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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 >> Pablo Star Ltd v Emirates Integrated Telecommunications Company PJSC (t/a Du) [2009] EWCA Civ 1044 (14 October 2009) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2009/1044.html Cite as: [2009] EWCA Civ 1044

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IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BIRMINGHAM DISTRICT REGISTRY
His Honour Judge Simon Brown QC
Sitting as a Mercantile Judge
8BM40064

		Royal Courts of Justice Strand, London, WC2A 2LL
		14/10/2009

Lord Justice Waller :

1. This is an appeal from the judgment of His Honour Judge Simon Brown QC sitting as the Mercantile Judge in Birmingham, given on 29^th October 2008. It is brought with the permission of Rix LJ.
2. The appellants (Pablo Star) commenced proceedings against the respondents a Dubai company (EITC) alleging that, following a competitive tender process, Pablo Star had been appointed by EITC to provide EITC with new ongoing multimedia video content for a 12 month period with a minimum spend of US $30,000 a month. The particulars of claim alleged that Pablo Star were paid over $100,000 in the first three months but that EITC had failed to provide or pay for the remaining 9 months of work and that Pablo Star have suffered losses in the result. The claim form provided particulars of the losses stating that although the same were calculated at some £90,000, the claim was limited to £50,000 bringing the same within the jurisdiction of the county court.
3. Pablo Star sought leave to serve the proceedings out of the jurisdiction relying on three grounds:

i) Article 23 of the Council Regulation (EC) No 44/2001 which involved asserting that under the contract which Pablo Star alleged there was a clause agreeing the jurisdiction of the English court;

ii) CPR 6PBD 3-3.1(6)(c) (formerly CPR6.20(5)) i.e. that the contract was governed by English law;

iii) CPR 6PBD 3-3.1(6)(d) (formerly CPR 6.20(6)) i.e. that EITC had breached the contract within the jurisdiction.

4. Leave to serve out was granted on a without notice application Mr Haydn Price making a statement supporting that application. In accordance with the court's direction, service was effected by "Fedex" on 17^th February 2009. By application dated 2^nd March 2009 EITC initially challenged the method of service under CPR 23 preserving their position on the question of jurisdiction. Ultimately by application dated 7^th May 2009 under CPR Part 11 EITC challenged the jurisdiction, that application being supported by a statement from Mr Brijesh Qadar S Ansari. The main point taken in that statement was that in relation to any contract that came into existence the contract was on terms which Mr Ansari asserted were terms referred to in the relevant Purchase Orders and which he exhibited to his statement, those terms I shall quote fully hereafter. Suffice it to say they contained a term providing for Dubai law as the law governing the contract, an arbitration clause and ironically having regard to the way in which matters have proceeded, a term requiring sensible negotiation before costs were incurred in litigation.
5. The judge found that the terms relied on by Mr Ansari were incorporated into the contract, or at least that EITC had the better of the argument that they were. He also found that any breach of contract occurred in Dubai. Thus he set aside service. He also awarded costs against Pablo Star. EITC were seeking costs in the region of £50,000 but the judge assessed the same at £10,000.
6. Pablo Star have struggled to obtain permission to appeal, permission being refused by the judge and initially refused by a single Lord Justice. As this judgment will subsequently make clear, in my view the appeal should succeed. It is further my view that Pablo Star has a strongly arguable case that a long term contract was entered into and indeed it has not been the main thrust of any argument on their behalf that there was no such contract. Further it is my view that on a proper analysis it is almost unarguable that the terms produced and relied on for the first time in Mr Ansari's statement were incorporated into any contract between EITC and Pablo Star. It is worrying indeed that a respectable company such as EITC faced with a claim for under £50,000, which they must appreciate has some merit even if not certain of success, should spend many thousands of pounds seeking to argue about where such a dispute should be resolved. It is as I have already said ironic that they should do so relying on terms which include a term that sensible negotiation should precede the incurring of expenditure. I am not saying that they should necessarily have just accepted England, but surely it would have made sense either to compromise swiftly as their own terms envisaged or, if that failed, suggest an arbitral tribunal or mediation in a neutral place.
7. The issues which need to be addressed on the appeal are, first, has Pablo Star got a claim with a reasonable prospect of success, i.e. is there a reasonable prospect of Pablo Star establishing at a trial that there was a long term contract with a minimum monthly spend of £30,000? If so, were the terms as to jurisdiction and applicable law which Pablo Star asserts terms of that contract or were the terms which EITC assert as to applicable law and jurisdiction terms of the contract or were no terms as to jurisdiction or applicable law agreed? If no terms as to jurisdiction were agreed, with which law does any contract have its closest connection? Finally where did any breach of contract take place?

Case on long term contract and if so what are its terms?

8. It is convenient to look at these issues together. The chronological sequence as indicated by the contemporaneous documents and e-mails seems to be as follows:-

i) In August 2006 Pablo Star and EITC were seeking to enter into a contract in respect of video and photography work called by Mr Haydn Price (who as Director and major shareholder in Pablo Star was given permission to argue the appeal for Pablo Star) Work 1. This he distinguished from the tendering process for Work 2 which was to take place in September 2006. In relation to Work 1 Pablo Star had provided its standard from of contract which included a term at paragraph 8:-

"The courts of England shall have sole jurisdiction in relation to the terms and conditions of this agreement which shall be interpreted according to the laws of England and Wales."

ii) During August Mr Price pressed for the signing of a contract and completion of the paper work [see e-mail of 14^th August 2006]. Ultimately Pablo Star received an e-mail of 21^st August 2006 from Mr Ansari saying "Please find attached the PO. I am now working on your contract". The purchase order dated 20th August covered video production and photography to the value of $103,000. It contained at the bottom a note reading: "This Purchase Order will be considered acknowledged and accepted by the vendor if it is not acknowledged within five days as per attached EITC terms and conditions". It is important to note that no terms were attached to that PO.

iii) Ultimately no further contractual documents were produced and Work 1 was completed and paid for. The question whether, as EITC would allege, the terms relied on by Mr Ansari as being the EITC terms referred to were incorporated into the Work 1 contract involves the same considerations as to whether they were incorporated into any contract for Work 2 and can be considered at that stage.

iv) By a document dated 12^th September 2006 EITC (known as and described in many documents as "du") made a request for a proposal in relation to "Multi Media" and "Retail Multi Media content". By 1.4 that request provided:-

"1.4.1. The vendor shall note that a response to this RfP does not commit du to any course of action resulting from its receipt and that du may, at its discretion:

Reject any Response; du is not bound to give any reason for the rejection.

Reject any Response which does not conform to the instructions and specifications which are contained therein."

v) By 4.6 Form of Contract:

"4.6.1 Vendors will be expected to contract on du terms and conditions as supplied in Appendix B. All Responses must be submitted based on these terms and conditions.

4.6.2 Vendors must highlight any issues with the contract in their Response. It is not sufficient to state that contract terms will be discussed at a later stage."

vi) Appendix B provides as follows "Vendor to supply contract template". Again it is important to note (a) that no "du terms and conditions" were supplied either in Appendix B or at all; and (b) that although Mr Holloway for EITC placed some reliance on clause 1.4.1, that clause clearly did not prevent a contract coming into existence if a tender was accepted.

vii) Pablo Star responded with a detailed proposal by a response dated 16^th September 2006. As to the terms of any contract its proposal said at 2.22:-

"Pablo Star acknowledges and accepts that du will issue any contract, but as requested, we attach a general draft template of one of our own contracts. See Appendix 1 – Draft Contract. We hope this will be helpful."

In an appendix was Pablo Star's standard form of contract and as with the standard form for Work 1 so for this proposal the terms included clause 8 quoted above.

viii) There then follow an exchange of e-mails which themselves refer to conversations being held between Mr Price and Mr Ansari. Mr Holloway relied on a note which appeared at the bottom of all e-mails in the following terms:-

"Without exception, du does not enter into agreements by exchange of emails and nothing in this mail shall be construed or interpreted as binding du or creating any obligation on behalf of du."

ix) Then by e-mail dated 20^th September 2006 Mr Ansari informed Mr Haydn ". . . we are formalizing the draft contract with the legal team. . . ".

x) There were then a series of e-mails in which EITC identified their requirements for the launch. In one such e-mail George Abihabib of EITC identified items for the launch "total $45,000 as launch budget for you to work toward as launch deliverables" and further stated "With this we can raise a PO and run the legal contract in parallel." There was a telephone conversation between Mr Ansari and Mr Haydn Price which resulted in an e-mail of 21^st September from Mr Haydn Price in the following terms:-

"Good to talk to you and thank you for your very constructive information and feedback.

As discussed, we would be delighted with a year contract with a guaranteed minimum budget each month. Clearly the budget would reflect each months changing these as decided by Du.

If you could please clarify if Du will be waiting until we have finished the first months work before organizing the PO for the second months work. As you know the deadlines are very tight and the sooner we have the second PO – the soon we can schedule subsequent work and this will help us to improve quality and reduce unnecessary future overtime costs.

Following our conversation, I am pleased to agree to your standard payment terms of 35% on PO, 35% on 15 days and 30% on 30 days.

I hope you have an enjoyable weekend."

xi) There are then further e-mails and further conversations in which a PO is promised and in which Mr Price is pressing for a PO to confirm EITC's commitment. Mr Price's evidence is that during this period Mr Ansari was saying that the legal department was overwhelmed and thus that no further paperwork would be produced – a PO would be sufficient.

xii) On 25^th September by e-mail George Abihabib for EITC said "As a minimum monthly commit to Pablo Star -1 digi poster 10k- 1 monthly feature 15k- 1 locked off filming 5k. Total monthly minimum is 30kUSD. However du will have requirements over this amount, but will commit only to this as a minimum".

xiii) The response from Pablo Star was by e-mail on 25^th September "That's reasonable. Assuming we will receive the first PO today, when would you like to meet? I will fit in with you."

xiv) Two purchase orders were then sent by EITC – PO 2125 dated 26^th September covering 1 Retail Multi Media Production for launch …Unit price $45,000" Under the total however appeared "0"; PO 2127 also dated 26^th September covering 1 Retail Multi Media – monthly production minimum . . . unit price $30,000" Under total appeared "0".

xv) On both POs at the bottom appeared a note identical to that on PO 1333 for Work 1 in the following terms "This Purchase Order will be considered acknowledged and accepted by the vendor if it is not acknowledged within five days as per attached EITC terms and conditions". No EITC terms or conditions were attached.

xvi) Mr Haydn Price by e-mail on 27^th September queried the total "0" hoping when Pablo Star invoiced "the finance department of EITC will still be able to pay". The response to that was an e-mail from Mr Ansari later on 27^th September in the following terms:

"Dear Haydn

Please note that the PO for 45K is for launch and it's the PO for the first month of our contract.

PO for 30K is the minimum fee which for the next 11 months.

Please note that these Pos are the blanket PO which is a confirmation from du about your work with us. Having received this PO, the next steps will be as follows

1. For every work (after discussion about the amount of work with George) you will submit a formal quotation to me.

2. After the quotation is ratified by me and George, he will book your quotation amount in our system.

3. I will map this quotation to the PO submitted to you (this is process is called as Release)

4. The release of the quotation will be accepted by George in the system and then your invoice will be ready for payment.

In other words you have just one PO for the entire 11 month period, but the payment will be released periodically.

I would also call you to explain this over the phone. Please feel reassured that this [is] a valid PO. Kindly start your discussion with George for the work for launch so that you could quickly start with step 1 above.

Regards

Brijesh"

xvii) The response from Mr Haydn Price for Pablo Star was on the same day:-

"Hi Brijesh

Thanks for the information. I know this is a bizzy time for you and I appreciate all your efforts.

Your information was very clear and we happily accept your offer of 12 months worth of work with the agreed minimum monthly values. It is a very exciting project and we are delighted to be working with Du at [the] start of such a high profile venture. Attached is the first invoice for month 1. I trust this is correct and that you or George can print it out and forward in to finance for payment. I am seeing George on Sunday to start work on the launch content and hope to see you again soon.

Thanks once again and have a good day."

xviii) Work was then performed and over the first three months payment was duly made by EITC. It is also right to note that EITC sent a further purchase order 2677 to take the place of Purchase Order 2125 on 31^st October. The note on the bottom of that PO simply read:-

"This Purchase Order will be considered acknowledged and accepted by the Vendor, if we do not receive any written notice to the contrary from you within five days from the date we have sent this Purchase Order."

In other words it made no reference to EITC conditions. The e-mail with that purchase order said "The terms and conditions agreed for the PO 2125 are applicable to PO 2677." Mr Haydn Price made clear by e-mail of 31^st October that EITC were not entitled simply to cancel a PO but was prepared to accept the new PO in place of 2125 on that understanding.

xix) Ultimately EITC stopped ordering work, and it is Mr Haydn Price's case that he was telephoned finally from to Dubai to be told there would be no more work and no work in substitution. That led to correspondence between Pablo Star and those with whom he had been dealing in the hope of resolving matters. That then led to correspondence with persons in EITC's legal department first Thomas Forsch and then Anneleise Reinhold. Finally a letter came from Denton Wilde Sapte, an English firm of solicitors with an office in Dubai. In not one of the letters from the lawyers was there any reference to "EITC terms and conditions" or any suggestion that by such terms the parties had agreed Dubai law and/or to arbitrate.

xx) It was only when EITC applied to set aside service that for the first time reliance was placed on terms and conditions said to have been those referred to in the notes at the bottom of the two purchase orders. They contained the following terms:-

"18. Applicable Law

The relationship between the Parties and any issue arising out of, with regard to or in connection with the subject matter of this Agreement shall be governed by and construed in accordance with this Agreement and, where this Agreement does not contain any applicable provision, by the Federal laws of the United Arab Emirates and the laws of the emirate of Dubai.

19. Dispute Resolution

19.1 All disputes arising out of on in connection with this Agreement shall be finally settled under the Rules of Commercial Conciliation and Arbitration of the Dubai Chamber of Commerce and industry by three arbitrators appointed in accordance with the said Rules. The arbitration shall be held in Dubai, UAE. The language used in the arbitration, including the language of the proceedings, the language of the decision, and the reasons supporting it, shall be English.

19.2 du and the Supplier agree to do their utmost to settle amicably any dispute or difference between the Parties arising out of or relating to this Agreement, including the formation, performance, interpretation, nullification, termination or invalidation of this Agreement, by conference and negotiations. In order to resolve any disagreement or difference of opinion arising out of this Agreement, du and the Supplier agree to escalade the matter as set out under Clause 19.3.

19.3 The Services Managers of du and the Supplier shall meet to attempt resolution. Should they not meet and resolve the matter within seven days from the day on which either of the Services Managers convenes a meeting to resolve the matter, then

19.3.1 The matter shall be promptly referred for resolution to the Chief Executive Officer of the Supplier and a person of equivalent standing nominated by du. If they are not able to resolve the matter within seven days of the referral under this Clause 19.3.1. then

19.3.2 The provisions of Clause 19.1 shall apply.

19.4 Nothing in this Clause 19 shall prevent either of the Parties from applying to any court fro injunctive relief n order to protect their valid interests."

9. Mr Haydn Price submits that when the chronology is traced through, it demonstrates that Pablo Star have a reasonable prospect of succeeding in a claim that EITC agreed a long term contract under which they would order at least a minimum of $30,000 a month. Mr Holloway sought to argue but only faintly that that was not so. He sought to rely on the note on the e-mails and on the lack of certainty.
10. It seems to me that the language used in the e-mails of 26^th and 27^th September taken with the production of the Purchase Orders in the context of those e-mails together with the fact for three months work was done and paid for, provides a strongly arguable case that EITC committed themselves to providing $30,000 worth of work each month as identified in the e-mail of 26^th September. The commitment was not purely by e-mail and thus the note on the bottom seems to me not to be applicable.
11. The critical issue relates to how far terms were agreed as to jurisdiction or applicable law. Mr Holloway submits that the reference to du's terms in the tender document and to EITC terms on the bottom of the Purchase Orders should lead to his argument succeeding that the terms produced by Mr Ansari were incorporated. It seems to me that there are various highly arguable answers to that submission. First the tender document does not have any such terms at appendix B indeed it seeks a template from Pablo Star. Furthermore Pablo Star were on any view submitting terms which seek to have English law and English jurisdiction agreed. There is no comeback from EITC expressly saying that they wish for a term which makes Dubai the applicable law and an arbitration clause. So far as the purchase orders are concerned they were being sent late on in the negotiating process and still in the context of Pablo Star's express proposal that there should be a term as to English law and English jurisdiction. If EITC are to seek to incorporate their own terms as to the appropriate law or as to arbitration they must do what is reasonably sufficient to draw that to Pablo Star's attention. [See Chitty on Contracts paragraph 12-013]. It is practically unarguable that they did sufficient to draw such terms to Pablo Star's attention if they did not attach the terms. Even if they had attached the terms it is strongly arguable that they were doing no more than drawing attention to a provision that required written notice within 5 days if the order was not to be treated as accepted.
12. Even if it were possible to construe the note as incorporating terms that EITC simply held in its office, it seems to me that the final point which can be made is that on the proper construction of the note, such terms and conditions had to be the ones that contained a provision which required written notice within 5 days if the order is not to be treated as accepted. The terms and conditions produced by Mr Ansari did not contain such a provision and thus it can be argued as it seems to me fairly conclusively that they simply cannot be the terms or conditions to which the note refers. They appear indeed not to be standard terms and conditions in the ordinary sense of that word; they appear to be the terms of an "Information Technology Master Agreement". It cannot be open to a party to a contract to refer to "Its terms and conditions" and then pull any terms and conditions out of the drawer which suits its purpose.
13. Does it follow that clause 8 of Pablo Star's standard contract is a term of the long term contract? There is an argument that it should be so held. Pablo Star had made it clear in relation to work 1 that that was the term they wished agreed and made it clear again in relation to Work 2 and it could be said that the failure to put forward a counter provision as I have already indicated should lead to clause 8 being incorporated. But I do not think that it is sufficiently clear that this is the right answer. Both parties left over the agreement of more detailed terms and Pablo Star recognised that if a detailed contract was going to be agreed it would be EITC who would draft the contract helped possibly by the template provided by them. The contract made by the series of e-mails and the purchase order arguably stands alone without the incorporation of Pablo Star's template terms.
14. I turn accordingly to the question as to which system of law such long term contract as Pablo Star may succeed in establishing has the closest connection and as to whether Pablo Star can bring themselves within CPR 6PBD .3 3.1(6)(c). It is common ground that by Article 4(2) of the Rome Convention as enacted into English law by the Contracts (Applicable Law) Act 1990, there is a presumption in favour of the law of the place of business of the person who is to effect characteristic performance of a contract. Although footnote 10 to Mr Holloway's skeleton suggests it may not be clear that that was Pablo Star in this case because of the management activities of EITC, that point was not taken orally and argument rightly proceeded on the basis that Pablo Star was that party.
15. Article 4(5) provides that the above presumption will not apply if characteristic performance cannot be determined and further provides that the presumption shall be disregarded "if it appears from the circumstances as a whole that the contract is more closely connected with another country."
16. Mr Holloway argued that that there were very few connecting factors with England and many connecting factors with Dubai. He pointed out that in the tender proposal from Pablo Star there is no mention of England at all. In particular it was never a term that Pablo Star had to perform any part of the contract in England. It was free to perform where it liked and Mr Holloway pointed out how some filming took place in Australia and how emphasis was placed by Pablo Star on its having offices in "New York, Sydney and Toronto". The purpose of the work was to encourage people in Dubai to walk into shops in Dubai. The work was to be supervised by personnel from Dubai and development meetings were to take place in Dubai.
17. Mr Haydn Price placed emphasis on the fact that Pablo Star did in fact perform the contract in England. He explained how much of the work was loaded onto a server in England and electronically delivered to Dubai. Some work a DVD was actually handed over physically in England. This was not surprising because Pablo Star was an English company and the tender request was sent to the company at its Birmingham office in England. The language of negotiation was all English.
18. It seems to me that Pablo Star have the better of the argument as to whether EITC are able to rebut the presumption and that they have much the better of the argument that the law with which any contract that Pablo Star establish has its closest connection is English.
19. It follows that Pablo Star can establish that the court is entitled to take jurisdiction under CPR 6BPD.3 3.1(6)(c), and it is thus unnecessary to consider whether there is a further basis by reference to where the breach took place.
20. The final question to which the court must direct itself is whether England is the proper place for this claim to be brought. [see CPR 6.37(3)]
21. Little argument has been addressed to the position of witnesses and convenience in that sense, but it would seem likely that the position is fairly evenly balanced i.e. some will have to come from Dubai if the case is to be fought here, and some would have to go to Dubai if the case was fought there. The factor which it seems to me ultimately weighs in favour of England is the fact that the contract if established is likely to be found to be governed by English law. It is more convenient to try such a case in England.
22. I would accordingly allow the appeal and restore the order granting permission to serve out of the jurisdiction.

Lord Justice Ward :

23. I agree.

Lord Justice Wall :

24. I agree that this appeal should be allowed for the reasons given by Waller LJ. I would like to associate myself particularly with the final three sentences of paragraph 6 of his judgment.