WPP Holdings SRL and Others v Benatti
| Jurisdiction | England & Wales |
| Judge | Lord Justice Toulson,Lord Justice Buxton |
| Judgment Date | 28 March 2007 |
| Neutral Citation | [2007] EWCA Civ 263 |
| Docket Number | Case Nos: A3/2006/1765, A3/2006/1765 (B) |
| Court | Court of Appeal (Civil Division) |
| Date | 28 March 2007 |
[2007] EWCA Civ 263
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HIGH COURT QB COMMERCIAL COURT
FIELD J
2006 Folio 535
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Anthony Clarke, Mr
Lord Justice Buxton and
Lord Justice Toulson
Case Nos: A3/2006/1765,
A3/2006/1765(A)
A3/2006/1765 (B)
Miss Barbara Dohmann QC and Mr Dominic Chambers (instructed by Reed Smith Richards Butler LLP) for the Appellant
Mr Joe Smouha QC and Mr Nathan Pillow (instructed by Freshfields Bruckhaus Deringer) for the Respondents
Hearing dates: 19, 20 and 21 February 2007
Introduction
This is a battle over jurisdiction under Council Regulation (EC) No 44/2001 (“the Judgments Regulation”). The matters in dispute are also the subject of proceedings brought by Mr Benatti against the present claimants in Italy.
Mr Benatti's challenge to the jurisdiction of the English court was rejected by Field J. His judgment [2006] EWHC 1641 (Comm), [2007] 1 All ER (Comm) 208, contains a detailed account of the factual background. For present purposes, a less detailed account will be sufficient.
The Parties
Mr Benatti is an Italian businessman, domiciled in Italy, with interests in various companies active in the worlds of advertising, media buying and public relations.
The claimant companies all belong to the WPP Group (“the Group”), one of the world's largest communications services groups with interests which include advertising, media buying and public relations. The Chief Executive Officer of the Group has at all relevant times been Sir Martin Sorrell.
The corporate structure of the Group has caused some confusion, which has a relevance as will appear. Until 25 October 2005 the parent company was WPP Group plc (registered number 01003653) but on that day it changed names, as part of an internal reconstruction, with a newly formed company called WPP 2005 plc. The upshot was that both before and after 25 October 2005 the parent company bore the name “WPP Group plc”, but they were different companies. On 9 November 2005 the company then called WPP 2005 plc (ie old WPP Group plc) changed its name and status to become WPP 2005 Limited. That company is the second claimant. The first claimant (“WPP Italy”) is incorporated in Italy and its operations are centred there. The third claimant (“BSH”) is a Dutch company used by the Group for the purposes of acquiring majority holdings in European companies.
The Contract
On 4 March 2002 WPP Italy and Mr Benatti entered into a written agreement expressed to be a consultancy agreement. By clause 2 Mr Benatti was appointed as a consultant to old WPP Group plc (referred to in the agreement as WPP) and to WPP Italy, in respect of all their business activities in Italy, with the title of WPP Country Manager for Italy.
Mr Benatti's duties were set out in clause 3. He was to assist WPP Italy and any other Group company in Italy in their business activities, when asked to do so by WPP Italy or WPP, and was to liaise with and report to the Chief Executive in relation to performance of his duties, subject at all times to the directions and instructions of WPP's board of directors. In particular, he was to assist in identifying and negotiating business acquisitions in Italy and elsewhere as agreed with the Chief Executive; identifying key executives; developing client relationships in Italy; identifying and proposing network synergies for the Group Companies in Italy; and assisting the Chief Executive in formulating and implementing strategic objectives in Italy. He was to be free to have interests in other companies not forming part of the WPP Group, provided that those interests did not detract from or interfere with his ability to perform his duties under the consultancy agreement, and he was to keep the Chief Executive informed of his business activities which were not concerned with any WPP company. Clause 3 also provided that Mr Benatti was not required to work on average over any period of 90 days for more than one and a half days per week.
Clause 4 provided that Mr Benatti should be paid a base retainer fee equivalent to €198,000 per annum, plus VAT, and a commission of 1% of the value of any businesses acquired through his introduction or with his assistance. Clause 5 entitled him to reimbursement of expenses incurred in the performance of his duties and to the provision of a personal assistant, secretary and properly equipped office at the expense of WPP Italy.
Clause 8 contained post termination non-solicitation and non-competition covenants on the part of Mr Benatti in favour of WPP Italy and/or WPP and/or any of the Group companies.
Clause 11 provided:
“This agreement shall be governed by English Law and any controversies arising from or related to the interpretation or enforcement of this contract shall be exclusively submitted to the Courts of England.”
By a written amendment dated 12 May 2003 Mr Benatti's base fee was increased to €500,000 with effect from 1 January 2003. It was increased again from 1 January 2005 to €850,000 per annum. On this occasion there was no written variation. It is Mr Benatti's contention that the increase was in consideration of an increase in his working time up to 5 days a week. This is denied by Sir Martin Sorrell, who agreed to the increase at a meeting with Mr Benatti.
The Termination of the Contract
In November 2002 BSH acquired an Italian media buying agency called Media Club for a fixed payment to be followed by three “earn-out” payments, dependant on the profits of Media Club over the following years. The acquisition was recommended by Mr Benatti, and he received a commission on the amount of the initial payment. In the course of auditing the figures on which the second earn-out payment was to be calculated, the Group's accountants drew Sir Martin Sorrell's attention to what they regarded as a suspicious transaction involving the sale by Media Club of a receivable owed to it by a company in liquidation called OVT. The effect of the sale was to increase the amount of the earn-out payment, on which Mr Benatti would receive further commission. It is the Group's case that investigations revealed that Mr Benatti had interests in Media Club and OVT, which placed him in a position to obtain secret profits from the Group's dealings in relation to Media Club, but he wrongly failed to disclose those interests to Sir Martin Sorrell.
On 9 January 2006 Sir Martin Sorrell summarily terminated the agreement at a meeting with Mr Benatti. On the same day WPP Italy issued a letter of termination, which reminded him of his post termination covenants and asked him to confirm that he would observe his ongoing obligations to WPP Italy and to “WPP Group plc”.
The WPP Companies' Claims
The particulars of claim assert that Mr Benatti owed contractual and fiduciary duties to each of the claimants—contractual duties to WPP Italy as the contracting counterparty; contractual duties to WPP 2005 Limited and BSH by virtue of the terms of the contract and section 1 of the Contracts (Rights of Third Parties) Act 1999 (“the Third Parties Act”); and fiduciary duties towards the claimants by reason of the contractual obligations which he undertook towards them.
The allegations of wrongdoing are all denied, but Miss Dohmann QC accepted for jurisdictional purposes (but not otherwise) that each claimant has a good arguable case in respect of its contractual and equitable claims.
The Judgments Regulation
Section 1 contains general provisions. The general rule, set out in article 2, is that persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State.
Section 2 is headed “Special jurisdiction”. Article 5 provides:
“A person domiciled in a Member State may, in another Member State, be sued:
1 (a) in matters relating to a contract, in the courts for the place of performance of the obligation in question;…
3. in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur.”
Section 5 is headed “Jurisdiction over individual contracts of employment”. Article 20(1) provides that an employer may bring proceedings only in the courts of the Member State in which the employee is domiciled. Article 21 provides that this requirement can be departed from by an agreement on jurisdiction only in limited circumstances, which would not apply in this case.
Section 7 is headed “Prorogation of jurisdiction”. Article 23 provides:
“1.If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise. Such an agreement conferring jurisdiction shall be either:
(a) in writing or evidenced in writing;…
5. Agreements…conferring jurisdiction shall have no legal force if they are contrary to Articles…21…”
Section 9 is headed “Lis pendens-related actions”. Article 27 provides that where proceedings involving the same cause of action between the same parties are brought in courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until the jurisdiction of the court first...
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