In short

Force India, the F1 team bought by Vijay Mallya, had a main sponsorship contract with Etihad and Aldar. After rebranding as Force India and dropping the sponsors' names from the team, disputes arose over livery, Kingfisher branding and clause 5 options.

The judge held Etihad and Aldar repudiated by terminating in January 2008, having affirmed the contract through a wait-and-see approach. Force India claimed damages of over $5 million.

The Court of Appeal allowed the sponsors' appeal, holding Force India repudiated by changing the team name and branding without consent, and remitted damages to the trial court.

Decision

Appeal allowed in part. [139]
Contract dismissed. [139]

Issues

Did Force India commit a repudiatory breach by changing the team name to Force India Formula One Team without retaining the Etihad Aldar prefix required by clause 4.6?
Yes. On 1 November 2007 the team abandoned the sponsors' names despite Mr Phillips raising the contractual obligation; the change was deliberate and not remedied. [50]
Did Etihad and Aldar affirm the contract or waive breaches by failing to complain before terminating in January 2008?
No. Their wait-and-see approach reflected consciousness of clause 5 and hope of alternative Ferrari sponsorship, not a clear and unequivocal election to affirm; the accumulating breaches were continuing. [139]
Was Spyker entitled to the clause 16.3 Constructors' Championship bonus for finishing tenth in 2007?
No. Spyker was placed tenth out of ten valid competitors; McLaren's unranked listing was informational only and did not earn a penultimate-position bonus. [138]

Reasoning

The sponsors were entitled to terminate for Force India's repudiation; the clause 16.3 bonus is not payable where the team gained no ranked championship position. [139]

Written by AI from the judgment on 28 August 2026. Each ¶ links to the paragraph it came from. Read those before relying on it.

▶Case Law Cited7

▶Cited By15

Force India Formula One Team Ltd v Etihad Airways PJSC & Anor [2010] EWCA Civ 1051

Case No A2/2009/2493

[2010] EWCA Civ 1051

IN THE HIGH COURT OF JUSTICE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEEN’S BENCH DIVISION

SIR CHARLES GRAY

(SITTING AS A JUDGE OF THE HIGH COURT)

HQ08X01237

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

Date 06/10/2010

Before

LORD JUSTICE RIX

LORD JUSTICE PATTEN

SIR MARK WALLER

Between

Force India Formula One Team LimitedRespondent / Claimant

(1) Etihad Airways PJSCAppellants / Defendants

(2) Aldar Properties PJSCAppellant

(Transcript of the Handed Down Judgment of

WordWave International Limited

A Merrill Communications Company

165 Fleet Street, London EC4A 2DY

Tel No: 020 7404 1400, Fax No: 020 7404 1424

Official Shorthand Writers to the Court)

Mr Stephen Auld QC & Ms Eleanor Campbell (instructed by Messrs Nabarro) for Appellants

Mr Francis Tregear QC & Mr Edward Knight (instructed by Messrs Fladgate) for Respondent

Hearing Hearing dates : Tuesday 27 th& Wednesday 28 th July 2010

Judgment

Lord Justice Rix :

[1]Formula One (“F1”) World Championship motor racing is a global brand which excites considerable interest and demands deep pockets. Sponsorship of the relatively small number of teams which compete in F1 is expensive, and prized both by the teams which seek it and the companies which provide it. A team may have many sponsors, but its main sponsors have particular rights. This litigation is between the owner of an F1 team, Spyker F1 Team Limited (“Spyker”), which entered into a main sponsorship agreement with two Abu Dhabi companies, Etihad Airways PJSC (“Etihad”) and Aldar Properties PJSC (“Aldar”), together the “sponsors”. The sponsorship agreement is dated 12 April 2007 (the “contract”). Under it Etihad and Aldar committed to provide at least US $20 million of sponsorship over the three years of 2007, 2008 and 2009: $5 million in 2007, $6 million in 2008 and $9 million in 2009.

[2]As it turned out, the contract came to an end by, as is common ground, 31 January 2008 at latest. The essential question in this appeal is whether the agreement ended as a result of a repudiation by the sponsors or by the team company, which by then had been renamed as “Force India Formula One Limited” (“Force India”). The judge, Sir Charles Gray, sitting as a judge of the High Court, held that it had been the sponsors who had repudiated and he found that they were liable to Force India for damages in the sum of $5,140,775, apportioned as to $3,084,465 to be paid by Etihad and $2,056,310 to be paid by Aldar. The sponsors appeal, however, on the ground that it had been the team company, Force India, which had repudiated.

The parties

[3]Etihad is an Abu Dhabi company which owns and operates Abu Dhabi’s national airline. It is a relatively new airline, founded in 2003, which seeks to compete as a national champion with airlines such as Emirates and Singapore Airlines. Aldar is a major Abu Dhabi property development company. It was involved in the development of Abu Dhabi’s new F1 racetrack where an inaugural grand prix race took place in November 2009. Close by was a theme park, called “Ferrari”, in which Aldar was also involved.

[4]The personnel at Etihad with whom we are chiefly concerned were James Hogan, its CEO; Peter Baumgartner, its vice president and head of marketing; Nick Cottage, its sponsorship manager; and an independent sports sponsorship consultant, Jamie Cunningham, of Professional Sports Group (“PSG”).

[5]The CEO of Aldar was Ronald Barrott.

[6]The team company which entered into the agreement with the sponsors was Spyker, ie Spyker F1 Team Limited. It was owned by Spyker Cars NV, the Dutch manufacturer of Spyker luxury sports cars, a brand influenced by the aerodynamics expertise of the aircraft industry (“Spyker Cars”). Since the events with which we are concerned, the Spyker car interests have bought Saab. Spyker Cars was a listed company in which the Mol family was prominent as shareholders and managers.

[7]The team which became the Spyker team had originally been known as “Jordan Grand Prix”, but in 2005 Jordan Grand Prix Limited was purchased by Midland Resources (Holdings) Limited, an international conglomerate (“Midland”). The team company was renamed Midland F1 Racing Limited and the team name became “MF 1 Racing”. Midland’s interest only lasted a year, however, for in September 2006 it sold the team company to Spyker Cars NV, and the team name became “Spyker MF 1 Racing”.

[8]The principal of the Spyker team was Colin Kolles, and Mr Phillips was its director of business affairs.

[9]At the beginning of 2007, Spyker still lacked main sponsors for that year’s racing season, although it was in the course of establishing contact with Etihad. In early February 2007, the inaugural Abu Dhabi grand prix was announced for November 2009 and Mr Hogan of Etihad and Mr Kolles of Spyker met in Abu Dhabi. Then, immediately before the opening grand prix event in Australia, a binding Heads of Terms Agreement dated 13 March 2007 was entered into with Etihad (but dealing with the terms relating to both sponsors), and the contract followed on 12 April 2007. Spyker had negotiated for greater sponsorship sums than the contract gave them, but there was no other main sponsorship interest, and therefore it had to settle for what it could get. However, as will appear below, the contract contained its own mechanism to protect Spyker in case thereafter a better main sponsorship deal became available from other potential sponsors for the 2008 and/or 2009 seasons.

[10]However, Spyker Cars, like Midland before it, was not long in the saddle. On 14 August 2007 a press release announced that it was contemplating the sale of the Spyker team, ie Spyker. On 1 September 2007 Dr Vijay Mallya, a prominent Indian entrepreneur and billionaire, announced at a press conference in Mumbai that he had made a successful bid for it. Dr Mallya was chairman of United Breweries Group, one of the largest spirits companies in the world. Among its brands is White & Mackay whisky. The Group also encompasses United Breweries Limited, which has 45% of the Indian beer market including Kingfisher beer, and Kingfisher Airlines, India’s largest airline. From his arrival on the scene, Dr Mallya became the dominant figure in Spyker, or rather, as will appear, in Force India, as the team became known as a result of a re-branding exercise. Dr Mallya had been interested in F1 racing for some time, and at this juncture in 2007 had been sponsoring the Toyota F1 team through Kingfisher Airlines. Dr Mallya is henceforth the single most prominent figure in our story.

[11]Dr Mallya’s buying into the Spyker team was in fact effected by a joint venture with the Mol family. The ultimate holding company, owned jointly between Dr Mallya and the Mol family, was called Orange India Holdings Sarl (“OIH”). The “Orange” reflected the Mol Dutch interest, the “India” reflected Dr Mallya’s interest, and “Holdings” spoke to the fact that OIH was the ultimate parent of the enterprise. Its subsidiary was Force India Formula One Limited, and that company’s subsidiary was the renamed Spyker, viz Force India Formula One Team Limited (Force India).

The Heads of Terms Agreement

[12]Ultimately it is the contract which governs the relationship of the parties. However, because we are concerned with repudiation, and what might amount to a repudiatory breach of the contract, it may be instructive also to consider the Heads of Terms Agreement which sets out in headline terms what the deal was. Thus the Agreement contained the following provisions: “OVERALL RIGHTS• Right for Etihad to become one of the two main team sponsors of Spyker F1 from 2007 – 2009 together with Aldar…

• Right to ensure that Etihad is the sole and official airline associated with Spyker F1.

• Right to have the naming & livery rights of the team. The precise name for the 2007 season is to be agreed prior to the first race of the season in Australia and there will be no changes to the livery in 2007. The naming and livery rights are also included for 2008 & 2009, subject to the Naming Rights clause listed below… BRANDING RIGHTS

• Right for Etihad together with Aldar to be the most prominent brands associated with the Spyker F1 team outside of automotive-related brands.

• Right for Etihad to be the sole & exclusive airline brand to be associated with the Spyker F1 team…

• Right for Etihad to have final approval of their logo positions in any branding activities… ENDORSEMENT AND IMAGE RIGHTS

• Right to use the Spyker F1 team logo in any Etihad marketing activities, subject to the approval of Spyker F1 – such approval not to be unreasonably withheld…

• Right for Etihad to become one of the two main team sponsors of Spyker F1 from 2007 – 2009 together with Aldar…

• Right to ensure that Etihad is the sole and official airline associated with Spyker F1.

• Right for Etihad together with Aldar to be the most prominent brands associated with the Spyker F1 team outside of automotive-related brands.

• Right for Etihad to be the sole & exclusive airline brand to be associated with the Spyker F1 team…

• Right for Etihad to have final approval of their logo positions in any branding activities… ENDORSEMENT AND IMAGE RIGHTS

• Right to use the Spyker F1 team logo in any Etihad marketing activities, subject to the approval of Spyker F1 – such approval not to be unreasonably withheld…

[13]The Naming Rights Clause (referred to in the third bullet point under “OVERALL RIGHTS”) was what was to become the clause 5 mechanism under the contract to enable Spyker to seek more profitable main sponsors for the 2008 and 2009 seasons. The securing of such potential main sponsors for the second and third years of the contract was to be the occasion for Etihad/Aldar to have three options:(1) to match the new sponsorship, thereby preserving their position as main sponsors;

(2) to continue as a “presenting sponsor” ie to take a back-seat to new main sponsors while preserving the value of their branding assets, subject to some discount in their financial obligations; or

(3) to terminate the sponsorship for the future without any further obligation.

The contract

[14]The contract contained inter alia the following provisions – “1 Interpretation, General remarks 1.1 The definitions and general provisions in Schedule 1 apply to and are incorporated in this Agreement… 1.3 SPYKER hereby appoints the Sponsors as the main team sponsors of SPYKER from the Commencement Date until 31 December 2009, upon the terms and conditions set out below. 1.1 The definitions and general provisions in Schedule 1 apply to and are incorporated in this Agreement… 1.3 SPYKER hereby appoints the Sponsors as the main team sponsors of SPYKER from the Commencement Date until 31 December 2009, upon the terms and conditions set out below. 3 Spyker’s obligations and rights SPYKER undertakes and warrants to the Sponsors that it will not during the Term enter into any sponsorship, marketing or advertising arrangement which may be deemed by the Sponsors to be in conflict with the respective main activities of the Sponsors. SPYKER undertakes and warrants to the Sponsors that it will throughout the Term:… 3.2.3 include the Sponsors Logos on all the materials in accordance with Clause 6.1. 3.2.4 ETIHAD would be official airline associated with SPYKER and be the sole and exclusive airline brand to be associated with the SPYKER… 4 Sponsorship licences and Naming Rights … 4.6 Subject to the Sponsors’ due payment of the Fee in accordance with Clause 16, SPYKER undertakes and warrants that it will ensure that the Team Name is integrated in the beginning of the name of the Team during the years 2007, 2008 and 2009 subject to FOM and FIA regulations and instructions. Further, SPYKER undertakes the obligation to use the integrated name whenever referring to the Team in any written or oral press communication of the Team… 4.7 There will be no major livery changes in 2007 to those detailed in Appendix 4, 5 and 6 of this Agreement. In respect of the 2008 Season and the 2009 Season, the sponsors shall have the right to decide and approve the livery of the Cars, Race Driver’ and Mechanics’ racesuits, and Team Shirts. 5 Sponsor Options 5.1 SPYKER has the right to source an alternative Team sponsor for the years 2008 and/or 2009 with the naming and livery rights mentioned in 4.6 and 4.7 above, enabling an alternative sponsor to become the main Team sponsor. In the event that SPYKER is able to demonstrate via e-mail and courier to the Sponsors an irrevocable and enforceable written commitment covering the remainder of the Term and encompassing the rights to become the main Team sponsor from an alternative potential sponsor on the potential sponsor’s company letterhead before either 31 January 2008 for the 2008 Season or in the case of the 2009 Season by 31 January 2009 and if in either event the commitment is greater than combined payment obligations detailed in Clauses16.1 and 16.3 of this Agreement to be paid by the Sponsors (i.e. the basic payment obligations, excluding the points bonus but including the F1 Constructors Final Championship position bonus), then the sponsors shall have three options, which they must consider jointly:

5.1.1 Option

a. A. The Sponsors shall have the right to match this commitment…

5.1.2 Option

b. B. The sponsors shall agree to continue as the main presenting sponsor of the Team as per this Agreement with the exception that:

(a) the points bonus payment obligations detailed in clause

16.2 of this Agreement shall be reduced by 25% for each Sponsor, and

(b) the F1 Constructors Championship position bonus detailed in Clause

16.3 shall no longer apply. In the event that the Sponsors exercise this Option B, SPYKER may request that the sponsors receive alternative branding assets to those described in Clause 6 and detailed in Appendix 4, 5 and 6 of this Agreement always on the understanding that the value of the branding shall be of no less value than the original branding package. The Sponsors shall not unreasonably withhold or delay their acceptance of an alternative branding proposed by SPYKER.

5.1.3 Option

c. C. The Sponsors shall have the right to terminate this Agreement with immediate effect without any liability for payments relating to the remaining duration of the Agreement and thereby permit SPYKER to conclude an agreement with the potential sponsor in the terms of such commitment or other similar terms more favourable to SPYKER provided that, if SPYKER does not conclude such legally binding agreement within 10 (ten) business days after the date of the notice from the Sponsors referred to at Clause 5.1.5 [sc. Clause 5.1?], this Agreement shall remain in force…

5.1.4 The Sponsors must make this decision regarding Option A, B or C jointly and agrees to inform SPYKER of its joint decision regarding Option A, B or C above no more than ten (10) working days after receipt of the e-mail and courier notification from SPYKER that it has a potential alternative sponsor.

5.1.5 In each year of the Term Sponsors shall inform SPYKER by e-mail as early as practical and in due course of the name of the Team they request as the Team name bearing in mind always the requirements of the FOM and FIA in this respect as notified to the Sponsors by SPYKER. 6. Livery and branding Subject to the Sponsors’ due payment of the Fee in accordance with Clause 16 and the terms of this Agreement SPYKER will ensure that no other Team Sponsor will be more prominently branded than the Sponsors in terms of size, frequency and positioning of branding in its association with SPYKER outside of automotive related brands due to the naming and livery rights set out in Clauses 4.6, 4.7 and by applying the Sponsor Logos as follows… 6.2 The Sponsors will have the final approval of their logo positions in any branding activities described in Clause 6.1 above. Approval is not to be unreasonably withheld and will be given where, in the Sponsors’ reasonable opinion, positioning adheres to the description of positioning given above and as illustrated in the relevant Appendix… 10. Media and photographic services 10.1 SPYKER grants the Sponsors the right to preview the marketing and media plan for the Team at the beginning of each race season… 10.6 Neither party will permit the issue of any press release or media statement relating in any way to the other without the prior written approval of the other, such approval not to be unreasonably withheld or delayed. 10.7 SPYKER will use its best endeavours at all times to keep the Sponsors informed of relevant potential marketing, networking and business development opportunities with Team Sponsors and within the Formula 1 community… 12 Team Sponsors 12.1 Nothing in this Agreement will prevent SPYKER from obtaining or contracting with potential and actual Team Sponsors providing that the Sponsors have the right to approve all Team Sponsors, such approval not to be unreasonably withheld or delayed and not to restrict the performance capabilities of the Team. SPYKER hereby acknowledges that tobacco and pornography agreements are unlikely to be approved and gambling and alcohol related sponsor agreements will only be considered favourably if they entail no branding of the Cars or Drivers. 13 Reputation 13.1 SPYKER will ensure that the Team and Team Personnel do nothing, either by act or omission, to harm the reputation, image or goodwill of the Sponsors, their products or services, the Sponsor Logos or the Spyker F1 Logo… 21 Term and Termination 21.2 This Agreement is for the Term… 21.2 Termination by SPYKER: 21.2.1 SPYKER may terminate this Agreement with immediate effect on the giving of written notice to both Sponsors on the happening of any of the following events by or in relation to one Sponsor (the Defaulting Sponsor): (a) the Defaulting Sponsor has committed any material breach of this Agreement which, if capable of remedy, has not been remedied by whomsoever within ten (10) Business Days of receipt of written notice giving particulars of breach and requiring its remedy… 21.3 Termination by the Sponsors: 21.3.1 The Sponsors may terminate this Agreement with immediate effect on the giving of written notice to SPYKER at any time on the happening of any of the following events by or in relation to the other party: (a) SPYKER has committed any material breach of this Agreement which, if capable of remedy, has not been remedied within ten (10) Business days of receipt of written notice giving particulars of the breach and requiring its remedy; (b) an order is made or an effective resolution is passed for the liquidation, winding up or dissolution of SPYKER and such order or resolution is not cancelled within one month;

(c) an encumbrancer takes possession or a receiver is appointed over all or any part of the assets or undertaking of SPYKER;

(d) SPYKER becomes insolvent, enters into a voluntary arrangement with any of its creditors and is unable to pay its debts or admits in writing its inability to pay its debts as they fall due; or

(e) under the provisions of Clauses 19, 5.1.3 (and 5.1.4). 24 General … No parties will be effected by any delay or failure in exercising or any partial exercising of its rights under this Agreement unless he has signed an express written waiver or release. Schedule 1 – Definitions and Interpretation – (Clause 1) 1. Unless the context otherwise requires the following definitions will apply throughout this Agreement: … Commencement Date 13th March 2007… … Default A material breach of any material obligation of this Agreement by the Defaulting Party which if the breach is capable of remedy the Defaulting Party has failed to remedy within five Business Days after receipt of a notice from the initiating party giving full particulars of the breach… FIA Federation Internationale de l’Automobile or its successors FOM Formula One Management Limited and its successors… Spyker Group SPYKER and their respective Holding Companies, Affiliates and/or Subsidiaries from time to time… Team The Formula One motor racing team owned and managed by SPYKER… Term The period from the Commencement Date to 31 December 2009, or the Termination Date whichever is the earlier. Team Name Etihad Aldar Spyker F1 Team Termination Date The actual date termination of this Agreement takes effect in accordance with its terms.”

[15]Thus, the principal negative obligation of Spyker was not to do anything by way of sponsorship or marketing which could be deemed to be in conflict with the sponsors’ main activities (clause 3.1) and in this respect to ensure that Etihad would be the sole and exclusive airline brand to be associated with the team (clause 3.2.4) and to submit other potential team sponsors to the approval of the sponsors (clause 12.1); and its principal positive obligations were to integrate the Team Name in the name of the Team and to use the integrated name whenever referring to the Team in any oral or written press communication (clause 4.6) and to respect the adopted livery for 2007 and the sponsors’ choices of livery in 2008 and 2009 (clause 4.7). As for the second and third years of the sponsorship term, clause 5, entitled “Sponsor Options” (where the Heads of Terms Agreement had referred to the “Naming Rights Clause”), enabled a balance to be preserved between the parties whereby Spyker could seek a higher sponsorship value from alternative main sponsors for 2008 and 2009, whereas the sponsors then had the options of either(a) (A) matching such potential new sponsorship, or

(b) (B) retaining their main sponsorship position at a somewhat discounted price while ceding something of their branding rights (provided that their overall value remained the same), or

(c) (C) terminating the contract. There was a termination clause (clause 21) which was designed principally to deal with material but remediable breaches. The finer details of clause 5 did not have to be examined, but it seems to me that there was a major uncertainty about option (B). Logic suggested that option (B) was designed to cover the situation where the sponsors made way for a new main sponsor but accepted a discounted price for retaining the essential value of their (altered) branding rights. However, in terms clause 5.1.2 appears to leave the sponsors continuing “as the main presenting sponsor”.

[16]The fees to be paid by the sponsors were dealt with in clause 16, which I have not set out above, but will now describe. It provided for three kinds of payments. The basic payment was a total of $20 million over the three years of the contract: $5 million in 2007, $6 million in 2008 and $9 million in 2009. I do not know why the 2009 figure was materially higher than in the previous two years, but I suspect that it had something to do with the projected inauguration of the new grand prix venue in Abu Dhabi. (It may also have reflected the absence in 2009 of any contingent bonus under clause 16.3, see below.) The payments were split 60%/40% between the two sponsors, with Etihad paying the major figure. Those payments were dealt with in clause 16.1. Clauses 16.2 and 16.3 then dealt with two kinds of further, but contingent, payments, which depended on how the team prospered. Clause 16.2 payments were premised on the number of points that the team obtained in each year’s championship, and clause 16.3 payments were premised on the placing of the team in the championship. (Thus in 2007 the team received no points, and was placed tenth. This earned Spyker nothing under clause 16.2, but there is a dispute about clause 16.3, which depends upon whether the team’s tenth place represents a penultimate or last place in circumstances where the eleventh team which had commenced the championship in 2007 was disqualified in the course of the season.) The clause 16.2 payment, called a “points bonus” was $100,000 per point (again split 60/40 between the two sponsors) up to a maximum of $480,000 per sponsor in 2007, $720,000 per sponsor in 2008, and $900,000 in 2009. The clause 16.3 payment, called a “Constructors’ Championship bonus”, operated only in respect of the 2007 and 2008 seasons. It provided for a payment of $500,000 “for each position gained” up to a maximum of $3 million (assuming 11 participants) again payable 60% by Etihad and 40% by Aldar. There was nothing if the team was “placed last”. I will set out the terms of clause 16.3 below when I come to deal with the entirely separate dispute concerning this bonus.

The repudiation dispute

[17]Before I come, next, to the history of the contract down to its termination, it is as well to have in mind at the outset what the shape of the repudiation dispute looks like. The essence of it is this. When Dr Mallya bought into OIH, the joint venture company which took control of Spyker, he became the driving force of the new enterprise. He was an enthusiast for F1 racing, a proud and successful Indian businessman, who was keen to bring Formula One and India into a love affair with one other. Indeed, India was to follow shortly on the heels of Abu Dhabi in having its own grand prix venue. To these ends, he drove the rebranding of the team as “Force India”. He clearly wanted the team to be known as an Indian team. He also felt that Etihad and Aldar, whom he had inherited from Spyker as the main sponsors of the team, were paying too little for the privilege. He probably thought that if they were to remain as main sponsors, then they should pay more, if only because his effective takeover of the team had raised it or would in due course raise it to a new level. In these circumstances, the case made by Etihad and Aldar was that they were effectively forced out of their position as the team’s main sponsors, while the team was publicised as Force India, rather than under their own names. Meanwhile, they were also faced by the fait accompli of a new livery for the car, and with sharing their own logos on the car with the prominent use of the Kingfisher logo. To make it worse, Kingfisher was not only a rival, or at any rate another, airline, India’s major airline, which detracted from the sponsorship logic of marketing Etihad, the Abu Dhabi national carrier, but also the major beer brand in India, which did not go well with the antipathy to alcohol in Muslim Abu Dhabi. Things came to a head in December 2007 and January 2008 when the Force India team tried to misuse the clause 5 options to manoeuvre the sponsors to take a back-seat to Kingfisher in the marketing of the Force India brand.

[18]That is how the sponsors looked at events. However, Force India presented another view of the dispute. They submitted to the judge, and again to this court, that a careful reading of the contract and a proper consideration of the facts revealed that there were no breaches of that contract at all, or if perhaps there was any breach, it was minor rather than, in the terms of the contract, “material”, made in error, and in any event easily remediable. There never was a clause 5 situation, because there never was another potential sponsor which was prepared to commit itself in the terms of clause 5 to providing greater sponsorship monies than the sponsors were already committed to. In any event, the sponsors were entirely happy with the new arrangements, or at any rate presented themselves as such, and concealed from Force India any disquiet, if they had any. They approved of the new name, and of the car’s new livery, and of the entry of the Kingfisher logo onto that livery. They had their own reasons for doing so, among which was the fact that they did not want Force India to know that they were negotiating on the side to change their support to another team such as Ferrari, and a desire in the meantime to retain Dr Mallya’s goodwill for the purpose of renting an Airbus for Etihad. For these reasons, and also by reason of negotiating in terms of the clause 5 options, the sponsors had affirmed the contract and waived any breaches. When therefore on 27 January 2008 Etihad and Aldar served a letter terminating the contract, they did so out of the blue and in bad faith. They were not entitled to do so. There was no clause 5 situation which entitled termination under option C. There was no irremediable breach entitling repudiation. If there ever had been, the contract had been affirmed. The truth was, however, that Force India was entirely willing to perform the contract to the letter. The sponsors only had to ask. It was the sponsors who had repudiated the contract, and Force India was entitled to accept that repudiation.

[19]The judge accepted Force India’s view of the facts and the dispute. On this appeal Mr Francis Tregear QC, on behalf of Force India, submits that the judge was right both for the reasons which he gave, and for other reasons too, and that there is no warrant for this court to depart from the judge’s analysis and factual findings.

The judgment

[20]The essence of the judge’s judgment is in the following paragraphs:

“66. I accept the evidence of Mr Kolles [Force India’s principal officer] that he did tell Mr Baumgartner [Etihad’s vice president and head of marketing] that the Kingfisher logo would be on the car during testing and that the only concern raised by Mr Baumgartner was that it should not include a reference to Kingfisher Airlines… 67. As to whether Mr Kolles also mentioned to Mr Baumgartner the new livery to be used during testing, there is no contemporaneous evidence…It may well be that he did not deem it necessary to inform Mr Baumgartner about the new livery because it was only intended to be used on an interim basis during testing in the closed season. 68. I am not in any event persuaded that this limited use of the new livery was a material breach by the Team of its obligations under the Agreement. Moreover I note that, whilst it is apparent from Mr Baumgartner’s internal e-mail to Mr Barrott (his superior) sent on 18 November 2007 that E/A sought legal advice about the livery design changes made in order “to understand our potential leverage”, it is common ground that no complaint was made to the Team about the livery at that stage. That was probably because, as Mr Cunningham accepted in his evidence, E/A were at this time well aware of the likelihood that the Team would be able to find an alternative sponsor able to offer better terms, thus enabling the Team to exercise Option A of the Agreement… 69. Even if, contrary to my finding, the livery and/or the logo used by the Team during the winter testing did constitute material breaches of the Agreement, it appears to me that those breaches were remediable in the sense that the Team could have put matters right by reverting to the previous livery and removing the Kingfisher logo for the remainder of the winter testing. It follows that under the Agreement E/A were obliged to give notice to the Team requiring the breaches to be remedied. 70. I further find that these breaches were in any event waived by E/A. I base that finding upon the conduct of E/A both during winter testing and afterwards, in full knowledge of the appearance of both car and driver during that testing. Not only did E/A not complain of conduct which they now assert to have been a material breach, but also they led the Team to believe that they were happy with its performance of the Agreement. In this connection I refer by way of example to the parties’ meeting on 13 December 2007 and the unchallenged note of that meeting which was sent by Mr Kolles’s e-mail to Mr Mallya of even date. 71. I turn to the other breaches relied on by E/A…starting with the change of the Team name to Force India which E/A contend constituted a breach of clause 4.6 of the Agreement. There is a certain unreality about construing the obligation imposed by clause 4.6 as requiring the retention in the Team Name of a reference to Spyker in circumstances where the original Dutch-owned Spyker had been taken over by the Indian concert party led by Mr Mallya and Mr Mol. 72. That said, I am prepared to assume, without deciding, that the change of name by substituting Force India for Spyker did constitute a material breach of clause 4.6 of the Agreement. The wording of clause 4.6 (which was put forward by E/A) strikes me as confused and confusing. I do not overlook the fact that Mr Baumgartner found it difficult to answer the question of how clause 4.6 was intended to operate. 73. What appears to me to be clear is that, assuming the change of name to be a material breach of the Agreement, it was a breach that was plainly remediable. If E/A had given the notice required by clause 21. 3.1(a) of the agreement, the Team could have changed the team name back to Etihard Aldar Spyker F1 team. There is no reason to suppose that this change back would have been prevented by the F1 authorities. No objection was made to the various changes to the chassis name. 74. The next breach relied on by E/A…is that Spyker was acquired by a company associated with Kingfisher Airlines, particularly for the purpose of promoting Kingfisher Airlines. That is said to be a breach of clauses 3.1 and 3.2.4 of the Agreement. Whilst I accept that the company which acquired Spyker was “associated with”

Kingfisher Airlines, I do not accept that the evidence supports the proposition that the acquisition was “particularly for the purpose of promoting Kingfisher Airlines”. I accept the evidence of Mr Mallya to that effect: see paragraph [17] above [where the judge had said that Dr Mallya’s evidence was that he did not set up OIH in order to promote products; that could be done through sponsorship of a racing team. Indeed UB already had agreed to sponsor the Toyota team.] In any event I find it difficult to reconcile clauses 3.1 and 3.2.4 of the Agreement with, firstly, the right conferred on the Team by clause 5.1 of the Agreement to source an alternative Team Sponsor for the years 2008 and/or 2009 and, secondly, with clause 12.1 of the agreement which expressly permits the Team to obtain and contract with potential and actual Team Sponsors other than E/A. I note that the latter clause makes no reference to airlines being unlikely to be approved. 75. I am in any event entirely satisfied on the evidence that any breach of clause 3.1 or 3.2.4 was waived or alternatively acquiesced in by E/A by reason of their conduct after they became aware of the identity and business interests of the new owners of the Team. 76…It appears to me to be clear from the contemporaneous exchanges of e-mails, as well as from the evidence of Mr Baumgartner and Mr Cunningham, that E/A were at all material times aware of what was happening over the weeks and months following the acquisition of Spyker. Notwithstanding this knowledge, E/A did not lodge any complaint with the Team; nor did E/A object that the Team was behaving in a manner which breached its obligations under the Agreement. On the contrary E/A expressed their happiness with the way in which the contract was being performed by the Team and told the Team that they were delighted with the media coverage achieved in the 2007 season. It is now apparent that E/A were busily pursuing the possibility of sponsoring other teams (including Ferrari) and carefully considering their options under the Agreement; but E/A were careful to conceal this from the Team. 77. In my opinion there were a number of reasons why E/A did not protest. In the first place they were well aware that the level of sponsorship for which the Agreement provided fell significantly short of what the Team hoped to achieve once the acquisition of Spyker had been completed. Mr Mallya made no secret of the fact that he wanted and expected an improved level of sponsorship. The evidence supports the conclusion that E/A well knew that they had driven a hard bargain when negotiating the amount of the sponsorship payable to the Team. 78. Moreover, I am satisfied that the senior management at E/A had well in mind the entitlement of the Team under clause 5 of the Agreement to exercise its option to seek an alternative sponsor willing and able to pay a materially greater amount by way of sponsorship for the 2008 and 2009 seasons. Clause 5 is a highly unusual provision which in effect entitled the Team to walk away from the Agreement if it managed to find a better deal with another sponsor. It was unlikely that E/A would thereupon have exercised Option A and in the event they did not do so. 79. My conclusion on the evidence is that the existence of the clause 5 option was the major reason why E/A made no complaint about what they now assert were breaches by the Team of its contractual obligations. There were two further reasons: firstly, I am satisfied that from an early stage E/A were hopeful of concluding an alternative sponsorship agreement with Ferrari or, failing that, with another established F1 team. I have described above the contact which took place between E/A and Ferrari during the currency of the Agreement. Secondly, I am satisfied that the desire of Etihad to prevail on Kingfisher Airlines to lend them an aircraft was a further material reason why E/A did not wish to rock the boat by complaining of breaches of contract on the part of the Team. 80. I have set out earlier in this judgment the guidance given in the authorities on the question of waiver, acquiescence and affirmation of a contract. Applying those authorities to the facts of the present case, my conclusion is that over the period starting with the date of the acquisition of Spyker and concluding with the letter of termination dated 27 January 2008, E/A was, as Mr Tregear submitted, engaged upon a strategy of watch and wait and see what advantage they might be able to extract from the situation. In my judgment this is a case where E/A, being the party that had the right to terminate the contract, with knowledge of the facts said to amount to breaches on the part of the Team, acted in a manner which is consistent only with it having chosen to affirm the Agreement, that being one of the two alternative and inconsistent courses of action open to it (i.e. to terminate or affirm the contract), and so will be held to have elected by their words and conduct to affirm the Agreement: see The Kanchenjunga cited above. 81. My finding is that E/A by their course of conduct over the months detailed above had, prior to sending the letter of termination, elected not to exercise any right they might otherwise have had to terminate the contract. By parity of reasoning the various breaches of contract now relied on were waived by E/A or alternatively acquiesced in by their conduct over that period.”

[21]These are a series of strong findings made by the judge after a substantial trial, and I have set them out in extenso because on this appeal Mr Tregear powerfully submits that they are justified and that this court is unable to unpick them, even if they are properly challenged, which he submits that they are not. On the other side, Mr Stephen Auld QC, who did not appear for the sponsors at trial, submits that the judge erred fundamentally by failing to appreciate that, following the acquisition of Spyker, the new team owners had committed an accumulating series of deliberate breaches, beginning with the important change of team name to “Force India” thereby excluding reference to Etihad and Aldar, breaches which were cumulative and continuing in their effect, and which well justified the sponsors to accept such breaches as a repudiation of the contract. He submits that the judge erred in failing to find such breaches proved, or in belittling them, or in being prepared to deal with them only on an assumption, and in finding them remediable. He submits that the judge was wrong to find that the sponsors had done or said anything to amount to a clear and unequivocal affirmation of the contract or waiver of or acquiescence in any breach. He challenges the whole of the judge’s analysis of the difficult situation caused by the change of ownership and control of the team, submitting that “wait and see” was not the vice of the sponsors’ response but an appropriate response in circumstances where the Force India team knew that it was intent either to replace them as the main sponsor or to make them pay more for their existing rights, and all this against the background of clause 5. These submissions require this court to review the essential history of the contract from the change of ownership of Spyker down to its termination, and that is what most of the time taken in oral submissions before us has been devoted to.

[22]It is necessary at this stage to pause for a moment to ask what the judge’s essential reasoning is. It seems to me that it is this. He considered that the Force India team owners were entitled to act as they did. They were entitled to drop the Spyker name and replace it with Force India. He did not ask himself whether the dropping of the sponsors’ names of Etihad and Aldar was something Force India was entitled to do. However, even if the change of name was a material breach, it was remediable because, if the sponsors had asked, the team name could have been changed back to Etihad Aldar Spyker F1 Team. The judge did not ask himself whether the team name would have been changed back from Force India. The allegations about livery and the use of the Kingfisher logo as breaches of the contract were beside the point in circumstances where Mr Baumgartner had approved at least the use of the Kingfisher logo. With approval there could be no breach. The sponsors’ policy of wait and see, the absence of complaint or protest, was driven by their consciousness of clause 5 (in circumstances where they knew they were paying too little); and to a lesser extent by the hope of changing their sponsorship to Ferrari or elsewhere (which the judge referred to as having been concealed), and by the desire to borrow one of Kingfisher Airlines’ aircraft. Their policy, with full knowledge of what was going on, was an affirmation of the contract. The sponsors should be properly viewed as having “chosen” to affirm.

The history of events

[23]I have referred above to Dr Mallya’s announcement at a press conference in Mumbai on 1 September 2007 that he had made a successful bid for Spyker. At the press conference he referred to “Team India” being on the grid, a generic reference to India, as he was to say at trial. He accepted, however, in his trial evidence that he wanted to introduce the name of India into the team or chassis name. On 3 September Mr Phillips (Spyker’s director of business affairs) emailed Mr Barrott (the CEO of Aldar) about OIH’s purchase of Spyker. He said that completion of the deal was expected in 30 days. He referred to the move as “hugely positive…as it brings immediate financial stability and long term development capital to Silverstone”. He added:

“We don’t anticipate any major changes in the team or staff structure.”

Mr Barrott replied on 4 September:

“In light of this transaction could you confirm to me that there will be no changes as far as the Spiker name is concerned”

. Mr Phillips replied the same day:

“The Spyker name remains. The rules say a Constructors name can only change once every five years (although there can be exceptions). The conditions of sale include a free licence to use the name Spyker”

. In cross-examination Mr Kolles said that Mr Phillips had no authority to say this and that he had no knowledge about the takeover and its details. Mr Barrott’s enquiry demonstrated his concern about the team name.

[24]It is necessary to explain something about team, constructor’s and chassis names. A chassis name has to be registered with the FIA, and there are limitations on changing it, for which approval has to be given. A chassis name is often but not always the same as a constructor’s name. A team name, however, is the name by which a team is known and publicised, inter alia for the benefit of its main sponsors. There is plainly a tension between the publicity that might be given to a chassis or constructor’s name and a team name. The contract said nothing about the chassis or constructor’s name.

[25]At the Monza grand prix, which took place between 7/9 September 2007, Dr Mallya had a meeting with Mr Hogan and Mr Baumgartner of Etihad. It was Dr Mallya’s evidence that he told Mr Hogan that he wanted Etihad and Aldar to remain sponsors of the team and spoke positively about their future relationship. However, Mr Baumgartner’s evidence was that Dr Mallya’s opening words were “I don’t know why you’ve got that sponsorship so cheap you know, but it’s certainly not what I can provide you into the future”.

[26]On 18 September 2007 Dr Mallya emailed Mr Kolles. He spoke of a “new livery” being in progress. He also said he would speak to “Bernie”, ie Mr Bernie Ecclestone, the head of FOM, “regarding the name change. As you know his wish is to include team India in the name”. Mr Kolles replied:

“What do you think about calling the chassis VJM? You know the team name consists firstly of the title sponsor which could be India Kingfisher Etihad Aldar, then the chassis name which would be VJM and then the engine name Ferrari.”

Albeit this was an internal exchange and Mr Kolles was plainly seeking to flatter his new boss by suggesting his initials, VJM, as the new chassis name, it demonstrates early moves, even before completion of the takeover, to rebrand the team, including in particular the team name. Mr Kolles’s suggestion of a new team name was to put “India” first, Dr Mallya’s Kingfisher brand second, and Etihad Aldar last.

[27]On 27 September 2007 Mr Cunningham, Etihad’s sponsorship consultant, emailed Mr Baumgartner to respond to a request to state his “thoughts on the Spyker state of play”. Mr Cunningham wrote:

“• We let Spyker end the agreement with us from a contractual state of play. If we do not hear anything formally from them by mid-November, then we should request a meeting with them in Abu Dhabi in late November or early December. • We put a tender document together for USD 3-5 million per annum for: BMW, Ferrari, McLaren & Renault to make Etihad an offer to become their official airline partner for 2008 & 2009. We would ask each to make a pitch in Abu Dhabi in late January / early February.”

Mr Baumgartner answered that he agreed “in principle” and asked to continue the dialogue over the coming weeks. I would infer from this exchange that Etihad was concerned at the turn of events brought about by the takeover of Spyker and was looking to the future. Mr Cunningham and Mr Baumgartner appear to have considered it likely that the new owners would seek a termination of the contract in favour of Dr Mallya’s national and business interests, and that Etihad should therefore be ready for an alternative sponsorship relationship elsewhere. The timing references are probably linked to the operation of clause 5 by end January 2008, and of course readiness for the new season, whose racing would open in March 2008.

[28]On 5 October 2007 OIH completed the takeover of Spyker. An initial board meeting of OIH was held in Shanghai on the following day. The minutes of the meeting disclose that Dr Mallya was chairman of the board. Extracts of the minutes state the following:

“Control and Reporting Procedures In line with the shareholders’ agreement The Board unanimously agreed VJM would act on behalf of Orange India Holdings in all matters relating to the company. The Team Principal, Mr Colin Kolles and/or other company directors and managers would report and defer to VJM. Authorised Media Spokespersons The Board unanimously agreed VJM, Colin Kolles and Mike Gascoyne would be the only media spokespersons for the Formula Team… PR, Marketing, Sponsorship and Hospitality The Board unanimously agreed all PR, Marketing, Sponsorship and Hospitality will be managed and implemented from the Silverstone facility… Existing Sponsors Mr Colin Kolles was invited to the meeting to receive notification of some of the Board’s decisions and a request to provide VJM with a draft letter informing all existing sponsors of the race team’s new owners and to seek their co-operation in organising a meeting to discuss their ongoing sponsorship commitments during the fourth quarter 2007… Constructor Name Change Following the presentation of a professional demographic and statistical analysis report by VJM the name Kingfisher IndiaStar was tabled as a potential constructor name. The Board was undecided on the name and requested further alternatives to be submitted… Subsequent Events The constructors name “Force India F1” was unanimously approved by the Board.”

In line with the shareholders’ agreement The Board unanimously agreed VJM would act on behalf of Orange India Holdings in all matters relating to the company. The Team Principal, Mr Colin Kolles and/or other company directors and managers would report and defer to VJM. Authorised Media Spokespersons The Board unanimously agreed VJM, Colin Kolles and Mike Gascoyne would be the only media spokespersons for the Formula Team… PR, Marketing, Sponsorship and Hospitality The Board unanimously agreed all PR, Marketing, Sponsorship and Hospitality will be managed and implemented from the Silverstone facility… Existing Sponsors Mr Colin Kolles was invited to the meeting to receive notification of some of the Board’s decisions and a request to provide VJM with a draft letter informing all existing sponsors of the race team’s new owners and to seek their co-operation in organising a meeting to discuss their ongoing sponsorship commitments during the fourth quarter 2007… Constructor Name Change Following the presentation of a professional demographic and statistical analysis report by VJM the name Kingfisher IndiaStar was tabled as a potential constructor name. The Board was undecided on the name and requested further alternatives to be submitted… Subsequent Events The constructors name “Force India F1” was unanimously approved by the Board.”

[29]It appears below that the constructor’s name change was agreed within at most a day or two of the meeting. It is clear, moreover, that Dr Mallya imposed his rule on the new operation from the outset. It is also clear that among the most important early decisions was to take control over the media, PR, marketing and sponsorship aspects of the business, which were to be treated as a whole. The draft letter to existing sponsors appears never to have been drafted, or at any rate was never sent.

[30]On 8 October 2007 Dr Mallya emailed Mr Kolles to say:

“The Board has approved the change of the Team Name to ForceIndia. What are the formalities we need to complete so as to get World Council approval? I will also speak to Bernie.”

The board minutes spoke of the decision to change the constructor’s name. It seems, however, that it was also decided to change the team name, and that, as will be seen below, was done.

[31]On 11 October 2007 Dr Mallya gave a press interview which appeared on the same day on Force India’s website. His contributions included the following:

“I will be the CEO of that new outfit and will have the operational control. You can be sure that my contribution is very much hands on!... I have been involved in Formula One over the last ten years. But my role has definitely been upgraded and so my input will be more essential than as a mere sponsor because now I am in the driving seat of future team decisions. What can I add? Well, first of all I bring India to the F1 table. The potential of India is equal or even better than China… Q. Another thing that is eagerly awaited is the name of the team. Rumour has it that it could be called ‘Pride of India’. Have you decided on a team name yet? VM. It is my vision that India is part of the name, yes. What it will be in the end is not decided yet so everybody will have to wait. The name is an integral part of the team identity…[emphasis added].”

[32]On the same day Dr Mallya had met Mr Ecclestone and discussed the change of chassis name. He said in his witness statement:

“I wanted India in the chassis name and Mr Ecclestone said that would be helpful to the future of Formula 1”

. We know from Dr Mallya’s email above that the decision to use Force India as the new team name had already been taken.

[33]Dr Mallya’s witness statement developed the theme of India. He said:

“The reason I wanted to purchase the team, apart from it simply being available, was because I believed that it could make a huge impact in India. By 2010 India will have 400 hundred million middle class people. When I bought the team, the country had an annual growth rate of 9%. There are 500 million people under the age of 25. I believed their aspirations would be higher and more outward looking than previous generations and that Formula 1 would perfectly suit those aspirations. In short I believed that Formula 1 would become extremely popular in India.”

[34]On 20 October OIH held a second board meeting at Sao Paolo, to coincide with the Brazilian grand prix, the last race in the 2007 season. The minutes included the following:

“Existing Sponsors Ian Phillips will be requested to make recommendations to the Board as to how existing sponsors can be incorporated within a US$ 60 mil sponsorship programme for the 2008 season inclusive of proposed space allocation for new sponsors to meet the US$ 60 mil 2008 sponsorship funding requirement… Constructor Name Change VJM informed the Board the constructor name FORCE INDIA F1 had been approved by FOM and the FIA.”

It is possible that Dr Mallya’s report was somewhat in advance of the formal decision, for it would seem that the change of the chassis name to Force India was finally approved by the World Motor Sport Council on 1 November 2007. Ian Phillips will be requested to make recommendations to the Board as to how existing sponsors can be incorporated within a US$ 60 mil sponsorship programme for the 2008 season inclusive of proposed space allocation for new sponsors to meet the US$ 60 mil 2008 sponsorship funding requirement… Constructor Name Change VJM informed the Board the constructor name FORCE INDIA F1 had been approved by FOM and the FIA.”

[35]On 22 October 2007 a further interview with Dr Mallya was published in the International Herald Tribune. Extracts include:

“He is often called the Richard Branson of Bangalore…India’s most colourful billionaire investor, executive and entrepreneur finalized a deal this month to buy the Spyker Formula One Team… “The critical issue is: ‘India on the F1 grid,’”

Mallya said in an interview at Monza, Italy, days after the deal was announced in September… A group of architects who work for Formula One recently visited a site near Delhi to study it as a potential circuit location for a race by 2010. Mallya is also chairman of both of the Indian motor sport federations trying to sort out a venue for the race… In addition to being the Chairman of UB Group, one of the world’s largest liquor companies, and owner of Kingfisher beer and Kingfisher Airlines, Mallya, 51, is also a member of Parliament. His love of racing goes back to the 1970s, when he raced formula cars in India…This year, Kingfisher sponsored the Toyota team… Mallya, who is in Brazil this weekend for the final Formula One race of the season, plans to call his team Force India F1… “Since the announcement was made, India is on fire,” Mallya said…”

[36]On 23 October 2007, Vikram Malhotra, Kingfisher Airlines’ marketing manager, emailed Dr Mallya about the “advanced stages of setting up our business and marketing plans from Force India Formula One Team in India and building the plan for working together with the current Spyker management team globally…”. It is clear from subsequent documentation that Dr Mallya worked closely with Mr Malhotra as his in-house marketing man.

[37]On 24 October 2007 Mr Mol forwarded to Dr Mallya the proposal of a Dutch design house “for the logo/brand identity based on the new name and we hope we win this race”. The title of the email was “Force India F1 Team”. Dr Mallya promptly emailed back directly to the design house, with copy to Mr Mol, Mr Kolles and Mr Malhotra, as follows:

“Thank you for your mail and creative efforts. Currently, we are doing everything in-house. We have our own UB Marketing team in India who have developed the logo. This concept has been well received and considering that India is our target market and audience, it is important that we address this appropriately… If you also wish to make a design proposal, please feel free to do so. However, the attachments to your mail seem to revolve around the Etihad-Aldar title sponsorship which will not be the case. We are looking at sponsorships at levels that this team has never achieved before so you need to be mindful of the design elements that other big sponsors would want. I suggest that you co-ordinate your efforts with Vikram Malhotra, who works for me so there is proper co-ordination.”

We have our own UB Marketing team in India who have developed the logo. This concept has been well received and considering that India is our target market and audience, it is important that we address this appropriately… If you also wish to make a design proposal, please feel free to do so. However, the attachments to your mail seem to revolve around the Etihad-Aldar title sponsorship which will not be the case. We are looking at sponsorships at levels that this team has never achieved before so you need to be mindful of the design elements that other big sponsors would want. I suggest that you co-ordinate your efforts with Vikram Malhotra, who works for me so there is proper co-ordination.”

[38]The Dutch design house as promptly replied to Dr Mallya:

“…The logo we proposed…is based on your logo with the Indian flag. I think the wording FORCEINDIA F1 TEAM as proposed in the concept brand guide is very strong. We do not understand what you mean that it is built around Etihad-Aldar…We are very interested in your comments. Please let us know if it is useful to spend more time on the branding matters. Of course we are motivated to help building a strong new brand. Our background is building brands…”

Dr Mallya replied, to make his point very clear:

“By way of background, the UB Group has conceived, developed, launched and built 3 of the largest brands in the World – so I understand brands perfectly well. Force India Formula One will NOT engage an external agency on the payment of any consideration whatsoever to develop the brand, image, logo or any other collateral. We have more than enough capability in-house… Thank you for your interest in the new Force India Formula One.”

Thank you for your interest in the new Force India Formula One.”

[39]Also on 24 October 2007 the BBC Sport Motorsport website ran the following item:

“Spyker change name to Force India Spyker have been granted permission to change their name to Force India by motorsport’s governing body, the FIA. The team, bought by Indian billionaire Vijay Mallya for £61m, will race under the new name with a logo in the colours of the India flag from the next season. India is set to host its first ever Grand Prix in New Delhi in 2010.”

On 25 October the Daily Mail in England and the New Zealand Herald, also publicised the change of name to Force India. It would appear that the BBC, Daily Mail and New Zealand Herald stories were all based on Dr Mallya’s interview given to the International Herald Tribune. It may be that at this stage any reference to Force India’s team name as distinct from chassis name having been changed to Force India was premature, but Dr Mallya never seems to have made much distinction between the two. He was keen to advertise the name of Force India, and to direct his attention to the Indian market, without reference to such possible niceties. Spyker have been granted permission to change their name to Force India by motorsport’s governing body, the FIA. The team, bought by Indian billionaire Vijay Mallya for £61m, will race under the new name with a logo in the colours of the India flag from the next season.

[40]It seems that it was the BBC website item that for the first time brought the change of name to the attention of Etihad. There had certainly been no direct communication from Force India. Thus on 25 October 2007 Mr Barrott of Aldar emailed Mr Baumgartner at Etihad as follows:

“Please find attached an internet page from the BBC Sport which as you will see clearly states that Spyker is changing its name under its new ownership to Force India. I find it amazing that neither any of us have been approached about this matter, as it has major implications on our joint sponsorship of the team. I will call you later to discuss so that we can agree an appropriate joint response to the team owners.”

[41]Mr Baumgartner, having discussed the matter with Mr Hogan and on the telephone with Mr Barrott, responded to say that Etihad’s lawyers had been asked to advise and to draft a suitable letter to protect their joint interests. There would be a meeting to discuss scenarios. He added:

“Clearly not a situation in the spirit of the partnership between us and the team. But the present case does also provide opportunities for Etihad and Aldar which we now have to use to our best benefit.”

It is not clear what happened with respect to the legal advice given to the sponsors. Certainly no draft letter has been disclosed, and no letter was written at this time to Force India. Nevertheless this correspondence evidences the sponsors’ concern about the future of the relationship, and also the need to look to the future.

The judge recorded Mr Baumgartner’s evidence as to this period as follows:

“23. Mr Baumgartner gave evidence that Etihad’s principal source of information about the acquisition of the Team by OIH was through media reports. He said that he was upset by the failure of the Team to keep sponsors “in the loop”

. He considered that there were obvious problems for E/A arising from the acquisition of the team by OIH because for him Mr Mallya and the UB group were synonymous with the Kingfisher brand, which is associated both with the airline industry through Kingfisher Airlines and with the alcohol industry throught Kingfisher beer. According to Mr Baumgartner, Etihad was a competitor of Kingfisher Airlines and Etihad were very sensitive about any potential association with alcohol. He also expressed concern about the dominant personality of Mr Mallya. 24. Notwithstanding these concerns it was the evidence of Mr Baumgartner that E/A hoped that the sponsorship relationship would continue. E/A made no complaint about the change to the name of the chassis sponsor.” And the judge then went on to describe Mr Baumgartner’s email of 25 October to which I have referred above.

[43]The judge’s reference in this context to Mr Baumgartner’s hopes for the continuing relationship is, I feel, somewhat misplaced. It is a plain inference from the material I have cited above that Mr Baumgartner was of the view that the relationship was quite likely to be on the way out. The way he put it in his witness statement was as follows:

“39. I have a clear recollection of this period, in part because at the time I felt that the potential collapse of the sponsorship with Spyker might reflect badly on my own decision-making at Etihad…I played a key role in recommending Spyker to the company and, to that extent, my own reputation and credibility were potentially compromised by any subsequent failure… 40. We had not given up hope, however. We genuinely felt that the 2007 Season had gone very well and continued to hope that the relationship would continue. But the very fact that the relationship had been working so well contributed to the sense of disappointment within Etihad and Aldar in relation to the team, in its new incarnation under Mr Mallya’s control. There had been no attempt to give prior notice to the sponsors and no attempt to manage the relationship sensitively after the acquisition… 41. Although we were very concerned at the takeover and Mr Mallya’s reluctance to respect the terms of the Agreement, we made a deliberate effort to keep calm and retain a cordial relationship with Force India. If we were to remain in any kind of a sponsorship relationship with them then we did not want to stir up any unnecessary tension.”

[44]On 1 November 2007 the formal approval of the chassis name change from Spyker to Force India came through and was notified by the FIA to Mr Phillips and on to Dr Mallya. Force India’s solicitors asked for confirmation of the status of the name. On the same day Dr Mallya telephoned Mr Hogan of Etihad and followed that up with an email, under title “Etihad Aldar Force India Formula One”, as follows:

“This has reference to our telephone conversation. As I told you, I am committed to maximising the value of the Etihad Aldar sponsorship because I have seen things from a sponsors perspective. Having said this and also in view of the fact that the team now has the unique draw amongst millions of Indians, the current title sponsorship amount is way too low. I would request you to consider all the “value addition”

I am bringing and either agree in principle to a fairly substantial increase or an alternate space on the new car at the same cost. We are ready with presentations…” There was nothing there about the change of any aspect of the team or chassis name. In effect, Dr Mallya was resuming where he started off with Mr Hogan at Monza. We are ready with presentations…”

[45]The judge said (at his para 26) “Notwithstanding the terms of that email, Mr Mallya insisted in his evidence that, if E/A had wanted the terms of the contract to stand, with E/A remaining as sponsors and the name continuing to be Etihad Aldar India F1 Team, he would have accepted that position.” Other than implying that that evidence was at variance with the email which Dr Mallya sent to Mr Hogan that day, the judge never stated whether or not he accepted that evidence.

[46]Also on 1 November 2007 Mr Phillips emailed Dr Mallya and Mr Kolles as follows:

“I have been asked by the FIA to clarify our team name following the approval of the chassis name change. TODAY. I guess what we want today is Force India Formula 1 Team but what do we do about Etihad and Aldar? I believe that technically they are still the title sponsor. We are able to change the name in future but I’d rather it be a positive change adding a title sponsor rather than taking one off. I don’t imagine that they will stay title sponsors at the current price! I suggest that I tell the FIA it’s Force India Formula 1 Team and if Etihad and Aldar complain I can say that I thought I was being asked for the new company name. Your instructions would be appreciated.”

Your instructions would be appreciated.”

[47]Dr Mallya replied:

“There is no question of adding a sponsor’s name to the Chassis (Constructor’s) name. To clarify: The name of the Chassis (Constructor) is Force India F1. The name of the Company is Force India Formula One Limited.”

Thus Dr Mallya ignored the question, which the FIA demanded answering that day, of what the team was to be called. He made it clear, however, that there could be no question of using anything but Force India. Mr Kolles for his part replied to Dr Mallya:

“I think the chassis name has to be “Force India” not “Force India F1”

. The team name is “Force India F1 Team”. This are FOM’s rules. Ian can you confirm?” So the essential question was put back to Mr Phillips. In fact there is nothing in the FOM rules to govern the team name, other than that it perhaps had to include the chassis name. At trial Mr Kolles gave evidence, in his witness statement, that – “The team name is at the discretion of each team. It normally consists of the title sponsors name plus the obligatory chassis name and, if contractually required, the engine manufacturers name. The team name is not regulated by FIA or FOM.” Ian can you confirm?”

[48]On the same day, Mr Phillips replied to Dr Mallya and Mr Kolles:

“Chassis name as confirmed in writing today by FIA is Force India. The team name – which must include the chassis name – should be the company registration 02417588 which is Force India Formula One Team Ltd. There is no need to use the Ltd… FOM’s rules for the use of any F1 trademark in any guise by an entrant is that it must be immediately followed by the word ‘Team’. It is this team name (entrant’s name would be more appropriate) which can be changed at any stage to reflect title sponsorship ie Kingfisher Force India Formula One Team. The chassis name cannot be modified in any way except to add the engine manufacturer. I suggest we use Force India Formula One Team now.”

That was then done, by formal notification that day by email to the FIA. I suggest we use Force India Formula One Team now.”

[49]And so it was determined to use Force India as the team name as well as the chassis name, and Etihad and Aldar were abandoned. Although it may be that Dr Mallya and Mr Kolles had to defer to Mr Phillips about the technicalities of the rules, it was clear that Dr Mallya would not brook any reference to Etihad and Aldar. Mr Phillips, who had raised the question about Etihad and Aldar in terms, while suggesting the expedient of being less than candid with their sponsors if Force India had to be given an explanation as to why the team name had changed, plumped for his first preference – to call the team Force India Formula One Team. It is also revealing that, not for the first time, Kingfisher was spoken of as a possible component of a team name.

[50]The judge made no reference to this series of emails on 1 November between Mr Phillips, Dr Mallya and Mr Kolles, which shows each of them in a poor light. At para 21 the judge merely stated the change of the chassis name as having been approved on 1 November 2007 and made no reference to the change of the team name. At para 28 he merely reported that the takeover was completed in early October and “There followed the name change to Force India F1 Team Limited on 31 October 2007”. That appears to have been a reference to the company name change. If so, there is no reference whatsoever in the factual part of the judgment to the 1 November change of team name and the abandonment of the Etihad and Aldar elements in it. Later in his judgment, when he was considering the sponsors’ submission of a breach of clause 4.6 by reason of the change of team name, he expressed the alleged breach only as a change from Spyker to Force India, not as an abandonment of the names of Etihad and Aldar (at para 71). Mr Tregear submitted that this reflected the narrow way in which the alleged breach of clause 4.6 had been argued on behalf of the sponsors. However, the sponsors’ opening skeleton argument for trial emphasised the change of team name thus – “they changed the team name to Force India Formula One Team (in flagrant breach of the Defendants’ rights as title sponsors)” [emphasis added]. The sponsors’ closing skeleton argument at trial was to similar effect – “5.4 All of Force India’s main breaches were serious and irremediable: (a) changing the team name, not only to substitute Force India for Spyker but also to drop the sponsor prefix…” [emphasis added]. Thus in closing at trial the sponsors had highlighted the complaint about the change of team name as the first of a series of breaches.

[51]On 9 November 2007 Dr Mallya emailed Lucy Nell, who worked at Force India in the publicity department, to warn her that since she would be at a forthcoming Etihad PR event she should “be aware that I have told James Hogan that they cannot continue title sponsorship at current levels and that I am looking at a significant increase”. That was Dr Mallya himself categorising his conversation with and email to Mr Hogan in the strongest terms, viz “they cannot continue title sponsorship at current levels”. Dr Mallya knew what he was saying, and thinking.

[52]On 10 November 2007 Force India released a press release, under the line “FORCE INDIA BEGINS WINTER TESTING”. The press release began as follows:

“With a distinctive new interim burgundy red and white livery, the newly-renamed Force India F1 Team will embark on a three-day test at the Circuit de Catalunya, Barcelona, from 13-15 November…”

That press release used the new team name, and made no mention of Etihad and Aldar. It was a plain breach of clause 4.6. The new livery had not been discussed in advance with the sponsors. At trial Mr Kolles was to say that the reference to “newly-renamed Force India F1 Team” was a mistake by Lucy Nell, who had prepared the release. He maintained that evidence even after it was pointed out to him that he and Dr Mallya had been sent a draft of the release by Ms Nell on the previous day. It was in reply to that draft that Dr Mallya had warned Ms Nell of what he had told Mr Logan. Mr Kolles insisted that there was nothing in writing to show that he, as distinct from Dr Mallya, had approved the release and said that he had not, and went as far as to say that he would not have approved the press release if he had observed the point about the team name. The judge did not comment on this episode. I am conscious that I have not observed the witnesses give their evidence: but this was not impressive testimony.

[53]Force India sent the press release to Mr Cunningham. On 11 November he emailed Etihad to say:

“Have they officially notified us of the change of name and the fact that Etihad will be used in conjunction with it? I suspect not…this could be deemed a clear breach of the agreement.”

[54]On 13 November 2007, Mr Mol, who had observed Kingfisher’s name in prominent display on the new car livery, emailed Mr Kolles:

“I noticed Kingfisher big on the car. Why are they on the car without Board approval? If they are a sponsor already, what is the deal?”

Mr Kolles replied:

“As far as I understand usd 6 mill.”

In cross-examination, Mr Kolles explained that there had been no commitment as yet, as he would know, since he was the only officer authorised to sign a sponsorship contract. Mr Mol was entitled to be concerned. He was a joint venture investor in OIH, and Dr Mallya’s investment did not entitle him to free publicity on the car for Kingfisher. Also, he was involved in seeking sponsorship for the team, and he wanted to know what the procedures were. Plainly unsatisfied by Mr Kolles’s answer, he emailed Mr Phillips later that day with a number of questions, amongst them this:

“Are there procedures in place already how to deal with sponsor requests…? We did decide in the board that all sponsorship deals need to be approved by the board, but there is more to it than that. Kingfisher is now on the car without board approval and I don’t know what the exact deal was and what procedures were followed.”

Mr Phillips replied:

“I am aware that the board has to approve all sponsorship deals, however I have no knowledge of anything to do with Kingfisher.”

In his witness statement for trial Dr Mallya said that he sent an email to Mr Mol on the same day to say that Kingfisher had committed to sponsoring Force India. However, he also said that the commitment was an aspiration and it would need further consideration after he had had a better opportunity to consider the contract with Etihad and Aldar.

[55]On 13 November 2007 Dr Mallya emailed Mr Mol in response to the latter’s query about the Kingfisher logo on the car. He wrote:

“I understand that you asked CK why Kingfisher was on the car in the interim livery… Kingfisher Airlines has committed to get out of Toyota and sponsor Force India. I believe I briefed the OIH Board about Kingfisher’s commitment at both Board Meetings at Shanghai and Sao Paolo.”

If Dr Mallya did brief OIH’s board, it does not appear in the board’s minutes. This email confirms Dr Mallya’s intention to cease support for Toyota, which is what happened.

[56]On 14 November there was a meeting at Silverstone between members of the Force India operation (their travel manager, race team services co-ordinator, and, albeit very briefly, their team manager) and members of Etihad’s corporate sales department. The meeting was positive. The Etihad report of it said that the “Etihad” name was on everything, but with the car testing in Barcelona “I can’t tell you how we appear on the cars”. Also, “At no point was Kingfisher mentioned and positively everyone seemed really keen to develop the relationship further with Etihad”.

[57]Also on 14 November Mr Cunningham’s colleague at PSG emailed Etihad internet photos of the new livery: “you will see the large Kingfisher branding”.

[58]On the same day, but confirming a telephone call of “some days ago”, Mr Baumgartner emailed Mr Kolles and Dr Mallya to say “we are looking forward to welcoming both of you in Abu Dhabi to discuss current situation and partnership options”. It would seem that this was Etihad’s reaction to news of the change of team name. However, it was also in line with Mr Cunningham’s and Mr Baumgartner’s strategy since learning of the takeover (see their exchange of emails of 27 September). Mr Tregear submitted that the proposed meeting was merely to discuss implementation of the 2008 season. That seems to me an unrealistic suggestion, and in the event, as will appear below, the meeting was, as might have been expected, about clause 5 and negotiations for the future of the contract as a whole.

[59]The revealing of the new livery also prompted concern on the part of the sponsors. In this connection Mr Baumgartner emailed Mr Barrott at Aldar on 18 November as follows:

“Given the recent livery design changes (including the Kingfisher airline brand) and interviews as attached, we have initiated a legal assessment of the sponsorship contractual situation on behalf of both our companies to understand our potential leverage.”

The “interviews attached” appear to have been an interview given by Dr Mallya on the Formula One website back on 17 July 2007. It is headed “Exclusive interview – Dr Vijay Mallya of Kingfisher Airlines”. Kingfisher Airlines was then a sponsor of Toyota – although that sponsorship ended with the 2007 season to make way for the Spyker takeover. The concentration of the interview was on Formula One sponsorship as a means of marketing Kingfisher Airlines. For example, Mr Mallya said this:

“…there is a need to make the world aware of Kingfisher Airlines because we target to become an international brand by expanding our network over the next five to 10 years and therefore Formula One was considered the appropriate platform.”

This had been on the eve of Dr Mallya’s move with the Mol family to take over Spyker.

[60]On 13 December 2007 the parties met in Abu Dhabi to discuss the situation. Mr Kolles was the sole representative of Force India. We have his email report to Dr Mallya immediately after finishing the meeting. It reads as follows:

“Just finished the meeting with Etihad and Aldar…All people present [who included Mr Baumgartner and Mr Cunningham] emphasised that they were very happy with the relationship, results and return of investment on the sponsorship… What has been discussed are the 3 potential options in the contract: 1) Match a potential different title sponsorship option at a value of eur 15 mill [equivalent to US$ 22.5 million]. What has been discussed are the 3 potential options in the contract: 2) Not increase the sponsorship but move to other spaces. 3) Termination of the agreement. All the discussions were without prejudice and I informed them about our view, that we would like to continue with the good relationship but we have to look into option 1 and 2, the reasons being potential new title sponsors, increased budget, better performance, better drivers (no pay drivers) and of course India. At this stage I suggested to call in Vikram who then made his presentation [on a conference call]. Following points have been agreed: 1) Until 7.01.08 Etihad/Aldar to be informed about potential new title sponsorship. 2) New offer to be presented to Etihad/Aldar asap in case they would accept option 2 and not terminate. Vikram will send the presentation via email. Some more massage work has to be done because they are used to an extraordinary good deal in 2007. One concern has been raised in terms of the Kingfisher branding. As I told you, I spoke after completion to Peter and he accepted to have Kingfisher on the car but not Fly Kingfisher. Their concern is more in terms of communication because on the F1 FOM website if it’s talked about Kingfisher the perception is that it’s talked about Fly Kingfisher. I think we have to be more diligent. This point has been raised also on the conference call with Vikram and I think both of us explained and clarified that Kingfisher is not only an airline, it’s much more.”

What has been discussed are the 3 potential options in the contract:

[61]A number of points need to be observed about that account. First, although the sponsors were genuinely pleased about the way the 2007 season had gone (and they had only in the previous few days received marketing surveys which demonstrated that they had obtained excellent value from the 2007 sponsorship), it is quite clear that the meeting had been called to deal with the new situation created by the takeover of Spyker. That had not impacted on the 2007 season but threatened to destabilise the relationship. On the one hand Force India was anxious to get more much more money out of the sponsors (ie a jump from $6 to $18 million for 2008 alone) or else to downgrade them from the role and branding of title sponsors. Mr Kolles gave evidence as to how he had discussed that strategy with Dr Mallya in advance of the meeting. On the other hand, however polite and friendly they were, the sponsors were clearly anxious about the new situation and the use of Kingfisher branding. Secondly, it is clear that the meeting was grappling with the three alternatives of the contract’s clause 5, which included termination. The possibility of termination was expressly discussed, as Mr Kolles confirmed in his witness statement. Thirdly, it is clear that the meeting was agreed to be “without prejudice”. Without prejudice to what? Clearly, without prejudice to the parties’ respective rights. Without prejudice privilege has been subsequently and consensually withdrawn from those discussions, but the contemporaneous sensitivity is apparent. Mr Tregear submitted that Mr Kolles had used “without prejudice” in his report inaccurately, in order to refer to a concept of “subject to contract”, but I would not accept that submission which is not supported by any evidence.

[62]Fourthly, an important issue was raised at trial by Mr Kolles’s comment in this email to the effect that “after completion” Mr Baumgartner had accepted to have Kingfisher but not “Fly Kingfisher” on the car. On this allegation, Force India based the alleged approval of the new livery and the use of the Kingfisher logo on the car and the acceptance of Kingfisher as a sponsor. Since all this had been approved, there was no possibility of any breach in this connection. Mr Baumgartner in his evidence denied that he had done any of this (see para 32 of the judge’s judgment).

The judge made cautious and limited findings about this dispute as follows:

“66. I accept the evidence of Mr Kolles that he did tell Mr Baumgartner that the Kingfisher logo would be on the car during testing and that the only concern raised by Mr Baumgartner was that it should not include a reference to Kingfisher Airlines. I see no reason why Mr Kolles should have misrepresented the position in his e-mail to Mr Mallya of 13 December 2007… 67. As to whether Mr Kolles also mentioned to Mr Baumgartner the new livery to be used during testing, there is no contemporaneous documentary evidence. Mr Kolles does not refer to the topic in his e-mail of 13 December 2007. It may well be that he did not deem it necessary to inform Mr Baumgartner about the new livery because it was only intended to be used on an interim basis during testing in the closed season.”

[63]The only basis on which the judge preferred the evidence of Mr Kolles to the extent to which he did was that Mr Kolles had referred to a previous conversation with Mr Baumgartner in his email to Dr Mallya of 13 December 2007. As the judge said:

“I see no reason why Mr Kolles should have misrepresented the position in his e-mail to Mr Mallya of 13 December 2007…”

However, Mr Kolles’s evidence at trial about this conversation, even if accepted to the fullest extent, fell a long way short of any contractual approval on the part of Mr Baumgartner.

[64]Thus Mr Kolles referred to the conversation in his witness statement in these terms:

“32. At some point during this period I spoke to Peter Baumgartner on the telephone about having Kingfisher branded on the car. I told him that the interim livery for the post-season test would be in Etihad colours and would include a Kingfisher logo. In principle, Peter Baumgartner did not object to the word Kingfisher on its own being on the car or on the interim livery so the reference to this in paragraph 8(c)(vii) of the Defence as evidence of an intention not to be bound by the contract is unfounded. We had decided internally within the team not to put “Fly Kingfisher” on the car because it was a competitor of Etihad Airways. However, in 2007 we had an official supply deal with the Dutch brewer, Heineken, which Etihad had expressly consented to so I thought that sponsorship by Kingfisher Beer may be possible.”

[65]In his cross-examination, Mr Kolles gave the following evidence:

“Q. Third sentence of paragraph 32: ‘In principle, Peter Baumgartner did not object to the word Kingfisher.’ A. Yes. Q. But what you don’t say, Mr Kolles, you don’t say Peter Baumgartner agreed to Kingfisher going on the car. A. Again, Peter Baumgartner’s concern was regarding Fly Kingfisher and we discussed on the phone that there would be the new livery, there will be Kingfisher on the car and then he wanted to see it in pictures and react. This was the basis of the discussion. Q. Well if that is the case Mr Kolles, then why did you not follow up on this conversation by sending him pictures? A. Because…He said he will come back; he did not come back to me in this respect.”

[66]It is plain therefore that even on Mr Kolles’s evidence there was no approval of the Kingfisher branding, only an initial conversation which was deflected by Mr Baumgartner saying that it would depend on seeing the proposal in pictures. That is exactly what one would expect to be said if any such enquiry had been made. Mr Kolles did not follow up on that conversation and never put the enquiry to the test by showing Mr Baumgartner the pictures which had been requested. Therefore, whatever Force India did, it did on its own initiative, and without the sponsors’ approval – just as it adopted the new team name without telling the sponsors and had been prepared to be less than candid with them about its motivation if the matter had been challenged.

[67]Mr Baumgartner’s evidence included a denial of any such, even limited, conversation. He said that when they saw the new livery from photos obtained at the Barcelona winter testing, they “were surprised and disappointed to see the Kingfisher logo used alongside that of Etihad, given the obvious conflicts…” He added the following evidence about Mr Kolles’s reference to the Spyker deal with Heineken:

“As Mr Kolles is well aware, Etihad had only “expressly consented” to this deal after a number of heated exchanges in which Etihad (and PSG on our behalf) had expressed serious reservations about such an agreement with a supplier of alcohol. The reason for the consent was that the Heineken name would not be used in public communications by the team and the logo would not be displayed on the car or media backdrops. It was therefore unlikely that there would be a clear association between the Heineken and Etihad brands. This was in stark contrast to Force India’s plans for the Kingfisher brands, which it wanted displayed as prominently as possible.”

[68]The judge’s limited finding is therefore a slender reed on which to base any reliance of approval or affirmation. In any event, for the reasons explained it cannot stand even in its own terms, irrespective of whether the finding was formally disputed in the sponsors’ grounds of appeal (of which more below). Moreover, the only basis on which the judge accepted Mr Kolles’s evidence to the limited extent to which he did was that it was foreshadowed in the email report of 13 December 2007. However, that report has its own unsatisfactory elements. Mr Kolles places the telephone conversation as having taken place “after completion”: that would be in early October, well before the development of the livery for the purpose of the winter testing. Moreover Mr Kolles wrote that Mr Baumgartner “accepted to have Kingfisher on the car”, whereas it is clear from his evidence that he did not, preferring to see in pictures what was proposed. It is in general clear from Mr Kolles’s e-mail both that the sponsors were concerned about the Kingfisher branding and that Mr Kolles felt sensitive about this, even to the point of telling Dr Mallya that “we have to be more diligent”.

[69]On 20 December 2007, Vikram Malhotra emailed, as had been promised, a copy of his presentation, to which he had spoken in the conference call on 13 December. The presentation, which had been prepared, as Dr Mallya would have described it, “in-house”, was a general pitch to principally Indian potential sponsors. Several pages referred with heavy emphasis to “Force India Formula One Team”. Examples of the copy are as follows:

“Force India F1 Racing • India’s first truly global sports foray - The first and only Indian Formula 1 racing team to compete with the best in the world at the pinnacle of sport… Force India Formula One Team The new global face of an emerging superpower… Driving force in India • The Force India Formula 1 Team will be taking key initiatives that will have the force of a billion hearts cheering the pride of India…” • India’s first truly global sports foray - The first and only Indian Formula 1 racing team to compete with the best in the world at the pinnacle of sport… Force India Formula One Team The new global face of an emerging superpower… Driving force in India • The Force India Formula 1 Team will be taking key initiatives that will have the force of a billion hearts cheering the pride of India…”

[70]On 3 January Etihad chased Mr Kolles for the three options which had been promised at the meeting in Abu Dhabi. On the same day Dr Mallya emailed Mr Kolles and Mr Malhotra (and other of his associates) as follows:

“Notwithstanding the current status of potential Indian sponsors, it is clear that Etihad-Aldar cannot get title sponsorship for the current amount that they are paying. Since your last meeting with them, we have launched our advertisement campaign with India’s most popular film star Shahrukh Khan and the awareness of Force India is increasing by leaps and bounds. I am sure that Etihad-Aldar are targeting the Indian market and this is good reason for them to be a substantial sponsor of our team. The question is (a) how much are they willing to increase the sponsorship or (b) which are the spaces on the car they will accept for the same amount that they are paying now. You should get an early answer from them.”

Again Dr Mallya said that the sponsors “cannot” get (ie retain) title sponsorship for the amount they were paying. On 5 January Mr Malhotra emailed Dr Mallya:

“Colin and I spoke last night. We plan to tell Etihad that we have an offer of Euro 12 million for title from an Indian sponsor. They should at least match it or we can talk about other spaces on the car.”

You should get an early answer from them.”

[71]That was a reference to sponsorship in 2008. The proposal made to Dr Mallya was a proposal not based in fact. Force India did not have an offer of €12 million (the equivalent of $18 million) for 2008. Dr Mallya replied the same day, more cautiously:

“A jump from $6 mio [the 2008 contract sum] to €12 mio ($ 18 mio) may be too much for them. I suggest that you engage them in conversation, make them feel that you want them to deliver full value to them and assess their willingness to spend.”

[72]On 9 January 2008 there was a further chasing email from Etihad to Force India for the promised options.

[73]On 10 January 2008 Force India made a press release, sourced from “Force India Formula One Team” and headed “Force India Formula One Team Media Advisory”. The press release began:

“The Force India Formula One Team is delighted to confirm it will broadcast today’s press conference announcing its 2008 season driver line-up live online…”

It appears, of course, that the use of the new team name was not a mistake at all. However, the names of Etihad and Aldar did appear in the website banner next to the team name of “Force India formula one team”.

[74]On 11 January 2008 there was a large article in the Daily Telegraph based on an interview with Dr Mallya. The headline was “India’s Richard Branson has the drive to be an F1 force”. The interview and article was timed to coincide with the presentation in Mumbai of Force India’s driver line-up, referred to in the press release just cited. The article contained the following:

“There are two dimensions to Mallya’s Indian adventure. The repositioning of India, which hosts its first grand prix in 2010, on the global stage is only part of the equation. Equally, if not more important, is selling the Mallya corporate message. He has not entered F1 on the philanthropist ticket. Mallya is in it to make money. And lots of it. ‘F1 and Force India is a carefully thought business for me, capitalising on what I see as a huge opportunity for India. I think it will be successful, not immediately but over time… ‘As owner of the Kingfisher brand I saw F1 as a unique opportunity to promote the brand. Nothing changes there. To use F1 as a platform for advertising is something I subscribe to… ‘It’s a tough environment, very challenging, but from 2008 the world will see that Force India F1 means serious business, on and off the track.’”

[75]On 13 January 2008 Fred Muller, a director of OIH representing one of the joint venture interests, emailed Dr Mallya to request “an overview of the potential sponsors we are working on”. He complimented Dr Mallya on his “marketing and PR machine”, having seen a “great article in Times Online this morning”. There was also a telephone conversation between them. Dr Mallya replied, beginning with a reprimand for what he took as a lack of 100% faith and trust between the partners, and reminding Mr Muller that he, Dr Mallya, had been granted management control of the team. He threatened a review of “the Management or the Shareholding or both”. He continued:

“6. We have commenced a slow process of re-branding and building up the team image… 7. Proper sponsors will come over time. I don’t want small time sponsors and project an image of a struggling team that grabs every penny that it can for a space on the car. Kingfisher/UB Group itself has committed $7.0 mio in sponsorship so we put our money where our mouth is… 9. Etihad-Aldar is also not finalised as they want the same title sponsorship at $6.0 mio. If this is the case then Kingfisher should get it at a higher value. I am now putting pressure on Etihad using Kingfisher Airlines as they want to lease 2 of my Airbus A 330 planes which are in short supply.”

[76]This is the first and only reference in the papers to Etihad’s interest in leasing an aircraft from Kingfisher Airlines. However, Mr Baumgartner and Mr Cunningham confirmed that interest in their evidence at trial. It appears to have arisen out of a testing accident to one of Etihad’s aircraft. Nothing came of the interest. Mr Baumgartner accepted that it was a reason for Etihad not wanting to harm its relationship with Dr Mallya. It is clear from Dr Mallya’s email that he saw the enquiry as a means of “putting pressure on Etihad”.

[77]On 14 January 2008 Mr Kolles responded to his promise in Abu Dhabi to give the sponsors their three options. However, his message was limited to information about option B. His email to Mr Baumgartner contained the following: “We would like to continue our successful relationship with option B meaning no title sponsorship, no livery rights and new branding on the car etc as per attached visual allocated to Etihad/Aldar. Therefore we would like to propose to you the following regarding 2008 and 2009. The sponsoring fees as set out in clause 16 shall apply, except for the points bonus detailed in clause 16.2 shall be reduced by 25% for each sponsor and the F1 constructors’ championship position bonus detailed in clause 16.3 shall no longer apply. All other benefits such as race and non-race corporate hospitality, showcar, media, photographic services and website shall remain. The option B proposed by Force India does not, I think, square with the wording of clause 5.1.2.

[78]While the sponsors were considering their position, Dr Mallya gave firm instructions to his associates about the car livery. He said:

“Put Kingfisher as title sponsor…Put the Etihad and Aldar logos as per CK’s latest offer to them…”

[79]On 27 January 2008 Etihad and Aldar wrote to Mr Kolles (at “Spyker F1 Team Ltd”) to terminate the contract. It purported to do so both under clause 5’s option C and alternatively under clause 21.3.1(a) as notice of immediate termination for Spyker’s material and irremediable breach. In relying on clause 5 the sponsors said that they took “Spyker’s” latest email as “notice of its intention to exercise its rights…to replace Etihad and Aldar as the main Team Sponsors and we accept it as such, notwithstanding that such notice has not been given in accordance with the terms of the Sponsorship Agreement”. In terminating for breach, the sponsors stressed breach of clause 4.6 and the change of the team name to Force India.

[80]On 31 January 2008 Mr Kolles replied on behalf of Force India. The stationary he used had its “letterhead” at the bottom of the page. This referred to “ForceIndia formula one team” which had become the style of the new team name. Mr Kolles’s letter alleged that the sponsors’ letter was itself a repudiation of the contract which was accepted, bringing the contract to an end. The letter argued its case as follows. As to clause 5, it said that the sponsors had not followed the procedure in clause 5. As to breach, it said that there had been no breach of clause 4.6 because(a) the team became Force India after the takeover of Spyker (citing the contract’s definition of “Team” rather than “Team Name”); and

(b) clause 4.6 rights were subject to payment of the contract fees, as to which the $500,000 bonus under clause 16.3 had become due on 1 January 2008. Neither argument has been pursued into this appeal.

[81]Mr Kolles gave evidence that just before receipt of the 27 January 2008 letter he had received a telephone call from Mr Baumgartner saying that “they were happy with the team and people involved but that someone in the Abu Dhabi royal family was not happy with the presence of Kingfisher and the reference to India in the team name”. The judge referred to this evidence but did not state whether he accepted it. Mr Baumgartner gave evidence denying it. He said that he had no idea what the views of the Abu Dhabi royal family were, but the decision to terminate came from within Etihad and was taken for reasons which had been communicated on several occasions by him to Mr Kolles, namely the presence of the Kingfisher brand and the association with India. Mr Kolles had accepted in his witness statement that Mr Baumgartner had made adverse comments about some of the remarks in the press attributed to Dr Mallya.

After the termination of the contract

[82]The position of main title sponsorship following the departure of Etihad and Aldar remained obscure. On 13 January 2008 Dr Mallya had referred to a commitment for 2008 of $7 million, but there was nothing in writing. On 11 February 2008 Kingfisher Airlines signed a Memorandum of Understanding for non-exclusive sponsorship rights at a fee of $5 million for each of the 2008 and 2009 seasons. The MOU looked forward to a sponsorship agreement with detailed terms. An unsigned agreement dated 6 March 2008 spoke of granting to Kingfisher Airlines a licence to use the team logo and likeness of the cars in its advertising and to describe itself as “official Partner of Force India Formula One Team”, and of the right of Kingfisher Airlines to have its partner logo on the car. The fee was stated to be $7.5 million for each of 2008 and 2009, a total of $15 million. A further, executed, sponsorship agreement dated 23 April 2009 between Force India and Whyte & Mackay, a company within the United Brands group, provided for payment of £12 million at the rate of £1 million per year during 2009 to 2020: however, the sum of £12 million could be reduced to £3 million if the latter sum was paid before 31 March 2009. At trial the judge heard evidence which satisfied him that the proper amounts to take into account as monies received by Force India in mitigation of the loss of the sponsors’ contract was only $10 million from Kingfisher Airlines and $2,841,025. The further sums paid by Kingfisher Airlines were treated as a loan, and further sums paid by Whyte & Mackay were accepted as being properly allocated to subsequent years. It has been unnecessary to delve into these complexities. However, it may be observed that on this basis it is hard to see why Force India contended that the sponsors had driven a hard and profitable bargain in agreeing their contract for $20 million over three years plus potentially valuable bonus rights.

[83]On 12 March 2008 Etihad signed a sponsorship agreement with Ferrari. At trial Force India made much of Etihad’s relationship with Ferrari, and it appears to have impressed the judge, who devoted a section of his judgment to “The Ferrari proposal”, and also criticised the sponsors for being “careful to conceal” their contacts with Ferrari and other competitors pending the breakdown of their contract with Force India. On appeal, however, we have heard little to nothing about this aspect of the matter. It is hard to see its relevance. Plainly, if the sponsors were concerned with the future of their contract with Force India, they would be well advised to be in contact with other teams. The fact of those contacts demonstrates that the sponsors were not satisfied with the way they were being treated by Force India. In the meantime, they would be well advised to keep such contacts discreet.

Breach of contract and repudiation

[84]On these facts, was Force India in repudiatory breach of the contract? I put the question in this way, since Mr Auld’s submission is that if Force India had committed an irremediable repudiatory breach, then the sponsors were entitled to accept it under common law, irrespective of clause 21. I think that is correct. Clause 21, upon analysis, does not apply to irremediable breach, only to a material but remediable breach. No written notice is required of an irremediable repudiatory breach. Since no notice under clause 21.3.1(a) was ever given calling for remedy within 10 days of a remediable breach, the sponsors cannot, and do not, rely on that clause.

[85]Mr Tregear submits that clause 21.3.1(a), being expressed in terms of “material” as distinct from “repudiatory” breach, does not cover repudiatory breach. In his submission, the clause extends the common law by permitting a party to terminate the contract (even in the absence of repudiation) where a material (albeit not repudiatory) breach is remediable and notice has been given to remedy it within 10 days and the specified breach has not been remedied within that time. If that submission is correct, then it would follow that common law repudiation would remain outside the contractual scheme and could operate according to its own principles.

[86]Mr Auld submits that “material” means in context “repudiatory” and that therefore clause 21.3.1(a) overlaps with the common law. Whether that is so or not, in my judgment the sub-clause only deals with remediable breaches. Mr Auld accepts that if the breaches complained about are remediable, then the sponsors must lose on liability, for no notice to remedy was ever given. Thus his reliance is ultimately on the common law.

[87]In my judgment, the facts stated above reveal a series of repeated, or continuing, breaches which were sooner or later but ultimately repudiatory. I will consider below whether they were remediable.

[88]I shall begin with clause 4.6, whether or not that is strictly logical. The Heads of Terms of Agreement demonstrates its importance by putting it as one of the three main bullet point rights listed under “Overall Rights”. It is also highlighted, together with clause 4.7, in clause 5.1. There are two important sentences in clause 4.6 which provide the sponsors with cumulative rights. Mr Tregear sought to present the clause as though the only significant right was that contained in its second sentence, but the first sentence must also be given separate effect. There is a certain awkwardness about the language of the first sentence, but the sense of it is nevertheless clear, that the name under which the team was to be known in the three years of the contract had to include the Team Name as defined in Appendix 1, which was to be integrated at the start of any such name under which the team was known. One reason why the clause may have involved such contorted language was to allow the possibility that the engine manufacturer might also have to have been allowed a place in the name under which the team was known.

[89]One question, but only a subsidiary question, is whether the change of name from Spyker to Force India was itself permitted. I am inclined to think that it was not. There is, it is true, no express prohibition on the sale of the Spyker company, nor any express prohibition on the change of the company name, but it remains the case that “Team” is defined as the Formula One motor racing team owned and managed by Spyker, and “Team Name” as “Etihad Aldar Spyker F1 Team”. For the purposes of Etihad and Aldar, both Abu Dhabi companies, there was obvious comfort in the name Spyker, which was nationally neutral and a name known, at any rate by cognoscenti, as the manufacturer of very special and technologically distinguished cars. That comfort was lost when the Team Name was changed to Force India, even had that loss been mitigated by the use of the integrated name “Etihad Aldar Force India”. As it was, the “Etihad Aldar” prefix was abandoned and in those circumstances the Abu Dhabi connection was not only lost but wholly overtaken by the strong and expressly emphasised connection with India, a nation which lay in some sense in the same region, albeit separated by the Indian Ocean, and was vastly bigger than Abu Dhabi.

[90]The first sentence of clause 4.6 ensured that whenever the Team was referred to as a Team it would be by the defined Team Name. The second sentence went on to require that the Team Name would be used whenever the Team was referred to in any written or oral press communication of the Team. The obligation of the first sentence was subject to FOM and FIA regulations, but there was nothing in those regulations to prevent use of the defined Team Name. It is possible, but uncertain, that the chassis name had to be incorporated in a team name, but there was nothing to require Force India to change its chassis name, for which it in any event needed permission: and if the regulations did require the chassis name to be incorporated in a team name and Force India had contracted to be known by a defined Team Name, then it would be strongly arguable that it could not change its chassis name if that required a change of the Team Name.

[91]These complications are, however, beside the principal point, not even adverted to by the judge, which is that on 1 November 2007 Force India changed its team name and abandoned the contractual Team Name in particular by omitting the names of its main sponsors Etihad and Aldar. This was a clear, grave and continuing breach of its contract. It was done deliberately as part of a clearly defined marketing campaign imposed by Dr Mallya, who, from his position as chairman and CEO of OIH, Force India’s ultimate holding company, personally directed, as though he were Force India himself, as in effect he was, every aspect of Force India’s new campaign.

[92]In the end the judge was prepared to assume, but without deciding, that the (limited) change of name from Spyker to Force India was a material breach of contract. However, he never expressly considered the significance of the abandonment of the Etihad Aldar prefix. Nor did he consider the impact of the name of “Force India” on the interests of the Abu Dhabi sponsors.

[93]Clause 4.7 promised that there would be no major livery changes in (calendar year) 2007, and that the sponsors would have the right to decide and approve the livery of the cars etc for the 2008 and 2009 seasons. The judge’s findings of breach about clause 4.7 are uncertain, partly because he relied on a mistaken understanding of Mr Kolles’s evidence about approval of the Kingfisher logo and partly because he was not persuaded that “this limited use of the new livery was a material breach”. In my judgment, he erred in both aspects. There was, even on the evidence which he accepted, no approval by Mr Baumgartner of use of the Kingfisher logo, even in the abstract and certainly not on the basis of any defined use of it on the car; and the deliberate change of the car livery without consultation with, and the approval of, the sponsors was a further serious breach of the contract. It was part and parcel of Force India’s campaign to emphasise the Indian connections of the new operation, a deliberate rebranding which was emphasised by Dr Mallya in every press interview which he gave. In those press interviews Dr Mallya was wearing at least two hats. He was no doubt speaking in part as a leading Indian businessman and chairman of Kingfisher Airlines and United Brands; but he was also, and perhaps principally, speaking for Force India, with the authority which had been vested in him by its holding company OIH. His interest lay in his Indian businesses but also in his investment in the team. He no doubt rightly considered that each of those hands would wash the other. He clearly had great personal enthusiasm for and knowledge of Formula 1 racing, and great pride in his country and its gathering economic strength. It was, if I may say so, an imaginative and brilliant concept to put all these interests together, but unfortunately the contract lay in his way.

[94]The same essential story can be looked at from the point of view of other aspects of the contract, apart from clauses 4.6 and 4.7. Thus clause 1.3 stated that Etihad and Aldar were appointed “main team sponsors” of Spyker for the period of the contract, on the terms and conditions set out below. Those terms gave substance and definition to the concept of a main team sponsor (and see the first bullet point under “Overall Rights” in the Heads of Terms Agreement): but it is clear from the facts set out above that, after the takeover, Dr Mallya’s, ie Force India’s, position was that Etihad and Aldar could not remain main team sponsors without paying a great deal more money for the privilege. That was what Dr Mallya said in effect to Mr Hogan when he first met him at the Monza race event. However, it appears that Dr Mallya did not want formally to sign up, through one or other of his businesses, as a replacement main team sponsor, although clause 5 of the contract would have entitled him to do so, subject to the sponsors’ rights to match the sum involved. Perhaps he feared that the sponsors would match the sum. More likely, however, was that he considered that he could derive a main sponsor’s benefits from his position within Force India itself, together with his ability to associate his own businesses with Force India through his press interviews. On that basis, his dominant interest was to bring the sponsors to a position where they paid the same money upfront as they had agreed under the contract, with possibly some relief under the contingent bonus payments, but for a lesser role where they no longer had the rights of main sponsors. That was ultimately the sole option which Force India put forward in their email of 14 January 2008 – “meaning no title sponsorship, no livery rights and new branding on the car etc”. That was what Dr Mallya and Force India were in practice seeking all along, as demonstrated by the fait accompli which they put in hand in renaming the team and rebranding the car without consultation or approval from the sponsors.

[95]Clause 3.1 similarly reflected the sponsors’ rights by barring the team from entering into “any sponsorship, marketing or advertising arrangement” which the sponsors might deem to be in conflict with their main activities. Similarly clause 3.2.4 guaranteed that Etihad would be the “official airline associated with SPYKER and be the sole & exclusive airline brand to be associated with SPYKER”. Yet after the takeover Dr Mallya and Force India adopted a deliberate policy of promoting India in general and Dr Mallya’s Indian business interests in particular, including Kingfisher Airlines. All of this was a deliberate marketing campaign which was plainly in conflict with the sponsors’ interests which were concentrated in Abu Dhabi, and all the more so as Etihad’s main commercial interest in the sponsorship was in its airline operations, and Aldar’s interests were focused on bringing international awareness to their commercial property interests in Abu Dhabi including its interests in the first Abu Dhabi grand prix in 2009 and the neighbouring theme park. There was also some “arrangement” (whether it could properly be called a commitment I do not know) with Dr Mallya and/or Kingfisher Airlines for sponsorship of the team, or at any rate for using Kingfisher’s logo on the car as advertising for Kingfisher. In truth only a binding commitment could justify Kingfisher’s name on the car. The absence or mystery about such a commitment was a matter of legitimate concern to Dr Mallya’s partners in OIH, for his investment in the team did not entitle him to benefit from unpaid sponsorship, marketing or advertising. It was also, however, a matter of legitimate concern to Etihad and Aldar, because clauses 3.1 and 3.2.4 made it so. Similarly clause 12 warranted the sponsors the right “to approve all Team Sponsors” and expressed a clear sensitivity about alcohol related branding. In my judgment, the facts stated above show that Force India rode roughshod over all these rights and protections.

[96]That is not to say that the sponsors might not, in an atmosphere of give and take, have been prepared to accommodate Force India to a certain extent, particularly if they could be satisfied both that the marketing of the team towards India would not be fundamentally inconsistent with their own interests, and that the strengths that Dr Mallya brought to the party would outweigh any detriments to those interests. That, however, would have required some sensitivity in Force India’s approach to the problem, which was lacking in its determination to create new facts on the ground without seeking the sponsors’ involvement and co-operation.

[97]These matters can also be considered through the lens of clause 5. There is no longer any separate reliance on clause 5 on the part of the sponsors, either as justifying termination under option C itself, or as having been itself unjustifiably manipulated in the discussions at and following the Abu Dhabi meeting. Nevertheless, as Mr Tregear accepted in the course of his submissions, it is appropriate to consider that meeting and the email proposal from Force India which followed it as part of the general background situation to the question of repudiation. Indeed, it was Mr Tregear’s principal submission on the question of affirmation by the sponsors, that their working with clause 5 at that meeting showed that they were operating the contract and thus that they were affirming it.

[98]In this connection, it is to be observed that at the Abu Dhabi meeting, Force India falsely represented that it had potential main sponsors (for 2008) at €15 million, when it appears to have had no potential main sponsors at any figure which overtopped what the sponsors were paying (and in the event Kingfisher Airlines itself provided what the judge accepted was only $5 million in each of 2008 and 2009). Force India therefore was representing to the sponsors that the parties were concerned with a clause 5 situation, when they were not. When the meeting ended with Force India’s promise to put its proposals for the three clause 5 options in writing, Force India first discussed internally committing to writing the false information that it had “an offer of Euro 12 million for title from an Indian sponsor”, when it did not, and finally resolved, somewhat more cautiously, to put forward an “option B” solution (which must therefore have been premised on an implicit but suppressed option A) which involved the sponsors giving up their essential rights under the contract (“no title sponsorship, no livery rights and new branding on the car etc”) while maintaining the same basic clause16.1 payment, with 25% discount on the contingent clause

16.2 bonus and a remission on the smaller but also contingent clause

16.3 bonus. In the light of the history of events stated above, that final offer can be seen to reflect the end-game of the strategy which Force India had, through Dr Mallya, been constantly following throughout the period after the takeover: namely, the exclusion of the sponsors from their main title sponsorship rights but the retention of as much of their payments as possible. In truth, Dr Mallya and Force India were not prepared to share the team name or the car livery with Etihad and Aldar as main title sponsors: their interests in promoting Force India to the Indian market were far too important for that.

[99]In my judgment, this accumulation of breaches, set against this background and strategy, has ultimately to be seen as a clear repudiation of the contract. It was in fact a cumulative, continuing and accelerating repudiation born of a very real clash of interests.

Remediability

[100]The next issue is whether these breaches, this repudiation, were remediable for the purposes of clause 21.3.1(a).

[101]If Mr Tregear were right in his submission, that a “material” remediable breach is not a repudiatory breach, then we are not concerned with the question of remediability at all.

[102]However, I will assume for the sake of argument that, whether or not a “material” breach need be repudiatory or not, the clause is intended to and does cover repudiatory but remediable breaches.

[103]Was the judge right therefore to say that the breaches that he assumed or found were all remediable? Could the breaches and repudiation which I have described above been remedied?

[104]The leading case on this issue is F L Schuler AG v. Wickman Machine Tool Sales Ltd

[1974] AC 235

. Clause 11(a)(i) of the agreement in that case entitled either party to terminate if the other party “shall have committed a material breach of its obligations hereunder and shall have failed to remedy the same within 60 days of being required in writing to do so”. Under the agreement Schuler had given Wickman sole selling rights for the former’s products in the UK. It was a “condition” of the agreement that Wickman should visit the six largest UK manufacturers “at least once in any week”. Wickman failed to do that, and arbitrators found that to be a “material breach”. The actual issue for decision in the House of Lords was whether the “condition” was one in the strict sense, any breach of which entitled the other party to put an end to the agreement, or merely an ordinary term. In reaching the conclusion that it was the latter, some of their Lordships started by interpreting clause 11(a)(i). They did so in the following passages.

[105]Lord Reid said (at 249G-250B):

“It appears to me that clause 11(a)(i) is intended to apply to all material breaches of the agreement which are capable of being remedied. The question then is what is meant by the word “remedy”

. It could mean obviate or nullify the effect of a breach so that any damage already done is in some way made good. Or it could mean cure so that matters are put right for the future. I think that the latter is the more natural meaning. The word is commonly used in connection with diseases or ailments and they would normally be said to be remedied if they were cured although no cure can remove the past effect or result of the disease before the cure took place. And in general it can only be in a rare case that any remedy of something that has gone wrong in the performance of a continuing positive obligation will, in addition to putting it right for the future, remove or nullify damage already incurred before the remedy was applied. To restrict the meaning or remedy to cases where all damage past and future can be put right would leave hardly any scope at all for this clause. On the other hand, there are cases where it would seem a misuse of language to say that a breach can be remedied. For example, a breach of clause 14 by disclosure of confidential information could not be said to be remedied by a promise not to do it again.”

[106]Lord Simon of Glaisdale merely said that he agreed with Lord Reid that “condition” meant “a contractual term breach of which if unremedied (i.e., unrectified for the future, if capable of rectification) gives Schulers the right to terminate in accordance with clause 11” (at 265D).

[107]Lord Kilbrandon said (at 271D/E):

“…many of the obligations referred to are, in the strict sense, irremediable. For example, once the respondents have communicated the appellants’ trade secrets in breach of clause 14, or once the appellants have published advertising matter not containing the respondents’ name, in breach of clause 17, the damage is done, and nothing can be done within 60 days, or ever, by way of remedy. It is possible that “remedy” means “satisfy the other party that it won’t happen again”

. It is also possible that, in the case of a truly irremediable material breach, which goes to the root of the contractual relationship, as would presumably a breach of clause 14, you simply write the provision for remedying in 60 days out of the document as a term incapable of being fulfilled. And your Lordships have already noticed the difficulties under this clause, to which an anticipatory breach will give rise.”

[108]The judge, without citing this authority, recorded the sponsors’ counsel as accepting that the authorities “favour a practical rather than an unduly technical test”. I think that is right. The judge concluded that any breaches of clauses 4.6 or 4.7 were remediable, in the sense that Force India “could have put matters right”, either by changing the Team Name back to Etihad Aldar Spyker F1 Team and/or by reverting to the previous livery and removing the Kingfisher logo. However, in my judgment, these were not remediable breaches. The closest analogies are with the publication of confidential information or the publishing of advertising matter not containing a party’s name: one releases information which should be kept confidential, the other broadcasts a product in an inappropriate way. Looking at the matter pragmatically and not technically, I think that a proper marketing campaign is, generally speaking, all of a piece. Where Dr Mallya and Force India had persistently marketed the team as “Force India” to the Indian market and had publicised the car’s new livery with deployment of the Kingfisher logo, and where Kingfisher was so much associated with Dr Mallya himself and he with Force India, and where, as Dr Mallya himself said in his interview which appeared on Force India’s website on 11 October 2007, “The name is an integral part of the team identity”, which I regard as truly said, the marketing genie cannot be put back into the bottle. The breach is irremediable. This conclusion is to my mind re-emphasised where the breach or breaches are repeated, cumulative, continuing and repudiatory.

[109]Moreover, even if Force India could have, in some sense, sought to turn the clock back in an attempt to make amends, it is perfectly clear from all that happened that it would not have been willing to do so. Its whole campaign was to produce a fait accompli to put pressure on the sponsors to take a back seat, to accept option B in the sense (whether contractual or not) of taking a back seat to an alternative main sponsor or, (as things turned out) an alternative marketing and branding strategy. Dr Mallya would not have been willing to market the team as other than “Force India”. His whole strategy of appealing so strongly to the Indian market could not have been delivered if it had to be pursued with the message of “Etihad Aldar Spyker F1 Team”, or even with the mixed message of “Etihad Aldar Force India Formula One Team”. That would have been a broken strategy.

[110]In my judgment, therefore, unless the contract was affirmed or the breaches waived or acquiesced in, the sponsors were entitled under common law to accept Force India’s repudiation as putting an end to the contract under common law.

Affirmation etc

[111]The judge held that any material breach had been affirmed, waived or acquiesced in. He did not analyse the matter in terms of repudiation. He addressed repudiation only as the consequence of the sponsors’ failed attempt to terminate the contract. This is because it appears that he may have accepted Mr Tregear’s submission that the sponsors’ reactions to any breach on the part of Force India were to be analysed as an invocation of the contractual clause 21 and not as the acceptance of a repudiation at common law (see para 60 of the judgment). As for clause 21, that gave an option to elect to terminate for material breach. Thus it was the sponsors who had repudiated the contract (see para 87 of the judgment). Despite this omission, however, the sponsors had pleaded that the breaches relied upon had amounted to a repudiation of the contract, and indeed that “from the moment of its acquisition of Spyker on 5 October 2007 Force India had no intention of honouring its sponsorship obligations under the Agreement”. Moreoever, the sponsors’ opening and closing skeletons at trial spoke of Force India’s repudiation of the contract. The closing skeleton had a whole section headed “Repudiation”.

[112]It is of course possible to affirm a contract which the other party has repudiated. A repudiatory breach, whether actual or anticipatory, gives to the innocent party a right to elect whether or not to accept the repudiation as bringing the contract to an end. The judge cited The Kanchenjunga

[1990] 1 Lloyd’s Rep 391

(HL) at 397-399, as summarised in Tele2 InternationalCard Company SA v. Post Office Limited

[2009] EWCA Civ 9

at para 53, as explaining the principles of election. He accepted that an election requires knowledge of the relevant facts and a communication of the election, in words or conduct, in clear and unequivocal terms. Moreover, a party may be taken to have elected to affirm where it acts in a manner which is consistent only with a decision to affirm or where it allows too much time to pass by without indicating any decision.

[113]However, it has to be remembered that a situation of repudiation may well be more or less complex and call for more or less urgency. The Kanchenjunga itself concerned a decision whether or not to accept the nomination of a port. The shipowners accepted it by giving notice of readiness to load, a relatively straightforward situation where prompt reactions are required. In other situations, however, it may take some time to understand what is happening. A further complication may arise where, in the meantime, the innocent party operates a term of the contract which may itself lead on to termination. I spoke of these problems in Stocznia Gdanska SA v. Latvian Shipping Co [2002] 2 Lloyd’s Ref 436, where the innocent shipyard, faced by the repudiatory conduct of its purchaser of vessels under construction, issued to its purchaser a notice, designed to set up a right to terminate under their contract for non-payment of an instalment of the purchase price, but invalidly so. I said:

“86…Thus Latreefers [the purchaser] is anxious to present the keel laying notices not only as acts of affirmation for the past, but also for the future; whereas the yard is keen for the notices to be seen in their overall context as a means by which the yard put a recalcitrant contractor to proof in anticipation of continuing obduracy. 87. In my judgment, there is of course a middle ground between acceptance of a repudiation and affirmation of the contract, and that is the period when the innocent party is making up his mind what to do. If he does nothing for too long, there may come a time when the law will treat him as having affirmed. If he maintains the contract in being for the moment, while reserving his right to treat it as repudiated if his contract partner persists in his repudiation, then he has not yet elected. As long as the contract remains alive, the innocent party runs the risk that a merely anticipatory repudiatory breach, a thing “writ in water” until acceptance can be overtaken by another event which prejudices the innocent party’s rights under the contract – such as frustration or even his own breach. He also runs the risk, if that is the right word, that the party in repudiation will resume performance of the contract and thus end any continuing right in the innocent party to accept the former repudiation as terminating the contract. 88. It is clear therefore that during the period when the yard was serving its notices up to the time of purporting to exercise its contractual rights of rescission the respective contracts remained alive. The question is whether the keel laying notices were an unequivocal affirmation of them…I do not think that the use of a contractual mechanism for terminating the contracts is inconsistent with reliance on repudiatory conduct for effecting a common law acceptance of an anticipatory breach. Where contractual and common law rights overlap, it would be too harsh a doctrine to regard the use of a contractual mechanism of termination as unequivocally ousting the common law mechanism, at any rate against the background of an express reservation of rights.”

[114]In a later dispute involving the same shipyard but a different purchaser, Stocznia Gdynia SA v. Gearbulk Holdings Ltd

[2009] EWCA Civ 75

[2009] 3 WLR 677

, this court had to deal with an argument that the purchaser, who had sought to use contractual machinery to recover its initial payment to the yard in the face of the yard’s repudiatory non-delivery, had affirmed its contract and was therefore limited to the return of its money but excluded from repudiatory damages for loss of its bargain. This court rejected that submission. It was also submitted that the clause which the purchaser had invoked, clause 10, excluded common law rights which arose on a repudiation. This court rejected that argument as well. The contractual rights of termination might overlap with the common law of repudiation, but the latter was not excluded.

[115]Moore-Bick LJ there said this (at para 20):

“In Stocznia Gdanska SA v Latvian Shipping Co [2002] 2 Lloyd’s Rep 436, para 88 Rix LJ expressed the view that where contractual and common law rights overlap it would be too harsh to regard the use of a contractual mechanism of termination as ousting the common law mechanism, at any rate against a background of an express reservation of rights. In this case I would go further. In my view it is wrong to treat the right to terminate in accordance with the terms of the contract as different in substance from the right to treat the contract as discharged by reason of repudiation at common law.”

[116]There, as in the earlier Stocznia case and here, the innocent party had sought to use a contractual form of termination. In the earlier Stocznia case and here the attempt was unsuccessful. In the later Stocznia case it was not inconsistent with common law acceptance of repudiation. The question was whether the invocation of a contractual mechanism prevented reliance on common law doctrine. In both cases this court rejected the submission that it was. In the earlier case I said (at para 32):

“It is established law that, where one party to a contract has repudiated it, the other may validly accept that repudiation by bringing the contract to an end, even if he gives the wrong reason for doing so or no reason at all.”

In the later case, Moore-Bick LJ said (at paras 44/45):

“In such cases it is sufficient for the injured party simply to make it clear that he is treating the contract as discharged: see the Dalkia case [2006] 1 Lloyd’s Rep 599, para 153, per Clarke J. If he gives a bad reason for doing so, his action is nonetheless effective if the circumstances support it. That, as I understand it, is what Rix LJ was saying in Stocznia Gdanska SA v Latvian Shipping Co [2002] 2 Lloyd’s Rep 436, para 32 with which I respectfully agree…I accept Mr Dunning’s submission that in its letters…Gearbulk purported to terminate the contract pursuant to article 10.1(b) and (c) and not under the general law, but each of the letters made it clear that it was treating the contract as discharged and in those circumstances each was sufficient to amount to an acceptance of the yard’s repudiation.”

[117]In the present case, the sponsors sought to operate clause 5’s option C and clause 21.3.1(a) in the alternative as giving them the right to terminate the contract. Both these mechanisms however were ineffective on their own terms: the sponsors abandoned reliance on clause 5 and it seems to me that clause 21 is dealing with remediable material breaches and not with irremediable repudiation. However, what the sponsors’ letter of 27 January 2008 made unequivocably clear was that what the sponsors relied on was a deeply serious (“There can be no more blatant breach of our rights under the Sponsorship Agreement”) and irremediable breach of the contract which entitled them to terminate it. Moreover the reliance on clause 5’s option C was expressed as “subject to the other terms of this letter”.

[118]If therefore the right to accept Force India’s repudiation survived to 27 January 2008, the terms of the sponsors’ letter of termination of that date did not prevent them from accepting it. If the judge intended to decide otherwise, and I am not sure about that, in my respectful opinion he erred. For the same reason I reject Mr Tregear’s submission to any like effect. Mr Tregear also repeatedly submitted that the contract was still alive on 13 December 2007. So it was, and immediately before the sponsors’ letter of termination. That, however, was not the point. If it was alive but repudiated, and there had been no unequivocal election to affirm the contract despite its repudiation, the sponsors were entitled to terminate it at common law.

[119]The question remains whether Force India’s repudiation survived for acceptance on 27 January 2008. Here Mr Tregear’s submissions are different. He primarily relied on the proposition advanced at length in oral argument that the discussion of clause 5 at the meeting in Abu Dhabi on 13 December 2007 showed the sponsors operating the contract in a manner inconsistent with an open election still to accept Force India’s repudiation. That was not the way the judge put it in his judgment and there was no respondent’s notice to that effect. However, Mr Tregear also relied on the judge’s analysis that “by their course of conduct over the months” (para 81) the sponsors had elected not to exercise any right to terminate. The judge was thinking, as I understand it, of a contractual termination. He was not thinking of Force India’s conduct as amounting to repudiatory conduct, for he never analysed it as such, nor considered the sponsors’ argument that it amounted to such.

[120]In my judgment, both versions of Mr Tregear’s argument fail. Nothing which occurred at the Abu Dhabi meeting amounted to an election not to terminate the contract for repudiatory breach. First, the whole meeting was conducted under reserves, for all the discussions took place under an agreement that they were “without prejudice”. Secondly, the meeting took place expressly to deal with a situation which both sides to it understood threatened the stability and continuation of the contract. It may be that neither side knew everything that was in each other’s heart, if indeed each side clearly understood everything of its own: but both sides knew perfectly well that matters could not continue as they were into the future. Force India knew that it had broken its contract by rebranding the team as “Force India” (see Mr Kolles preparing in advance his lack of candour about the motivation of the change, at para 48above). Force India knew that it was not being straight with the sponsors about potential main title sponsorship and that it was doing so in order to force the sponsors to make way for Dr Mallya and his interests and his ambitions for the team (or else to more than triple its 2008 payment). And, however moderately they expressed themselves at the meeting, the sponsors knew that they were being taken down a road that they did not want to travel down. Thirdly, however politely the sponsors expressed themselves regarding the success of the 2007 season, they made it perfectly clear to Mr Kolles that they were contemplating the option of termination. Mr Baumgartner also told Mr Kolles of his disquiet about the team’s association with Kingfisher Airlines, which created a clash with Etihad’s interests. Mr Kolles accepted to Dr Mallya that they had to be “more diligent”. Fourthly, although the judge said that the sponsors “led the Team to believe that they were happy with its performance of the Agreement” and he referred “by way of example to the parties’ meeting on 13 December 2007 and the unchallenged note of that meeting” (at para 70), the position remained as stated above, that the 2007 season was one thing (Force India was only on the scene, following completion, at the very end of that season), but the destabilising consequences of the takeover were another matter and the very reason for the meeting at Abu Dhabi.

[121]There remains Mr Tregear’s fall-back position, and the judge’s analysis, that the sponsors’ lack of complaint and course of conduct “over the months” amounted to an affirmation of the contract or otherwise waiver or acquiescence in any breaches of it. In my judgment, however, this analysis cannot survive the undisputed facts. Force India was only on the scene contractually from 5 October 2007. The change of Team Name only occurred on 1 November and did not come immediately to the sponsors’ notice, if indeed they ever knew that it had been formally changed. The change of car livery was not revealed until 13 November. The sponsors were never consulted about any of this, or about Dr Mallya’s strategy for marketing the team, but left to pick matters up from this and that as time went by. As it was, the change of livery was the almost immediate catalyst for the invitation issued to Dr Mallya and Mr Kolles to come to Abu Dhabi. It is not suggested that it was the sponsors’ fault that it was not possible to arrange that meeting until 13 December. It was certainly not the sponsors’ fault that Force India’s follow-up to that meeting did not come until 14 January 2008.

[122]Although delay may always be capable of being compromising, this contract, especially during the winter break between two racing seasons, did not present the typical case where mere delay may demonstrate a decision to affirm. Such cases typically occur where time is of the essence, for instance, in an extreme case where markets are always on the move such as in a share transaction, or more generally in a sales of goods case where a seller has to know whether or not his buyer is accepting the goods which have been delivered. In the present case, however, we are not faced with either an urgent situation of that kind, nor are we faced with some minor and remediable breach where the injured party only has to speak up for the matter to be remedied; or where firm protest is immediately necessary to prevent the party in breach from being misled. The present case concerns a complex and medium term relationship, which a takeover has destabilised, and where it necessarily and legitimately takes time for the consequences to become clearer and for the innocent party to consider his position. That is the middle ground between acceptance of a repudiation and affirmation of a contract which I discussed in the earlier Stocznia case (cited at para 113 above). In my judgment, the sponsors were always in fact considering their position, and Force India knew or must have known that that was so. In the meantime Force India was prepared to press ahead with its new strategy, conscious of the difficulty created by that strategy, and indeed thriving on it. In my judgment there was no affirmation, waiver or acquiescence which prevented the sponsors from exercising their common law right to accept Force India’s repudiation of the contract.

Fact or law?

[123]In coming to these conclusions I have been conscious that to some extent I have trespassed on the judge’s findings of fact, even if for the most part I have differed, where I have, in my inferences and legal analysis on the basis of common facts.

[124]The question arises whether it is legitimate in this court for me to reach such conclusions in this way, especially where the sponsors’ grounds of appeal have expressed their objections as errors of law and have not expressly challenged the judge’s findings other than his conclusory findings. Mr Tregear has made some, albeit limited, complaint that such a process is not open to this court, and in this connection has particularly focused on the judge’s finding that Mr Baumgartner approved the Kingfisher logo on the car.

[125]In my judgment, however, the conclusions to which I have come above do not go beyond the legitimate subject matter of this appeal. Although the grounds were drafted in terms of errors of law, there was no confusion as to the true width of the sponsors’ appeal, of which their lengthy skeleton argument on the basis of which permission to appeal was granted provided further insight. It is, I fear, a common matter for counsel to seek to present complaints about facts as errors of law. Where an appeal comes from a separate specialist tribunal, such as an arbitrator, which has exclusive jurisdiction over the facts and from which an appeal only lies on an error of law, it may be necessary in the final analysis to be strict about what is fact and what is law. Where, however, there is no such jurisdictional problem, it is a question of proper process and fairness as to the extent to which a challenge of fact, perhaps ambitiously presented as a matter of law, can be visited. If it can be properly and fairly visited, then this court will review the judgment with the law as stated in Assicurazioni Generali SpA v. Arab Insurance Group (BSC)

[2002] EWCA Civ 1642

[2003] 1 WLR 577

well in mind.

[126]In the present case, the judge has erred in law in the respects identified above, but ultimately his principal error to my mind is a mixture of fact and law and consists of a mistaken analysis of undisputed facts, for instance recorded in contemporaneous documents. His error I think largely consists in failing to appreciate that behind and beyond the individual breaches which he considered there was on the part of Force India a strategy for the rebranding of the team and the livery which was simply inconsistent with the sponsors’ vital rights. He did not consider the sponsors’ complaint as a whole, under the lens of a complaint about repudiatory conduct. He considered their complaints remediable without asking himself why they had occurred in the first place or whether the team, ie Dr Mallya, had any intention of reversing his strategy. He focused on the sponsors’ absence of complaint (which in any event he over-stated) without considering the objective position between the parties, and thus whether Force India could really suggest that the sponsors’ termination was a reversal of an election which they had already made or came out of the blue.

[127]The closest that my judgment comes to reversing the judge on a pure matter of fact is in respect of Mr Kolles’s telephone conversation with Mr Baumgartner concerning the Kingfisher logo. However, the judge erred in misstating the evidence given by Mr Kolles at its highest, and what that evidence consisted in was common ground on this appeal. The judge never made findings as to the credibility of individual witnesses. On the evidence as a whole, therefore, it has to be assumed that, if Mr Kolles’s evidence, such as it really was, regarding a telephone conversation with Mr Baumgartner, is to be accepted, as the judge did, and as I therefore do, Mr Baumgartner’s evidence that it did not occur is to be explained as the conversation passing him by. That may well have happened since(a) it happened “after completion” (see Mr Kolles’s email of 13 December 2007), ie at the beginning of the new relationship;

(b) it was not definitive, since Mr Baumgartner was not prepared to make a decision without seeing anything in front of him;

(c) Mr Kolles put nothing in writing at the time, which one might think he would have done if he had considered his conversation a meaningful one; and

(d) he never followed up on Mr Baumgartner’s remark that he could not make a decision without seeing the proposal on paper.

Conclusion, subject to the separate issue of the clause 16.3 bonus

[128]It follows that the sponsors were entitled to bring the contract to an end, which they did on 27 January 2008. Their counterclaim for repudiation damages has never been considered and has to be remitted to the trial court for adjudication. Force India’s damages claim falls to the ground and the judge’s order for the payment of damages falls with it. Had it been necessary to consider it, the sponsors had detailed submissions to the effect that the judge had erred with respect to procedure, evidence and fact.

[129]There remains, however, the separate issue of the clause 16.3 bonus. This was earned, if it was, within the 2007 season, and was payable under the contract by 1 December 2007. Force India’s invoices for it (at least the invoice to Etihad is in the bundles and I am prepared to assume that a similar invoice for the sum due from Aldar was also sent to Aldar) were submitted on 11 December 2007 for payment on 1 January 2008. Therefore, if that bonus of $0.5 million ($300,000 from Etihad and $200,000 from Aldar) was properly due, it was earned before the contract had come to an end and survives the acceptance of repudiatory breach, subject to any rights of set-off (which have not been pleaded).

The clause 16.3 bonus

[130]This claim by Force India of $0.5 million is thus a separate issue. I have therefore left it to the end, together with the contractual provisions relating to it.

[131]The contract provided:

“16.3 The Sponsor will pay in respect of the race seasons 2007 and 2008 a Constructors’ Championship bonus which will be payable on 01 January of the following year and determined by the finishing position of SPYKER in the FIA Formula 1 Constructors’ Championship equal to US$ 500,000 for each position gained by SPYKER in the previous year’s Constructors’ Championship. ETIHAD’s obligation: US$300,000…and ALDAR’s obligation US$200,000…respectively for each position gained by SPYKER in the previous year’s Constructors’ Championship. 16.3.1 ETIHAD’s obligation regarding the Constructors’ Championship bonus is to pay US$300,000…for each position gained by SPYKER in the previous year’s Constructors’ Championship. By way of example ETIHAD will be obliged to pay the following bonuses in the circumstances set out below: (a) US$ 300,000…if SPYKER is placed in the penultimate position in the Constructors’ Championship; or (b) US$ 600,000…if SPYKER gain one further position higher in the Constructors’ Championship; or (c) US$ 900,000…if SPYKER gain two further positions higher in the Constructors’ Championship etc; up to a maximum of US$1,980,000…in the event of there being 12 participants in the Championship or US$1,800,000…in the event of there being 11 participants, unless a valid prize indemnity policy/hedge is sourced by the first Race of the season. 16.3.2 [sets out a similar provision to 16.3.1 but with reference to Aldar’s several obligation.] 16.3.3 No bonus will be payable by either Sponsor if SPYKER is placed last in the Constructors’ Championship.”

[132]What happened was that there were 11, not 12, participants in the 2007 Constructors’ Championship, but one of the participants, McLaren, was disqualified in the course of the Championship and all its points already gained were removed. Its offence was to be found in breach of the International Sporting Code by reason of possession of confidential Ferrari data. McLaren ended up therefore with no points. The disqualification occurred on 13 September 2007 pursuant to the decision of the FIA which imposed the following penalty on McLaren:

“a penalty consisting of exclusion from and withdrawal of all points awarded to McLaren in all rounds of the 2007 Constructors’ Championship. For the avoidance of doubt, McLaren will be permitted to race in the remaining rounds of the 2007 Championship but will not be permitted to score points in the Constructors’ Championship or attend the podium in the event of a top three finish in any of the remaining races in the 2007 season…”

The concession to permit McLaren cars to race in the remaining rounds of the 2007 season was to enable McLaren’s drivers to continue to compete for the drivers’ championship. In the result, Lewis Hamilton, driving a McLaren car, won the F1 drivers’ championship that year.

[133]The official FIA archive records the result of the 2007 Constructors’ Championship as follows. The 11 teams which had competed in 2007 were listed under the heading “Constructors’ Provisonal Standings”. The top 10 teams were given a “Position”, numbering from 1 to 10. “Etihad Aldar Spyker F1 Team” was at position 10. The last of the 11 teams listed was McLaren, but it had no position number against it in the “Position” column, only a dash (“-”). The individual race placings were listed for each of the 11 team’s two cars. The “Points” column gave the teams’ points. In the case of McLaren the points stated are “0” (not “-”).

[134]The question is whether in these circumstances the team had earned a bonus of $0.5 million. The contractual language put the concept in several ways. It was a bonus “for each position gained”. It was a bonus for being “placed in the penultimate position”, and a further $0.5 million bonus was payable if the team “gain one further position higher” and so on, up to a maximum which depended on how many participants there were in the championship, 12 or 11. But no bonus was payable if the team was “placed last”.

[135]The judge held that the bonus was payable. He said that the plain fact was that it was McLaren that “finished last” although unranked.

[136]This is a delicious point. No doubt no one drafting the contract envisaged the problem. In one sense McLaren was placed last, although unranked, in another sense McLaren was unranked and therefore not placed at all. In one sense Spyker was placed in the penultimate position, as could be seen on the page of results, which showed McLaren cited below it with 0 points, in another sense Spyker was placed last in that it was ranked tenth out of the ten competitors who completed the competition.

[137]In my judgment the solution is not to be sought by fixing on any one of the contractual expressions as if it were the shibboleth which determined the correct answer. It is the underlying concept which matters, which is why the contract sought to gloss that concept with its different wordings, and to give results “By way of example”. The underlying concept to my mind is to ask where among the “participants” the Spyker team ended up – last or higher? It is not merely to ask where the team ended up after disqualified teams are excluded from all consideration. Otherwise a competitor who had been awarded a gold medal because of the disqualification of all other competitors might be said to have been placed last – when he or she was placed first! 11 competed, one was disqualified, and Spyker came tenth: tenth not eleventh, but tenth out of ten.

[138]The facts remain that at the end of the day there were only ten competitors which finished the championship as valid competitors, and there were only ten ranked positions. McLaren’s place at the bottom of the page was only for information. It was not a ranked position. It could not therefore be said to have been “placed last”, even if it might be said in some sense, but only in a sense, to have come last. Spyker was placed last, namely tenth out of ten. It was not “placed in the penultimate position”, for otherwise it would have been placed ninth. It did not “gain a position”, it gained nothing at all. It therefore follows that the bonus was not payable. On a point as nice as this, I have had my uncertainties: but I am content to decide as I do with my Lords who have not shared my hesitation.

In sum

[139]In sum, I would allow the appeal, hold that the sponsors were entitled to terminate the contract for Force India’s repudiation and remit the case to the trial court for the sponsors’ damages to be assessed. There is nothing payable by the sponsors under clause 16.3.

Lord Justice Patten :

[140]I agree.

Sir Mark Waller :

[141]I also agree.

Cited in 15 later judgments

and 6 more of the most senior