Force India Formula One Team Ltd v Etihad Airways PJSC and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix,Lord Justice Patten,Sir Mark Waller |
| Judgment Date | 06 October 2010 |
| Neutral Citation | [2010] EWCA Civ 1051 |
| Docket Number | Case No: A2/2009/2493 |
| Court | Court of Appeal (Civil Division) |
| Date | 06 October 2010 |
[2010] EWCA Civ 1051
Sir Charles Gray
(Sitting as a Judge of the High Court)
Before: Lord Justice Rix Lord Justice Patten and Sir Mark Waller
Case No: A2/2009/2493
HQ08X01237
IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE QUEEN'S BENCH DIVISION
Mr Stephen Auld QC & Ms Eleanor Campbell (instructed by Messrs Nabarro) for the Appellants
Mr Francis Tregear QC & Mr Edward Knight (instructed by Messrs Fladgate) for the Respondent
Hearing dates: Tuesday 27 th & Wednesday 28 th July 2010
Lord Justice Rix :
Formula One (“F1”) World Championship motor racing is a global brand which excites considerable interest and demands deep pockets. Sponsorship of the relatively small number of teams which compete in F1 is expensive, and prized both by the teams which seek it and the companies which provide it. A team may have many sponsors, but its main sponsors have particular rights. This litigation is between the owner of an F1 team, Spyker F1 Team Limited (“Spyker”), which entered into a main sponsorship agreement with two Abu Dhabi companies, Etihad Airways PJSC (“Etihad”) and Aldar Properties PJSC (“Aldar”), together the “sponsors”. The sponsorship agreement is dated 12 April 2007 (the “contract”). Under it Etihad and Aldar committed to provide at least US $20 million of sponsorship over the three years of 2007, 2008 and 2009: $5 million in 2007, $6 million in 2008 and $9 million in 2009.
As it turned out, the contract came to an end by, as is common ground, 31 January 2008 at latest. The essential question in this appeal is whether the agreement ended as a result of a repudiation by the sponsors or by the team company, which by then had been renamed as “Force India Formula One Limited” (“Force India”). The judge, Sir Charles Gray, sitting as a judge of the High Court, held that it had been the sponsors who had repudiated and he found that they were liable to Force India for damages in the sum of $5,140,775, apportioned as to $3,084,465 to be paid by Etihad and $2,056,310 to be paid by Aldar. The sponsors appeal, however, on the ground that it had been the team company, Force India, which had repudiated.
The parties
Etihad is an Abu Dhabi company which owns and operates Abu Dhabi's national airline. It is a relatively new airline, founded in 2003, which seeks to compete as a national champion with airlines such as Emirates and Singapore Airlines. Aldar is a major Abu Dhabi property development company. It was involved in the development of Abu Dhabi's new F1 racetrack where an inaugural grand prix race took place in November 2009. Close by was a theme park, called “Ferrari”, in which Aldar was also involved.
The personnel at Etihad with whom we are chiefly concerned were James Hogan, its CEO; Peter Baumgartner, its vice president and head of marketing; Nick Cottage, its sponsorship manager; and an independent sports sponsorship consultant, Jamie Cunningham, of Professional Sports Group (“PSG”).
The CEO of Aldar was Ronald Barrott.
The team company which entered into the agreement with the sponsors was Spyker, ie Spyker F1 Team Limited. It was owned by Spyker Cars NV, the Dutch manufacturer of Spyker luxury sports cars, a brand influenced by the aerodynamics expertise of the aircraft industry (“Spyker Cars”). Since the events with which we are concerned, the Spyker car interests have bought Saab. Spyker Cars was a listed company in which the Mol family was prominent as shareholders and managers.
The team which became the Spyker team had originally been known as “Jordan Grand Prix”, but in 2005 Jordan Grand Prix Limited was purchased by Midland Resources (Holdings) Limited, an international conglomerate (“Midland”). The team company was renamed Midland F1 Racing Limited and the team name became “MF 1 Racing”. Midland's interest only lasted a year, however, for in September 2006 it sold the team company to Spyker Cars NV, and the team name became “Spyker MF 1 Racing”.
The principal of the Spyker team was Colin Kolles, and Mr Phillips was its director of business affairs.
At the beginning of 2007, Spyker still lacked main sponsors for that year's racing season, although it was in the course of establishing contact with Etihad. In early February 2007, the inaugural Abu Dhabi grand prix was announced for November 2009 and Mr Hogan of Etihad and Mr Kolles of Spyker met in Abu Dhabi. Then, immediately before the opening grand prix event in Australia, a binding Heads of Terms Agreement dated 13 March 2007 was entered into with Etihad (but dealing with the terms relating to both sponsors), and the contract followed on 12 April 2007. Spyker had negotiated for greater sponsorship sums than the contract gave them, but there was no other main sponsorship interest, and therefore it had to settle for what it could get. However, as will appear below, the contract contained its own mechanism to protect Spyker in case thereafter a better main sponsorship deal became available from other potential sponsors for the 2008 and/or 2009 seasons.
However, Spyker Cars, like Midland before it, was not long in the saddle. On 14 August 2007 a press release announced that it was contemplating the sale of the Spyker team, ie Spyker. On 1 September 2007 Dr Vijay Mallya, a prominent Indian entrepreneur and billionaire, announced at a press conference in Mumbai that he had made a successful bid for it. Dr Mallya was chairman of United Breweries Group, one of the largest spirits companies in the world. Among its brands is White & Mackay whisky. The Group also encompasses United Breweries Limited, which has 45% of the Indian beer market including Kingfisher beer, and Kingfisher Airlines, India's largest airline. From his arrival on the scene, Dr Mallya became the dominant figure in Spyker, or rather, as will appear, in Force India, as the team became known as a result of a re-branding exercise. Dr Mallya had been interested in F1 racing for some time, and at this juncture in 2007 had been sponsoring the Toyota F1 team through Kingfisher Airlines. Dr Mallya is henceforth the single most prominent figure in our story.
Dr Mallya's buying into the Spyker team was in fact effected by a joint venture with the Mol family. The ultimate holding company, owned jointly between Dr Mallya and the Mol family, was called Orange India Holdings Sarl (“OIH”). The “Orange” reflected the Mol Dutch interest, the “India” reflected Dr Mallya's interest, and “Holdings” spoke to the fact that OIH was the ultimate parent of the enterprise. Its subsidiary was Force India Formula One Limited, and that company's subsidiary was the renamed Spyker, viz Force India Formula One Team Limited (Force India).
The Heads of Terms Agreement
Ultimately it is the contract which governs the relationship of the parties. However, because we are concerned with repudiation, and what might amount to a repudiatory breach of the contract, it may be instructive also to consider the Heads of Terms Agreement which sets out in headline terms what the deal was. Thus the Agreement contained the following provisions:
“OVERALL RIGHTS
• Right for Etihad to become one of the two main team sponsors of Spyker F1 from 2007 – 2009 together with Aldar…
• Right to ensure that Etihad is the sole and official airline associated with Spyker F1.
• Right to have the naming & livery rights of the team. The precise name for the 2007 season is to be agreed prior to the first race of the season in Australia and there will be no changes to the livery in 2007. The naming and livery rights are also included for 2008 & 2009, subject to the Naming Rights clause listed below…
BRANDING RIGHTS
• Right for Etihad together with Aldar to be the most prominent brands associated with the Spyker F1 team outside of automotive-related brands.
• Right for Etihad to be the sole & exclusive airline brand to be associated with the Spyker F1 team…
• Right for Etihad to have final approval of their logo positions in any branding activities…
ENDORSEMENT AND IMAGE RIGHTS
• Right to use the Spyker F1 team logo in any Etihad marketing activities, subject to the approval of Spyker F1 – such approval not to be unreasonably withheld…
The Naming Rights Clause (referred to in the third bullet point under “OVERALL RIGHTS”) was what was to become the clause 5 mechanism under the contract to enable Spyker to seek more profitable main sponsors for the 2008 and 2009 seasons. The securing of such potential main sponsors for the second and third years of the contract was to be the occasion for Etihad/Aldar to have three options: (1) to match the new sponsorship, thereby preserving their position as main sponsors; (2) to continue as a “presenting sponsor” ie to take a back-seat to new main sponsors while preserving the value of their branding assets, subject to some discount in their financial obligations; or (3) to terminate the sponsorship for the future without any further obligation.
The contract
The contract contained inter alia the following provisions –
“ 1 Interpretation, General remarks
1.1 The definitions and general provisions in Schedule 1 apply to and are incorporated in this Agreement…
1.3 SPYKER hereby appoints the Sponsors as the main team sponsors of SPYKER from the Commencement Date until 31 December 2009, upon the terms and conditions set out below.
3 Spyker's obligations and rights
SPYKER undertakes and warrants to the Sponsors that it will not...
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