Cheverny Consulting Ltd v Whitehead Mann Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Carnwath,Lord Justice Moses,The Chancellor |
| Judgment Date | 11 October 2006 |
| Neutral Citation | [2006] EWCA Civ 1303 |
| Docket Number | Case No: A3/2005/2633/CH |
| Court | Court of Appeal (Civil Division) |
| Date | 11 October 2006 |
[2006] EWCA Civ 1303
The Chancellor of The High Court
Lord Justice Carnwath and
Lord Justice Moses
Case No: A3/2005/2633/CH
HC04C02512
IN THE SUPREME COURT OF JUDICAT
COURT OF APPEAL (CIVIL DIVISI
ON APPEAL FROM CHANCERY DIVIS
Mr Nicholas Davidson QC (Sitting as a Deputy High Court Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Andrew Clarke QC and Mr Martyn Barklem (instructed by Clifford Chance) for the Appellant
Mr John Wardell QC and Mr Jonathan Evans (instructed by Withers) for the Respondent
The Chancellor:
Introduction
Whitehead Mann plc ("WMplc") is a publicly quoted company engaged, by itself and through its subsidiaries, in the executive search industry in the United Kingdom and elsewhere. One of its subsidiaries is the defendant Whitehead Mann Ltd ("WML") . M.Jean-Michel Beigbeder ("M.Beigbeder") has been engaged in such industry in France for many years, since 1986 though Beigbeder & Partners SA. In the summer 2000 there were negotiations for the acquisition of the business of Beigbeder & Partners SA by the Whitehead Mann Group. The negotiations led to the incorporation or acquisition of two companies and the execution of three agreements.
The two companies were Whitehead Mann SARL ("WMSARL") and the claimant Cheverny Consulting Ltd ("Cheverny") . WMSARL was incorporated in France to carry on the business of the Whitehead Mann Group in France formerly carried on by a branch office in Paris. Thus it was a member of the Whitehead Mann Group. Cheverny had been incorporated in England in 1999. It was acquired by or on behalf of M.Beigbeder in the summer 2000 but he did not become a director until 3rd November 2000.
The three agreements were:
(1) An Acte de Cession de Fonds de Commerce ("the Asset Sale Contract") made between Beigbeder & Partners SA (1) WMSARL (2) M.Beigbeder (3) and Maitre Dubois (4) whereby the assets of Beigbeder & Partners were sold to WMSARL for a total consideration of Fr.F 5m;
(2) A Contrat de Travail ("the Employment Contract") made between WMSARL (1) and M.Beigbeder (2) whereby, for a basic salary of Fr.F1.2m, the former employed the latter as a senior consultant responsible for developing the business of WMSARL by securing new assignments with new or existing clients and carrying them out;
(3) A Consultancy Agreement ("the Consultancy Agreement") executed by all parties as a deed and made between WML (defined as "the Company") (1) , Cheverny (defined as "the Consultancy") (2) and M.Beigbeder (3) whereby WML engaged Cheverny as a consultant for the period of three years to provide advice and assistance to WML by means of M.Beigbeder in relation to a consultancy recruitment "in the UK, Europe, the United States of America and any other place in the world but outside France as the Board may require ("the Services") " for the consideration set out in Clause 3 thereof.
The consideration set out in clause 3 of the Consultancy Agreement comprised the retainer fees prescribed by clauses 3.1 to 3.4 and the stock consideration set out in paragraph 3.5. Clause 3.5 provided, so far as material, that:
"In addition, the Consultancy will be eligible at the end of the Duration to a stock consideration comprised of a certain number of shares in Whitehead Mann Plc payable by the Company. The maximum number of shares that may be granted to the Consultancy is 162,295 shares with a nominal value of 5 pence ("the Stock Consideration")
The number of shares to be granted by WMplc depended on the amount of "Source of Business". This phrase was defined, by means of clauses 13.1, 3.6 and 2.1.1, as the fees collected in the relevant period relating to obtaining assignments from new or existing clients of WML further to the Services referred to in paragraph 3(3) rendered "in the UK, Europe, the United States of America and any other place in the world but outside France".
Clause 12.5 of the Consultancy Agreement provided that:
"This Agreement constitutes the entire agreement between the parties to it with respect to its subject matter and shall have effect to the exclusion of any other memorandum agreement or understanding of any kind between the parties hereto preceding the date of this Agreement and touching or concerning its subject matter."
During the negotiations to which I have referred consideration was also given to a side letter ("the Side Letter") . It was written on the headed writing paper of WMplc and in French. The agreed translation is as follows:
"Paris, 1 July 2000
Dear Jean-Michel,
I refer to the different agreements signed between the Whitehead Mann group, the company Beigbeder & Partners and yourself.
I confirm that when the said agreements refer to certain levels of performance to realise in order to give you directly or indirectly certain rights, the amount to consider will be the total amounts directly or indirectly realised by you for the benefit of the Whitehead Mann Group, taken as a whole.
Yours sincerely,
[Space for signature, in the event unfilled]
Gerard Clery-Melin
Chief Executive Officer"
It was not signed by Gerard Clery-Melin or any one else.
At the end of the period for which the Consultancy Agreement provided Cheverny claimed to be entitled to all the 162,295 shares in WMplc for which clause 3.5 provided on the footing that the Side Letter had varied the Consultancy Agreement so as to remove the limitation on the relevant services to those performed outside France imposed by clause 2.1. The Whitehead Mann Group did not agree and these proceedings were instituted by Cheverny against WML on 30th July 2004. It sought damages of £501,393 for breach of contract.
The claim was heard by Mr Nicholas Davidson QC, sitting as a deputy High Court judge of the Chancery Division, on 13th, 14th and 15th June 2005. The deputy judge handed down his judgment on 8th November 2005. I shall refer to his findings and conclusions in some detail later. For present purposes it is sufficient to record that he considered (paragraph 98) that it was
"….more probable than not that the Side Letter was agreed as part of the arrangements which were to be given written effect, and agreed by [WML] as arrangements to be given written effect, as well as by all other parties. I think that by 28th June there was agreement all round that those concerned, including, when it was able to, the English company in the course of formation for Mr Beigbeder [Cheverny], would enter into four, not three, agreements including the Side Letter. I have found it impossible to arrive at a conclusion which leaves no puzzle unresolved, but I regard my conclusion as very much more probable than anything else."
He held that the entire agreement clause contained in clause 12.5 of the Consultancy Agreement did not operate to preclude the Side Letter having contractual effect. He awarded Cheverny damages in the sum of £501,934 and their costs.
WML appeals with the permission of Latham LJ. It contends that the judge's conclusion quoted in paragraph 8 above cannot stand as he placed substantial reliance on the written witness statement of a witness for Cheverny, M. Dominique Rongier, which that witness himself materially qualified in his oral evidence. It also contends that the judge's conclusion that the entire agreement clause did not preclude the Side Letter from contractual effect is untenable in the light of his own conclusion that "there was agreement all round that those concerned…. would enter into four, not three, agreements". (emphasis added) Finally WML contends that the Side Letter, even if signed, could not have effected a variation of clause 2.1 of the Consultancy Agreement because the parties were different. Thus there are three issues:
(1) Is the judge's failure to recognise the nature and extent of the qualifications to his witness statement made by M.Rongier in his oral evidence such as to entitle this court to interfere with the judge's finding of fact, and if so with what consequence? If not,
(2) Does clause 12.5 of the Consultancy Agreement preclude the Side Letter having any contractual effect? If not
(3) Given the intended parties to and contents of the Side Letter did it vary the provisions of clause 2.1 of the Consultancy Agreement so as to remove the exclusion of France?
In due course I shall address each of these questions. First it is necessary to describe the background in greater detail. I shall do so by reference to the contemporary documents as that is the factual framework within which the arguments concerning the evidence of M.Rongier must be considered.
The Facts
M. Gérard Cléry-Melin and M. Beigbeder had known each other since 1974. M. Cléry-Melin had been running the Paris Office of WML when the negotiations with M. Beigbeder started. Shortly thereafter he was appointed the Chief Executive Officer of WML and Mr Jeremy White took over the running of the Paris Office. In the initial stages the negotiations were conducted by M. Cléry-Melin for WML and M. Beigbeder for his firm. On 21st February 2000 WML sent a draft proposal to M. Beigbeder. It envisaged that three consultants from Beigbeder & Partners SA, including M. Beigbeder himself, would work for WML and the business of Beigbeder & Partners SA should be bought by WML for Fr.F 10m but with provision of reduction in the price if the fees earned by WML through the three consultants failed to reach a target figure of Fr.F 10m in the first year and more in subsequent years.
The proposal was broadly acceptable to M. Beigbeder and lawyers were instructed on both sides. M. Beigbeder...
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