England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
COMMERCIAL COURT
MR JUSTICE BEATSON
2010 FOLIO 1051

		Royal Courts of Justice Strand, London, WC2A 2LL
		19/01/2012

Lord Justice Rix :

1. This appeal is about a challenge to the jurisdiction of the English court, which succeeded before Beatson J. The claimant, Global 5000 Limited ("Global"), a Jersey, Channel Islands company, sues on a contract of guarantee whose terms are said to be contained in a letter dated 9 August 2008 written by Mr Sarang Wadhawan, the managing director of Privilege Airways Pvt Ltd, an Indian company ("Privilege"). The guarantee is said to have been concluded by the claimant's conduct in entering into a contract with Privilege for the sale of a Bombardier BD-700.1A11(Global 5000) aircraft,…' dated 14 August 2008 (the Aircraft Purchase and Sale Agreement or "PSA"). The PSA contains an English law clause (clause 3.12), and an agreement for arbitration in England.
2. Privilege changed its mind about the purchase not long after the PSA was made. It failed to pay the 10% deposit of US$5.55 million which had been due in two tranches, $1 million by 20 August and $4.55 million by 27 August 2008. It failed to pay what should have been the balance of $49.95 million as of 30 August 2008 (at which time the full price of $55.5 million was owing). And on 15 September 2008 it emailed Global to state that it had decided to defer its purchase for 6 months and, in a separate email on 28 November 2009, that it had decided not to purchase the aircraft. On 19 January 2009. Global's solicitors, Ince & Co, wrote to Privilege terminating the PSA. On 24 September 2009 Global commenced arbitration proceedings against Privilege. However, no progress has been made in that arbitration since Privilege filed its defence on 11 November 2009.
3. Global did not commence these proceedings in the commercial court in London against Mr Wadhawan until 8 september 2010. The claim form states (there are no particulars of claim) that damages are claimed for breach of contract "by which the Defendant agreed to procure and/or see to it that Privilege…complied with its obligation to pay US$55,500,000 to the Claimant by 31 August 2008, as the purchase price payable for a Bombardier…aircraft pursuant to a written Purchase and Sale Agreement… The aforesaid contract is contained in and/or evidenced by a letter dated 9 August 2008 from the Defendant to the Claimant and the Purchase and Sale Agreement".
4. For the purposes of applying for permission to serve out against Mr Wadhawan, who lives in India, Global relied on the alleged contract of guarantee taking its proper law from the PSA to which it was collateral and thus being a contract which was itself governed by English law. On that basis, Global invoked CPR 6.37(1)(a) and the jurisdictional gateway set out in CPR PD 6B, para 3.1(6)(c), namely that –

"(6) A claim is made in respect of a contract where the contract –

…

(c) is governed by English law…"

The first witness statement of Katherine Marsh, a solicitor with Ince & Co, made it clear that the contract "in respect of" which the claim was made was the alleged contract of guarantee.

5. Permission to serve out was granted ex parte by Flaux J on 6 September 2010. Mr Wadhawan was served in Mumbai on 13 October 2010, and he issued his CPR Part 11 challenge to the jurisdiction on 2 December 2010. The inter partes hearing came before Beatson J on 14 March 2011. At that time Global altered the basis on which it invoked the jurisdictional gateway under para 3.1(6)(c). It then submitted that the contract "in respect of" which the claim was made, and which was governed by English law, was not the alleged contract of guarantee itself, but the PSA. It did so perhaps in part because the PSA was expressly governed by English law, which the alleged guarantee was not, but also because an issue had arisen as to whether there was any contract of guarantee at all. While this change of horse has been forensically commented on by Mr Robert Lawson QC on behalf of Mr Wadhawan, no formal objection has been made against it.
6. In the result two substantial issues arose before the judge and have survived to this appeal. One is whether Global can rely on the PSA, to which Mr Wadhawan is not a party, as the contract governed by English law "in respect of" which the claim is made, when it might be said that its claim is really "in respect of" the alleged guarantee. The other is whether the alleged guarantee exists at all, and for the purpose of this enquiry whether the test is that of a "good arguable case", which applies to the jurisdictional basis of an application to serve out of the jurisdiction, or only a "serious issue to be tried", which is the merits test which applies to those parts of the claim which do not have to be made good to the higher standard applicable only to those ingredients which are essential to the jurisdictional gateway in question: see Lord Goff of Chieveley's famous speech in Seaconsar Far East Ltd v. Bank Markazi Jomhouri Islami Iran [1994] AC 438 at 453-455.
7. These two issues are linked in the following way. If the alleged guarantee does not even reach the merits test of a "serious issue to be tried", then the question as to the proper interpretation of para 3.1(6)(c) does not matter, for it will be irrelevant whether or not the guarantee has to meet the standard of the "good arguable case" test. If, however, the case in favour of the existence of the guarantee contract were to meet the merits test but not the jurisdictional test, then it would be essential to know whether in such a case the existence of a contract under which a claim is made needs to meet the jurisdictional test when there is another contract in respect of which the claim is made which (as is common ground) would meet that test.
8. These issues could be approached in either order. I will approach them in the order in which I have stated them above. But first I will state the background facts, about which there is little dispute.

The background facts

9. Mr Wadhawan, together with his father, owns all the shares in Privilege. In effect he is the principal of the business – even if his evidence, relied on by Global, that "I am, therefore, Privilege" (para 10 of his witness statement dated 27 November 2010) has been misunderstood: he was explaining the use of the first person singular in a letter written by him as Privilege's managing director. In fact his statement said: "I am a director of Privilege. I am, therefore, Privilege." Mr Wadhawan is the defendant in these proceedings, and in this court the respondent.
10. On the claimant's side, Global, here the appellant, is owned as to 50% by Berger Motorsport AG, which is effectively managed by Gerhard Berger. The sale of the aircraft was being managed on Global's behalf by Avpro Inc, whose managing partner was Don Bass. Global (or possibly Avpro) also employed as brokers Jahid Fazal-Karim and Nick Houseman.
11. On Privilege's side, the negotiations were dealt with by Pradeep Thampi and Tanveer Romani. Mr Thampi had his own business, Executive Airways, but he also acted as Privilege's chief of operations, albeit through Executive Airways. He described himself on Privilege's notepaper as its "Chief of Operations", and he used a "privilegeair" email address. Mr Romani, who signed a letter of intent described below on behalf of Privilege, did so as an "authorised signatory", but he was not an employee of the company.
12. The matter was argued before the judge below on certain assumptions accepted for present purposes on behalf of Mr Wadhawan. One was that the aircraft was new, even though it was described in the PSA as "used" and sold on an "as is" basis. A second was that when negotiations between the parties started, it was the only new aircraft of that type available for delivery in August 2008. A third was that the aircraft therefore commanded a substantial premium. A fourth was that the court should take Global's evidence, where it differed from Mr Wadhawan's, at its highest, and should rely on Mr Wadhawan's evidence only where it was uncontroverted.
13. On 1 August 2008 Mr Romani signed a letter of intent (also "LOI") on behalf of Privilege, and Mr Bass signed for Global's acceptance of it. It contained an offer by Privilege to buy the aircraft for $55.5 million; to pay a $1 million deposit within 24 hours "to secure the acquisition"; and to sign an agreed purchase contract by 6 August 2008. Global accepts that the letter was without any binding legal effect. On behalf of Global, Ms Marsh's evidence is that the letter of intent's purpose was "to secure the acquisition of the aircraft by Privilege and to provide [Global] with an assurance that Privilege intended to purchase the aircraft".
14. However, the $1 million deposit had not been paid within 24 hours, and the parties were still negotiating the PSA on 7 August. Early that day Mr Houseman emailed Mr Thampi to register the non-receipt of the deposit. Mr Thampi replied later that morning in an email which has been described by Mr Mark Hapgood QC on behalf of Global, as the "first bombshell". In it Mr Thampi informed Mr Houseman of new restrictions on the transfer of foreign exchange by non-scheduled airlines which Privilege had only just learned about with the refusal of its application to pay the $1 million deposit. He continued:

"After detail discussions with our client, we extend our apologies for not meeting the deadline whereas if this Global 5000 can be hold, the first instalment of $ 1 m should be in your account around 20^th of this month and balance between 25^th and 30^th of this month. The above commitment is due to long weekend in India from 14^th to 19^th Aug."

15. This was preceded by and/or led to internal discussions within Global and its agents which Ms Marsh describes in her evidence (albeit only in her third statement) as follows:

"I am informed that prior to 7 August 2008 Mr Jahid Fazal Karim, Mr Tobi Mathews [Global's lawyer and a director] and Mr Brian Knop had all made it clear to Mr Houseman that [Global] would need something further, beyond the assurances that had already been given, to convince [Global] to proceed with the sale to Privilege. Mr Houseman therefore informed Privilege, via Mr Thampi, that if they wished [Global] to continue with the sale of the Aircraft to Privilege then they would need Mr Wadhawan, as the man standing behind Privilege, to confirm his personal commitment to the transaction."

Mr Hapgood lays great stress on this reference to "personal commitment".

16. Although that evidence is first, hearsay, secondly purports to describe largely internal discussions apart from the final conversation between Mr Houseman and Mr Thampi, thirdly as to the latter conversation probably amounts to inadmissible evidence of negotiations rather than "matrix" for the purposes of the alleged guarantee, and fourthly describes an oral conversation not committed to writing, nevertheless for present purposes Mr Lawson on behalf of Mr Wadhawan is content to argue this appeal, as he was content to argue the hearing below, on the basis of Global's own evidence. I will refer to further evidence of negotiations, but Mr Lawson's concession applies generally.
17. At any rate it appears that Mr Wadhawan accepted that something further was required, and this time from him, to preserve the negotiations. Later on 7 August Mr Thampi therefore sent Mr Houseman a draft letter addressed to Mr Berger. The draft read as follows:

"I am in touch with Mr Nick Houseman of M/s Zenith Jet through Mr Pradeep Thampi of my operation team for purchase of your GLOBAL 5000…

The LOI for USD. 55.5m has been signed and due to a revised regulation imposed by our government, the initial payment of $ 1m cannot be wire transferred till all my paper works including receipt of No Objection Certificate to import Global 5000 is issued by the Ministry of Civil Aviation, India. Our request for import of Global 5000 is already considered by the Ministry and awaiting written permission. By considering a long weekend coming up between 14th to 19th August the initial payment can be sent to you only after 20th of August. Also assure the balance payment can be sent by the end of this month to close the transaction and take the delivery of the aircraft.

Mr Berger, I have a Falcon 2000 currently in India and on the way to add a Global 5000 and EC 135 helicopter into my fleet.

I have received a draft copy of your purchase agreement which can be executed immediately with payment scheduled as stated above."

The draft was signed by Mr Wadhawan as managing director of Privilege.

18. Mr Hapgood described some of the information contained in that draft as the "second bombshell", ie that import clearance had not yet been obtained. Mr Houseman replied to Mr Thampi:

"Pradeep,

One question – I thought you had the permission from the government to import the aircraft? "When will you get this?"

I would add at the end of the letter that Mr Sarang would like to talk to Mr Berger personally to assure him that he wants to buy the aircraft."

19. There was then an email report from Mr Fazal-Karim to Global's lawyer, Mr Mathews, (again, internal to Global), as follows:

"My guy spoke to them and in fact they learned today that the central Bank held the transfer as there was an approval step that was missed. Mr. Sarang Wadhawan who is the principal wants to send Gerhard an email directly to explain and re-confirm that he will buy this aircraft. He said he will sign the PA immediately but the process of fund transfer from India due to new rules cd take up to Aug 20th. He said he wants the aircraft and wd like to explain to Gerhard personally the situation.

I believe it is a good idea and I will have the email sent to you and Gerhard directly from them.

I believe we are still good and have a real buyer."

20. Despite Mr Houseman's suggestion, which Mr Wadhawan had adopted, and Mr Fazal-Karim had endorsed, for Mr Wadhawan to speak directly to Mr Berger, Mr Berger preferred to keep his distance and have the matter dealt with through Mr Bass (of Avpro). As a result Mr Houseman made substantial amendments to the draft letter, which included addressing it to Mr Bass (not Mr Berger), and inserting references to "my personal assurance" and to "I will pay for the aircraft" (see below). Mr Houseman's draft was sent to Mr Thampi late on 8 August. Mr Houseman asked Mr Thampi to email it to Mr Bass.
21. Mr Wadhawan sent Mr Houseman's draft to Mr Bass, unaltered. He put it on Privilege notepaper and signed it managing director, Privilege. It read as follows:

"I am Mr Sarang Wadhawan, Managing Director of HDIL, one of Indian foremost company. We currently operate a Falcon 2000 aircraft and we are interested in expanding our fleet in the near future with a long range aircraft and a large helicopter.

I have been working with Mr Pradeep Thampi from my operations team and Mr Nick Houseman and Mr Jahid Fazal-Karim from Zenith Jet on an aircraft purchase. I recently signed a Letter of Intent for the purchase of Global 5000 serial number 9271 for a purchase price of $55.5M. Due to some unforeseen circumstances with new Indian government regulations we were unable to make the $1M non refundable deposit as we had expected. I want to express my sincere interest in the aircraft and my intent to purchase the aircraft. However, I must comply with Indian government regulations and have outlined payment terms in the agreement that I can achieve and I also hope can bring us to a mutually satisfactory sale. As I outlined in the purchase agreement I will pay for the aircraft in full by the end of August.

I would be happy to discuss this matter further with you and give you my personal assurance that I want to proceed with the transaction and I am ready to sign an agreed upon purchase agreement in advance.

If this proposal is not satisfactory then we will proceed with other purchase opportunities that exist in the marketplace today."

22. In the meantime the negotiations for the PSA were going on simultaneously. The timing of the payments of the deposit instalments and of the final payment were altered to meet the new situation.
23. The first question, then, is whether this amounts to the offer of a guarantee "to see to it" that Privilege would pay for the aircraft (see Moschi v. Lep Air Services Ltd [1973] AC 331 (HL) at 348H/349B), available for Global to accept by entering into the PSA. That is how Global currently puts its claim. At the ex parte stage it had raised an alternative case (not however mentioned in its claim form) that Mr Wadhawan had thereby entered into a personal promise to pay for the aircraft himself: but that was not pursued before the judge.

The first issue: Does the allegation of a contract of guarantee meet the merits test of a serious issue to be tried?

24. The judge did not answer this question, since he contented himself with the conclusions that para 3.1(6)(c) required that the allegation of a guarantee needed to satisfy the good arguable case test and that the guarantee claim failed that test. However, although the merits test is an easier test to meet, the arguments are much the same.
25. It was common ground that for these purposes the serious issue to be tried test could be expressed in the same terms as an application to dismiss a claim summarily under CPR Part 24. In this connection, both parties adopted what Lord Collins had said in AK Investment CJSC v. Kyrgyz Mobil Tel Limited [2011] UKPC 7 at [81]-[82]:

"[81] A question of law can arise on an application in connection with service out of the jurisdiction, and, if the question of law goes to the existence of jurisdiction, the court will normally decide it, rather than treating it as a question of whether there is a good arguable case: Hutton (EF) & Co (London) Ltd. v Mofarrij [1989] 1 WLR 488, 495 (CA); Chellaram v Chellaram (No 2) [2002] EWHC 632 (Ch), [2002] 3 All ER 17, [36].

[82] Because this appeal is concerned with the "necessary or proper party" provision, the question of the merits of the claims is relevant to the question of whether the claim against D1 is "bound to fail" and to the question whether there is a "serious issue to be tried" in relation to the claim against D2. There is no practical difference between the two tests, and they are in turn the same as the test for summary judgment."

26. Mr Hapgood accepted that the court could decide the issue summarily, but urged it not to, on the basis that the evidence addressed by Ms Marsh was admissible matrix evidence going to the common purpose of the letter of 9 August and that the exposure of this evidence required a trial. However, Mr Hapgood also accepted that if this evidence was accepted for present purposes as admissible and was taken at its highest, then, subject to the mere possibility of further facts emerging (there would be no new documents however), the court could proceed by reference to the summary judgment test.
27. Mr Hapgood's submission as to factual matrix was, as he agreed, set out in para 43 of his skeleton argument for the appeal, which subject to minor amendments is incorporated below:

"(1) Mr Wadhawan had a very strong desire to purchase the Aircraft in August 2008 given that it was the only one of its kind available for delivery in August 2008…He was very anxious to acquire the Aircraft even though he had been unable to deliver that which he had informally promised in the LOI. He wanted to purchase the Aircraft not only for corporate use but also for private use by himself and his family.

(2) Prior to sending the Letter, Mr Wadhawan and Global were aware that there was a real risk that Global would abort the sale of the Aircraft to Privilege unless something beyond the assurances that the LOI Deposit would be paid was given, and that Global required Mr Wadhawan as the man standing behind Privilege, to confirm his personal commitment to the transaction…

(3) Mr Wadhawan had, through his representatives, informed Global on 7 August 2008 that he was the principal who stood behind Privilege, he wanted to purchase the Aircraft, he would sign the PSA immediately and he wanted to explain the situation to Mr Berger personally: see [Mr Fazal-Karim's internal email to Mr Mathews].

(4) Mr Wadhawan was an experienced, astute and very successful business man, who must have well understood that giving his "personal assurance" meant just that…

(6) Mr Wadhawan was Privilege, yet he had defaulted in implementing his statement of intent embodied in the LOI. This cast obvious doubt on his ability (through Privilege) to complete the purchase. What was needed was something more than a simple restatement of that which Mr Wadhawan had already committed to in his breached statement of intent. He needed to give his "personal assurance" that Privilege would perform its side of the bargain, and that is exactly what Mr Wadhawan did. The case advanced by Mr Wadhawan gives no meaning to the crucial expression of a "personal assurance".

(7) Looked at from the standpoint of Mr Wadhawan, who is in any event a very wealthy individual, the giving of the personal guarantee would not have appeared to involve the assumption of any material risk. By purchasing the aircraft, Privilege would be acquiring an asset which Mr Wadhawan must have considered to be its fair value."

28. That is a mixture of alleged matrix and submission. In sum Mr Hapgood submitted that, against the background of this matrix, the letter should be understood, at any rate reasonably arguably so, as the offer of a promise to see to it that Privilege would pay for the aircraft, an offer to stand behind Privilege's obligations, and thus as the offer of a guarantee. Both parties would have reasonably understood that nothing less was required if Global was not to abort the negotiations. The letter of intent had proved a great disappointment. Another mere letter of comfort was not what the parties were negotiating about. Particular emphasis was put on Ms Marsh's phrase "personal commitment" which had become Mr Wadhawan's "personal assurance" in the letter (see the skeleton cited above). However, as oral submissions extended themselves and Mr Hapgood was asked to identify where Mr Wadhawan's personal obligation was to be found in the letter, he answered (not that it was in the "personal assurance" sentence but) that it was in the phrase "I will pay for the aircraft in full by the end of August". In any event no formal language was necessary. In Jones v. Williams (1841) 7 M & W 493 the guarantee was contained in the words "I should consider it a matter of favour to myself if your brothers will join, and I will see that they come to no harm by it".
29. In my judgment, however, these submissions fail to persuade me that there is a serious issue to be tried of a guarantee offered by Mr Wadhawan in the letter.
30. I should make it clear that Mr Hapgood did not rely upon any other form of personal undertaking or any other form of contract other than a contract of guarantee. Thus he made it clear that he was not relying on the letter as an undertaking to procure that Privilege would enter into the PSA (which after all Privilege did), or as any undertaking given in bad faith as to Privilege's or Mr Wadhawan's intentions, or for instance as to Privilege's abilities to finance the purchase. Therefore the sole question was whether the letter, objectively construed in the context alleged, raised a serious enough issue of the existence of an offer of a guarantee to require trial.
31. My reasons for answering that question in the negative are as follows. First, there is nothing in the letter which has the express wording of any form of guarantee. There is no express language of guarantee or of personal obligation, or of "seeing to it" that Privilege would meet its contractual obligations, or of "standing behind" Privilege, or of holding Global harmless. In particular the two expressions most relied on by Global in the letter dissolve under scrutiny. The "personal assurance" turns out to have nothing whatsoever to do with the obligations of a guarantor but to be "my personal assurance that I want to proceed with the transaction and that I am ready to sign an agreed upon purchase agreement". Mr Wadhawan did want to proceed with the transaction, and did sign the PSA when it was agreed, and it is not suggested otherwise. Moreover this personal assurance comes in a sentence which begins "I would be happy to discuss this matter further with you…". That indicates that the writer recognises that his letter may not be sufficiently persuasive to Global without the personal contact of a person to person discussion: whereas if in truth the letter amounts to an offer of a guarantee for the whole amount of the purchase price (US$ 55.5 million), or even for the deposit of $5.55 million (on the basis that clause 1.5 of the PSA states that in the event of Privilege's failure to accept the aircraft, Global's sole and exclusive remedy is to retain the deposit), what more is there to discuss?
32. As for the other phrase particularly relied upon, "I will pay for the aircraft in full by the end of August", this was originally submitted to amount to a personal undertaking by Mr Wadhawan in his own capacity to pay for the aircraft. However, that alternative submission was not maintained. Again, the full sentence in any event undermines the submission. Mr Wadhawan wrote: "As I outlined in the purchase agreement I will pay for the aircraft…". That is Mr Wadhawan speaking in the name of Privilege, as its managing director, and pointing out that the PSA provides for full payment by the end of August. There is nothing in the PSA, and was nothing in the draft, to amount to any personal obligation on the part of Mr Wadhawan to pay, or guarantee the payment of, the purchase price of the aircraft. The obligation to pay "outlined in the purchase agreement" was that of Privilege. Of course, if Global had wanted a guarantee from Mr Wadhawan, the obvious place to insert it would have been in the PSA itself. If the letter amounted to the offer of a guarantee, then one would have expected that guarantee to be incorporated in the PSA, which Mr Wadhawan was due to sign on behalf of Privilege and which his letter said he would sign ("ready to sign"). But no guarantee is incorporated in the PSA.
33. In this respect, Mr Hapgood acknowledged that the letter's use of the first person singular and plural throughout its content was inconsistent and confusing. Nevertheless, he submitted that this reference to payment was Mr Wadhawan's personal promise to pay, at any rate if Privilege did not. However, I agree with the judge's careful analysis of the letter's "I", "we" and my" (at paras 51/52 of his judgment) which demonstrates that the singular and plural forms are used interchangeably to refer to Privilege, on whose behalf Mr Wadhawan was writing as its managing director. It is only when one comes to the paragraph dealing with Mr Wadhawan's "personal assurance" that Mr Wadhawan is speaking for himself and where the assurance is "I want to proceed…I am ready to sign…". In any event, Global has abandoned its one time alternative submission of a personal undertaking to pay the price of the aircraft, and has to say that the words "I will pay" mean "I will pay if Privilege does not" or "I will see that Privilege pays". But that is not what the words say.
34. Moreover, the interpretation is not helped by the factual matrix which is relied upon. There is nothing whatsoever to suggest that what was being sought was a guarantee from Mr Wadhawan, whether of the whole purchase price or of the deposit, or even of the $1 million which Global was disappointed not to receive on time. Of course, if any guarantee had been agreed, it would probably have been of the deposit alone. It is indeed remarkable, if the context was the seeking and giving of a guarantee, that there was no discussion of its extent. What, on the contrary, the background shows, however, is that Global was concerned that Privilege was not a serious buyer, and that it was, to use the vernacular, messing Global about. That is what Global wanted to hear, from the principal, Mr Wadhawan himself, was not the case. That was why Mr Houseman had suggested, if he did, that Global would need Mr Wadhawan to confirm "his personal commitment to the transaction", ie to the making of the PSA. That was why Mr Fazal-Karim reported to Mr Mathews that Mr Wadhawan "who is the principal, wants to send Gerhard an email directly to explain and re-confirm that he will buy this aircraft…He said he wants the aircraft and wd like to explain to Gerhard personally the situation…I believe we are still good and have a real buyer". There is not a single word in this report, made to a director of Global, who was to be the person who signed the PSA for Global, about the offer, or the seeking, of a guarantee. It was for the same reason that Mr Houseman, in reviewing Mr Thampi's first draft of a letter from Mr Wadhawan, a draft which it is not suggested contained an offer of a guarantee, replied, in the email set out above, not to the effect that "This is not good enough, what is needed is a guarantee from Mr Wadhawan", but "I would add at the end of the letter that Mr Sarang would like to talk to Mr Berger personally to assure him that he wants to buy the aircraft". That is the origin of Mr Houseman's subsequent and final draft containing Mr Wadhawan's "personal assurance that I want to proceed".
35. That leads to the next point, which is that ultimately Mr Thampi's draft was completely rewritten by Mr Houseman on behalf of Global: so it was Global's own draft that was put to Mr Wadhawan for his signature, and there is still no mention of a guarantee. Rather the context remains what it had been before, a personal apology for the delay and explanation from the man at the top of Privilege that he wants to proceed, and that everything is on course to sign a contract which will give Global the sale it seeks and under it payment in full by the end of August. That is the "proposal" with which the letter ends, with the final remark, added by Mr Houseman himself, that if this proposal is not satisfactory "we will proceed with other purchase opportunities that exist in the marketplace today". That would be an extraordinary way in which to end a document which, on Global's case as to the matrix of the letter, amounted to the offer of a guarantee to prevent Global from walking away from the negotiations.
36. As for Jones v. Williams, the situation there was entirely different. The defendant and his correspondent had decided to sign a bond, to support the cost of litigation, but the lender was only willing to make the advance if the correspondent's brothers joined in the security. There were two letters from the defendant which made all this clear, closing in the clear statement "I will see that they come to no harm by it".
37. In sum, I would conclude that there is no serious issue to be tried on Global's claim against Mr Wadhawan, which, were there to be jurisdiction for it in the English court, would have been susceptible to summary judgment being given against it. In the circumstances, it follows, a fortiori, that there is no good arguable case for the existence of the alleged contract of guarantee.
38. In the circumstances this appeal must fail.
39. It has been unnecessary in the circumstances to consider a further argument advanced by Mr Wadhawan, to the effect that it is relevant to the consideration of the existence of a contract of guarantee constituted by the offer contained in the letter and its acceptance by Global through its entering into the PSA, that it is clear from the subsequent conduct of Global that it never considered that it had received such a guarantee. Thus despite the failure of the PSA and the irresolute pursuit of Privilege in arbitration, and an attempt in July 2009 to obtain a freezing injunction over the Falcon aircraft referred to in Mr Wadhawan's letter (an injunction which was discharged within a few days when it turned out that the Falcon was not owned by Privilege but leased to it), there is no reliance on the alleged guarantee until the preparation for the commencement of these proceedings in the summer of 2010: that is nearly two years after Privilege's failure to live up to its PSA obligations. The judge merely said that, had he concluded that there was a good arguable case that the letter was an offer of a personal guarantee, he would "with some hesitation" have concluded that there was a good arguable case that entering the PSA constituted its acceptance. On the stated hypothesis, that is an understandable observation. However, on the hypothesis constituted by the conclusion to which I have come, the failure of Global to rely on the guarantee it now alleges adds grist to the mill that there never was a contract of guarantee which was available to be accepted or therefore was accepted. Mr Lawson has argued that, whereas it is acknowledged that subsequent conduct cannot be used as relevant to an issue as to the true construction of a contract, it is relevant to the question whether a contract ever existed and/or to whether the making of the PSA (which had its own logic of course) was referable to the acceptance of a disputed offer. It is sufficient in the circumstances to say that that is an attractive proposition which would render the law consistent with common sense.

The second issue:CPR PD 6B para 3.1(6)(c)

40. In the circumstances, the second issue need not be decided. However, it was fully argued, and is of some importance, and therefore I will give my opinion on it.
41. The question may be expressed to be whether, where a claim is made under contract A, and that contract is collateral to another contract B, so that the claim can be said to be in some sense "in respect of" contract B, it is sufficient for the purposes of para 3.1(6)(c) that there is a good arguable case as to the existence of contract B and that it is governed by English law, even if there is no good arguable case of the existence of contract A or of its being governed by English law.
42. Under the previous Rules of the Supreme Court, the relevant gateway, contained in RSC Order 11, rule 1(1)(d) was that "the claim is brought to enforce, rescind, dissolve, annul or otherwise affect a contract, or to recover damages or obtain other relief in respect of the breach of a contract, being (in either case) a contract which…(iii) is by its terms, or by implication, governed by English law". This formulation, broad as it was, led to some uncertainty as to whether it justified claims which were ancillary to a contract, as distinct from under a contract. It may be observed, however, that the RSC formulation did not in terms use the language "under a contract".
43. In the present formulation, under the Civil Procedure Rules, the formula of "under a contract" is likewise avoided, but the language of the gateway is simple as well as broad, viz that "a claim is made in respect of a contract" which has the necessary connection with England such as being governed by English law.
44. A number of cases have been decided under para 3.1(6) or its somewhat earlier CPR Part 6.20 equivalent, which are collected in the most recent of them, Cecil v. Bayat [2010] EWHC 641 (Comm) (Hamblen J): see at [43]-[49]. This aspect of Hamblen J's judgment was not the subject of the appeal to this court at [2011] EWCA Civ 135.
45. In Albon v. Naza Motor Trading Sdn Bhd [2007] EWHC 9 (Ch), [2007] 1 WLR 2489 Lightman J decided that a restitutionary claim in respect of a contract governed by English law was within the modern rule. The claim did not have to be "under" the contract if it was "in respect of" it, which was a broad expression. The claim was for the restitution of overpayments made under an agency contract. Lightman J considered that the claim could have been formulated by reference to an implied term in the contract itself, although it was not so alleged. He concluded (at [28]):

"Claims in contract and restitution to repayment are (so far as necessary for this purpose) overlapping alternatives. The necessary relationship and connection between the claim and the UK agreement is established."

That was a "one contract" case.

46. In Greene Wood & McLean LLP v. Templeton Insurance Ltd [2009] EWCA Civ 65, [2009] 1 WLR 2013, the claimants, GWM were a firm of solicitors who had entered into a conditional fee agreement with their clients, coal miners who were suing their trade unions and former solicitors over their conduct of a compensation scheme for industrial illnesses. In connection with the conditional fee agreement, GWM had arranged an after the event insurance (ATE) policy for their clients with the defendant insurance company, Templeton. GWM alleged that, as part of this arrangement, GWM had entered directly into an agency contract with Templeton whereby Templeton promised GWM that it would meet valid claims under the miners' policy with it. Templeton did not pay what GWM alleged that it ought to have paid, GWM felt themselves liable to discharge the miners' costs obligations and did so, and sued Templeton (a) under the alleged agency contract, and (b) in contribution, under the Civil Liability (Contribution) Act 1978, on the basis that they and Templeton were both liable for "the same damage". Since Templeton was based in the Isle of Man, permission to serve out needed to be obtained. The question was whether the alternative claims fell within the rule's "in respect of a contract" governed by English law. The court of appeal held that they both did. The first claim was under the agency contract, and the second claim, in contribution, was in respect of the policy.
47. Templeton did not challenge the existence of the alleged agency contract (at [9]), but there was a question as to whether it contained the implied term for payment on which GWM relied. That was a merits issue, which was debated, ultimately in GWM's favour, under the test of a serious issue to be tried.
48. As for the alternative claim in contribution, the novel feature of the case was that the contract relied on for this purpose was not one to which GWM, the claimant, was a party. Longmore LJ reasoned the matter as follows:

"[17]…But can it be said that GWM's claim is a claim in respect of a contract? It is not a contract to which GWM are a party and the paradigm case of a contract pursuant to which permission is given under rule 6.20(5)(c) is a contract between the intended claimant and the intended defendant. Indeed the notes to the rule in Civil Procedure 2008, vol I, p 203, para 6.21.34 do actually say that the contract has to be a contract between those parties. That is adopted by Mr Sweeting for the insurers who says that it is not enough for only one of the parties to the intended action to be a party to a contract. Suppose that there is a contract to which only the intended claimant is a party and the defendant merely has a tortious or fiduciary obligation to the third party, would that be sufficient for the sub-rule to apply? That would be odd because the defendant would be brought before the court under a contractual provision of CPR r 6.20 when he was not a party to a contract at all.

[18] To say that, for a claim to be "in respect of a contract", it must be "in respect of a contract between the intended claimant and the intended defendant" is to add words to the rule which are not there. The commentary in Dicey, Morris & Collins, Conflict of Laws, 14^th ed (2006), vol I, paras 11-182-11-184 does not suggest any such requirement. Moreover, since the Contracts (Rights of Third Parties) Act 1999, Parliament has contemplated cases in which a third party can sue on a contract made between two persons for his benefit. If such a contract is governed by English law, (or, even, made or broken in England) why should the third party not be able to take advantage of sub-rule (5)(c) of CPR r 6.20? It would be odd if he could not and every reason to suppose that he should be able to utilise the sub-rule, always subject to the court being satisfied that England is the "proper place" in which to bring the claim, pursuant to CPR 6.21(2A).

[19] The claim in the present case clearly has a connection with a contract governed by English law. To my mind that makes it a claim in respect of that contract even if it is not a claim brought under the contract. No doubt some connections with contracts are more remote than others but the present claim has a very close connection with the insurers' contract with the miners to pay their costs and own disbursements if they lose. As the judge said the remoteness from the contract (if any) is something that can be dealt with when the court considers whether England is the proper place for a claim under CPR 6.21(2A)

[20] I doubt whether it would be any different if it was the intended claimant rather than the intended defendant who was a party to the contract in respect of which the claim was brought but I am content to leave that question to be decided in a case in which it actually arises."

49. That was also, for the purpose of the claim in contribution, a one contract case, namely a claim in respect of the policy. In such a case, and subject to the point left open, as to whether it made a difference whether or not the defendant was a party to the relevant contract, it would seem that the critical question is whether the claim "has a connection with a contract" governed by English law (para [19] of the citation above).
50. Cecil v. Bayat, however, was a "two contract" case, ie a case where a claimant relied on a claim (under contract A) in respect of contract B where contract B, but not contract A, was alleged to have the necessary jurisdictional link with England. There were four claimants, Messrs Cecil, Bentham, Grinling and Lehmkuhl. Hamblen J considered three separate contracts relied on by the claimants. One was alleged by Cecil and Bentham, another by Grinling, and the third by Lehmkuhl. Each of the claimants claimed that the relevant defendants had promised him a shareholding in a telephone enterprise which they were collaborating to establish in Afghanistan. The judge dealt with each seriatim (at paras 50-95, 96-104 and 105-110). As for the Cecil and Bentham contract, those claimants satisfied the judge to the necessary standard of a good arguable case that (i) their contract existed, (ii) that it was made in England, and (iii) that it was governed by English law. Therefore, on two separate grounds there was jurisdiction for their claim. So far, that claim was premised on a "one contract" scenario. In the case of the Grinling claim, the judge was again satisfied that his contract existed and that it had been made in England. Therefore, there was again jurisdiction (even though the reliance on English law in this respect failed), but again in a "one contract" scenario. The judge, went on, however, to consider Grinling's alternative reliance on the Cecil and Bayat contract as the contract "in respect of" which his claim under his own contract was brought. This is a "two contract" case. The judge said:

"[103] I would not, however, accept that the claim pursuant to the Grinling contract is "a claim in respect of" the Cecil and Bentham contract. I do not consider that the claims pursuant to the Grinling Contract are sufficiently legally connected to the Cecil and Bentham contract to fall within this head. They are claims in respect of the Grinling contract, not some other contract. On the Claimants' case the claim is an independent claim made under an independent contract. It does not depend on the existence or terms of the Cecil and Bentham contract. Grinling had an enforceable right to his 1% shareholding regardless of the Cecil and Bentham contract."

51. There is something for both parties in the present case in the paragraph last cited. On the one hand, the judge may be thought there to be applying the "connection" test proposed by Longmore LJ in Greene Wood and saying that Mr Grinling failed to meet it, not just as a matter of the exercise of a judicial discretion as to the proper forum (as to which there would have been a strong argument that the three contractual claims should have been heard together), but as a matter of the requirement of a good arguable case. On the other hand, he appears to be going beyond that when he said "They are claims in respect of the Grinling contract, not some other contract". That is a matter of legal categorisation.
52. This uncertainty as to his reasoning is not entirely resolved by an earlier passage in his judgment where, after referring to the Albon and Greene Wood cases, he said:

"[47] The Claimants accordingly submitted that all they needed to show to bring themselves within this gateway was a "connection with" a contract falling within the criteria (a) to (d). Thus even though Grinling['s] and Lehmkuhl's contractual claims were claims made under their own contracts with the relevant Defendants, since they were related to the Cecil and Bentham contract it did not matter if they could not show that their own contracts fell within the relevant criteria. It was sufficient if the Cecil and Bentham contract did so.

[48] This submission goes far beyond the existing caselaw and would have far reaching consequences. It would also potentially subvert the application of the prescribed contractual jurisdictional criteria.

[49] In my judgment, at least in respect of contractual claims, some relevant legal connection between the claim and the other contract is required. If that contract needs to be referred to and relied upon in order to assert the relevant cause of action then that requirement is likely to be satisfied since it will be a necessary part of the cause of action. However, a mere factual connection between the two contracts is not enough."

53. Hamblen J's [49] presents a reformulated rationale of what is needed for Longmore LJ's test in Greene Wood of "has a connection with the contract". In his view, the strength of the connection cannot be dealt with, as Longmore LJ suggested it could be, entirely within the separate question of the proper forum. Even so, on the pleading test put forward in that paragraph, Global's guarantee claim, if it had been shown sufficiently to exist at all, would have satisfied that reformulation of the requirement of "in respect of" a contract governed by English law. On the other hand, the logic of Hamblen J's comments in [47] and [48] tie in more closely with the legal categorisation test briefly suggested in [103].
54. As for the Lehmkuhl contract, Hamblen J was satisfied that it existed, but not that any jurisdictional gateway had been established. He was not satisfied that it was itself governed by English law. As for the submission that the Lehmkuhl contract claim was "in respect of" the Cecil and Bentham contract, Hamblen J said this (at [110](1)):

"…For reasons already stated, I do not consider the claims pursuant to the Lehmkuhl contract are sufficiently legally connected to the Cecil and Bentham contract to fall within this head. They are claims in respect of the Lehmkuhl contract, not some other contract."

It is possible to say that the same double rationale is present there, with the legal categorisation rationale being given this time the greater prominence.

55. Hamblen J next turned to the claimants' alternative quantum meruit claims (at [111]-[118]). He accepted that the Cecil and Bentham quantum meruit claim was a claim "in respect of" the Cecil and Bentham contract. He considered that this result followed from the logic of Albon. I would agree. As for the Grinling and Lehmkuhl quantum meruit claims, although he was satisfied that they met the merits test of a serious issue to be tried, he was satisfied that only Grinling's claim was "in respect of" a contract which came within the jurisdictional gateways. That was because, as he had previously demonstrated, Grinling alone was able to rely on his own contract as having been made in England. However, in as much as Grinling and Lehmkuhl relied on the Cecil and Bentham contract as the contract "in respect of" which their quantum meruit claims were made, he held that the jurisdictional gateway had not been met. He said (at [117] (1)):

"…However, in my judgment they are claims in respect of the requests/promises/assurances allegedly made to Grinling and Lehmkuhl, not those made to Cecil and Bentham and the Claimants' own case is that they are independent claims."

56. Mr Hapgood submitted that the only relevant test was Longmore LJ's broad test of "in connection with" the relevant contract relied upon: and that any question of that connection being too remote was a matter for the court's overall discretion as to the proper forum (see CPR Part 6.37(3): "The court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim."). As for Hamblen J's pleading test of what amounted to a sufficient connection, Global's guarantee claim in any event met that test, because the guarantee was collateral to the PSA, and the PSA would have to be pleaded as the background to the guarantee.
57. Mr Lawson, however, submitted that in a two contract case it made no sense to relegate contract A, the contract under or pursuant to which the claim was made, to a mere merits test: the court still had to be satisfied to the standard of a good arguable case that contract A itself existed. It was the "relevant contract" in question: see Seaconsar at 455A per Lord Goff ("the existence of the relevant contract has to be sufficiently proved"), albeit that was admittedly said in the context of a "one contract" case. Unless the link, constituted by contract A, to contract B, the contract relied on as being within the contractual jurisdictional gateway, here of being governed by English law, actually exists, then the connection expressed by the rule's requirement of "in respect of" cannot be said to have been satisfactorily shown, to the sufficient test of a good arguable case.
58. In my judgment, the jurisprudence and submissions put before us on this issue suggests four possible tests of what has to be shown to the standard of a good arguable case under para 3.1(6)'s "in respect of a contract". The first is Longmore J's test from Greene Wood that what has to be shown is that the claim "has a connection with a contract". As Longmore LJ said "that makes it a claim in respect of that contract even if it is not a claim brought under the contract". Remoteness and sufficiency of the connection is a matter for the separate test of "proper place". It seems to me that at any rate in a "one contract" case, that is a ratio that is binding on this court. It follows that it has to be shown, to the standard of a good arguable case, also that the contract relied upon exists, and that it is governed by English law (or meets the other jurisdictional requirements under sub-rules (a), (b) or (d)). The question is whether Longmore LJ's test applies (a) to a "two contract" case, and (b) to a case where the contract relied on is not one to which the defendant is a party. Those points are open.
59. The second test is Hamblen J's pleading test of what is a sufficient connection. He puts that forward in the context of a "two contract" case. He may be right, for intuitively something is needed to explain why, if reliance were to be placed directly on contract A, the contract under which the claim is made, the application for permission to serve out would fail, but might succeed if instead contract B, which is only linked in some way to contract A, is relied on for passing through the jurisdictional gateway. However, it is not obvious to me that in this respect a two contract case is different from a one contract case. Once it is accepted that contract B is the right contract to investigate in a two contract case, then I do not see why Longmore LJ's test is not a complete answer: the connection has to be shown, but the strength of the connection is a matter for what is now CPR 6.37(3).
60. The third test is that put forward by Mr Lawson, that in a two contract case, the claimant must satisfy the good arguable case standard for demonstrating the existence not only of contract B, the contract relied on for passing a jurisdictional gateway, but also of contract A, because this contract is a link in the chain which takes one to contract B. I do not think this rationale is correct, for, once it is accepted that the focus is on contract B, not contract A, the role of contract A is merely that of any cause of action, which only has to be demonstrated to the standard of the general merits test of a serious issue to be tried. If, as was common ground, the restitution or contribution claims (in respect of a relevant contract) need only be demonstrated to the standard of a serious issue to be tried, I do not see why contract A is in a different category, once the current hypothesis were to be accepted.
61. The fourth test is perhaps a variation of the alternative rationale suggested, to my mind, by Hamblen J's reasoning in Cecil v. Bayat. The question arises, in a two contract case, of just which contract is the contract "in respect of" which the claim is made: is it contract A or contract B? If in truth the claim is made under or pursuant to contract A, which is plainly also a claim being made "in respect of" contract A, and indeed the paradigm example of such a claim, can the claimant choose to say, without being gainsaid, that the claim is instead being made "in respect of" another contract, contract B, just because it suits him to do so where contract B both exists and meets a contractual jurisdictional gateway but contract A very arguably does neither? In my judgment, no. The rule is admittedly expressed in terms of "in respect of" and not "under", and is thus intended to embrace both the standard case of claims being made under a contract and other cases of claims which are not under a contract but in respect of one. The question nevertheless arises as to which contract, A or B, the claim is made "in respect of" in the exceptional case where the claimant wishes to bring a claim under contract A but does not wish to apply for permission to serve out in respect of that contract, but in respect of another contract, B.
62. In such a situation, the rationale of the rule, and of the whole of the regime originating in CPR Part 6.37, provides the answer that the relevant contract "in respect of" which the claim is made is contract A, the contract under or pursuant to which the claim is made. It is a matter of legal categorisation. As Hamblen J said in Cecil v. Bayat, "They are claims in respect of the Grinling contract, not some other contract" (at [103]); and "They are claims in respect of the Lehmkuhl contract, not some other contract" (at [110]). Whether or not he intended this to be a separate rationale of his decision, distinct from his pleading test, in my judgment it is the correct rationale.
63. If it were otherwise, then an application to serve out which could not succeed if reliance were placed on the real contract which founds the claim might be able to succeed if some merely collateral contract were relied on. That would make no sense at all. Such a case is wholly different from the cases of restitution and contribution found in Albon and Greene Wood. There the claims arose, and arose directly, out of a single contract, even if they were not themselves contractual claims. The question never had to be asked whether those claims were in respect of some other contract from the one relied upon as giving the jurisdictional link over the defendant.
64. If it were otherwise, it would also be highly anomalous that jurisdiction could be obtained against a defendant not within the jurisdiction by reference to a contract to which he was not a party. There could be no rational basis on which a foreigner who owes no allegiance to this jurisdiction could properly be brought to face trial here on the basis of a claim under a contract for whose existence there was no good arguable case or which (for the sake of argument) could not be shown to the standard of a good arguable case to be governed by English law, or made within the jurisdiction etc, merely on the basis of an allegation that, if that contract had existed, there would be a collateral connection to another contract to which he is not even a party (but which can be shown to exist and to be governed by English law etc). See in this connection the well known authorities to which Lord Goff referred in Spiliada Maritime Corp v. Cansulex Ltd [1987] AC 460 at 481B/D. Although those authorities were there referred to in the context of the ultimate need to be satisfied that England was clearly the appropriate forum for a trial, they apply equally to the need for the clear establishment, to the standard of a good arguable case, of the necessary link between the defendant to be brought to face trial in England and this jurisdiction. On the hypothesis just stated, there would be no link. In this connection it seems to me to be relevant that sub-rule (d) of para 3.1(6) refers to a claim in respect of a contract where the contract "contains a term to the effect that the court shall have jurisdiction to determine any claim in respect of the contract". Unless the defendant were bound by that term and that agreement, what would be the relevance of that provision?

Conclusion

65. In sum, I would dismiss this appeal on the ground that there is no serious issue to be tried as to the existence of a contract of guarantee binding on Mr Wadhawan. I would also express the opinion that where a claim is made under or pursuant to a contract, that is the contract "in respect of" which it has to be shown, to the standard of a good arguable case, that it exists and that one or other of the requirements of para 3.1(6) has been met.

Lord Justice Sullivan :

66. I agree.

Lord Justice Lewison :


 


67. I agree with Lord Justice Rix for the reasons that he has given that the contention that Mr Wadhawan gave a personal guarantee of Privilege's contractual obligations is unarguable. The highest that it could be put is that Mr Wadhawan gave a personal assurance that Privilege would enter into the contract (which it did); not that Privilege would perform its contractual obligations once they had arisen.
68. On the second question I also agree. The essential difference between the parties seems to me to be as follows. Mr Hapgood starts with a contract over which this court has jurisdiction; and then seeks to bolt a claim onto it. Mr Lawson starts with the claim in fact made; and asks: in respect of what contract is it made? Since the focus of CPR 6.39 (1) and paragraph 3.1 of the Practice Direction is on claims, the claim seems to me to be the right place to begin. Once that is acknowledged to be the right starting point then for the reasons given by Lord Justice Rix, it is plain that the contract "in respect of" which the claim is made is the alleged contract of guarantee.
69. I, too, would dismiss the appeal.