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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Weill v Mean Fiddler Holdings Ltd. [2003] EWCA Civ 1058 (25 July 2003) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2003/1058.html Cite as: [2003] EWCA Civ 1058

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH
DIVISION HIS HONOUR JUDGE COLES

		Royal Courts of Justice Strand, London, WC2A 2LL
		25th July 2003

Mr Justice Lightman:

INTRODUCTION

1. There are before the court: (1) an appeal by the Defendant Mean Fiddler Holdings Limited ("the Defendant") against the judgment dated the 26^th January 2003 ("the First Judgment") of His Honour Judge Bruce Coles QC ("the Judge") given at the trial of the issue of liability in this action holding that a document dated the 19^th August 1999 ("the Signed Document") signed by the Claimant Mr Weill ("the Claimant") and the Defendant constituted a binding contract between the parties; and (2) an appeal by the Claimant against the judgment of the Judge dated the 10^th April 2003 ("the Second Judgment") holding that the costs of the trial of the issue of liability should be reserved until after the trial of the outstanding issues in the action. The issue on the Defendant's appeal against the First Judgment is one of construction. The issue on the Claimant's appeal against the Second Judgment is whether the Judge in refusing the Claimant's application for an immediate order for costs in his favour exercised his discretion wrongly and in a manner which entitles this court to interfere.

FACTS

2. The Claimant is a financial adviser and consultant. The Defendant owns and operates venues for talent in the music industry. The Defendant was at all material times owned by Mr Vince Power ("Mr Power"). The only other relevant participant in business of the Defendant was Mr James Prior ("Mr Prior"), an associate of Mr Power, who through a family trust lent £1 million to the Defendant convertible into ordinary shares if and when the Defendant became a public company.
3. In 1999, when Mr Power was considering the flotation of the Defendant, Mr Prior introduced the Claimant, who was a neighbour, to Mr Power as a person who could add value to the Defendant by reason of his financial expertise, his connections and his familiarity with the internet and the opportunities which it offered the Defendant. The three met for lunch on the 17^th May 1999 and discussed the opportunities which the internet was offering. Following this meeting, on the 24^th May 1999 the Claimant wrote to Mr Prior stating that there was a large scope to develop further the Defendant's business "via the Internet" and offering consultancy services to this end in return for an initial retainer, a monthly fee of £2,000 per month for six months and the grant to a family company of options to purchase 2% of the Defendant at the current mutually agreed valuation, 3% of the Defendant at a valuation 50% higher than the current valuation and 5% of the Defendant at a valuation 100% higher than the current valuation for four years.
4. Mr Prior replied by letter dated the 26^th May 1999 stating that he and Mr Power would welcome the Claimant's participation in the development and expansion of the Defendant in general and in the internet in particular; that he had difficulty with the retainer; that the equity option had definite merit; that the Claimant, Mr Power and he should meet to agree the valuation; that a simple option agreement should be drawn up; and that if the Claimant agreed to the reservation about the consultancy, he (Mr Prior) would very much like to have an amended letter in substantially the same form as the letter dated the 24^th May 1999.
5. The same day the Claimant wrote back to Mr Prior. He said that the retainer and monthly fee were certainly not deal-breakers and that he would work for a token monthly payment in the United Kingdom and equity options granted to the off shore family company.
6. The Claimant thereafter prepared two documents, one headed "Company Proposal" and the other headed "Project Proposal" both dated the 21^st June 1999 which he sent with no covering letter to Mr Prior and Mr Power. The Project Proposal was headed "Subject to Contract". Both documents related to the means by which the Defendant could achieve its potential for commercial success. Neither contained any proposed terms for a contract between the Claimant and the Defendant. No doubt correctly the Defendant never advanced any case before the Judge that the use of the phrase "subject to contract" on one of the documents had any relevance or legal effect on the issue to be tried. If the Defendant had done so, that issue would have had to be investigated. Possibly further evidence might have been called. It is too late for the Defendant to seek to make such a case for the first time in the course of the argument on this appeal.
7. On the 26^th July 1999 a meeting took place between the Claimant, Mr Power and Mr Prior during which terms for the Claimant's consultancy were further discussed, but (as held by the Judge) no contract was concluded at this meeting.
8. On the 5^th August 1999 the Claimant wrote to Mr Prior a letter about how things were progressing at the Company and his activities on its behalf. The concluding paragraph read as follows:

"On a housekeeping note I include a general commencement letter that I would appreciate to have signed and returned that simply reiterates the terms that we discussed [on the 26^th July 1999]. I am happy to work out the details of a contract later but would appreciate this just as a friendly letter to have in hand, as in some ways I am representing the company."

9. The enclosure addressed to Mr Prior read as follows:

"This letter is to confirm our discussion of 26^th July.

It is a pleasure to formally commence a consultancy relationship with the Mean Fiddler Group. My brief is to develop the internet presence of the company to include web sites, internet communities and e-commerce solutions; and to familiarise myself, and add value to, the normal day to day operations of the company.

Compensation for this activity is to include a fee of £2000 per monthly plus reasonable expenses and warrants to purchase shares in the Mean Fiddler by a company representing my family interests for 2% of the company at the current mutually agreed valuation of £22 million, 3% of the company at a valuation 50% higher than the current valuation, and 5% of the company at a valuation of 100% higher than the current valuation for 4 years.

I look forward to formalising our relationship under contract and am very pleased to be part of such an exciting and growing company."

10. At Mr Prior's request the Claimant sent to Mr Power a letter in the terms of the enclosure addressed to Mr Power. On receipt of this letter Mr Prior wrote to Mr Power stating that there had been discussion of a valuation of the Defendant at £25 million and that Mr Prior thought that the Claimant could add "a lot of additional value" to the Defendant.
11. On the 7^th August 1999, the Claimant wrote to Mr Prior that he thought it "a good idea to discuss a commencement letter with terms so that we can all be clear on this"; that he saw the contract to be for six months at £2,000 per month with options granted to his family company for which purpose the Defendant should be valued at £22 million; and that if they could not come to terms, they should remain good friends and neighbours.
12. On the 11^th August 1999 the Claimant wrote a letter to Mr Power and Mr Prior in which he said:

"I suggest that we all sit down together early next week. I believe that both of you appreciate that to continue this project, we must clarify our relationship and document the nature of an agreement between ourselves….

Just to be absolutely clear, the value created by re-positioning the company into a media company as well as a media facilitator should accrue completely to the Mean Fiddler Group. Hence I wish to be involved, through warrants, in this entity."

13. Having received no reply, on the 18^th August 1999 the Claimant wrote again to Mr Prior. Under the heading: "Where are we?", he said that he was concerned that no movement had been made to agree terms and, if they were not to be agreed, he would bow out. He concluded: "There are plenty of fish in the sea!"
14. The Claimant gave evidence that on his receipt of this letter Mr Prior telephoned him to say that he had spoken to Mr Power, that Mr Power had suggested a valuation of the Defendant at £22.5 million rather than £22 million and that, if the Claimant sent Mr Power another engagement letter, he would sign it. Mr Prior in his evidence recalled no such conversation and denied inviting the Claimant to send another engagement letter or suggesting a valuation of £22.5 million. He described the Claimant's evidence as a "concoction". The Judge in the First Judgment made no finding whether he accepted the Claimant's or Mr Prior's evidence regarding this telephone conversation, and neither party thereafter asked him to make a finding.
15. On the 19^th August 1999 the Claimant sent to Mr Power what was to become the Signed Document already signed by him for signature by the Defendant. The letter read as follows:

"Dear Sir

This letter is to confirm our discussion of 26^th July 1999.

It is a pleasure to formally commence a consultancy relationship with the Mean Fiddler Group. My brief is to develop the internet presence of the company to include web sites, internet communities and e-commerce solutions; and to familiarise myself, and add value to, the normal day to day operations of the company. The value created through re-positioning the company, and capitalising on the internet dimension, will accrue to the Mean Fiddler Group.

Compensation for this activity is to include a fee of £299 per month plus reasonable expenses (postage, stationary, etc) for 6 months starting from 26^th July 1999 payable in arrears. In addition, warrants to purchase shares in the Mean Fiddler Group Ltd will be granted to a company representing my family interests for 2% of the company at the current mutually agreed valuation of £22.5 million, 3% of the company at a valuation 50% higher than the current valuation, and 5% of the company at a valuation of 100% higher than the current valuation for 4 years.

I look forward to formalising our relationship under contract and am very pleased to be part of such an exciting opportunity.

Sincerely

[signed]

David de Jongh Weill

[signed]

signed and accepted for Mean Fiddler Ltd"

16. On receipt of this letter, Mr Power instructed the Defendant's managing Director Mr O'Keefe, to sign it. Not merely did Mr O'Keefe sign it, but he supplied the omission of the word "Holdings" in the Defendant's name.

THE TRIAL

17. In his Particulars of Claim in this action the Claimant sought specific performance of the contract constituted by the Signed Document and in the alternative damages. To cover the eventuality that no contract was established, at the trial the Claimant was given permission to add an alternative claim to a quantum meruit in respect of the service which he had provided to the Defendant. The only defences raised to the Claimant's case were that the Signed Document did not constitute a contract and in the alternative that it was discharged by a later agreement. No argument was pleaded or raised that the remedy of specific performance was not available of such a consultancy agreement (as to which see Jones & Goodhart on Specific Performance 2^nd ed. p.169) or that for any other reason, if the contract was established, the Claimant should not be granted this relief. By an order dated the 4^th April 2002 made on the application of the Defendant it was directed that the trial be limited to the issue of liability. After a five day trial in the First Judgment the Judge upheld the Claimant's case that a valid and binding contract had been made and rejected the Defendant's case that the contract had been discharged by a later agreement. It was accordingly unnecessary for him to consider the alternative claim to a quantum meruit.
18. The Claimant did not at the date of the First Judgment or at the later hearing when directions were given for the trial of the issues on damages make any formal election between alternative and inconsistent remedies which he claimed for breach of contract and in particular between an order for specific performance and an order for payment of damages for loss of bargain. Whether and when such an election should have been or should be made are not issues which arise on this appeal, and accordingly no argument has been addressed to the court on these questions. But they are questions that should be considered and determined by the Judge at the Case Management Conference due to be held in September, for the election will critically affect the future course of this action. For the benefit of the Judge I should briefly express my provisional view of the relevant principles, but without in any way tying his hand.
19. Well-established principle requires that a claimant suing on a contract must elect between alternative remedies, and in particular whether to claim specific performance or seek common law damages for loss of bargain, at the time of judgment establishing the existence of the contract, the breach of contract by the defendant and his entitlement to relief (see Johnson v. Agnew [1980] AC 367 at 392 per Lord Wilberforce). Exceptionally it may be possible to postpone the election for a short period after judgment where this delay is necessary to enable the claimant to make an informed choice between the alternative remedies available (consider Island Records v. Tring International Plc [1996] 1 WLR 1256 approved in Tang Man Sit v. Capacious Investments Limited [1996] AC 514 at 521-2). Mr Onslow, Counsel for the Claimant, as I understood him has submitted that: (1) notwithstanding the First and Second Judgments there is not yet a judgment establishing his entitlement to relief which brings into play the requirement for election. This submission requires examination (in particular) of the order for the split trial, the First and Second Judgments and the directions given after the Second Judgment; and (2) the Claimant has wanted a period of time to take an informed view of the value of the warrants before making the election. For this purpose it is relevant to decide whether: (a) the Claimant was entitled to request financial information from the Defendant to enable him to reach such a view, and if he was so entitled; (b) the period necessary to obtain and consider this information; and in any event (c) the period necessary to reach an informed view. Mr Moverley Smith, Counsel for the Defendant, has indicated to us that he may wish to submit that the time for an election has already expired. The Judge must consider these submissions and decide whether the Claimant can or should be allowed any further period of time to make his election and (if so) the duration of that further period.

THE DEFENDANT'S APPEAL ON CONSTRUCTION

20. The issue in the action before the Judge was, and the issue before this court is, one of construction of the Signed Document in its factual context. This requires regard to be given to the genesis of the Signed Document; it must be construed in the context of the matrix of facts in which it was entered into; and a purposive construction must be adopted.
21. The Judge, after stating that he had concluded that the Signed Document had the effect of bringing a binding contract into existence, went on to say that he had reached this conclusion for the following reasons:

"(1) The letter of 19^th August is a formal letter, couched in formal terms. Mr Power (who was on first-name terms with Mr Weill) was addressed as 'Dear Sir' and the language used is formal language. It is also expressed in the language of contract.

(2) All the relevant terms are set out in the letter. It is true that in the third paragraph the compensation is said to 'include' what follows, but I do not think that this detracts from the fact that that paragraph purports to set out a complete set of terms for payment for the services to be rendered by Mr Weill.

(3) The letter states clearly there is a formal commencement of the consultancy relationship which is commencing then.

(4) The letter is an advance on the earlier letter of 3^rd August in that it clearly states what the basis of valuation is to be.

(5) The endorsement by Mr O'Keefe is in terms of an 'acceptance' – this is the language of agreement. The countersignature does not 'confirm' what is set out as merely being a record of the discussions of 26^th July. What it is saying is: 'I accept that you are now a consultant for Holdings and that you are entitled to remuneration on the basis as set out therein.

(6) It is a 'stand-alone' document. It does not depend upon the agreement of any other terms.

(7) I do not believe that the last paragraph detracts from these points. It is not expressed conditionally. Indeed, I have concluded that it very much comes within the sort of situation with which the Court of Appeal were dealing in Branca v Cobarro. I think that this last paragraph is just an expression of an intention that a more formal document will be drawn up which will incorporate the terms set out in this letter."

22. There are, as it seems to me, indications in the Signed Document both ways, whether an immediate contract was intended to be concluded or whether the Signed Document was intended merely to be a memorandum which should be the starting point for further negotiations. Support for the view advanced by the Defendant that there was no intention to conclude a contract may be found: (1) in the first paragraph which speaks of the Signed Document "confirming out discussion of the 26^th July 1999" which (as held by the Judge) did not culminate in a concluded contract; and (2) the statement in the first sentence of the third paragraph that compensation is to "include" the items specific, a term apposite to leaving open for negotiation the matter of inclusion of other items. The fact that a document contemplates the possibility of agreeing further terms is not however inconsistent with the document having contractual force. The contemplated further agreement, if it materialises, may be intended to be merely supplementary to the contract already concluded.
23. The Defendant sought further support in the last sentence of the Signed Document where the Claimant says: "I look forward to formalising our relationship under contract". The Defendant argues that this sentence is saying that there is to be a formal contract in the future and accordingly at the date of the Signed Document the parties were at the negotiation stage only. I do not think that this is the meaning of the sentence. Indeed the sentence supports the opposite conclusion. The language used is indicative of the intention that the parties' relationship should be formalised and made contractual by signature on the Signed Document. Differing from the Judge I do not think that the language used indicates that the Signed Document itself was to be a provisional agreement pending execution of a further and more formal document (as in the case of Branca v. Cobarro [1947] 1 KB 854). As it seems to me no further document was in contemplation. The Signed Document itself was to be the contractual bond between the parties taking effect immediately upon signature.
24. The Defendant also sought to pray in aid the fact that the greater part of the Signed Document was taken verbatim from the letter dated the 3^rd August 1999 and that the letter dated the 3^rd August 1999 did not have contractual force. The answer to this contention is that: (1) it is not clear that the letter of the 3^rd August 1999 if signed by both parties would not have had contractual force. The question could not arise because it was never signed by the Defendant; (2) the argument that the letter of the 3^rd August 1999 was not intended to be contractual gains force from the last paragraph of the accompanying letter dated the 5^th August 1999 which was (for the purposes of construction) part of the same transaction. There was no such accompanying letter to the Signed Document; (3) three additions were made in the Signed Document, namely (a) the addition of the last sentence of paragraph 2; (b) the addition in the first sentence of the third paragraph of the provision specifying the period during which compensation is to be paid; and (c) the increase in the valuation of the Defendant to £22.5 million; and (4) significant developments took place between the 3^rd and the 19^th August 1998, and in particular the Claimant gave, and the Defendant acceded to, an ultimatum requiring agreement of terms. For these reasons I do not think that the fact that the genesis of much of the Signed Document lies in the letter of the 3^rd August 1999 supports, still less impels acceptance of, the Defendant's case.
25. On the other side favouring the Claimant's case of the immediate conclusion of a contract are the first six facts relied on by the Judge as the reasons for his decision. I would express my reasons for reaching this conclusion as follows: (1) on its face the Signed Document has the appearance of a concluded contract signed by both parties; (2) the Signed Document was signed in response to the threat by the Claimant that in default of agreement of terms he would "walk away"; (3) amendments and additions were made to the terms which appeared in the letter of the 3^rd August 1999 giving greater particularity to the agreement; (4) the last sentence in the Signed Document (as I have construed it) is indicative of the intention that contractual relations should arise on signature of the Signed Document; and (5) the Managing Director not merely signed the document but (in evident recognition in its legal significance) corrected the omission of one of the Defendant's names. I should add that I do not agree with the Defendant that any significance should be attached to the use under the space for the Defendant's signature of the term "accepted" as opposed to "agreed". Either term is equally apposite to a concluded contract. The Defendant by signing accepted the terms offered by the Claimant: by so accepting them, it agreed them.
26. In a word, I have no doubt that the Judge was correct in holding that the Signed Document viewed in the context in which it was signed manifested the intention of both parties to constitute an immediate binding contract as opposed to a mere non-contractual memorandum of understanding and a basis for further negotiation.
27. For the purposes of this exercise of construction it is unnecessary to accede to the request of the Claimant to resolve the issue of fact left unresolved by the Judge whether the evidence of the Claimant or Mr Prior is correct as to the telephone conversation on the 18^th August 1999. It is in my view important that, when a judgment is delivered by a trial judge, the parties and their representatives should examine it carefully to see whether it leaves unresolved issues of fact which will or may have a bearing on a possible appeal. If it does do so, the parties and their representatives are duty bound as soon as practicable to invite the Judge in the judgment itself or a supplementary judgment to resolve that issue. Where this course is available but not taken, it is not apposite to leave the question over to be raised in the Court of Appeal. The Court of Appeal will not generally be in the position, certainly as good a position, as the Judge to fill the gap, and the Court of Appeal may for this reason be slow to do so. I would not be willing on this appeal to resolve the conflict of evidence as to the course of the conversation. If this issue had to be resolved, it would have to be referred back to the Judge.
28. I would accordingly dismiss the Defendant's appeal.

THE CLAIMANT'S APPEAL ON COSTS

29. The issue raised on the Claimant's appeal as to costs is whether the Judge's exercise of discretion refusing to make an immediate order for costs in favour of the Claimant in respect of the trial of the issue of liability and postponing any order in respect of such costs until after the trial of the remaining issues was clearly wrong or so flawed as to be open to challenge.
30. The relevant applicable principles are set out in CPR 44.3 and the judgment of Lord Woolf MR in Phonographic Performance Ltd v. AEI Rediffusion Music Ltd [1999] 1 WLR 1507 ("Phonographic"). The court has a discretion whether to make an order about costs (see CPR 44.3(1)). If the court decides to make an order about costs, the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order (see CPR 44.3(2)). In deciding what (if any) order to make about costs, the court must have regard to all the circumstances (see CPR 44.3(4)). The orders that the court may make include an order that a party must pay the costs from and until a certain date only (see CPR 44.3(6)(c)) and this accordingly includes an order for costs from the date of the order for the trial on the issue of liability alone until the date of judgment on that issue. The CPR encourages the court today to make issue specific orders for costs. As Lord Woolf MR stated in Phonographic at 1522-3:

"The most significant change in emphasis of the new rules is to require courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this the new rules are reflecting a change of practice which has already started. It is now clear that too robust an application of the 'follow the event principle' encourages litigants to increase the costs of litigation since it discourages litigants from being selective as to the points they take. If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your effort to do so."

31. The considerations to which I have referred would in any ordinary case in the absence of special circumstances be likely to lead the court to make an order for costs in favour of the claimant who has succeeded on the issue of liability. In this case the Defendant sought to establish the existence of special circumstances requiring or justifying a different course. These special circumstances were that: (a) the Defendants would at the subsequent hearings seek to establish (though no hint of this suggestion was given in the Defence) that the warrants were valueless; (b) if the Defendant established this fact, any damages for breach of contract would be nominal and the value of the order for specific performance would be nil; and (c) it should be left open to the Judge at the subsequent trial in the light of these findings to hold that the Claimant was not (within the language of CPR 44.3(2)) a successful party or otherwise should not be awarded the costs of the issue of liability. The Judge acceded to the Defendant's submission and held that it was inappropriate and premature to make any order for costs at this stage:

"I have reached this conclusion primarily for the reason that it would be pre-empting the exercise of the court's discretion at the final stage of the proceedings after it has been decided whether or not the claimant suffered anything more than a nominal loss." (paragraph 10 of the Second Judgment).

32. The short issue on this appeal is whether the Judge was entitled to conclude (as he did) on the argument addressed to him that a nil valuation of the warrants (if subsequently established by the Defendants) could justify a refusal to make an order in favour of the Claimant of the full costs of the trial of the issue of liability. Whilst in the exercise of his discretion the Judge could have made, and indeed might well have been expected to make, an immediate order for the payment to the Claimant of the costs of the trial of the issue of liability or at least a proportion of those costs (leaving the question of entitlement to the remainder over until later), with some hesitation I reach the conclusion that on this appeal it is not possible to say that the Judge's decision was clearly one which he was not entitled to reach.
33. The fact that only nominal damages are awarded after a single trial of the issues of liability and damages in the circumstances of a particular case may constitute grounds for refusing the claimant his costs or his full costs of the issue of liability. There is much to be said for the view that the incidence of costs should be the same whether or not for case management reasons there has been an order for a split trial and whether or not the order for a split trial was made on the initiative of the claimant or the defendant. If this is so, in the case where there is a split trial and it is left uncertain until conclusion of the trial on quantum whether the claimant will recover more than nominal damages, it may be proper for the trial judge to defer making any order for the costs of the trial of the issue of liability until the final outcome of the action is known. This may be the case whenever the judge considers that there is a real possibility that the outcome of the assessment of damages may affect the merits of the parties' entitlement to the costs of the issue of liability. If the Judge forms the view that it does, he must consider carefully whether justice to the defendant requires him to postpone any decision on costs until the final outcome of the action is known. I do not think that the Judge's decision in the exercise of his discretion to follow this course in this case and postpone the decision on costs can or should be disturbed.
34. For these reasons I would dismiss the Claimant's appeal on costs.

Lord Justice Tuckey

35. I agree.

Lord Justice Ward

36. I also agree.
Order: appeal dismissed with costs and cross-appeal dismissed with costs, to be assessed if not agreed. (Order does not form part of the approved judgment)