MV Promotions Ltd v Telegraph Media Group Ltd
| Jurisdiction | England & Wales |
| Judge | Hodge |
| Judgment Date | 29 May 2020 |
| Neutral Citation | [2020] EWHC 1357 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: BL-2019-LIV-000018 |
| Date | 29 May 2020 |
[2020] EWHC 1357 (Ch)
HIS HONOUR JUDGE Hodge QC
Sitting as a Judge of the High Court
Case No: BL-2019-LIV-000018
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
IN LIVERPOOL
BUSINESS LIST (ChD)
Liverpool Civil & Family Court
35 Vernon Street
Liverpool L2 2BX
Contract — Interpretation — Mistake as to parties — Correction by construction
Contract — Rectification — Common Mistake — Discretion — Existing Deed of Rectification — Tax advantages
Mr Alfred Weiss (instructed by Brabners LLP, Liverpool) for the Claimants
The First Defendant consented to the relief sought and took no part in the hearing
Mr Richard Chapman QC (instructed by The Solicitor's Office and Legal Services, HMRC, Manchester) for the Second defendant
Hearing date: Thursday 21 May 2020
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 Hodge QC
The following cases are referred to in the judgment:
AML Global Ltd v Exxonmobil Petroleum & Chemical bvba [2018] EWHC 3321 (TCC)
Arnold v Britton [2015] UKSC 36, [2015] AC 1619
Ashcroft v Barnsdale [2010] EWHC 1948 (Ch), [2010] STC 2544
Daventry District Council v Daventry & District Housing Limited [2011] EWCA Civ 1153, [2012] 1 WLR 1333
East v Pantiles (Plant Hire) Ltd (1981) 263 EG 61
Liberty Mercian Ltd v Cuddy Civil Engineering Ltd [2013] EWHC 2688 (TCC), [2014] 1 All ER (Comm) 761
Racal Group Services Ltd v Ashmore [1995] STC 1151, CA and [1994] STC 416 (Vinelott J)
Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71
No additional cases were cited to the court or referred to in the skeleton arguments.
His Honour Judge Hodge QC:
I: Introduction and overview
This is the court's judgment on the final hearing of a Part 8 Claim issued by MV Promotions Limited (“ MVP”) and the former international cricketer and cricket commentator, Mr Michael Vaughan, on 19 August 2019. The Claimants are represented by Mr Alfred Weiss (of counsel). The First Defendant, Telegraph Media Group Limited (“ TMG”), consents to the relief sought and has taken no active part in the proceedings. The Second Defendants, the Commissioners for Her Majesty's Revenue and Customs (“ HMRC”), are represented by Mr Richard Chapman QC. The hearing took place on Thursday 21 May 2020 during the supposed lockdown caused by the Coronavirus pandemic with the judge (attended by a clerk) sitting in open court in Liverpool and the parties, the witnesses, and an interested journalist attending remotely by Skype for Business.
The claimants seek a declaration that, on the true interpretation of a contract dated 24 June 2011 (“ the 2011 contract”), the contracting parties have since its inception been MVP and TMG; alternately, a declaration that the 2011 contract shall be rectified such that the contracting parties have since the inception of the 2011 contract been MVP and TMG. The claimants invited HMRC to be joined as a party to these proceedings since HMRC have an interest in the outcome arising out of closure notices issued by HMRC which (on HMRC's case) operate to add additional taxable business profits to Mr Vaughan's self-assessment tax returns for the services he has provided pursuant to the 2011 contract. HMRC's contention is that as a matter of interpretation, the 2011 contract is between TMG and Mr Vaughan and that, as a result, the income paid to MVP in respect of the 2011 contract (and various other agreements) should be recognised for tax purposes as income attributable to Mr Vaughan rather than as income attributable to MVP. TMG, Mr Vaughan and MVP entered into a deed of rectification dated 8 March 2018 whereby they agreed that the 2011 contract, as properly construed, constitutes an agreement entered into as between TMG and MVP and they confirmed that their intention was that TMG would contract with MVP. HMRC's position is that the 2018 deed does not rectify the 2011 contract with retrospective effect. It is in the light of HMRC's stance that MVP and Mr Vaughan seek a declaration from the court. HMRC actively oppose the claimants' case on the true interpretation of the 2011 contract. They assume a neutral stance on the rectification claim although, at the court's invitation, Mr Chapman has sought to assist the court by drawing its attention to HMRC's broader concerns in relation to rectification claims of this nature. The court is grateful to Mr Chapman because, in the past, commentators have expressed concerns that HMRC have not sought actively to participate in cases where rectification is sought in circumstances where the grant of that relief will confer fiscal advantages on the party seeking rectification. This case is unusual both for the involvement of HMRC and because it raises the thorny question of the appropriate exercise of the court's discretion to order rectification in a case where the parties to the relevant document have already sought to correct any mistake that it may contain. This latter issue raises the vexed issue of the true scope and effect of the much-discussed, and criticised, decision of the Court of Appeal in the case of Whiteside v Whiteside [1950] Ch 65.
II: The evidence
In support of their claim, the claimants rely upon the witness statements of Mr Neil Fairbrother dated 16 April 2019, Mr Gavin Reoch, also dated 16 August 2019, and Mr Adam Sills dated 23 May 2019. These provide full particulars of the claim. Mr Fairbrother is the cricket director of International Sports Management Limited (“ ISM”), a company limited by guarantee that provides sports agent services to sports professionals and sporting celebrities. Mr Fairbrother is charged with the responsibility of managing ISM's cricket division and in that capacity he has acted as Mr Vaughan's agent since around October 2002, whilst he was still a professional cricketer. Since 4 August 2015 Mr Fairbrother has also been a director of MVP. The other two directors of MVP (since its incorporation on 11 April 2003) are Mr Vaughan and his wife, Nichola. Mr Reoch is a former senior editorial manager of TMG, whilst Mr Sills is the Head of Sport for TMG. There was also a witness statement from Mr Ronald Kelly dated 18 September 2019. Mr Kelly is a solicitor with HMRC. Mr Fairbrother and Mr Reoch were both called to confirm their witness statements; and Mr Fairbrother was briefly allowed to supplement his written evidence by testifying that Mr Vaughan had purported to assign his image and merchandising rights to MVP at the time of its incorporation in 2003. As Mr Chapman pointed out in oral submissions, however, the precise terms of that assignment are not in evidence, and HMRC does not accept its efficacy. Moreover, there is no evidence that the assignment was available to TMG at the time of the 2011 contract or that Mr Reoch had seen it. Mr Chapman submitted that the assignment is not part of the admissible factual matrix and that it would not have prevented Mr Vaughan entering into the 2011 contract, particularly since he and his wife were the two directors of MVP at that time. Neither Mr Fairbrother nor Mr Vaughan were cross-examined; and there was no challenge to any of the witness evidence. The court notes that there is no evidence from Mr Vaughan himself.
In his witness statement Mr Fairbrother: (1) explains the history of his involvement with Mr Vaughan and MVP; (2) explains the negotiations antecedent to, and the execution of, a previous contract between MVP and TMG dated 21 October 2008 (“ the 2008 contract”); (3) explains the negotiations antecedent to, and the execution of, the 2011 contract; (4) explains the relief sought in these proceedings by way of a declaration as to the true identity of the contracting parties to the 2011 contract, alternately for rectification of the 2011 contract so as to correct it to reflect the true identity of the contracting parties from the inception of that contract; (5) explains the position of TMG and why Mr Fairbrother believes that it is appropriate for the court to grant the relief sought; and (6) confirms that he has given notice of this claim to HMRC as a potentially interested party.
Mr Fairbrother relates that part of his role as ISM's cricket director involves the negotiation of endorsement, sponsorship and commentary contracts for ISM's clients, including Mr Vaughan. MVP is the limited company through which Mr Vaughan provides his non-playing services to third parties, including, latterly, his services as a cricket commentator. According to Mr Fairbrother, it is his practice to obtain a power of attorney to act on behalf of his clients and he believes that it is likely that he held a power of attorney in respect of Mr Vaughan ever since he first became his client. The most recent copy of a power of attorney in respect of Mr Vaughan that Mr Fairbrother can locate is dated 22 August 2011 (and thus...
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