Carlton Communications Plc and Another v Football League
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice Langley,Mr Justice Langley |
| Judgment Date | 01 August 2002 |
| Neutral Citation | [2002] EWHC 1650 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2002 Folio 377 |
| Date | 01 August 2002 |
[2002] EWHC 1650 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
The Honourable Mr Justice Langley
Case No: 2002 Folio 377
Lord Grabiner QC & Mr Daniel Toledano (instructed by Messrs. Slaughter and May) for the Claimants
Mr Charles Flint QC & Mr Andrew Green (instructed by Messrs. Lawrence Graham) for the Defendant
Hearing dates : 25, 26 & 29 July 2002
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Langley
Introduction
The claimants ("Carlton" and "Granada") are each 50% shareholders in ITV Digital Holdings Limited ("Holdings") which is itself the parent company of ITV Digital plc (formerly ONdigital plc). Throughout most of the material events the company was known as and I shall refer to it as ONdigital. On 27 March 2002 ONdigital was placed into administration by an order of the High Court.
The Defendant ("The Football League") is a company of which the shareholders are the football club members of the Football League. The clubs are those playing in what are commonly referred to as the Football League first, second and third divisions. The Football League owns the broadcasting rights to matches played by members in those divisions as well as to matches in other competitions it organises.
ONdigital was incorporated in January 1997 to provide digital terrestrial television services to subscribers. The service was launched in November 1998 as ONdigital and changed its name to ITV Digital in July 2001.
The Football League and ONdigital entered into a written contract dated 15 June 2000 ("The June Contract") by which The Football League agreed to license to ONdigital the rights to all matches during the 2001/2, 2002/3 and 2003/4 football seasons. Under the June Contract ONdigital was due to pay the Football League the sums of £89.25 million on both 1 August 2002 and 1 August 2003.
The central issue in these proceedings is whether or not the liabilities of ONdigital under the June Contract were guaranteed by Carlton and Granada. As is well known the financial condition of ONdigital is such that it has ceased to broadcast and would have been unable to meet the payments when they fell due.
These proceedings were commenced by Carlton and Granada by a Claim Form dated 12 April 2002. The relief claimed was (and is) a declaration that neither company is liable for any payments due under the June Contract. By a counterclaim dated 9 May, the Football League claimed a declaration that Carlton and Granada were jointly and severally liable as guarantors of ONdigital's obligations under the June Contract. The original counterclaim sought a declaration of liability to pay the two sums of £89.25m "if such sums are not paid" by ONdigital. As amended, a declaration of liability to pay damages in the sum of £131,833,334 is sought.
On 13 May The Football League's solicitors wrote to the administrators of ITV Digital "terminating the licence arrangements pursuant to the (June Contract) as a result of the Company's present position." The letter purported to accept "the repudiatory breaches" of the June Contract by ONdigital said to be that the Company could not perform the Contract as it had ceased broadcasting and "does not propose to pay the remaining instalments."
On 5 July The Football League granted broadcasting rights for the seasons 2002/3 to 2005/6 to British Sky Broadcasting Limited (Sky). It is The Football League's case that for the 2002/3 and 2003/4 seasons the sum payable by Sky under the agreement is £46,666,666 and that to that extent it has mitigated its loss under the June Contract. Hence also the amended claim to which I have referred in paragraph 6.
This court ordered on 17 May that the trial of the proceedings be expedited. They began before me on 25 July and concluded on 29 July when I reserved my judgment. It was agreed that, despite the form of the proceedings, the Football League should conduct the trial as claimant. It was also agreed that should issues of mitigation and quantum be required to be tried they should be left to a subsequent hearing.
The Football League's Case
The Football League contends that by a statement made in an Initial Bid document dated 7 June 2000 that "ONdigital and its shareholders will guarantee all funding to the FL outlined in this document" Carlton and Granada made a "unilateral offer to guarantee" the obligations of ONdigital to the Football League in the event that a contract was concluded between the Football League and ONdigital for the licensing to ONdigital of broadcasting rights owned by the Football League. It is the Football League's case that this unilateral offer was accepted by the Football League's conduct in entering into the June Contract on 15 June. The June Contract itself did not contain a guarantee and neither Carlton nor Granada were parties to it.
Carlton and Granada's Case
Carlton and Granada contend that:
i) The Initial Bid did not contain a "unilateral offer to guarantee". The statement relied upon by The Football League was part of a "subject to contract" proposal. It was not expressed to be or capable of "acceptance" by conduct, nor did The Football League purport to accept it. I will refer to this as "the construction issue".
ii) Even if the statement was an offer to guarantee it was made by ONdigital and ONdigital was not authorised to make it on behalf of either Carlton or Granada. I will refer to this as "the authority issue".
iii) In any event the alleged guarantee is unenforceable by virtue of section 4 of the Statute of Frauds 1677 ("The Statute of Frauds Issue"). Section 4 provides that:
"No action shall be brought whereby to charge the defendant upon any special promise to answer for the debt default or miscarriage of another person unless the agreement upon which such action shall be brought or some memorandum or note thereof shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised."
iv) The alleged guarantee would not in any event enable The Football League to recover damages for anticipatory repudiatory breach of contract by ONdigital. I shall refer to this as "the scope of the guarantee issue".
The Football League relies in response on what it says was the actual or ostensible authority of ONdigital to make the offer on behalf of Carlton and Granada. It also contends that the Initial Bid and the letter enclosing it, a later Revised Bid and the letter enclosing it, and Clause 18 of the June Contract fulfil the statutory requirement for a "memorandum or note" of the agreement to give a guarantee, relying on the signature of those documents by ONdigital as signatures on behalf of Carlton and Granada. The other issues are ones which substantially depend on the documents and to a limited extent case law.
The Parties and Players
ONdigital
Holdings was incorporated on 9 October 1996 and ONdigital in January 1997. At that time the company was called British Digital Broadcasting plc.
ONdigital was the subject of a "Restated Joint Venture Agreement" ("The JVA") dated 18 December 1997 made between Carlton and Granada, Holdings and ONdigital. Clause 2.3 of the JVA expressed the intention that the company was to operate as "a stand alone profitable viable entity having independent management and an existence independent of the shareholders consistent with the success and profitability of the business." As regards the management of the company, the JVA provided for each of Carlton and Granada to appoint up to 3 directors of each of Holdings and ONdigital. Each was also required, at the insistence of the Independent Television Commission, to use its best endeavours to ensure that there were at least two independent directors on the board of ONdigital. The Board of ONdigital was required to appoint additional directors and senior management who were to be of sufficient calibre to operate the company independently of Carlton and Granada and who were obliged to act in the best interests of the company independently of the interests of Carlton and Granada.
Whilst the day to day management of ONdigital was to be conducted by the Board acting by a simple majority various matters required the approval of the Holdings Board. In particular Clause 9.4.8 of the JVA provided that ONdigital would not without the approval of the board of Holdings
"incur or enter into any binding commitment to incur any capital or other expenditure in any accounting period … which would or would be likely to result in expenditure aggregating more than £10 million …"
ONdigital, as a new venture, was dependent on funding from Carlton and Granada save to the extent it generated funds from its own business. The statutory accounts of ONdigital for the year ended 30 September 2000 (signed on 19 February 2001) stated that the company was dependent on continuing financial support from Carlton and Granada to continue its activity and meet its liabilities as they fell due. In a press release issued by the Executive Chairman (Charles Allen) of Granada towards the end of November 2001 it was stated that Carlton and Granada had both "confirmed their current intention" to continue to provide funds to ONdigital to enable the business to meet its operational requirements as and when they fell due. In Carlton's statutory accounts for the year ended 30 September 2001 Carlton recorded that it had indicated "its current intention" to that effect with a specific reference...
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