Global 5000 Ltd v Wadhawan
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rix,Lord Justice Sullivan,Lord Justice Lewison |
| Judgment Date | 19 January 2012 |
| Neutral Citation | [2012] EWCA Civ 13 |
| Docket Number | Case No: A3/2011/1119 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 January 2012 |
[2012] EWCA Civ 13
Lord Justice Rix
Lord Justice Sullivan
and
Lord Justice Lewison
Case No: A3/2011/1119
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MR JUSTICE BEATSON
2010 FOLIO 1051
Royal Courts of Justice
Strand, London, WC2A 2LL
Mark Hapgood QC and Jasbir Dhillon (instructed by Ince & Co LLP) for the Appellant
Robert Lawson QC and Tim Marland (instructed by Gates and Partners) for the Respondent
Hearing dates : Wednesday 19th October 2011
This appeal is about a challenge to the jurisdiction of the English court, which succeeded before Beatson J. The claimant, Global 5000 Limited ("Global"), a Jersey, Channel Islands company, sues on a contract of guarantee whose terms are said to be contained in a letter dated 9 August 2008 written by Mr Sarang Wadhawan, the managing director of Privilege Airways Pvt Ltd, an Indian company ("Privilege"). The guarantee is said to have been concluded by the claimant's conduct in entering into a contract with Privilege for the sale of a Bombardier BD-700.1A11(Global 5000) aircraft,…' dated 14 August 2008 (the Aircraft Purchase and Sale Agreement or "PSA"). The PSA contains an English law clause (clause 3.12), and an agreement for arbitration in England.
Privilege changed its mind about the purchase not long after the PSA was made. It failed to pay the 10% deposit of US$5.55 million which had been due in two tranches, $1 million by 20 August and $4.55 million by 27 August 2008. It failed to pay what should have been the balance of $49.95 million as of 30 August 2008 (at which time the full price of $55.5 million was owing). And on 15 September 2008 it emailed Global to state that it had decided to defer its purchase for 6 months and, in a separate email on 28 November 2009, that it had decided not to purchase the aircraft. On 19 January 2009. Global's solicitors, Ince & Co, wrote to Privilege terminating the PSA. On 24 September 2009 Global commenced arbitration proceedings against Privilege. However, no progress has been made in that arbitration since Privilege filed its defence on 11 November 2009.
Global did not commence these proceedings in the commercial court in London against Mr Wadhawan until 8 september 2010. The claim form states (there are no particulars of claim) that damages are claimed for breach of contract "by which the Defendant agreed to procure and/or see to it that Privilege…complied with its obligation to pay US$55,500,000 to the Claimant by 31 August 2008, as the purchase price payable for a Bombardier…aircraft pursuant to a written Purchase and Sale Agreement… The aforesaid contract is contained in and/or evidenced by a letter dated 9 August 2008 from the Defendant to the Claimant and the Purchase and Sale Agreement".
For the purposes of applying for permission to serve out against Mr Wadhawan, who lives in India, Global relied on the alleged contract of guarantee taking its proper law from the PSA to which it was collateral and thus being a contract which was itself governed by English law. On that basis, Global invoked CPR 6.37(1)(a) and the jurisdictional gateway set out in CPR PD 6B, para 3.1(6)(c), namely that –
"(6) A claim is made in respect of a contract where the contract –
…
(c) is governed by English law…"
The first witness statement of Katherine Marsh, a solicitor with Ince & Co, made it clear that the contract "in respect of" which the claim was made was the alleged contract of guarantee.
Permission to serve out was granted ex parte by Flaux J on 6 September 2010. Mr Wadhawan was served in Mumbai on 13 October 2010, and he issued his CPR Part 11 challenge to the jurisdiction on 2 December 2010. The inter partes hearing came before Beatson J on 14 March 2011. At that time Global altered the basis on which it invoked the jurisdictional gateway under para 3.1(6)(c). It then submitted that the contract "in respect of" which the claim was made, and which was governed by English law, was not the alleged contract of guarantee itself, but the PSA. It did so perhaps in part because the PSA was expressly governed by English law, which the alleged guarantee was not, but also because an issue had arisen as to whether there was any contract of guarantee at all. While this change of horse has been forensically commented on by Mr Robert Lawson QC on behalf of Mr Wadhawan, no formal objection has been made against it.
In the result two substantial issues arose before the judge and have survived to this appeal. One is whether Global can rely on the PSA, to which Mr Wadhawan is not a party, as the contract governed by English law "in respect of" which the claim is made, when it might be said that its claim is really "in respect of" the alleged guarantee. The other is whether the alleged guarantee exists at all, and for the purpose of this enquiry whether the test is that of a "good arguable case", which applies to the jurisdictional basis of an application to serve out of the jurisdiction, or only a "serious issue to be tried", which is the merits test which applies to those parts of the claim which do not have to be made good to the higher standard applicable only to those ingredients which are essential to the jurisdictional gateway in question: see Lord Goff of Chieveley's famous speech in Seaconsar Far East Ltd v. Bank Markazi Jomhouri Islami Iran [1994] AC 438 at 453–455.
These two issues are linked in the following way. If the alleged guarantee does not even reach the merits test of a "serious issue to be tried", then the question as to the proper interpretation of para 3.1(6)(c) does not matter, for it will be irrelevant whether or not the guarantee has to meet the standard of the "good arguable case" test. If, however, the case in favour of the existence of the guarantee contract were to meet the merits test but not the jurisdictional test, then it would be essential to know whether in such a case the existence of a contract under which a claim is made needs to meet the jurisdictional test when there is another contract in respect of which the claim is made which (as is common ground) would meet that test.
These issues could be approached in either order. I will approach them in the order in which I have stated them above. But first I will state the background facts, about which there is little dispute.
The background facts
Mr Wadhawan, together with his father, owns all the shares in Privilege. In effect he is the principal of the business – even if his evidence, relied on by Global, that "I am, therefore, Privilege" (para 10 of his witness statement dated 27 November 2010) has been misunderstood: he was explaining the use of the first person singular in a letter written by him as Privilege's managing director. In fact his statement said: "I am a director of Privilege. I am, therefore, Privilege." Mr Wadhawan is the defendant in these proceedings, and in this court the respondent.
On the claimant's side, Global, here the appellant, is owned as to 50% by Berger Motorsport AG, which is effectively managed by Gerhard Berger. The sale of the aircraft was being managed on Global's behalf by Avpro Inc, whose managing partner was Don Bass. Global (or possibly Avpro) also employed as brokers Jahid Fazal-Karim and Nick Houseman.
On Privilege's side, the negotiations were dealt with by Pradeep Thampi and Tanveer Romani. Mr Thampi had his own business, Executive Airways, but he also acted as Privilege's chief of operations, albeit through Executive Airways. He described himself on Privilege's notepaper as its "Chief of Operations", and he used a "privilegeair" email address. Mr Romani, who signed a letter of intent described below on behalf of Privilege, did so as an "authorised signatory", but he was not an employee of the company.
The matter was argued before the judge below on certain assumptions accepted for present purposes on behalf of Mr Wadhawan. One was that the aircraft was new, even though it was described in the PSA as "used" and sold on an "as is" basis. A second was that when negotiations between the parties started, it was the only new aircraft of that type available for delivery in August 2008. A third was that the aircraft therefore commanded a substantial premium. A fourth was that the court should take Global's evidence, where it differed from Mr Wadhawan's, at its highest, and should rely on Mr Wadhawan's evidence only where it was uncontroverted.
On 1 August 2008 Mr Romani signed a letter of intent (also "LOI") on behalf of Privilege, and Mr Bass signed for Global's acceptance of it. It contained an offer by Privilege to buy the aircraft for $55.5 million; to pay a $1 million deposit within 24 hours "to secure the acquisition"; and to sign an agreed purchase contract by 6 August 2008. Global accepts that the letter was without any binding legal effect. On behalf of Global, Ms Marsh's evidence is that the letter of intent's purpose was "to secure the acquisition of the aircraft by Privilege and to provide [Global] with an assurance that Privilege intended to purchase the aircraft".
However, the $1 million deposit had not been paid within 24 hours, and the parties were still negotiating the PSA on 7 August. Early that day Mr Houseman emailed Mr Thampi to register the non-receipt of the deposit. Mr Thampi replied later that morning in an email which has been described by Mr Mark Hapgood QC on behalf of Global, as the "first bombshell". In it Mr Thampi informed Mr Houseman of new restrictions on the transfer of...
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