England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION,
COMMERCIAL COURT
(MR JUSTICE ANDREW SMITH)

		Royal Courts of Justice Strand London WC2 Friday, 2nd November 2001

Friday, 2nd November 2001

1. LORD JUSTICE SCHIEMANN: Before us is an interlocutory appeal from a judgment of Andrew Smith J. The dispute between the parties arises out of a singularly unfortunately and unclearly worded licence agreement. The appellant, Harrods, demanded payment from the respondent of certain guaranteed royalties (as they were called in the agreement) totalling £500,000 which it claimed had fallen due under the licence agreement on 1st February and on 1st May 2000. Following nonpayment of those sums the appellant purported to terminate the licence agreement on 25th August 2000 and to claim the royalties, together with other sums, pursuant to the termination provisions of the licence agreement.
2. The respondent's case was that the guaranteed royalty in question did not fall due until 31st October 2000 and that the appellant was not entitled to terminate. The respondent has claimed damages quantified at approximately £27m for repudiatory breach by the appellant of the licence agreement.
3. In those circumstances, the respondent, to whom for present purposes I can refer as Mr Tawil, applied for an order under Part 24 of the Civil Procedure Rules that he have summary judgment on liability to be entered in his favour with costs and damages to be assessed, because he claimed, first, that the defendant had wrongfully repudiated the licence agreement and he had accepted those repudiations; and second, that he believed that the defendant had no real prospect of successfully defending the claim against it and he knew of no other reason why the disposal of the claim should await trial. He relied, as that very formulation will make clear, upon CPR 24.12.
4. The judge at the end of the day dismissed the claimant's application for summary judgment and indeed the claimant's application for an interim payment, and ordered that various issues should go to trial. He however held that Harrods' case on construction of the licence agreement was not arguable and therefore he made a declaration as to the proper construction of the licence agreement in favour of the respondent. However he held that Harrods' other defences, which included rectification and estoppel, were arguable and ought to go to trial. As matters stand, therefore, the action is going for trial on those defences and also on various other issues. The judge refused permission to Harrods to appeal his decision on construction, but permission was given by my Lord, and we have heard argument as to the meaning of this singularly obscurely worded licence agreement.
5. The procedural position at which we have arrived, is a very unsatisfactory one. Because of the way the matter came before the learned judge, which I can fully understand but need not detail, he had formed a view on the proper construction of the licence agreement before he had to get down to consider various other defences which in themselves had attracted some late evidence. I think if he had applied his mind, as it were, the other way round and said: "There is clearly a case here to be argued on rectification and estoppel. Shall I decide this tricky point on construction?" he might very well not have done so. But having applied his mind at some length to it, and having formed a firm view that one side was right and the other side was unarguable, he proceeded in the manner which I have indicated.
6. We have heard very able arguments on each side in respect of two opposite contentions as to the proper construction of this agreement. In my judgment, it was unsatisfactory to split the issues in the way adopted. I feel that the whole matter ought to be dealt with at one hearing. If that be the right view it would not be right for me to set out the arguments and my preliminary conclusions as to one or the other way. That would merely be an embarrassment for the judge who eventually has to try the case. This is not a case where the parties have agreed upon a preliminary issue being tried. Nor is it a case, as I understand it, where it was specifically sought that this issue be tried on its own and the other go off to trial in the future. That is a result which was achieved, I would venture to guess, almost by accident, and certainly, as I understand it, without the assent of Harrods.
7. In principle that is unsatisfactory. Mr Poppelwell of course (and very understandably) says that although there is evidence to be heard quite possibly on rectification, that evidence in all probability will not be admissible on the question of construction unless it can somehow get under the wire, as it were, in one of the relatively few exceptions to the rule, which is that you construe a document as best you can on its face. I see that way of putting it, and it may be that at the end of the day he will succeed in precisely that line of argument. But I am not convinced that that is so self-evidently just on the facts of this case, that it would be right to proceed by way of summary judgment on the point and to deprive Harrods of the opportunity of arguing the matter in full, when the judge will have more material as to what might be relevant as to matters of construction. I follow the strength of Mr Popplewell's case but I have had from the very beginning the instinct that this way of splitting up an issue which in itself, certainly if resolved in Mr Popplewell's favour, would not even dispose of the action, is unsatisfactory. I accept it might make it easier to settle in some ways although in other ways, it might make it more difficult to settle. One does not know.
8. In those circumstances I would allow this appeal and leave the judge's order as it stands so as to remove the declaration which he gave in the, as I think, erroneous belief that the contrary was not a tenable argument.
9. LORD JUSTICE RIX: I agree. The matter came before the judge on the basis that the argument on construction was all one way, and that there was no evidence admissible or relevant to that question of construction which could prevent him fairly and justly disposing of the matter if he agreed with the claimant's submission on a summary basis. He did in fact agree that the claimant, Mr Tawil, was clearly right on the point of construction, and he thought that the contrary was simply unarguable. He therefore made the order which he did.
10. Having heard the submissions on construction in this court, it seems to me that there is much to be said on both sides of the part of construction, and that it could not be said that the matter was either plain on the one side or unarguable on the other. Not only that, but, although it is difficult at this stage to see clearly how matters of evidence may ultimately work in relation to the point of construction, it does seem to me, in particular for reasons which have only emerged since the matter was before the judge, namely Mr Tawil's own reply and defence to counterclaim, that there is a reasonable argument that there may be evidence which may, to some extent, overlap with evidence relevant to the issue of rectification and which may also go to the question of construction.
11. As I say that is to some extent looking through a glass darkly, but, for those reasons and those which have been given by my Lord, I would agree that this appeal should be allowed and the judge's order should be amended in the way indicated.
(Defendant's appeal allowed; Defendant's costs to be paid by the Claimant; costs to be assessed by a costs judge unless agreed; an interim payment of £25,000 to be made).