CPL Ltd v CPL OPCO (Trinidad) Ltd & Anor [2017] EWHC 381 (Ch)

Case No HC-2015-001153[2017] EWHC 381 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 27/2/2017
Before
MASTER CLARK
Between
CPL LIMITEDClaimantCPL OPCO (TRINIDAD) LIMITEDDefendantsPETTIGO COMERCIO INTERNACIONAL LDADefendant
Daniel Cashman (instructed by Muckle LLP) for ClaimantTom Richards (instructed by Signature Litigation LLP) for DefendantsHearing Hearing date: 9 February 2017
JudgmentMaster Clark:Application
[1]This is the defendants’ application, made at the costs and case management conference, for an order that there be a trial of a preliminary issue.

Parties and the claim against the first defendant

[2]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 first 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”).[3]The second defendant is a company incorporated in Madeira, and is the indirect parent company of the first defendant.[4]The claim against the first defendant is based on an agreement dated 22 July 2013 between it and the claimant described as a participation agreement (“the Agreement”). Under the Agreement(1) the first defendant became the “operator” of the team;(2) the claimant was responsible for the costs of operating the League;(3) the first defendant was responsible for the costs of operating the team.[5]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 first 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 first defendant] under this Agreement, then as soon as practicable and in any event with ten days following a request from [the claimant] [the first 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 … “ If [the claimant] reasonably believes that at any time a parent company (or companies) is (or are) required to guarantee the obligations of [the first defendant] under this Agreement, then as soon as practicable and in any event with ten days following a request from [the claimant] [the first 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 … “[6]The claimant’s case is that the first defendant failed to comply with its obligations under the Agreement and accordingly is liable under it in debt under the Agreement (“the debt claim”) and in damages for breach of the Agreement (“the damages claim”). The total sum claimed is about £700,000.[7]By its Amended Defence (dated 24 June 2015) the first defendant acknowledged that the relevant expenses were in principle recoverable, but disputed that they had in fact become payable, alleged that on the proper construction of the Agreement they are not recoverable after its termination, disputed the amount claimed, and alleged that an agreement was reached to settle the claim (“the settlement agreement”).

Procedural background

[8]The claim was commenced on 10 March 2015 against the first defendant only. On 23 April 2015 I made an order giving directions to trial. In February or March 2016, the claimant was informed by Mohammed Malique, on behalf of the first defendant, that it was financially unable to meet any judgment against it. On 17 June 2016 I granted permission to add the second defendant to the claim, and to re-amend the Particulars of Claim; and vacated the existing trial date. By this stage disclosure had taken place between the original parties. This, I am told, consists of some 20 lever arch files, mainly comprising invoices and other documents evidencing the operating costs claimed by the claimant in the debt claim.

The claim against the second defendant

[9]The claim against the second defendant is set out in paragraphs 25 to 32 of the Re-Amended Particulars of Claim (“AmPoC”) dated 7 July 2016. They allege a collateral agreement (“the collateral contract”) made orally between the claimant and the second defendant under which the second defendant “expressly warranted that it would share primary liability for all and any debt incurred by the first defendant pursuant to the Agreement” (AmPoC, para 25).[10]The basis on which the collateral contract is alleged is that Mr Malique, with the second defendant’s authority, made an oral promise to Mr Kieran Foley of the claimant that “[the second defendant] would be responsible for all payments due and owing under the Agreement” (“the oral promise”).[11]It is then alleged that in reliance on the oral promise and in consideration for it, the claimant entered into the Agreement. Alternatively, it is said that the claimant’s decision not to exercise its rights under clauses 10.2(d) and 22 (set out above) was, as the second defendant knew and intended, influenced by and therefore taken in consideration for the oral promise.[12]The AmPoC also alleges that the collateral contract is evidenced by the second defendant’s conduct in asking the claimant to send to it invoices in respect of the first defendant and paying those invoices.[13]The second defendant is not alleged to be liable in the damages claim.

Preliminary issue(s)

[14]The preliminary issue (“D2’s issue”) sought to be tried by the defendants is:
“The issue raised by paragraphs 25 to 32 of the Re-Amended Particulars of Claim (namely whether the Second Defendant is required under an oral “Collateral Contract” as there alleged to meet any liability incurred under [the Agreement])”
[15]This is effectively broken down into 3 sub-issues, as set out in the defendants’ proposed directions[16]The claimant was not opposed in principle to a trial of preliminary issues, but its counsel submitted that the issues should be entirely determinative of the claim against the second defendant, whatever the outcome of the claim as a whole i.e. in addition to the issue of the second defendant’s liability, it should include the existence and extent of the debt claimed in the debt claim (“C’s issues”). However, his fall back position was that rather than order D2’s issue, the court should decline to order the trial of any preliminary issue.

Whether to order a preliminary issue – the test

[17]The Court of Appeal has warned on a number of occasions of the risks of delay and increased costs resulting from trial of preliminary issues, particularly in complex cases. In Rossetti Marketing Ltd & Anor v Diamond Sofa Company Ltd [2012] EWCA Civ 1021, [2013] Bus L.R. 543, Lord Neuberger described preliminary issues as offering a siren song to the parties. There have been other warnings as well, in the cases of SCA Packaging Ltd v Boyle [2009] UKHL37, [2009] ICR 1056 and Bond v Dunster [2011] EWCA Civ 455. It is clear from these authorities that I should take a cautious approach to deciding whether to order a trial of a preliminary issue.[18]There are several useful summaries of the factors which the Court should take into account in making its decision. These are found in:(1) Section 8 of the Technology and Construction Court Guide – 2016 White Book, Vol 2, paras 2C-43, pp532-534;(2) Steele v Steele [2001] CP Rep 106 – a decision of Neuberger J, in which he identified 10 factors which could be relevant;(3) McLoughlin v Jones [2001] EWCA Civ 1743, [2002] QB 1312, in which David Steel J set out the following principles: (i) Only issues which are decisive or potentially decisive should be identified; (ii) The questions should usually be questions of law; (iii) They should be decided on the basis of a schedule of agreed or assumed facts; (iv) They should be triable without significant delay making full allowance for the implications of a possible appeal; (v) Any order should be made by the court following a case management conference. I have considered this guidance and do not set it out.[19]In addition, I also have in mind the guidance of Briggs J in Lexi Holdings Plc v Pannone & Partners [2009] EWHC 3507 (Ch) at [4]:
“questions of case management, questions of cost, delay and the use of the parties’ and the court’s resources must come first and foremost in the consideration whether any particular issue should be dealt with as a preliminary issue.”

Defendants’ submissions

[20]The defendants’ counsel put forward the following points in favour of ordering a trial of D2’s issue.[21]First, he submitted that there was a real prospect of the trial being determinative of all or part of the proceedings: if the second defendant succeeded on the issue, that would dispose of the claimant’s claim against it. It is also likely, he submitted, that in practice such success would bring the claim against the first defendant to an end; as the claimant’s rationale for joining the second defendant was that the first defendant lacks the funds to satisfy any judgment in the claimant’s favour, there would be no commercial purpose in continuing the claim against the first defendant.[22]Secondly, he submitted that if the claimant succeeded in establishing the collateral contract, that would increase the prospects of settlement by the second defendant. This submission is supported by the fact that the second defendant’s Defence does not raise any positive defences to the debt claim.[23]Thirdly, he submitted that the trial of D2’s issue could save the parties and the court the time and costs of a trial of the full claim. The parties’ time estimate for the trial of the whole claim is 7 days. Their costs, set out in their agreed budgets, are £408,692 (claimant) and £369,829 (defendants). It is agreed that D2’s issue could be tried in 1-2 days. The second defendant would, he said, not be required to expend costs on considering the voluminous documentation relating to the debt claim, enabling D2’s issue to be determined quickly and at much lower cost.[24]Fourthly, he submitted that while the trial of D2’s issue would involve the determination of questions of fact, the factual and legal issues relating to the collateral contract are entirely discrete from the remainder of the claim, and there is no overlap in the relevant witnesses. Mr Foley is the claimant’s witness as to the specific occasion on which the collateral contract is alleged to have been entered into; and not, he said, a witness as to any other issue in the claim against the second defendant and the same is true of Mr Malique. This absence of overlap removed he said the risk of a significant increase in costs.[25]Fifthly, he submitted that, since D2’s issue involved the determination of facts, this was not a case in which there was the risk of factual assumptions on which a preliminary issue was ordered turning out to be false.[26]Sixthly, he submitted that there was no risk of the parties circumventing the outcome of the trial of D2’s issue by amendment.[27]Finally, he submitted that there would be no significant delay, as the main trial has not yet been relisted, and D2’s issue could be tried relatively soon.

Claimant’s submissions – C’s issues

[28]The claimant’s counsel’s primary submission was that C’s issues should be tried as preliminary issues. He submitted that there was an overlap between D2’s issue and the issues in the debt claim (discussed in more detail at para 32 below), and that they arose in the same factual matrix. He relied on the fact that the second defendant in its Defence has not raised any positive defences to the debt claim, but merely put the claimant to proof. Proving the quantum of the debt claim could, he said, be done relatively swiftly and C’s issues determined in 2 days. This would leave the damages claim, which is only against the first defendant, to be tried (if not settled), at a later stage. This, the claimant’s counsel submitted, would avoid the overlap of the oral evidence at both trials; and the debt claim could be dealt with quickly and efficiently by a judge who was already familiar with the subject matter.

Defendants’ submissions – C’s issues

[29]The defendants’ counsel argued that the debt claim was unsuitable for determination as a preliminary issue. He relied on the fact that the parties’ directions questionnaires provide for a total of 5 witnesses (3 on behalf of the claimant; 2 on behalf of the first defendant) and that the disclosure relating to the debt claim was the substantial majority of the 20 files of documents disclosed before the second defendant was added to the claim. He submitted that it was unrealistic to suggest that the time estimate would remain at 2 days if the debt claim were added.

Discussion and conclusions – C’s issues

[30]Since the second defendant’s liability to the claimant is contingent on the first defendant’s liability to the claimant, it is clear that for a trial to be wholly determinative of the second defendant’s liability, it would also need to be determinative of the debt claim. It follows that the first defendant would have to be a party in the determination of C’s issues, and its defences to the debt claim would have to be determined by the court.[31]In the light of this, I consider that a time estimate of 2 days for C’s issues is unrealistic. I also consider that the factual matrix in which the debt and damages claims arise overlap to a degree that makes a trial of C’s issues as preliminary issues unlikely to save time or costs, as well as giving rise to the risk of inconsistent findings in respect of the relevant witnesses. It is not in my judgment appropriate to order a trial of C’s issues as preliminary issues.

Claimant’s submissions – D2’s issue

[32]Turning therefore to D2’s issue, the claimant’s counsel submitted that the significant overlap between the factual matters in issue in D2’s issue and in the debt claim militates against trying D2’s issue as a preliminary issue. First, he said, Mr Foley was a witness of fact in the remainder of the claim, as he is able to give evidence in relation to the issue of whether there was a settlement agreement, as alleged by the first defendant. Secondly, he relied upon para 31 of the Re-Amended Particulars of Claim, in which the claimant relies upon the second defendant’s conduct in requesting invoices in respect of the first defendant to be sent to it, and paying those invoices. This allegation is made against the background that the first defendant denies that these sums were or are now payable. In order to decide these allegations in the claim against the second defendant, the judge would, he said, need to have an understanding of the underlying factual matrix giving rise to these invoices.

D2’s issue - discussion and conclusion

[33]It is clear that the determination of D2’s issue could be determinative of the claim against it, but I do not consider this to be a conclusive factor. Furthermore, whilst the court may order a trial of a preliminary issue of fact, the factual nature of the proposed issue is a factor against it being tried separately from the main claim.[34]However, the key considerations against ordering a trial of D2’s issue are, in my judgment, the degree of overlap between the factual matters which the judge would need to investigate to determine both D2’s issue and the remainder of the claim; and the fact that Mr Foley would have to give evidence at both trials. In determining D2’s issue the judge would need to consider not just the specific occasion on which the collateral contract is said to have been entered into, but also the parties’ subsequent conduct, which overlaps with factual issues relating to the debt claim. In addition, the evidence in relation to D2’s issue would need to include evidence as to the factual background leading up to and the commercial context of the meeting at which the alleged collateral contract is said to have been entered into. This will be necessary to decide the issues set out in para 15(2) and (3) above, as well as relevant to the judge’s assessment of the likelihood that the collateral contract was entered into. These factual matters will also be relevant in the debt claim, particularly as constituting the factual matrix in which the Agreement was made, and relevant therefore to the issue as to the construction of the Agreement raised by the first defendant.[35]I accept that some costs may be incurred in considering the documentation relating to the debt claim (though these costs do not dissuade the claimant from seeking a full trial). However, since the second defendant is not putting forward any positive case as to the claim against the first defendant, but leaving the claimant to prove it, the exercise is likely to be largely an arithmetical one. I agree with the claimant’s submission that, on its pleaded case, the second defendant is not entitled to raise positive defences in respect of the debt claim. It may be that the first defendant does seek (despite its impecuniosity) to maintain those defences at trial. However, the fact that both defendants have the same solicitors (who carry out work for each defendant) does not mean that the second defendant can rely, for the purposes of this application, upon the costs of these positive defences, which are properly attributable to the first defendant. I do not therefore consider that the trial of D2’s issue would save the second defendant sufficient time and costs for this to be a significant factor in favour of ordering the preliminary issue.[36]As for delay, the current trial window for a 2 day trial is 1 July 2017 to 30 November 2017; whilst the window for a 7 day trial is 1 November 2017 to 31 January 2018. The preliminary issue might therefore not be tried until shortly before the time when a full trial could be heard, if listed now; and, if an order listing the full trial were not made until November 2017, the trial window is likely to be in the autumn of 2018. I have considered whether this factor could be obviated by listing the remainder of the claim now, to enable it to be tried, if necessary, in the current window. However, to do so when the trial may not take place is, in my judgment, unfair to other litigants waiting for trial, and risks a waste of court resources. The effect of ordering the preliminary issue would therefore be to delay the full trial by at least a further 6 months and possibly longer. This is a further factor against ordering the preliminary issue, where this claim is fast approaching its second anniversary.[37]For these reasons, therefore, I will not order the trial of D2’s issue as a preliminary issue.

order

(1) Did Mr Malique assure Mr Foley by way of an oral promise at a meeting on 22 July 2013 that the second defendant would be responsible for all sums due under the Agreement by the first defendant?(2) Did Mr Malique have authority to bind the second defendant?(3) What was Mr Foley’s knowledge or belief as to Mr Malique’s authority to bind the second defendant?