TTI Team Telecom International Ltd v Hutchison 3G UK Ltd

JurisdictionEngland & Wales
Judgment Date23 January 2003
Neutral Citation[2003] EWHC 762 (TCC)
Docket NumberCase No: HT-02449
CourtQueen's Bench Division (Technology and Construction Court)
Date23 January 2003

[2005] EWHC 762 (TCC)

IN THE HIGH COURT OF JUSTICE

TECHNOLOGY AND CONSTRUCTION COURT

QUEEN'S BENCH DIVISION

St. Dunstan's House

Fetter Lane, London

Before:

His Honour Judge Thornton QC

Case No: HT-02449

(1) Tti Team Telecom International Limited
(2) Axarte Limited
Claimants
and
Hutchison 3g Uk Limited
Defendants

Mr Andrew Goddard appeared for the claimants instructed by Mayer, Brown, Rowe & Maw, 11 Pilgrim Street, London EC4V 6RW DX: 93 LDE Ref: 679/358.31603.4

Miss Finola O'Farrell QC appeared for the defendant instructed by Barlow Lyde & Gilbert, London EC DX: London, Ref: 7655483/AJH/8.58

Hearing dates: 25 and 26 November, 9 December 2002

JUDGMENT.

Subject Matter

Interim injunction application to restrain beneficiary from making a threatened call on a bond —principles applicable when application made by a party to the underlying contract against the other party to that contract who is, additionally, the beneficiary of the guarantee provided by the bond — Cargill International SA v Bangladesh Sugar and FoodIndustries Corp applied —application refused —threatened call not restrained

1
1

This claim seeks to restrain a threatened call on a bond which was provided by the bank of the claimant, a specialist supplier of software. The bond was ancillary to the provision of software services to, and under an agreement with, the defendant, a provider of services to mobile telephone users.

2

The background to the dispute is the development in the United Kingdom of Third Generation or 3G mobile telephone licences and services. The defendant, Hutchison 3G UK Limited ("H3G"), is a wholly owned subsidiary of Hutchison 3G UK Holdings Limited, the majority of whose shares are owned by Hutchison Whampoa Limited which is registered in Hong Kong and whose other shares are owned by NTT DoCoMo registered in Japan and KPN Mobile registered in the Netherlands. The object of H3G is to market the UMTS licence it acquired in 2000 to operate Third Generation mobile services in the United Kingdom. These services include the delivery of voice, data and other services to mobile users. For this purpose, H3G has had to procure complex hardware and software whose purpose is to manage and monitor the 3G network and to provide operation support systems for the network's operation.

3

TTI Team Telecom International Ltd ("TTI"), a company registered in Israel and which has been in business since 1992, specialises in the provision of such services and, in particular, markets a system with the appropriate name of Manager of Managers which is minimalised to MOM. This is a customised software system which provides management functions that have been developed by TTI and which comprises a suite of management features such as inventory, fault, performance, configuration and service management.

4

The parties entered into an agreement which came into effect on 14 February 2002, the "Effective Date", and a contract price, the "Total Price", of £13,485,610. The price was payable against the achievement of defined milestones, being the staged delivery and the successful acceptance testing of a defined part of the overall functionality to be provided by the MOM. A first or Advance Payment of £1,059,305 had to be paid by H3G on the Effective Date before TTI had performed any services or delivered any of the software. The next five Milestones provided for the five stages of delivery of the MOM split into Functionality 1 —5. The contract Programme Schedule identified the Milestone Dates for the completion of each milestone and the lump sum Milestone Payments to be paid on each of these dates. Each of the first four Functionality Milestone Payments was for the same lump sum of £1,588,957 and that for the fifth was for twice that sum, £3,177,91The five Milestone Dates following the Effective Date were stated to be the last days of each month from March to June 2002 and 2 September 2002. The programme also provided for further Milestone Dates, 2 September 2003 and 2 September 2004, being the dates for the acceptance of upgraded MOM for 2003 and 2004.

5

The agreement also provided that TTI should procure a bond, described in the agreement as "an advance payment bond" in the form appended to the contract in respect of the Advance Payment. A bond in similar but not identical terms guaranteeing payment to H3G by TTI for the same sum as the Advance Payment, £1,059,305, was subsequently procured from Bank Leumi Le Israel with the same date, 14 February 2002, as the Effective Date. The current dispute arises because H3G gave notice of its intention to draw down the total amount guaranteed by the bond on 12 November 2002 in circumstances in which TTI disputes H3G's entitlement to do so. Thus, as TTI believed, H3G was threatening a breach of its obligations relating to that bond contained in its agreement with TTI. TTI seeks an interim injunction to prevent that draw down and consequent perceived breach of the agreement from occurring.

6

This injunction application was started by a without notice application for an interim injunction to restrain the threatened call on the bond which was heard by me during a telephone application on 18 November 2002. The application was granted. At a with notice hearing on 19 November 2002, the interim injunction was replaced by an undertaking given by H3G not to call the bond until the hearing of TTI's full application for an interim injunction. At the conclusion of that subsequent hearing on 9 December 2002, 1 reserved judgment. The bond was about to expire and, to avoid it being called pending the determination of TTI's application, TTI agreed to pay the sum bonded into court to abide court's decision on its application for an interim unction. If the injunction application succeeds, this sum will be repaid to TTI but if it is dismissed, the sum will be paid to H3G in obviate a call on the bond.

7

There are, of course, three parties and two separate contracts to consider. First, there are the two parties to the bond, being H3G and the bank. Any call on the bond would be made under this contract to which TTI is not a party. TTI is, however, vitally interested in any call since the bond was provided by TTI's bank under its contractual banking arrangements and, if the bond was to be called, that bank would immediately debit TTI with the sum it had paid pursuant to the call. In addition to having to fund the call, TTI's credit facilities and commercial standing might be affected although I should stress that there was no evidence that either of these would in fact be affected by H3G's threatened call.

8

TTI's only direct contractual interest in the bond arises out of its separate contract with H3G whereby TTI agreed to procure the bond and H3G agreed to the circumstances under which it could make a call on TTI's bank under the bond. TTI's application is based on H3G's threatened breach of contract in threatening a call in circumstances that are not provided for in the agreement with TTI.

9

The application is, therefore, one for interim relief pending the full trial of TTI's claim to restrain a threatened breach of contract and one of the questions I must decide is what test is applicable to the exercise of my discretion to grant interim relief. In particular I must decide whether the applicable test is the traditional American Cyanamide test ( American Cyanamide Co v Ethicon Ltd [1975] AC 396, HL) so that TTI must show that there is a serious issue to be tried and that the balance of convenience favours the grant of an interim injunction in its favour. Alternatively, I must decide whether, since a call on a bond is in issue, TTI must overcome a higher hurdle and show that H3G's call, if made, would amount to fraud, dishonesty or bad faith on the part of H3G. In other words, I must decide whether the appropriate test in determining whether or not to grant TTI an interim injunction to restrain H3G from making a call on a bond is similar to the test that would be applicable if TTI was to seek to restrain the bank from paying that call.

2

The background facts

10

A significant volume of factual and documentary evidence was filed by both TTI and H3G to fill in the background to H3G's threatened call—on the bond. Essentially, there were significant delays in progress and in the provision, testing and bringing into service of the programmed functionality and the relevant milestone dates were not achieved as programmed. However, the reasons for and causes of these delays were and remain disputed.

11

TTI, in summary, alleged that a new Project Plan in the form of a series of revised Programme Schedule Milestone dates was agreed by the parties in late March or early April 2002, a change necessitated by H3G's inability to provide the information and data storage facilities required by TTI which H3G had a contractual obligation to supply timeously. Some of these essential matters were not provided at all and others were provided later than required. This would have inevitably delayed the projected launch date of the Third Generation network by at least six months. This led H3G to reduce the scope of the functionality required by Milestones 1 to 5 and to bring forward part of the functionality of Milestone 3 into Milestone 2. These changes were introduced so as to enable H3G to launch a reduced service following the achievement of Milestone 3. A further change was unilaterally imposed by H3G in late June 2002 whereby what amounted to a new Milestone was introduced requiring the MOM to satisfy a new test called the Business Readiness Test. Further changes were also instructed as to the content of Milestone 2. Finally, a new testing requirement was imported which involved a yet further test, a Production Readiness Test. All the required tests on Milestones 1 and 2 were successfully completed on 3 November 2002.

12

Soon afterwards, on 13 November...

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1 books & journal articles
  • TWO DECADES OF RESTRAINING UNCONSCIONABLE CALLS ON PERFORMANCE GUARANTEES
    • Singapore
    • Singapore Academy of Law Journal No. 2011, December 2011
    • December 1, 2011
    ...(Malaysia) Sdn Bhd v Arab-Malaysian Merchant Bank Bhd [1996] 1 MLJ 425; TTI Team Telecom International Ltd v Hutchinson 3G UK Ltd [2003] EWHC 762 (TCC), [2003] 1 All ER (Comm) 914 (Judge Thornton QC); Prof Peter Ellinger, “Documentary Credits and Finance by Mercantile Houses” in Benjamin‘s ......

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