Jersey Unreported Judgments

Breach of agreement - contractual dispute.

[2017]JRC159

Royal Court

(Samedi)

2 October 2017

Before     :		T. J. Le Cocq, Esq., Deputy Bailiff, and Jurats Crill and Ronge.
Between	Calligo Limited		Plaintiff
And	Professional Business Systems CI Limited		Defendant

Advocate I. C. Jones for the Plaintiff.

Advocate O. A. Blakeley for the Defendant.

judgment

the deputy bailiff:

1.        This is a contractual dispute between the Plaintiff, Calligo Limited ("Calligo") and the Defendant, Professional Business Systems CI Limited ("PBS"). 

2.        On 30^th January, 2014, Mr Julian James Box ("Mr Box"), on behalf of Calligo, and Mr Anthony Le Tiec ("Mr Le Tiec"), on behalf of PBS, signed two documents each named a "Quotation and Order Form" and bearing each respectively the references "SOW001" and "SOW002".  "SOW" stands for "Statement of Works". 

3.        It is Calligo's case that the SOWs, once signed, constituted an agreement between it and PBS under which Calligo was to provide certain IT services and PBS was to pay a monthly payment.  Calligo acted on the alleged agreement. 

4.        It is PBS's case, however, that no agreement was entered into and that SOW001 and SOW002 were scoping documents and were not intended to have legal effect.  PBS asserts that there was no intention on the part of PBS, through Mr Le Tiec, to enter into a legally binding arrangement with Calligo at that point and accordingly a fundamental element of a valid contract in Jersey law, namely the requirement for consent, was absent. 

5.        There are, in addition, arguments as to whether, were such a contract to have otherwise been formed, it should be taken to incorporate Calligo's standard terms and conditions and further whether the claims by Calligo for loss could be sustained.  We will deal with each of these aspects in turn. 

The law relating to the formation of a contract and consent

6.        There is no dispute between the parties as to what is required in Jersey law for the formation of a valid contract.  This was stated definitively by Sir Philip Bailhache, Bailiff, in the case of Selby v Romeril [1996] JLR 210 at page 218, in the following terms:

"In our judgment, it may now be asserted that by the law of Jersey, there are four requirements for the creation of a valid contract, namely (a) consent; (b) capacity; (c) an "objet"; and (d) a "cause"."

7.        Similarly, there appears to be no significant dispute between the parties as to the existence of capacity, objet or cause in so far as it relates to the potential formation of any contract between Calligo and PBS.  What is in dispute, as we have said, is the question of consent. 

8.        How then are we to ascertain whether or not PBS, acting as it was through Mr Le Tiec, intended in signing the SOWs to enter into a legally binding contract with Calligo?  Calligo, for its part, would point to the signing of the SOWs and the surrounding circumstances as clear support for the intention of PBS to be bound legally.  PBS, for its part, would say that the surrounding circumstances do not support such a view but, in any event, the Court has before it the unambiguous evidence of Mr Le Tiec that he did not intend to be legally bound.  The Court should, so PBS would argue, accept that evidence as the best clarification of what was in the mind of PBS at the material time. 

9.        This difference in approach reflects an area of Jersey law that has been the subject of recent case law, namely whether identifying whether there is consent in a Jersey contract should be dealt with by looking for the subjective intention of the individual parties to the contract (the "subjective test") or whether we should rather ask what a properly informed reasonable man would take to be the position (the "objective test").  If the subjective test is the correct test to apply then, of course, Mr Le Tiec's evidence as to his intention may be of very significant interest.  If the objective test applies then it will be less important and the Court will pay more regard to what the surrounding circumstances would lead such a third party observer to deduce about the intention of the parties. 

10.      The authorities in Jersey as to the correct approach do not speak with one voice. 

11.      In Leech v Leech [1969] JJ 1107 the Court considered a contractual dispute in the context of a family arrangement.  At page 1118 of the judgment Ereaut, Deputy Bailiff (as he then was), said this:

"We have considered nevertheless whether we can by applying an objective test to statements and conduct with the parties and their lawyers and by endeavouring to draw a reasonable inference from the whole of the circumstances leading to the settlement, impute to the parties an intention that one or the other of them should take disputed items.  We have regretfully concluded that we cannot."

This appears to us to be an example of the use by the Royal Court of an objective test in determining an issue of consent in a contractual dispute. 

12.      In Mobil Sales v Transoil (Jersey) Limited [1981] JJ 143 the Royal Court again considered a contractual dispute and, at page 163, Ereaut, Bailiff, said this:

"The question which the Court has to determine is not what the parties had in their minds, but what reasonable third parties, "disinterested spectators", would infer from their words or conduct.  It has to determine "the sense of the promise", that is to say, whether a sensible third party would take the agreement to mean what A understood it to mean, or what B understood it to mean, or whether indeed any meaning can be attributed to it at all.  If whatever a parties real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other parties terms, notwithstanding that there is a material mistake."

This is a clear application of the objective test.

13.      In Le Motte Garages Limited v Morgan [1989] JLR 312 Hamon, Commissioner, in considering the question of mistake in a contract said:

"As to mistake, we see it as a mutual mistake.  If we have to ascertain "the sense of the promise" it seems to us that we must ascertain by the objective test what a reasonable man would have assumed it to mean.  ...There can be no doubt in our minds that a reasonable man would have seen at once that the Plaintiff meant to ask for £5,265 even though at the time the Defendant had not seen the mistake and assumed the sale price was £2,995."

14.      This is another example of the Royal Court approaching the analysis of a Jersey contract through the filter of the objective test.  It is perhaps of interest to note in that judgment, however, that the Court there referred to the concept of mistake as having been long accepted as negating agreement and quotes from Pothier.  It then expresses some disappointment that neither party had chosen to mine the "rich lodes of ancient French law" but to rely on English law.  It may be said that the Court in that case was alive to the French approach to contractual analysis but nonetheless proceeded to approach it on the basis of an objective assessment. 

15.      In Daisy Hill Real Estates Limited v Rent Control Tribunal [1995] JLR 176 at page 179 the Court said:

"In Jersey there are elements necessary to constitute an agreement with "cause".  The law does not, however, proclaim the existence of a contract merely because of the presence of mutual promises.  It seems to us that it matters not what the parties had in their minds, but what inference reasonable people would draw from their words or conduct."

16.      The above cases illustrate that the approach of the Royal Court to analysing matters of consent in Jersey contract is the objective approach.  The approach has been to make an assessment of what the reasonable man would from the circumstances have taken the parties to have agreed to and not a subjective approach by looking to what the parties actually did have in their minds when they purported to enter into a contract. 

17.      What then is the argument for departing from this objective test and applying a subjective test? 

18.      In Marett v Marett and O'Brien [2008] JLR 384 the Court of Appeal made a direct statement on the issue of consent in the Jersey law of contract; in, at paragraph 57, the following terms:

"57.    Ignoring capacity, which is not in issue, the Jersey law of contract determines consent by use of the subjective theory of contract (see Pothier, Treaties on the Law of Obligations or Contracts...and Selby v Romeril.  And see Mobil Sales and Supply Corp v Transoil (Jersey) Limited and La Motte Garages Limited v Morgan (which must now be considered per incuriam on the specific point in the light of Selby v Romeril))."

19.      At paragraph 58 the Court went on to say:

"58.    It follows that, "for a contractual theory based on the subjective intention of the parties, a mistake is the principle obstacle to a valid contract"..."

20.      It does not appear that there was any legal argument deployed before the Court of Appeal on that occasion relating to the issue of consent.  Indeed, at paragraph 55 of the judgment, the Court notes:

"As noted above, Advocate Sinel submits that there was no consent, under Jersey law, and therefore no enforceable compromise agreement.  This is not the time for a detailed analysis of the Jersey law of contract - .... The general principles can be taken from the helpful summary in Advocate Sinel's contentions on this issue (to which there was no objection by Advocate O'Connell)."

21.      The Court then went on to deploy the principles mentioned in paragraph 57 and 58 of its judgment above. 

22.      Accordingly there appears to us to be two competing lines of authority.  Those of the older cases which clearly applied an objective test in assessing the question of consent and Marett v O'Brien (based in part upon Selby v Romeril) which puts forward a subjective test. 

23.      A statement of law from the Jersey Court of Appeal, in general, would be binding on us.  That has not, however, been the last word of the Court of Appeal on this issue.  In Home Farm Developments Limited and Others v Le Sueur and Others [2015] JCA 242 the Court of Appeal, at paragraph 59 stated, in what is termed in the judgment as a "postscript": 

"59.    We have mentioned in Section 43 above that Advocate Taylor drew our attention to the decision in Marett.  Although the point was not argued in this appeal, and we do not need to decide it, we would nevertheless observe that the question of whether an objective or subjective test should be adopted was not argued in Marett either; it was simply assumed by the Court to be correct (see Section 55), and indeed the Court expressly stated that "this is not the time for a detailed analysis of the Jersey law of contract".  Advocate Taylor drew our attention to earlier case law such as Leech -v- Leech [1969] JJ 1107 where an objective approach had been adopted.  We would therefore be concerned if a body of opinion were to develop regarding Marett as the last word on this point.  We would be concerned because we consider that there are potentially powerful arguments against the adoption of a subjective test.  We cannot express a concluded view as to which arguments ought to prevail, but we do express the view that the arguments have yet to be deployed, and as a result the point has not yet been definitely resolved."

24.      We respectfully agree with the cautionary words of the Court of Appeal in Home Farm Developments Limited.  The question of whether Jersey law analyses questions of consent by the application on the objective test or the subjective test has not yet been definitively resolved.  In the absence of adversarial argument before it on the point, we respectfully express the view that the weight that can properly be placed on Marett is limited. 

25.      It seems to us that an important part of this Court's role is to develop the law of contract so far as it may be open to us to do so to suit the needs of a modern community which is also a sophisticated international finance centre.  Although it has been said that:

"Pothier (for example) is a "surer guide" to discovery of the law of Jersey than is the law of England."

That cannot mean that the Court looks to the text in Pothier and follows it without further consideration.  There may in those words be found a predisposition to find the law of Jersey within the principles articulated by Pothier or by even older authors but that does not mean that this Court must necessarily adopt those principles if they do not appear to serve the needs of Jersey in the 21st century. 

26.      As suggested by the Court of Appeal in Home Farm there are, so it seems to us, arguments of some force that might be deployed in favour of the objective approach.  It seems to us that such an approach is more likely to provide legal certainty for commercial transactions than would the subjective approach.  It is not necessary, if one approaches the matter objectively, to enquire into the actual state of mind of a party to the contract.  The state of mind in so far as it relates to consent is to be established by reference to what the parties did and/or said or the surrounding circumstances which point to what they intended.  It would it seems to us be unsatisfactory, if adopting the subjective approach, to reach a result where a party to a contract who believes that he has entered into a binding arrangement finds that it is of no effect because of some unknown but private intention of the other party.  There is the risk, of course, that a contracting party may change his mind ex post facto with all the uncertainty that that might bring. 

27.      There is also the public policy consideration that English law is used regularly as the preferred system of law in international commercial contracts because of its clarity and legal certainty.  It seems to us that it would be to the advantage of Jersey to develop its law, where it is permissible for it to do so, in those directions, namely clarity and certainty, as well.  In short it seems to us that a subjective approach will lead to greater uncertainty than will the approach that has traditionally been adopted by the Courts of Jersey, namely the objective approach.

28.      We were referred to an introduction to the Law of Contracts (5th Edition 2009), page 9 by P Atiyah, discussing the English law of contract, who says this:-

"It is one of the most fundamental features of the law of contract that the test of agreement is objective and not subjective.  It matters not whether the parties have really agreed in their innermost minds.  The question is not whether the parties have really agreed, or what they really intended, but whether their conduct and language are such as would lead reasonable people to assume that they have agreed."

29.      In our view, the preponderance of jurisprudence in Jersey shows that the Royal Court has applied an objective test in considering the question of consent.  There does not appear to be anything in Selby v Romeril that calls into question the continued use of the objective standard.  The fact that the elements of the Jersey law of contract have been identified by reference amongst other things to Pothier does not mean that the means of ascertaining whether those elements exist must equally be subject to the strictures of that body of law.  It is open to us, we think, to apply a different approach if we believe that that represents the current law of Jersey and is better suited to the needs of a modern society.  For the reasons that we have articulated, we prefer the approach of the Jersey courts in Leech v Leech and Others and in subsequent cases and adopt the objective standard for determining whether or not consent exists in a contract.  In other words the parties to a contract will be taken to have meant what on consideration of the evidence as a whole a reasonable man would have taken them to mean. 

The evidence

(i) Julian James Box

30.      We first heard evidence from Mr Box who is a director and Chief Executive Officer of Calligo and, together with Mr Andrew Angus Wicks ("Mr Wicks") co-founded Calligo some six years ago.  He identified and put in evidence his written statement.  He explained to us that Calligo provide cloud based services.  It provides all aspects of IT infrastructure in return for a monthly fee.  Mr Box has extensive business experience.  He explains that a typical engagement process for Calligo was to have an initial meeting with the client to understand their requirements and to 'scope out' what a potential client might require in terms of cloud service.  From that exercise a SOW is generated and presented to the client on a form entitled Quotation and Order Form and there is not infrequently negotiation over a period before a final SOW is created.  Once the SOW is signed Calligo then begins to provide its services and orders such hardware and software as may be required and 'ring fences' its resources that are to be dedicated to the new client.  Once that system is in place the new client's systems are then moved onto Calligo's cloud platform on an agreed timeline and Calligo thereafter provides support to the client. 

31.      Mr Box informed us that he had had a personal relationship with Mr Le Tiec of PBS for about five years. 

32.      There was a partnership in place between Calligo and PBS and a Business Partner Reseller Agreement was signed in June 2012 under which PBS would become a reseller of Calligo Services.  We will make some small reference to this reseller agreement later in this judgment.  This partnership was ultimately cancelled.  During this period, discussions had taken place between Mr Box and Mr Le Tiec concerning the use by PBS of the Calligo platform.  Mr Le Tiec asked, so Mr Box tells us, that Mr Box meet with Mr Rick Perello ("Mr Perello") who was PBS's IT director.  These discussions are reflected in an email between Mr Box and Mr Perello in which Mr Box thanks Mr Perello for the time that they have spent together in the preceding week and confirm that in order to create a "formal quote", Calligo's personnel needed to attend at PBS to perform a site survey.  The attendance on site happened and on 4^th June, 2013, a first draft of SOW001 was prepared by Calligo.  There followed discussions relating to price and on 9^th August, 2013, an updated version was sent by Mr Box to Mr Jamie Harkness ("Mr Harkness") of Calligo so that Mr Harkness could chase up responses from PBS.  Mr Box informed us that there was often some form of extended process of negotiation with the client before a SOW was finalised.  One of the changes from the initial SOW was at the instance of Mr Le Tiec who required that the professional services fees would be spread over a 12 month period.  The next version of the Quotation and Order Form SOW001 dated 17^th July, 2013, was provided after consultation with Mr Le Tiec and reflected that one-off charges relating to the implementation of the service would be paid over a 12 month period.  It would appear that Calligo encountered some resistance over the project and Mr Box informed us that Mr Perello was being difficult about it.  He said that it was not untypical to have resistance from a clients' internal IT personnel.  There were in total some six iterations or drafts of SOW001 before it was signed on 30^th January, 2014.  On 7^th October, 2013, Mr Harkness sent an email to Mr Le Tiec in which Mr Harkness reflects the fact that there had been a lot of delays and that Mr Box may well ask him to "put up or shut up". 

33.      The next version of SOW001 was dated 10^th October, 2013, and reflects the fact that discussions with PBS altered parts of the documentation.  There was a reduction in charges in some areas.  This, so Mr Box told us, was at the instigation of PBS. 

34.      Whilst the discussions were taking place there was dissatisfaction on the part of Mr Box and Calligo relating to the reseller agreement and partnership between Calligo and PBS and on 8^th November, 2013, Mr Box sent an email to Mr Le Tiec bringing that partnership to an end. 

35.      Subsequently, so Mr Box informs us, Mr Le Tiec and PBS began to re-engage with Calligo and the discussions concerning PBS moving to Calligo's cloud services resumed.  This resulted in an email between Mr Harkness and Mr Le Tiec giving details of the businesses in the PBS group to be put on the Calligo cloud and contains the paragraph "Following your meeting with Rick I would suggest that Julian and Rick meet (Fri 11.30) to prioritise at which point I will then produce a statement of works to be signed off on your return on Tue/Wed of next week".  There were then subsequent meetings with Mr Perello on 20^th January, 2014, and on 21^st January, 2014, there was an email from Mr Richard Hall of PBS to Mr Box (and cc'd to Mr Harkness and Mr Le Tiec) which contains the words "In the meantime I trust the meeting went well.  In my absence I would like to confirm that both Tony and I are committed to moving our core, confidential, OS Guernsey and PBS Media across to Calligo as soon as possible."  On 22^nd January an email from Mr Box to Mr Le Tiec attaches an "updated SOW that now has all your business units included (and broken down), I have discounted by 50% and also spread the implementation costs over the first 12 months for you.  Looking forward to our discussion and dinner tomorrow."

36.      Mr Box informs us that it was intended that he and Mr Le Tiec meet on the following day in order sign the updated paperwork.  He points out that the SOW001 contained considerably more breakdown and detail than the earlier versions.  It separated out, as he had been requested to do, the specific costs allocated to different parts of the PBS business.  The meeting scheduled for the following day did not go ahead but it was subsequently agreed that there would be a meeting with Mr Le Tiec at the Royal Yacht Hotel on 30^th January, 2014.  This meeting did take place and as Mr Box reported, it was attended, in addition to himself, by Mr Harkness (Mr Box was not sure if he was there already when Mr Box arrived) and a Mr Elliott who had shortly before joined Calligo.  Mr Harkness had with him the paperwork and when Mr Le Tiec arrived the paperwork was signed by both Mr Le Tiec and Mr Box. 

37.      There is dispute as to precisely what happened at this meeting.  There is an allegation that Mr Le Tiec had said "what's all this, I don't need all this" when considering the paperwork and that Mr Box had said that it was "not binding...it was just a statement of intent."  This exchange is expressly denied by Mr Box in his evidence before us.  Further, Mr Box denies that Mr Harkness said as alleged, in his presence, that it was "not a contract".  Mr Box does remember Mr Le Tiec saying that he was "sorry that it had taken so long" and that now they could move forward.  After the paperwork was signed there were drinks which Mr Box said, to his mind were celebratory drinks to celebrate the signing of the contract.

38.      Mr Box also told us after the meeting Calligo had taken practical steps to commence provision of their services to PBS including sourcing hardware and recruiting extra staff.  From time to time the "go live date" slipped but PBS had not given any indication to Calligo that they had changed their mind.  If a client does change its mind then Calligo would sit down and negotiate the appropriate fee to end the contract.  Mr Box indicated to us that he tried to escalate matters with Mr Le Tiec but he only became concerned after four or five months of delay. 

39.      Because resources had been 'ring-fenced' and a contract signed, Calligo eventually rendered accounts to PBS.  Initially they had not intended to render accounts to PBS until the implementation exercise had been completed but the delay on the part of PBS in moving to this stage, so Mr Box told us, meant that he needed to send invoices before that process had taken place.  He also thought that invoicing would focus Mr Le Tiec's mind and unlock the final information gathering stage required to complete implementation.  In the summer of 2015 Mr Le Tiec had asked to meet Mr Box at the Royal Yacht Hotel face to face but that had not happened and ultimately Mr Box wrote an email to Mr Le Tiec saying that he was under instructions to take steps legally to enforce the contract.

The Reseller Agreement

40.      As we have already said we heard evidence of a partnership by way of a reseller agreement between Calligo and PBS.  That agreement was signed in June 2012 and was designed to enable each of the businesses to sell each other's services to third parties.  The reseller agreement contains the following provisions:

"1.1 Statement of Work (SOW):

"means each separate agreement that is issued by Calligo to the Reseller that describes the services including any user contract terms and pricing arrangements." 

Pursuant to Clause 2.4 the Reseller agrees that: 

"every service that the Reseller is entitled to resell shall be in accordance with and governed by an SOW to which this Agreement is incorporated."

Pursuant to Clause 3.3 the:

"Reseller shall enter into end user agreements only with prospective licensees who Reseller reasonably believes are responsible and likely to comply with their obligations under the end user agreements attached in the relevant SOW."   

Pursuant to Clause 5.1: 

"The fees for Calligo's Services will be charged on the terms and at the rate specified in the applicable Statement of Works."

Pursuant to Clause 9.1: 

"The Reseller represents and warrants to Calligo that it has the ability and experience to carry out the obligations assumed by it under this Agreement and by virtue of entering into this Agreement...."

41.      This seems to us to be a strong indication that the Reseller, in this case PBS, would be familiar with the importance of a SOW as an underpinning for a contractual agreement and with the STCs.  The Reseller agreement was signed by Mr Wicks on behalf of Calligo and Mr Le Tiec on behalf of PBS. 

The SOW

42.      SOW001 (and SOW002) have the following features:-

(i)        After the itemised services and hardware and software in the quotation there are five numbered paragraphs.  The first numbered paragraph is in the following terms:-

"This sales purchase - SOW001 ("Order") is subject to the following terms and conditions:

(1)       Calligo's standard terms and conditions for the supply of cloud services published at http://www.calligo.net/licences (or such other web address notified by Supplier to the Client from time to time) and as amended from time to time in accordance with the provisions of the terms and conditions..."

(ii)       Immediately above the signatures of Mr Box and Mr Le Tiec on SOW001 are the words "in witness whereof, the parties have executed this order as of the date set forth above".  The only date set about above is on the first page of the document and is 27^th January, 2013, which clearly must be an error and should read 2014.  SOW002 contains the same error in the date and otherwise is in precisely the same terms as SOW001.  Mr Box recalls that Mr Le Tiec signed the document quickly but that to his mind was hardly surprising at it had been provided to Mr Le Tiec in advance.  PBS were not provided with Calligo's standard terms and conditions as these were available on the website and it was standard practice not to provide them in paper form.

The Standard Terms and Conditions

43.      Calligo's Standard Terms and Conditions ("STCs") that applied at the time that the documents were signed and are referred to in the SOWs contained the following provisions:

"6.6.1 Clause 2 Definitions: 

6.6.1.1 Effective Date "means the date defined in the Order Form or in the absence of any such definition, means the date that the Supplier received the Order form" (at page 2 of the Standard Terms and Conditions) [Vol 2, p.16];

6.6.1.2 Order Form "means a statement supplied by Client to Supplier requesting services including, without limitation, Supplier's order form, an on-line web form, a Client purchase order or a Client email" (at page 3 of the Standard Terms and Conditions) ]Vol 2, p.16];

6.6.1.3 Subscription Term "means the period of time which Client may access the applicable Service as set forth in the Order Form or in the absence of such a definition shall mean thirty six months" (at page 3 of the Standard Terms and Conditions) [Vol 2, p. 17];

6.6.2   Clause 3.1:  "Provided the Client complies with its obligations under this Agreement, Supplier will, from the Commencement Date and until the termination date of this Agreement, provide the Services to the Client on the terms and conditions of this Agreement." 

6.6.3   Clause 5.4:  "Supplier can vary Service fees by providing one month's notice to Client." 

6.6.4   Clause 5.5:  "Payment is due on the fifteenth (15th) day after the date of the invoice.  A service charge of 1.5% per month (or the maximum rate permitted by applicable law, if lower) will be assessed against overdue invoices from the original due date for payment." 

6.6.5   Clause 5.8:  "On the termination of this Agreement Client will pay Supplier, in accordance with this clause all unpaid fees and expenses accrued up to the date of termination of this Agreement and for all costs and expenses which Supplier has incurred or agreed to incur in connection with any work done or to be done for the client." 

6.6.6   Clause 6.1:  "The term of this Agreement shall commence on the Effective Date and shall continue until terminated as stated herein." 

6.6.7   Clause 6.2:  "The term of the Agreement shall be the Subscription Team unless extended or terminated as described below."

6.6.8   Clause 6.3:  "Termination for Cause.  If either party fails to comply with any of the material terms and conditions of this Agreement, including without limitation the payment of any fees or other reimbursement due and payable to Partner under this Agreement, the non-defaulting party may terminate this Agreement and any and all license rights upon thirty (30) days' written notice to the defaulting party specifying any such breach, unless within the period of such notice, all breaches specified therein shall have been remedied." 

16.1    This Clause set out the Parties' entire liability ... to the other in respect of: 

16.1.1 any breach of its contractual obligations arising under this Agreement; and

16.5    Notwithstanding anything else contained in this Agreement:

16.5.1 neither party shall be liable to the other for loss of profits, loss of contracts, loss of business, loss of revenue, loss of goodwill, loss of anticipated savings or loss of custom or customers; any indirect or consequential loss...

16.7    The provisions of this Clause 16 shall survive termination of this Agreement insofar as they relate to events occurring before such termination..."

Andrew Charles Angus Wicks

44.      Mr Wicks informed us that he had founded Calligo together with Mr Box in July 2011.  Calligo provides hosted IT services for the benefit of small and medium sized businesses that wish to outsource their IT.  Calligo uses a monthly fee structure.  Mr Wicks identified and brought into evidence his witness statement of 15^th June, 2016. 

45.      Mr Wicks informed us that Calligo's STCs for supply of services are to be found on its website.  Some clients preferred, however, to consolidate all the terms and conditions into one document and on such occasions Calligo would provide a master services agreement based largely on the STCs.  The standard master services agreement is almost identical to the Standard Terms but then some clients negotiate some changes to reflect their specific requirements.  The majority of Calligo's contractual relations with its clients were governed by an SOW and not by a master services agreement. 

46.      Since Calligo's founding it had an ongoing business relationship with PBS and PBS was responsible for supplying all the furniture in Calligo's original office.  Mr Wicks informed us about a reseller agreement with PBS.  Between April 2013 and August 2014 Calligo had employed Mr Jamie Harkness ("Mr Harkness") as a salesman, he had previously been employed by PBS and had managed the Calligo account whilst employed by them. 

47.      To a great extent, in terms of the relationship with PBS, Mr Wicks corroborated the evidence of Mr Box.  He also told us that on 30^th January, 2014, Mr Le Tiec signed two quotation and order forms that are referred to as SOWs which set out the scope of work to be undertaken for PBS.  This, so Mr Wicks informed us, was the standard form of document that Calligo uses when taking on new customers and, on signature, it formed a contract.  That is why they were known as "Quotation and Order Forms".  They were quotations handed by Calligo to a perspective customer but once finalised and signed by that perspective customer they became a contractual document on which Calligo would rely in taking steps to provide what it was contractually obliged to do.

48.      Mr Wicks was not directly involved in discussions with PBS although he did have discussions with Mr Box as to how the Calligo contract would be implemented.  There was discussion about the changes necessary at Calligo to implement the contract including investment and infrastructure and extra staff.  He informs us how pleased he was once PBS had signed the contract as it represented a stable source of income for Calligo over the following three years.  Given the relationship between PBS and the surrounding circumstances, Mr Wicks informed us that he had no reason not to rely on the contractual documentation and, as a consequence, several important decisions were made by Calligo resulting in commitments and expenditure.  In particular, Calligo added six additional staff, two of which were in client support roles and others were in management software development and marketing roles.  This was a general expansion as a result of the agreement with PBS.  In addition there was equipment purchased to support what Mr Wicks described as the growth in demand.

49.      Mr Wicks was not directly involved in the implementation of the contract with PBS although he was provided with regular updates.  Calligo allocated or "ring-fenced" computing resources which meant in effect that they had dedicated part of their equipment such as processing power to the needs of PBS.  He became aware that PBS had rescheduled implementation on a number of occasions and there were discussions between him and Mr Box as to whether or not Calligo should start invoicing PBS on a monthly basis.  They were anxious to maintain the relationship and did not do so.  In July of 2014 Mr Wicks has been told by Mr Box that there was no implementation meeting as yet although there was no suggestion by PBS that they intended to cancel the agreement with Calligo nor did Calligo anticipate that.  He had a discussion with Mr Box later in the year concerning PBS's continued failure to hold an implementation meeting and it was decided that Calligo could no longer hold off billing PBS.  By the end of November 2014 Mr Wicks said that his understanding was that Calligo had created a virtual data centre and 'ring-fenced' resources which meant, of course, that they could not be sold to other clients and that preliminary work had been done on the implementation plan for the services that they would deliver to PBS.

50.      In December 2014 in response to the invoices sent by Calligo to PBS there was an email from PBS's company secretary disputing the invoices received. 

51.      Thereafter Calligo regularly invoiced for services and regularly received emails from PBS saying they would not be paid.  In March 2015 the Board of Calligo resolved that legal advisers should be instructed in connection with this matter. 

52.      Mr Wicks informed us in his statement of the adverse effects on Calligo of the failure of the contract with PBS.  He points first to the loss of income that was due under the contract and the fact that it had been compounded by increased staff costs and equipment to service the contract.  Some of the costs had been mitigated as services had been sold to new clients.  He indicated that both Mr Le Tiec and PBS generally were aware of how Calligo operates and would have been aware of the effect of signing an SOW. 

53.      He confirmed that the duration of three years for such a contract was industry standard practice and he indicated that Calligo's contracts with other organisations were at least three years in length.  He was surprised at the suggestion that Mr Harkness may not know about the three year period as he had worked closely with Mr Harkness whilst he was at Calligo and Mr Harkness was familiar with the way that Calligo operated.  Furthermore Mr Harkness was on a basic salary and commission which was calculated to reflect the three year value of any agreement.  Mr Harkness's livelihood was calculated on the three year term and hence Mr Wicks found it very strange that Mr Harkness would suggest that he was not aware of that term. 

54.      In his view the effective date was the date on the SOW and the date was when that was signed, namely 30^th January, 2014. 

55.      In response to cross-examination Mr Wicks said that it was common practice not to bill immediately but the ability to render accounts protected Calligo if the client deferred the 'go live' date.  He also confirmed that the SOW serves two purposes - it acts as a quotation and when signed becomes an order form.  He did not believe that the SOW was misleading and everyone knew that they were signing an agreement.  He confirmed that Calligo had put money into buying equipment and employing more people and had they not believed that there was a valid contract with PBS, they would not have done as much. 

Anthony Le Tiec

56.      For the defendant we heard first from Mr Le Tiec who identified and put into evidence his statement. 

57.      Mr Le Tiec is the executive chairman of the PBS group of companies and 100% shareholder of PBS.  He had begun as a salesman with that company in 1988 and worked his way up through the company to achieve his present ownership position.  He describes PBS's core business as selling stationery, photocopiers, office furniture as well as servicing and maintaining copying machines. 

58.      Mr Le Tiec met Mr Box at a seminar in 2010 or 2011.  He found him very pleasant and they remained in contact and had discussions about incorporating PBS's photocopying services into the cloud.  Mr Box was looking to get a good client base and there was some discussion of cross-selling each other's products by PBS and Calligo. 

59.      Mr Le Tiec could well see the benefit of Calligo and PBS working together and, in 2012, as a result of Mr Box indicating that he needed an experienced and dedicated salesperson, he agreed that Mr Harkness would leave PBS and begin working with Calligo whilst also continuing to sell PBS's equipment.  This was in the context of having a 'joined up' approach between the two companies.  Mr Le Tiec was happy with that arrangement as Mr Harkness would in fact still be selling PBS's goods although they would not be paying his salary. 

60.      Mr Le Tiec describes an occasional social arrangement between himself and Mr Box along with other members of staff, often occurring on a Friday evening.  They would regularly meet for drinks or food and drinks at the Royal Yacht or Pier Road Museum bars. 

61.      At some point thereafter Mr Le Tiec began to feel pressurised by Mr Box to take on Calligo's services.  Mr Box and Mr Harkness explained that it would look odd for PBS to be promoting Calligo to clients when PBS itself was not a Calligo user.

62.      At the time PBS did not have a cloud service and PBS's data and software was installed on a local system.  As far as he was concerned the PBS system operated perfectly well and PBS did not need to have Calligo's offering.  He did not deny there might benefits but there was nothing in the offering that made him eager to change the company's systems.  He estimated that PBS's costs at the time for internet access and email service was approximately £350 per month (although this did not include a salary component) but he was perfectly happy for PBS to take on Calligo's services provided it did not result in PBS's expenditure increasing.  There were a number of entities in the PBS group of companies but these were all new and were still developing at the time. 

63.      Of the meeting on 30^th January, 2014, Mr Le Tiec told us that he had arranged to meet Mr Box and Mr Harkness at the Royal Yacht bar.  This was from his perspective purely a social meeting.  He was at the Royal Yacht when he received a text message from Mr Harkness saying that he and Mr Box were on their way.  Within a short time of them arriving Mr Harkness produced a document from his pocket.  Mr Box asked him to sign it and said it was the scope of works document he had sent to him previously by email.  Mr Le Tiec told us that he found it odd to be asked to sign a document at a pub on a social meeting and he asked about it and was told it was a scoping document and it just needed to be signed off so progress could be made.  Mr Le Tiec was not in any way suspicious or apprehensive and it did not occur to him that he would be signing a document whilst standing at a bar drinking which Calligo would later assert was a legally enforceable contract. 

64.      Mr Le Tiec remembers flicking through the pages and casting an eye on the lists set out and asking what it all was about.  At that point Mr Harkness said to him it was only a scoping document and he wasn't bound by it.  He told us in his statement that he remembered saying to Mr Harkness "are you sure about that?" and Mr Harkness confirming what he had said and specifically remembered him saying "come on, it's me you're talking to."  Mr Le Tiec categorically stated that he did not intend to sign a document in which PBS would be liable to Calligo for cloud services at £3500 per month over the next three years that covered every company in the PBS Group. 

65.      Mr Le Tiec said that he simply signed the document and did not read it.  He did so because he trusted both Mr Harkness and Mr Box.  He does not feel that PBS is liable for any amounts to Calligo and he feels cheated and mislead by Mr Box.  He did not view or read Calligo's STCs and was not in a position to do so that evening and he considers himself tricked into signing the document.  In further questions put in examination in chief, Mr Le Tiec said that no-one had ever explained the documents to him and he certainly was not aware of the three year duration.  PBS's contracts are different from those of Calligo.  He also confirmed that PBS's IT costs were £350 - £380 per month excluding the salary of Mr Rick Perello, the IT manager.

66.      In cross-examination Mr Le Tiec confirmed that he had been managing director for the company for eight years and he had been with PBS for 20 years or more.  He is in charge of PBS and is a shareholder of the other group companies.  He agreed that nothing of moment would be done without his say so.  One of the group companies was regulated by the JFSC and consequently he was a member and an officer in a regulated entity.  He was happy to work with Calligo and was happy to enter into a contract with them if the costs to PBS were no more than they were currently paying. 

67.      He was referred to an email of 8^th August, 2013, from Mr Harkness to Mr Box was sent with the words "alteration to PBS quote (as agreed with TLT) - initial cost to be spread over 12 months, thereafter reverting to normal monthly rental."  Mr Le Tiec agreed that TLT referred to himself and he confirmed that he did have input in the PBS documentation and expressed the view that he wanted a monthly payment.  Mr Le Tiec's position was that he would go into the agreement to help him sell photocopiers but he did not need that measure of change to the IT system.  He agreed however that negotiation was taking place for PBS to become a client of Calligo but not at the level detailed in the SOW. 

68.      Mr Le Tiec told us that Mr Harkness said that he must show willing to keep Mr Box happy and indicated that he would not normally get involved in contract signing and he had more of an ambassadorial role in terms of meeting clients. 

69.      A further email was put to Mr Le Tiec.  On 21^st January Mr Richard Hall of the PBS group sent an email to Mr Box copied to Mr Harkness and Mr Le Tiec.  The title of this email was "cloud requirements".  The email begins with an apology for missing a meeting and contains these words:-

"In the meantime I trust the meeting went well.  In my absence I would like to confirm that both Tony and I are committed to moving our core, confidential, OS Guernsey and PBS media across to Calligo as soon as possible".

70.      Mr Le Tiec's response to questioning about that email was that Mr Hall had exaggerated and he did not instruct Mr Hall to write at that time.  He did not recall if he read the email when he was copied into it. 

71.      There then followed an email of 22^nd January, 2014, from Mr Box to Mr Le Tiec directly with Mr Harkness copied in.  The main part of the email reads as follows:-

"Please find attached an updated SOW that now has all your business units included (and broken-down), I have discounted by 50% and also spread the implementation costs over the first 12 months for you."

72.      Mr Le Tiec confirmed that he received that email and received SOW001 which accompanied it.  Mr Le Tiec's observation when this email was put to him in cross-examination was that he did not understand the document and that he was a "mere photocopying salesman". 

73.      We might at this point observe that we took Mr Le Tiec's protestations as to his abilities difficult to accept.  It is difficult for the Court to believe that he simply did not understand SOW001 but nonetheless went on to sign it.  We think he was far from accurate in describing himself as a simple seller of photocopiers; he was, after all, a manager in a regulated entity and the leading figure in a significant group of companies.

74.      Mr Le Tiec was shown in cross-examination the second page of SOW001 and the words set out in paragraph 40 above were read out to him.  He confirmed that he understood what they meant but that he did not read the document.

75.      Similarly Mr Le Tiec was shown an email from Mr Box copied to Mr Le Tiec and Mr Harkness.  In it Mr Box writes:-

"I met with Tony Le Tiec last night as they are coming onto the Calligo cloud platform, part of this is the need for a 10MB connection from their offices up to the foreshore data centre.  I attach the quote that I was given. 

Are you able to look at the costs for Tony, with everything else PBS are doing with you guys, Tony would appreciate you sharpening the pencil if you could on this. 

We are looking to get this signed ASAP as we need to get the line in for April, let me know if there is anything that I can do to help."

76.      In response to questions on this Mr Le Tiec accepted that he had sought to get a better price. 

77.      At one point in his evidence Mr Le Tiec told us that he could not have signed for the various entities set out in SOW001 and would have needed their permission.  We observe, however, that he did sign the document which listed all of the entities and clearly, on any analysis, he was agreeing something for those entities even if, on his version of events, it was simply a scope of work. 

78.      A further email was put to Mr Le Tiec which passed from him to a number of individuals at C5 Alliance and copied in to Mr Perello amongst others.  It is dated 25^th September, 2014, and it reflects the fact that there had been a meeting between Mr Le Tiec and others and C5 alliance in which areas of mutual interest were discussed.  Mr Le Tiec lists amongst those interests:-

"6.       PBS requirement for new cloud based MS Office services to run the business and integrate with new oasis back office systems."

79.      This seems to indicate that only a few months after the alleged agreement with Calligo PBS was expressing an interest in a similar cloud based service.  Mr Le Tiec told us, however, that he had had no intention of taking the C5 cloud service. 

80.      A further email was put to Mr Le Tiec.  This was from Mr Harkness to a person in Calligo and then it was copied to Mr Perello and Mr Le Tiec on the following day.  The original email is dated 13^th May, 2014, and Mr Harkness writes:-

"Hi Charles we are two messengers...! 

This has the potential of getting very messy as Tony had signed a contract with Julian.

I was with Tony last night and he knows he has signed a contract.  We will have to have the conversation with Tony and TM on Friday at the lunch - Julian will not be very nice if Tony dumps on him again."

81.      Mr Le Tiec told us that he was not aware of the email until he saw it on discovery although he accepts that he would have received the email the following day he did not remember reading it. 

Jamie Harkness

82.      We next heard from Mr Harkness.  His current occupation is as a consultant for the PBS group where he has been for approximately one year.  Prior to that role he worked for Calligo as a sales manager again for approximately one year.  Prior to working at Calligo he was employed by PBS where he had been for some five years.  He described for us a growing relationship between Mr Box and Mr Le Tiec and Calligo and PBS generally.  Whilst still working at PBS he became aware that Mr Box was keen for PBS to use Calligo's cloud services.  He told us that when he discussed this matter with Mr Le Tiec, Mr Le Tiec's view was that PBS would use Calligo's services if the cost was the same as PBS was currently paying. 

83.      He described his role at Calligo when he moved there from PBS as finding opportunities in which Mr Box could meet potential clients.  Selling Calligo's services involved a long lead time although he indicated in his statement that the introductions he secured did not result in sales.  He then described Mr Box increasing the pressure on PBS to take Calligo's services.  This was a recurring conversation in the meetings between Mr Box and Mr Le Tiec. 

84.      Mr Harkness recalls in his statement that Mr Box put together a quotation for Mr Le Tiec and Mr Le Tiec questioned Mr Box about that, why there were so many items listed that were, on Mr Le Tiec's view, unnecessary.  Over time Mr Box, who Mr Harkness understood was under pressure from investors to increase Calligo's business, was becoming frustrated with PBS.  Mr Harkness's experience was that Mr Box would want every service or item that a business could use put in a Statement of Works.  He remembered looking over an SOW prepared by Mr Box and Mr Box asking to check that nothing had been left out.

85.      On 30^th January, 2014, Mr Box and Mr Harkness were due to meet with Mr Le Tiec at the Royal Yacht bar.  Mr Harkness described it as a social meeting but before he and Mr Box left the offices Mr Box handed him an SOW concerning PBS and asked him to keep hold of it for when they met with Mr Le Tiec.  Mr Box said to Mr Harkness he wanted to make sure Mr Le Tiec signed up that evening. 

86.      Immediately on arriving Mr Box procured the SOW from Mr Harkness and put it next to Mr Le Tiec.  Mr Harkness then reports in his statement that Mr Le Tiec asked what it was and Mr Box explained it was an SOW that set out PBS's requirements.  Mr Harkness remembers watching Mr Le Tiec flick through the pages and saying something along the lines of "but I have said we don't need all of this".  Mr Le Tiec asked Mr Harkness what he was being asked to sign and Mr Harkness said to him "just sign in".  He said it was merely to get things moving and to show PBS was really interested in taking matters forward.  He also told him it was nothing more than that and it was not binding on him, it was just a quotation that did not mean he was then forced to take what was being offered.  Mr Le Tiec signed.  Mr Harkness stated to us that what he said to Mr Le Tiec he believed at the time and that he had been led to believe that an SOW and quotations produced by Calligo were non-binding scoping documents.  He also stated that he had never heard of a three year lock in period. 

87.      Mr Harkness then described the gradual increase in Mr Box's frustration when Calligo began to issue invoices to PBS which were unpaid.  Mr Harkness in his statement said that he "felt in the middle" of everything. 

88.      He was referred to the email of 13^th May, 2014, in which he said:-

"I was with Tony last night and he knows he has signed a contract...".

89.      Mr Harkness said that he knew what he was saying in that email was not correct.  He knew there was no contract between Calligo and PBS but he was trying to exert pressure on PBS to take on some of Calligo's services.  It was his way of trying to get PBS to succumb to what Calligo and Mr Box wanted. 

90.      Mr Harkness identified and put in evidence the contents of his statement.  In cross-examination Mr Harkness repeated that he always viewed the SOW as a scoping document and not legally binding.  It could go "up or down".  He thought that the sale was completed and the clients would start to pay when the client started to use the product.  He thought his role was to "go out and open doors" and not to deal with the IT side of the sale. 

91.      He was referred to his email of 15^th January, 2014, sent to Mr Le Tiec and copied to Mr Box.  Under the title "Call to Action" he describes a number of PBS businesses to go on the cloud and that they should be prioritised.  He lists the PBS group, OS Guernsey, PBS Media, OS Media Guernsey, PBS Confidential, PBS Insurance and PBS Lending. 

92.      He then goes on to say:-

"Following your meeting with Rick it was suggested that Julian and Rick meet ... to prioritise at which point I will then produce a Statement of Works to be signed off on your return on Tue/Wed of next week."

93.      Mr Harkness describes his email as outlining his understanding of the various PBS entities but then says in evidence that he knew and Mr Box knew that PBS did not require services for all of their divisions. 

94.      He said of the meeting on 30^th January, 2014, that in his view Mr Le Tiec would have seen it as a social meeting.  He did not agree that he would have produced the SOW himself notwithstanding what he said in his email and that the SOW would have been produced by Mr Box.  In his view the SOW prepared had many items in it that PBS did not require. 

95.      He was cross-examined on the email of 13^th May, 2014.  He confirmed that he recalled writing it and that it contained a false statement by him.  In his words "they are lies". 

96.      In an email of 20^th February, 2014, between Mr Harkness and a lady who worked for Calligo, over the outstanding invoices between Calligo and PBS, the following words appear:-

"My take on this is always and continues to be;

Tony believes he gave required notice and therefore he is not due this bill however, Julian maintains this invoice is valid! 

My point is this - I say we do not push Tony for payment as we have now got SOW signed for work across PBS and this "will" now take place."

97.      It was put to him that this was a clear statement that he believed that a binding arrangement had been entered into.  Mr Harkness in response to that maintained that he was of the view that the SOW was simply a scoping document. 

98.      He maintained his version of what had transpired at the meeting of 30^th January. 

99.      We did not find the evidence of Mr Harkness satisfactory.  As is clear from his evidence he has been employed by PBS and then by Calligo and latterly as a consultant for PBS.  It is clear on his own admission that he would be prepared to lie in documentation to serve his employer's ends and we are concerned that his evidence is slanted to suit the ends of PBS.  We do not find it credible, acting as he was as sales manager for Calligo at the time, that he did not know that Calligo's standard terms provided for a three year duration.  In our view when he says in the email that Mr Le Tiec knew he had entered into a contract he was in fact reflecting his current understanding at that time and was not lying as he claimed in evidence before us.

Chris Paul Byrne

100.   We then heard evidence from Mr Chris Paul Byrne ("Mr Byrne") who identified his witness statement and put it in evidence. 

101.   He had no evidence to give that directly bore upon the matters for us to resolve but instead he gave evidence of a different deal between his company, Lumiere Wealth, and Calligo.  He described meeting with Mr Harkness of Calligo in June 2014 with another of his colleagues and that the meeting took place at Calligo's office.  He was receiving a demonstration or presentation concerning Calligo's services and how the cloud operated.  It was also an opportunity for Calligo to understand his business need for IT services.  His evidence was that on the following day he attended with that same colleague Calligo's offices again meeting with Mr Harkness.  The purpose of that meeting was to sign a "Quotation and Order Form - SOW001" and he recalls that at that meeting Mr Harkness expressly stated what we were signing was "not a contract and just a statement of works so that the guys can begin to build your desktops". 

102.   During July he recalls that there were problems with the service provided by Calligo and also some hardware problems.  On 9^th July he received an invoice from Calligo for £242.17 which was paid. 

103.   Around about the same time he started looking for software designed specifically for Lumiere's field of business.  He identified a different service provider and thought at the time that it was unnecessary if he was going to use that service provider also to use Calligo. 

104.   He subsequently met Mr Harkness again and said that he did not believe there was any good reason to continue with the Calligo services.  The meeting was followed by another meeting within the space of no more than two days at which both Mr Harkness and Mr Box of Calligo attended.  The representatives from Calligo did not offer him an explanation as to why his business should retain their services.  On 18^th July Mr Byrne informed Mr Harkness that the business would not be carrying on with Calligo's services.  On 1^st August Calligo prepared a document called a "Project Closure Report" to Lumiere.  There followed meetings between Mr Byrne and Calligo during which he made clear that he had been told from the onset by Mr Harkness that what he was signing when he signed a SOW was "just a quotation and does not tie me in or hold me to anything".  This notwithstanding, Mr Wicks insisted that there was a contract for a minimum period of three years.  At the end Lumiere Holdings and Calligo reached a financial agreement to settle the dispute between them. 

105.   We did not find Mr Byrne's evidence to be particularly helpful.  At its highest it is an example of a situation where Mr Harkness may or may not have said that the document SOW signed by Lumiere was non-binding in its effect.  That was disputed by Calligo and a termination deal was done.  We do not think it assists us in evaluating the evidence of Mr Harkness and Mr Le Tiec regarding what happened at the January 2014 meeting. 

Evidence of Rick Perello

106.   The last witness for PBS was Mr Rick Perello ("Mr Perello") who was the IT director of the PBS group.  He had joined in 1988 and had been in a management/director position for approximately 20 years. 

107.   Whilst he was aware of the dispute between Calligo and PBS he was, "strangely" as he puts it, not heavily involved in the discussions between Calligo and PBS concerning PBS using Calligo's cloud services.  Mr Perello remembers first becoming aware of the possibility of PBS moving its entire IT services to Calligo's cloud platform towards the end of 2012.  Following an initial contact from Mr Box he had advised him that he, Mr Perello, had not been involved in discussions regarding migrating of systems to the cloud but would need to speak to Mr Le Tiec.  He also recalls requesting pricing and details of the proposed services and was advised that this could only be done with PBS's assistance.  He recalls having a meeting in May 2013 with representatives of Calligo and giving them information about the computer users at PBS's offices, the types of programmes used at the office and the capacity of electronic storage required for data.  He recalls requesting that the scoping document was sent to him at first instance for review but he did not receive a copy.  The first time he had sight of any document resulting from this meeting was in October 2013 when he received a copy of the SOW from Mr Harkness. 

108.   He recalls there was a further scoping meeting with Calligo in January 2014 at Mr Le Tiec's requests so the costs and details could be discussed. 

109.   He recalls he received an updated statement of works from Mr Box listing what Calligo considered was required for PBS's IT needs.  He recalls that on reading it it seemed fairly to reflect what Mr Box and he had discussed at the previous meeting.  He noticed, however, that some things were not "like for like" matches for the programmes and services currently being used by the groups' computer users.  He did not like the entirety of what was proposed.  He also thought that the quoted price was very high as PBS were probably only paying at that time in the region of £350.  He did not think there would be a noticeable benefit to PBS in taking over Calligo's systems.  Mr Perello recalls advising Mr Le Tiec that PBS should not take Calligo's services to the extent being proposed by them. 

110.   In cross-examination Mr Perello was taken through a number of invoices and lines of expenditure relating to IT.  It is not necessary for us to go through all of the documentation save to the effect that it was put to Mr Perello that in fact before considering his own salary the monthly charge for IT related matters was £631.36 and not the £350 that he suggested.  He was then questioned about his salary and indicated that his salary was not apportioned between his IT functions and other functions.  As an estimate, however, it appeared to be the case that some £3249 per month of salary would be attributable to IT.  In total, therefore, some £3881.01 would be the cost in real terms of PBS's IT spend.  Mr Perello did not necessarily accept these points and indicated that the correct figure was £350 approximately per month excluding his own salary.  In any event, Mr Perello explained, he would be needed at PBS for other aspects for which he was responsible.  In re-examination he confirmed that Calligo did not provide a cheaper service as there was in his words a "staggering" difference between what Calligo was charging and what PBS was then currently paying. 

View of evidence and findings of fact

111.   During the course of hearing the witnesses we have, of course, had the opportunity of assessing their demeanour and the clarity with which they answered various questions put to them during examination in chief and cross-examination. 

112.   We are in no doubt that Mr Box and Calligo believed they were signing and intended to sign a document that had legal effect when Mr Box signed SOW001 and SOW002 on 30^th January, 2014, in the Royal Yacht.  The question for us to resolve is whether or not the reasonable bystander would think that Mr Le Tiec, on the part of PBS, intended to sign a document with legal effect. 

113.   As we have said, we do not accept Mr Le Tiec's portrayal of himself when he makes reference to being a "photocopier salesman".  He is in our view a sophisticated and experienced businessman.  He is a senior manager in a regulated entity and he is in effect the 'top man' at PBS. 

114.   He clearly took some part in the development of the various iterations of SOW001.  He was copied into the documentation and he must have been aware of its general intent.  Even if he was not entirely fluent with the technical detail set out in SOW001 we cannot believe that he thought it to be other than an ordering document when it describes itself as such on the signature page.  We also do not accept that he would not have seen the direct reference to the terms and conditions and know that by clicking on the hyperlink on that document he could have had access to them. 

115.   We also have in mind the emails to which he was copied where he is described as keen to take up Calligo's services or knowing that he had signed a contract.  We do not find credible in the circumstances, his statements to us that he did not read those documents, when copied to him.  This was potentially a difficult situation for him and he would in our view have read the emails. 

116.   He was copied in to the last iteration of SOW001 some days before the meeting at the Royal Yacht and this was a document that had reflected his input. 

117.   We are not convinced by the evidence that PBS spent only £350 per month on IT costs.  That did not allow for the salary of Mr Perello but in any event we found the evidence underpinning that figure unsatisfactory.  We think it more likely than not that Mr Le Tiec was aware that in signing SOW001 he was signing an order on which Calligo would act.  Whether he thought that this was a necessary step in order to seal the relationship between the two businesses we do not say but in our clear view Mr Le Tiec knew that when he signed SOW001 (and indeed SOW002) that he was creating a legally binding agreement. 

118.   In our view a reasonable individual apprised of such facts as the nature of Calligo's contractual documentation, the nature of the relationship between PBS and Calligo, the iterative development of SOW001 to accommodate PBS's input and specifically input to some extent from Mr Le Tiec personally, and the signing by Mr Le Tiec of the documentation, would be satisfied that Calligo intended to create a contract which would be legally binding on both parties. 

119.   However, even were we to apply the subjective analysis to the issue of consent, we would still on the view that we have taken of the evidence as set out above, hold that at the time that he signed the documents on 30^th January Mr Le Tiec knew he would be legally bound by them.

120.   Accordingly we find that consent existed and there was a contract between Calligo and PBS. 

Incorporation of the STCs

121.   Having found that PBS intended to enter into an agreement that was binding in its terms when Mr Le Tiec on its behalf signed the two SOWs we must go on to consider whether or not in our view the STCs should be taken as a part of the agreement.  This is of significant importance because if the STCs were not incorporated into the agreement between Calligo and PBS then arguments arise relating to the certainty of the terms and indeed the completeness of the terms of any agreement and hence essentially to whether such an agreement exists. 

122.   The Plaintiff argues that the STCs were incorporated by reference into the agreement.  The Plaintiff argues by analogy from the case of EMTV & Merchandising v Bayerische Landersbank [2003] JRC 039 in which the Royal Court considered whether certain statutory criteria under a securities interest agreement had been met.  One of the requirements was that the security interest agreement must "specify" events of default.  The security interest agreement considered by the Court did specify such events but did so by making reference to another document.  The Court rejected the argument that incorporation by reference of the events of default did not meet the statutory requirements and said:-

"Provided the events of default can be definitively or explicitly identified in the security agreement and any documents incorporated by reference, the requirements ... are... satisfied.  Clearly, the longer the paper trail, and the more convoluted the cross referencing may be, the greater the scope for argument that ambiguities exist."

123.   For its part the Defendant relies on the case of Café de Lecq Limited v R A Rossborough (Insurance Brokers) Limited [2012] (1) JLR 245 in which the Court there said:-

"... the notion that standard terms and conditions of the kind described above can properly be treated as having been the subject of such consent so as to become binding on A simply because they appear on the reverse of correspondence emanating from B is, on any view, long out moded (if it was ever tenable, which is doubtful)...."  

124.   The evidence from Mr Le Tiec is that he did not read the STCs before signing the SOWs.  He informs us that he had not seen the STCs before the discovery process in the course of the litigation. 

125.   For its part the Plaintiff's argue that the STCs were expressly incorporated by reference in the SOWs.  We have already set out at paragraph 41(i) of this judgment the precise terms of that incorporation. 

126.   Furthermore, so the Plaintiff argues, the reference to the STCs appear in every iteration of the SOWs that were provided from time to time to Mr Le Tiec and PBS.  It is incredible, so Calligo argues, that Mr Le Tiec, as a prudent businessman, would not have read the STCs or ensured that they were adequately perused by a member of his staff.  Furthermore it is incredible so the Plaintiff argues that Mr Harkness, as he indicated to us in evidence, was unfamiliar with the STCs given that they were an integral part of the product that he was from time to time selling. 

127.   Even if, so Calligo argues, neither Mr Le Tiec nor anyone else at PBS familiarised themselves with the STCs that would be a negligent business practice for which Calligo should not suffer.  Calligo was entitled to assume that the STCs, referred to in every iteration of the SOWs had been perused and considered by PBS.  The SOWs were sent electronically and there is a hyperlink to the STCs embedded in the SOWs. 

128.   We must, it seems to us, consider the overall context in which the signing of the SOWs happened.  This was not a case in which a Plaintiff was seeking to incorporate by reference complex terms and conditions and to rely on them against an ordinary and perhaps unsophisticated member of the public.  Both Calligo and PBS are substantial businesses and Mr Box, for Calligo, and Mr Le Tiec, for PBS, were both experienced businessman. 

129.   In our view, a reasonable person would assume that PBS would have familiarised itself with the STCs at some stage in the process leading up to the signing of the SOWs.  The express reference to the STCs within the SOWs in the prominent position immediately above the signature of the parties, would also indicate that the STCs were incorporated by reference.

130.   A significant amount of further documentation and communications were put before us in evidence.  We do not refer to these extensively but we have considered all of them.  The documentation and evidence to which we have made reference appears to us to be the most salient either as to the issues we have to determine or by way of essential background understanding.

131.   Accordingly we also find that the STCs of Calligo form part of the contract.  They were referenced in every iteration of SOW001 and in SOW002 and we cannot think that Mr Le Tiec did not know that he would be bound by them.  Whether or not he read them in detail we cannot say but the evidence that we heard was to the effect that it is normal practice that terms and conditions are referenced by way of a hyperlink and in our view Mr Le Tiec would have been aware of this.

Damages

132.   The issue of what, if any, damages should be paid by PBS to Calligo in the event that the Court finds that an agreement exists and that the STCs were incorporated into it has been the subject of some argument. 

133.   The general principle, namely that a successful plaintiff is entitled to be placed in the same situation that he would have been in had the agreement been performed, is not in dispute. 

134.   It was suggested to us in argument that Clause 16.5 of the STC above effectively meant that there could be no claim by Calligo because all of its claim was for financial loss.  That is not, in our view, the meaning of Clause 16.5.  In our view that Clause relates to circumstances in which one party to the agreement might wish to argue for a loss of profit element in the future conduct of their business but not in the current circumstances where what is claimed is in effect a loss that arises directly from a breach of contract.  That clause deals with indirect or consequential loss.  

135.   At paragraph 25 of Calligo's Order of Justice it pleads, in relation to the loss it has allegedly suffered, as follows:

"In relation to the agreement, the Plaintiff's net profit margin is estimated as 54%.  The loss suffered by the Plaintiff is therefore 54% of the total value of the agreement."

And it then particularises the loss it has allegedly suffered. 

136.   It appears clear from that pleading that even though in the prayer Calligo claims liquidated damages the Plaintiff's allegation is that the loss it has suffered is its profit margin and the claim is in effect for loss of profits.

137.   That is not how Calligo puts its claim in its closing submissions.  In its closing submissions Calligo seeks:

(i)        Payment in full of the value of the invoices rendered to date;

(ii)       1.5% that it is entitled to charge on overdue invoices from the date due for payment to the present day;

(iii)      The payment of the total remaining monthly billable amounts up to 1^st January, 2017, being the earliest date upon which the contract could have been terminated but reduced by 46% to account for the fact that Calligo has ultimately been able to re-sell some of the resources which had been set aside for the PBS contract. 

138.   Calligo quantifies that claim (leaving out the interest component) of 36 payments of £3,457.75 plus the implementation costs of £7,800, totalling £132,279.  On that, so Calligo argues, should be deducted 46% leaving a claim for 54% of the total contract sum being its profit margin. 

139.   There was an application by Calligo shortly before the trial to amend its Order of Justice which would have, in the amendments sought with regard to the prayer of the Order of Justice, enabled Calligo to put its case in the way that it now seeks to do so.  That application was refused.  PBS has been highly critical of the prayer of the Order of Justice and indeed of the submissions of Calligo's counsel on the basis that the claims should have been made in debt and in damages. 

140.   In our view it is necessary to bring some measure of clarity.  As we have found above there was a legally enforceable agreement entered into which incorporated Calligo's STCs.  Therefore under the terms of the agreement that we have found established PBS would have paid monthly sums for 36 months to Calligo.  The starting date would be 30^th January, 2014, and the finishing date would be 30th January 2017 (and not 1st January as suggested by Calligo through counsel). 

141.   It is clear from its pleading that Calligo is seeking to recover what it has lost, namely the contractual sums it would have received less the cost that it would have incurred in providing the services but did not.  Calligo has assessed its profit margin at 54% (more or less).  That claim was not challenged in cross-examination and we accept that 54% is the correct figure to take. 

142.   Accordingly we think that the correct assessment of what is due by PBS to Calligo is as follows:-

(i)        The total of the invoices already submitted; plus

(ii)       The value of the remaining months of monthly payments that were due under the agreement until its termination on 30th January 2017; plus

(iii)      A deduction of 46% on the total under (b) above on the basis that the first invoices raised would have already contained an element of cost to Calligo; plus

(iv)      Interest at the court rate from the date of judgment until the date of payment. 

143.   In our view there may need to be a quantification of damages and, therefore, in default of agreement we refer quantification to the Master for determination. 

144.   We leave over costs for further argument. 

Authorities

Selby v Romeril [1996] JLR 210.

Leech v Leech [1969] JJ 1107.

Mobil Sales v Transoil (Jersey) Limited [1981] JJ 143.

Le Motte Garages Limited v Morgan [1989] JLR 312.

Pothier.

Daisy Hill Real Estates Limited v Rent Control Tribunal [1995] JLR 176.

Marett v Marett and O'Brien [2008] JLR 384.

Home Farm Developments Limited and Others v Le Sueur and Others [2015] JCA 242.

Law of Contracts (5th Edition 2009).

EMTV & Merchandising v Bayerische Landersbank [2003] JRC 039.

Café de Lecq Limited v R A Rossborough (Insurance Brokers) Limited [2012] (1) JLR 245.