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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Pharmexco Anstalt v Glaxomed Ltd [2001] EWHC 516 (Comm) (16 January 2001)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/2001/516.html
Cite as: [2001] EWHC 516 (Comm)
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Case No: 2000 Folio No 242
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Date:16th January 2001
| PHARMEXCO ANSTALT | Claimant | |
| - v - | ||
| GLAXOMED LIMITED | Defendant |
The Hon. Mr Justice Langley
COPIES OF THIS JUDGMENT ARE AVAILABLE IN WORD 6 for WINDOWS 3.1 ON PROVISION OF A CLEAN DISC. APPLY TO THE CLERK TO THE HONOURABLE MR JUSTICE LANGLEY Telephone 0207-947-6395
Mr Justice Langley:
The Claimant is a company incorporated in Liechtenstein owned by Nelson Camilleri, a former financier based in Switzerland. The Defendant company is an exporter of pharmaceutical products. From about 1991, the Claimant acted for the Defendant in connection with the sale of products to Libya. The dispute relates to the terms of the agreement on which that occurred and its termination.
There are three applications before the court. The first in time is the defendant company's application to strike out the Claim Form and the Particulars of Claim pursuant to C P R Part 3.4(2)(a) as disclosing no reasonable grounds for bringing the claim. The specific basis for the application is that :
The agency agreement alleged in paragraphs 2 and 3 of the Particulars of Claim was not, on the proper construction of the documents referred to in those paragraphs, an exclusive agency agreement. Accordingly, there are no reasonable grounds for the primary allegation in the Particulars of Claim that the Defendant acted in breach of the exclusivity provision in that alleged agreement. The claimant cannot, therefore, be entitled to the damages claimed.
The Claimant makes two applications. The first seeks a summary declaration pursuant to CPR Part 24 that the agreement referred to in paragraphs 2 and 3 of the Amended Particulars of Claim contained the terms set out in paragraphs 4(i) -4 (viii) of the Amended Particulars of Claim. This is substantially the reverse of the Defendant's application, and it is these applications which give rise to the major issue between the parties. They led to a further application made by the Claimant in the course of Miss Dohman's submissions for permission further to amend the Particulars of Claim, an application which it was agreed should be granted only to the extent, if at all, that the proposed further amendment disclosed reasonable grounds for bringing the claim which Mr Vos submitted they did not.
The second application by the Claimant is for summary judgment in relation to part of the claim, namely the claim for an account of all monies received by the Defendant in respect of tenders submitted by the Claimant in 1993 - 1995 and for payment of 20% of all amounts received by the Defendant in respect of the tenders less certain sums already paid.
As the submissions developed, Mr Vos accepted that an account should be provided as sought in the Claimant's second application, but submitted that nothing was due and in any event no payment should be ordered even if it was because of the Defendant's proposed counterclaim. Miss Dohman submitted that the counterclaim was so hopeless it should be ignored.
Paragraph 2 to 4 of the present Amended Particulars of Claim allege an Exclusive Agency Agreement in these terms:
2. By an agreement evidenced by or contained in a letter dated 7th June 1991, as varied by letters dated 1st January 1992 and 18th January 1994 (hereinafter referred to as the "Exclusive Agency Agreement"), the Defendant appointed one Pharmaco Establishment ("Pharmaco") its exclusive agent for the purpose of exporting pharmaceutical products into Libya. The Exclusive Agency Agreement was further evidenced by letters from the Defendant to the Libyan authority "DMEAICO" (the Drugs Medical Equipment and Appliances Import Company) dated 2nd December 1991, 27th August 1992 and 6th January 1994.
3. By a further agreement entered into between Pharmaco and the Claimant and the Defendant evidenced by a letter dated 18th March 1994, all three parties agreed that all the rights of Pharmaco under the Exclusive Agency Agreement would be assigned to or transferred to or would otherwise be vested in the Claimant.
4. The Exclusive Agency Agreement contained the following terms:-
(i) the Claimant would be the Defendant's exclusive agent with sole authority to submit tender offers to DMEAICO or the Medical Supply Organisation ("MSO") or to whomsoever were from time to time the relevant Libyan authorities responsible for the importation of pharmaceutical products into Libya.
(ii) the Claimant would be the Defendant's exclusive agent with sole authority to receive orders from Libya for the supply of pharmaceutical products into Libya.
(iii) the Claimant would be the Defendant's exclusive agent with sole authority to receive payments from Libya in respect of pharmaceutical products supplied to Libya.
(iv) the Defendant would pay the Claimant a commission upon all monies actually received from Libya in respect of all pharmaceutical products supplied by the Defendant to Libya for the duration of the Exclusive Agency Agreement. Such commission was to be calculated (as from 18th January 1994) as being equivalent to a 20% mark-up on the Defendant's net invoice prices.
(v) Further or in the alternative, the Exclusive Agency Agreement provided that with effect from the start of the Libya Tender No 2/93 the Claimant would include within the tender prices quoted by it to DMEAICO (or other relevant Libyan authority) a "mark up" of 20% of the Defendant's net invoice prices to represent the Claimant's disbursements and profit margins. In the premises, upon the true construction of the Exclusive Agency Agreement the Claimant was entitled to a commission of 20% of the Defendant's net invoice prices upon all orders placed by the relevant Libyan authority in response to tender No. 2/93 and upon all orders placed by the relevant Libyan authority in response to subsequent tenders submitted by the Claimant.
(vi) the Defendant would if necessary render accounts to the Claimant periodically to enable the Claimant to ascertain its entitlement to commission.
(vii) the Exclusive Agency Agreement was to continue in force until terminated by either party giving 12 months notice on 30th June or 31st December of any given year.
(viii) on the true construction of the Exclusive Agency Agreement, the Defendant was obliged for the duration of the Exclusive Agency Agreement to conduct all pharmaceutical export business to Libya through the Claimant and not to submit tenders directly to Libya or to obtain orders or payments directly from Libya.
The claim alleges that proper notice to terminate the Exclusive Agency Agreement was only given on 23 December 1999 (effective on 31 December 2000) alternatively only with effect on 31 December 1998. The breach of the agreement alleged is that since about 1995 the Defendant has been dealing directly with "DMEAICO, MSO and/or other relevant Libyan entities" without accounting to the Claimant.
Although Miss Dohman said it was not the intention of the draughtsman of the claim to do so, the language of the claim in my judgment was plainly asserting an exclusive agency as regards any and all sales of the Defendant's products to Libya to whomsoever they might be sold. In the course of the hearing Miss Dohman made it clear that this was not and never had been the Claimant's case; the case was that the exclusive agency was limited to the submission of tenders to and the receipt of orders and payments from (a) DMEAICO itself and/or (b) "whomsoever were from time to time the relevant Libyan State Authorities responsible for the importation of pharmaceutical products into Libya". The further amendments to the Particulars of Claim for which permission was sought in the course of the hearing were intended to spell out this limitation on the exclusive agency by amending paragraph 2 and the various sub-paragraphs of paragraph 4 of the Particulars of Claim to that effect. The alleged and assumed factual matrix relied upon to support this case and resist the Defendant's application is, and is only, that in 1991 and until about March 1994 DMEAICO was the only Libyan State Authority responsible for the importation of pharmaceutical products and that after March 1994 a new organisation known as the Medical Supply Organisation ("MSO") took on one of the functions of DMEAICO, namely the importation of such products for public sector use as distinct from the private market in Libya.
It remains the case that the exclusive agency is alleged to have
(1) applied to all sales to DMEAICO however effected; and
(2) in the wider version, applied to all sales to any and every Libyan State organisation which might at any time be created and purchase pharmaceutical products from the Defendant.
The Exclusive Agency Agreement is therefore alleged to be "evidenced by or contained in" three letters dated June 7, 1991, January 1, 1992 and January 18, 1994, each of which was written by the Defendant to the Claimant and to be "further evidenced" by three letters from the Defendant to DMEAICO dated December 2, 1991, August 27, 1992 and January 6, 1994. In addition reliance is placed on a letter from the Defendant to the Claimant dated March 18, 1994.
THE JUNE 7, 1991 LETTER
At the time this letter was written by the Defendant, it was owed a substantial sum by DMEAICO and the letter refers to the Claimant's "personal contacts" with Libyan banks and DMEAICO enabling it (in effect Mr Camilleri) to facilitate and expedite payments to the Defendant.
The letter continues that the Claimant "will ensure that all future business between Glaxo and DMEAICO is transacted on Letters of Credit basis" for which the Claimant had already made suitable arrangements, and states:
For the above services, we have agreed to pay you an honorarium of 6% of all remittances received from Libya as from 1st May 1991. The same honorarium will apply to all Letters of Credit received from the above date. It is however understood that these sums will only become due after successful negotiation of the relevant letters of credit and receipt of funds by Glaxo in London. Details of such receipts will be notified to you periodically, so that you may bill us accordingly.
At a later date, and possibly starting with the 1992 tender, you will arrange to receive Letters of Credit opened in your favour by the Jamahiriya bank for account of DMEAICO and you will simultaneously open back-to-back confirmed L/C's in favour of Glaxo (through a prime Swiss or Liechtenstein bank) for the net value of relevant orders covered by such L/C's without any deductions whatever.
As your various disbursements will then be covered by a suitable mark-up of the relevant tender prices quoted to DMEAICO, the honorarium paid to you by Glaxo will be reduced from 6% to 3% of the value of the Letters of Credit.
If the above terms and conditions are agreeable to you, please sign and return a copy of this letter to this office, to signify your acceptance of same.
It is agreed that the Claimant did sign this letter as requested.
Mr Vos made the following comments on this letter which is the foundation of the relationship between the parties:
(1) The focus is entirely upon DMEAICO. That may not be surprising if it was the sole importer. But it does not in any way follow that similar arrangements would be, let alone were impliedly, agreed if that were to change.
(2) The context was the personal relationships the Claimant had established. The "services" for which it was to be paid were the recovery of sums due and the secure financing of future transactions, payment to the Claimant to be made only upon actual payment under the letters of credit to the Defendant.
(3) There is no express reference to any form of exclusivity; nor any express term for the length of the arrangement. The nearest the letter comes to it is the passage on which Miss Dohman places particular emphasis that the Claimant "will ensure that all future business between Glaxo and DMEAICO is transacted on Letters of Credit basis". The passage is, however, expressed in terms of an obligation upon the Claimant, not the Defendant, is an equivocal basis for an argument that the Defendant was (improbably) agreeing that "all" its future business even with DMEAICO alone would be channelled only through the Claimant, and is open to the meaning that this will be the method of business as and when it is done through the Claimant.
THE SUBSEQUENT LETTERS
The next letter in time is the Defendant's letter of December 2, 1991 to DMEAICO. The letter stated that it would be "quite acceptable" to the Defendant if DMEAICO were to route future letters of credit through a Swiss-based bank rather than a UK bank and continued:
If you should decide on this method of payment for future orders, I confirm that [the Claimant] is authorised to act on our behalf. All letters of credit should therefore be opened in their favour for onward transmission to us in London.
As Mr Vos submitted, and might be expected, the letter demonstrates that the method of payment and so the use of the Claimant's services was at the option of DMEAICO and is not consistent with an obligation upon the Defendant only to supply product by that means.
The letter from the Defendant to the Claimant dated January 1, 1992 confirmed our agreement to raise your rate of commission on all business transacted by Glaxo in Libya from 6% to 7% of the value of the relevant letters of credit received from DMEAICO.
I cannot read anything further into this letter than can be found in the letter of June 7, 1991.
The letter dated August 27, 1992 from the Defendant to DMEAICO confirmed the Claimant's role and that it would submit tenders on behalf of the Defendant and open and execute letters of credit to cover supplies.
I also do not think this letter can affect the issues. Indeed there is no evidence that the Claimant was even aware of it.
THE JANUARY 18 1994 LETTER
By this date a tender (1/93) had been submitted by the Claimant for the Defendant to DMEAICO which had led to orders and payments by Letters of Credit. The Defendant accepts liability to pay the appropriate commission on these payments albeit it contends it in fact did so.
The January 1994 letter is expressed to record agreed variations to the agreement in the June 1991 letter. The letter continues:
With effect from the start of the Libya Tender No 2/93, our C&F invoice prices to [the Claimant] will be expressed in Swiss francs. This, in order to eliminate price changes due to currency fluctuations. It is therefore agreed that relevant tender prices quoted by you to DMEAICO will be similarly expressed in that currency and will include a suitable mark-up to cover your own disbursements and profit margins. It is further understood that, starting with the said Libya Tender No 2/93, this mark-up will amount to 20% of our net invoice prices.
It is also agreed that the overriding commission of 3% currently paid to you by Glaxo (as per our agreement dated 7 June 1991) will cease to apply w e f all DMEAICO orders received after 1 January 1994.
Lastly, we confirm that this agreement can be terminated by either party, with twelve months notice, on 30 June or 31 December of any given year.
Miss Dohman also placed considerable reliance upon this letter and in particular the requirement for 12 months notice of termination. She (rightly) did not contend that its terms extended beyond DMEAICO itself but did submit that it constituted an agreement that all tenders for or sales of the Defendant's products would be effected only through the Claimant until the relevant notice expired. Mr Vos submitted that the letter did no more than vary the terms on which such future tenders as the Claimant might submit to DMEAICO would be processed and provide that those terms were to remain applicable in such cases subject to notice. Hence, he submitted, the fact that the notice provision was two-way.
THE FURTHER LETTERS
The remaining letters relied upon simply relate to the transfer of Mr Camilleri's operations from Pharmaco Est. to the Claimant Anstalt and do not, as counsel recognised, add anything of substance to the submissions.
SUBSEQUENT EVENTS
It Is the Defendant's case that after the MSO became the relevant Libyan Authority for purchases for the public sector in 1994 although further tenders were submitted through the Claimant to both MSO (1/94) and DMEAICO (1/95) they resulted only in one small order from MSO and none from DMEAICO. MSO (in May 1995) also placed an order against the DMEAICO tender 2/93. The Defendant does not dispute its liability to account to the Claimant for all sales effected through the Claimant, including sales to MSO, albeit it again says it has done so.
Unsurprisingly, there is no dispute that the issue is one of construction of the letters in the limited factual matrix to which I have referred. There is no suggestion that the Defendant has at any time sought to make sales through any other agent, but it has made sales directly to Libya since 1995. Thus the Defendant seeks to show that there is no reasonable ground on which a court could conclude that the parties agreed that the Claimant was to have an exclusive agency in the sense that all and any sales of the Defendant's products to (a) DMEAICO and (b) any Libyan State Authority would only be made by using the Claimant's services and not even by the Defendant acting directly. The Claimant does not rely on any oral discussions, implied term nor on any course of conduct or dealing to support its case.
Mr Vos referred me to a number of authorities essentially in support of the proposition that even where a sole agency existed unless the contract expressly prohibited the principal from doing so he was free to sell his goods directly without the use of an agent. I only propose to refer to one passage in the speech of Lord Wright in Luxor v Cooper [1941] AC 108 at page 145 where, after citing a number of cases involving commission agents other than estate agents (as the plaintiff was in Luxor v Cooper) he said:
These cases, no doubt, deal with a different type of commission agency, but they illustrate how essential it is to examine the express terms of the contract and how difficult it is to imply in these cases a term restricting in the interests of an agent the freedom of a principal to deal with his own property or business according to his own judgment. In Bentall, Horsley and Baldry v Vicary McCardie J held that the appointment by a property owner of estate agents as sole agents for the sale of the property on the terms that if they introduced a purchaser they should receive commission of 5 per cent on the purchase price did not debar the owner from himself negotiating and effecting a sale to a third person apart from the agents' intervention. As McCardie J said "the contract contains no express words at all indicating a prohibition against a sale by the defendant himself. If the parties intended such a prohibition nothing would have been easier than to insert the appropriate words." In Martyn's case all the Lords Justices approved this decision which, to my mind, is correct.
Whilst I agree with Miss Dohman that it does not at all follow that parties may not make a truly "exclusive" agency agreement and, indeed, may be more likely commercially to do so if it is to be limited to only one specific purchaser such as DMEAICO, I also agree with Mr Vos that there remain obvious commercial improbabilities in such an agreement and if one were to be made one would expect to find it spelt out in clear language defining the exact scope of the restrictions on the commercial freedoms of both parties. In this case, had the parties contemplated exclusivity I think, as Mr Vos submitted, they would have been bound to address what was to happen for example should the Claimant's personal contacts with DMEAICO end, or should DMEAICO refuse to permit the use of agents by suppliers or should it decline to make payment by letters of credit, quite apart from consideration of DMEAICO losing its purchasing role. Miss Dohman's response was to submit that such events might amount to frustration of the agreement or simply trigger notice to terminate the agreement she contends for, but commercial men asked to give up their commercial freedom tend to see such things coming and to provide for them expressly in their contracts rather than rely on such possibilities or incur delays.
Mr Vos also submitted that it was a feature of an exclusive agency that in consideration of the exclusivity the agent would have obligations to promote the sale of the principal's products whereas in this case the Claimant had no obligations at all unless and until the Defendant prepared a tender for its products. I, however, agree with Miss Dohman that at most this could be some small indication of the true nature of the relationship. More compelling to my mind is the absence of any express obligation upon the Claimant limiting in any way his own commercial freedom, for example to arranging payments only for the Defendant's products.
Miss Dohman frankly acknowledged that the proposed amended claim based on an exclusive agency for supplies to any relevant Libyan State Authority was not one which could readily be spelt out of the letters on which the Claimant relies. In my judgment it cannot be spelt out at all. The whole context of the letters is DMEAICO and the Claimant's personal relations with DMEAICO. The fact that some orders by the MSO were processed by the Claimant and that the Defendant acknowledges liability to pay commission on those cannot affect the position because it occurred after the contract is alleged to have been made and no relevant variation or course of conduct is pleaded or relied upon. Moreover it is the Defendant's case that if and insofar as the Claimant's services were in fact used then it is entitled to be paid.
In those circumstances in my judgment not only is the currently pleaded claim wholly unsustainable but so too is the proposed amended claim that there was an exclusive agency for sales to "the relevant Libyan State Authority".
The more difficult question is whether the proposed amended claim to an exclusive agency for sales to DMEAICO is also one which should be struck out. If the Defendant is right in its case that in fact no sales have been made to DMEAICO other than those for which payment has already been made to the Claimant, the question is academic. But that is in issue, or at least is not accepted.
I have reached the conclusion, however, that this proposed claim is also one which discloses no reasonable ground for bringing it. I prefer Mr Vos' submissions. I do not think it can reasonably be argued that the letters and facts relied upon evidence an agreement that the Defendant would not itself supply its products direct to DMEAICO during the currency of the arrangements with the Claimant. In particular, I think it is not possible to spell out such an obligation from the words used and no implication is relied upon, no doubt because of the commercial probabilities to which I have referred. The Claimant was to be paid only for his services by way of the use of his personal contacts and for the actual financing arrangements he made. Those parts of the letters on which the Claimant places most reliance are just as consistent with a sole agency as an exclusive agency, but in any event do not in my judgment establish a reasonable basis for the exclusive agreement essential to sustain the Claimant's case. The reality is I think that the express words do not provide for exclusivity and implication is neither necessary nor contended for.
It follows therefore that the Defendant is entitled to an order striking out the present claim (save for the claim to an account) and I shall refuse permission to the Claimant to make either of the proposed amendments. It also follows that the Claimant's Part 24 application must be dismissed.
There remains the second application made by the Claimant, in effect for an account in respect of sales and receipts by the Defendant pursuant to tenders and letters of credit for which it is agreed the Claimant was responsible and is entitled to be paid according to the terms of the agreement applicable at the time. As the submissions developed it was accepted that it was appropriate to order an account of all monies received by the Defendant in respect of tenders submitted by the Claimant in 1993-5 and that I will do albeit I will hear the parties on the precise terms of the order.
The only dispute was whether the order for an account should include an order for payment of any sum found to be due on taking it. Not only do there appear to be possible disputes over the amount of any such sums (depending on the timing of the receipts and the applicable "commission" rate and also possible credits against the 20% mark-up) and over the credits for sums already paid, but the Defendant has exhibited a draft counterclaim in which it is alleged that the Claimant was in breach of a duty of care owed to the Defendant in the manner in which the 1/94 tender was submitted and pursued. Miss Dohman submitted with some justification that this proposed counterclaim was an afterthought and conflicted with the Defendant's instructions and conduct at the time. She also submitted any claim would be statute-barred. I do not think it necessary to consider the matter in any detail because I am satisfied that the remaining issues which arise are at least not ones which would at this stage make it right to order any payment to be made to the Claimant on taking the proposed account. When the account is provided and the counterclaim pleaded (if it is) the matter can be reviewed. Indeed as counsel sensibly suggested at the conclusion of the hearing the future conduct of the proceedings is a matter better addressed when this judgment is formally handed down.
All, therefore, I am now determining is that there should be an order for the taking of the account to which I have referred but no further order for any payment. Subject to that, I will hear the parties on whatever other proposals they may seek to put forward for the future conduct of the proceedings.