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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Anstalt & Ors v Hayek & Ors [2002] EWCA Civ 1729 (26 November 2002)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2002/1729.html
Cite as: [2003] 1 BCLC 278, [2002] EWCA Civ 1729

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Neutral Citation Number: [2002] EWCA Civ 1729
Case No: 2002/0234
2002/0253
2002/0647

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
(MR JUSTICE EVANS-LOMBE)

Royal Courts of Justice
Strand,
London, WC2A 2LL
Tuesday 26 November 2002

B e f o r e :

THE LORD CHIEF JUSTICE OF ENGLAND AND WALES
LORD JUSTICE BROOKE
and
LORD JUSTICE CHADWICK

____________________

DRANEZ ANSTALT and others
Claimants

- and -


ZAMIR HAYEK and others
Defendants

____________________

(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)

____________________

Mr. T Bailey (instructed by Messrs WBLM (solrs) for the 4th Claimant in relation only to the application to adjourn)
Mr T Mowschenson QC & Mr M Malone (instructed by Messrs Denton Wilde Sapte for the 1st, 2nd and 4th Defendants)

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Lord Justice Chadwick :

  1. These are appeals from orders made by Mr Justice Evans-Lombe in proceedings brought to restrain Dr Zamir Hayek, the inventor and original patentee of a mechanical ventilator known as the Hayek Oscillator, and his company, Medivent Limited, from competing with the business of exploiting the Oscillator, carried on by (amongst others) Breasy Medical Equipment Limited and Flexco Medical Instruments AG.
  2. The parties

  3. The claimants in the proceedings include Breasy; its holding company, Charenton Limited, to which Dr Hayek had transferred the rights conferred by the patents in 1986; Dranez Anstalt, to which the patent rights had been transferred by Charenton in 1988; and Flexco, to which the rights to manufacture and distribute the Oscillator had been granted by Dranez Anstalt, also in 1988. Breasy is incorporated in the United Kingdom. Charenton, Dranez Anstalt and Flexco are incorporated or constituted in Liechtenstein. Breasy carried on business under licences granted by Dranez Anstalt and Flexco.
  4. On 8 March 1994 a number of individuals and entities (together "the Investors") entered into an agreement with Dranez Anstalt ("the Investment Agreement") under which they were to become entitled to participate in the commercial exploitation of the Oscillator by Flexco and Breasy. The vehicle through which the Investors were to participate was to be a new company, Dranez Holdings AG, also to be incorporated in Liechtenstein. The Investment Agreement provided that Dranez Anstalt would transfer to Dranez Holdings, subject to the existing licences granted to Flexco and Breasy, the intellectual property rights in the Oscillator; and that the Investors would be allotted 7.5% of the shares in Dranez Holdings. The remaining shares in Dranez Holdings would be held by Dranez Anstalt. Dranez Holdings is a claimant in these proceedings.
  5. The moving spirit behind the incorporation of, and the transfer of the patents to, Charenton in 1986, the constitution of Dranez Anstalt and the incorporation of Flexco, the transfer of rights to Dranez Anstalt and the licences granted to Flexco and Breasy in 1988 and the Investors Agreement in March 1994 had been Dr Hayek's brother, Samuel, an experienced businessman with some legal training. A third brother, Mr Simon Hayek, had also been involved in the development of the Oscillator from an early stage. On 8 March 1994 the three brothers signed a letter ("the side letter"), addressed to the Investors and clearly intended to be collateral to the Investment Agreement of the same date. The side letter included the following paragraphs:
  6. "2. We undertake to act in our capacities both as Shareholders and/or as beneficiaries under trusts of shares and as directors and/or officers in Dranez Holdings (hereinafter "DH") and in the corporate entities defined under the [Investment] Agreement as "the Other Corporate Bodies" and to perform all such acts reasonably necessary and to exercise such influence in order to cause the performance of DH's and the Other Corporate Bodies' undertakings under the Agreement.
    3. We shall not act, other than in Dranez [Anstalt], DH and the Other Corporate Bodies, directly or indirectly in Dranez's, DH's and the Other Corporate Bodies' range of activities in connection with present and future generations and applications of the [Oscillator] and/or emanating therefrom and undertake not to compete directly or indirectly with the above entities."

    In that context, "the Other Corporate Bodies" included Flexco, Charenton and Breasy.

  7. The Investors to whom the side letter was addressed included "A group of investors presided over by Mr Raphi Berber". In a witness statement made on 5 June 2001 Mr Berber, there described as "Managing Director of Equity Markets at Merrill Lynch", has identified three other individuals as the investors in his group. Mr Berber is the fifth named claimant in these proceedings.
  8. The Investment Agreement was amended in May 1994 by an agreement ("the Adopting Agreement") under which two of the original investors dropped out, two were replaced and provision was made for further investors to be included in the future. By a further amendment to the Investment Agreement ("Amendment III") the parties took advantage of that provision to add three additional investors. Two of those additional investors, Kilroy Holdings SA and Dorley Investment Limited, are respectively the sixth and seventh named claimants in these proceedings. They are companies incorporated in Panama. Their address for service, given in the writ of summons, is in Switzerland.
  9. In late 1994 issues arose between Dr Hayek and his two brothers as to their respective interests in the various entities which Mr Samuel Hayek had caused to be incorporated or constituted. In particular, Dr Hayek became concerned that his brothers did not acknowledge that he had any interest in Dranez Anstalt. In March 1995 matters came to a head. Dr Hayek left his employment with Breasy and was removed as a director. Later that year he incorporated Medivent. He turned his powers of invention to the development of a new ventilator. He sought to describe that as "the Hayek Respirator"; but in response to complaints from the claimants, changed that name to "the RTX Respirator".
  10. These proceedings were commenced in September 1997. The first and second named defendants to the proceedings are Dr Hayek and Medivent. The third named defendant, Ms Kay de Bernardo, who is a solicitor, was employed by Breasy between February 1992 and May 1996. Thereafter she took employment with Medivent. The fourth named defendant, Mr Andrew Higgs, was employed by Flexco between February and October 1995 as sales and marketing manager.
  11. The orders under appeal

  12. The proceedings came before Mr Justice Evans-Lombe for a trial on liability. In the written judgment which he handed down on 20 December 2001, the judge identified, correctly, that the claims made by Dranez Anstalt, Dranez Holdings, Flexco, Breasy and Charenton – to whom he referred, collectively, as "the Companies" – were distinct from those made by Mr Berber, Kilroy and Dorley – to whom he referred as "the Investors". He addressed the claims by the Companies against Dr Hayek and Medivent under four heads: (i) misuse of confidential information, (ii) passing off, (iii) breach of fiduciary duty and (iv) unlawful interference with contractual relations. He held that the claims under each of those heads should fail. He held, also, that the Companies' claims against Ms de Bernardo and Mr Higgs were without foundation. There is no appeal against those findings.
  13. The judge recognised, again correctly, that Mr Berber's claim was a claim under the side letter of 8 March 1994. He held that Kilroy and Dorley were entitled, also, to claim under the side letter; notwithstanding that it had not been addressed to them and they were not investors at the time that it was signed. He held that Dr Hayek had acted in breach of the side letter; and that Medivent had procured that breach. But he rejected the Investors' claim for an injunction to restrain further breach of the undertaking not to compete; holding that damages was the appropriate remedy.
  14. The findings made by the judge in his judgment of 20 December 2001 were reflected in the order which he made on 23 January 2002. By paragraph 1 of that order the judge dismissed all of the Companies' claims. By paragraph 8 he ordered the Companies to pay all the costs other than those attributable to "the Side Letter issues" – to which I refer below – and that the costs incurred by Ms de Bernardo and Mr Higgs be assessed on an indemnity basis. In a subsequent order, made on 19 March 2002, he ordered the Companies to pay £250,000 on account of those costs within 14 days; that amount to include the monies (£170,000) which had been paid into court as security for costs and which the judge ordered to be paid out to the defendants.
  15. Paragraph 2 of the order of 23 January 2002 was in these terms:
  16. "In relation to the Side Letter the Court determines:
    (a) the Side Letter is enforceable by the Fifth, Sixth and Seventh Claimants against the First Defendant;
    (b) the First Defendant has acted in breach of the Side Letter;
    (c) and the Second Defendant procured the breach."

    But, by paragraph 4 of the order, the judge gave Dr Hayek and Medivent permission to appeal in respect of what he described as "the Side Letter issues, namely, those relating to restraint of trade, estoppel and procurement of breach of contract". By paragraph 5 of the order the judge ordered an assessment of the damages suffered by the Investors as a result of Dr Hayek's breach of the undertaking in the side letter and Medivent's procurement of that breach. But, by paragraph 3, he dismissed the Investors' application for an interim payment on account of those damages; and refused permission to appeal against that dismissal. By paragraph 9 of the order the judge reserved the Investors' application that their costs of the Side Letter issues be paid by Dr Hayek and Medivent until after the hearing of the appeal for which he had given permission, or the assessment of damages, as appropriate.

    These appeals

  17. There were three appeals before this Court. The first (2002/0234) is an appeal by Dr Hayek and Medivent against paragraph 2 of the judge's order of 23 January 2002. That, as I have said, is an appeal for which the judge himself gave permission. The respondents to that appeal are the Investors – Mr Berber, Kilroy and Dorley. The second (2002/0253) was by way of cross appeal against the order of 23 January 2002. It had three limbs: (i) an appeal by the Companies against so much of paragraph 8 of that order as directed assessment of Mr Higgs' costs on an indemnity basis; (ii) an appeal by the Investors against paragraph 3 of the order – refusing to order an interim payment on account of damages; and (iii) an appeal by the Investors against paragraph 9 of the order – reserving their costs of the side letter issues. Permission for that appeal (or those appeals) was granted by this Court (Lord Justice Jonathan Parker) on 25 February 2002. The third appeal (2002/0647) was an appeal by the Companies against the order of 19 March 2002 – directing interim payment of £250,000 on account of the defendants' costs of the non-side letter issues. Permission for that appeal was granted by this Court (also Lord Justice Jonathan Parker) on 28 March 2002.
  18. The three appeals were listed for hearing in the week commencing 14 October 2002, with a time estimate of three days. At the end of August 2002 the solicitors formerly instructed by all the claimants, Messrs Mischon de Reya, applied to come off the record as solicitors for the Companies. A letter of 3 September 2002 addressed to Mr Samuel Hayek at Breasy – and put in evidence by him – discloses the reason. The solicitors were not prepared to continue without payment in respect of past fees and disbursements (in so far as not reduced or written off) and without funds to meet counsel's fees of the appeal. There is no indication what response (if any) the solicitors received to that letter; but the existing application to come off the record as solicitors for the Companies was pursued and, on 11 September 2002, was coupled with a further application to come off the record as solicitors for the Investors. On 25 September 2002, the orders sought were made by the Master of the Court of Appeal. There was no application, at that stage, for the hearing fixed to commence in what was, then, some three weeks time, to be vacated or adjourned.
  19. An application to adjourn the hearing was made by Mr Samuel Hayek, as managing director of Breasy, in an application notice dated 11 October 2002 – that is to say, on the Friday before the Monday which had been fixed for the hearing of the appeals. On its face that application sought only an order that "the hearing of the appeals of the fifth, sixth and seventh claimants and the appeals of the Defendants" be adjourned. So there was no application, at that stage, for an adjournment of the appeals in which the Companies were the appellants – that is to say, appeal 2002/0647 and the first limb of appeal 2002/0253. Nor was it clear on what basis Mr Samuel Hayek (or Breasy) claimed authority to seek an adjournment of appeals - 2002/0234 and the second and third limbs of 2002/0253 – to which neither were party. The most that Mr Samuel Hayek was able to say, in Part C of the application notice, was that he had acted as a conduit between Mischon de Reya and the claimants; and that "the Claimants included three non-UK resident investors (the Fifth, Sixth & Seventh Claimants) and I acted as their UK-based contact." Nor was there anything to explain why, in circumstances in which the claimants had known, since early September, that Mischon de Reya were not prepared to represent them on the appeals without payment, the application to adjourn was not made until the last minute.
  20. The application to adjourn was not granted on paper. It was renewed, in open court, on Monday 14 October, when the appeals were called on for hearing. Breasy was represented by counsel, but for the purpose only of the application. Counsel informed us that - although instructed only by Breasy, and notwithstanding the terms of the application notice - he sought an adjournment of all three appeals. He confirmed that Mr Samuel Hayek, at least, had known for at least six weeks that the claimants would need to obtain representation by solicitors in the place of Mischon de Reya. He offered no explanation why steps had not been taken to that end.
  21. Dr Hayek and Medivent, as appellants in appeal 2002/0234 and respondents to the other appeals, opposed the application for an adjournment. Evidence was put before us on their behalf, in a witness statement made by their solicitor, that when, on 10 October 2002, he had appreciated that no solicitors had come on the record in the place of Mischon de Reya, he had attempted to make contact with the claimants. In particular, he had attempted to make contact with Mr Berber at his office in London. We were satisfied by his evidence (i) that Mr Berber was aware that the appeals to which he was party were listed for hearing on 14 October 2002 and that (although resident in London and employed in a senior position by a well known financial institution) he had taken no steps, himself, to obtain representation or to seek an adjournment; (ii) that four of the claimants – Dranez Anstalt, Dranez Holdings, Flexco and Charenton – had no board of directors with authority to give instructions on their behalf and were on the verge of liquidation (or of being struck-off the register) in Liechtenstein; and (iii) that Kilroy and Dorley had been made aware of the position and had not sought to take any steps to obtain representation or to seek an adjournment.
  22. In those circumstances we refused the application for an adjournment of these appeals. The effect of that refusal was that there was no-one to pursue the claimants' appeals 2002/0253 and 2002/0647. We ordered that those appeals be dismissed. The only appeal on which we have heard argument – and that only on behalf of the appellants – has been appeal 2002/0234. That appeal raises the issues (i) whether the restriction on competition contained in paragraph 3 of the side letter of 8 March 1994 is enforceable and (ii), if so, by whom. It is to those issues that I now turn.
  23. The enforceability of the side letter

  24. The judge held that, upon its true construction, the effect of paragraph 3 of the side letter of 8 March 1994 was to seek to impose on Dr Hayek a restriction from competing in the business of manufacturing and selling ventilators, world-wide, for so long as the Companies were conducting that business. The appellants – in this context, Dr Hayek and Medivent – do not contend that the judge was wrong to reach that conclusion; although they say that he should have given effect to that conclusion by addressing the question whether, by the time that Medivent was in a position to manufacture and sell the RTX Respirator in competition with the Oscillator, the Companies' business had already collapsed.
  25. The judge made no finding on that point – save to the extent that he refused an injunction on the ground that the evidence showed that (at least by the date of the trial) "the business of the Companies has run into the ground". In the circumstances that I would hold that the restriction on competition which the side letter sought to impose was never enforceable – even during the period that the Companies were engaged in the business of manufacturing and selling ventilators - it is unnecessary to consider, further, whether the absence of a finding as to the date by which the Companies had ceased to carry on that business would have entitled the appellants to succeed on that ground alone. That ground is not advanced as a ground of appeal in the appellants' notice.
  26. It is not in doubt that a covenant which seeks to prevent a former employee from competing with his former employer after his employment has come to an end operates in restraint of trade and will not be enforced by the courts unless it is reasonable having regard both to the interests of the parties themselves and to the interests of the public at large. If authority be needed for that proposition, it can be found in Nordenfelt v Maxim Nordenfelt Guns & Ammunition Company Limited [1894] AC 535, 565, and Herbert Morris Limited v Saxelby [1916] 1 AC 688, 700. The principle applies where an employee, who is the owner of the company by whom he is employed, sells the company to another and, as a term of the sale, undertakes not to compete with the company which he has sold. But, in the latter case, it is recognised that the interests of the public at large may require that the purchaser obtains some protection from competition. The point was explained by Lord Watson in the Nordenfelt case, in a passage (at page 552) to which the judge referred:
  27. "I think it is now generally conceded that it is to the advantage of the public to allow a trader who has established a lucrative business to dispose of it to a successor by whom it may efficiently be carried on. That object could not be accomplished if, upon the score of public policy, the law reserved to the seller an absolute and indefeasible right to start a rival business the day after he sold. Accordingly it has been determined judicially, that in cases where the purchaser, for his own protection, obtains an obligation restraining the seller from competing with him, within bounds which having regard to the nature of the business are reasonable and are limited in respect of space, the obligation is not obnoxious to public policy, and is therefore capable of being enforced."

    The question which the judge had to address, therefore, was whether, in the circumstances of this case, a covenant which sought to prevent Dr Hayek, as the inventor of the Oscillator, from competing in the business of manufacturing and selling ventilators, world-wide, for so long as the Companies were conducting that business was reasonable having regard (i) to the respective interests of Dr Hayek and the persons to whom the side letter was addressed and (ii) to the interest of the public at large that Dr Hayek should not be restricted from applying his inventive skills in a field of medical science in which he was expert and in the development of which there was an obvious public benefit.

  28. The judge directed himself that:
  29. ". . . there is no valid distinction to be drawn between a covenant given by a vendor not to compete with a business being sold and a covenant given by the proprietors of a business to an intending investor in that business as a condition of making that investment. The restrictions imposed will not be struck down where the court is satisfied that they are reasonably necessary to preserve the business in question from the competition of the proprietors or any of them."

    Applying that test, he reached the conclusion that:

    ". . . it was reasonable for the Investors as a condition of entering into the Investment Agreement to require the Brothers, and, in particular, Zamir, to enter into a covenant against competition with the Companies in the business of manufacturing and selling ventilators for so long as the Companies were conducting that business."

    He was led to that conclusion, I think, by an observation in the judgment of Lord Justice Evans in Dawnay Day & Co Ltd v De Braconier, D'Alphen & ors [1997] IRLR 442, 447, (approving a passage in the judgment below) that:

    "the parties are likely to have been the best judges of what was reasonable between them."
  30. The judge's conclusion in the present case is challenged on the grounds that the restriction was unreasonably wide in that: (i) it imposed restrictions on Dr Hayek which were not limited to the Oscillator but extended to the Companies' "range of activities in connection with present and future generations and applications of the [Oscillator] and/or emanating therefrom"; (ii) imposed restrictions on competition with any of the Companies and various other corporate bodies; (iii) imposed restrictions without limit in time or area; and (iv) prevented Dr Hayek from participating in the field of ventilation or respiration. There is force in each of these grounds. But, to my mind, the more powerful criticisms of the judge's approach are, first, that (in addressing the question whether the restriction was reasonable as between the parties) he failed to relate the protection from competition which the Investors sought to obtain under the side letter to the nature of the investment which they were making; and, second, that (in so far as he did address the question whether the restriction was reasonable in the public interest) he failed to give any (or any sufficient) weight to the interest of the public at large that Dr Hayek should not be restricted from applying his inventive skills in a field of medical science in the development of which there was an obvious public benefit.
  31. It is, in my view, important to keep in mind that the Investors to whom the side letter was addressed were taking a relatively small stake (7.5%) in a company, Dranez Holdings, to which patent rights in the Oscillator had been (or were about to be) transferred by Dranez Anstalt. The transfer of those rights was subject to the existing licences to develop, manufacture and sell the Oscillator already granted to Flexco and Breasy. The value of the Investors' stake in Dranez Holdings was linked directly to the value of the patent rights vested in that corporation; but was linked to the success of the businesses carried on by Flexco and Breasy only to the extent that the success of the those businesses enhanced the value of the rights which they were licensed to exploit. On a proper analysis this was not a case in which the Investors were buying – or even investing in – the businesses carried on by Flexco or Breasy; they were investing in the patent rights which those businesses were licensed to exploit. In those circumstances they were entitled to, and obtained, the protection from competition which registration of the patents provided – see, for example, sections 60 and 61 of the Patents Act 1977. But it is not at all self-evident that they were entitled to protect the businesses carried on by Flexco and Breasy from competition; in so far as competition with those businesses did not involve infringement of the patents. In particular, it is not clear - at least, not clear to me – why the judge thought it reasonable that, as between the Investors and Dr Hayek, Dr Hayek he should be prevented from competing with Breasy, of which he was an employee and the holder of shares (through Charenton); a fortiori, why it was thought reasonable that he should be prevented from competing with Flexco, of which he was not an employee and in which he held no shares. The judge did not decide whether or not Dr Hayek had an interest in Dranez Anstalt, which itself held shares in Flexco. Dr Hayek was an inventor. He was restricted in what he could do as an inventor by the fact that Dranez Holdings had become the proprietor of the patents in respect of the Oscillator. If the matter were viewed solely as a bargain between Dr Hayek and the Investors, powerful reasons would be required to justify the imposition of further restrictions upon his freedom to exploit his skill and expertise as an inventor. The judge does not identify the reasons which led him to think that those further restrictions were justified.
  32. Further, and perhaps of more concern, the judge does not appear to have addressed the question whether it could be in the interest of the public at large that Dr Hayek be subject to greater restrictions in the application of his inventive skills than those which Parliament had thought right to impose under the Patents Act. The grant or registration of a patent confers a monopoly. The statutory monopoly can be justified on the grounds that it is necessary (for a limited time) in order to encourage inventors, and those who fund them, to apply their skills and resources in developing products and processes from which the public will benefit. But the balance between the benefits which will accrue to the public from permitting monopolies in order to encourage invention and the detriment which may be suffered by the public from monopolistic practices is struck by the patent legislation. A case in which it could be justified as reasonable in the interest of the public to superimpose further contractual restraints on invention, going beyond what Parliament has thought necessary, must be regarded as exceptional. In particular, it must be a wholly exceptional case in which the imposition of such restraints on a pioneer in a field of medical science - in the development of which there is, at least prima facie, such an obvious public benefit – can be justified. There is nothing in his judgment to indicate whether, and if so why, the judge thought that this was such a case. In my view he ought to have concluded that it was not.
  33. The persons by whom the side letter could have been enforced

  34. The conclusion that the restraint on competition contained in the side letter is unenforceable on grounds of public policy makes it unnecessary to consider, at any length, the question whether (if otherwise enforceable) the restraint could have been enforced by those – Kilroy and Dorley - to whom the letter was not addressed and who did not become Investors until some time afterwards. The judge accepted that it was impossible to construe the side letter, the Investment Agreement, the Adopting Agreement and Amendment III so as to establish privity of contract between the signatories to the side letter and the additional Investors, added by Amendment III. But, in the course of closing submissions, he raised the suggestion that the evidence established an estoppel against Dr Hayek, which prevented him from contending that Kilroy and Dorley (to whom he referred in this context as "the Replacement Investors") were not entitled to enforce the restraint which the side letter sought to impose. After hearing argument on this new point – which had not been, and never became, part of the claimants' pleaded case – he found that estoppel to be established. He said this:
  35. "I have come to the conclusion that, on the evidence as it stood at the conclusion of the hearing, facts amounting to an estoppel preventing Zamir from denying that Kilroy and Dorley could enforce for their benefit the provisions of the Side Letter Agreement had been established. Zamir knew that the Replacement Investors were relying on his undertaking not to compete with the claimant companies contained in the Side Letter. He knew that they were not parties to the Side Letter and that in consequence no direct undertaking had been given by him to them. In the circumstances, it seems to me, that if, as against them, he thought he was able to compete with the companies in which they were proposing to invest, as is his case today, he was under a duty to inform them before they could effect such an investment. It was not reasonable for him to think that the Original Investors [meaning those to whom the side letter had been addressed] who remained would have restrained such competition. It was not reasonable for him to think that the claimant companies would have restrained such competition. . . . This is an estoppel put forward by the Claimants to demolish a defence of no privity of contract."
  36. The appellants complain that it was not open to the judge to find, as a fact, that Dr Hayek knew that Kilroy and Dorley were relying on his undertaking, in the side letter, not to compete. The allegation had never been pleaded; no evidence had been led to suggest that he had any knowledge as to the matters which were, or were not, taken into account by whoever might have been the directing mind of Kilroy or Dorley in connection with the decision to join as additional investors; and Dr Hayek was never asked about his knowledge of such matters. Nor was there any evidence to suggest that Dr Hayek ever gave thought – or ought to have given thought – at the time that Kilroy and Dorley joined as additional investors under Amendment III to the question whether they should be treated as persons to whom the side letter was addressed. An estoppel – based on the premise that Dr Hayek's silence at the time that Kilroy and Dorley became additional investors made it unconscionable for him to assert in these proceedings that they were not persons to whom the side letter was addressed – had not been made out.
  37. If it were necessary to decide the point, I would hold the appellants' contentions well founded. It seems to me that this was a case in which the judge ought not to have made a finding of estoppel by silence without a firm foundation of pleaded and established fact. A party who is said to have been under a duty to speak is entitled, in my view, to have a proper opportunity to investigate and challenge the facts which are said to give rise to that duty.
  38. Conclusion

  39. It is, I think, accepted – and, if it were not, I would so hold – that, if the side letter is unenforceable against Dr Hayek, there can be no claim against Medivent for inducing a breach of its terms. It follows that I would allow the appeal 2002/0234. As I have said, we have already dismissed the appeals 2002/0253 and 2002/0647.
  40. Lord Justice Brooke:

  41. I agree.
  42. The Lord Chief Justice:

  43. I also agree.
  44. Order: Appeals 2002/0253 & 2002/0647 dismissed; Appeal 2002/0234 allowed with costs as per minute of order dated 26/11/02.
    (Order does not form part of the approved judgment)


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