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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Equant SAS (UK Branch) v Ives & Ors [2002] EWHC 1992 (Ch) (04 October 2002) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2002/1992.html Cite as: [2002] EWHC 1992 (Ch) |
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CHANCERY DIVISION
Strand London WC2A 2LL | ||
B e f o r e :
____________________
EQUANT SAS (UK BRANCH) | Claimant | |
- and - | ||
(1) STEPHEN JAMES IVES | ||
(2) ROBERT GERALD LEE | ||
(3) TRISTAR DATA SOLUTIONS LIMITED | ||
(4) MAGELLAN COMMUNICATIONS LIMITED | Defendants |
____________________
Mr ANDREW CLUTTERBUCK (instructed by Messrs Walker Morris, Kings Court, 12 King Street, Leeds LS1 2HL) appeared on behalf of the Defendants/Respondents
____________________
Crown Copyright ©
MR LESLIE KOSMIN Q.C.
INTRODUCTION
(1) summary judgment under Part 24 of the CPR against the Defendants; and/or
(2) strike out of the Defendants’ Defences under Part 3.4(2) of the CPR and a consequential order for judgment in the Claimant’s favour; and/or
(3) an interim payment pursuant to Part 25.7(1)(c) of the CPR in the event that the application for summary judgment or strike out is not successful.
Mr Robert Hunter of Allen & Overy, who appears on behalf of the Claimant, has made it clear that the application for summary judgment under Part 24 is his client’s principal claim. I should also mention that the Defendants, who are represented by Mr Andrew Clutterbuck of Counsel, have served as part of their evidence a draft Amended Defence which replaces those filed in October 2001 and for which permission will be sought if the case continues to trial.
PROCEDURAL HISTORY
THE LEGAL TEST FOR A PART 24 APPLICATION
“The Court may give summary judgment against a ... defendant on the whole of a claim or on a particular issue if–
(a) it considers that-
(i) ... ... ...
(ii) the defendant has no real prospect of successfully defending the claim or issue; and
(b) there. is no other compelling reason why the case or issue should be disposed of at a trial.”
“The words “no real prospect of being successful or succeeding” do not need any amplification, they speak for themselves. The word “real” distinguishes fanciful prospects of success or [as counsel for the defendant] submits, they direct the court to the need to see whether there is a “realistic” as opposed to a “fanciful” prospect of success.”
“The overriding objective of the CPR is to enable the court to deal with cases justly (see r 1.1). To adopt the language of art. 6.1 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (Rome, 4 November 1950; TS 71 (1953); Cmd 8969) set out in Sch 1 to theHuman Rights Act 1998) with which this aim is consistent, the court must ensure that there is a fair trial. It must seek to give effect to the overriding objective when it exercises any power given to it by the rules or interprets any rule (see r 1.2).”
Later at paragraph [93] Lord Hope again cited Lord Woolf’s judgment in Swain v Hillman where he stated that Part 24 is not meant to dispense with the need for a trial where there are issues which should be investigated at the trial. At paragraph [95] Lord Hope summarised the position in the following terms when answering the question - what is to be the scope of the court’s inquiry?:
“The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf MR said in Swain’s case (2001) 1 All ER 91 at 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.”
“However, in a case where the defendant’s account appears farfetched but is not contradicted by independent evidence, the court should in my view normally hesitate long before rejecting it as incredible at a preliminary stage. The evaluation of witnesses is essentially a matter for a judge at trial who has the benefit of seeing them give evidence. Moreover, where contradictory accounts are given in the witness statements, any attempt to evaluate the competing accounts inevitably involves an exercise in the nature of a trial.”
THE EVIDENCE
“(25) The proposal was that Mr Lee and I had to guarantee him 32.5% gross profit on a turnover of £2 million per year. Allowing for £250,000 overheads, this equated to a requirement to guarantee the Claimant net profits of £400,000 per year. Mr Hector stated that he did not appreciate having a gun pointed at his head but that being a realistic businessman he realised that to a degree we had backed him into a corner. Anything over the required £400,000 net profit contribution he agreed that we could take. There would however be no further investment in the division, pay rises would be minimised and sales support would be unavailable except where the rest of the company had an interest in the client. A corollary of the proposal that Equant Cabling would receive no investment was that there would be no objection if Mr Lee and I sought to take advantage of business opportunities that Equant Cabling, because of the decision that it would receive no investment to expand into new product and service areas, could not take up.
(26) Having heard Mr Hector’s proposal I went out of my office and briefed Mr Lee. The three of us then went and continued the discussion over lunch at the New Miller Dam pub. It was agreed that we would take out any additional profit by invoicing the Claimant from a new company as if it were a supplier. Mr Hector was to arrange for the new company to be approved. I assumed that he would inform the finance department of the arrangement since they were responsible for setting up new supplier accounts and running the necessary credit checks. Mr Hector made it clear that he wanted the arrangement kept confidential. We agreed to this - we were aware that there were other similar arrangements within the Claimant’s organisation which were kept as confidential as possible in order to prevent everyone pressing for a special deal.
(27) As agreed with Mr Hector, Mr Lee and I accordingly acquired [Tristar] and started invoicing in accordance with the new arrangement. Presumably Mr Hector made the necessary arrangements with the finance department to ensure that the invoices were paid.
(28) To ensure that we were not abusing the arrangement and that the £400,000 annual net profit was safe, Mr Hector of course had the monthly spreadsheets on which he could check that margins were intact and that revenue was meeting projections.
…
(30) The arrangement which we had reached with Mr Hector continued after he left his post as UK General Manager and went to work for the Claimant’s parent company, SITA. This was in late 1999. Mr Hector was replaced temporarily by a Mark Hayden. I did not expressly discuss the arrangement with Mr Hayden. He was only in post for a short time and Mr Hector told us that the necessary people knew of what we were doing. At about the end of the year Mr Hayden was replaced by a new acting UK General Manager, Russell Bolan. Mr Hector told us that he had explained everything to Mr Bolan and indeed Mr Bolan mentioned his conversation with Mr Hector to me at a management meeting I attended in February. He expressly mentioned that he knew of Tristar and the arrangement we had agreed with Mr Hector. He said that if the deal was good enough for Mr Hector it was good enough for him.”
The substance of these crucial paragraphs is repeated in the draft Amended Defence and they are confirmed as accurate by Mr Lee in his brief second witness statement dated 24th January 2002.
(1) the method by which the payment was to be made would have appeared to him to be fraudulent as it involved a company being paid for services it had not provided
(2) the proposal would have been outside the scope of his authority and that Mr Ives and Mr Lee were aware of the limits under which he operated
(3) he would not have agreed or have been able to agree to any such confidential arrangement
(4) there was nothing to stop him agreeing to setting up a transparent bonus scheme if he had wanted to increase their salaries
(5) his own bonus was in part linked to the financial performance of the division and the arrangement would have had an adverse effect on him
(6) Mr Ives is silent as to how he and Mr Lee could have guaranteed net profits of £400,000 per year for the division.
“It was clear to me that some sort of inquiry was going on into the Citibank costs. I did not want to open up altogether the arrangement we had reached with Mr Hector and Mr Bolan, and my responses were the best I could come up with.”
I have been referred by Mr Hunter to a lengthy e-mail sent by Mr Ives to Mr Patel dated 11th January 2001. This contains a purported explanation of the problems arising on the Citibank contract and refers to a summary of fictitious “events” which caused the costs to escalate. The e-mail, which was copied by Mr Ives to Mr Bolan, also suggests that the new company set up by Mr Ives and Mr Lee be engaged to resolve the problems at no cost to Equant. It is claimed by Mr Hunter that this was an attempt by the Defendants to cover their tracks and conceal the financial difficulties and inconsistencies that had arisen as the result of the fact that they had procured the payment to Tristar of sums totalling £809,516.25 in respect of the Citibank contract.
“Furthermore, and in breach of the duties pleaded in paragraphs 9 and 10 above, Mr Ives and Mr Lee did not have the consent of the Claimant’s UK General Manager to the creation of Tristar, nor did either of them report the other’s wrongdoing in procuring payment of the invoices referred to at Schedule l.”
The Defence of Mr Ives and Magellan served on 26th October 2001, which was settled by experienced counsel and is supported by a statement of truth signed by Mr Ives, pleads at paragraph 22:
“Save that it is admitted that the First and Second Defendants did not have the consent of the Claimant’s UK General Manager to the creation of Tristar, no admissions are made as to paragraph 22 of the Particulars of Claim.”
“5. You will not carry out any other professional activity without the written consent of the General Manager ITS UK.”
Mr Hunter argues that this explanation is spurious and indicative of the lack of credibility in the Defendants’ evidence. For my part, in the absence of cross-examination I do not consider that that is a conclusion that the Court can fairly reach.
“28. I am informed by Mr Watts that due to the passage of time, Equant no longer holds every copy of every invoice and purchase order for the relevant period, but does still hold the majority. Of these, every invoice or order has been initialled by Mr Ives alone, save for a small number initialled by Donna Eccles. Mr Watts informs me that Donna Townsend has told him that she only initialled purchase orders on Mr Ives’ instructions, that she is unaware of any circumstances in which purchase orders had to be referred to anyone else in senior management, and that she understood that Mr Ives’ signature authorised all purchase orders. I am also informed that there is no indication that any other person authorised these documents prior to payment or reviewed their authenticity.”
Mr Clutterbuck pointed out that this paragraph was not only not direct evidence of the procedures, but it did not explain Ms Townsend’s role in signing invoices. I was told during the hearing that Donna Eccles and Ms Townsend were one and the same person. (It is also somewhat strange that the Finance Director should rely on Mr Watts to tell him what documents had been retained in his department.) Mr Hunter responded by acknowledging that there was a mistake in the evidence and that the third sentence should have referred to the invoices initialled by Ms Townsend rather than purchase orders. Mr Hunter offered to correct the error by means of a witness statement from his colleague, Mr Rainer Evers, who had responsibility for the proof of evidence from which the witness statement of Mr Patel was drafted. I directed that the Claimant was at liberty to produce such a corrective statement after the close of the hearing provided that it was first shown to Mr Clutterbuck and he had the opportunity to comment on its contents.
“4. On the evening of 19th September 2002, while reviewing the First Witness Statement given by Mr Rajesh Mavji Patel on 1st July 2002 in support of the Claimant’s application, it became clear to me that there were mistakes in paragraph 28 of that Statement. The words “or order” should not appear in the second sentence beginning “Of these, every invoice or order”. In the third sentence beginning “Mr Watts informs me that Donna Townsend has told him that she only initialled purchase orders on Mr Ives instructions”, the reference to “purchase orders”, where it appears for the first time in that sentence, should be a reference to “invoices”.”
Mr Evers exhibits an excerpt from a draft statement given by Ms Townsend to Mr Watts on 24th March 2002 and states that the mistakes in Mr Patel’s witness statement were his and not those of Mr Watts or Mr Patel. He apologises for the mistake.
SUBMISSIONS OF THE PARTIES
(1) The alleged arrangement
(2) The Lufthansa invoices
(2) The claim against Magellan
(3) Another compelling reason
CONCLUSION