CPL Ltd v CPL Opco (Trinidad) Ltd [2016] EWHC 1452 (Ch)

Case No HC-2015-001153[2016] EWHC 1452 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 17/6/2016
Before
MASTER CLARK
Between
CPL LIMITEDClaimantCPL OPCO (TRINIDAD) LIMITEDDefendant
Andrew George QC (instructed by Muckle LLP) for ClaimantTom Richards (instructed by Signature Litigation LLP) for Defendant and Pettigo Comercio Internacional LDAHearing Hearing date: 27 May 2016
JudgmentMaster Clark:Application
[1]This is the claimant’s application dated 24 March 2016 to add an additional defendant to the claim and to re-amend the Particulars of Claim to make a claim against it.[2]The trial of the claim (estimated to last 7 days) is listed in a window from 27 June 2016 to 11 July 2016. It is common ground that if permission to amend is granted, the trial will have to be vacated and re-listed.

Parties and the claim

[3]The claimant is a company incorporated in St Lucia and the originator of the Caribbean Premier League, an annual twenty20 cricket league staged in the West Indies (“the League”). The defendant is a company incorporated in Trinidad and Tobago, which was set up for the specific purpose of “operating” a cricket team representing Trinidad and Tobago (“the team”).[4]The proposed second defendant to the claim is a company incorporated in Madeira, and is the indirect parent company of the defendant. It is now called Pettigo Comercio Internacional LDA, but at the material times it was called Hastings Trading e Servicios LDA. I follow the parties in referring to it as “Hastings”.[5]On 20 July 2013, 2 days before the claimant and the defendant entered into the agreement which is the subject of the claim, the claimant and Hastings entered into a share purchase agreement (“the SPA”) under which the claimant sold to Hastings the shares in CPL Holdco (Trinidad & Tobago) Ltd, which is itself a 100% shareholder of the defendant.[6]The claim (before the proposed amendment) is based on an agreement dated 22 July 2013 between the claimant and the defendant described as a Participation Agreement (“the Agreement”). Under the Agreement(1) the defendant became the “operator” of the team;(2) the claimant was responsible for the costs of operating the League;(3) the defendant was responsible for the costs of operating the team.[7]It is relevant to note that the Agreement also provided, at clause 10.2(d) that the claimant was entitled to require: “a guarantor of sufficient financial standing … to guarantee [the defendant’s] obligations (or, where applicable, the obligations of Purchaser) on such terms as may be required by [the claimant], if and to the extent [the claimant] believes that such a guarantor is necessary” and, at clause 22 provided: “22. Guarantee If [the claimant] reasonably believes that at any time a parent company (or companies) is (or are) required to guarantee the obligations of [the defendant] under this Agreement then as soon as practicable and in any event within ten days following a request from [the claimant] [the defendant] shall ensure that a company or companies of financial standing which is (or are) acceptable to [the claimant] (each a “Guarantor”) duly and properly executes as a deed of guarantee … “[8]The claimant’s case is that the defendant failed to comply with its obligations under the Agreement, and accordingly is liable under it in debt or damages. The sum claimed is about £700,000.[9]By its Amended Defence (dated 24 June 2015) the defendant acknowledged that the relevant expenses were in principle recoverable, but disputes the amount, and alleges that the claim has been settled.

Procedural chronology

[10]The claim was commenced on 12 March 2014. On 23 April 2015 I made an order giving directions to trial. The defendant failed to comply with its obligation to give disclosure by 16 July 2015, and on 14 December 2015 I made an unless order requiring it to do so, and to pay costs of £4,000. These costs have not been paid.[11]The directions also provided for a single joint expert to be jointly funded by the parties. The defendant has failed to provide the joint funding ordered; and in the light of that failure the claimant is willing to proceed without expert evidence, though it seeks a direction to serve and file supplemental factual evidence. The defendant’s evidence is that although its own costs are being paid by Lycatel Services Limited (“Lycatel”) which it describes as an “affiliated company”, it does not have the funds to pay the costs order or fund the joint expert.[12]The claimant’s position is that the event occasioning this application was the receipt by the claimant of an email dated 9 March 2016 from Mohammed Malique on behalf of the defendant stating that the defendant “lacks the ability to settle any judgment should it’s (sic) Defence fail.” I note however that that email was in response to a letter dated 7 March 2016 from the claimant’s solicitors (not itself in the bundle). From Mr Malique’s reply it seems that that letter sought the defendant’s consent to the joinder of Hastings, and asked Mr Malique if Lycatel was instructed to accept service of proceedings on behalf of Hastings. The evidence indicates therefore that it was some other event (the nature of which is unclear) which prompted the claimant to seek to join Hastings to the claim.[13]The application notice was issued just over 2 weeks later. Hastings refused to accept service in the UK, so that the claimant was obliged to serve it in Madeira. This meant that Hastings was not served until 10 May 2016, and after allowing time for its evidence, the application not listed until 27 May 2016. Even so, Hastings’ evidence in opposition was not served until 24 May 2016, leaving the claimant only 2 days to serve its evidence in reply. While Hastings appeared on the application it did so expressly without prejudice to its right to challenge the jurisdiction of the Court if joined to the claim.

Proposed amendments

[14]The proposed amendments are in paragraphs 25 to 31 of the draft Re-Amended Particulars of Claim (“AmPoC”). They allege a collateral agreement, made orally or by conduct, between the claimant and Hastings under which Hastings “warranted that it would share primary liability for all and any debt incurred by the defendant pursuant to the Agreement” (AmPoC, para 25).[15]The primary basis on which the collateral agreement is alleged is that Mr Malique, with Hastings’ authority, made an oral promise to Mr Kieran Foley of the Claimant that “[Hastings] would be responsible for all payments due and owing under the Agreement” (“the oral promise”).[16]It is then alleged that in reliance on the oral promise and in consideration for it, the claimant entered into the Agreement.[17]The claim is then put on two alternative bases. Firstly, it is said that the claimant’s decision not to exercise its rights under clauses 10.2(d) and 22 was, as Hastings knew and intended, influenced by and therefore taken in consideration for the oral promise. Secondly, it is said that the collateral agreement was formed, alternatively is evidenced by, Hastings’ conduct in asking the claimant to send to it invoices in respect of the defendant and paying those invoices.[18]The application is supported by a witness statement dated 24 March 2016 of the claimant’s solicitor, Susan Howe, which sets out her instructions from Mr Foley, who signed the Agreement on the claimant’s behalf. At paragraph 14 she states:
“Mr Malique assured Mr Foley on the day of the signing of the Agreement on 22 July 2013 (and before the Agreement was signed) that Hastings as the owner of the Lycamobile brand, would be responsible for all payments due and owing under the Agreement. … the Claimant would never have agreed to enter into the Agreement with the Defendant had it not been for Mr Malique’s assurance.”
[19]Mr Malique responded to Ms Howe’s evidence in his witness statement dated 24 May 2016, in which he denies having made the assurances alleged by the claimant, denies having had the authority to do so and asserts that Mr Foley would have known that he lacked such authority.[20]Mr Foley himself then provided a witness statement dated 26 May 2016, in which he says:
“Mr Malique gave me clear assurances that, although [the claimant] was entering into the Agreement with [the defendant], Hastings was the parent company of Lycamobile UK Limited (Lycamobile) and that Hastings sat behind both Lycamobile and [the defendant] and would be responsible for all sums due under the Trinidad and Tobago Franchise and the [operating expenses] incurred by [the defendant]. … [The claimant] was concerned about payment and where this would come from given that it was entering into the SPA with Hastings which was not previously known to [the claimant] and into the Agreement with [the defendant] which was a shell company. These assurances from Mr Malique that Hastings was essentially Lycamobile and the fact that Lycamobile was a global, well-known organisation satisfied our concerns. [The claimant] would never have agreed to enter into the Agreement with [the defendant], knowing it was a shell company, had it not been for these assurances.”
Legal principles Joinder

Legal principles

[21]CPR 19.2(2) provides:
“The court may order a person to be added as a new party if – (a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or (b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.”
[22]Hastings’ counsel submitted that the test for whether permission for joinder of a party should be given was “good arguable case”, relying upon Allergan Inc v Sauflon Pharmaceuticals Ltd (Ch. Div., 2 February 2000), [4]. However, he also referred me to PeCe Beheer BV v Alevere Ltd [2016] EWHC 434 (IPEC), [35]-[39] per HHJ Hacon as indicating that may be some flexibility in the threshold of requisite arguability, with a minimum requirement that the proposed claim would survive a strike-out or summary judgment application.[23]In my judgment the correct test to be applied to joinder applications is that applicable to amendment generally, namely that a joinder will not be permitted if it would not survive an application for strike out or summary judgment – because to do otherwise would be a pointless waste of the court’s and the parties’ resources. Where the proposed party to be joined is a foreign party, this reflects the standard for the test on the merits in an application for service out of the jurisdiction.

Late amendments

[24]The principles applicable to late amendments have recently been considered in the light of a review of the Court of Appeal authorities in Quah Su-Ling v Goldman Sachs International [2015] EWHC 759 (Comm), where Carr J said at [38]:
“(a) Whether to allow an amendment is a matter for the discretion of the court. In exercising that discretion, the overriding objective is of the greatest importance. Applications always involve the court striking a balance between injustice to the applicant if the amendment is refused, and injustice to the opposing party and other litigants in general, if the amendment is permitted; (b) Where a very late application to amend is made the correct approach is not that the amendments ought, in general, to be allowed so that the real dispute between the parties can be adjudicated upon. Rather, a heavy burden lies on a party seeking a very late amendment to show the strength of the new case and why justice to him, his opponent and other court users requires him to be able to pursue it. The risk to a trial date may mean that the lateness of the application to amend will of itself cause the balance to be loaded heavily against the grant of permission; (c) A very late amendment is one made when the trial date has been fixed and where permitting the amendments would cause the trial date to be lost. Parties and the court have a legitimate expectation that trial fixtures will be kept; (d) Lateness is not an absolute, but a relative concept. It depends on a review of the nature of the proposed amendment, the quality of the explanation for its timing, and a fair appreciation of the consequences in terms of work wasted and consequential work to be done; (e) Gone are the days when it was sufficient for the amending party to argue that no prejudice had been suffered, save as to costs. In the modern era it is more readily recognised that the payment of costs may not be adequate compensation; (f) It is incumbent on a party seeking the indulgence of the court to be allowed to raise a late claim to provide a good explanation for the delay; (g) A much stricter view is taken nowadays of non-compliance with the CPR and directions of the Court. The achievement of justice means something different now. Parties can no longer expect indulgence if they fail to comply with their procedural obligations because those obligations not only serve the purpose of ensuring that they conduct the litigation proportionately in order to ensure their own costs are kept within proportionate bounds but also the wider public interest of ensuring that other litigants can obtain justice efficiently and proportionately, and that the courts enable them to do so.”
[25]I respectfully adopt these principles, and approach this application on that basis.

Whether the application should be allowed

[26]It is convenient to consider the application by reference to the grounds of opposition to it put forward by Hastings’ counsel, which can be summarised under the following headings:(1) Weakness of case;(2) Lateness;(3) Balance of prejudice.

Weakness of case

[27]Hastings’ counsel submitted that the proposed claim against it was hopeless, alternatively, even if strong enough to survive summary judgment, insufficiently strong to justify losing the trial date.

Paragraphs 25 to 27 of the AmPoC

[28]So far as the oral promise was concerned, Hastings’ counsel submitted that the claimant had no real prospect of establishing that it was made.[29]Firstly, he referred me to the SPA as evidencing that at the date the oral promise is alleged to have been made, the claimant and Hastings had already entered into contractual relations formalised in a written document. He drew to my attention various provisions of the SPA(1) para 5.7, which provided that Hastings would procure that the defendant signed the Agreement;(2) para 11 – an entire agreement clause;(3) para 12 – which excludes oral variations or waivers; and to the fact that the SPA is formally signed by a director of Hastings.[30]He also relied on the Agreement itself, and the claimant’s express confirmation in clause 12 that it was not relying on any representations in entering into the agreement. In addition he submitted that clause 22 formally provided a mechanism by which the claimant was able to obtain a guarantee from Hastings, but the claimant failed to request one.[31]He submitted that both these documents showed that the parties had chosen to govern their relationship with formal written documents and rendered it wholly implausible that they would have supplemented these documents with an informal oral agreement, particularly when the claimant had a direct contractual relationship with Hastings (in the SPA) as well as an express right to call for a guarantee under the Agreement.[32]I agree that the existence of formal written agreements between the parties makes it less likely that they would also have reached an oral agreement in relation to matters connected to or arising out of the written agreements. But whether they in fact did so is a fact sensitive inquiry which is unsuitable for summary judgment; and the existence of the written agreements, whilst weakening the claimant’s case, does not in my judgment render it totally implausible, or insufficiently strong to justify loss of the trial date.[33]Secondly, Hastings’ counsel submitted that Mr Foley’s evidence as to the oral promise materially differs from the claimant’s pleaded case (at para 26 of the AmPoC) and Ms Howe’s evidence. The precise words used in the AmPoC, Ms Howe’s witness statement and Mr Foley’s witness statement do differ, but I do not consider that the differences are material. They all set out a promise/assurance that Hastings would be responsible for the defendant’s payment obligations under the Agreement.[34]Hastings’ counsel referred me to CPR 16PD 7.4, which provides:
“Where a claim is based upon an oral agreement, the particulars of claim should set out the contractual words used and state by whom, to whom, when and where they were spoken.”
[35]He accepted (correctly in my view) that either the actual words used or the gist of what was said was sufficient for pleading purposes. However, he argued that Mr Foley did neither, relying on his using the expression “assurances” as not purporting to set what Mr Malique said or the gist of it as accurately as he can. However, I disagree. It seems to me that the word is capable of being used to report indirect speech, and I would not decide this application on the basis of this verbal nuance.[36]Finally, Hastings’ counsel submitted that there was no evidence that Mr Malique had actual authority to act on Hastings’ behalf; and that Mr Foley’s evidence that he was acting on behalf of Hastings was his mere subjective belief. In my judgment the issue of whether Mr Malique had authority to act on Hastings’ behalf will require disclosure and cross examination, and is not suitable for summary determination.[37]In principle, therefore, I consider that paras 25 to 27 of the AmPoC have a real prospect of success and would not be struck out, subject to two qualifications. First, paragraph 26 is insufficiently particularised and particulars of what Mr Malique is alleged to have said to Mr Foley must be provided. Secondly, the basis on which the claimant entering into the Agreement provided the consideration for the oral promise is not set out. The claimant’s counsel submitted that it was to be implied into Mr Malique’s promise that it was in return for the claimant entering into the Agreement; but if that is the claimant’s case it must be pleaded and the basis on which it is to be implied also pleaded.

Paragraph 28

[38]This paragraph pleads that the claimant’s decision not to exercise its rights under clauses 10.2(d) and 22 of the Agreement were “as [Hastings] would have well known and intended, influenced by, and therefore taken in consideration for, [the oral promise].”[39]This paragraph also depends on the claimant establishing the oral promise, and for the reasons given above has a real prospect of success.

Paragraph 29

[40]This alleges that the collateral agreement was “formed, alternatively evidenced, by [Hastings]’s conduct in requesting the claimant to send to it invoices in respect of the [defendant] and then paying those invoices.”[41]It is common ground that the claimant sent invoices to Hastings for sums due to it from the defendant under the Agreement and that Hastings paid those invoices. An example (dated 1 August 2013) is for:
“2013 [claimant] operating expenses incurred on behalf of [defendant]”
[42]There is no reference in this or the other invoices relied upon to a primary liability on the part of Hastings. In my judgment, the invoices, whilst not inconsistent with the claim made in paragraph 29, do not support it either. They are equally consistent with Hastings, as the defendant’s parent company, discharging the defendant’s liabilities without being under any contractual obligation to do so. I therefore regard the allegation that the collateral contract (or presumably another collateral contract) was formed by these payments as hopeless. The allegation that the collateral contract is evidenced by these payments is sustainable, if it is alleged that the payments were made pursuant to the collateral agreement.

Lateness

[43]Hastings’ counsel submitted that the joinder application was made far too late, in circumstances where, as Mr Foley says, the claimant knew from the outset that the defendant was a shell company of no substance. The claimant’s delay was, he said, inexcusable.[44]As for the claimant’s explanation as to its lateness, its position was, as set out above, that its decision to seek to join Hastings was triggered by Mr Malique’s email of 9 March 2016. Ms Howe explains it in the following terms:
“The collateral contract between Hastings and the Claimant has not been of relevance in the proceedings to date because it has always been understood that the defendant would meet any judgment made against it (by virtue of the financial backing provided by its parent company or otherwise).”
[45]As noted above, Ms Howe’s evidence is not supported by the correspondence, which indicates that the decision to seek joinder was made before receiving Mr Malique’s email. Since the claimant’s case is that Hastings accepted primary liability for the defendant’s debts and it was aware from the outset that the defendant was a shell company, then there seems to be no good reason why it did not sue Hastings from the outset.[46]In any event, the claimant is properly to be criticised for not at the very least seeking at the outset formal written confirmation of the position as it understood it from Hastings, and, if this was not provided, promptly bringing its claim against Hastings. Having said that, once the claimant made its application, Hastings’ obstructiveness has significantly delayed the hearing of the application to this very late stage.[47]In addition, lateness, is, as Carr J, observed, a relative concept. Since the trial date is fixed at the case management conference, which is often 6 months to a year away, an application that results in vacation of a trial date may be made some months before the trial, increasing the likelihood that judicial resources can be redeployed. In this case, the application was made 3 months before the trial date, unlike Su Ling, where it was made a mere 3 weeks before. Furthermore, given the very limited issues which the proposed amendments add, if Hastings had accepted the principle of joinder at the outset, and the parties had co-operated in an expedited procedural timetable, then the trial date might not have been lost.[48]When considering lateness, I also consider that I should take into account the defendant’s conduct in the litigation set out at paragraphs 10 and 11 above. The defendant failed to engage with the proceedings, and delayed by over 6 months in providing disclosure, which it only provided once an unless order had been made. Hastings’ submission that its earlier non-compliance has been cured is not an answer to this point.

Balance of prejudice

[49]Hastings’ counsel submitted that the vacating of the trial would cause prejudice to the defendant, who wishes and has a legitimate expectation that the case should come to trial, and to other court users. Refusing joinder would not, he said, leave the claimant without redress against Hastings, as the claimant could bring separate proceedings against it in Portugal.[50]The claimant’s counsel referred me to para 38(b) of Su-Ling. This was, he submitted, an unusual case where there was no real prejudice to the defendant. The defendant has not spent anything on the litigation, as its legal costs are being paid by Lycatel; and since the defendant has no assets, there is no prospect of it repaying Lycatel. If joinder is refused, the claim will go to trial and will be defended by the defendant, whose costs will continue to be met by Lycatel. If, however, the claimant succeeds, as Hastings’ counsel frankly accepted, Lycatel will not meet the judgment against the defendant or (subject to any non-party costs order) any costs awarded against it. The only prejudice to the defendant is the delay in having this claim resolved, when it has itself dragged its feet in progressing it.[51]In addition, the claim against Hastings, which the claimant contends can properly be brought in this jurisdiction, would require largely similar matters to those in issue in this claim to be relitigated. This, the claimant’s counsel submitted, will cause serious prejudice to it and to other court users. I agree that it is wasteful of the claimant’s and at the least potentially the court’s resources for the matters in issue in this claim to be litigated twice.[52]I also note that, unlike Su Ling where the proposed amended case involved the wholesale abandonment of the previously pleaded case, the joinder of Hastings will not require a recasting of the claimant’s case against the defendant.[53]In my judgment these are unusual features which are sufficient to shift the balance of prejudice in the claimant’s favour, notwithstanding the relative lateness of its application and the weakness of its explanation for not having applied earlier.

Conclusion

[54]For these reasons therefore, I will permit the joinder of Hastings as a defendant, and subject to my comments in paragraphs 37 and 42 above, permit the claimant to amend the particulars of claim in terms of paras 25 to 28 of the AmPoC.