefore was best placed to know the true position. In the absence of direct evidence from him (whatever the reasons), there is nothing to contradict the obvious inference to be drawn from his letters.

[65]It is true that at various points in his analysis the judge returns to M Rongier for support, even where there is no need to do so. For example, at paragraph 96, he refers to the “theoretical” possibility that the side-letter was an “optional” extra, to be included at the option of the defendants, but comments:

“but that would involve rejecting M Rongier’s account of the genesis of the letter, and that I am not prepared to do.”

The only curiosity about that comment is that the judge thought it necessary to refer to M Rongier at all. Had rejection of the side-letter been even a theoretical option, it is inconceivable that M Olier would not have mentioned that possibility in his letters.

[66]The judge’s reading of the contemporary documents was confirmed by Mr Brassington’s later recollection. In an e-mail in October 2003, responding to an internal inquiry (unprompted by anyone on M Beigbeder’s side), Mr Brassington recorded his understanding that there had been a side-letter including France in the calculation. Although he claimed not to have seen the actual side-letter (notwithstanding M Olier’s letter to him of 6th July), the judge found this unsurprising, given that the side-letter was sent to him simply to be passed on to M Clery-Melin, and that his mind had been on other things at the time (judgment para 81-85).

[67]The only significant evidence to the contrary was that of M Clery-Melin. That was rejected by the judge, in my view rightly. His treatment of M Clery-Melin’s evidence (para 97) did not in terms depend on its inconsistency with that of M Rongier, nor did it need to do so.

[68]The evidence was both internally inconsistent, and inconsistent with the contemporary documentary material. M Clery-Melin’s made two comments on the side-letter, both long after the events in question. The first was in his e-mail response to M Beigbeder’s query in October 2003. He said:

“… I have been requested by Beigbeder to acknowledge in writing that there is a side letter to the Cheverny agreement extending the calculation of his performed work to include French business. I have no recollection of having suscribed [sic] to the then request of his lawyers, and if the letter was presented to me for signature, I certainly believe that I would not have signed it.”

The second was in his witness statement (made in April 2005): 16. The most likely explanation of its existence in my view is that the “Side Letter” was produced on the instructions of either Jean-Michel, or of his business advisors (though I accept that this is speculation on my part). The first time I became aware of the existence of the Side Letter was at some point in June 2000 when Matthew Brassington came into my office waving a bit of paper explaining that Jean-Michel was asking us to “vary” the Consultancy Agreement to include France in the Source of Business calculations. I recall Matthew saying “you’re not going to agree to this are you?”, and I said to him clearly “no”. Neither Matthew nor I ever had any intention of agreeing to this.”

[69]The judge commented that this evidence had “a number of problems” (para 68). I agree. M Clery-Melin’s account of the dramatic circumstances of his first sight of the side-letter had no support from Mr Brassington himself, who surely would have remembered such an episode. It was not consistent with his earlier email statement, which implied that it had never seen it. It ignored the fact, clear from the contemporary documents, that the letter had been sent to him for signing, not by M Beigbeder’s advisers, but by his own solicitor, on the clear basis that it had been agreed. It gives no explanation of why, if that was his reaction at the time, there is no record of it having been made known to M Olier or anyone else. As the judge said:

“His witness statement simply does not address the role of Clifford Chance and interplay between the Defendant and Clifford Chance.”

[70]There were other factors which the judge properly took into account in assessing the credibility of the defendants’ case. The first was that M Beigbeder’s importance to WML was principally as a major figure in the French market, where they wished to establish a significant presence (para 99). It would be surprising to find that market specifically excluded from any formula based on performance. There was also some evidence that, after M Beigbeder had entered their service, WML themselves proceeded on the assumption that the French market was to be included in the calculations. The judge referred to a memorandum from Mr Brassington to M Clery-Melin in August 2002 calculating the entitlement on a basis which could only make sense if France were included (para 77).

[71]Taking all these factors together, and even allowing for his failure to take account of M Rongier’s inconsistencies, I see no reason to overturn the judge’s conclusion that the side-letter was part of the agreed package. On the contrary, it seems to me the only reasonable conclusion on the evidence before him. Accordingly, I would dismiss the appeal on grounds 1 and 2.

Did the letter have contractual effect?

[72]The claimant faced two potential problems: first, the side-letter, alone of the documents included in the agreed package, was not signed (“the signature point”); secondly, its effect was arguably excluded by an “entire agreement” clause in the consultancy agreement itself (“the entire agreement point”). Only the second was treated by the judge as a live issue.

[73]On the signature point, he noted what he understood to have been a concession by counsel for WML (para 100):

“(He) accepted, rightly in my judgment in this case, that if there were four agreements pre-agreed to be signed so far as possible on the same day, it was not open to his clients to decide after the event to sign some only some, insisting that they would be binding without the other parts of the arrangement.”

On that basis, as soon as there was partial completion by signing of some parts of the package (as happened on the 28th June), the parties were to be treated as contractually committed to the whole package.

[74]On the second point he referred to the wording of the entire agreement clause (Clause 12.5 of the Consultancy Agreement) which provided:

“This Agreement constitutes the entire agreement between the parties to it with respect to its subject matter and shall have effect to the exclusion of any other memorandum agreement or understanding of any kind between the parties hereto preceding the date of this Agreement and touching or concerning its subject matter.”

[75]The judge did not regard this clause as an obstacle for the claimants, for two reasons. First, if the side-letter had been signed, the statement that the “Agreement” constituted “the entire agreement” would have been “literally untrue”. In those circumstances, the Agreement should be treated as “including the associated document”; and the absence of a signature should not be regarded as fatal (para 102- 103). Secondly, the reference to documents “preceding” the date of the agreement was not intended to exclude “reference to a document forming part of the suite devised for execution on the same occasion” (para 104). Uncertainty over the precise date of execution of the various agreements was not a problem; he said: “I have pointed out that the (Consultancy) Agreement in fact has no date inserted in it. The reason for there being none originally was probably the necessity to avoid the accident of the Agreement bearing a typed date which in the event preceded the date of incorporation of the Claimant. The reason for there being none inserted in writing was probably human error rather than design. I do not believe that there was any intention that the Agreement should operate on the basis that it should be dated so as to bear a date later than the date of the side letter and so, possibly, exclude the side letter’s operation.” (para 105)

[76]He concluded accordingly that the side-letter must be treated as having contractual effect, and as qualifying the relevant parts of the consultancy agreement.

[77]In this court, I have not found the appellants’ case entirely clear. The judge’s understanding of their concession on the signature point was not in terms challenged in the grounds of appeal, which focus on the entire agreement point. However, it was pointed out to us that the judge’s understanding is not consistent with counsel’s closing submissions as recorded in the transcript. The transcript for 15th June 2005, during closing submissions, records the following exchange between the judge and Mr Barklem (for WML): Judge: One has this position. If there are a number of agreements to be signed on the same occasion and they are signed at various times during the meeting by different people, it does not actually matter in which order the agreements are signed because one is to infer that it is the intention of all parties that no one agreement will become binding unless all the agreements become binding simultaneously. Mr Barklem: Precisely. Judge: But you say that if the position at the end of the meeting is that some of the agreements have been signed by all parties and others have not, then those that have been signed are treated as coming into effect and the parties are at risk as to whether the signatures are ever applied to the other documents. Mr Barklem: I think that is a very fair summary…” On that submission, as I understand the exchange, the effect of partial completion was, not that the parties were contractually committed to the whole package, but that they were “at risk” in relation to those parts which were not ultimately signed. In other words, if M Beigbeder’s advisers failed to ensure that the side-letter was in fact signed, he could not subsequently rely on it. Mr Barklem: I think that is a very fair summary…”

[78]In the appellants’ skeleton argument, on the basis of which permission to appeal was give, the two points were conflated. Because the agreement was never signed, it cannot be said to have been made concurrently with the consultancy agreement. The most that can be said is that there was a prior agreement of some kind, and this would be excluded by the entire agreement clause. Further, in view of the uncertainty over whether agreement was in fact reached, this is precisely the kind of dispute which an entire agreement is designed to exclude.

[79]It seems to me that the two points are logically distinct, and need to be considered as such. Even if the signature point was not directly raised by the grounds of appeal, I find it difficult to arrive at a reasoned conclusion on the effect of the issues raised in relation to the entire agreement clause, without first considering what the contractual position would be in its absence.

[80]There is nothing unusual about a commercial arrangement in the form of a series of linked agreements, as in this case, nor in the procedures adopted. The parties agree on the basic principles of the deal; the lawyers advise on the appropriate legal framework, taking account of tax and other factors, and draft the necessary documents; they obtain their respective clients’ agreement on any outstanding issues; and arrangements are made for formal execution, either at a special meeting or by circulating the documents to those required to sign. Given the familiarity of the process it seems surprising that there appears to be so little authority on the legal consequences of something going wrong at any stage. Nor were we referred to any discussion in the textbooks.

[81]The cases to which the Chancellor has referred show that there is no general rule as to the stage at which a binding contract comes into existence. It all depends on the circumstances, and the intention of the parties as inferred from them. I would agree with him that, as a general rule, where solicitors are involved on both sides, and the agreement is put by them into written form with a view to formal execution by the parties at a completion meeting, the normal inference will be that the parties are not bound until that stage. That is supported by the statement of Cooke J, quoted by him, in Concorde Enterprises v Anthony Motors (Hutt) Ltd

[1981] 2 NZLR 385

, 389.

[82]However, I do not, with respect, accept that this approach can be applied without modification to a case, such as the present, where the arrangement consists of a package of linked agreements, and by the end of the completion meeting some but not all have been executed. I know of no direct authority on this point. However, there is no reason why the proper inference as to the intentions of the parties should remain the same throughout the process. As was said by Somervell LJ in the Sociedade Portuguesa case [1952] 1 Ll.L.R 407, 417 (cited by the Chancellor) there may come a stage where the intentions of the parties “take a new turn”.

[83]I agree with the Chancellor that up until 28th June no contractual commitment had been entered into. The clear intention was that the agreements should be embodied in formal documents to be executed by the parties. However, on that day, as previously arranged, the process of execution was begun by parties on both sides, in the presence of solicitors acting for everyone. The process was fully completed in relation to two of the linked agreements (the Asset Sale Contract and the Employment Contract). The Consultancy Agreement was signed only by M Beigbeder, but steps were put in hand to secure the remaining signatures to that agreement and to the side-letter. By the end of that day, therefore, events had taken a new turn, in that two of the four agreements were now, at least on their face, fully executed agreements.

[84]It is necessary to consider the legal consequences of that position. As I see it, there are only three possible interpretations: i) That the two executed agreements, though duly executed, were not to take effect unless and until the other two were executed; ii) That the two executed agreements were intended to be binding and of full effect, and that would remain the position whether or not the others were ever executed (that is, the parties were “at risk”); iii) That by allowing the process of execution to begin, the parties had committed themselves to complete the process, and were therefore contractually bound to the whole package from that time.

[85]The first, as I understand it, has not been advocated by anyone. That is not surprising, since those agreements were as I understand fully implemented, and no-one is asking to unravel them. The second is that advocated by WMD before the judge, in the exchange I have quoted. The third is the approach adopted by the judge, on the mistaken understanding of a concession to that effect. In choosing between them we get no help from the evidence or contemporary documents. Our guide must be the presumed intention of the parties, having regard to the previous dealings of the parties, to the commercial context and to common sense.

[86]Viewed in that light I have no hesitation in rejecting the second approach. It has to be borne in mind that the only person “at risk” was M Beigbeder. He had done everything needed to execute all the agreements, including the consultancy agreement. It is inconceivable that we would have done that, or that anyone would have believed he was doing that, except on the mutual understanding that the other parties would as soon as practicable do the same. Otherwise he was leaving it entirely to the choice of the WMD parties not only whether to sign the side-letter, but whether to sign the Consultancy Agreement itself.

[87]The Consultancy Agreement was in fact signed. However, it is important to bear in mind that the point, if it is a good one, applies to that as well as the side-letter. If following the 28th June meeting the WMD parties had simply refused to sign that agreement, Mr Beigbeder would have had no contractual redress. By the same token, if his advisers had at any time woken up to the M Clery-Melin’s failure to sign the side-letter, there was nothing in law that they could have done to compel him to do so. Such an interpretation of the dealing between the parties, to my mind, is contrary to commercial sense, and must be rejected. It is immaterial, in my view, that M Clery-Melin, as the formal representative of the parent company, was not in fact present at the meeting. M Olier was present as the representative of all parties, and through him all parties must be taken to have been aware both of the nature of the meeting, and of the basis on which M Beigbeder was signing the agreements.

[88]Although it was not so argued, the facts could also perhaps be analysed as a simple matter of offer and acceptance. M Olier’s agenda letter can be seen as an offer, made on behalf of all his clients, to complete the formal agreements on the basis set out in the letter. That offer was accepted by M Beigbeder by signing those agreements to which his signature was required. There was thereafter a binding obligation on the other WML parties, including M Clery-Melin, to do the same.

[89]Whichever is the correct approach, I am satisfied that from 28th June 2000 all parties were contractually committed to the whole package of agreements, including the side-letter.

[90]I turn to the “entire agreement” clause. The judge’s first reason for not applying the clause is that it was “literally untrue”. That with respect seems beside the point. The whole purpose of such a clause is to exclude any factual inquiry into what other agreements or understandings there might be. That is apparent from the comments of Lightman J, cited by the judge (in the Inntrepreneur case [2000] 2 LlR 611, 613). As he said, such a clause “constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere…”

[91]I agree with the judge, however, that the wording of the clause is important, and that it must be read in its context, against the background that it was designed as one part of a package of agreements intended to be concluded at the same time, and (on the view expressed above) in fact so concluded. Against that background, the words “any other agreement preceding the date of this agreement” are to be read as not excluding agreements which were part of that agreed package. I do not see it as material that the final signatures on the consultancy agreement were not achieved until some time later; that was a matter of mechanics not substance.

[92]I conclude therefore that the judge’s overall conclusion was correct, and that the appeal should be dismissed.

[93]I am happy to reach this conclusion, which is in accord with what I sense to be the merits of the case. I would add that, had I agreed with the Chancellor on the legal issues, I would not with respect have considered the appropriate order to be a direction for a new trial, as proposed by him. That might be appropriate if the only problem were that raised by the judge’s defective treatment of M Rongier’s evidence; but the resolution of that issue in the claimant’s favour would not get over the signature problem. On the Chancellor’s view of the law, as I understand it, that would be fatal to the claimant’s case in any event. It could only be overcome by widening the basis of the claim, for example to include estoppel by convention (as counsel for the claimants suggested). The Chancellor has also suggested how in the event of a new trial steps might be taken to fill the gaps in relation to the evidence of the French lawyers. I am sympathetic to both suggestions, but I do not think it is properly open to us to accept them. The claimants had their opportunity to plead their case on a wider basis, and both parties had their opportunity to fill the gaps in the evidence. They did not take those opportunities before the trial. I see no principled basis for us as an appellate court to give them a second chance. If the claimants have failed to prove the contract on which their pleaded case relied, the proper order in my view is judgment for the defendants.

[94]However, for the reasons I have given, I would dismiss the appeal.

Lord Justice Moses:

[95]I agree that the appeal should be allowed, for the reasons given by the Chancellor, and that we should order a new trial. I acknowledge the need for a new trial with reluctance. The events to which the proceedings related took place nearly five years before the trial. No resolution was achieved until four and a half months after the hearing. I have, therefore, considered whether it is possible to reach any definite conclusion, in favour of one party or the other, as to what had been agreed. In particular, a bystander, hoping for expeditious justice in commercial transactions, might have thought it possible, to resolve , on the face of the documents and the behaviour of the parties, whether there was a shared intention that all the different parties should be bound, notwithstanding that all the agreements had not been signed.

[96]But such a bystander would not have borne in mind the code of intransigent silence said to emanate from the French Lawyers’ Code of Ethics, which, as I understand, it was merely asserted, never proved and could, in the manner explained by the Chancellor, have been finessed. The purpose of the side letter, and in particular for whose benefit it was intended, thus remained without explanation. French tax linked to a French employment agreement was avoided by the use of Cheverny, an English company. Rongier’s evidence, flawed, for the reasons given by the Chancellor, did not provide any explanation whatever. It is, accordingly not possible to infer, from an objective assessment of the probabilities, to whose advantage such an agreement redounded, still less that both parties agreed that all agreements should take effect, once some of them had been signed.

[97]Nor is it possible to infer from those few documents which were produced that M. Cléry-Melin and Mr Brassington had agreed that M. Beigbeder’s services in France should be rewarded and had instructed M. Olier to prepare a side letter, sent to and approved by M. Rongier. Such a finding (paragraph 50) was crucial to the judge’s reasoning. But it is not open to this court to reach such a factual conclusion, once M. Rongier’s written evidence had been so seriously undermined.

[98]The agenda for the completion meeting, circulated by Clifford Chance, on 27 June 2000, was not regarded by the judge as independent evidence of a prior agreement of the side letter. At paragraph 56, he considers the agenda in the context of the evidence of M. Rongier. It is evidence that Clifford Chance were expecting its contents to be agreed, it is not evidence that it had been agreed. The same may be said of M.Olier’s letter dated 6th July 2000. But neither of those two documents nor Mr Brassington’s e-mail response, on 8th October, provide the necessary evidential basis that all parties had agreed to be bound before all agreements were executed.

[99]Any such conclusion is further inhibited by the evidence of the lack of any comment on the absence of the side letter, when the originals of the consultancy agreement were produced. (paragraph 71 of the judgment). Even if one were to attribute M. Begbeider’s insouciance to the speculative explanation of the judge, it does not explain his lawyers’ jemenfichiste attitude to its absence. M. Begbeider does not seem to have had any concern at all at the absence of agreement (see paragraph 83).

[100]If any doubts remained as to the significance of M. Rongier’s evidence, they must surely be dispelled by the judge’s own reliance on the credibility of that witness in dismissing the possibility that the side-letter was optional.

[101]In short, the judge regarded M. Rongier’s evidence as central to his conclusions. Once his reliance on that evidence has been demonstrated to be erroneous, it seems to me impossible to resurrect the claimant’s case by alternative means; this was not an approach the judge himself felt able to adopt.

[102]Accordingly, I am unable to find any basis for upholding the claim on an alternative basis, estoppel not having been pleaded.

Cited in 32 later judgments

and 23 more of the most senior