England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		02/12/2016

Mr Justice Leggatt :

1. The claimant in this action is the national governing body of cricket in New Zealand. One aspect of its role is that it owns the rights to broadcast cricket matches played in New Zealand. Both defendants are companies incorporated in India. The first defendant, which I shall refer to as "Neo Sports", owns two pay TV sports channels. The second defendant, which I shall refer to as "Nimbus", is also involved in sports broadcasting in India.

The factual background

2. On 26 February 2013, the claimant entered into a Media Rights Agreement with the defendants. This Agreement is governed by English law and provides that the High Court of England and Wales shall have exclusive jurisdiction to hear and determine any dispute between the parties arising out of it or in connection with it. Under the Agreement, the claimant granted a licence to Neo Sports, which included rights to broadcast cricket matches played in New Zealand during a period from the date of the Agreement until 2020. For these rights, Neo Sports agreed to pay a licence fee in a total amount of US$55 million. That fee was payable in instalments. In the case of tours of New Zealand by the Indian men's representative cricket team, part of the licence fee, which represented the "attributable value of the tour," was required to be paid in advance as follows: 65 percent of that sum was due no later than 30 days before the scheduled start of the tour and, on the same date, Neo Sports was also obliged to provide security for the remaining 35 percent of the attributable value of the tour in the form of a standby letter of credit. Performance of all the payment obligations of Neo Sports under the Agreement was guaranteed by Nimbus.
3. For the tour of the Indian men's representative cricket team in February and March 2014, the attributable value of the tour payable under the Agreement was US$13,430,232. 65 percent of this sum, being US$8,729,650, was due on 20 December 2013 and, on that date, Neo Sports was also obliged to provide the claimant with a letter of credit to secure the balance of US$4,700,582. As the witness evidence filed on behalf of the claimant for this hearing demonstrates, Neo Sports failed to pay the sum due on 20 December 2013 and also failed to provide the claimant with the requisite letter of credit.
4. On 21 December 2013, the claimant served a notice making a formal written request to Neo Sports to remedy its default by paying the sum due and providing the required letter of credit within seven days. Pursuant to standard term 9.11 of the Agreement, failure to comply with this request gave the claimant the right to terminate the Agreement. Neo Sports did not comply with the request and the claimant exercised its right to terminate the Agreement by giving written notice of termination on 4 January 2014.
5. This action was begun on 24 November 2014. The proceedings were served on Couchmans LLP, an English firm of solicitors who had been appointed by the defendants as their agent for the purpose of accepting service of process for all purposes in connection with the Agreement. Couchmans LLP filed an acknowledgement of service on behalf of the defendants in which they did not contest the jurisdiction of the court. Under the Civil Procedure Rules, the defendants were due to file any defence by 24 June 2015. They failed to file a defence by that date and have not subsequently filed any defence to the claim.
6. Because the claimant did not apply for judgment within six months of the date when the defence was due to be filed, that is to say by 24 June 2015, the claim became stayed at that time under CPR 15.11(1), with the result that the claimant could not thereafter enter or apply for judgment without an order of the court lifting the stay. On 5 August 2015, the claimant issued an application for the stay to be lifted, together with a further application for summary judgment. That combined application was served on Couchmans LLP on 6 August 2015. They responded to say that they were no longer instructed to accept service on behalf of the defendants. However, as they were still formally on the record at that time as acting for the defendants, the service was legally effective. Nevertheless, out of caution, the claimant applied to the court for permission to serve the application and supporting documents on the defendants out of the jurisdiction in India. The court gave permission for such service by three alternative methods, which included personal service and service in accordance with the Hague Convention. The evidence filed by the claimant confirms that service was effected by both of those methods. The defendants have, therefore, beyond any possible doubt, been duly served with the application. They have also, as documents which have been produced by the claimant today show, been given and have received notice of today's hearing of the application. The defendants have chosen, however, not to file any evidence in response to the application and not to appear or to be represented at the hearing today.
7. I have read all of the extensive evidence filed by the claimant in support of its application and have heard detailed submissions this morning from Mr Ian Mill QC, counsel for the claimant.

Application to lift the stay

8. The first application which the claimant makes is, as I have mentioned, for the stay of proceedings to be lifted. CPR 15.11(2) expressly provides that, where a claim is stayed under CPR 15.11, any party may apply for the stay to be lifted. Mr Mill accepts, correctly in my view, that the test applicable in such circumstances is the test which applies whenever a party seeks relief from sanctions. Guidance as to the application of that test in a situation where proceedings have become stayed is provided by the decision of the Court of Appeal in Michael Wilson & Partners Limited v Sinclair & Ors [2015] EWCA Civ 744. In that case, the Court of Appeal made it clear that, provided that at least some explanation has been given for the relevant delay, relief should be granted in a situation where the relevant delay has had no material impact on the efficient conduct of the litigation. That is undoubtedly the position here. The claimant's evidence explains that the reason why no application was issued within the period of six months was that advice was needed and was taken as to the ability to enforce an English judgment against the defendants in India and as to the appropriate course to take in the proceedings. Although in a situation where the delay had an impact on the case that explanation might not be convincing, it is clear that in this case the delay of one month that occurred had no effect whatever on the efficient conduct of the litigation. Certainly, it caused no prejudice of any kind to the defendants, nor can it be said that it has in any way affected their approach to the proceedings. In those circumstances, I am satisfied that it is appropriate to grant the application for the stay to be lifted.

Application for summary judgment

9. I therefore proceed to the second part of the application, by which the claimant asks the court to grant summary judgment for part of its claim, namely, the claim for the outstanding sum of US$8,729,650 which fell due on 20 December 2013, together with contractual interest on that sum. The claimant also seeks judgment on the remaining part of its claim for damages to be assessed. The test on an application for summary judgment under CPR Part 24 is whether the defendant has a real prospect of successfully defending the claim. Where, as here, the claimant has filed evidence and made submissions showing that, on the face of it, the defendants have no prospect of successfully defending the claim, the evidential burden is on the defendants to show some real prospect of success. In this case, however, as I have mentioned, the defendants have chosen not to file any evidence or make any submissions in response to the application. That silence is in itself telling and would be a sufficient reason in itself to grant the application. However, I have thought it right to examine the position further and to consider arguments that were made in correspondence on behalf of Neo Sports, albeit that those arguments have not subsequently been maintained.
10. In a letter from Neo Sports to the claimant dated 3 January 2014, complaint was made that. after the date for payment had elapsed and the formal request for payment within seven days which I mentioned earlier had been made by the claimant, conversations had taken place between the claimant's agent, Mr Le Grew, and other organisations in India with regard to a possible sale to them of rights which under the Media Rights Agreement had been granted exclusively to Neo Sports. It was asserted that those conversations amounted to a breach of the Agreement, and that this was a material breach incapable of remedy which gave Neo Sports the right to terminate the Agreement. The allegation of breach was made in three ways. First, it was said that the conversations amounted to a breach of the exclusivity provision of the Agreement with regard to the grant of media rights. Secondly, it was said that the conversations involved a breach of the provisions of the Agreement which gave Neo Sports the exclusive right to exploit the advertising rights under the Agreement. Thirdly, it was asserted that the discussions which had taken place breached what was said to be an implied covenant of good faith and fair dealing.
11. The claimant does not dispute that discussions took place with third parties to investigate whether they would be interested in purchasing the rights in the event that Neo Sports failed to pay the sum due and provide the requisite letter of credit within the time specified in the contractual notice and the Agreement was consequently terminated. It is the claimant's evidence, and I will come back to this point in a moment, that such discussions took place at the instigation of Neo Sports. However, leaving that for the time being to one side, it is in my view absolutely plain that such discussions did not amount to a breach of any obligation under the Media Rights Agreement. Under the provisions of the Agreement, Neo Sports had the exclusive right to exploit the media rights and advertising rights as defined. It cannot reasonably be argued or suggested that engaging in discussions with third parties about a possible sale of rights in the future infringed the exclusivity provisions. Equally, it is not reasonably arguable that such discussions involved any form of bad faith or constituted dishonest or uncommercial dealing, even if it were arguable that a covenant of good faith can be implied in the Agreement. A party which is in breach of contract and which faces termination of the contract within a matter of days if it continues to fail to comply with its obligations cannot complain, let alone complain of bad faith, if the other party to the Agreement begins to make enquiries during that time as to how it will seek to mitigate its loss in the event that the breach is not remedied. I am therefore satisfied that, simply as a matter of law and interpretation of the Agreement, the facts on which Neo Sports relied in its letter dated 3 January 2013 are incapable of providing a defence to the claim. However, it is in any event abundantly clear from the detailed evidence which the claimant has filed that the discussions which I have mentioned were instigated by Neo Sports itself.
12. The sequence of events is set out in a witness statement made by Mr Le Grew, the head of an organisation called Pitch International LLP, which acted as agent for the claimant. Mr Le Grew has also exhibited his contemporaneous notes, which evidence his discussions with Mr Tolia of Neo Sports. The first relevant conversation took place on 23 December 2013. In that conversation Mr Le Grew enquired whether Neo Sports was going to comply with its payment obligations under the Agreement. Mr Tolia claimed that Neo Sports was continuing to make attempts to comply with its obligations, but proposed in the meantime two possible solutions on a "without prejudice" basis. One of these proposals was that Pitch should take the rights to market immediately, before the Agreement had been terminated, and find out whether or not it could obtain an alternative buyer for the rights at a price that the claimant was happy with. If Pitch could find such a buyer then Neo Sports would relinquish the rights, provided that the claimant did not commence legal action against it for breach of the Agreement. Mr Le Grew took a detailed note of that call as it progressed, which he has exhibited to his witness statement.
13. That call was followed on the next day, 24 December 2013, by a further telephone conversation. Once again, Mr Le Grew made a detailed note of the conversation. In that second conversation, Mr Le Grew confirmed the claimant's position that Neo Sports was in breach and, if it failed to cure the breach by 28 December 2013, the claimant reserved the right to terminate the Agreement. That position was not challenged by Mr Tolia. They went on to discuss the proposals made in the earlier conversation. Mr Le Grew said that he was willing to consider exploring the first of the proposals and to have some exploratory discussions with other broadcasters to find out whether any organisation would be willing to offer a price acceptable to the claimant for the relevant rights. He made it clear to Mr Tolia that, although the claimant was prepared to have such exploratory discussions, it was not willing to waive any of its rights under the Agreement. Mr Tolia acknowledged that and wished him luck with the discussions.
14. Against that background, Mr Le Grew was naturally astonished to discover that Mr Tolia had written to the claimant on behalf of Neo Sports on 27 December 2013, complaining that Pitch had discussed the possible sale of media rights to other broadcasters in India and suggesting that such having discussions "smacks of bad faith" and is contrary to the terms of the Agreement. Mr Le Grew's reaction when he saw that letter was expressed in text messages sent to Mr Tolia, which he has exhibited to his witness statement. His first text to Mr Tolia on seeing the letter said, "Why does it accuse us of talking to other broadcasters? You told us to do so," followed by five exclamation marks. Mr Tolia's reaction to that was not to deny that he had invited Pitch to have such discussions with other broadcasters, but simply to ask whether Mr Le Grew wanted a without prejudice call. Mr Le Grew replied to that, "We had a without prejudice call and now I find what we discussed used against me in an open letter." In the event, no further conversation between them took place.
15. When the point was made by the claimant to Neo Sports in a letter dated 29 December 2013 that Neo Sports was in no position to complain about the preliminary discussions with other broadcasters that had taken place when it had expressly invited Pitch, on behalf of the claimant, to have such discussions, the response of Neo Sports in its letter dated 3 January 2014 was in the first place not to admit that such a telephone conversation with Mr Le Grew had taken place. In the second place, Neo Sports relied on the fact that any conversation which had taken place was "strictly on a without prejudice basis." The law is clear, however, that a party cannot hide behind the cloak of without prejudice protection of communications where to do so would involve covering up its own clear impropriety. See Unilever plc v Procter & Gamble Co [2000] WLR 2436 at 2444.
16. The detailed evidence filed by the claimant makes it unambiguously clear that the only party which has been guilty of bad faith in its conduct is Neo Sports. Having expressly proposed in a without prejudice communication that Pitch should hold discussions with other broadcasters, it clearly constituted bad faith for Neo Sports then to attempt to rely on the existence of such discussions as a justification for its failure to comply with the Agreement. There is, as I have indicated, no substance in that complaint in any event as a matter of law; but on the facts, it cannot succeed in circumstances where the cause of the discussions was Mr Tolia's own proposal. I am therefore satisfied that Neo Sports has no reasonable basis for defending the claim, which no doubt explains why it has not taken any active steps to oppose it.

Nimbus

17. The position of Nimbus under the guarantee depends on the position of Neo Sports, but it is also necessary under the terms of the Media Rights Agreement to show that a demand was made under the guarantee in order to trigger the guarantor's obligations. The evidence shows that such a demand was made in a letter from the claimant's solicitors, Bird & Bird, sent to Nimbus on 8 October 2014. At paragraph 11 of that letter, there was an express demand for payment of the outstanding amount from Nimbus. No payment was ever made in response to that demand and it follows that Nimbus also has no defence to the claim.

Conclusion

18. Accordingly, the application for summary judgment succeeds. I grant summary judgment to the claimant for the amount of the outstanding debt, together with interest, which is payable under clause 2.24 of the Agreement at a rate of 5 percent per annum above the current base rate of the Bank of England. That sum has been calculated and amounts as at today's date to US$1,412,110. As to the remaining part of the claim, judgment will be entered for damages to be assessed.