Marsfield Automotive Inc. v Kamal Siddiqi
|England & Wales
|Mr. Justice Teare,Mr Justice Teare
|10 February 2017
| EWHC 187 (Comm)
|10 February 2017
|Queen's Bench Division (Commercial Court)
|Case No: CL-2016-000182
 EWHC 187 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Mr. Justice Teare
Case No: CL-2016-000182
Neil Kitchener QC and Sebastian Isaac (instructed by Mishcon de Reya LLP) for the Claimant
Vernon Flynn QC and Jackie McArthur (instructed by Berwin Leighton Paisner LLP) for the Defendant
Hearing dates: 30 and 31 January 2017
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.
In this case the Claimant has brought a claim against the Defendant in restitution for the sum of £50m. The Claimant has issued an application for summary judgment. It has been opposed by the Defendant. The matters upon which he relies to resist the application are set out in a detailed skeleton argument of counsel running to 25 pages. Those defences are supported by 5 witness statements much of the content of which is disputed by witness statements served on behalf of the Claimant. The subject matter of the claim being restitution many authorities have been referred to and on several issues there is considerable dispute between counsel as to the applicable principles. A substantial claim in restitution involving disputed evidence and principles of law is not an obviously fertile ground for summary judgment.
It is first necessary to summarise the background to the claim. The Claimant, Marsfield Automotive Inc., is a company registered in the British Virgin Islands. Behind it is a Russian entrepreneur and businessman Mr. Dennis Sverlov. The Defendant, Mr. Kamal Siddiqi, is an inventor, engineer and entrepreneur who controls a group of companies including Frazer-Nash which has developed an electric vehicle. The Defendant is also the sole shareholder of Eco Motive AG, a Swiss company.
The Claimant and Eco Motive entered negotiations and agreed certain terms which are set out in a Term Sheet dated 9 May 2014. Save with regard to provisions concerning non-solicitation, confidentiality and the governing law and arbitration the Term Sheet was expressly stated not to be legally binding. The Term Sheet envisaged the setting up of a "platform company" jointly owned by Eco Motive (as to 35%) and by the Claimant and Genii, a Luxembourg company which was to be incorporated thereafter (as to 65%). Eco Motive was to provide a licence to the platform company to use the intellectual property concerning an electric vehicle. The Claimant and Genii wished to develop the product "on a global scale" utilising their access to financial resources and expertise, starting with a pilot project. The purpose of the venture was described in clause 1 of the Term Sheet and clause 2 described the share capital, structure and funding of the platform company. The intellectual property involved was described in clause 5 and clause 6 dealt with the proposed licence. The respective obligations of the parties were set out in clause 7. Clause 8 envisaged that Eco Motive would deliver two prototype vehicles to the platform company. Payments were dealt with in clause 9. The Claimant and Genii were to pay £50m. for the use of the licence and the sum would include compensation for costs incurred by Eco Motive for assisting in the setting up of the platform company and for its support for the pilot project. Within one week of signing the term sheet £40m. was to be paid to Eco Motive or its order. Two further sums, each of £5m. were to be paid later, the final tranche being on delivery of the two prototype vehicles under the pilot project. The proposed time scale was set out in clause 13. It envisaged that the shareholders' agreement and licence agreement would be signed by 9 June 2014, and the service agreement would be signed by 30 July 2014.
On 16 May 2014 the Defendant executed a deed on behalf of Eco Motive, entitled Payment Letter. It recited that the Claimant was to pay £40m. by way of down payment of the fee to be payable under the Licence. Clause 1.4 provided that the Claimant was instructed to pay £40m. to the account of the Defendant. Clause 1.6 provided:
"The final retention of the Payment by us is subjected to the execution of final agreements set out of clause 13 of the Term Sheet or any other such terms mutually agreed in writing."
There is evidence, which I do not understand to be challenged, that the Defendant asked for the payment to be made to him personally and that the Claimant's bank required the basis of the payment to be documented. That was the reason for the Payment Letter.
On 8 September 2014 a Supplemental Agreement was made by the Claimant and Eco Motive. It again was expressed to be not legally binding, save for provisions relating to non-solicitation, confidentiality, the governing law and arbitration. The licence was to be owned by Charge AG, a company to be incorporated in Switzerland, R and D was to be conducted by Charge Engineering Limited, a UK owned company (which I was told was owned by the Defendant) and Charge Holding AG, a company to be incorporated in Switzerland, was to hold 100% of the shares in Charge AG and Charge Engineering. Clause 2 dealt with the time line. It envisaged that the required agreements would now be agreed by 3 November 2014.
On 9 September 2014 the Defendant executed a deed on behalf of Eco Motive entitled Payment Letter. It recited that the Claimant was to pay Eco Motive £10m. in good faith and in advance of entering into the agreements to establish the joint venture. It provided for the sum to be paid into the account of the Defendant and clause 1.6 was in the same terms as clause 1.6 of the earlier Payment Letter.
There is no dispute that the sums referred to in the two Payment Letters were paid to the Defendant. There is also no dispute that the requisite agreements were never finalised. It is clear that by June 2015, if not before, the Claimant wanted the £50m. returned.
The Claimant has not commenced proceedings against Eco Motive for the return of the money. It fears that Eco Motive is not able to repay the money and has no assets. Rather, it has commenced proceedings against the Defendant, alleging a claim in restitution.
The basis of the claim was explained by Mr. Kitchener QC on behalf of the Claimant. The Claimant made the payment of £50m. as a deposit. It was not obliged to do so and when it was apparent that the parties could not reach a final and binding agreement the Claimant was entitled to its money back. The position was analogous to the facts of where, in the absence of a binding contract to purchase land, a deposit was paid. In the event the negotiations failed and it was held by the Court of Appeal that the intended purchaser was entitled to his deposit back. Warrington LJ said at p.112:
"The purchaser has not bound himself, but in order to show a definite intention he is willing to part with money, and run the risk of the vendor spending the money and being unable to return it if negotiations are broken off. The purchasers contend that this is a deposit paid in anticipation of a final contract and nothing more. That seems to me to be the true view."
Mr. Kitchener said that the Claimant's entitlement to the money back is made clear by clause 1.6 of the Payments Letters. The money can only be retained by Eco Motive if the requisite agreements were made. Since the money was in fact paid to the Defendant, albeit as agent for Eco Motive, Mr. Kitchener says that in circumstances where the basis of the payment has failed the Defendant has been unjustly enriched and is liable to repay the money in restitution.
Mr. Flynn QC, on behalf of the Defendant, has raised a number of defences to this claim. The question, on the Claimant's application for summary judgment, is whether any of them has a real prospect of success.
It became clear during Mr. Flynn's oral submissions that his "fundamental" defence to the claim was that in circumstances where the Claimant had chosen to deal with Eco Motive the Claimant could only have a claim against Eco Motive and could have no claim against the Defendant. This proposition was based upon the decision of the Court of Appeal in .
In that case a firm of builders entered into a contract with a company owned by Mr. and Mrs. Costello for the construction of houses on land owned by the Costellos. The builders' invoices were not paid and so proceedings were issued against both the company and the Costellos. The claim against the Costellos was in restitution for unjust enrichment. The Court of Appeal held that, notwithstanding that the Costellos had been enriched by the work done on their land, the claim in restitution failed. Etherton LJ said, at paragraph 23:
"……the unjust enrichment claim against Mr. and Mrs. Costello must fail because it would undermine the contractual arrangements between the parties, that is to say, the contract between the claimants and Oakwood and the absence of any contract between the claimants and Mr. and Mrs. Costello. The general rule should be to uphold contractual arrangements by which parties have defined and allocated and, to that extent, restricted their mutual obligations, and, in so doing, have similarly allocated and circumscribed the consequences of non-performance. That general rule reflects a sound legal policy which acknowledges the parties' autonomy, and so limits disputes and litigation."
There are, it seems to me, some difficulties with the application of that general principle to the facts of this case. First, the...
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Sixteenth Ocean Gmbh & Company KG v Société Générale
...of the law should be on the basis of actual and not hypothetical facts …”. In a similar vein, in Marsfield Automotive Inc v Siddiqi  EWHC 187 (Comm), Teare, J said (at paragraph 1) that “ The subject matter of the claim being restitution many authorities have been referred to and on s......