Green Deal Marketing Southern Ltd v Economy Energy Trading Ltd
| Jurisdiction | England & Wales |
| Judge | Keyser |
| Judgment Date | 06 March 2019 |
| Neutral Citation | [2019] EWHC 507 (Ch) |
| Docket Number | Case No: HC-2017-001572 |
| Court | Chancery Division |
| Date | 06 March 2019 |
and
[2019] EWHC 507 (Ch)
HIS HONOUR JUDGE Keyser Q.C.
sitting as a Judge of the High Court
Case No: HC-2017-001572
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
The Rolls Building, 7 Rolls Buildings,
Fetter Lane, London, EC4A 1NL
Jeffrey Chapman QC and Rory Brown (instructed by Brandsmiths) for the Claimant, Third Party, Fourth Party and Fifth Party
Andrew Green QC and Dominic Howells (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Defendants
Hearing dates: 13, 14, 15, 16, 19, 20, 21 November and 18 December 2018
Written submissions: 7 December 2018
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.
HIS HONOUR JUDGE Keyser Q.C.
H.H. Judge Keyser Q.C.:
Introduction
The first defendant, Economy Energy Trading Limited (“EE”), and the second defendant, E (Gas and Electricity) Limited (“EGEL”), are companies in the business of selling gas and electricity to domestic customers. On 14 January 2019, after the conclusion of the trial in these proceedings, EE entered administration. The third defendant, Lubna Khilji, is a director and the Chief Executive Officer of EE. The fourth defendant, Paul Cooke, is a director, now indeed the sole director, of EGEL. Ms Khilji and Mr Cooke live together in a personal relationship, are the principal beneficiaries of each other's wills, and together share ultimate beneficial ownership of the holding companies that own EE and EGEL.
Until the matters giving rise to these proceedings, the claimant, Green Deal Marketing Southern Limited (“GDM”), carried on the business of an energy mediator, connecting energy providers with gas and electricity consumers. More particularly, it had a team of door-to-door salesmen (sometimes referred to as “field sales agents”), numbering more than 200, who would visit the homes of customers of the larger energy suppliers and try to persuade those customers to transfer their custom to GDM's principal. From May 2015 until January 2017 GDM provided these services exclusively to EE. Initially it did so under a written contract (“the Partnering Agreement”) dated 18 May 2015 and signed on 20 July 2015. However, it contends that from 29 June 2016 its relationship with EE was governed by a new written contract signed on that date (“the Heads of Terms”). EE contends that the Heads of Terms had no legal effect and that the relationship remained subject to the Partnering Agreement.
On 31 January 2017 the commercial relationship between EE and GDM was summarily terminated by EE. The correct analysis of the termination is an issue between the parties.
GDM contends that in ending the commercial relationship EE was acting wrongfully and in repudiatory breach of contract. In these proceedings, GDM claims against EE damages at common law for breach of contract and compensation pursuant to regulation 17 of the Commercial Agents (Council Directive) Regulations 1993 (“the Regulations”).
EE denies the claim in its entirety. Its principal contention is that it was entitled to bring the relationship to an end on account of serious breaches of contract by GDM involving mis-selling on a large scale by GDM's field sales agents. EE counterclaims against GDM damages for loss of profits said to have resulted from GDM's breaches of contract. By reason of an order made at the pre-trial review, the quantum of the damages payable to EE, if liability on the counterclaim is established, do not fall to be assessed at this trial.
GDM makes a further claim against EE, EGEL, Ms Khilji and Mr Cooke for breach of confidentiality. The claim in summary is that, immediately after EE terminated its relationship with GDM, EGEL or its agent contacted over 200 of GDM's sales agents with an offer of work, using for that purpose a database that was confidential to GDM and had been obtained by EGEL from EE in breach of EE's duty of confidentiality to GDM.
EE also brought Part 20 claims against three directors of GDM, Tobias Jung, Richard Turner and Ashley Allen, alleging that they induced GDM's breaches of contract and that they conspired to injure EE by means of those breaches. Those Part 20 claims were discontinued very shortly before trial.
During the trial, reference was made to a significant amount of documentation generated by investigations into the operations of EE by the Office of Gas and Electricity Markets (“Ofgem”). That documentation was subject of a confidentiality order made at an earlier stage of the proceedings and extended by me at the trial. For the periods when that documentation was being referred to, the court sat in private; the trial was held in public at all other times. Some of that confidential documentation is relevant to the findings and conclusions expressed in this judgment. When reference to properly confidential material has been necessary, the text of this judgment is limited to what I consider to be an appropriate summary and the detailed references have been included in a confidential annex, available only to those permitted to have access to the documentation. I have tried to ensure that the amount of material so omitted from the public judgment is kept to the necessary minimum.
In the course of this judgment I shall make findings on some disputed issues of fact. In doing so, I have regard to all of the voluminous evidence that was adduced at trial, both documentary and from witnesses. The judgment is long enough as it is, perhaps too long. I shall not make it longer by a preamble giving my impressions of the various people who gave evidence. Suffice it to say at this stage that the principal actors, whom I have already named, all seemed to me to be highly motivated individuals who were willing to be less than frank or entirely truthful if they considered it to be in their financial interests. Ms Khilji and Mr Cooke were, perhaps, especially unimpressive; however, that was in part due to their unfortunate manner in the witness box—hers, sullen; his, blustering, combative and dismissive—and I have not assumed that their evidence was shown to be more unreliable than that of other witnesses on that account. One particular matter calls for brief comment at the outset. Both sides conducted the case by seeking to impeach the personal character of their opponents. (The attacks on Ms Khilji seemed to me to be particularly distasteful in tone.) More specifically, each side tried to persuade me that the other had no interest in fostering good selling practices and was happy to tolerate or even encourage mis-selling in the single-minded pursuit of profit. In respect of both sides of the case, I reject that picture. There is no doubt that GDM and EE and their respective directors were strongly driven by money and commercial growth. It is likely that this attitude contributed to pressures that led to or exacerbated the problems that came to a head in late 2016 and in 2017. I also think that EE was overly reliant on GDM to ensure good sales practices and that its lack of internal expertise was highlighted by its unimaginative and unconstructive response to Ofgem's concerns, dealt with in some detail below. However, I formed the clear view that the senior management of both companies, including the directors, were genuinely concerned to avoid mis-selling. Each side claims that much for itself. I find it to be true of both. Financial self-interest is a sufficient, albeit not necessarily exclusive, explanation of that concern. The fact that mis-selling was not avoided does not mean that the concern was not real.
The rest of this judgment will be structured as follows. In paragraphs 12 to 92 I shall set out the main factual narrative, referring only to such matters as seem to be relevant to the issues or helpful for explaining the context in which those issues have arisen. This part of the judgment will also set out the most relevant provisions of the Partnering Agreement and of the Heads of Terms. In paragraphs 93 to 98 I shall address the question concerning which contract governed the relationship between GDM and EE. In paragraphs 99 to 138 I shall consider the allegations of breach of contract and the correct analysis of the termination of the relationship between GDM and EE. In paragraphs 139 to 152 I shall consider GDM's claim to be entitled to compensation under the Regulations. In paragraphs 153 to 196 I shall consider issues of quantification. In paragraphs 197 to 202 I shall consider the claim for misuse of confidential information. The result is summarised at paragraph 203.
I am grateful to Mr Chapman QC and Mr Brown, counsel for GDM, and to Mr Green QC and Mr Howells, counsel for EE and EGEL, for their helpful written and oral submissions.
The Facts
In October 2012 EE began to carry on the business of the supply of low-cost gas and electricity to existing customers of the UK's major energy suppliers. Ms Khilji has at all times been the driving force behind EE, as well as the person with effective control of it, and has ensured that its vision for growth is ambitious. That ambitious vision was shared by others, notably the Chief Operations Officer Angela Beardsmore, who left the company in mid-2016, and the Head of Sales, Lynne Curtis-Blackwell. By February 2014 EE had approximately 70,000 customers, most of whom it had acquired in the last three months of 2013. Growth continued, and EE had approximately 94,000 customers by January 2016 and approximately 206,000 customers by January...
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