Servicepower Asia Pacific Pty Ltd v Servicepower Business Solutions Ltd [2009] EWHC 179 (Ch)

Case No HC 08 CO 1224[2009] EWHC 179 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 6 February 2009
Before
Mr. William Trower QC(sitting as a Deputy Judge of the High Court)
Between
SERVICEPOWER ASIA PACIFIC PTY LIMITEDClaimantSERVICEPOWER BUSINESS SOLUTIONS LIMITEDDefendant
Mr. Charles F Short III, director for ClaimantMr. Paul A. McGrath (instructed by TLT LLP) for DefendantHearing Hearing date: 22 nd January 2009
JudgmentMr. William Trower QC:
[1]This is an application under CPR Part 24 for summary judgment in proceedings brought by ServicePower Asia Pacific Pty Limited (“SPAP”) against ServicePower Business Solutions Limited (“SBS”). The application is made by SBS on the grounds that there is no real prospect of SPAP succeeding on its claims should the matter be permitted to go to trial.[2]The relief sought by SPAP is for declaratory relief and further or alternatively damages. Three declarations are sought. The first is that SBS’s purported termination of a written contract entitled “Authorised Solutions Partner Agreement” which appears to have been signed by SBS on 21 June 2006 and SPAP on 23 June 2006 (“the Agreement”) by notice dated 18 March 2008 is ineffective, and that SPAP and SBS remain bound by the terms of the Agreement.[3]The second declaration sought by SPAP is that Genpact International LLC (“Genpact”) is SPAP’s “customer / account” for the purposes of clauses 5 and 12(b) of the Agreement. The third declaration is that the relationship between SPAP and SBS in respect of Genpact, the procedures to be used in relation to sales of certain identified computer software products (“the ServicePower Products”) to Genpact and its customers and SPAP’s entitlement to a share of the revenue arising from such sales are governed by certain rules of engagement sent by SPAP to SBS on 28 October 2007 (“the Rules of Engagement”), or alternatively by the Agreement.[4]At the time the proceedings were commenced by Claim Form dated 2 May 2008, SPAP was represented by SJ Berwin LLP and a solicitor with that firm signed the statement of truth to the Particulars of Claim. SJ Berwin have now come off the record and at the hearing before me SPAP was represented (with the court’s permission) by its Chief Executive, Charles F Short III, who had also made 3 witness statements in opposition to SBS’ application. Although his witness statements were very lengthy, and it was sometime difficult to identify the relevant material, Mr. Short was personally involved in all of the events giving rise to the disputes between the parties, and during the hearing was able to direct me to all of the material on which SPAP relied in support of its case.[5]SBS is a subsidiary in a group headed by ServicePower Technologies PLC (“ServicePower”), which provides software designed to optimise the provision of field services, i.e. the reporting of a product fault under warranty by a consumer and the dispatch of an engineer to repair or otherwise deal with that fault. The Agreement was entered into between SPAP and SBS for the purpose of expanding SBS’s market presence into what is described in section 2 as the Asia-Pacific enterprise market.[6]A number of terms of the Agreement are relevant to the issues which I am asked to consider. 6.1. Section 3 of the Agreement summarises its terms as follows:
“SBS expressly grants to SPAP the right to exclusively distribute the SERVICEPower product lines into the Australian and New Zealand marketplace and an option for additional exclusive geographic territories as defined in section 7(a). This grant by SBS to exclusively distribute the SERVICEPower product lines covers all current SERVICEPower product versions, releases and enhancements, all future enhancements and releases to its current versions and any new releases of products developed in the future not listed in Schedule 3.1” 6.2. By section 5 of the Agreement, it is provided that SPAP is only entitled to sell ServicePower software products to corporations with a place of business in Australia or New Zealand. By the same term, it is provided that “prior written authorisation is required if SPAP wishes to sell outside of this market, except as set out in section 7, schedule 5 and schedule 6”. 6.3. Section 6 describes the term of the Agreement as follows: “This Agreement shall commence upon the effective date of this Agreement and shall have a term of 24 months. The Agreement will then automatically renew for a further 12 month term annually unless terminated by either party according to the provisions in section 20; Termination.” 6.4. Section 7.1 of the Agreement operates to grant SPAP a non-transferable exclusive licence to market and sell the software modules and documentation listed in schedule 3.1 to the Agreement (“Licensed Products”) to End Users in Australia and New Zealand, with an option for the Asia Pacific Geographic Basin. An End User is defined to mean “an entity that is not an affiliate of an [Authorised Solutions Partner’s] enterprise and acquires the Licensed Products for Internal Use”
. It is specifically provided that an End User “does not include an entity that re-sells, sells, licences, rents or leases Licensed Products to other parties in the regular course of business”. 6.5. The option referred to in section 7.1 is then further described in section 7.3 of the Agreement. SPAP is entitled to take what is described as “an option for exclusivity for additional geographic regions”. I understand that it is accepted by SPAP that this option is limited to regions in the Asia Pacific Geographic Basin. The option is available once SPAP has three customers in a new region (of which India is given as an example) so long as SPAP meets the market development requirements of Schedules 5 and 6, and “provided that at least (1) new geographic area is exercised within 24 months of the date of the Agreement”. 6.6. By section 9 of the Agreement it is provided that, while SPAP may not assign its rights under the Agreement without the prior written consent of SBS, SBS is entitled to do so. Section 10 of the Agreement makes provision for certain circumstances in which a purchaser of SBS might have the right to purchase SPAP on the same terms and conditions. 6.7.

(b) is most relevant for present purposes:

“SBS shall assign an account manager commercial to SPAP and to conduct monthly planning and account management conference calls. These conference calls will incorporate an opportunity registration process designed to ensure that SPAP does not waste sales effort. Once an account has been registered as an SPAP account, SBS will use best endeavours to ensure that the commercial terms outlined in this Agreement apply.” 6.8. Section 14.1 provides for a limitation on SBS’s liability in the event of any breaches of the Agreement, and section 16 is a complete Agreement clause, the last sentence of which provides: “No variation of these terms and conditions will be valid unless made or confirmed in writing by authorised signatories of both parties on or after the date of this Agreement”
. Section 18 provides that no waiver of any rights by the party to the Agreement will be deemed to be a waiver of any other right or any later breach. 6.9. Termination of the Agreement is dealt with by section 20. By section 20.1 it is provided:
“Either party may terminate this Agreement for the substantial breach by the other party of a material term. The terminating party will first give the other party written notice of the breach and a reasonable period of at least thirty (30) days or sufficient additional time as technically or commercially reasonable in which to cure the alleged breach. If a cure is not achieved during the cure period, then the non-breaching party may terminate this Agreement upon written notice”. 6.10. Section 20.2 of the Agreement permits termination at the suit of SPAP “if SBS changes the Licensed Products in a fundamental way such that the interworking with SPAP solutions becomes impracticable”
. Section 20.3 permits termination by SBS if SPAP fails to meet its payment obligations under the Agreement and if failure continues for 30 days following receipt of written notice. Section 20.4 provides for automatic termination of the Agreement on the occurrence of certain insolvency events committed by SPAP and gives SPAP an option to continue the Agreement on certain terms in the event of SBS’ insolvency. Sections 20.5 and 20.6 make provision for the acceleration of the payment on termination and the consequences of termination on any pre-termination obligations of either party under the Agreement.[7]Although SBS complains that SPAP generated no business for ServicePower Products from the time that the Agreement was concluded, the issues with which I am primarily concerned only arose in respect of Genpact, which is a business process outsourcing company based in India, and which first made contact with SBS in early 2007. SBS then passed on Genpact’s details to SPAP, apparently in the belief that Genpact’s interest related to SPAP’s territory.[8]Between March 2007 and the end of that year, it seems that SPAP (through Mr. Short) had a substantial amount of contact with Genpact, of which it kept SBS informed, in any event in general terms. It seems that Mr. Short was making strenuous efforts to develop a relationship with Genpact under which ServicePower Products would be bundled together with other services provided by Genpact and then sold on to Genpact’s own customers, in particular companies in the GE group (“GE”). It seems that he recognised that Genpact’s “hosting” of this operation would take place in India, although the ServicePower Products would be sold, together with the Genpact services, to GE (and possibly others) in the US. It is SPAP’s case that SBS, through ServicePower’s then Chief Executive Mr. David Brisco, was well aware that this was the position from early on in the negotiations and encouraged SPAP to continue with those negotiations. SBS says that it initially thought that Genpact’s interest was in respect of its own Indian customer base, and only became aware that the end users were US-based in June / July 2007.[9]On this application I cannot resolve the issue of when SBS first knew that sales to or through Genpact would not be to End Users located in the Asia Pacific region, nor can I resolve the extent to which SBS’ apparent encouragement of SPAP in developing its relationship with Genpact was based on full information as to the precise role which would be played by Genpact. It is clear, however, that from the outset Mr. Brisco knew that any sales to Genpact would be on-sold to Genpact’s own customers (i.e. Genpact would not be an End User as defined) and that they would be outside Australia and New Zealand.[10]Although the position in the early days is unclear, there is no dispute that, by the end of July 2007, both SBS and SPAP knew that the possible Genpact deal would involve on-sales to end users in the US and that some form of arrangements would be required to ensure that there was no conflict between the Genpact sales and other ServicePower selling activity in the US which was carried on through a US subsidiary. There is however no agreement between the parties as to the detail of these discussions, although it is of some materiality that Mr. Short said in his evidence that SBS and SPAP “ “agreed to agree” at a later date which we did on the appropriate commission split between SP and SPAP. SPAP’s position was that it should receive from Genpact the “hosted” price as stated in the June 23, 2006 agreement in Schedule 4 Section 2 Hosting Sales”.[11]Thereafter, SPAP continued to keep SBS informed as to the progress it was making with the Genpact project (presentations to GE etc), and Mr. Brisco responded with words of encouragement to the effect that he was pleased with the progress being made, although he remained concerned with what he described as “direct and indirect sales clashes”, an apparent reference to the potential for conflict with ServicePower’s other US marketing and sales activities. This led to detailed correspondence at the end of August and the beginning of September in which pricing proposals for the ServicePower / Genpact product were discussed. It is SPAP’s case that it reiterated on a number of occasions throughout this period the fact that Genpact was its customer and that SBS did not respond to the effect that this was not the case.[12]There was then a short lull in the correspondence, but it would appear that at some stage Mr. Brisco met with Genpact and agreed that a specific deal would have to be negotiated between SBS (not SPAP) and Genpact for any onward sales to GE. On 26 October 2008, there was a telephone call between Mr. Short and Mr. Brisco which led Mr. Short to produce a document entitled Rules of Engagement which was e-mailed to Mr. Brisco on 29 October. In the form drafted by Mr. Short, this document was expressed as a summary of “the Genpact opportunity” and was intended to ensure that “we act in synch with other arms of the ServicePower organization”. It made clear that SPAP regarded Genpact as SPAP’s partner and customer. There is no written evidence that the Rules of Engagement were ever accepted by SBS and shortly thereafter, the correspondence indicates that the parties were in dispute over the role which SPAP had and was entitled to play in introducing Genpact as a customer of ServicePower Products.[13]Shortly after the Rules of Engagement had been sent to SBS by Mr. Short, Mr. Brisco was replaced by Mr. Mark Duffin as Chief Executive of ServicePower. In an e-mail dated 17 December (if not before) Mr. Duffin made clear to Mr. Short that SBS would welcome working with SPAP in Australia and New Zealand but was not happy to grant him rights “to take a third party and enter our prime markets”, by which he appears to have been referring to Genpact and the USA.[14]The relationship continued to deteriorate and it is common ground that, by letter to Mr. Short of SPAP dated 18March 2008, Mr. Duffin of SBS purported to give notice of termination of the Agreement with effect from 21June 2008:
“In circumstances where there is no express provision for termination of the Agreement on notice, we are advised that the Agreement is subject to an implied term that the Agreement can be terminated on reasonable notice expiring on its anniversary dates following expiry of the initial fixed term. The first relevant anniversary date being 21 June 2008. You should take this letter as notice of termination of the Agreement with effect from 21 June 2008.”
[15]In the evidence on this application, Mr. Duffin has stated that the commercial reason he determined to take this step was that, when he became Chief Executive of ServicePower, it was immediately clear to him that SPAP was failing to perform in respect of the Agreement and generally. It is hotly disputed by SPAP that this was so, but whatever the position this issue is not relevant to the question of whether a term for determination on reasonable notice (without cause) ought to be implied into the Agreement.[16]Before considering, whether, as SBS contends, SPAP has no real prospect of succeeding on its claim for the heads of declaratory relief outlined at the beginning of this Judgment, I should deal with a preliminary point raised by SPAP in its skeleton argument, namely that the matter was settled at a teleconference held in July 2008. As I understand it, SPAP contends that the alleged compromise operates to prevent SBS from proceeding with this application for summary judgment, either because the agreement made express provision to that effect or because the settlement of all disputes between the parties operated as an agreement to stay all further steps being taken in these proceedings.[17]Of course, if the matter had indeed been settled in July 2008, there would be an alternative ground available to SBS for pursuing its application for summary judgment; namely that SPAP had no real prospect of succeeding on its claim because the causes of action it seeks to pursue have been compromised. SBS does not, however, take that course; it does not accept that the terms of the settlement alleged by SPAP are terms by which it is bound. Accordingly, SBS simply proceeds with its application without relying on the possibility that an agreement for settlement of the proceedings might have been reached. It continues to put its case on the basis that, irrespective of what occurred in July 2008, SPAP has no real prospect of succeeding on its claims.[18]In support of SPAP’s contention that a concluded agreement was reached, I was taken to a number of documents, none of which had been formally adduced in evidence by SPAP. Mr. Paul McGrath, who appeared on this application for SBS, did not submit that I should not look at this material, although he did submit in his skeleton argument that much of it reflected without prejudice negotiations and should not formally be before the court.[19]In brief, what happened was that on 30 July 2008 settlement discussions were held by telephone. There is no signed document which records the terms agreed during the course of those discussions, but there is some evidence that both parties considered that an agreement in principle had been reached. Thus, in an e-mail of 1 August 2008 to Mr. Short, Mr. Duffin concluded with the words “Best of luck and I am glad we have solved everything and we can now start to make something of the market”. Furthermore, a recent e-mail from an Australian solicitor who says that she was a party to the telephone call on 30 July 2008 and took detailed notes, confirms that “I can state unequivocally that although the teleconference was on a “without prejudice” basis, it was considered by all parties that agreement had been reached. At the conclusion of the call, all points discussed and agreed during the call were confirmed between TLT [solicitors for SBS] and SJ Berwin [solicitors then instructed by SPAP] in the presence of all parties including Mark Duffin. TLT were then instructed to prepare a Variation Agreement on the agreed terms and to send the same to SJ Berwin”[20]In the light of this material it may well be the case that the parties reached an agreement in principle. It seems clear to me, however, that they accepted that the terms of any agreement were required to be reduced to writing. It was contemplated that there would have to be a written contract, which operated so as to vary the Agreement and bring to an end the disputes which are the subject matter of these proceedings. Put another way, while it is plainly arguable that the parties reached a commercial arrangement as to how the issues between them ought in principle to be disposed of, there was no legally enforceable binding compromise until such time as all of the detailed terms had been finally negotiated and reduced to writing in a form which was approved by both parties.[21]Mr. McGrath submitted that the allegation of a binding compromise was an extremely surprising one to make, because it was not mentioned by Mr. Short in any of his witness statements and was never raised by SJ Berwin who remained on the record for some time thereafter. I agree with those submissions, but the most compelling reason for concluding that there was no binding compromised reached in July is that as recently as December 2008, SPAP’s e-mail correspondence dealing with the negotiation of a variation agreement continued to reflect a recognition by SPAP that there was no complete consensus as to the terms of an agreement and indeed was expressed to be without prejudice. It is clear to me that, despite the fact that an agreement in principle appears to have been reached between the parties as to the solution of the differences between them, the agreement was incomplete and was subject to the parties being able to agree detailed terms which were intended to be reduced to writing. I am satisfied that, in the events that occurred, those terms were not agreed so as to give rise to a legally enforceable contract.[22]I should add that I have given consideration to the question of whether it is possible to conclude from the evidence(a) that an enforceable agreement was reached that neither party should take any further steps in these proceedings pending the conclusion of detailed negotiations and(b) that any such agreement continues to operate notwithstanding the apparent breakdown in negotiations concerning the precise terms of the variation agreement. Although Mr. Short told me that the parties agreed to put these proceedings “in abeyance” while a contract was being drawn up, no explicit term to that effect was expressed in any of the material which I have been shown. In these circumstances, I am satisfied that SBS has not bound itself to take no further steps in the action, whether by application for summary judgment or otherwise, pending the conclusion of the negotiations. I have no doubt that, if it had done so, SPAP (given that SJ Berwin was on the record for some time thereafter) would have taken steps to vacate this hearing.[23]I now turn to consider SBS’s application for summary judgment in respect of each of the declarations sought in the Claim Form and Particulars of Claim. It is convenient to deal with each of them separately.[24]As to the first declaration, Mr. McGrath submitted in his skeleton argument that SBS has a real prospect of success in establishing a term permitting termination of the Agreement on reasonable notice. That may be so, but is not sufficient: for SBS to obtain summary judgment, it must show that SPAP has no real prospect of establishing at trial that there was no implied term of the Agreement for termination on reasonable notice, in any event on the expiry of the term of 24 months referred to in section 6 of the Agreement and annually thereafter, and that the notice given by SBS was otherwise ineffective.[25]In support of SBS’ case, Mr. McGrath submitted that traditionally the courts have not liked the idea of never-ending contracts. He accepts that it is clear law that a court will not imply a term for termination on reasonable notice if the contract is of a fixed duration, but he contends that this principle is inapplicable in a case such as the present where the contract is what he characterises as silent on the issue of its ultimate length. He referred me to Chitty on Contracts (30th edition) volume 1 at para. 13-027:
“A contract which contains no express provision for its termination may yet be determined by reasonable notice on the part of one or both of the parties. The question whether a contract can be determined in this way is often said to depend upon the implication of a term, although it is probably better to regard it as depending on the true construction of the agreement.”
[26]Mr. McGrath also submits (based on a passage in McMeel on the Construction of Contracts at para. 11.59) that the courts have shown a marked reluctance to construe any contract as continuing in perpetuity and also that the court will often imply into a licence agreement for the use and exploitation by one party of property owned by another, a term that it be determinable on reasonable notice (in any event where that agreement contains no provision for determination). In the normal course the principle that such a term should be implied will follow as a matter of obvious inference.[27]In my judgment, however, the same cannot be said in circumstances in which the parties to an agreement have given careful consideration to defining by way of express term the circumstances in which the agreement should in any event be terminated. While it is clear that the issue of whether such a term should be implied will nearly always arise whenever there is no provision dealing expressly with termination (Winter Garden Theatre (London) Ltd v Millennium Productions Ltd [1949] AC 173, 203 per Lord MacDermott), that will not so obviously be the case where there is provision for termination, albeit provision which does not contemplate termination on notice without cause. The position is clearly summarised in Lewison on The Interpretation of Contracts (4th edition) at para. 6.16:
“So, too, where the agreement already contains terms for termination, it would be difficult to imply further such terms.”
[28]In the present case, section 20 of the Agreement made detailed provision for the circumstances in which termination was to arise. Section20.1 permitted termination for cause by both parties in circumstances in which there was a substantial breach by the other party of a material term, so long as notice is given by the innocent party and a reasonable period to cure the alleged breach expires without the cure being achieved. Furthermore, as I have explained above, sections20.2 and20.3 made further explicit provisions for the circumstances in which termination was available to SPAP and SBS for what amounted to specific further cause. In addition, section20.4 of the Agreement made provision for termination on insolvency.[29]SBS contends that the effect of refusing to imply a term for determination on reasonable notice is that the Agreement will then continue indefinitely so long as there is no substantial breach by SPAP. Indeed, this consequence is actually pleaded in paragraph 11 of the Particulars of Claim. It is strongly submitted by Mr. McGrath that this is commercially absurd, particularly in circumstances where one party has been given an exclusive licence over a substantial territory of potential work and that there is no obligation to make specific levels of sale. He stresses that the absurdity is all the greater as the licence granted to SPAP relates to all future enhancements and releases and any new releases or products developed in the future. He also says that it is difficult to square the interpretation advanced by SPAP with the wording of section 6 of the agreement which makes specific provision for periods of renewal. He says that such renewal periods would be otiose if SPAP were to be right and there was no room for implying a term for termination on reasonable notice.[30]SPAP disagrees. In particular it relies on the nature of the upfront commitment required from it and says that this is not answered by the fact that SBS concedes that the Agreement was not terminable (anyway without cause) for the first 24 months. In summary, it alleges that the work which the parties contemplated it might have carried out in fostering future customers, taken together with the fact that the Agreement gave detailed consideration of other circumstances in which termination was permitted at the suit of either or both parties, means that it is not a case in which the implication of term for determination on reasonable notice is appropriate. In particular it points to the provisions which permit termination for cause and it relies on the change of ownership provisions in section 10. Although SPAP does not allege in the alternative that the period of notice actually given was unreasonable in any event, I take it that this is because it does not accept that even a lengthy period of notice would be reasonable.[31]It is only appropriate for me to grant summary judgment in favour of SBS on this issue if there is no real prospect that SPAP will succeed in its claim for the first declaration sought. I am unable to reach that conclusion. In my view SPAP has a real prospect of establishing at trial that, the parties having given detailed expression to circumstances in which the Agreement is terminable, there is no room for the implication of any further term. I am not satisfied that section 6 is necessarily inconsistent with such an argument: like many other aspects of the Agreement it may just have been inelegantly conceived and expressed. Furthermore, the commercial absurdity of an exclusive licence, which is not terminable on reasonable notice, is less obvious in circumstances in which the right to exclusivity is dependent on the achievement of the market development obligations described in section 7.2(b) of the Agreement.[32]I should add that, in reaching this conclusion, I have not found it necessary to consider the submission made by SPAP that an earlier draft of the Agreement had included provision for termination on notice, and that the specific exclusion of that provision during the negotiation of the Agreement makes it impossible to reintroduce by implication a term that the Agreement is terminable on reasonable notice. There would have been considerable force in SBS’ submission that this material amounted to no more than evidence of prior negotiations and is therefore inadmissible on the true construction of the Agreement.[33]For these reasons, I am not prepared to dismiss SPAP’s claim in its entirety. Irrespective of whether or not SPAP has a real prospect of succeeding in its claim for the remaining declarations, it is entitled to a final determination on the issue of whether or not SBS’ letter of 18March 2008 was effective to terminate the Agreement. The fact, however, that these proceedings will be continuing in any event is no reason for me not to consider whether SPAP has a real prospect of succeeding on its claim for the second and third declarations. It is plainly consistent with the overriding objective for the court to consider these issues: if it does not, the ambit and magnitude of the dispute between the parties might be very much greater than would otherwise be the case.[34]The second declaration sought by SPAP is that Genpact is SPAP’s “customer / account” for the purposes of sections 5 and 12(b) of the Agreement. This is not the same as the question of whether SPAP took steps to foster a relationship with Genpact in the hope that it would become a customer to whom sales of ServicePower Products would be made pursuant to the terms of the Agreement. It is the more limited question of whether Genpact had become a customer of SPAP for a specific contractual purpose.[35]The way in which the Agreement contemplated that a particular counterparty might become a customer to whom SPAP was authorised to sell ServicePower Products is as follows. Section 5 provides that SPAP only has general permission to sell ServicePower Products to corporations with a place of business in Australia and New Zealand, and that it may only do so outside this market with the prior written authorisation of SBS, except as set out in section 7. Section 7.1 then grants an exclusive licence to SPAP to market and sell Licensed Products to End Users in Australia and New Zealand, with an option to extend that licence to elsewhere in what is described as the Asia Pacific Geographic Basin. The terms of that option are set out in section 7.3. In short summary, the option is only capable of being exercised by SPAP once it has three customers in a new geographic region and once (and for so long as) it is able to satisfy the market development obligations set out in Schedules 5 and 6 of the Agreement.[36]As I understand SPAP’s case, the significance of a customer being its “customer / account” for the purposes of section 12(b) of the Agreement is that, once that has taken place “the commercial terms outlined in this Agreement apply”. This would appear to incorporate in relation to any such sales the provisions of Schedules 3 and 4, dealing with payment terms, pricing and licence fees. SPAP claims that it follows from this that, once a person is “registered … as a customer / account” for the purposes of section 12(b) of the Agreement, SPAP will have the opportunity to generate income from sales to that customer in accordance with the terms of the Agreement. It may be the case that whether or not it has an exclusive right to do so depends on the further question of whether the exclusivity provisions of section 7 apply to the sales to that customer as well.[37]In a number of respects the Agreement is not very well drafted. What is clear, however, is that, in the absence of specific authorisation from SBS (leading to what is described in the heading to section 5 as “Account Registration”), the Agreement only governs sales to customers of SPAP(a) who are End Users and(b) who are either customers in Australia / New Zealand or are customers in a region to which the section 7 option has been extended. This is evident not just from the specific licensing provisions under the Agreement, but also from several other parts of the Agreement. These include in particular (a) sections 2 and 3(a) which make plain that the Agreement is for the purpose of distributing ServicePower Products into the Australian and New Zealand market place, with distribution elsewhere being limited to the Asia Pacific Geographic Basin once but only once the option has been exercised in relation to an additional region in that basin and (b) Schedule 1 which deals with the intellectual property rights wording to be included in contracts between SPAP and End Users.[38]It is common ground that Genpact was in fact based in India (i.e. outside the market referred to in section 5 of the Agreement, albeit within the option area referred to in section 7.3). There is some indication that Genpact may also have had operations in Australia (Mr. Short’s e-mail of 14 March 2007), but that fact alone does not assist SPAP because it is clear from section 5 that, absent operation of the section 7 option, written authorisation is required for any sales outside Australia and New Zealand. It is also common ground(a) that, whatever SBS might have thought from time to time, Genpact’s interest in ServicePower Products was for onwards sale to its own customers which were based worldwide, including in the US and(b) as was accepted by Mr. Short during the course of the hearing, that Genpact was not itself an End User. The Genpact discussions therefore always contemplated distribution into territories which were outside both the Australia / New Zealand market place and the Asia Pacific Geographic Basin in general, and were with a person who did not qualify as an End User.[39]The means by which SPAP contends that Genpact became its “customer / account” for the purposes of sections 5 and 12(b) of the Agreement are pleaded in paragraph 14 of the Particulars of Claim:
“By an e-mail dated 14 March 2007, Mr. Short informed Mr. Brisco of the discussions that had taken place with Genpact and thereby registered Genpact as a customer/account of the Claimant in accordance with clauses 5 and 12(b) of the Agreement. By an e-mail dated 16 March 2007 Mr. Brisco acknowledged receipt of the information and wished Mr. Short “Good Luck”.”
During the course of his submissions to me, Mr. Short confirmed that the e-mail of 14 March (together with a further e-mail dated 30 March 2007) were the “registration” documents on which SPAP relied in support of its case. He said that he assumed that he was registering Genpact as a client but says that he did not go back to consider the terms of the Agreement to ascertain whether or not he had complied with its terms. It therefore appears to be SPAP’s case that a unilateral act by SPAP amounted to registration of a new “customer / account” outside Australia and New Zealand in accordance with sections 5 and 12(b) of the Agreement.[40]In my judgment, it is clear that, in the absence of prior written authorisation, SPAP could not treat Genpact as a person to whom it was entitled to sell pursuant to section 5, and that Genpact could not therefore by a “customer / account” for the purposes of that section. The reasons for this are that the relationship contemplated by the e-mail relied on in support of the allegation(a) would not have been between SPAP and an End User and(b) would not have involved sales within the Australia or New Zealand market place.[41]It is also clear that section 12 adds nothing to this conclusion. In my judgment, it is plain that this provision is primarily concerned with the registration of customers for whom no prior authorisation is required under section 5, either because it is an Australia / New Zealand sale or a sale elsewhere in the Asia Pacific Geographic Basin, where SPAP has taken an option under section 7.3. It makes no commercial sense for a customer account to be capable of being “registered” for the purposes of this provision without that customer first becoming a person to whom SPAP was entitled to sell by operation of sections 5 and/or 7 of the Agreement. I am satisfied that SBS has no obligations under section 12 in respect of sales outside Australia and New Zealand unless(a) it has authorised the sale (either specifically or generally) under section 5 or(b) SPAP has effectively exercised the option to acquire an exclusive licence in relation to the relevant region by operation of section 7.3 (the latter of which is not alleged to have occurred).[42]It follows that I must next consider whether SPAP has any real prospect of demonstrating that SBS gave written authorisation to SPAP to sell to Genpact or otherwise outside the market referred to in section 5 of the Agreement. To that end, it is necessary for there to be some evidence that SBS(a) gave authorisation for sales to be actually effected outside Australia and New Zealand and(b) that such authority extended in its terms (whether explicitly or by implication) to Genpact as a purchaser which did not qualify as an End User. In my judgment, unless SPAP is able to point to any such evidence, it has no real prospect of succeeding in its claim for the second declaration.[43]SPAP relies primarily on e-mails from Mr. Brisco dated 16 March 2007 and 30 March 2007. It also contends that, from time to time after 16 March 2007, SBS expressly or implicitly acknowledged that Genpact was a “customer / account” of SPAP and authorised as such under the Agreement. In the course of the hearing I was told by Mr. Short that all of the written material was to be found in Appendix 4 to his principal witness statement and I asked him to show me the documents on which he placed particular reliance.[44]There is no doubt that the documentation relied on is consistent with SBS (through Mr. Brisco) encouraging SPAP to work at developing a relationship with Genpact, doubtless with the intention that, when the time was right, ServicePower Products would be sold on to end users by Genpact. The documentation is also consistent with hope on the part of SPAP that, once the relationship with Genpact was finalised, sales to Genpact would be treated as covered by the terms of the Agreement. In my judgment, however, none of the e-mail correspondence to which my attention has been drawn is capable of amounting to authorisation by SBS to sell for the purposes of section 5 of the Agreement.[45]The e-mail of 16 March did no more than wish SPAP good luck with the opportunities (of which Genpact was one) described in outline in the 14 March e-mail from SPAP. The SBS e-mail of 30 March, SBS said that the “Genpact opportunity looks very interesting – I would very much like to know more following your conference call on Tuesday”. In my view, these e-mails cannot be read as authorisation for the purposes of section 5. The most that can be said is that the e-mail of 30 March encouraged SPAP to work at developing a relationship with Genpact, with the intention that, once a deal in principle had been concluded, terms as between Genpact and the ServicePower group on the one hand and as between SBS and SPAP on the other would then be finalised.[46]I have also considered the e-mail of 13 April 2007 which, together with the e-mail of 16 March 2007 (the pleaded reference to 14 March must be wrong in this context), is said to amount to an acknowledgment that Genpact was a “customer / account” of SPAP and an authority to proceed with negotiations and to sell ServicePower Products to Genpact with the goal of Genpact selling into the US market. I agree that these e-mails amount to an authority to proceed with negotiations with Genpact, but I am quite unable to see how they are capable of amounting to either(a) an acknowledgment that Genpact was a “customer / account” of SPAP for the purposes of sections 5 or 12(b) of the Agreement or(b) an authority to sell ServicePower Products to Genpact with the goal of Genpact selling into the US market. In my judgment, SPAP has no real prospect of establishing that they have such an effect.[47]Although the way in which it does so is not free from doubt, it seems that SPAP also relies on a number of other contacts between Mr. Short and Mr. Brisco during the period I have described in paragraphs 8 to 12 of this judgment in support of its claim that Genpact was a “customer / account” of SPAP for the purposes of sections 5 or 12(b) of the Agreement. I do not think that they are capable of being read in that way. The most that can be said is that Mr. Short described Genpact as SPAP’s customer (although not with any reference to the consequence which such a characterisation might have on the parties’ rights and obligations under the Agreement) and that Mr. Brisco did not assert that Genpact was not SPAP’s customer. It is, however, a striking fact that, at no stage prior to the beginning of this dispute, did SPAP request that authorisation under section 5 be given, nor did it ever seek confirmation that the effect of what had occurred was that Genpact had been registered as an SPAP account for the purposes of section 12(b) or indeed any other section of the Agreement. This is all the more striking in circumstances in which (as Mr. McGrath pointed out) SPAP never once indicated that it thought that Genpact was its customer for the purposes of sections 5 or 12(b) of the Agreement, nor did it make any attempt to explain why it thought that Genpact fulfilled the relevant criteria despite the fact that it was neither purchasing in Australia or New Zealand, nor itself an End User.[48]Although SPAP can make out an arguable case that the correspondence taken as a whole amounted to assent on the part of SBS that Genpact was SPAP’s customer in a general sense, in my judgment it comes nowhere near an acknowledgment that Genpact’s relationship with the ServicePower group would be governed (as between SBS and SPAP) by the terms of the Agreement. Throughout his submissions to me, Mr. Short stressed that he assumed that, because he was doing the work summarised in paragraph 18 of the Particulars of Claim and because SBS allowed that work to be carried on for a period of time, it is equitable that SPAP should be treated as if Genpact were a customer under the Agreement. It may be that this is sufficient to ground a claim to remuneration of some sort (e.g. in the form of the finders’ fee referred to by Mr. McGrath in his submissions or for a quantum meruit). That is not, however, a pleaded issue, and is quite different from the declaratory relief sought in SPAP’s Claim Form and Particulars of Claim. It is not a matter on which I can or should reach even a provisional conclusion on this application.[49]It is then said by SPAP that, in reliance on Mr. Brisco’s e-mails of 14 March (by which must be meant 16 March) and 13 April 2007, it expended considerable time and resources in pursuing Genpact as a customer for ServicePower Products, which is said to give rise to an estoppel in the following terms (see paragraph 19 of the Particulars of Claim):
“In the premises, [SBS] is stopped from denying that Genpact is [SPAP’s] customer/account and that the Claimant is authorised to sell ServicePower Products to Genpact, who will sell to its customers globally and in particular, North America.”
[50]I assume that this is intended to be a plea that SBS is estopped from denying that Genpact is SPAP’s “customer / account” for the purposes of sections 5 and 12(b) of the Agreement (although that is not spelt out in terms), because if it is not, the allegation has no obvious relevance to the relief sought in the proceedings. For an estoppel to arise, the words or conduct must be clear and unequivocal. I find it impossible to conclude that either of the e-mails on which reliance is placed, or indeed anything which occurred thereafter, are even arguably capable of founding the estoppels claimed. The most that can be said is that SBS gave non-specific encouragement to SPAP to develop the relationship – it is hardly likely to have done anything else. It may be that this is sufficient to ground a claim to remuneration of some sort, but that falls well short of a representation, promise or other form of conduct from which SBS cannot now resile to the effect(a) that Genpact would be a customer of SPAP for the purposes of the Agreement or(b) that the Claimant is authorised to sell ServicePower Products to Genpact, who would then sell to its customers globally and in particular, North America.[51]It follows that on the evidence available to me I am satisfied that SPAP has no real prospect of establishing that it is entitled to the declaration claimed in paragraph 1(b) of the prayer to the Particulars of Claim and that it should be struck out accordingly. It seems to me that it also follows for the same reasons that SPAP has no real prospect of establishing that the relationship between SPAP and SBS in respect of Genpact, the procedures to be used in relation to sales of the ServicePower Products to Genpact and its customers and SPAP’s entitlement to a share of the revenue arising from such sales are governed by the Agreement. In my judgment, in so far as it relates to the Agreement as opposed to the Rules of Engagement, the declaration sought in paragraph 1(c) of the Particulars of Claim must be struck out.[52]As to the Rules of Engagement, it is pleaded in paragraph 23 of the Particulars of Claim that on 6 November 2007, an oral agreement was reached between Mr. Short (for SPAP), Mr. Brisco (for SBS) and Mr. Vanga (for Genpact) that the relationship between SPAP and SBS would be governed by the Rules of Engagement. It is said that this was required to ensure that there was no conflict between SBS and Genpact as they would both be selling into the same US market. The oral agreement is said to be evidenced by an e-mail from Mr. Short to Mr. Brisco dated 7 November 2007, although I am bound to say that the e-mail of that date to which my attention has been drawn does no such thing. It simply amounts to an assertion by Mr. Short to Mr. Brisco (who had just informed Mr. Short that he was being replaced as Chief Executive of SBS by Mr. Duffin) that he was expecting confirmation from SBS that Genpact would be SPAP’s customer when it sells in the US.[53]In any event, Mr. Short accepted towards the end of his submissions to me that he could not argue for a complete agreement other than the Agreement. In my judgment, this concession by Mr. Short is entirely consistent with the form of the Rules of Engagement. They do not on their face amount to a free standing contract capable of governing the matters referred to in declaration 1(c). They simply set out the terms on which Genpact might have proceeded to market and sell ServicePower Products in the US, in the event that an agreement permitting that to occur were otherwise to be reached. As I have concluded that SPAP has no real prospect of establishing that it was entitled to sell to Genpact under the terms of the Agreement and as no other agreement is pleaded by which such sales might have been made, I am satisfied that it is appropriate to strike out declaration 1(c) in so far as it relates to the Rules of Engagement as well.[54]In the light of my conclusion that the claim for declaration 1(a) should go to trial, it is appropriate for further directions to be given. My provisional view is that SPAP should be given permission to serve Amended Particulars of Claim, deleting those allegations which are no longer relevant and otherwise taking into account the conclusions which I have reached. I will, however, hear counsel on this and any other directions which the parties seek.

Cited in 1 later judgment