Everton Football Club Company Ltd v Sail Group Ltd & Anor [2011] EWHC 126 (QB)

[2011] EWHC 126 (QB)Case No 7MA 91550
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Venue MANCHESTER DISTRICT REGISTRY
Civil Justice Centre
1 Bridge Street West
Venue Manchester 60 9DJDate 04/02/2011
Before
HIS HONOUR JUDGE PELLING QCSITTING AS A JUDGE OF THE HIGH COURT
Between
EVERTON FOOTBALL CLUB COMPANY LIMITEDClaimantSAIL GROUP LIMITEDDefendantsALEXANDER ROSS LIMITEDDefendant
Mr Jonathan Crystal (instructed by IPS Law) for ClaimantMr Thomas Plewman (instructed by DLA Piper UK LLP) for First DefendantMr Thomas Grant (instructed by Brabners Chaffe Street LLP) for Second DefendantHearing Hearing dates: 24 th-27 th January and 4 th February 2011
Judgment

HH Judge Pelling QC:

[1]The Claimant (“Everton”) is and was at all material times a limited company that carried on business as a football club competing in the Football Association Premier League (“FAPL”). The First Defendant (“Sail”) is and was at all material times a limited company formed in accordance with the laws of the Republic of South Africa whose business included the promotion of a football tournament to be played in South Africa in July 2007 known as the Vodacom Challenge (“Tournament”). The Tournament involved a series of football matches to be played between two South African based teams (the “Kaizer Chiefs” and the “Orlando Pirates”) and a club from either the FAPL or another league of similar standing in another European country. The Tournament was played between 21st and 28th July 2007, following another football event in South Africa called the Bloemfontein Festival which took place between 12th and 21st July 2007.[2]In order that the Tournament could take place it was necessary for Sail to secure the agreement of an English or European team of the requisite standing to compete in the Tournament. In order to secure such an agreement Sail appointed as its agent an English registered company called Player One Promotions Limited (“POPL”) which acted throughout by one of its directors Mr. Peter Russell (“Mr. Russell”). The Second Defendant (“AR”) is also an English registered company that describes itself in Paragraph 7 of its Defence [1/4/18] as being a “sports consultancy event management business”. Mr. Ben Hatton and Mr. Michael Blood are two of its directors. As well as being a director of AR, Mr Blood is and was at all material times also a partner in the well known Manchester based solicitors’ practice of Brabners Chaffe Street LLP (“Brabners”).[3]AR’s precise relationship with the other parties is in dispute between the parties. Everton maintain that AR was at all material times the agent of Sail. Both Sail and POL maintain that such was not the case. Sail maintain that if and to the extent that AR was an agent at all it was Everton’s agent. AR itself maintains that it was not at any time material to these proceedings an agent of anyone. It is common ground that AR acting by Mr. Hatton was approached by Mr. Russell because Mr. Hatton was known to have personal contacts with the senior executives of a number of Premier League clubs and Mr. Russell hoped that Mr. Hatton could affect an introduction to such a club that would be willing to participate in the Tournament. Both Mr. Russell and Mr. Blood maintained that AR was essentially trading on its own account from its contacts and was anxious to deliver a club willing to participate in the Tournament so as to secure a fee.[4]Everton’s case in these proceedings is that a contract was concluded between it and Sail in the course of a telephone conversation that took place on 15th May 2007 between Mr. Christopher Farnell (Everton’s solicitor who was at all material times a partner in another Manchester practice called IPS Law) and Mr. Blood. Both Defendants deny that this was so maintaining that throughout the mutual understanding of the parties was that an agreement would be concluded only if and when a formal agreement was signed by the authorised signatories of each party. It is common ground that no such agreement was ever signed or exchanged . Somewhat surprisingly given the nature of Everton’s case the only relief that is sought by it as against Sail is a declaration that an agreement was concluded between it and Sail as alleged by it. I say that this is surprising because Everton assert that under the agreement it would have been entitled to a fee of £785,000 and plead in Paragraph 18 of the Particulars of Claim as the damages it claims from AR both the fee and wasted costs alleged to have been £166,057.61 expended on another tour to the US. I return to this below.[5]The claim against AR is pleaded in a number of different ways. However both in his written opening and in his closing submissions Mr. Crystal advanced the claim exclusively as one of damages for breach of a warranty of authority given on behalf of AR by Mr. Blood. This led Mr. Grant to say in the course of his closing submissions that the alternative ways in which the claim against AR had been framed had been abandoned. That was not objected to at the time by Mr. Crystal but in the course of his reply submissions for the first time Mr. Crystal maintained these alternatives were still relied on. In my judgment that was an impermissible position for Mr. Crystal to adopt not least because technically it meant that Mr. Grant was deprived of the opportunity of responding to the alternatives in the course of his closing submissions.[6]Everton’s case concerning breach of a warranty of authority is based on an assertion pleaded in Paragraph 3 of the Particulars of Claim that a meeting took place on 8th May 2007 between Mr. Wyness (then the CEO of Everton) and Mr. Harrison (then as now a senior executive employed by Everton) and Mr. Blood. The fact the meeting took place is not in dispute. It is asserted by Everton that in the course of the meeting, Mr. Blood said that he was representing AR “… in its role as agent for [Sail] who wished the claimant to participate in the 2007 Tournament …”. On that basis it is asserted in Paragraph 14 of the Particulars of Claim that AR thereby “… warranted that it could conclude an agreement on behalf of the First Defendant …” and that if AR did not act on behalf of Sail “… in any capacity …” then AR acted in breach of its warranty of authority.[7]Everton claims as damages for this alleged breach(a) the fee payable under what it maintains was a concluded agreement with Sail(b) the sum of £166,057.61 being costs which it is alleged were incurred in an alternative tour of the USA and finally payment over to Everton of a fee of £125,000 paid to AR for procuring the participation of another Premier League club in the Tournament. Although the basis of this last mentioned claim was not pleaded or set out in the written openings, Mr. Crystal submitted that Everton could advance it by reference to the principles identified in AG v. Blake [2001] 1 AC 268 at 285G-H. If this was the basis on which this claim was advanced it is surprising that Mr. Crystal did not cite that case in either his written opening or closing submissions or identify the exceptional nature of that remedy or the various qualifications to the availability of that remedy that are identified both in Blake itself and the cases that have followed it. In my judgment a claim formulated by reference to the principles in Blake is plainly not maintainable because no exceptional circumstances apply on the case as advanced by Everton that would justify an order that required AR to disgorge the, or any part of the, fee that it received for procuring the participation of another Premier League club in the Tournament. I consider the other remedies sought further later in this judgment.[8]The trial took place between 24th and 27th January 2011. I heard oral evidence from Mr. Harrison and Mr. Farnell who were called by Everton. The statement of Mr. Elstone (the current chief executive of Everton and at the time material to this claim its Deputy Chief Executive) was not challenged. Sail called Mr. Brand De Villiers, who was at all material times the CEO of Sail and Mr. Russell. AR called Mr. Blood and Mr. Hatton. I make it clear now as I did in the course of Mr. Plewman’s submissions that I accept Mr. De Villiers’ evidence in its entirety. The degree to which I need to accept or reject the evidence of the other witnesses will become apparent hereafter.

The No Contract Issue

[9]The Issue As will be apparent from what I have said already, the key issue is whether an agreement was concluded between Everton and Sail as is alleged by Everton. If such a contract was concluded then the claim against AR must necessarily fail. If no contract was concluded because the mutual understanding of the parties was that an agreement could be concluded only by the signature of a formal agreement by the duly authorised signatories of each party and the mutual exchange of such an agreement then not only must the claim as against Sail fail but so also must the claim against AR to the extent that it is based on a breach of an alleged warranty of authority since it is not and never has been Everton’s case that Mr. Blood was authorised to sign a formal agreement on behalf of Sail or that Mr. Blood signed such a document nor has it ever been Sail’s case that no agreement was concluded because Mr. Blood was not authorised to conclude it on its behalf on 15th May 2007, although it is its case that in fact Mr. Blood did not have any such authority.[10]In relation to this issue the difference between the parties is a very narrow one. Mr. Farnell who was the solicitor who acted for Everton in relation to the putative transaction accepted in the course of his oral evidence that in effect the negotiations between the parties were conducted on an implicit “subject to contract” basis. I regard this concession as inevitable. The difference between the parties is that Everton maintain that there was a change in this arrangement on 15th May 2007 whereas both Defendants maintain that this was not so. Notwithstanding Mr Farnell’s acknowledgement of the position down to the 15th May 2007, in order to test properly the assertion of a change as alleged it is necessary to consider in some detail how the parties proceeded prior to the 15th May 2007.[11]The Legal Principles In summary: i) Where the parties wish to ensure that a contract that was otherwise capable of being made orally is only made in a formal document the parties may ensure that is so by expressly stipulating that their negotiations will take place “subject to contract”. Where there is such a stipulation then there is no binding agreement until a formal written agreement has been duly executed – see Winn v. Bull (1877) 7 Ch.D 29 per Sir George Jessel MR at 32; ii) It is not essential that there be an express stipulation that the negotiations are to be conducted “subject to contract” if that was nevertheless the mutual understanding of the parties – see Winn v. Bull (ante) per Sir George Jessel MR at 32, Whitehead Mann Ltd v. Cheverny Consulting Ltd [2006] EWCA Civ 1303 [2007] 1 All E.R. (Comm.) 124 per Sir Andrew Morritt C at [42] and RTS Ltd v. Molkerei Alois Muller GmbH & Co AG [2010] UKSC 14 [2010] 1 WLR 753 per Lord Clarke at [46] to [49]; iii) Whilst negotiations being conducted “subject to contract” are most commonly encountered in transactions concerning land, the rule is capable of applying to any contractual negotiation – see RTS Ltd v. Molkerei Alois Muller GmbH & Co AG (ante) per Lord Clarke at [48]; iv) Whilst whether there was a mutual understanding that negotiations would proceed on a “subject to contract” basis is a question of fact in each case: “… where as here, solicitors are involved on both sides, formal written agreements are to be produced and arrangements made for their execution the normal inference will be that the parties are not bound unless and until both of them sign the agreement. In a sense this case is an a fortiori case in that on any view there are at least three agreements to be executed and the respective parties are not the same” - see Whitehead Mann Ltd v. Cheverny Consulting Ltd (ante) per Sir Andrew Morritt C at 45; v) Even if the parties have initially agreed to proceed “subject to contract” it is open to them subsequently to agree to remove that qualification – see the authorities noted at footnote 529 in Chitty On Contracts, Vol.1 Para.2-120; however, whether the parties have so agreed is a question of fact that needs to be approached with care (particularly where intermediaries are involved and the parties are physically based on different continents) since the Court should “… not impose contracts on the parties which they have not reached …” - see RTS Ltd v. Molkerei Alois Muller GmbH & Co AG (ante) per Lord Clarke at [47].[12]The Facts There is no doubt in my mind that there was a mutual understanding between the parties (that is Everton, Sail, AR, Everton’s solicitor Mr. Farnell, Mr. Russell, and Mr. Blood) that negotiations would proceed on a “subject to contract” basis and that no contract was to be binding until a formal agreement in four counterparts had been executed by the authorised signatory for each of the relevant parties (ultimately Mr. Harrison on behalf of Everton and Mr. De Villiers on behalf of Sail) and exchanged. My reasons for reaching this conclusion are as follows.[13]First, the general background point mentioned in Paragraph 11(iv) above applies with full force and effect but with additional factors which make the point one that is even more cogent in the circumstances. Sail was and is a South African registered company which has and had no presence in England and Wales. It had no solicitors acting for it in the UK. All its legal advice in relation to this transaction was I find provided by its South African lawyers in South Africa. This was why all the drafts that came from Sail contained a South African governing law clause and a non-exclusive South African Courts jurisdiction clause.[14]Secondly Mr. De Villiers told me and I accept that there were strict controls that applied within Sail concerning how material commercial agreements were to be entered into. Mr. De Villiers told me and I accept that the internal controls within Sail’s organisation required that any material agreement had to be signed by Mr. De Villiers but that before he could or would sign such an agreement it had first to be signed off as approved by the commercial director and also by Sail’s lawyers. This evidence is entirely consistent with the fact that every draft of the agreement to which it was intended Sail should be a party provided for Mr. De Villiers to be Sail’s authorised signatory and it explains also why every draft had to be sent to Sail in South Africa. It is also entirely consistent with(i) Clause 5(a) of the agreement between PO Promotions Limited and Sail [3/462] which makes it clear that POPL has no authority to enter into any contractual arrangements on behalf of Sail and(ii) the fact that that agreement is signed on behalf of Sail by Mr. De Villiers.[15]In my judgment the matters to which I have so far referred make it inherently unlikely either that Sail would agree to negotiate other than on a subject to contract basis or that it would agree to depart from any such arrangement much less authorise someone else to do so on its behalf.[16]Thirdly, there were on any view two contracts that had to be considered and thus the a fortiori point made by Sir Andrew Morritt C applies here as well. Not merely was there to be a contract entered into between Sail and Everton but there was also to be an agreement entered into by Everton with AR, a draft of which appears at [3/510] by which AR was to be appointed by Everton “… as their representative to project manage Everton’s attendance and involvement in the Tour ….”. It is entirely clear from Mr Blood’s oral evidence that at least AR regarded signature of this agreement as being equally important as signature of the agreement between Everton and Sail because it was the mechanism by which it was to receive payment for introducing Everton to Sail. The interrelationship between the two agreements from AR’s perspective is apparent from the email exchanges on 11th May at [3/531] and following. Mr. Farnell emailed Mr. Blood at 16.26 informing him that he had “… a signed copy by my client … which I am holding pending exchange with you”. Mr. Blood emailed back “is that both agreements”. Mr. Farnell replied “Just SA so far” and Mr. Blood then responded [535] “we will need both before we can exchange”. It is also clear that establishing the role of AR was of importance to Sail because Mr De Villiers wished to be sure that no liability would attach to Sail for the activities of AR. This much is apparent from Sail’s comments concerning a proposal that AR’s involvement was a requirement of Everton – see [3/485] where Sail makes clear that in that event a formal agreement concerning the role of AR would be required. The interdependence of the two agreements is also emphasised by the fact that as the negotiations developed all the later draft agreements to which it was intended that Sail and Everton would be the parties record in the second recital that “… AR is the appointed representative of the Club and is authorised to conduct detailed negotiations on its behalf”.[17]Fourthly, all the written communications between the parties proceeded on the basis that there would be no formal agreement reached unless and until a formal agreement had been signed and exchanged. So on 23rd April 2007 Mr. Blood wrote on behalf of “my clients” to Mr. Elstone of Everton [3/474] on terms that included the following: … this is a firm offer and my clients are keen and able to enter into binding contracts almost immediately. I must also inform you that we are likely to proceed with one other FAPL team and a Serie A team and yourselves in a form of first past the post contract race but I will let you know when this will happen.” Whatever the significance of the words ”my clients” might be to Everton’s claim against AR what Mr Blood writes is clearly consistent only with a negotiation being on a subject to contract basis. Indeed it is difficult to see how a contract race could be run other than on such a basis. Thereafter the negotiations proceeded by reference to a series of draft agreements. It was not at any stage suggested by or on behalf of any of the parties that there would be some form of agreement in principle that would be regarded as binding with the details being left to be incorporated in a formal agreement to be entered into in due course. The first email which illustrates that process is that of the 23rd April from Sail to Mr. Russell [3/475]. Given the arrangements that applied within Sail referred to above this is hardly surprising. It also shows that Mr. Russell did not have any authority to agree anything in the absence of instructions from Sail. This was a point made by Mr. De Villiers on a number of occasions in the course of his evidence and thus provides me with further comfort that I can safely rely on his oral evidence.[18]The email from Mr. Blood to Mr. Elstone of 25th April [3/479] clearly anticipates that a formal written agreement would be the only basis of agreement between the parties. Similar considerations apply to the email from Mr. Blood to Mr. Elstone of 26th April 2007 [3/481] where he writes that “… my clients will pay the first instalment of £250K immediately upon the contract becoming unconditional …”. Similar considerations apply to the email from Mr. Russell to Sail of 30th April 2007 [3/485B], the report by Mr Russell to Sail of the same date [3/488], Mr. Blood’s email to Mr. Elstone and copied to Mr. Hatton of 2nd May 2007 [3/496], Mr. Hatton’s email of 3rd May 2007 [3/498] and Mr. Elstone’s email of 5th May 2007 to Mr. Blood of 5th May 2007 [3/506].[19]Mr. Farnell first entered the correspondence on 9th May 2007 [3/508]. His email of that date is consistent only with the negotiations being, and as being understood by him and therefore by Everton as being, conducted on a subject to contract basis. Mr. Farnell’s understanding could only have come from the instructions that he received from Everton. His email to Mr. Blood of that date refers to Everton having “… a huge appetite … to get this matter completed as quickly as possible …”, that he had a number of points that he wanted to discuss with a view to having “… by the end of today … a document that is capable of being executed.”. In the light of this entirely unambiguous email from Mr. Farnell it is hardly surprising that he accepted in his oral evidence that the negotiations had been conducted through out on a subject to contract basis albeit on his evidence only down to the 15th May when the position changed.[20]From this point on there is nothing in the negotiations that in any way altered the position to which I have referred. All the email traffic is consistent and consistent only with the parties intending that the negotiations should continue subject to contract and that no agreement would or was intended to come into effect unless and until a duly executed formal agreement had been unconditionally exchanged between the parties – see by way of example the email from Mr. Fletcher of IPS to Mr. Blood of 9th May 2007 [3/512A], that from Mr. Blood to Mr. Hatton of the same date [3/514A] and the email from Mr. Russell to Mr. Blood [3/516A].[21]It is now necessary that I mention what became the major issue between the parties – namely the dates between which Everton would be required to play in South Africa. So far as Mr. De Villiers was concerned it was always the case that the Tournament had to take place between 21st and 28th July 2007. An earlier window of 13th to 21st July 2007 was not acceptable and never had been acceptable to Sail. On 10th May the difference between the parties became apparent at least to Mr. Blood and Mr. Russell – see the email of that date at [3/521]. In the course of his oral evidence Mr. De Villiers said and I accept that he could never have accepted the earlier dates as dates for the tour. As he explained, for the Tournament to take place at all the South African FA had to be approached via one of the local clubs that was to participate for approval including approval of the dates between which the Tournament was to take place. He said that this approach had been made in March 2007. This evidence is evidence I accept because it is consistent with the letter sent by Mr. De Villiers to the Chairman of Kaizer Chiefs (Pty) Limited dated 29th March 2007 [3/464]. It is also consistent with the terms of the formal invitation letters sent by Mr. De Villiers to Newcastle FC [3/472] and Mr. Elstone at Everton [3/473]. It would appear also that the Bloemfontein Festival was scheduled to take place earlier in July and that one of the teams due to participate in that festival was also due to play in the Vodacom Challenge.[22]Mr. De Villiers also told me and I accept that he was required by contract to inform the Tournament’s Official Broadcaster of the dates of the Tournament and had done so and likewise he had to and had told the sponsor (Vodacom) of the dates specifically so that they could book the advertising space required for them to take advantage of its sponsorship. As I say I accept this evidence which in my judgment is self evident commercial sense. It probably also goes some way to explain why Mr. De Villiers was so anxious about the lack of progress that was being made in sourcing an appropriate European or English Premier League club to participate – see the concern noted by Mr. Hatton in his email to Mr. Russell of 14th April 2007 [3/466]. Mr. De Villiers told me and I accept that he became progressively concerned that he was being as he put it “strung along” he thought by Everton concerning dates in the period between 10th and 15th May 2007. He told me that ultimately he was sent a draft agreement for signature on 15th May that contained a definition of “Tour” in the body of the agreement which incorrectly referred to the earlier dates even though the later dates he wanted were in the relevant schedule to the agreement he was asked to sign. He told me that was unwilling to sign the document for that reason and I accept that evidence.[23]Originally the date problem had been the result of a possibility that Everton would have to compete in the Inter Toto Cup in order to qualify to participate in the UEFA Championship [3/482]. However, that problem appears to have disappeared by 5th May [3/504] because Everton had secured an automatic place to compete in the UEFA Cup and thus did not need to participate in the Inter Toto Cup over the weekend of the 21st-22nd July 2007. This enabled clause 16 of the travelling draft agreement to be omitted thereafter [2/341(AP) (xix)].[24]What happened thereafter was a negotiation that continued in relation to two issues – the terms of the agreement to be signed by the parties assuming agreement as to dates could be arrived at and an attempt to reach an agreement concerning dates. It is sometimes said that an agreement can be regarded as having been made orally if all the “essential terms” have been agreed between the parties. Thus in a case of this sort, if the only outstanding issue was the dates of the Tournament and if agreement had been reached on that issue then agreement could be said to have been reached. However where as here the negotiations had been conducted on a subject to contract basis that would not mean that a binding agreement had been concluded unless and until a formal agreement had been executed and exchanged or an agreement reached that the negotiations would no longer be carried on subject to contract.[25]Agreement concerning the terms of the formal agreement (other than date) appears to have been close by 11th May 2007 but even at that stage it was still contemplated by the parties that there would be no concluded agreement unless and until there had been an exchange of duly signed contracts – see the email from Mr. Blood to Mr. Farnell and Mr. Wyness of that date [3/524] - and some outstanding legal issues remained to be resolved by Sail’s lawyers [3/525]. It was not contemplated that agreement would be concluded unless and until a final agreement was signed and exchanged or that an agreement could be issued for signature much less signed until after these outstanding issues had been resolved to the satisfaction of Sail’s lawyers. No question of a change in the mutual understanding concerning the circumstances in which an agreement could arise had been suggested much less agreed between the relevant parties (Sail and Everton) at that stage [3/528]. It was for that reason that on 11th May [3/530] two copies of an agreement were sent by Mr. Blood to Mr. Farnell for signature by Mr. Harrison who was and had for some time been the person authorised to sign on behalf of Everton.[26]There then followed the exchange of emails that I have already referred to at [3/531] to [3/539] concerning what signed documents are held by Mr. Farnell. None of this is consistent with a change in the understanding of the parties concerning how a final agreement was to be reached. Rather it is only consistent with the understanding of the parties being as I have described it above. At 18.06 on 11th May 2007, Sail informed Mr. Russell that Mr. De Villiers was in the bush and not able to down load a document. Mr. De Villiers confirmed that this was so in his oral evidence before me, he was not challenged about it and I accept it to be so. This email also confirmed that the final version of the agreement would need to be approved by Sail’s lawyer before it could be signed. This further corroborates the evidence given by Mr De Villiers concerning the internal conventions that applied to the signature of material agreements on behalf of Sail. By 12th May it is clear that there was an outstanding issue between Sail and Everton concerning the terms of two clauses in the draft agreement [3/544] as well as some objections by Sail as to the form of the agreement.[27]By 14th May 2007 Mr Farnell was becoming frustrated. He emailed Mr Blood complaining that he had not received back any executed documents. The significant point for present purposes is that this email is consistent only with the continued understanding of Mr Farnell being that agreement would only be reached once signed formal agreements had been exchanged. This belief is also evidenced by Mr Farnell’s email of 14th May (12:51) [3/550] by which he was chasing for an exchange of contracts. It is equally clear that this was Mr Hatton’s view because on 14th May 2007 at 14:17 he approached Tottenham Hotspur Football & Athletic Co. Ltd (“Spurs”) with a proposal concerning the participation of Spurs in the Tournament in place of Everton. Such an approach would not have been rational had he thought that an agreement had been concluded with Everton by the time that email came to be sent.[28]On 14th May there was an exchange of three emails between Mr Hatton and Mr Blood. At 15:47 Mr Blood was informed by Mr Hatton that Sail could not change the dates and that “… we need to inform Everton that the original dates of 21-28 July remain and see what, if anything, they can do”. Mr Hatton then emailed Mr Russell a minute later asking him to confirm that “… if Everton can change the dates then Brand will immediately sign the contract”. Mr Russell responded 13 minutes later with a one word answer “yes”. This email exchange was subsequently forwarded by Mr Hatton to Mr Blood and by Mr Blood to Mr Farnell on 15th May 2007. This email exchange is not consistent with an understanding on the part of either Mr Hatton or Mr Russell that if the dates could be changed a contract would thereupon come into existence and neither accepted that such was their understanding at the time. In the context in which the exchange took place it could only mean and be understood to mean that it was thought this was the only major commercial issue that remained. There remained the legal issues identified in Sail’s email to Mr Russell of 12th May 2007 [3/544]. Mr Farnell was aware of these issues as is apparent from the email of 14th May 2007 (04:12) from Mr Blood to Mr Farnell. Mr Blood was in Bahrain at the time and thus the time equates to either 07:12 or 08:12 in Bahrain. The terms of the exchange are not consistent with an understanding that an agreement would be concluded as and when agreement on dates could be reached. The terms of the emails between Mr Hatton and Mr Russell are consistent only with an agreement coming into existence when signed and exchanged – that is why the emphasis of Mr Hatton’s email was on Sail, by Mr De Villiers, signing the draft contract.[29]I now turn to the events of the 15th May 2007. At 10:56, Mr Farnell wrote to Mr Blood chasing progress. He said “… I think that the situation is now very urgent from my client’s perspective and we need to get the signed documents back from South Africa. …”. Whilst it is clear from this email that Everton was anxious about the lack of progress it is equally clear that Mr Farnell did not consider that agreement could be reached unless and until there had been an exchange of signed agreements. Indeed it was precisely because that was the position that he was concerned at that stage to get the signed agreements. The contrary is not arguable. That was also the view of Mr Russell and at least Mr Jansen of Sail because they were continuing to discuss the format of a proposal to be put to Spurs at 13:05 on 15th May [3/557].[30]On 15th May 2007 at 15:01 Mr Blood sent an email to Mr Farnell. In it he said:
“I left you a message to say that politically the Bloemfontein Festival cannot be moved and that the only way Everton can participate in the tour is if the dates change by one week to the 19th and returning on the 28th. Please can you take instructions on whether this is possible.”
There is nothing in the email from Mr Blood to Mr Farnell that could be construed as suggesting a change to the process for concluding a contract that had been the mutual understanding from the commencement of negotiations.[31]Just over an hour later, Sail sent a draft agreement to Mr Russell for Spurs to sign [3/559]. This email is consistent only with an understanding on their part that as at that date and time no agreement had been concluded with Everton. Unless there had been a change in the arrangements between the parties as to how an agreement was to be reached this understanding was clearly a correct one. Although Mr Crystal criticised Sail’s contact with Spurs as in some way underhand in my judgment this was misplaced. Either an agreement had been concluded or it had not. There was no “lock out” or exclusivity arrangement between Everton and Sail. If and as long as agreement had not been concluded between Everton and Sail, Sail was entitled to pursue other avenues. Such an approach is entirely consistent with the contract race concept that had been identified by Mr Blood to Everton at the outset and it would have been commercially reckless of Sail not to have adopted such a course when Mr De Villiers knew that the Tournament dates were not moveable and that Everton had indicated that it was not able to move the dates due to a clashing commitment.[32]Everton’s case that a contract was concluded as set out in the letter before action [3/569] was that following the 15:01 email on 15th May:
“… Our client agreed to the dates change and Mr Farnell telephoned Mr Blood to inform him of this. The call was overheard by Mr Harrison. Mr Farnell informed Mr Blood that Everton were agreeable to the amended dates and would this mean that they would get the signed agreements back? Mr Blood replied “yes””
In Paragraph 10 of the Particulars of Claim, it is alleged that the effect of this conversation was that a concluded agreement was reached. However, that is not how the position was described by Mr Farnell in the immediate aftermath. Following an earlier attempt that had material errors in it, he emailed Mr Blood at 21:53 on 15th May 2007. In this email Mr Farnell referred to the email from Mr Blood concerning the Bloemfontein Festival and asserted that a binding contract had been concluded between the parties on the basis of an unidentified email exchange. This is not consistent with a belief that an agreement had been concluded in the course of the conversation on 15th May and takes no account of the pre existing mutual understanding between the parties. If and to the extent this was a reference to the emails originally passing between Mr Hatton and Mr Russell on 14th May and copied to Mr Farnell on 15th May then it is as misplaced as the reliance that was placed on the conversation and for the same reasons. The emails expressly made reference to the need for a document that was to be signed and exchanged.[33]I am not able to accept the contention that a concluded agreement had been reached between Sail and Everton as alleged. As I have already explained, it was clearly the common understanding of the parties throughout that an agreement would be concluded only once a contract signed by the authorised signatories of the parties was exchanged between them. Mr Farnell accepted that such was the case but maintained that this changed on 15th May. It was said that this was the result of him being sent the exchange of emails between Mr Hatton and Mr Blood at 15:48 and 16:01 on 14th May that was copied to him by Mr Blood on 15th May at 11.20. However, as I have said there is nothing in the terms of those emails that suggests the mutual understanding of the parties concerning how an agreement was to be concluded had changed. To the contrary the emails were concerned with the circumstances in which an agreement would be signed. Similar considerations apply to the terms of the conversation relied on by Mr Farnell.[34]What passed between the parties after this conversation is similarly consistent with there having been no agreed change concerning the mutual understanding of the parties. So, at 16:40 on 15th May Mr Blood wrote to Mr Russell attaching a form of agreement signed by Everton. He claimed that the dates had changed although in fact for reasons I will come to in a moment there was a serious ambiguity in the document attached. Mr Blood said of Everton that “… they have agreed to complete this if it can be signed by 5pm tonight”. That is not in any sense consistent with the understanding being that an agreement had been concluded at 16:30 in the course of the conversation between Mr Blood and Mr Farnell. If the understanding of Mr Farnell was that the mutual understanding concerning how an agreement was to become binding had been altered then the terms of the conversation would have been entirely different from what is alleged. Indeed, on the basis that it had been understood by him that an agreement had been reached then there would not have been the great urgency to obtain a signed contract from Mr De Villiers and Mr Farnell would have sent an email or fax to Mr Blood confirming that agreement had been reached between the parties.[35]There is a more fundamental point however and it is this – Everton’s pleaded case that a concluded agreement was reached between Mr Farnell and Mr Blood in the course of their conversation on the 15th May depended upon an assertion that Mr Blood had authority to bind on behalf of Sail. Such a proposition is entirely without foundation. The only person with authority to bind Sail was Mr De Villiers as had been apparent to all concerned from the outset. It had been apparent from the draft agreements that had been circulated. At no stage was it suggested by Sail that anyone else much less Mr Blood was authorised to bind Sail. Since it cannot credibly be suggested that Brabners were retained to act on behalf of Sail, the only basis on which it can be said Mr Blood had the requisite authority was as a director of AR. However, it is not suggested that AR had ostensible authority to act on behalf of Sail. Thus if Everton is to succeed it must establish that AR or Mr Blood had actual authority to bind Sail. There is no evidence that supports any such contention and all the contemporaneous correspondence and the travelling draft agreements are inconsistent with AR having such authority.[36]Since it is not alleged that Mr Blood was given any authority directly by or on behalf of Sail in any of the conversations that took place between him and Mr Jansen of Sail over the week end of the 12th -13th May 2007 or in the conversation between them that preceded the fax at [3/542] and because all the remaining contact appears to have been between Mr Russell on the one hand and Mr Hatton and/or Mr Blood on the other, it follows that if AR was to be appointed as agent for Sail that could only have been carried out by Mr Russell on behalf of Sail. However, I have found that Mr Russell did not have authority to enter into binding agreements on behalf of Sail. No allegation of ostensible authority is made. That being so, it is difficult to see on what basis it can tenably be suggested that Mr Russell or his company had authority to appoint AR to act as Sail’s agent with authority to bind Sail. Any such appointment would have to be expressly authorised by Sail and there is no evidence that suggests any such authority was ever conferred on Mr Russell or his company by Sail. Indeed, it is inherently unlikely that Sail would enter into such an arrangement because such an arrangement would be wholly contrary to the internal arrangements that I have accepted applied to the making of material contracts by or with Sail. It is entirely inconsistent with the terms of the agreement between PO Promotions Limited and Sail referred to above and it is also inherently improbable that Sail would authorise Mr Russell to enter into an an agreement with AR under which AR would be given express authority to bind Sail in relation to a contract which was of enormous commercial importance to it and which required agreement on a large number of matters of detail if it was to be acceptable. Finally not merely did Mr De Villiers deny that any such agreement had been entered into by Sail but Mr Russell denied that he had been authorised to enter into any such agreement and both Mr Blood and Mr Hatton denied it as well. Given that an alternative claim is advanced against AR based on breach of a warranty of authority, this evidence from Mr Hatton and Mr Blood was clearly against interest and I accept it.[37]Aside from the facts that(1) the mutual understanding of the parties from the outset was that no agreement would be concluded between the parties unless and until a formal agreement was signed by the authorised signatories of each party and exchanged,(2) that understanding never altered, and(3) none of the conversations or email exchanges relied on as constituting either an agreement or a change in the mutual understanding concerning how an agreement was to be reached involved anyone authorised by Sail to bind it either by entering into an agreement with Everton or authorising anyone else to enter into a contract with Everton on its behalf, there is one further reason why in my judgment the suggestion that a binding agreement was entered into by Everton with Sail as Everton allege is without foundation and that concerns the terms of the drafts that had passed between the parties. The draft relied on as containing the terms of the agreement supposedly concluded orally between Mr Farnell and Mr Blood was itself incomplete and inconsistent with or contrary to what Everton maintains to be the true agreement between the parties.[38]Everton’s pleaded case is that the terms of the supposed agreement are those set out in the draft referred to in Paragraph 5 of the Particulars of Claim – see Paragraph 10, Particulars of Claim [1/6]. The draft referred to in Paragraph 5 of the Particulars of Claim is a draft of 11th May 2007 that had been signed on behalf of Everton but was never signed by or on behalf of Sail. This document does not contain the correct dates. Thus it could not be signed by Sail without Sail agreeing to the very dates that it could not and did not agree to. Although it is pleaded in Paragraph 10 of the Particulars of Claim that the terms of the alleged agreement were those set out in this document subject to the agreed change of dates, that does not work because of the provisions within the 11th May draft (which remained the same in every draft that was produced) concerning variation of the terms of the agreement and the written agreement being the entire agreement between the parties. Before this document could be adopted there would have to be express changes which would involve changing the definition of “2007 Tour” in Clause 1.1 [2/345] and schedule 2 and the insertion of a club logo in schedule 1 or changing or removing the entire contract clause and possibly the clause that limited variations as well.[39]This was only resolved by the production of a further draft that was sent out by Mr Blood to Mr Russell [2/365 and 3/560] after the conversation between Mr Blood and Mr Farnell at 16:30 on 15th May 2007. This draft was itself not satisfactory because the dates in the definition section remained unchanged even though the dates in Schedule 2 had been changed. Mr De Villiers’ evidence was that he could not sign a document in that form and furthermore had become progressively more suspicious that as he put it he was being “strung along” by Everton and its advisors. I accept this evidence. I accept that as he told me he was not able to see how if Everton had a conflicting arrangement which prevented it from competing on the dates that Sail required (which had been Everton’s position down to the 15th May) it was able to change dates with such great speed. Given this concern and the ambiguity contained in the draft that was sent to him he was entitled to take that view and in any event I am satisfied that he genuinely took that view. In any event, he could not sign the document in the form that it was offered to him for signature.[40]In the result I conclude that no agreement was ever concluded between Everton and sail and for that reason the claim by Everton against Sail fails and must be dismissed. In reaching that conclusion I am bound to reject Mr Farnell’s evidence to contrary effect.

The Claim against AR

[41]Everton’s case as pleaded in Paragraph 14 of the Particulars of Claim is that:
“… in purporting to act on behalf of [Sail], [AR] warranted that it could conclude an agreement on behalf of [Sail]. If [AR] … never acted for [Sail] in any capacity then the [AR] acted in breach of its warranty of authority.”
The key point that emerges from this formulation is that (correctly) it acknowledges that for the claim for damages for breach of the warranty of authority to succeed against AR it has to be established not merely that AR warranted that it was Sail’s agent but critically that it was Sail’s agent with authority to bind Sail to a contract with Everton. If this last element is not established then the claim must necessarily fail. Evidentially there is no tenable basis on which such a submission can or could be advanced. At no stage did AR either by Mr Hatton or Mr Blood represent to anyone least of all either to Mr Harrison or Mr Farnell that either had authority to bind Sail. Indeed, when the whole of the transactional history is reviewed the one thing that is abundantly clear is that no one had authority to bind Sail other than its authorised signatory Mr De Villiers and that no one acting on behalf of Everton thought or could reasonably have thought that such was not the case.[42]The sole pleaded representation concerning authority attributed to AR is that which is set out in Paragraph 3 of the Particulars of Claim where it is said that in the course of a meeting that took place on 8th May 2007 between Mr Wyness and Mr Harrison of Everton and Mr Blood (representing for these purposes AR):
“…Mr Blood stated that he was representing [AR] in its role as agent for [Sail] who wished [Everton] to participate in the [Tournament]. During the meeting, Mr Blood handed over a proposed draft agreement.”
[43]The key point is that it is not even alleged in that paragraph that Mr Blood represented he had authority to bind Sail. It was entirely clear from the draft agreement there referred to that the only person with authority to bind Sail was Mr De Villiers. No evidence was given concerning this conversation by Mr Wyness who did not give evidence at all. Mr Harrison referred to the meeting in Paragraph 2 of his witness statement in terms that reflected what was said in the Particulars of Claim. He did not suggest that Mr Blood said he had authority to bind Everton. Mr Harrison’s oral evidence did not support what he apparently asserted in his statement. When cross examined on behalf of Sail he acknowledged that Everton expected that a contract would only arise when a formal document was signed by duly authorised officers of the parties and in particular by Mr De Villiers on behalf of Sail. When cross examined on behalf of AR, Mr Harrison acknowledged that he could not remember everything that happened at the meeting and that at that stage he was attending in a supporting role because Everton was principally represented at the meeting by Mr Wyness who was then Everton’s CEO. He recalled being handed a version of the draft agreement at the meeting. In relation to the assertion in the statement that Mr Blood said he was acting as agent for Sail, Mr Harrison was able to say only that that this was the impression that Mr Blood gave. Mr Crystal returned to this issue in re-examination. All that Mr Harrison was able to add was that he had the impression that as he put it Mr Blood would not have to “… run off and take instructions …”. He said that the impression that he had formed was derived from “… his mannerisms; his belief that if we wanted it, it was for us to take … he was there to sell the tour to us …”. This does not establish a representation by Mr Blood that AR had authority to bind Sail. As I have said the terms of the draft agreement made it clear that AR did not have that kind of authority in any event.[44]Mr Blood was cross examined at great length about his use of the word “client” in emails to Mr Elstone including in particular those dated 23rd April 2007 [3/474], 25th April 2007 [3/479] and 26th April 2007 [3/481]. Mr Blood maintained that in using this word he was referring to AR. At the time these emails were written it was contemplated that the agreements would be structured so that AR would be the counter party to Everton and under a separate agreement to Sail – see [2/35 and 35A]. Thus in context what Mr Blood said could at that time have been correct. These emails were written using Mr Blood’s Brabners email account. This is something that ought never to have happened and which was bound to confuse and mislead. However in context in the circumstances they could only have been written on behalf of AR. If this is wrong and the emails are to be construed as a representation by Mr Blood in his capacity as a director of AR that AR has been retained by Sail that was of course untrue. However, it does not matter for present purposes. Not merely are these communications not pleaded as being representations much less representations that were relied on by Everton, they do not carry matters any further because they do not contain any suggestion that AR is able to bind Sail. Critically Mr Elstone (to whom the emails were addressed) does not suggest that he considered what was said in the emails to constitute a representation on behalf of AR that it had authority to bind to Sail – see his witness statement passim at 1[58-60].[45]In the result it was for Everton to plead and prove both a representation on the part of AR that it had authority to act on behalf of Sail and to commit Sail to a binding agreement and it has failed to do so. On that ground alone the claim based on breach of a warranty of authority must fail.[46]Even if that were to be wrong and Everton could be held to have established a representation by or on behalf of AR that AR had authority to act on behalf of Sail and to commit Sail to a binding agreement, I consider that the claim as it has been formulated must fail.[47]Merely to establish the making of a representation is not enough to establish liability. It must also be shown that the claimant in a breach of warranty of authority claim relied on the representation to act in a manner in which he would not have acted if that representation had not been made – see Bowstead on Agency 19th Ed., Para.9-060. Paragraph 3 of the Particulars of Claim sets out the representation relied on. Paragraph 14 alleges that AR acted in breach of its warranty of authority “… if [AR] … never acted for [Sail] …”. No reliance of any sort has been pleaded and none has been alleged or proved in the course of the trial. Thus it is not apparent what it is alleged Everton did in reliance upon the supposed representation or what loss was suffered by Everton in consequence.[48]Where a contract is repudiated by the supposed principal on the basis that it was made without his authority the remedy is damages which are measured by reference to the sum that the third party could have recovered from the supposed principal had the supposed principal entered into the agreement but then refused to perform it. The logic that underlies this is that the cause of action for breach of a warranty of authority is contractual and thus the damages that can be recovered are calculated “… by considering the difference in the position [the claimant] would have been in had the representation been true and the position he is actually in in consequence of it being untrue” – see Firbank’s Executors v. Humphreys (1886) 18 QBD 54 per Lord Esher MR at 60. Everton’s damages claim as formulated alleges that the Claimant was deprived of the fee that it would have received from Sail had Everton participated in the Tournament. However that was not a loss caused by any reliance by Everton on the supposed representation by AR that it had authority to bind Sail. That was a loss suffered as a result of no agreement having been concluded between Sail and Everton. It is alleged that Everton incurred costs of £166,057.61 in touring the US. Even assuming that it could be demonstrated that if an agreement with Sail been concluded Everton would not have toured the US – and that has not been established by evidence before me – that is not a loss that was caused by any reliance by Everton on the alleged representation. That is a loss that was caused either by a decision to tour the US at a loss taken by Everton’s management or because no concluded agreement between Sail and Everton had been made. Similar considerations apply to losses supposedly based on the loss of an opportunity to tour South Africa although no evidence of any sort was led which supported a claim made on that basis.

Conclusions

[49]For the reasons set out above, Everton’s claims against Sail and AR must each be dismissed. 0000000000000000000000000000000000000000000000000