Motivate Publishing FZ LLC & Anor v Hello Ltd [2015] EWHC 1554 (Ch)

Case No HC-2015-00009863[2015] EWHC 1554 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 04/06/2015
Before
MR JUSTICE BIRSS
Between
(1) MOTIVATE PUBLISHING FZ LLCClaimants(2) MOTIVATE PUBLISHINGClaimantHELLO LIMITEDDefendant
Gwilym Harbottle (instructed by Mackrell Turner Garrett) for ClaimantsRupert Butler instructed via direct access for DefendantHearing Hearing dates: 29th, 30th April, 1st May 2015
JudgmentMr Justice Birss :
[1]The first claimant is a company registered in Dubai. The second claimant is a partnership in Dubai. The first claimant is a wholly owned subsidiary of the second claimant. It will be necessary to distinguish between these two entities in due course but to start with I will refer to both businesses together as “Motivate”. Motivate publishes books and magazines in the United Arab Emirates.[2]With effect from 8th February 2005 the first claimant entered into a written licence to publish the Middle East edition of Hello! magazine in English in a territory consisting of the UAE, Bahrain, Qatar, Kuwait, Oman, Saudi Arabia, Jordan and Syria. Hello! is a celebrity lifestyle magazine.[3]The licensor and other party to the contract was the defendant, Hello Ltd. The defendant is a UK company which is in turn a subsidiary of Hola SL. Hello Ltd publishes the UK edition of Hello! magazine. Hola SL publishes ¡Hola! in Spain. The Hello/Hola group publish or license the publication of versions of the magazine all over the world.[4]The 2005 licence had a five year term. In 2010 the licence was renewed for another five years, to expire on 31st March 2015.

The Licence

[5]The 2005 licence grants the licensee an exclusive licence to use “the Trade Dress, the Brand Features, the Content and the Know-How” in order to publish the Magazine in the Territory (clause 3.1, with defined terms capitalised). Among the rights licensed is a UAE trade mark application in class 16 for a logo form of the familiar title to Hello! magazine. I believe, although nothing turns on it, that that application was not granted.[6]Clause 3.2 includes an acknowledgement that the rights granted by the agreement do not exclude other English language editions of Hello! being published outside the territory and being distributed by third parties within the territory.[7]Clauses 4 to 7 contain detailed provisions dealing with Trade Dress, Brand Features, Content and Know-How. Clause 8 addresses Business Performance including a revenue plan and publication frequency. The magazine will be weekly. Quality Standards Performance Criteria are addressed in clause 9. This includes (9.1) a right for the Licensor to periodically approve the physical edition specifications of the magazine and a provision that if the Licensor does not approve the then current specifications the Licensee shall modify the specifications to those requested by the Licensor if requested in writing to do so. Clause 10 deals with Editorial Matters. By clause 10.2 the Licensee shall select an Editor subject to the Licensor’s approval (not to be unreasonably withheld). The editorial policy will follow the Licensor magazine (clause 10.5) and to facilitate editorial coordination the table of contents and other elements on request must be provided in advance of publication.[8]Advertisement, Promotion and dealings with Celebrities are covered by clauses 11 to 13. Editorial and Business Disagreements are dealt with in clause 14 and the License Fee Royalty and Minimum Guarantee are in clause 15.[9]Clauses 16 and 17 deal with term and termination. The term is five years and clause 16.1 also provides that:
“No later than twelve (12) months prior to the expiration of the Term, each of the Parties will make its representatives available regarding negotiations for any additional term if so requested by, and upon reasonable notice from, either Party. The Parties will negotiate in good faith and will execute appropriate amendments in the case that any additional term is agreed.”
[10]Clause 18 deals with ownership and registration of the Licensor’s intellectual property rights, referring to copyright, trade marks and goodwill and design rights. They remain the sole and exclusive property of the Licensor.[11]Clauses 19 to 34 deal with other miscellaneous matters (in fact there is no clause 19). The only clauses of significance are: clause 27 which provides that the agreement shall not be assigned, sub-licensed or otherwise transferred by one party without the other party’s consent; and clause 31, which provides that the governing law of the agreement is the law of England and Wales. Each side argued the whole case by reference to the law of England and Wales.[12]The document has seven exhibits. The only significant one for present purposes is Exhibit E, which specifies Magazine Characteristics including matters such as size, page count at 88 + 4 pages (which means 88 internal pages and 4 thicker glossier outer pages) and average print run (20,000 per week). It also includes a requirement that approx 65% of the editorial content will be from the Licensor and 35% will be locally generated.[13]When the licence was renewed in 2010 an Addendum was signed. The terms remain the same save for a very few variations in the Addendum. The territory is expanded to include Lebanon. Under Exhibit E the page count is reduced to 76+4 (except that in summer 64+4 will be acceptable if advertising reduces significantly in that period). Second, the print run is reduced to 13,000 copies per week with every effort to be made to increase it.[14]The Addendum also mentioned an Option Agreement but nothing turned on that before me.

Recent events and the parties’ submissions

[15]Hello Ltd’s position is that the licence expired in March 2015 and was not renewed. The non-renewal was confirmed in an email dated 22nd January 2015. Hello Ltd has entered into a licence with a rival Middle East publisher (APP) for them to publish a Middle East Edition of Hello!. The state of affairs today is that the Middle East edition is being published by APP. Motivate has stopped publishing Hello!. The defendant’s case is necessarily that Motivate has no right to publish the magazine and that it would be unlawful of Motivate to do so.[16]Motivate contends that agreement was reached to renew the licence for a further five years. This arose as a result of emails exchanged in 2014 between Mr Ian Fairservice for Motivate and Mr Aitor Santiago for Hello Ltd. The important ones are a message from Mr Santiago on 10th November and a reply from Mr Fairservice on 13th November.[17]This action is brought for specific performance of that renewed contract and cancellation of the licence granted to APP.[18]Motivate also contends that in any event, by the emails in November and generally, Hello Ltd led Motivate to believe that the licence was going to be renewed for a further five years at least in the UAE, Motivate acted to its detriment in reliance on that representation and it would be unconscionable for Hello Ltd now to be permitted to resile from it. Thus Motivate contends that Hello Ltd is estopped by the law of proprietary estoppel from denying the existence of a renewed licence. The remedy sought is an order requiring the defendant to enter into a renewed licence and cancellation of the APP licence. Alternatively Motivate seeks damages for breach of contract and equitable compensation for the wasted expenditure and other damage to satisfy the estoppel.

Proceedings

[19]Proceedings were issued on 6th March 2015 and directions were given for an expedited trial. Any question of damages did not have to be expedited and will be dealt with separately if necessary.[20]When proceedings were issued, only the first claimant was named. The existence of the second claimant and the nature of the distinction between the two entities only emerged during the trial. After the evidence had closed counsel produced a draft amended Particulars of Claim naming the second claimant and setting out the relationship between the two entities. I permitted the amendment to be made but only on the basis that no further evidence could be called. The claimants contend that the precise relationship is that the second claimant partnership published the magazine on behalf of the first claimant. The first claimant is the licensee of the defendant. The second claimant acts on the first claimant’s behalf pursuant to an authorisation and in return for a licence fee. It is the second claimant which actually publishes the magazines and which (for example) incurred most of the expenses relied on as detrimental reliance.[21]There is no suggestion that the defendant was aware of the separate existence of these two entities. I find that the defendant was entirely unaware of any of this. As far as it was concerned the counterparty to the contract was the entity which published the magazine. Whether the arrangement in the UAE was in breach of the terms of the licence is a question I will return to.

The witnesses

[22]I heard evidence from three witnesses, Mr Fairservice for the claimant and Mr Santiago and Mr Anthony Luke for the defendant.[23]Mr Fairservice is the managing partner of the first claimant. He explained the background and history of the relationship between Motivate and the Hello/Hola group. He approached the group with a proposal to launch Hello! Middle East and once the February 2005 licence agreement was signed, the first edition was launched in April of that year. He addressed the renewal of that licence in 2010. The 2005 licence was due to expire on 31st March 2010. There was a relaxed email exchange which started in February and continued after that date. Issues were discussed in the messages. The Addendum to the licence was ultimately signed off by Motivate in July 2010 and was not signed by the defendant until December of that year. In the meantime publication of the magazine continued.[24]Mr Fairservice addressed events in 2014 and early 2015. He explained essentially that he saw those events as the same as what happened in 2010. There was an exchange of emails in November. He took this and later emails as confirmation that the renewal was going ahead. There were issues discussed in the emails but that did not indicate that there was no agreement. There was no pressure to formalise the renewal at that stage, just as in 2010. Based on Motivate’s understanding of the position contracts were entered into for the forthcoming year such as advertising and printing contracts and bookings for point of sale slots in retailers. The email of 22nd January 2015 in which Javier Junco of Hola informed Mr Fairservice that the licence would not be renewed was a shock and surprise.[25]Although, as I shall address below, the employees of the Hello/Hola group were prepared to say one thing while thinking another, nevertheless having heard Mr Fairservice’s testimony I was left with the clear impression that the picture he painted of the relationship between Motivate and the defendant was not entirely realistic. In fact both sides knew there had been long standing friction. The defendant was not happy with the performance of Motivate; particular topics were the page count of the magazine and the proportion of local content. Motivate was not happy either. Its concern was with the UK edition of Hello! magazine being available in airports in the Middle East. Mr Fairservice acknowledged the existence of these issues in his evidence but downplayed them. I have no doubt the defendant could have made its concerns much more explicit, and there are striking strongly worded draft emails which were written in early 2014 but which the defendant never sent. However, overall I find that Mr Fairservice knew that there was tension in the relationship with his licensor. I have no doubt about the authenticity of his shock when he received the message on 22nd January 2015 that the licence would not be renewed but his attempt to reduce the significance of the tension between the two sides in his evidence was not convincing.[26]The next witness was Mr Santiago. Although it is not his first language Mr Santiago is a fluent English speaker. He works in the International Business Department of Hola SL. Mr Santiago joined the company in September 2010. He was not involved in the 2010 renewal of the Motivate licence.[27]Mr Santiago explained that the Hello/Hola group were not happy with Motivate’s performance, referring to the page count and content and also to other points. The group were concerned about difficulties in training the Motivate editorial staff and high staff turnover. He explained that they rarely received information about what was going to be published before publication, despite a right to receive that information in that way in the licence agreement.[28]Mr Santiago addressed the exchange of emails in November 2014. Mr Santiago’s view was that Mr Fairservice had not accepted the points Mr Santiago had made in his November email. Mr Santiago said that he never considered that the agreement had been renewed or that he had made promises to renew the contract or that they were on a path leading to agreeing terms of potential renewal. Mr Santiago said that he had kept Mr Junco informed of the correspondence and had expressed to him his (Mr Santiago’s) opinion that the contract should not be renewed.[29]In my judgment, at no time in 2014 did Mr Santiago ever want to renew the licence with Motivate. Mr Santiago was unclear in his evidence when pressed about decision making in the group but I think the position was clear enough. The decision was not his to make, it was a decision for either Mr Junco or for the Chief Executive Officer, Mr Sanchez. The views of Mr Santiago and others would be taken into account but the decision was not theirs.[30]I think Mr Santiago was actually rather pleased when he received the 13th November email from Mr Fairservice because he saw it as a rebuff. I do not think Mr Santiago gave any thought to the impression his later communications might have given to Motivate about the intentions of the Hello/Hola group.[31]The last witness was Anthony Luke. He is employed in Spain by Hola SL. He joined the company 20 years ago, at first writing for Hello! UK in the Madrid offices. His role today is as the Operations Manager for licensed editions of the magazine around the world. Mr Luke explained that in his opinion Hello! Middle East had been ably managed by the first two Editors in Chief, Scott Birch and Anita Quade, but following the departure of Ms Quade in 2012 after seven years at Motivate, the communication between Madrid and Dubai became erratic and the quality of the Middle East edition fell. After Ms Quade left the magazine had a series of four editors. Although the licence gave the licensor the right of veto over new editors, these were presented by Motivate as a fait accompli. Mr Luke said that Motivate’s attitude presented a general lack of understanding, or willingness to understand, the values of the brand as well as a general lack of enthusiasm.[32]A key event from Mr Luke’s point of view was the departure from Motivate of Ms Selina Julien as Editor-in-Chief in December 2014. Motivate explained she would be replaced by the promotion of Annah Cuthbert, who had worked on the magazine for some years already. Ms Julien had been the fourth editor since Ms Quade left but although she had not been screened by the International Department, she had impressed the team in Madrid and they liked her. Mr Luke said her departure was a severe disappointment and this is supported by internal emails.[33]The email Mr Luke sent to Gina Johnson at Motivate on 11th January 2015 is different in tone. It does express surprise at Ms Julien’s departure but looks forward to Ms Cuthbert’s tenure saying “I am sure Annah will do a great job and the magazine will prosper under her guidance. […] Let’s organize a phoner or even better Skype so we can talk about the coming year.” Understandably Motivate relies on this in support of its case that the defendant was conducting itself on the basis that the licence would be renewed.[34]In fact Mr Fairservice explained that Ms Julien had not been sacked but what happened was that, under local law, a new employee has a probationary period and Motivate had simply decided at the end of that period not to employ Ms Julien on a permanent basis. I accept Mr Fairservice’s evidence. It may mean that under the terms of the licence the defendant had no ground to object to Ms Julien’s departure but this point does not alter the appearance of things from Mr Luke’s point of view.[35]Another important dimension to Mr Luke’s evidence is that he was well aware of the publisher APP as a local competitor of Motivate’s. He had been in contact with them in 2013. He was not involved in the discussions which led to the awarding of the 2015 licence to APP but I find he was aware of them. Some of the negotiations appear to have taken place in 2014 although I find that the licence contract with APP itself was not entered into until sometime in January 2015.[36]Mr Luke’s explanation for the 11th January email was that at that stage he was not aware of any decision by the executive to renew with Motivate and that the objective of the email was to maintain a good relationship with the editorial team at Motivate. I am sure that explanation is true. It reflects part of Mr Luke’s approach. His evidence showed that while he and those with him in Spain were very unhappy, they would at the same time send upbeat messages to Motivate editorial staff in an attempt to cajole them into producing the kind of magazine Madrid wanted.

Agreement to renew?

[37]Motivate submitted that clause 16.1 of the Licence obliged the parties to negotiate in good faith in relation to renewal and that if renewal is agreed, to execute appropriate amendments. The point being made was that to be effective all that was required was an agreement in any form. The defendant did not dissent from this. The only question is whether a legally binding agreement was reached.[38]The law was not in dispute. In deciding whether the parties have reached agreement an objective test is normally applied (Chitty 2-002). Mr Harbottle cited the judgment of the Supreme Court given by Lord Clarke in RTS Flexible Systems v Molkerei Alois Müller [2010] 1 WLR 753 in which he said: “45. The general principles are not in doubt. Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a pre-condition to a concluded and legally binding agreement.” [Claimant’s emphasis].[39]Mr Harbottle also referred to paragraph 49 of the judgment in which Lord Clarke approved a summary of the relevant principles set out in the judgment of Lloyd LJ in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd's Rep 601 at 619: “(1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole … (2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary ‘subject to contract’ case. (3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed … (4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled … (5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty … It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge [at page 611] ‘the masters of their contractual fate’. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so called ‘heads of agreement’.” [Claimant’s emphasis]

[Claimant’s emphasis]

[40]Motivate’s case is that the agreement to renew was formed by an offer made by an email of 10th November 2014 sent by Mr Santiago followed by acceptance of that offer in an email dated 13th December 2014 sent by Mr Fairservice. Those two emails followed an earlier exchange between the two individuals in October. The emails are not too long and it is convenient to set them out in their entirety.[41]The October exchange is: 8th October 2014 Mr Santiago to Mr Fairservice:
“Dear Ian, I hope this e-mail finds you well. I am writing with regard to the renewal of our licence agreement for HELLO! MIDDLE EAST, which is due before March 31. To this purpose, we would like to hear your comments about the last period as well as your projections and strategies for the upcoming period. Kind regards Aitor Santiago”
Reply from Mr Fairservice to Mr Santiago:
“Dear Aitor, Many thanks, I’m travelling for the next few days and will respond after returning to Dubai and discussing our projections with my team. Regards Ian”
Mr Santiago to Mr Fairservice: Kind regards Aitor Santiago” Reply from Mr Fairservice to Mr Santiago: Regards Ian”

Regards

[42]The November emails are: 10th November 2014 Mr Santiago to Mr Fairservice:
“Hello Ian, We never received your reply to the e-mail I sent a month ago concerning the renewal of our license agreement. Since we are approaching the end of the year, there are a few items we would like to address. They will sound familiar, as we have been remarking on them for a while now, but we don’t feel that our concerns have been taken into consideration. • In our last renewal, we agreed to reduce the size of the magazine due to the severe economic downturn Dubai was suffering. Seeing that the economy grew by 3.9% in 2011, 4.4% in 2012 and 4% in 2013, this reduction is no longer necessary or reasonable. The minimum size of the magazine should be 96+4 pages, effective immediately. • In line with the book size, the local production is extremely limited. According to our original licence agreement, 35% of the editorial content should be locally produced and relate to local celebrities (thus the lifestyle pages are not included in this calculation). We realize that the star system and social life of the UAE are not comparable to the UK, but there needs to be a local flair to the magazine that distinguishes it from the British edition. This too is effective immediately. • Under our original license agreement, we gave you the right to promote and distribute the magazine in a number of countries, including the GCC [Gulf Cooperation Council], Saudi Arabia and others. However, according to the revenue reports distribution outside the UAE is minimal (only 169 copies per issue in 2014). Therefore, we will only be renewing the licence agreement for the UAE. We look forward to your reply. Kind regards Aitor Santiago” 13th November 2014 Reply from Mr Fairservice to Mr Santiago: “Dear Aitor, Thank you for your recent email regarding the renewal of our license agreement for HELLO! MIDDLE EAST. In relation to your points raised below, please find our comments that should help to offer some insight in to our decision-making process in relation regional market conditions: • Book size – while the economy is in moderate recovery, we are not seeing an increase in print advertising revenues industry-wide. With particular reference to HELLO! Middle East, advertising revenue growth has been flat since 2012, while our cost base has increased, putting pressure on the profitability of the title. Your suggestion to increase the book size with immediate effect would place the magazine in losses and hamper the growth we expect to see in the coming years as the market recovers further. Within the competitive set of titles, similar issue sizes are running between 76 and 84 pages. • Local production – a vast majority of the content of the magazine is drawn from a local context. To give some perspective to this, 90% of the population of the UAE – our core market – is non-indigenous. Given the International demographic and the globalised audience perspective, our local coverage includes everything from regional royalty and VIP profiles through to Bollywood celebrities (in line with the large South Asian population of the UAE) and international stars who have an interest or current touch point in the region. Examples of this are the exclusive Lily Allen profile this week linked to her Dubai concert tomorrow, HH Prince Harry’s Sentebale Cup in Abu Dhabi next week and yesterday’s visit of the Princess of Serbia and Queen of Sweden as guests of Princess Haya for a local charity event. Our exclusive interview and photo shoot with Princess Katherine of Serbia, like all our originally generated content, has a strong local angle. As to the Lifestyle pages, they often carry profiles on rising stars of the region and this is a great way to cultivate the local socialite scene as well as being highly popular content for both our readers and advertisers. • Middle East license – while our core market is indeed the UAE – as is the case with all titles published in this market – it is vital for us to maintain our presence in the wider region as we draw advertising out of the territories such as Saudi Arabia, Kuwait, Bahrain and Qatar and we plan to further strengthen our presence and content from these regions including our relationships with such events as the Doha Film Festival and important VIPs such as the Jordanian Royal Family. • One other change of critical importance is the need to withdraw the UK edition from news points and Duty Free stores in airports within our region. These travel points are crucial to our point of sale presence and brand positioning and, given our competitors in the region have POS agreements for their regional editions, we must retain these to remain competitive in the market. We are comfortable with the majority of terms being based on the current agreement and look forward to your feedback as soon as possible. Regards Ian”
Mr Santiago to Mr Fairservice: Kind regards Aitor Santiago” Reply from Mr Fairservice to Mr Santiago: Regards Ian”

Regards

[43]On the face of it Mr Santiago’s email of 10th November proposes terms dealing with three issues. The first issue is book size. The defendant requires Motivate to agree to publish a magazine with more pages in it than hitherto. 96+4 pages is a higher count than the original licence (88+4) and more than stated in the 2010 Addendum (76+4 or 64+4). The second issue is content. The defendant requires Motivate to agree to publish a magazine with 35% local editorial content which, it is asserted, has not been happening. The third issue is territory. The defendant appears only to be offering to renew the licence for the single territory of the UAE.[44]At first sight Mr Fairservice’s reply seems not to accept any of the three terms on offer. On book size he argues that a size of between 76 and 84 pages is all that can be managed. On local content he justifies what has been in the Middle East edition up to now. On territory, he argues that it is vital to maintain a presence in the wider region. Also on the face of it Mr Fairservice seeks to impose a further term in the fourth bullet point, asking the defendant to withdraw the UK edition from sale in airports in the Middle East.[45]Nevertheless Motivate submitted that in fact this exchange represented a binding agreement for a number of reasons. First the words at the start and end of Mr Fairservice’s email are relevant. He refers to renewal of the licence agreement at the start and at the end states that Motivate are “comfortable” with the majority of terms of what must be the renewed form of the licence being based on the current agreement. Second Motivate submits that the points on book size and content have to be seen in the context of the existing licence in which although book size and share of local content are specified in Exhibit E (and modified in the Addendum), the licensor has the power to vary them and thereby to require the licensee to print a different book size and share of local content under clause 9.1. Thus, Motivate submits, these debates were not about terms to be agreed in a new contract at all because they arose under the already agreed terms which would remain in that form. Moreover they are covered by the words “effective immediately” which means they were advanced as a requirement under the existing licence, not the renewed licence. Third the renewal in 2010 was agreed informally in a similar exchange and only formalised months afterwards while all the time the publishing continued. The lack of a formally signed document is not an indication of a lack of effective renewal.[46]I am unable to accept Motivate’s case that these emails, even looked at in context of the existing terms and the renewal in 2010, amount to a binding agreement. I will assume in Motivate’s favour that the 10th November email was an offer capable of acceptance. For that offer to have been accepted would have required Motivate to agree to the 96+4 page count, agree that the lifestyle pages did not count towards 35% local content and agree to renewal in the UAE alone. That is simply not consistent with the actual reply on 13th November, for the following reasons.[47]First, the fact that the existing licence terms give the Licensor power to require changes to whatever page count and local content share are expressed in the agreement does not help. Accepting the offer in relation to page count would have produced an agreement in which that 96 + 4 page count was expressly set out in the equivalent of Exhibit E. That would be an agreement in different terms from either the 2005 licence or the 2010 Addendum. The same goes for the share of local content. With the new licence written that way, the licensor would not then have needed to exercise its power under 9.1 to compel the licensee to produce the magazine it wanted.[48]The words “effective immediately” do not support Motivate’s approach to the emails. The email is concerned with renewal of the licence. The most these words can mean is that not only are the terms about page count and content going to be required in the renewed form of the licence from the defendant’s point of view but that pursuant to clause 9.1 of the existing licence, the changes are being demanded immediately as well. The refusal to accept these terms in the 13th November reply is fatal to Motivate’s case.[49]Second, the reply simply does not accept the renewal for UAE alone. It describes Motivate’s ability to publish elsewhere in the territory as “vital”. Mr Fairservice was pressed in cross-examination about the tone and language used in his reply. He characterised some of it, such as the word “vital”, as hyperbole. Whether or nor that is the case, a reasonable person in the position of the defendant could only draw the conclusion that Motivate regarded renewal in more territory than the UAE as vital.[50]Mr Harbottle drew an analogy with the attempt to improve on terms already agreed in Maple Leaf Macro Volatility Master Fund v Rouvroy [2009] EWHC 257 (Comm) (at 230) which was held not to show that agreement had not been reached. I did not find the comparison relevant. No reasonable reader of the 13th November reply would understand this to mean what Motivate’s case would require – that in effect it was an acceptance of renewal for the UAE but an attempt to persuade the defendant to offer more territory.[51]Third the reply includes a clear counter proposal regarding the UK edition in airports. Part of the context for this is clause 3.2 which provides that Motivate cannot object to other English editions being distributed by third parties in the territory. The counter proposal is expressed as being of “critical importance”. No reasonable reader of that could think it was anything other than a clear statement that Motivate did not want to agree to renewal unless this was accepted.[52]Motivate refers to a later email on 21st December 2014 which it is argued shows that Mr Fairservice always regarded this problem as a non-contractual issue. The 21st December email does describe the problem in that way and the evidence also showed that Mr Fairservice knew that when it had been discussed in the past, Mr Junco had made clear he would try and persuade the distributor to limit distribution of UK Hello! in the Middle East as a gesture of goodwill rather than by contract. Neither the past context nor the later 21st December email alters the fact that the 13th November email itself makes no such concession. No reasonable reader could think that it did.[53]Fourth and finally, the language at the start and end of the reply clearly reflects Mr Fairservice’s belief that the licence was going to be renewed, but I do not accept that it is capable of undermining the impact of the bulk of the message. Taking the 13th November email as a whole, to a reasonable person reading it, Mr Fairservice is not accepting the 10th November offer.[54]So I reject the case based on contract.

Proprietary Estoppel

[55]The representation relied on is the statement in Mr Santiago’s email of 10th November that “we will only be renewing the licence agreement for the UAE”.[56]The classic description of the requirements for proprietary estoppel made by Oliver J in Taylors Fashions v Liverpool Victoria Trustees [1982] QB 133 refers to a certain interest in land. Mr Butler accepted that a proprietary estoppel was capable of covering property other than land but submitted that it was only capable of giving a party a cause of action if it related to land. If it did not relate to real property then such an estoppel could not create a cause of action for the claimant. It could only be used as a so-called “shield” and not as a “sword”. He referred to a passage from Spencer Bower (4th Ed paragraph XII.6.1) but the passage does not support the submission.[57]Mr Harbottle did not agree and submitted that in Cobbe v Yeoman’s Row [2008] UKHL 44 at paragraph 14, Lord Scott (with whom Lord Mance and Lord Brown agreed and with whose reasoning Lord Hoffmann agreed) held that the remedy was in principle available in relation to chattels and choses in action as well as land. He also cited Strover v Strover [2005] EWHC 860 (Ch) in which Hart J applied the law of proprietary estoppel to the benefit of an insurance policy, drawing my attention to the fact that the point had occurred to the judge after trial and also that the claimant’s counsel did not seek permission to amend his pleading.[58]Mr Harbottle also drew my attention to paragraph 3-155 of Chitty (31st Ed) which states that there is a conflict of judicial opinion about whether the doctrine extends beyond land to other kinds of property. The basis for this statement is said to be that Baird Textile Holdings v Marks & Spencer [2001] EWCA Civ 274 holds that the doctrine is limited to land while Strover v Strover is to the contrary. Mr Harbottle submitted that the editors of Chitty were wrong about Baird Textile in that it did not decide that proprietary estoppel was not available for property rights other than land.[59]I accept Mr Harbottle’s submission about Chitty. The Court of Appeal in Baird Textile were careful not to hold that proprietary estoppel was confined to rights relating to land. The case was about long standing contracts between a retailer and a wholesale supplier of goods. Each of the three judges (the Vice Chancellor Sir Andrew Morritt, Lords Justices Judge and Mance as they then were) held that proprietary estoppel was not available in that case but left open the possibility that the estoppel at least may be available in relation to other property (my emphasis) apart from land. The problem for the claimant was that its pleaded case was not based on property at all. The passages in which the three judges were clearly leaving open the possibility of an estoppel extending beyond land to other property are: VC paragraphs 34 and 35, Judge LJ paragraph 54 and Mance LJ paragraph 97. The language used about the extension to other property varies from “possibly” (Judge LJ) to “probably” (Mance LJ) but each judge is clear not to rule that out. In those passages each judge referred to Western Fish Products v Penwith DC [1981] 2 AER 204.[60]In this case the estoppel which Motivate seeks to enforce is one to prevent the defendant from denying the existence of a licence. The licence would be permission to publish the Middle East edition of Hello magazine. The reason it is a licence is because the defendant (or the Hello/Hola group) holds intellectual property rights which I can take it would otherwise be infringed if Motivate published a version of Hello magazine without permission. In English law those intellectual property rights consist of goodwill, know-how, copyright and perhaps design rights.[61]I can think of no reason in principle why a proprietary estoppel should not be available to the claimants in this case to prevent the defendant from denying the existence of a licence of this kind. It would be a right enforceable by the claimants against the defendant. The fact that the licence is a licence of intellectual property rights rather than an interest in land makes no difference. No case has been drawn to my attention in which a proprietary estoppel has been refused on that ground. I hold it is available to the claimants.

Representation

[62]Motivate contends that the 10th November email amounts to a representation by the defendant that the licence agreement for the UAE would be renewed (Particulars of Claim paragraph 11). The defendant contends that this cannot amount to a promise to renew the licence because it is bound up with the other terms of the offer in the email.[63]In my judgment the defendant is right. The statement in the 10th November email cannot be taken out of the context of the email as a whole. It was not a statement that, come what may, the licence would be renewed for the UAE. The licence would and could only be renewed if agreement to do so was reached. That element of the claimants’ case must fail.[64]Furthermore, as I have found, Mr Fairservice knew that there was friction in the relationship between his company and the licensor. He knew or ought to have known that the terms set out in the 10th November email were significant matters and his reply showed that there was still work to be done in coming to an agreement about them.[65]In paragraph 11 of the Particulars of Claim Motivate also alleges in the alternative that the representation was that the defendant intended that the licence should be renewed and/or created an expectation on the claimants’ part that the licence would be renewed. That is nearer the mark. Although Mr Santiago did not want to renew the licence with Motivate, his email did not reflect that, no doubt because it was not his decision to make. Also, although Mr Fairservice knew that the points raised by Mr Santiago were significant, equally Mr Santiago’s email does include a positive reference to renewing the licence albeit for the UAE only.[66]The existing licence did not create a binding obligation on the defendant to renew it. It was obliged to negotiate in good faith but that is all. Seen in that context, the 10th November message certainly encouraged Motivate to think that the defendant was interested in renewing the licence but the fact remains that detailed terms still needed to be agreed.[67]An additional aspect of Motivate’s case is the allegation that at all times the defendant conducted itself on the basis that the licence would be renewed (paragraph 14 Particulars of Claim). Motivate relies on two matters, first the defendant never stated in correspondence that the licence would or might not be renewed, and second the 11th January message from Mr Luke.[68]On the first point, it is correct that there was no suggestion prior to the November emails that the licence might not be renewed. From Motivate’s point of view the indications from the contacts, particularly at the editorial level, were that it was assumed the relationship would continue. However I do not place much weight on the events prior to the 8th October email since both sides knew that the existing term expired on 31st March 2015 and the matter was obviously going to have to be discussed sometime.[69]As far as events after the November emails are concerned, an exchange between Mr Fairservice and Mr Santiago in December is significant. Mr Fairservice wrote to Mr Santiago on 15th December and again raised the complaint about the other editions of Hello magazine appearing in airports in the region. In this message Mr Fairservice also makes the point that Motivate is in the midst of planning their 2015 marketing efforts and that agencies are confirming their advertising spends. Thus Mr Santiago knew that Motivate were at that time working on the basis that the licence was going to be renewed. I reject the suggestion made at trial that this sort of exchange could be explained by the fact that the licence would still run until 31st March 2015 even if not renewed. That is plainly not what Mr Fairservice was referring to. Mr Santiago’s reply on 19th December points out that the licence does not preclude distribution of the British edition of Hello in the Middle East. It does not contain any suggestion that the licence might not be renewed. It must have encouraged Mr Fairservice to think that the defendant was assuming the licence was going to be renewed. The 21st December email from Mr Fairservice I have mentioned above was his reply to Mr Santiago.[70]The second point is also significant. The 11th January email cannot sensibly be explained away on the basis that the licence was always going to run until 31st March. The “coming year” mentioned means much more than that.[71]The only other significant step was an email on 21st January 2015 from Mr Fairservice to Mr Junco, copied to Mr Santiago, asking to move to formalise the renewal of the licence in the Middle East region and referring to the discussions he had had with Mr Santiago. Mr Junco’s negative response came on 22nd January.[72]Looking at the matter as a whole and despite communications like the 11th January email from Mr Luke, I cannot accept any of the different ways in which the claimant puts its case on representation. The defendant’s conduct as a whole will have encouraged Motivate to think that the defendant was assuming the licence was going to be renewed but on no occasion did the defendant’s words, conduct or even silence amount to a representation that further negotiations were not required or that an agreement about terms was unnecessary. In the end what took place was that a negotiation about renewal started on 10th November (or perhaps 8th October). Events before that exchange, the terms of the exchange itself and what happened afterwards all encouraged Motivate to think that renewal was likely, at least for the UAE. The negotiations ended with Mr Junco’s negative email on 22nd January.[73]I reject the claimants’ case that a representation in sufficiently concrete terms to be capable of giving rise to an estoppel was made.

Reliance

[74]There is nothing odd or unreasonable about Motivate, at the end of 2014 and in early 2015, making plans for 2015 (i.e. post 31st March 2015). The evidence showed that that is how the publishing business works. If Motivate had been aware that there was any serious question mark over the renewal then the matter would have been raised with the licensor. However any business in that situation knows it is at risk unless the licence is actually renewed. It was no doubt a sensible business decision for Motivate to enter into contracts for the forthcoming year but until the renewal had actually been agreed, it was or should have been a decision based on weighing up the risks.[75]Mr Butler submitted that in fact Mr Fairservice had assumed from the beginning that renewal would take place irrespective of what Mr Santiago had written. This was because Mr Fairservice thought (wrongly) that licences of this kind operated on a rolling basis and were only not renewed in extreme circumstances and following exhaustive dispute resolution. Mr Fairservice did indeed have that view of licence agreements in general and this licence in particular. In my judgment it played a significant part in Mr Fairservice’s thinking. A major cause of Mr Fairservice’s actions in this case has been an assumption along these lines on his part. That assumption was not caused by the defendant.

Detriment

[76]The claimants relied on four matters as amounting to relevant detriment: i) A print contract entered into in December 2014 for the period up to January 2016 based on an annual volume calculated including Hello Middle East for the whole year. The loss if the licence ends on 31st March 2015 is estimated to be US$ 148,000. ii) Point of sale contracts entered into in December 2014 with local retailers. The loss is estimated to be US$ 233,242. iii) Licence fees paid to the government in the UAE for permission to publish the magazine for the year. One was on 19th November 2014 for US$ 1,400 and another on 27th December 2014 for US$ 6,850. iv) Forward advertising bookings beyond April 2015 worth US$ 46,595.[77]The substantial nature of these sums can be gauged, say the claimants, by the fact that they amount to more than the profit in 2014 from the Hello! Middle East edition itself.[78]What emerged at trial was that while point (iii) was paid by the first claimant, points (i), (ii) and (iv) were contracts entered into by the second claimant. The first claimant is the licensee and is the only entity the defendant thought it was dealing with. In fact it appears that it is the second claimant which actually publishes the magazine. That is why it is the second claimant which entered into the contracts. The claimants’ case is that the first claimant authorised the second claimant to manage the publishing of the magazine on its behalf in return for a licence fee paid by the second claimant to the first claimant.[79]Since I have rejected the claimants’ case above, I do not have to decide whether a detriment incurred by another entity unknown to the defendant is capable of supporting an estoppel. No case was cited on this by either party. In the claimants’ favour it can be said that the kinds of expenses relied on are the sort of thing the defendant would have assumed the party it had contracted with would incur. They are natural and foreseeable expenses of such a party and so the defendant is no worse off if in fact they were incurred by someone else. However on the defendant’s side it can be said that this arrangement is itself likely to be a breach of the existing licence agreement. I will not decide this point either but I cannot avoid expressing doubts that the attempt in the Particulars of Claim to characterise the relationship between the claimants as effectively an agency would avoid the prohibition against sub-licensing in clause 27. In a licence of this kind the licensor’s goodwill in the territory is in the hands of the licensee. A licensor would not willingly permit the party with whom it is contracting to hand over control of its goodwill to yet another entity with whom the licensor has no legal relationship.[80]At trial Mr Butler challenged the evidence relating to these expenses. The evidence supporting them was thin and if the trial had been required to assess the level of compensation or damages then I am not convinced it would have been sufficient. However having heard Mr Fairservice give evidence I am satisfied that it is more likely than not that expenses broadly on the scale proposed by the claimants were indeed incurred on the assumption that the licence would be renewed. As I have said already there is nothing surprising about a publisher entering into contracts like these, involving sums of that magnitude, at the time it did.

Unconscionability

[81]Since I have rejected the claimants’ case already, the question of whether it would be unconscionable to allow the defendant to deny the existence of a licence does not arise. Nevertheless in deference to the arguments I will address the issues briefly.[82]Mr Fairservice feels aggrieved by what has happened in this case and one can understand why. The contrast between the defendant’s internal emails and the messages it was sending Motivate is striking. I have mentioned the draft emails from early in 2014. They would have told Mr Fairservice that the defendant was very doubtful about renewing the contract but they were never sent. Another similar contrast exists between the email Mr Luke sent on 11th January and his own messages to his colleagues, which refer to Motivate “playing into our hands” and calls Motivate “sons of bitches”. I find that the defendant’s communication with Motivate in the period was entirely two faced.[83]All the time the defendant was in contact with Motivate in the relevant period, it must have been in contact with the competitor publisher APP, albeit perhaps intermittently. Mr Fairservice was never given an inkling that he was facing a competitor. I infer that the actual decision not to renew Motivate’s licence was precipitated by Mr Fairservice’s email of 21st January. Probably, in addition to the issues arising from the November emails, the departure of the editor Ms Julien also played a part in the decision (rightly or wrongly). Finally I also infer the decision was only made once the defendant was confident a licence with APP had been or would be entered into.[84]However even though the defendant’s conduct was two faced, the fact remains that Mr Fairservice also bears significant responsibility for the predicament Motivate is in. The 10th November email was not put to him on a false basis. If Mr Fairservice had replied constructively then everything would have been different. At that time the defendant had not closed its mind to renewal although many of the staff in Madrid were not in favour. The defendant might well have renewed the licence for a further five year period, at least for the UAE. But that is not what happened.

Conclusion

[85]The claimants’ case will be dismissed.

Cited in 3 later judgments