Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Apple Corps Ltd v Apple Computer Inc [2004] EWHC 768 (Ch) (07 April 2004)
URL: http://www.bailii.org/ew/cases/EWHC/Ch/2004/768.html
Cite as: [2004] EWHC 768 (Ch)
[New search] [Printable RTF version] [Help]
CHANCERY DIVISION
Strand, London, WC2A 2LL |
||
B e f o r e :
____________________
| APPLE CORPS LIMITED |
Claimant |
|
| - and - |
|
|
| APPLE COMPUTER, INC |
Defendant |
____________________
Anthony Grabiner Q.C., Daniel Toledano (instructed by Linklaters) for the Defendant
Hearing dates: 25-27 February 2004
____________________
Crown Copyright ©
- This is the application of the defendant, Apple Computer Inc ("Computer"), disputing the jurisdiction of the court in respect of proceedings where service out of the jurisdiction has been ordered. The defendant is the well-known producer of computers and software. The claimant ("Corps") is the well-known record company formed by the Beatles. The basis of the claim made against Computer is that that corporation has broken, and intends to break, an agreement made between the two companies in October 1991 which regulated the use of their respective marks in respect of various areas of activity or proposed activity. On 7th August 2003 Master Moncaster granted permission to serve Computer outside the jurisdiction under CPR 6.20 on two grounds that the relevant agreement was governed by English law, and that the contract was made in England. At the hearing before me Corps sought to rely on the additional ground that Computer threatens a breach of contract within the jurisdiction which would entitle Corps to an injunction to restrain it. Computer disputes the propriety of service out on those grounds, denying the relevant factual bases, and further maintaining that England is not the appropriate forum for the dispute. In the circumstances the applications before me raise the following questions:
- Those issues arise out of the wording of CPR 6.20:
- The burden and level of proof in relation to those issues is common ground between the parties. It is agreed that:
- In addition, it is for Corps to establish that there is a serious question to be tried on the main question in the action, namely whether there is or will be a breach of the agreement. The agreed approach on this at the hearing was that I could assume that there was, though the outline of Corps' case on the point given by Mr Vos was not always clear to me. At a late stage and having seen a written elaboration of Corps argument on the point, Computer sought to resile from its position that there was a serious question to be tried, and to say that it had become apparent that there wasn't but after (I confess) flirting with idea that that should be allowed, I decided that it was too late for Computer to change its stance on that.
- The agreement in question, which is called the Trade Mark Agreement in the jargon of this case, was a keenly negotiated agreement, negotiated between experienced lawyers (English and US) over many months. The evidence before me showed that each of the parties was overtly adamant that it did not wish to accept the other's jurisdiction or governing law, and could reach no agreement on any other jurisdiction or governing law. As a result it contains no governing law clause and no jurisdiction clause. In addition, neither party wanted to give the other an advantage in terms of where the agreement was finalised. If their intention in doing so was to create obscurity and difficulty for lawyers to debate in future years, they have succeeded handsomely.
- As will appear in more detail when I come to set out the detailed history of this matter, the purpose of the Trade Mark Agreement was to regulate the activities of the two parties for the future. Computer was described as "Apple Computer"; Corps was described as "Apple Corps". It is dated 9th October 1991 and its key terms are as follows:
- The alleged breaches come about in the following manner. Computer has launched a web-based product in the United States called iTunes Music Store. By using that service members of the public can download songs over the internet, and store them on a computer with a view to playing them back over the computer, or via portable players such as Computer's well-known iPod player. Computer's mark is clearly associated with that product it appears on all the relevant pages, and one gets to it either via the Apple website or via a website known as Applemusic.com. The content (that is to say, the music tracks) is licensed by the owner of the rights in that content. Corps' case is that Computer's conduct in this respect is a breach of the Trade Mark Agreement; that is the breach which is relied on in this action as currently constituted.
- At the moment the content is available only in the USA. Marketing takes place in the USA, but because of the worldwide effect of the media, and particularly of the internet, some of the marketing is available elsewhere. The evidence of Computer's witnesses is that the reason the content has not been available in Europe is that there is as yet no agreement with the owners of rights in the content which permits that. However, there have been suggestions that Computer is looking to make the site available in Europe this year (2004). Corps says that this demonstrates that a breach of the agreement is intended to be carried out in this jurisdiction hence its alternative case for jurisdiction.
- It may assist an understanding of the significance of the facts as they develop if I first outline the nature of the dispute that centres around the order of events at completion, which is what this part of the case concerns. The process of drafting ended up with drafts of the agreement being in place, signed by each party, and countersigned by one but not the other, in the offices of Frere Cholmeley, solicitors for Apple, and with Mr Lagod, counsel for Computer in California. On 9th October 1991 there was a conversation to arrange completion. Computer says that the telephone call ended with (in effect) Mr Lagod in California proposing completion and Mr Zeffman (of Frere Cholmeley) agreeing that. If correct, that would amount to an offer from Mr Lagod, accepted by Mr Zeffman. Since Mr Zeffman's acceptance was received in California, on an application of the principle in Entores v Miles Far East Corporation [1955] 2 QB 327 at 334, approved in Brinkibon v Stahag Stahl [1983] 2 AC 34 a 41-2 (in the case of instantaneous communications the contract is made where the acceptance is received the contract was made in California). Corps puts the final events the other way round Mr Zeffman offered, and Mr Lagod accepted, so the acceptance was received in London and the contract was made there on the same legal basis. The inquiry is therefore as to whether there is a good arguable case that, on the facts, Corps is right. In addition to that Corps advances a largely novel case. It invites me to find that in the context of this case, and taking due account of the different ways in which contracts might now be concluded which did not exist when the traditional rules were laid down, it would be right to find in principle that a contract can be made in two places at once, and that this was such a contract. I say this is "largely" novel because a submission was made in Brinkibon to that effect by Mr Anthony Thompson QC, but it was not ruled on, or even commented on, in the speeches in that case.
- That is where the parties respectively would like to end up. I must now consider and analyse the facts as they appear from the witness statements and the contemporaneous documents.
- The Trade Mark Agreement had its roots in litigation in the High Court which commenced in February 1989, and in proceedings in the European Commission which had been suspended but which were re-activated 2 months later. The parties were then locked in a large and expensive dispute which turned on an agreement in 1981 which was expressly governed by English law. The High Court proceedings were heard by Ferris J, and had lasted 100 days by the time they were settled. Settlement negotiations started in the UK, and then took place in California and New York. The evidence before me shows that the parties were both adamant that the other's jurisdiction should not be used as the basis of governing law or court jurisdiction. In addition Mr Lagod, the US attorney/negotiator for Computer said this in his witness statement evidence:
- The trial of the 1990 action between Corps and Computer started on 29th October 1990. The first meeting at which an attempt was made to settle the outstanding disputes took place on 19th March 1991. The offer to settle made by Computer was rejected. There were then no meetings until June, when there was a flurry of activity. Meetings took place on the 5th, 7th and 10th June, again all in London. On 10th June 1991 Computer offered to pay $26.5 m. It seems that was not accepted, but drafting commenced. The figure offered was actually accepted on 21st June 1991, again at a meeting in London. The drafting and settlement meetings then carried on. One of the structures adopted for the settlement was to have two agreements. The first was called a Settlement Agreement, and by that agreement the parties intended to settle (and ultimately did settle) the historical matters, that is to say the disputes that had existed between the two. The second agreement was the Trade Mark Agreement; that was intended to regulate their activities for the future.
- Settlement meetings took place in London on the 26th/27th June and then negotiations took place in New York on 2nd/3rd August 1991 and 31st August 1991. On 12th September there was a meeting in San Francisco, and a further meeting in New York on 21st September. As well as that, especially at the end of the process, certain negotiations took place over the phone in transatlantic phone calls.
- At the end of the process the parties began to address their minds to settlement procedure. The best evidence of what they were doing can be seen in the contemporaneous documentation. On 26th September 1991 Mr Zeffman wrote or faxed Mr Lagod in the following terms:
- It is apparent from this that, as was ultimately the case, the parties expected both the Settlement Agreement and the Trade Mark Agreement to be completed at the same time. It is also apparent that Mr Zeffman, on behalf of Corps, was also concerned that the money should have been received by or at completion (or closing); the money in question is the $26.4 m payable under the Settlement Agreement and the $100,000 payable under the Trade Mark Agreement. The "Neil" referred to is Mr Aspinall, Manager and sole executive officer of Corps.
- After that letter further amendments were made to the agreement in the course of the drafting in process. The parties returned to the theme of completion on the 4th October when Mr Lagod faxed Mr Zeffman:
- The background to this was that the parties had agreed to split up the process of drafting. Mr Lagod had the conduct of drafting the Trade Mark Agreement; he had it on his firm's word-processor. For his part Mr Zeffman had the conduct of the drafting of the Settlement Agreement he had it on his word-processor. The parties did not exchange electronic drafts; it is easy to forget that those facilities did not exist as recently as 1991.
- Later on on the same day Mr Zeffman faxed Mr Lagod with what he hoped was a final draft of the Settlement Agreement. His letter went on to say this:
- It will be noted that the arrangements involved each party signing a copy of the Agreements, with delivery being handed over to a representative of the other party, albeit that they were held to the order of the signor. The trigger for the actual completion would be Mr Zeffman informing Mr Lagod of the receipt of the bankers draft. Although the word "escrow" was used, I do not consider that the parties thought that they would be irretrievably bound by signing the documents, so that each party would, in theory, have been in a position to resile up until the time when Mr Zeffman confirmed receipt of the draft. Receipt of the draft remained the key to the completion.
- Later still on the same day there was a further fax from Mr Lagod, enclosing a further revision of the Trade Mark Agreement which included a new provision that the agreement might not be varied except by written consent of the parties. The second paragraph of that letter reads:
- This letter seems to be responding to the earlier letter from Mr Zeffman. It was timed at 18:20 which is presumably California time.
- There was obviously a conversation on the phone the next day, because a letter from Mr Zeffman on the following Monday (7th October 1991) starts by saying:
- The letter goes on to make slightly different proposals for completion. It reads:
- It is apparent that the completion arrangements have changed slightly. The signed agreements would be in the hands of the other party via courier, and the draft would accompany the agreements coming from California, the parties would then sign the Agreements, and completion would take place when the parties agreed that it would, over the telephone. Completion was no longer expressly to take place when Mr Zeffman confirmed that the draft had been received, although obviously he would need to be satisfied as to his receipt and validity for he would, for his part, agree to complete. The newly agreed feature at this stage is that Mr Lagod himself would apparently also have to agree that completion should take place. The fall back arrangement for effective completion, based on the draft clearing, does not matter for these purposes.
- Later that day (7th October) Mr Lagod faxed a photocopy of the draft (or "cashier cheque" as he called it). The fax said he was sending the actual draft by courier that day. That duly happened - on that day Mr Lagod wrote enclosing the Trade Mark Agreement and Settlement Agreement executed by Mr Graziano on behalf of Computer, as well as a letter from Mr Stead to Mr Aspinall enclosing the draft. The letter was sent by overnight courier. It closed with Mr Lagod saying: "I look forward to hearing from you when we are ready to wrap up the closing."
- For his part, Mr Zeffman went to Corps' offices at 3.45 pm to get Mr Aspinall's signature to the two agreements; they were apparently signed in the presence of Mr Zeffman and Vanessa Marsland; the latter took the signed agreements away for couriering to Mr Lagod in accordance with the then agreed closing procedure.
- A few days later, on 9th October 1991, the events took place which led to completion, and which are at the centre of the present issue. I will have to set out the material which was placed before me, because it is on an interpretation of that material that the present question turns. It is necessary to do so verbatim.
- It is common ground that a telephone conversation took place between Mr Zeffman and Mr Lagod on 9th October 1991, as a result of which completion (or closure) of the matter took place. Mr Lagod does not have a contemporaneous record. Mr Zeffman does. He made an attendance note and it reads as follows:
- In his witness statement provided for the purposes of the application before me, Mr Zeffman says that, as recorded in his attendance note, he and Mr Lagod agreed on the telephone that:
- In his witness statement Mr Lagod expressly accepts that the Trade Mark and Settlement Agreements were completed:
- Both parties started their analysis of this transaction by analysing it in traditional offer and acceptance terms and applying the well known rule (or at least the well known prima facia rule) that where instantaneous forms of communication are concerned a contact is made where the acceptance is received Entores v- Miles Far East Corporation [1955] 2Q.B. 327; Brinkibon Limited v- Stahag Stahl [1983] 2 A.C. 34. Accordingly, each side sought to analyse the facts so that in effect, the penultimate words were uttered within their jurisdiction in order that the final words of acceptance should be uttered outside the jurisdiction and received within it. Mr Vos also put forward an alternative analysis, which was that, in the circumstances, the contract was made in the two jurisdictions simultaneously.
- For Computer, Lord Grabiner Q.C. started his argument from the mechanism which was contemplated in the preceding correspondence between parties. He relies on the fact that the mechanism contemplated that the signed agreements would be in place, held in escrow, and that what was required was for Mr Zeffman in London to communicate with Mr Lagod in California that the money payable under the Settlement Agreement had been satisfactorily received. This anticipated mechanism was complied with, save that there was one additional tweak in so far as Mr Lagod had not actually procured Computer's signatures on the engrossment that he had received from London. What happened during the relevant telephone conversation was that Mr Lagod waived the requirement for those countersignatures and indicated that, despite the fact that he did not have them, he, Mr Lagod, was ready to complete. Mr Zeffman in London confirmed that he too was content that there should be completion. If this indication was the last step in the operation, it was a statement uttered in London and received in California and amounts to a final acceptance in California. In this respect he relies on paragraph 38 of Mr Lagod's witness statement, which I have already set out in paragraph 30 above, and in particular, the sentence:
- Mr Vos seeks to analyse the evidence differently. He traces the various proposals for completing through the correspondence, and points out that by the time one gets to 9th October three uncertainties needed to be cleared up Mr Lagod did not know whether Mr Zeffman had had the agreements countersigned; he did not know whether the banker's draft was satisfactory to Mr Zeffman; and Mr Zeffman did not know whether Mr Lagod had countersigned his agreements at his own end. What must have happened is that Mr Zeffman, having finally got through to Mr Lagod, must have said that he had got signatures and the money. Mr Lagod must have said that he had not got signatures but that that was alright by him. Mr Zeffman then must have said that for his part he agreed the deal could be closed and that for his part Mr Lagod then confirmed that. That last stage was an utterance by Mr Lagod in California amounting to an acceptance, which was received by Mr Zeffman in London. Accordingly, on the traditional analysis the contract was made in England.
- I remind myself that, for the purposes of jurisdiction, what Mr Vos has to establish is a good arguable case Seaconsar Limited v- Bank Markazi [1994] 1 AC 438. He does not have to prove his case on a balance of probabilities. Can it be said that Mr Vos has established his case to that extent? At one level it has to be acknowledged that the evidence does not enable a clear view to be taken one way or the other as to who said what and in what order. What is quite clear is that immediately before the telephone conversation nothing binding was in place. The parties had agreed that the Agreements were held "in escrow", but it seems to me that both parties could have resiled from the Agreement in principle at any point of time up until both men agreed, by appropriate words, that the Agreement had become binding. While Mr Zeffman's letter of 4th October might be said to have suggested a mechanism under which only one act, namely Mr Zeffman's confirmation that the money had been safely received, was sufficient to bring about a binding agreement, in his letter of 7th October he clearly anticipated that both gentlemen would have to agree that completion should take place see paragraph 5 although each party would obviously not agree that unless and until he was satisfied with the engrossed agreement in his possession. Accordingly, the actively expressed consent of both men was required. Neither Mr Lagod's evidence nor Mr Zeffman's evidence makes it clear in what order each man spoke, or indeed what he said. A full analysis of the situation in offer and acceptance terms would require one to be able to analyse the situation in that way. The attendance note does not actually refer to the confirmation of the receipt of the draft. It refers to the fact that Mr Lagod had not got his client's signatures on the engrossment at his end, and despite that "we agreed we were in a position to close". That could mean that they agreed to close at that point; or it could mean that they agreed subject to the matters dealt with subsequently in the attendance note. If it means the former, one cannot tell in what order the gentlemen spoke. In offer and acceptance terms, each is equally likely at present. In my view that means that Mr Vos has a good arguable case. In fact, they may not have agreed a closing at that point, because the attendance note goes on to record a discussion as to dating, and it ends "finally we agreed to close then (at around 11.40 pm) on the basis that both agreements would have 9th October typed in as the relevant date". If completion was postponed until that point in the meeting, then one would have to have an enquiry as to the order of the events and the relevant parts of the conversation in order to determine who made final offers and who made final acceptances. It seems to me that in this respect too Corps as a good arguable case for saying that something amounting to an acceptance was uttered in California and received by Mr Zeffman in England.
- I confess that, looking at the evidence in this case, the application of the "good arguable test" case has troubled me a little. That is because the evidence as such does not directly address the question of the order of events in the conversation. It is understandable that the attendance note should not do so; presumably the minds of the parties were not focused on that fact. However, neither of the principal witnesses has dealt with it in terms in his witness statement either. In my view the sentence relied on by Lord Grabiner in Mr Lagod's statement, in which he refers to waiver, is not in terms dealing with the order in which utterances were made; the paragraph is in fact dealing with how the parties overcame something which hitherto had been a precondition to completion. By the same token, Mr Zeffman does not deal with it in terms either. It is maybe that neither witness would be wholly confident of the precise order of events, down to the very small refinements that would be necessary to analyse this issue thoroughly, at this point in time (nearly 13 years after the events in question). However, it does not seem to me that this means that I cannot determine that the Claimant has a good arguable case. The test does not require Mr Vos to establish his case to the full civil standard of proof, and I can find the test satisfied even though it may not be possible on the present evidence to predict the outcome of the case or to find that the Claimant is more likely than not to win on the point were it to be tried see Agrafax Public Relations Limited v- United Scottish Society Inc. [Times Law Reports, 22nd May 1995] Court of Appeal per Henry L.J.
- The conclusion that Mr Vos has established a good arguable case makes it unnecessary for me to consider the alternative way in which Mr Vos sought to establish jurisdiction by showing that the contract was made within both jurisdictions and therefore within England, but since submissions were addressed to me upon it and because it may provide an appealing approach to cases like the present, I will deal with the matter. Mr Vos made the bold and almost unprecedented submission (so far as the researches in this case have established) that the contract could be shown to have been made in both England and California, which is sufficient for CPR 6.20 (5) (a). I say "almost" unprecedented because in Brinkibon case Mr Anthony Thompson Q.C. submitted that as a matter of principle a contract may be made in two places at once see the argument at page 37 E. The point was not adverted to in any of the speeches in that case and the case was decided by applying the traditional principle which I have already identified. So far as the authorities material put before me is concerned, nothing in terms deals with the point and Lord Grabiner, while not accepting that such an analysis was possible, was unable to identify any principle which rendered the concept heretical, a nonsense or impermissible. No academic learning was put before me, and the only learning that my own researches have thrown up is in an article by Mr Charles Lewis MA in [1990] LMCLQ at page 433, an article commenting on Brinkibon in the Court of Appeal. At the end of his article Mr Lewis says this:
- Before considering whether authority compels a conclusion one way or another, it is worth considering the validity of the point as a matter of principle. I confess that I can detect no conceptual barriers to the notion of a contract being treated as having been made in two places, and some not inconsiderable attractions. In a case where the two parties to a contract are not in the same location at the time of contracting, the notion of where the contract is made is essentially a lawyer's construct. It seldom matters of course, but where it does matter (principally for the purposes of jurisdiction under English law) the law has to provide some answers where an application of the experience of everyday life does not enable one to provide them. Hence the rule in Entores and Brinkibon to the effect that in the case of instantaneous communications (in those cases telex) the contract is made where acceptance is received. That form of approach assumes that one can analyse the formation of a contract in offer and acceptance terms, and in Brinkibon Lord Wilberforce indicated that, difficult though the exercise may be, the courts have to do their best with the evidence in order to work out, sometimes in situations of some difficulty, how the offer and acceptance analysis pans out. However, in the post-Brinkibon world, where oral telephone communications are even more common, and where such communications can involve three or more participants in three or more different jurisdictions, and where parties might even conclude a written contract by each signing, and observing each other signing, over a video-link, the law may have to move on and to recognise that there is nothing inherently wrong or heretical in allowing the notion of a contract made in two (or more) jurisdictions at the same time. This is not merely a way of avoiding an unfortunate, and perhaps difficult, evidential enquiry. It may well reflect the reality of the situation. Take the case of three parties who each agree to complete a written agreement by signing simultaneously over a three way video link where is that contract made? The natural answer is that it is made in all three jurisdictions. Such a conclusion does not necessarily create practical difficulties. If one of those jurisdictions is England, then one of the foundations for the English courts to assume jurisdiction is present, but it does not necessarily follow that jurisdiction will be assumed, because a Claimant who seeks to sue here would still have to establish that it is the most appropriate jurisdiction in which to sue. Jurisdiction would then dealt with on the basis of a mature forum conveniens doctrine rather than what might otherwise be a very forced and artificial analysis of trying to establish in which single jurisdiction the contract was made.
- Such an analysis also has the merit of reflecting the fact that it is simply not always possible to analyse a contract in offer and acceptance terms. As Lord Diplock observed in Gibson v- Manchester CC [1979] 1 WLR 294 at page 297:
- Where such a contract is brought into existence, a fortiori it will not be possible to find out where the contract is made by applying the Brinkibon test. Of course, in most cases there will be no problem, but I do not see why, in the exceptional case, the answer should not be that a contract is made in two places (or conceivably in more than two places) if the facts admit of that result and drive one to that conclusion.
- As I have indicated, there is no authority which bears directly on this point. Two authorities were relied on in Brinkibon Evans v- Nicholson (No. 2) [1875] 32 LT 778 and Bennett v- Cosgriff [1878] 38 LT 177, but Mr Vos accepted that neither actually supported the proposition because they deal with different points namely where a letter stating an account or ordering goods should be taken as speaking. Mr Vos did, however, rely on pointers in other cases. The first was Commission for New Towns v- Cooper (GB) Limited [1995] Ch. 259 at p. 285 where Stuart-Smith L.J., referring to exchange of contracts, said (at page 285:
- There is therefore no authority which directly supports the proposition. Is there any authority which gainsays it? Unless it is implicit in Brinkibon then it does not seem to me that there is. Brinkibon was a case in which the House of Lords had to consider a contract reached by means of a telex machine. The effect of the decision was to apply the rule as to instantaneous communications which appeared in Entores. Despite the recorded submission of Mr Thompson that a contract can be made in two places at once, the debate in the judgments is really as to the applicability of the instantaneous communication rule. True it is that Lord Wilberforce at page 40 anticipates that an offer and acceptance analysis will be appropriate, but I do not read him as saying that it would be appropriate if it cannot be done or if it is utterly artificial or inappropriate to do it. At page 42D he observed that many variations might occur in relation to the communication and receipt of a telex and that:
- So far as it is necessary for me to do so, therefore, I am prepared to consider this matter on the footing that it is possible, as a matter of principle, for a contract to be made in two places at once so that if one of those two places is England the requirement of CPR 6.20 (5) (a) is made out. It is therefore necessary to consider whether on the facts of this case there is a good arguable case for saying that that is the appropriate analysis. In my view Mr Vos has succeeded. It seems to me that this sort of case is very arguably one of the class contemplated by Lord Diplock in which an analysis in terms of offer an acceptance is not appropriate. The parties had, by a long process of negotiation, arrived at agreed forms of agreement which were not to be made binding until both parties indicated that they were. If both parties had met in order to sign and complete in the same place, it might well have been extremely difficult to find anything amounting to an offer and acceptance. Where completion takes place at a distance over the telephone, it might well be possible to construct an offer and acceptance analysis (indeed, each party has sought to do so in this case) but it might equally be thought that that analysis is extremely forced and introduces a highly random element. The offer and acceptance may well depend on who speaks first and who speaks second, which is likely to be largely a matter of chance in closing an agreement of this sort. It is very arguably a much more satisfactory analysis to say that the contract was made in both places at the same time. On the facts of this particular case, that would coincide with the clearly expressed intentions of the parties that neither wished to give the other an advantage in terms of governing law and jurisdiction, and although introducing the somewhat random element of offer and acceptance into the concept might be said in one sense to coincide with their respective wishes, and although their expressed wishes did not go so far as to encompass the place of contracting, it seems to me that there is a good arguable case for saying that a dual place of contracting coincides rather more closely with the intentions of the parties.
- I therefore conclude that as a matter of principle, and on the facts of this case, Corps has a good arguable case for saying that the contract was made in both England and California; since that means it was made in England that establishes one of the bases of jurisdiction in CPR 6.20, although it does not conclude the question of whether it is appropriate to litigate the matter here because I shall have to go on to consider whether this is the appropriate forum. I do so below.
- The next alternative ground of jurisdiction relied on by Corps is that the contract is governed by English law. Neither the Settlement Agreement nor the Trade Mark Agreement contains an express choice of law clause (a deliberate decision of the parties, as appears above). So I have to determine the law which applies by the reference to the Rome Convention, incorporated into English law by the Contracts Applicable Law Act 1990. The relevant provisions are in Article 4 which, so far as relevant, reads as follows:
- I therefore have to carry out the following exercise:
- My first task is therefore to identify the characteristic performance due under this contract.
- There were two principal areas of dispute between the parties on this issue, namely what factors I was entitled to take into account in determining characteristic performance, and then what the answer was. Lord Grabiner propounded a wide ranging test, entitling one to go beyond the four corners of the contract and to see how it operated in the real world and where its real "bite" was. Mr Vos propounded a narrower view, which confined itself largely to the four corners of the contract and severely limiting the factual context into which it was to be put for determining characteristic performance and who was to provide it.
- It is common ground that in determining the meaning and effect of the Rome Convention I can derive assistance from the Giuliano-Lagarde Report (OJ C282/1980). Mr Vos said that the thrust of this report was to require one to work principally from the contract to ascertain characteristic performance. The purpose of the Convention in this respect was to simplify the inquiry
- I do not think that the inquiry required under this head should be confined in the manner submitted by Mr Vos. All contracts operate in their own commercial environment, and in order to understand them and how they operate they have to be placed in that environment. In many cases the position will be obvious without doing much of that; in some it will be less obvious. Accordingly, as a matter of principle it seems to me to be wrong to seek to confine the inquiry in the way suggested by Mr Vos. Obviously the contract is a starting point, and in many cases it may be obvious, without going further, what the characteristic performance is; but that does not mean that one cannot or should not put the contract into its commercial context.
- This approach is also supported by authority. In Print Concept GmbH v Gew (EC) Ltd [2001] EWCA 352 Longmore LJ said:
- Accordingly, I do not confine my inquiry to the terms of the contract in this case, though obviously that is a vital starting point. The principal piece of context which Lord Grabiner relies on is the fact (which he says the evidence establishes) that the "bite" of the agreement was directed at Computer and what it did and sought to do. In 1991 it was the party that was seeking to expand its product range and was introducing various new products (hardware and software). That was at least part of the genesis of the 1989 dispute which ended up before Ferris J. By contrast, Corps was not innovating at the time. The purpose of the Trademark Agreement was to move the boundaries and to permit Computer to move into new areas that Corps was not interested in moving into anyway. In this respect Lord Grabiner relied on what a Mr Tenenbaum (one of Corp's principal negotiators) had said on deposition in other US proceedings in 1995, which he said supported this analysis of what was really going on. He also maintained that Computer was entitled to rely on events subsequent to the contract to show its bite, and pointed to the relatively recent introduction of iTunes software in January 2001. Accordingly, if one asks what the real subject of the agreement was, it was primarily directed at defining what Computer could and could not do, and not at what Corps could and could not do.
- I am afraid that I do not accept this analysis. I start by considering the concept of "performance" under the contract. The concept of "performance" is an easier concept to deal with where what is required is positive acts. Although there will always be cases of difficulty, one can see how the concept applies where one can see what positive acts have to be done under the contract, identify one act or set of acts as lying at the heart of it, and identify the party that has to do those acts. That is not the case for much of the Trademark Agreement. At the heart of the agreement are, in effect, negative provisions. I have set out the recital to the agreement above. It recites its purpose as being to reserve certain fields of use to the parties respectively. There is then a provision for payment, which, while clearly "performance", is not "characteristic" for these purposes, as both parties implicitly recognised before me. The heart of the agreement lies in clause 4, which provides for the parties to use their marks in their respective defined fields of use. These are not positive obligations under which the parties undertake to do something. They are permissive, until one gets to clause 4.9 which imposes a negative obligation on both parties they are not to use their own marks in the other's field of use. They both perform by not doing something. Clause 5 imposes positive obligations, but it is quite clear that they are ancillary to the primary matters which are in clause 4 they essentially provide for how the parties are to implement the fields of use which they are both to have by specifying what each is to do in various jurisdictions to leave their respective fields of use open to their owners. The remaining provisions do not contain any material items of performance; nor do they shed any further light on characterisation.
- The heart, or meat, of this agreement is therefore a negative one. The parties perform it (so far as they perform it at all) by not doing something, rather than by doing something positive. However, I am prepared to assume that a negative obligation can amount to "performance" within the meaning of Convention, and that where a negative obligation lies at the heart of a contract then the fulfilment of that negative obligation is the "characteristic performance" for the same purposes. Nonetheless, in relation to the present contract, it seems to me that the mutuality of the obligations means that the central performance elements (I deliberately avoid the expression "characteristic performance" at this point of the argument) are shared between the parties. Each has to do (or refrain from doing) the same acts vis-ΰ-vis the other. Accordingly, so far as the concept of identifying "characteristic performance" provided by one party is concerned, one cannot do it looking at the contract as such.
- That one might arrive at this conclusion is not entirely unforeseen. Dicey & Morris on the Conflict of Laws at page 1240 gives barter as an example of a contract where one cannot determine characteristic performance. That is doubtless because there are, in effect, matching obligations neither of which is more characteristic than the other. That has resonsances in the present case. More presciently, the problem of identifying characteristic performance in cases of complex intellectual property rights agreements was referred to in Cheshire & North's Private International Law (1999) at page 570 where the authors refer to the difficulty of applying the concept to complex contracts for the commercial exploitation of intellectual property rights.
- Accordingly, I consider that starting from the contract itself, and looking at its nature, one cannot identify characteristic performance provided by one party or the other. However, I have already accepted that it is, or could be, appropriate to put the contract in its proper context in order to consider this point fully, and that is in effect what Lord Grabiner does when he says that whatever the contract may say as between the parties, the "real meat" of the contract lies in the fact that the purpose of this contract was to free up his clients so they could pursue their innovations into new areas and applications. I do not agree. First, while that may be how his clients saw it, that does not describe how the central parts of this contract work. Whether or not the agreement provided a more helpful commercial and intellectual property environment than had existed hitherto, it is still the case that this contract regulated the activities of both parties, in real and substantial ways. The restrictions on Corps were in no way subsidiary to those imposed on Computer, and Corps' rights were in no real way less significant, or less central, than Computer's. The reality of this contract was still that it divided up a potentially disputed cake, and that remained the reality even if it was the case that Computer was getting a bigger slice of the cake than it might hitherto have had. I therefore do not consider that Lord Grabiner's factor somehow shifts the performance in favour of his client. In addition, even if he were right on the facts I do not see how the argument assists him in saying his client had become the party who provided characteristic performance. Computer undertook no obligation to carry out any activities in its newly established territory, so it was itself providing no additional performance itself. If anyone was providing additional elements of performance which somehow tilted the balance so as to create a characteristic performance, it was Corps, which had extended the area affected by its negative obligation and thus (if anyone did) had provided the characteristic performance. If that were correct then it would make the law of Corps central administration (ie England) the governing law under Article 4(2) which is not the result that Lord Grabiner seeks. In truth, however, that analysis is not the correct one. The true position is that this is not a case where one can determine characteristic performance.
- Accordingly the presumption created by Article 4(2) does not apply, by virtue of the wording of Article 4(5), and I have to ascertain "the country with which [the contract] is most closely connected" in accordance with Article 4(1).
- At this point in the argument the stances of the parties reversed. Lord Grabiner sought to limit the kind of factors that can be taken into account in this exercise, whereas Mr Vos sought to say they were wide. Lord Grabiner's submission was that the sort of matters that could be used to establish the connection had to be "geographical connections" and connected with performance. They must be connections between the contract and a country, not connections between the contract and a legal system. This means that such things as considerations which might go to the question of express or inferred choice of law are irrelevant they come in under Article 3 or not at all. The same applies to such factors as currency identified in the agreement.
- Lord Grabiner said that his proposed limitation was supported by the Giuliano-Lagarde report and by the judgment of Hobouse LJ in Credit Lyonnais v New Hampshire Insurance Co [1997] 2 Lloyds Rep 1. That case concerned the question of the governing law of an insurance contract which was to be determined under the provisions of similar but not identical legislation to the Convention. In deciding the question before him Hobhouse LJ considered the Convention, and observed that the Article 4(2) test:
- Mr Vos disputed this narrow view of the factors that could be taken into account. In my view he is correct, and Lord Grabiner's approach is not correct either as a matter of principle or as a matter of authority.
- Accordingly, I consider that I am entitled to take a broad approach to the question of connection, unlimited by any categorisation of the relevant factors.
- This has turned out to be a very difficult question. The contract in question is a contract between two companies in different jurisdictions and which governs their respective worldwide activities. In one sense it has connections with many jurisdictions but neither Corps nor Computer has put forward any close connection other than with England and California respectively. I must determine which is correct.
- Computer relies on the following connections with California:
- That gives some, but it might be thought not much, connection with California. However, I have to measure this against the alleged connections with England. Those connections are said to be as follows:
- This is an agreement in respect of which a close connection with either jurisdiction is very difficult to find. However, the question for me is slightly different because I have to find the country "with which it is most closely connected" (Art 4(1)). As appears above, I find that most of the connecting features are weak or neutral, and because of the essentially worldwide nature of the effect and operation of the Trade Mark Agreement the question is a very difficult one, but in the end I think that the closer connection is with England. I think that one of the weightier factors in favour of England is that the Trade Mark Agreement is part of an overall settlement of English litigation, albeit that that is litigation with worldwide impact. Taking that factor, and assessing the other admissible factors so far as they are of any significance, I consider that this contract has a closer connection with England than with California. That means that English law is the governing law.
- Accordingly, Corps establish that head of jurisdiction as well.
- It is common ground that the burden is on Corps to satisfy me of this. The dispute in this case is essentially one of construction of the Trade Mark Agreement. Corps say that on its true terms and effect that agreement prohibits Computer from operating the iTunes Music Store. Subject to one difference of Californian law the material for reasoning that dispute will be the contract (and argument on what it means) evidence of the surrounding circumstances, and evidence of what Computer is doing and intends to do (including evidence of how its product works, to a limited extent) in order to identify the exact breach (if any).
- The parties put various factors before me in this connection, of which the main ones are as follows.
- Taking into account all these considerations, and the other points advanced by the parties, I have concluded that England is the proper place for this litigation. I accept that the governing law is a key (though, as I have said, not determinative) point, and that points to England. I also think that the prospect of parol evidence and depositions are likely to lengthen a trial and make the proceedings more costly. I also give some weight, but not a lot of, to the disruption to Corps' business arising out of Mr Aspinall's engagement in California litigation. Taking all these factors into account, I think that this construction point arising out of this English law contract is more appropriately tried in England.
- Corps advanced additional heads of jurisdiction under CPR 6.20, namely an injunction to restrain breaches of contract to be committed within the jurisdiction, and an injunction to restrain the commission of acts within the jurisdiction. These claims were based on assertions that Computer threatened to make the iTunes product available in this jurisdiction. In the light of my determination on the main point I do not have to go on to consider this alternative basis, and therefore I do not do so.
- There is one further matter of procedural history that I should refer to. In October 2003, several months after the present proceedings were started, Computer started its own proceedings in California, seeking negative declaratory relief in respect of Corps' complaints. Corps sought to have those proceedings dismissed on the basis of lack of personal jurisdiction. Judgment in that application was pending at the time of the hearing before me. Since then judgment has been given, and the application has been dismissed I have seen a copy of the judgment of the judge (Judge Whyte). Nothing in that application or that judgment relates to anything that I have to decide, and neither party sought to say that it did.
- In the circumstances I dismiss Computer's application.
Mr Justice Mann :
Introduction
a. Was the contract made in England?
b. Was the contract governed by English law?
c. Is there a threatened breach of contract within the jurisdiction?
d. If any of those heads are made out, is England the proper place in which to bring the claim?
" a claim form may be served out of the jurisdiction with the permission of the court if -
(2) a claim is made for an injunction ordering the defendant to do or refrain from doing an act within the jurisdiction.
(5) a claim is made in respect of a contract where the contract
(a) was made within the jurisdiction;
(c) is governed by English law;
(6) a claim is made in respect of a breach of contract committed within the jurisdiction."
CPR 6.21(2A) provides that:
"The court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim."
a. In relation to (a), the burden is on Corps, and it has to establish a good arguable case.
b. In relation to (b) and (c) the burden is on Corps and it has to be actually decided.
c. In relation to (d) the burden is on Corps to establish the fact.
The key terms of the agreement
"AGREEMENT" . Whereas, the context in which this Agreement arises in the parties' desire to reserve for Apple Corps' field of use for its Trade Marks, the record business, The Beatles, Apple Corps' catalog and artists and related material all as set forth in section 1.3 herein and to reserve for Apple Computers field of use for its Trade Marks, the computer, data processing and telecommunications business as set forth in section 1.2 herein and to coordinate the use of their respective Trade Marks in such fields of use as set forth in section 4 herein.
"Accordingly, the parties agree as follows:
1. DEFINITIONS
2. "Apple Computer Field of Use" means (i) electronic good,s including but not limited to computers, microprocessors and microprocessor controlled devices, telecommunications equipment, data processing equipment, ancillary and peripheral equipment, and computer software of any kind on any medium; (ii) data processing services, data transmission services, broadcasting services, telecommunications services; (iii) ancillary services relating to any of the foregoing, including without limitation, training, education, maintenance, repair, financing and distribution; (iv) printed matter relating to any of the foregoing goods or services; and (v) promotional merchandising relating to the foregoing.3. "Apple Corps Field of Use" means (i) the Apple Musical Artists; the Apple Catalog; personalities or characters which appear in or are derived from the Apple Catalog; the names likenesses, voices or musical sounds of the Apple Musical Artists; any musical works or performances of the Apple Musical Artists; (ii) any current or future creative works whose principal content is music and/or musical performances; regardless of the means by which those works are recorded, or communicated, whether tangible or intangible; (iii) promotional merchandise relating to any of the foregoing; (iv) merchandising relating to the Apple Musical Artists and the Apple Catalog and the related subject matter set forth in subsection (i), including, without limitation, the commercial exploitation of personalities, characters, names, designs, images, words, photographs, drawings, or other materials through articles such as posters, toys, games (including computer games), novelties, figures, figurines and clothing; and (v) printed matter relating to any of the foregoing goods or services.4. "Apple Computer Marks" means (i) any design, reproduction or other depiction of an apple, in whole or in part, except for a whole green apple or a half apple (of any color(s)); and (ii) the word "Apple".5. "Apple Corps Marks" means (i) any design, reproduction or other depiction of an apple, in whole or in part, except a "rainbow" or multicolour striped apple (in whole or in part) or any apple (of any color(s)) with a "bite" removed; and (ii) the words "Apple", and "Zapple".2. PAYMENT
"Apple Computer shall pay to Apple Corps the sum of One Hundred Thousand Dollars ($100,000) (exclusive of VAT), the receipt of which is hereby acknowledged by Apple Corps. Apple Computer shall be responsible for any VAT that may be levied as a consequence of such payment and will indemnify and hold harmless Apple Corps if any VAT is due but not paid and any attempt is made by the relevant authority to levy such upon Apple Corps, Apple Corps shall be responsible for any income or similar tax payable by Apple Corps as a consequence of the receipt of such payment and will indemnify and hold harmless Apple Computer if such tax is not paid and any attempt is made by the relevant fiscal authority to levy such upon Apple Computer. If there is any attempt to levy any VAT or income tax on the payment set forth herein, the indemnified party shall cooperate fully with the indemnifying party and the indemnifying party shall have the right to contest or control any proceeding arising in connection thereto.
4. RIGHTS TO USE TRADE MARKS
1. "Apple Computer shall have the exclusive worldwide right, as between the parties, to use and authorise others to use the Apple Computer Marks on or in connection with goods and services within the Apple Computer Field of Use.2. "Apple Corps shall have the exclusive worldwide right, as between the parties, to use and authorise others to use the Apple Corps Marks on or in connection with goods and services within the Apple Corps Field of Use.3. "The parties acknowledge that certain goods and services within the Apple Computer Field of Use are capable of delivering content within the Apple Corps Field of Use. In such case, even though Apple Corps shall have the exclusive right to use or authorise others to use the Apple Corps Marks on or in connection with content within subsection 1.3(i) or (ii), Apple Computer shall have the exclusive right to use or authorise others to use the Apple Computer Marks on or in connection with goods or services within subsection 1.2 (such as software, hardware or broadcasting services) used to reproduce, run, play or otherwise deliver such content provided it shall not use or authorise others to use the Apple Computer Marks on or in connection with physical media delivering pre-recorded content within subsection 1.3(i) or (ii) (such as a compact disc of the Rolling Stones music).4. "Except as provided in subsection 4.4, neither party shall use or authorise others to use their respective Marks on or in connection wit the other party's exclusive field of use hereunder.6. NO CHALLENGE; LIMITS ON USE/RESTRICTIONS IN EEC
1. "Neither party shall challenge the other party's Trade Mark registrations or applications for registration in any part of the world with respect to that other party's Field of Use.2. Apple Corps' rights of use and the restrictions on Apple Computer's rights of use of their respective trade marks (including the restrictions on challenging Apple Corps' trade mark registrations and applications for registration) hereunder shall cease in relation to the European Economic Community if within ninety (90) days of a reasonably grounded request from Apple Computer, Apple Corps fails to satisfy the following test of use. Apple Corps shall satisfy the test of use if Apple corps or its authorised licensees has used the Apple Corps Marks or any of them on or in relation to goods or services within the Apple Corps Field of Use anywhere within the European Economic Community at any time during the five (5) year period ending with the date of the request.7. NO LICENSE
"This Agreement does not constitute a license.
9. SEVERABILITY
"If any part or parts of this Agreement shall be determined to be void, invalid or unenforceable by any court or competent authority in any jurisdiction, such determination shall not affect the validity or enforceability of any other part or parts of this Agreement all of which shall remain in full force and effect. The part or parts of this Agreement rendered or declared void, invalid or unenforceable shall be void, invalid or unenforceable as the case may be in that jurisdiction only, and this Agreement shall remain in full force and effect in all other jurisdictions.
13. NOTIFICATION
1. The parties shall as soon as possible after execution hereof jointly notify this Agreement to The Commission of the European Communities for negative clearance and/or exemption under Council Regulation 17 of 6th February 1962, and shall jointly take all reasonably necessary steps and cooperate with each other with a view to obtaining such clearance and/or exemption.2. No provision of this Agreement (including any agreement or arrangement of which it forms part) being a restriction by virtue of which this Agreement is subject to registration under Section 35 of the Restrictive Trade Practices Act 1976 shall take effect until the day after particulars of this Agreement have been furnished to the Director General of Fair Trading under that Act. Both parties shall use all reasonable endeavors to procure that the said particulars are so furnished as soon as possible after execution of this Agreement and, in any event, within three (3) months thereafter.
Clause 5 is headed Registrations. It is a long clause which sets out, first, the steps to be taken by Corps if any Corps registrations are cited by any Trade Mark authority against any application by Computer, and then similar provisions applying the other way round. They provide for cascading steps involving cancellation, consents, amendments and assignments. They apply worldwide, though specific provisions are made for Spain, Sweden, Portugal and Brazil. It is unnecessary to set out its terms in full; that description is sufficient.
Clause 6.3 is a counterpart to 6.2, switching the parties round.
The agreement is signed by Mr Aspinall on behalf of Corps, and Mr Graziano on behalf of Computer.
The alleged breaches
Where the contract was made
"Computer's representatives and I were aware that the determination of governing law and jurisdiction could be influenced by the location(s) where the parties signed the agreements and where the agreements were formed. As a result, we took precautions to ensure that neither party could claim priority for its preferred jurisdiction based on the place where the agreements were signed and formed.
Those precautions included a mechanism for closing [and he goes on to describe a procedure set out in a letter of 7th October, to which I will refer, in which engrossments executed by each party in their respective jurisdictions would be held "in escrow" pending a telephone conversation in which their release would be ordered; this procedure was not precisely followed].
This procedure ensured that an agreement was not concluded in England earlier than it was made in California, and vice versa. Because the Settlement Agreement and the Trade Mark Agreement would become simultaneously binding in England and California, those agreements would have no greater connection, in terms of their place of making, with either jurisdiction."
Mr Zeffman, the English solicitor/negotiator for Corps at the end of the negotiation process, does not agree that the purpose of the mechanism was to achieve neutrality in terms of where the agreements would be deemed subsequently to be made, and does not recall that the intention was that the agreements should become binding and effective at both places at the same instant.
I mention these points because it is apparent that at least one party was sensitive to the place of the making of the agreement, and because the evidence might go to the proposition that the contract was made in two places.
"I have been thinking a bit more about the closing arrangements (on the assumption that we manage to finalise the drafting). I suggest the following procedure. Each of the two agreements will be in two parts. I will prepare engrossments of the Settlement Agreement and you will prepare engrossments of the Trade Mark Agreement. We will each get our clients to sign both parts of the Agreement that we have each prepared and I will send you both copies of the signed Settlement Agreement at the same time as you send me both of the signed copies of the Trade Mark Agreement. We will both then get our clients to sign both copies of the other Agreement so that all four documents have been signed by both parties'. We will then send to each other one fully signed copy of the Agreement that we are holding, so that we both end up with full-executed Settlement and Trade Mark Agreements. We will each hold these in escrow until Neil receives the money and I will let you know as soon as he has received it."
"Enclosed please find a revised Trade Mark Agreement which reflects the changes we discussed yesterday. I am pleased to state that, assuming all changes we discussed are made to the Settlement Agreement, that this Trade Mark Agreement is ready for execution by the parties'. Please give me a call to discuss how we go about closing this case."
"As far as closing is concerned I suggest the following:
1.The Apple Computer signatory will sign the two Agreements (which, in the case of the Settlement Agreement, will be a faxed copy) in the presence of an Apple Corp representative such as Wayne Cooper. The Apple Corp representative will then take away the signed agreements and hold them to your order.
2. At around the same time, Neil will sign the two agreements (which, in the case of the Trade Mark Agreement will be a faxed copy) in the presence of an Apple Computer representative such as a Clifford Chance person. The Apple Computer representative will take away the two signed agreements held to my order.
3. The signed agreements will remain held in escrow until Neil receives the banker's draft. I will inform you as soon as it is received and the signed agreements will then be released from escrow.
4. I look forward to hearing from you later today."
"I look forward to working out the closing arrangements on Monday. For your information, I plan to meet with Graziano at 6:00am on Monday to get his signature, as he will be going out of town later that morning. You can have Wayne Cooper (or whoever Apple Corps' representative will be) contact me Monday morning to arrange to pick up the signed agreements. (I assume he will not be interested in meeting us at 6.00pm to witness the signing). Please give me a call so we can confirm the logistics.
"As discussed on Saturday, I attach copies of those pages of the Trade Mark Agreement on which I have marked typos or other minor word changes".
"As far as closing, the procedure is to be as follows:
1. Joe Graziano will sign the two Agreements (which in the case of the Settlement Agreement will be a faxed copy) at 6:00 am your time today. We agreed that there was no need for Wayne Cooper to attend as a witness and indeed I suggest that you courier the signed agreement to me together with the banker's draft and I will hold both the Agreement and the draft to your order.
2. Some time today I will arrange for Neil to sign the two Agreements (which in the case of the Trade Mark Agreement will be a faxed copy). I will courier these to you and you will hold them to my order. (I do not know if you require Vanessa to be present as a witness. If that is what you prefer then Vanessa can take away the agreements and courier them to you). [I interpose that the reference to Vanessa was a reference to Vanessa Marsland, a partner at Clifford Chance, solicitors to Apple Computer.]
3. When you courier the Agreements and draft to me under 1 above, it would probably be preferable if you had already substituted the corrected pages of the Trade Mark Agreement. Similarly, when you receive the Agreement signed by Neil you can then substitute the corrected pages.
4. When we each receive the two Agreements signed by the other party we will get our own clients also to sign those Agreements so that we each end up with full, executed copies.
5. When we both have fully executed copies in our possession we will have a telephone conversation and agree that the Agreement and the draft may be released from escrow and we will date all the agreements.
Can you also please fax me today a copy of the banker's draft and give me all other relevant details, concerning the draft so that we can tee up Apple Corps' bank. As we discussed, when the agreement refers to "banker's draft" we are talking about an instrument which will represent immediately available cleared funds when presented to Apple Corps' bank and I want to make sure there are no problems otherwise all the agreements will not be released from escrow until the draft has cleared"
"Wednesday 9th October 1991.
At around 5.00 pm I received a couriered letter from Marti Lagod enclosing the Trade Mark and Settlement Agreements signed by Apple Computer together with the banker's draft. I gave the bankers draft and signed agreements to Sarah Moore (a trainee solicitor employed by Frere Cholmley) who took them over to Apple at around 5.45 pm for signature by Neil Aspinall.
I tried to speak to Marty Lagod at various times during the evening and eventually spoke to him from home at around 11.30 pm. He had received from Vanessa Marsland the agreements which Neil had signed on Monday and although he had not yet obtained Apple Computer's counter signature of those agreements, we agreed that we were in a position to close.
I told him that I had checked through the Trade Mark Agreement to see if he had incorporated the various minor wording changes I had sent to him and that the one point he had not changed is that the Agreement had 7th October typed in as its date whereas we would not be completing until that evening i.e. 9th October. We had a debate about this and it became clear that US and UK practice differed in that he was not used to writing in dates and I was not used to having typed in a date earlier than that on which the agreement became effective. Finally, we agreed to close then (at around 11.45 pm) on the basis that both agreements would have 9th October typed in as the relevant date and we would therefore each send each other substitute front pages on which 9th October had been typed in.
I then telephoned Neil Aspinall to inform him that we had closed."
"Even though Mr Graziano had not signed Apple Computer's part of the agreement, which were by then in California, nevertheless we would close then on the basis that (a) Mr Aspinall had by then signed both the agreements (those copies had been previously signed by Mr Graziano), and that (b) Mr Aspinall had by then received the funds. "
He goes on to disagree with an interpretation that Mr Lagod seeks to put on the attendance note (to which I will come) and says that they were not forced to deviate from the previously agreed procedure.
"We agreed to deviate because we clearly had a deal Mr Aspinall had signed on the same copies as Mr Graziano had previously signed and the money had been safely received by Mr Aspinall and there was no need or point in waiting for Mr Graziano subsequently to sign Apple Computer's copies of the two agreements."
"When Mr Zeffman and I agreed on 9th October 1991, by telephone, that we were in a position to close. Mr Zeffman's telephone attendance note confirms this fact. That attendance note is consistent with my recollection of the events of 9th October 1991 and states ["and he then quotes the sentence beginning "finally"]
He then goes on to make a comment about the word "although" in the sentence beginning "he had received from the Vanessa Marsland". He says that:
"In my opinion, the word "although" confirms that the parties viewed the closing procedure as binding, but that they were forced to deviate from that procedure. The deviation resulted because the counterparts held by me did not include Computer's signatures. It was therefore necessary for me to waive the need for those signatures before the Agreements became binding. I made that plain that in the closing telephone call and Mr Zeffman agreed that we could close the deal."
He ends this section of his witness statement by saying that the parties had not agreed to any closing procedure that tipped the scales on governing law and jurisdiction in favour of either party.
"As a result, as set forth in Mr Zeffman's 7th October 1991 letter, we agreed to and followed a procedure that ensured that the Agreements became binding and effective at the same instant in both England and California".
"I made that waiver in the closing telephone call, and Mr Zeffman agreed that we could close the deal."
That is said to amount to an offer to complete, accepted by Mr Zeffman.
"Why should not an acceptance or a repudiation communicated over a distance have a spatially continuing existence, so that the contract is made for jurisdictional purposes, albeit not for the purpose of fixing the moment the contract assumed binding force, at both points, the place for sending the message and the place of its receipt Unfortunately, this is a type of lateral thinking with which the precise and literal analysis of the common law intellect has neither familiarity nor sympathy."
"My Lords, there may be certain types of contract, although I think they are exceptional, which do not fit easily into the normal analysis of a contract as being constituted by offer and acceptance "
"Exchange can also take place by telephone, in which case it will be simultaneous."
That, however, merely deals with timing and mechanism; it does not deal with place and does not assist one way or the other. BP Exploration Limited v- Hunt [1976] 1 WLR 788 contains a debate as to where a contract was made, and it deals with a contention that a contract was made partly in London and partly in Texas, because a London contract was amended in Texas. That contention was rejected in favour of a finding that the contract was made in London and amended in Dallas rather being made partly in one jurisdiction and partly in the other. So that does not assist me. The last case which Mr Vos relied on as containing pointers was IRC v- Muller [1901] AC 217. That was a stamp duty case where an agreement for the sale of a business, including goodwill, was executed by the vendor abroad and by the purchaser in England. One of the issues was whether the agreement was "made" in England for the purposes of section 59 (1) of the Stamp Act 1891. At page 223 Lord MacNaghten said:
"I think the agreement was made in England, and none the less so because it may also be described with equal propriety as being made abroad."
However, the context of that quotation makes it quite clear that he is considering the very limited question of where the agreement should be treated as having been "made" for the limited purposes of the legislation before him. None of the other members of the committee expressed a view which assists one way or the other.
"No universal rule can cover all such cases: they must be resolved by reference to the intentions of the parties, by sound business practice and in some cases by a judgment where the risk should lie."
While that does not suggest that he was supporting the notion that in some cases it might be possible to find that a contract is made in two places at once, he is certainly pointing against any general rule applicable to all circumstances, and I think it is fair to say that it recognises the need to be appropriately flexible in reflecting the needs and practices of commerce. Both Lord Fraser and Lord Brandon (at pages 44 and 50 respectively) expressed the view that the general rule would have to give way to particular circumstances. In the circumstances, and while Brinkibon clearly lays down a general rule which is very helpful and desirable in terms of creating certainty, I do not take it as inevitably standing in the way of the concept that a contract can be made in two places at once in the sense that it forces a court always to find a single jurisdiction in which the contract should be taken to have been made.
The Governing Law of the Contract
"1. To the extent that the law applicable to the contract has not been chosen in accordance with Article 3, the contract shall be governed by the law of the country with which it is most closely connected
2. Subject to the provisions of paragraph 5 of this article, it shall be presumed that the contract is most closely connected with the country where the party who is to effect the performance which is characteristic of the contract has, at the time of conclusion of the contract, is habitual residence or, in the case of a body corporate or unincorporated, its central administration. However, if the contract his entered into in the course of that parties' trade or profession, that country shall be the country in which the principal place of business is situated or, where under the terms of the contract the performance is to be effected through a place of business other than the principal place of business, the country in which that other place of business is situated.
.
5. Paragraph 2 shall not apply if the characteristic performance cannot be determined, and the presumptions in paragraphs 2, 3 and 4 shall be disregarded if it fears from the circumstances as a whole that the contract is more closely connected with another country."
a. I have to identify, if possible, the characteristic performance due under the Trade Mark Agreement.
b. If I can do that, I then have to identify the party who effects that performance.
c. Once that party is identified (if possible) then I have to identify the place of the central administration of that party. That gives rise to a presumption that that is the jurisdiction with which the contract is most closely connected, and that close connection provides the governing law.
d. However, having identified that party and that performance (if I can), I have to consider whether or not the contract is in fact, and in the circumstances, more closely connected with another country (article 4(5); if so, then that other country provides the governing law.
e. If I cannot identify the characteristic performance due under the contract, then again I have to decide with which country the contract is most closely connected, and that country again provides the governing law (articles 4(5) and (4(1)).
"the submission of the contract to the law appropriate to the characteristic performance defines the connecting factor of the contract from the inside, and not from the outside by elements unrelated to the essence of the obligation such as the nationality of the contracting parties or the place where the contract was concluded" (p 20).The test "greatly simplifies the problem of determining the law applicable to the contract in default of choice by the parties Seeking the place of performance or the different places of performance becomes superfluous." (p 21)
"The global picture must be assessed ".
It is true, as Mr Vos observed, that that was a case in which the court had to define the contract and its nature first, because the contract was oral and the court had first to determine what its terms were, but having determined the terms and the thrust of the contract the Court of Appeal did not confine itself to those terms it looked at the "global picture" in order to ascertain the "characteristic performance". It also described the process as trying to find the "real meat" of the arrangement (adopting that description from an academic article); that concept does not suggest a narrow contract-bound inquiry. More compellingly, in Iran Continental Shelf v IRI International Corporation [2002] EWCA 1034 Clarke LJ, in connection with this test, said:
"24. It seems to me that in order to resolve this issue it is important to identify the terms of the contract. However, it is not in my judgment appropriate to look only at the purchase order and its acceptance. As in the case of any contract, it is important to view its terms against its surrounding circumstances or factual matrix. In this case the background to the contract is, I think, of particular importance because the contractual documents did not come out of the blue. On the contrary, they can be traced back to 1990."
"applies a criterion which takes into account the performance of the contract and a geographical location It is a criterion which seeks to identify the country in which the party providing the significant performance is located. It is also to be observed that just as it is not a test directed to ascertaining intention so it is not directed to identifying a legal system with respect to which the intention to enter into contractual relations must be taken to refer."
He then considered the circumstances in which the presumption in Article 4(2) might be rebutted, in accordance with Article 4(5), and referred to:
"the guidance that [Article 4(2)] gives as to what is meant by "the country with which it is most closely connected" and pointed out that the presumption "does not detract from the need to look for a geographical connection."
Having then returned to the provisions with which he was concerned, he embarked on a consideration of which country the contract was most closely connected with. In that context he said:
"Consistent with the policy of the directive one must look for links with the subject-matter and performance of the contract and their connection with a particular country
"There is no element of performance that is geographically connected with France references to French francs and the provisions of the French penal code do not themselves relate to the location of the performance of the contract nor to the location of either of the performing parties"
From this Lord Grabiner derived his submissions that the connecting factors had to be performance related and geographical, or to relate to the location of the parties. He said that this analysis was supported by Samcrete Egypt Engineers and Contractors SAW v Land Rover Experts Ltd [2002] CLC 533, which cited extensively from Credit Lyonnais and applied what it said.
a. While Hobhouse LJ is clearly drawing a distinction, he is in my view drawing a distinction between geographical links on the one hand and legal system links or matters relating to intention on the other. He points out that it is the first that is now determinative under the Convention; the old law had been otherwise. When he says that "one must look for links with the subject-matter and performance of the contract and their connection with a particular country" he is not, in my view, intending to impose restraints as to the sort of features that one takes into account in that process by reference to performance and subject matter he is emphasising the geographical element (though obviously performance and subject matter will be important factors in the assessment).b. The label "performance" is not going to be an easy one to deploy in some contracts. The same is true if one adds "subject-matter" as one of the tests. In some cases it might involve an artificial and ultimately profitless debate in ascertaining whether a given factor does or does not fall within one or other of those descriptions. Such a debate is not required by the wording of the Convention, which uses the broader words "contract" and "connected".
c. The limit suggested by Lord Grabiner is not reflected in the Giuliano-Lagarde report. That report refers to the "flexibility" of the general principal embodied in Article 4(1) (though it also uses the expression "vague concept" as well). There is no suggestion in the report of some sub-classification of relevant factors.
d. The authorities on Article 4 do not support Lord Grabiner's line.
i. Samcrete Egypt Engineers and Contractors SAW v Land Rover Experts Ltd [2002] CLC 533 was a case of a guarantee provided by a parent company of the obligations of a subsidiary under a distribution agreement. That was a case where the Article 4(2) presumption was held to be rebutted. Credit Lyonnais was cited, but the Court of Appeal did not draw from it the point now relied on by Lord Grabiner. The fact that the contract was written in English was said to be of "little consequence", not of "no consequence" which it ought to have been if Lord Grabiner were right. The presence of the creditor in England as a factor was said to "lack substance" because the purpose of the Article was to resolve questions of governing law precisely where two parties were of different domicile; but it was not rejected because it was not performance-related. The place of payment under the guarantee was held to be significant (which is consistent with Lord Grabiner's thesis). In addition, Potter LJ relied on the place where Land Rover had to deliver the vehicles under the guaranteed contract, which was England. In relation to this delivery, Potter LJ relied on delivery as being "the consideration stated in the guarantee". Performance in the sense of delivery was due under the distributorship agreement, which was made with the subsidiary. Delivery was not really performance due under the guarantee (there was apparently no promise to deliver under the guarantee); yet Potter LJ relied on it. He was therefore relying on performance under another contract as a relevant connecting factor. That is inconsistent with Lord Grabiner's thesis. Last, Potter LJ did not rely on the English choice of law clause in the underlying distributorship agreement, and declined to express a view as to whether it was relevant. He did, however, say that it was probably not, citing a passage in Credit Lyonnais in which Hobhouse LJ excluded inferred choice of law materials from that which the court could consider. While that is consistent with Lord Grabiner's line, it is significant that Potter LJ did not reject the submission as not being a "performance related" matter. Accordingly, looking at how Samcrete was decided, and despite the fact that it cited extensively from Credit Lyonnais, it did not articulate the distinction relied on by Lord Grabiner, and its reasoning is actually inconsistent with it in parts.ii. Bank of Scotland v Butcher is an unreported Court of Appeal case decided on 28th July 1998. In it the Court of Appeal was faced with a guarantee given to a Scottish bank by an English resident and a Scottish resident. The Article 4(2) presumption was held not to apply, and in determining the place of closest connection the Court of Appeal had regard to "all the circumstances", without identifying any limit to the categories of circumstances which could be taken into account. One must be a little cautious in taking this too far because Credit Lyonnais is not referred to in the judgment, and one does not know whether it was cited, and there are reasons for believing it may not have been because one of the factors taken into account by Aldous LJ was an inference as to the intentions of the parties as to governing law, which Hobhouse LJ expressly excluded; but nevertheless it does not provide any support for limiting the inquiry as to connection in the manner suggested by Lord Grabiner.iii. Definitely Maybe Ltd v Lieberburg GmBH [2001] 1 WLR 1745 was a case which concerned the rebuttal of the presumption provided by Article 4(2). In considering with which country (England or Germany) the contract was more closely connected, Morison J relied on the place of performance (which supports Lord Grabiner), and "for what it is worth", the fact that the defendant company was German, payment had to be made in Deutschmarks and payment was subject to deduction for German tax. Those last factors, albeit qualified by the judge, are not consistent with Lord Grabiner's line, and nothing in the judgment suggests Lord Grabiner's refinement of the test. Credit Lyonnais is referred to by the judge, and it was clearly cited to him.iv. Ennstone Ltd v Stanger Ltd [2002] 1 WLR 3059 was another case involving the rebuttal of the Article 4(2) presumption. The factors relied on by the Court of Appeal in its consideration of connection were all performance related apart from the reference to the domicile of the companies involved. To that extent it is consistent with Lord Grabiner's thesis. However, despite the fact that Credit Lyonnais was again referred to and relied on, Lord Grabiner's refinement was not articulated.v. The decision in Iran Contintental (see above) is consistent with Lord Grabiner's thesis but does not articulate his distinction.
a. While both parties are performing in their respective jurisdictions, greater weight should be given to Computer's performance in its jurisdiction because the Trade Mark Agreement was directed at its performance because it was being given a new liberty. Substantial compliance would therefore take place in California. This is, in effect, the argument referred to above (under characteristic performance). I have already rejected this analysis in that context, and I reject it here too. I do, however, accept that Computer would be performing, to a certain extent, by controlling activities from California, and that that gives a California connection. However, this is neutralised by the same factor operating for Apple in England.b. Computer relies on the fact that the contract was made in California. It may have been see above. However, I cannot find that it was, unless it was also made in England again, see above. Accordingly, this factor either does not operate at all, or it is neutral if the contract falls to be treated as having been made in two places at once. In any event, even if the contract were made in California alone, then that would be purely as a result of the accident as to who uttered the penultimate and who uttered the last words in the offer/acceptance analysis. That chance happening is too random to allow this factor (in the circumstances) to be of any weight.
c. Negotiations took place in New York and California, as well as in England. Negotiations in New York do not help to establish a California connection, but in truth the place of negotiations does not establish much of a connection anyway. The place of negotiation was essentially a matter of business convenience, not a contractual connection.
d. The sums paid under the Settlement Agreement and the Trade Mark Agreement were expressed in US dollars. This is true, and might be some sort of connecting factor, though Credit Lyonnais and Samcrete show that it is not strong. In the circumstances of the present cases it is not really of any material weight as a factor connoting the necessary geographical connection between the contract and California.
e. Under clause 4.1 of the Trade Mark Agreement Computer has the right to use its mark "on or in connection with" its goods and services. The same wording is used in clause 4.2 in relation to Corps' right to use its mark. The 1981 agreement, and early drafts of the Trade Mark Agreement, used the words "in relation to" instead. Ms Riola, a US trade mark attorney employed by Computer, says that the different specific wording was used in order to correspond with wording in the US federal Lanham Act, which is the main source of trade mark law in the US. She says, in a witness statement, that the phrase would be well known to trade mark attorneys and others seeking to register marks in the US. Mr Valner, who was heavily involved in the drafting of the 1991 agreements for Corps, says that he did not know, and there is no contemporaneous evidence, that the wording was changed for that purpose. Mr Zeffman did not know the reason for the change of wording either, so I infer that it was no part of the purpose of those acting for Corps at the time. In the light of that, and in the light of the oblique nature of the cross-reference, I regard this factor as being of no real weight. A clearer reference to legislation, even if not appreciated by one party, might import a connection, but this seems to me to be too obscure in the absence of a shared intention as to the drafting.
f. Clause 7.3 of the Settlement Agreement expressly excludes the effect of Section 1542 of the California Civil Code (which limits the effect of a general release). This reference is said import to import a connection to California (contrary to Lord Grabiner's main point that this would actually show a connection with a legal system, not a geographical connection). I agree that this is capable of demonstrating a connection.
g. The worldwide nature of the proceedings settled by the Settlement Agreement. I assume this means the worldwide nature of the disputes that were being litigated in 1991. I do not see how this can demonstrate a connection with California any more than any other country. If the proceedings had a worldwide nature, then this factor connects the agreement to every country in the world. While that includes California, it also includes England. It therefore might be said to be a connecting factor with California, but it does not particularly connect with California and is of no weight in demonstrating connection with that state.
h. Computer's principal place of business was in California. That is true and might be said to be some sort of connection, but not much, as appears from Samcrete. Since Corps' principal place of business was England, this factor is essentially neutral.
a. The history of the Trade Mark Agreement. The combined purpose of this agreement and the Settlement Agreement was to settle existing litigation in England, as well as disputes in the Commission. This is true, and is a connecting factor.b. The litigation concerned a preceding agreement (the 1981 agreement) which was expressly governed by English law, and the 1991 agreement follows the form of the 1981 agreement. This is true but I do not think that this imports a real geographical connection for the reasons referred to in Samcrete at p 545H.
c. Corps says that the 1991 agreement had, as a matter of fact, been operated and implemented in England, both parties having used English trade mark agents to co-ordinate the world-wide activities that resulted. Computer dispute that so far as they are concerned it says that co-ordination was achieved by Computer from California, using English trade mark agents as and when appropriate but not to co-ordinate the world-wide activities of Computer in relation to the agreement. Looking at the evidence, it does appear that very many aspects of implementation of the agreement took place in London, but they also took place elsewhere. This seems to me to be neutral on the facts. However, I do not think that this sort of conduct assists in determining closest connection. While it is true that the Giuliano-Lagarde report anticipates that subsequent performance can be taken into account, I think it can only do so by way of shedding light on the connection between contract and country at the time the contract was formed. Otherwise shifting performance giving rise to shifting connection could change the governing law, and that cannot be right. In the light of that, too, I do not think that this sort of evidential factor forges a connection. The parties happened to use London agents to deal with each other in order to implement the agreement, but that was not in any sense of the essence of the contract. They might have instructed agents anywhere.
d. Clause 13.2, which I have set out above, refers to delivery of particulars under the Restrictive Trade Practices Act 1976, and clause 14.2 made it clear that implementation of the agreement was conditional on fulfilment of that condition. Particulars were duly delivered, and the Office of Fair Trading decided that the 1976 Act did not in fact apply to it. This provision undoubtedly gives rise to some connection with England even though the delivery was ultimately not required by law. It seems to me, though, that this connection point is again weak. The agreement was intended to have worldwide operation, and this was just a specific provision referring to its operation in one specific jurisdiction.
e. The agreement was made in England. This point is neutral for the reasons given in relation to Computer's submissions.
Is England the proper place for this claim?
a. Governing law. Computer submitted that this was a key issue and that if California law governs the Trade Mark Agreement. I agree that it is an important, though not determinative, point, but since I have decided that English law is the governing law then this points towards England.b. The location of documents, evidence and witnesses. Computer says that it would be the party which had the principal burden of disclosure of documents, and those documents are in California. The documents and other evidence will go to the use, marketing, operation and circumstances surrounding the iTunes Music Store, and a number of witnesses would be called by Computer a greater number than would be called by Corps, probably. I accept much of this, though some of the evidence and witnesses will depend on the scope of the admissible evidence. Apparently California courts will admit parol evidence of such matters as negotiation on the question of construction of the contract, and while it is not absolutely clear whether this is a case in which they would do so there seems to me to be a substantial possibility that they will in this case. If they did, then presumably more evidence and perhaps more witnesses would be adduced and produced by Computer, though Corps would itself presumably expand its evidence too.
c. Corps submits that the disruption to its business arising from a trial in California would be greater than the disruption to Computer's business by a trial in London. This is because Corps' Mr Aspinall would have to be heavily involved in the trial and in events leading up to trial. He is Corps' only executive officer (albeit he has 9 junior employees) and there would be no-one to fulfil his role in his absence. While Computer's officers would have to be involved in a trial in England, Computer's size and managerial structures is such that the disruption to its business would be less.
d. Computer points out that the activities complained of (operating the iTunes Music Store) take place in and from California, and that the music is only available in the US at present. I do not regard this as a significant point.
e. It is said by Corps that a trial in England will take less time and will be available more speedily. Corps says an English trial would take about 3 days, whereas a California trial would take 10 days (or 12 with a jury, though Computer has said it will not seek a jury trial). There is a dispute about these estimates Computer's witnesses put the time for a trial in California as being shorter (not significantly different from Corps' estimates as to English trial lengths), unless one adds in time for assessement of damages (which Corps' estimate does not). For my part I cannot see why like for like trials in each jurisdiction should differ significantly in length. A California trial will inevitably be longer if parol evidence of such matters as negotiations is given.
f. Pre-trial preparation will be more costly and disruptive in Californian proceedings because witnesses will have to be deposed, either in California or in London, in addition to their attendance at trial. This seems to me to be correct as a matter of fact and of some weight.
g. Corps submitted that an earlier trial date could be obtained in London than in California. There was some equivocation as to quite when a trial in California would be obtainable, but I am satisfied that it would certainly be no earlier than a trial in London, and quite possibly later.
h. There was debate about the location of the parties. Corps pointed out that Computer had a trading subsidiary in England whereas Corps did not carry on business in California. Computer pointed out that this statement by Corps had to be qualified by the fact that it has a representative providing business services there (Mr Tenenbaum), its goods were sold there and it had litigated there in the past. I do not think that those factors mean that Corps has the same sort of presence in California as Computer has in England, but at the end of the day I do not think that this factor has any real weight in determining the point with which I am concerned. Although Corps is a smaller scale operation, it is still a sophisticated business operation benefiting from international connections and trade, and able to conduct litigation in California if it has to. The same applies to Computer, and would still apply even if it did not have its English trading subsidiary.
Alternative bases of jurisdiction
Concurrent proceedings
Conclusion