CIFAL Groupe S.A. Grontmij Investment Management S.A.S. & Ors v Meridian Securities (UK) Ltd & Ors [2013] EWHC 3553 (Comm) (15 November 2013)

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England and Wales High Court (Commercial Court) Decisions

You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> CIFAL Groupe S.A. Grontmij Investment Management S.A.S. & Ors v Meridian Securities (UK) Ltd & Ors [2013] EWHC 3553 (Comm) (15 November 2013)
URL: http://www.bailii.org/ew/cases/EWHC/Comm/2013/3553.html
Cite as: [2013] EWHC 3553 (Comm)

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		Neutral Citation Number: [2013] EWHC 3553 (Comm)
		Case No: 2012 Folio 1268

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

Royal Courts of Justice
Strand, London, WC2A 2LL

15/11/2013

B e f o r e :

THE HON. MR JUSTICE MALES
____________________

Between:

	CIFAL GROUPE S.A. GRONTMIJ INVESTMENT MANAGEMENT s.a.s. (formerly known as Ginger Investment Management s.a.s) (3) ASIA GULF SERVICES LLC	Claimants
	- and -
	MERIDIAN SECURITIES (UK) LTD MERIDIAN CAPITAL LLP CENTRAL ASIA INDUSTRIAL HOLDINGS NV YEVGENIY FELD also known as EVGENY FELD	Defendants

____________________

Mr Richard Morgan QC and Mr Ciaran Keller (instructed by Olswang LLP) for the Defendants
Mr Richard Walford and Mr Daniel McCourt Fritz (instructed by Ashfords LLP) for the Claimants
Hearing dates: 29th, 30th & 31st October 2013
____________________

HTML VERSION OF JUDGMENT
____________________

Mr Justice Males :

Introduction

These are applications (i) by the second and fourth defendants challenging the jurisdiction of the English court and (ii) by the claimants for permission to amend their Particulars of Claim.

This action is concerned with a project for the development of a large shopping centre in a prime position in St Petersburg described as the "Ligovsky Prospekt project". The development is on the junction between Ligovsky Prospekt and Nevsky Prospekt, a location which (I was told) is broadly comparable to Oxford Circus in London. The claimants, a consortium of French-managed companies, say that they were appointed by the defendants as project managers for this development on the basis that they would be rewarded by a success fee and a share of the profits, but that the defendants wrongly repudiated this agreement, and thereby prevented them from earning this success fee and profit share. They seek to recover, by way of damages or other compensation, the success fee and profit share to which they say they would have been entitled if the agreement had not been repudiated. It appears that the completed development was sold to Morgan Stanley in 2012 for US $1.1 billion, which may give some idea of its scope and scale, and that the claimants' claim, at least according to the principal way in which they put their case, may be for in excess of US $20 million.

The defendants say that no binding agreement was ever made entitling the claimants to a success fee or profit share. They accept that there were discussions about this, but say that terms were never agreed and that it was always clear that there was to be no binding agreement until whatever terms were eventually agreed were reduced to writing in a signed contract, which never happened. They add that there is in any event no basis on which the fourth defendant can be held personally liable as he acted throughout as an agent, as the claimants understood, and he was properly authorised to do so.

In addition to their contractual claim, the claimants also invoke principles of estoppel by convention and quantum meruit, but their counsel Mr Richard Walford made clear that these further claims all depend to some extent on the existence of an agreement that a success fee and profit share would be paid.

There are two potential agreements on which the claimants seek to rely. Their primary case is that an oral agreement was concluded at a meeting or meetings in St Petersburg on 12 and 13 December 2005 at which detailed agreement was reached on the success fee and profit share to which the claimants were to be entitled. Alternatively and in outline they say that there was a legally binding agreement in principle that a success fee and profit share would be payable on terms contained in an agreement described as a Consulting Services Agreement.

Jurisdiction – the three-stage test

The court has a discretionary power under CPR 6.36 and 6.37 to grant permission to serve a claim form out of the jurisdiction if the following conditions are met, on all of which the burden lies upon the claimant.

a. First, the claimants must satisfy the court that in relation to the foreign defendants there is a serious issue to be tried on the merits. This is the same test as for summary judgment, namely whether there is a real (as opposed to fanciful) prospect of success.

b. Second, the claimants must satisfy the court that there is a good arguable case that the claim falls within one or more of the jurisdictional gateways set out in CPR PD6B. This means that the claimants must have much the better argument on this point.

c. Third, the claimants must satisfy the court that in all the circumstances England is clearly or distinctly the appropriate forum for the trial of the dispute, and that in all the circumstances the court ought to exercise its discretion to permit service of the proceedings out of the jurisdiction.

Real prospect of success

The principal issue arising on this application is whether the claimants can satisfy the first of these requirements, that is to say, whether there is a real prospect of the claimants being able to establish that a binding agreement was concluded entitling them to payment of a success fee and a share in the profits of the development. In addition, in the case of the fourth defendant, there is the further issue whether there is a real prospect of the claimants being able to establish that although he purported to act as an agent, Mr Feld nevertheless incurred personal liability. The test of "real prospect of success" is a relatively low hurdle for a claimant and the cases are replete with warnings against attempting to conduct anything in the nature of a mini trial on the merits.

The approach to be taken in deciding whether a case has a real prospect of success has been considered in many cases. I would respectfully adopt the approach of Lewison J in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch) at [15]. Omitting citations, he said:

"i) The court must consider whether the claimant has a "realistic" as opposed to a "fanciful" prospect of success. …

ii) A "realistic" claim is one that carries some degree of conviction. This means a claim that is more than merely arguable. …

iii) In reaching its conclusion the court must not conduct a 'mini-trial'. …

iv) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents. …

v) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial. …

vi) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case. …"

The Supreme Court has recently emphasised that hearings on jurisdictional issues should not "involve masses of documents, long witness statements, detailed analysis of the issues, and long argument": VTB Capital Plc v Nutritek International Corpn [2013] UKSC 5, [2013] 2 WLR 398 at [82] and [83]. Even more recently, Flaux J has spoken of the need for a defendant challenging jurisdiction on the basis that the claim has no real prospect of success to identify "some 'killer point' which demonstrated that [the claimant's] case on the facts was unsustainable", without which "the expending of so much time and energy on a full-scale evidential challenge is a fruitless exercise": Erste Group Bank AG v JSC "VMZ Red October" [2013] EWHC 2926 (Comm) at [11].

I respectfully agree. If a claimant adduces apparently plausible evidence in support of its case, it is likely to be fruitless for a defendant to adduce substantial contrary evidence, unless it can identify some "killer point" to show even at this early stage why the claimant's evidence has no real prospect of being accepted at trial. That said, however, the burden remains on the claimant to establish by evidence that its claim has a real prospect of success.

For this reason Mr Richard Morgan QC for the defendants concentrated his fire on what he said were the weaknesses inherent in (and in some cases the absence of) the claimants' own evidence, the absence of any support for their case in the contemporary documents, and the ways in which the claimants' current case is contradicted out of their own mouths. While this took a little while to explain in view of the somewhat tangled dealings between the parties, not only at the time of the events in question but in subsequent litigation in France, in my view this represents a legitimate approach. It does not involve attempting to choose between conflicting evidence from each party or conducting any other form of mini trial, only an analysis of the claimants' case and of the evidence on which they seek to rely in support of that case. A defendant should not be required to come here to defend a case which is inherently weak and not supported by proper evidence, merely because the claimant is able to conceal that weakness within a complicated story.

The claimants' evidence

In a case such as the present, which turns on whether an oral agreement was concluded at a meeting in December 2005, almost seven years before the application for permission to serve the claim form out of the jurisdiction, it is to be expected that, as a minimum, a claimant would adduce evidence identifying the individuals who are said to have made this agreement and giving some account of what is said to have happened at the meeting in question. Such evidence need not necessarily be given personally by a participant at the meeting, but if given on instructions should at least make clear that the deponent's information is derived from such a participant or, if for some reason that is not possible, should explain why not. An application which cannot even do this much may find itself struggling to clear even the relatively undemanding hurdle of establishing a real prospect of success. Similarly, where a claimant has failed without explanation to adduce such evidence, it is hard to conclude that there are reasonable grounds for thinking that the claimant would be in a better position to prove its case after a trial.

In the present case the application was supported by the evidence of the claimants' solicitor, Ms Victoria Bonnet, in her third witness statement. Her source of information was said to be "facts and matters within my own knowledge, and/or derived from the study of the affairs books papers and documents of the Claimants which I have seen". Clearly Ms Bonnet has no personal knowledge of what transpired at the meetings in question. Nor does she identify any document which purports to be a record of those meetings. She identifies no individual who is the source of her information. Indeed, when I asked Mr Walford who were the individuals present at the meeting where the agreement is supposed to have been made, neither he nor Ms Bonnet knew the answer. That seemed to me to be remarkable, given that what happened at this meeting is central to the way the claimants put their case, although Mr Walford did later tell me, after taking instructions, who the claimants said were there and the claimants' representative at the meeting, Mr Jacques Gaudron, has since the hearing provided a witness statement confirming what I was told.

When Ms Bonnet's witness statement in support of the application came to deal with the meeting or meetings in December 2005, she was able to say no more than that:

"The arrangements under which the parties acted are set out in Paragraphs 6.3 to 6.5 of the Points of Claim. In particular, the scope of the Claimants' services was agreed in line with the CSA, and invoices for the ongoing services were submitted and paid. In addition, the base case profit figure for the computation of the Consortium's success fee and additional profit share were agreed: see Paragraph 6.4.2 of the Points of Claim and the spreadsheet there referred to."

The evidence therefore does no more than refer the reader to the pleading, the relevant paragraph of which states that:

"6.4 At or about the time of meetings held in St Petersburg on 12^th-13^th December 2005, agreements were reached between the Consortium and Meridian as follows:

6.4.1 The Consortium acting by Ginger would be retained to provide project management services, and would provide initially 2 operatives to work on the project. Ginger would be entitled to charge monthly management fees and disbursements (including the costs of such operatives) for its services; and

6.4.2 The Consortium would be entitled to a success fee and additional profit share on the same basis as for the Gorny Gigant Project (as was later confirmed by Bolat's e-mail of 9 November 2006) using the figures in the Consortium's Business Plan dated 11 October 2005, namely:

Likely eventual resale value: US $1.007 billion

Base case profit: US $375 million"

The Gorny Gigant project referred to here was a different project under discussion between the parties, for a proposed residential development in Kazakhstan. Gorny Gigant is an area in Almaty. Although the pleading refers to an e-mail of 9 November 2006, that e-mail comes nowhere near confirming that agreement on a success fee and profit share had been reached almost a year earlier.

The pleading above falls far short of the requirement in CPR 16PD paragraph 7.4 that:

"Where a claim is based upon an oral agreement, the particulars of claim should set out the contractual words used and state by whom, to whom, when and where they were spoken."

Mr Walford insisted that this is not a requirement, but is merely guidance for the pleader, and pointed to the use of the word "should" instead of "must" which appears in some of the other paragraphs. That may be so. It would no doubt be expecting too much to require a verbatim account of a meeting to be given, and a party is not to be shut out from advancing what may be a valid case merely because all the details of a conversation cannot be recalled. Nevertheless, the guidance is there to be complied with, not ignored. I have no doubt that a pleader as experienced as Mr Walford, seeking to establish a case with a real prospect of success, would wish to comply with this guidance to the greatest extent possible.

As it is, the evidence does no more than refer to the pleading, relying on the fact that it is supported by a statement of truth, while the pleading consists of mere assertion with no proper particulars. Even now, although further witness statements have been made by Ms Bonnet since the application for permission to serve the second and fourth defendants out of the jurisdiction, there is still no account of the relevant meeting or meetings based on evidence or instructions from anyone who was there. The claimants' case hangs from the slender thread of an unparticularised pleading consisting of a mere assertion that a very detailed agreement was concluded.

It is against this evidential background that the question whether a real prospect of success has been established must be considered.

The parties

The first and second claimants ("Cifal" and "Ginger", although the latter has recently changed its name) are French companies. Cifal is a company which invests in business development opportunities, while Ginger is a developer and manager of real estate and retail projects among other things. The third defendant ("AGS") is a UAE entity, which provides administrative, accounting and financial services. In or about July 2005 the three claimants agreed to work together, combining their different skills in providing services in CIS countries and the Middle East. Their agreement was recorded in a "Consortium Agreement" dated 9 December 2005.

The three corporate defendants are respectively a United Kingdom, Kazakh and Netherlands Antilles company. On 18 March 2004 they concluded an Agency Agreement with the fourth defendant Mr Evgeniy Feld. In that agreement the three corporate defendants, referred to collectively as the "Meridian Group", authorised Mr Feld to act on their behalf in respect of all projects in various countries to be undertaken in collaboration with the claimants pursuant to a Strategic Partnership Agreement then under discussion.

Mr Feld is a Kazakh national who is said rather cryptically to be a resident of Kazakhstan "for tax purposes" by his solicitor Mr Richard Bamforth. He is said by the claimants to be the directing mind and will of the three corporate defendants, although that is in dispute. However, I accept for the purpose of these applications that he acted in a manner suggesting that he was in a position to control their activities and indeed the activities of other similarly named companies in various jurisdictions. According to the evidence before me Mr Feld is currently seriously ill and receiving hospital treatment. He does not speak English or French, but only Russian. In his discussions with the claimants described below he communicated via an assistant, Mr Bolat Satubaldin, also a Kazakh resident, who was referred to in the evidence and documents as "Bolat".

The English action

The claim form in this action was issued on 27 September 2012 which, as is common ground, was only a few days before expiry of the limitation period. All four defendants are represented by the same solicitors and counsel. So far as the claims in this action are concerned, there is no difference in the position of the three corporate defendants. The claims against them will stand or fall together. The claim against Mr Feld is different in that it raises the issue not only whether a binding contract was (or purported to be) concluded but, if so, whether Mr Feld is under any personal liability.

The first and third defendants have been served with the proceedings and have filed Defences. They have indicated that they may seek summary dismissal of the claims against them, but have not yet filed any application.

Permission to serve the second and fourth defendants out of the jurisdiction was granted by Flaux J on 6 December 2012. Jurisdiction was founded on the basis that the claim is made in relation to a contract governed by English law, alternatively that the second and fourth defendants are necessary or proper parties to the claims against the first and third defendants.

The Strategic Partnership Agreement

The relationship between the parties is complex and involves a series of agreements or draft agreements which it is necessary to explain, in order to understand how the claimants put their case.

The first such agreement was the Strategic Partnership Agreement which is dated 19 March 2004, the day after the Agency Agreement was concluded between the defendants. It was entered into between "Groupe CIFAL" and its subsidiaries on the one hand, an expression which clearly includes the first claimant, and "Meridian Group" on the other. There is no corporate entity called "Meridian Group", although this was the name by which the three corporate defendants were referred to in the Agency Agreement signed the previous day. "Meridian Group" was described as having a registered office at an address in London which was in fact the office of the first defendant. The agreement was signed on behalf of "Meridian Group" by Mr Feld and was signed on behalf of "Groupe CIFAL" by the first claimant's chairman and chief executive officer Mr Gilles Remy. It was signed in London. Mr Feld and Mr Remy were described in the agreement as representing the respective parties for whom they signed.

The Strategic Partnership Agreement contained no choice of law or jurisdiction clause. It was a high level agreement recording that the parties had decided to work together, with "Meridian Group" investing in suitable projects which (it was hoped) would provide strong profitability and a fast return on investment, and "Groupe CIFAL" providing expertise in identifying and developing such projects.

The financial relations between the parties were dealt with in clause 3 as follows:

"Financial relations

3.1. Contract

On a case by case basis, the parties will define by separate contracts the conditions of remuneration of Groupe CIFAL.

3.2. Success Fee

This remuneration will take the form of a success fee of which a part could be paid in the form of shares or of participation in the project.

3.3. Expenses

During all the duration of preparation of a project, Groupe CIFAL will be responsible for all the costs related to the work and travelling expenses of its collaborators. It will not invoice any expenses of the structures used for MERIDIAN Group.

3.4. Advance on the bonus

3.4.1. Advance : in return for the exclusive rights (first refusal) and the non invoicing of its costs and the provision of its permanent structures, Groupe CIFAL will receive from MERIDIAN Group an advance deductible from its success fee of an amount of 1 M € (one million euros).

3.4.1. Deductibility : this advance will be deductible from the success fees until totally refunded without exceeding for each project more than one quarter of the net cash amount of the remuneration.

3.4.3. Guarantees : if need be the advance on success fee could be guaranteed by a pledge of shares in Groupe CIFAL.

3.4.4. Repayment of the advance : if at the end of a period of 18 months counting from the payment of the advance on bonus, no project has been conducted with success, the advance on bonus will be transformed into an interest-bearing loan, repayable in 3 (three) annual instalments."

Thus there was very general agreement in principle that the remuneration of "Groupe CIFAL" would take the form of a success fee, although all the details of this were expressly left to be dealt with by a separate agreement for each individual project. There was, however, firm agreement on an advance of €1 million, which was to be deductible from any success fee but which was to be transformed into a loan and repaid in instalments if no project had been successfully conducted within 18 months. The agreement was silent on what was to happen to the advance if the parties embarked on a project without first agreeing under what conditions a success fee would be payable or how much the fee would be. Presumably they did not contemplate that this would happen. The advance was paid by the third defendant on 4 June 2004.

Although the claimants refer to the Strategic Partnership Agreement, in particular as the first step in their argument as to why Mr Feld incurred personal liability on contracts concluded subsequently, they do not claim any relief for breach of or otherwise in relation to this contract.

The Consulting Services Agreement

The claimants' case is that a contract, described as a Consulting Services Agreement, was concluded orally between them and the defendants in November 2005, on terms set out in a draft which only came into existence some time later, in April or May 2006. This case, I have to say, is somewhat opaque.

As with the later agreement alleged to have been concluded orally in December 2005, there is no evidence from (or derived from) anyone who was there when this agreement is said to have been concluded and the claimants' pleading merely asserts that the Consulting Services Agreement was agreed in or about November 2005. If this is a plea of an oral agreement, it is wholly defective. Moreover, it seems thoroughly implausible that terms as detailed as those contained in the later document could have been agreed orally between individuals who could not even communicate together in the same language. However, if it is a plea that a written agreement was concluded, or perhaps more accurately that an oral agreement was concluded precisely on the terms of the later document, the claimants run immediately into a number of difficulties.

The first such difficulty is that the written document on which they rely, a draft which is dated 1 October 2005 but which (as I understand it) is not suggested to have been in existence at that date, is not with the defendants but with a separate Cayman Islands company called Meridian Capital CIS Fund. The claimants' own evidence is that Mr Feld required that the claimants' counterparty on this contract should be this Cayman Islands company, which was another of the companies under his control. Accordingly the draft contract, prepared by Mr Jacques Gaudron the chairman and chief executive officer of Ginger, was expressed to be between Ginger Investment Management-Cifal-AGS Partnership represented by Mr Gaudron and Meridian Capital CIS Fund represented by Mr Feld. Although at one time the claimants pleaded that this Cayman Islands company did not actually exist, that allegation has been abandoned.

The second difficulty for the claimants is that although the draft was signed by Mr Gaudron, it was never signed by anyone on the Meridian side and there is no evidence that anyone on the Meridian side ever agreed to its terms.

The third difficulty for the claimants is that, as they accept, the written document was only produced in April or May 2006, some five or six months after they say that its terms were agreed. But as already noted, it is thoroughly implausible to think that two parties, negotiating through an interpreter, would agree orally on all of the detailed terms contained in this written draft. To take one example, the draft contained a clause stating that the agreement was made in two languages, Russian and English, and that in the case of any difference the English text would prevail. That is the kind of clause which, in my judgment, is most unlikely to have been agreed orally and which, even if it were, would tend to suggest that the parties only intended to be bound once the written contract was agreed. However, once it is accepted that some of the terms in the written draft were not the subject of express oral agreement back in November 2005, there is no evidence with which to disentangle those terms which were agreed orally from those which were not.

Faced with these difficulties, the claimants say that they have a real prospect of establishing that this Consulting Services Agreement was in fact concluded because the parties (by which they appear to mean the claimants and the defendants, not the Cayman Islands company) acted in accordance with its terms. This requires some consideration of those terms and of the conduct on which the claimants rely.

Clause 1 of the draft provided for the claimants to carry out various services as follows:

"The Subject of the Agreement

The Consultant will provide the Client the below mentioned advisory, development and management services according to the conditions determined in the present Agreement. Once the Client will have decided to invest in any specific Project, the Client and the Consultant shall agree on the specific terms and conditions of the specific agreement to be entered into for this specific Project, conditions to comply with the terms and conditions of this Agreement.

The rendered Services include:

a) 'Express Preliminary Analysis' of any Project to the request of the Client.

b) 'Due Diligence Services' to the request of the Client as soon as the Client will hold a temporary control of some kind over the Land or the Project.

c) 'Development Services' as soon as the Client will hold a permanent control of some kind over the Land or the Project and will have decided to develop the Project.

d) 'Management Services' as soon as the construction of the Project will have commenced.

The Consultant and persons affiliated to him has no right to render development, coordination and management services of construction Projects to other companies in Almaty without preliminary written approval of the Client within the terms of rendering services by the Consultant to the Client."

The claimants' remuneration was addressed in clause 2:

"Remuneration and Payment

2.1. Advisory services. During the pre-development period, the advisory consulting services provided by the Consultant shall be remunerated as follows:

2.1.1. 'Express preliminary Analysis' services rendered at the request of the Client, out of headquarters of the member companies of the Consultant, must be paid on the basis of really spent time by the Consultant staff. The Consultant has the right to make an invoice to the Client to cover the costs of these experts' services, which should not exceed ten thousand Euros (equivalent) for a month of work of one expert plus a mark-up of 30% to cover the indirect costs and general overheads of the Consultant, in the limits of the budget preliminary agreed between the Consultant and the Client. The out-of-pocket expenses (travel, accommodation, visas and others) shall be reimbursed by the Client at net cost.

2.1.2. Project legal and technical due diligence services and surveys: direct payment by the Client to the third parties service providers, on the basis of contracts entered into by the Consultant with prior approval of the Client.

2.1.3. Market research and analysis (if any), preliminary space planning: Direct payment to the services providers, on the basis of contracts entered into with prior approval of the Client and monitored by the Consultant.

2.1.4. Architectural, Engineering and Interior Decoration design services: Direct payment to services providers, on the basis of contracts entered into with prior approval of the Client and monitored by the Consultant.

2.1.5. Permitting fees: direct payment by the Client to the local authorities or the utility providers whenever required.

2.1.6. All the invoices and statement of reimbursable expenses made by Consultant to the Client must be preliminarily agreed with the Client.

2.2. Project Development and Management Services during the Development and Construction Period.

In compensation for the Project Development and Management Services, during development and construction, the Consultant shall be remunerated by the Client on the basis of a budget to be agreed between the Client and Consultant prior to the commencement of the development of any specific project.

2.3. Success Fee

In compensation for success of any specific Project where the Consultant will render the project development and management services during the development and construction period, the Consultant shall be entitled to receive a profit sharing fee, to be computed on the basis of the Client's profit deriving from such Project.

The success fee for any specific Project shall be negotiated between the Parties before the commencement of the Development phase of the Project."

Clause 4.2 provided for a unilateral right to terminate the contract:

"Each Party has the right to terminate unilaterally the present Contract having notified it in written form to the other Party 45 (forty five) days before prospective date of cancellation of the Contract."

Clause 4.3 of the draft provided also for English law and ICC arbitration in London. It is in reliance on this clause that the claimants contend that the contract or contracts on which they sue were governed by English law. There is, however, no evidence that this particular term was ever agreed to by the defendants.

The conduct on which the claimants rely as showing that the parties acted on the basis of this agreement is that they provided and were paid for some of the services referred to in the agreement. For example, they provided a preliminary analysis for the Ligovsky Prospekt project (cf. clause 1(a) above). However, they did this on 11 October 2005, before they say that this agreement was concluded. Accordingly this can provide no evidence of having agreed in November 2005 the terms which were later contained in the draft Consulting Services Agreement. On the contrary, the fact that the claimants provided this analysis before any such agreement was concluded makes it impossible to show that other later conduct, such as providing a due diligence report dated 24 November 2005 (see clause 1(b) of the draft), was necessarily referable to the existence of any oral agreement on the terms later contained in the draft Consulting Services Agreement.

It does appear that from about November 2005 Ginger was providing project management services, or at least those appropriate for the preliminary stages of the project, and that it invoiced and was paid for its services on the basis later set out in the draft Consulting Services Agreement. However, the draft also contemplated that during the period of project development and construction the claimants would be "remunerated by the Client on the basis of a budget to be agreed between the Client and the Consultant prior to the commencement of the development of any specific project", and that although there was agreement in principle on payment of a success fee, the conditions which would count as success and the amount of any fee were expressly left over for future agreement, which it was also contemplated would take place before the commencement of the development phase of any project.

It may be that the conduct on which the claimants rely would enable them to show that the parties contemplated that an agreement providing for a success fee would be concluded in the event that a project reached the development stage, and that meanwhile Ginger would provide preliminary project management services for which it would be paid. However, it is difficult to see how that conduct could demonstrate the existence of an oral agreement in November 2005 on all of the terms eventually included in the draft Consulting Services Agreement. The conduct relied on is far too equivocal for that. Moreover, it is impossible in my judgment for such conduct to demonstrate not merely an intention that those terms should apply, but that the party or parties liable on the contract was not the Cayman Islands company expressly put forward to the claimants as their intended counterparty but the defendants. Even if it could, however, clause 4.2 of the draft expressly permitted the counterparty to terminate the contract unilaterally on 45 days notice.

For these reasons, although the claimants say that if they fail to establish a real prospect of success on their primary case (considered below) that a further oral agreement was concluded in December 2005, their alternative case is that they became entitled to a success fee pursuant to the terms of the Consulting Services Agreement, I consider that alternative case to be hopeless. Any liability would be that of the Cayman Islands company and not the defendants, while the most that the claimants could recover would be damages based on the fact that the contract was terminated with immediate effect rather than by giving 45 days notice. However, the claimants do not suggest that the absence of such notice made any difference at all.

The Ligovsky Prospekt project agreement

The next event of importance is the meeting or meetings on 12 and 13 December 2005 at which the claimants say that agreement was reached as to the success fee and profit share to which they would be entitled if the Ligovsky Prospekt project was successful. I have already referred to the very limited evidence which the claimants have adduced about this meeting. That has now been supplemented by Mr Gaudron's witness statement since the hearing, in which he says that the persons present were himself, Mr Feld and Bolat.

Mr Walford explained what was meant in paragraph 6.4.2 of the Particulars of Claim by the allegation that the success fee and additional profit share for the Ligovsky Prospekt project were to be "on the same basis as for the Gorny Gigant Project". This was a separate project which the parties were discussing for a proposed residential development in Kazakhstan. It is not suggested, as I understand it, that final agreement had been reached by December 2005 or indeed was ever reached on the remuneration to which the claimants would be entitled for their services in connection with the Gorny Gigant project. What is suggested is that at the meeting or meetings in St Petersburg in December 2005 the parties reached a detailed oral agreement about the claimants' remuneration for the proposed Ligovsky Prospekt project, which was based on the terms currently under discussion for the Gorny Gigant project.

The detailed terms said to have been agreed were set out in an unsigned draft agreement bearing the date of November 2005 between the claimants and an as yet unidentified "Client" which was said to be represented by Mr Feld. The draft was said to relate to the Ligovsky Prospekt project. The status if any of this document or the date when it came into existence is not at all clear, but the financial terms which it contains, which are alleged to have been agreed at the December 2005 meeting or meetings, were as follows:

"SUCCESS FEE

2.7 In case the Project target for selling price of apartments and the construction costs indicated in the financial planning in the Appendix to this Appendix is achieved and the cash profit of the Project reaches the level pointed out in the financial planning in the Appendix to this Agreement, the Client shall pay to the Consultant a success fee in the amount of $4 500 000 (four million five hundred thousands US Dollars). This sum includes all applicable taxes with the exception of VAT and/or withholding tax payable in Russia. Cash profit means net profit of this Project, remaining after paying all taxes, interests and the main credit debt, and realized in the monetary means received in the result of the project realization.

PROFIT SHARING

2.8 In case the Project cash profit before tax exceeds the equivalent of 375 (three seventy five) million USD, the Client shall pay to the Consultant an additional success fee that will be calculated according to the following formula:

Project cash profit, in millions US dollars	Amount of additional success fee
From 375 to 485	3% out of amount that exceeds 375 million US dollars.
From 485 to 535	3,666% out of amount that exceeds 375 million US dollars
From 535 to 580	4,333% out of amount that exceeds 375 million US dollars
From 580 to 630	5% out of amount that exceeds 375 million US dollars
Above 630	5% out of amount that exceeds 375 million US dollars

In case of voluntary no sale of all or part of the property, on in case of sale to companies or individuals related to the Project Company shareholders, should the Parties disagree on the bonus or profit sharing, the Parties agree to the appointment of an international external auditor that shall value the Project cash profit."

On its face clause 2.7 is inapplicable to the Ligovsky Prospekt project, which was for a retail development, and did not involve the sale of apartments. Leaving that aside, however, an agreement in these terms, if concluded, would have provided a degree of certainty as to the success fee to which the claimants would be entitled. If the cash profit of the project reached the specified level of US $375 million as shown in a business plan dated 11 October 2005, the claimants would be entitled to a success fee of US $4.5 million. Further, if that cash profit was exceeded, the claimants would be entitled to an additional fee according to the sliding scale set out in the table at clause 2.8.

This agreement, therefore, would have been extremely important to the claimants. It provided them, if it was made, with the right to a success fee and additional share in profit on which they had been seeking to pin the defendants down for some time. It is, therefore, extraordinary that there is no contemporary record of any meeting at which this agreement was made; there is no evidence from Mr Gaudron, the only representative of the claimants who is alleged to have been present, as to what transpired; there is no record of any report by him, contemporary or otherwise, to his colleagues either within Ginger or at Cifal or AGS; and he did not take the trouble to confirm this important agreement in writing with Mr Feld or Bolat. These considerations alone cast grave doubt, in my judgment, on the claimants' case that an oral agreement was made in these terms in December 2005. If there had been a witness statement from Mr Gaudron setting out what was agreed and how it came to be agreed, and explaining why there is no written record of the agreement, the position might have been different. But there is not. Indeed, the claimants' conduct thereafter is difficult or impossible to reconcile with the existence of the agreement which they say was concluded.

No evidence of the agreement in the parties' subsequent conduct

The claimants rely on the fact that they continued to act as project managers after the December meetings. I accept that they did so, but that does not provide support for a case as to what was agreed at those meetings. They rely also on an e-mail sent by Bolat to Mr Gaudron on 10 March 2006, which, on one view, may be read as implying that an agreement of some kind had been reached. It said, in relevant part:

"the agreement between you and us on Petersburg.

We paid your invoices for Jan and Feb with extra $5k for your additional time spent at the site. However, we propose to discuss the issue of these extra $5k at your next meeting with Eugeniy from the perspective of your total remuneration on Briz project.

You, probably, have made a draft of the agreement between you and us on Petersburg. If so, could you, please, send it to me.

Also, Eugeny showed me the calculations you gave him on Briz project.

Unfortunately, I am unable to understand what you are wanted to tell him with it. Could you, please, explain me, what was meant?"

The Briz project was another way of referring to the Ligovsky Prospekt project, Briz being the company which was to own the land and development rights. It is clear, however, that the focus of this e-mail was the amount being charged by the claimants for Mr Gaudron's attendance in St Petersburg. Bolat was seeking clarification of what the claimants understood to have been agreed about such charges. I cannot read this e-mail as stating or implying that anything had already been agreed about a success fee or profit share. On the contrary, when Bolat moved from addressing the question of charges for Mr Gaudron's time, indicating by the word "Also" that he was turning to a new topic, what he had to say was not that a success fee or profit share had been agreed, but that he did not understand the calculations which Mr Gaudron had provided to Mr Feld. So far as the Ligovsky Prospekt project was concerned, Mr Gaudron's response, in an e-mail dated April 2006, dealt only with the issue of charges for his time.

Nor do the claimants' other communications about this time provide any support for a suggestion that detailed agreement on the terms for a success fee and profit share had already been agreed in the December 2005 meetings. In a letter dated 12 January 2006 a Meridian company, in fact a Bermuda company, had pressed for repayment of the advance of €1 million pursuant to clause 3.4.4 of the Strategic Partnership Agreement on the ground that the claimants had failed to submit projects to the Meridian Group, and that no project had been conducted with success. The letter requested that the advance be repaid to the Cayman Islands company. Cifal responded to this letter on 16 March 2006, a few days after Bolat's e-mail referred to above. The response protested that a number of projects had been submitted to Meridian Group, and that two important projects were still "under implementation", namely the Gorny Gigant and Ligovsky Prospekt projects. It continued:

"Regarding both last projects, would you please take notice that it is necessary to complete as soon as possible the legal documents determining precisely the fixed remuneration and the success fee of Groupe CIFAL … Nevertheless, if Meridian Group wishes to put an end to the Partnership Agreement and to transform the advance payment into a loan, we give you our consent provided that the remuneration of Groupe CIFAL regarding the two real estate projects mentioned above is fixed in advance."

Cifal's letter offered two possibilities, a termination of the Strategic Partnership Agreement with the advance being transformed into a loan to be paid back within three years, or an extension of the agreement for a further year. Draft agreements to give effect to these possibilities were attached. Cifal stated that in the former case, Meridian Group and Cifal would need "to sign an agreement regarding the remuneration due to Groupe CIFAL in payment for services rendered in both real-estate projects". The attached draft agreement intended to provide for a termination included the following clause 3:

"CIFAL will pay back the balance of the advance on bonus made by Meridian Group within three years, in three annual instalments according to Clause 3.4.4 of the Partnership Agreement.

Nevertheless, this arrangement will be applicable once the contract determining the fees and remuneration of CIFAL concerning the two real estate projects in St Petersburg and Almaty is completed and signed. …"

Not only did the terms of this letter and draft agreement make no reference to the fact that, as the claimants now assert, there had already been a detailed oral agreement at the December 2005 meetings on the success fee and profit share, to which the claimants were to be entitled for their work on the Ligovsky Prospekt project in St Petersburg, but the letter and draft repeatedly asserted that these matters still needed to be determined. Mr Walford submitted that the passages quoted above were consistent with an oral agreement having already been concluded, so that in the case of St Petersburg all that remained was to record the figures and the formula which had been agreed, and that this letter was seeking to replace that existing agreement with a precise number. There is, however, no evidence from the claimants to suggest that this was what they meant to say and in my judgment it is an untenable reading of this letter. Moreover, it is clear that the letter treated the two projects, Gorny Gigant and Ligovsky Prospekt, as being in the same position so far as agreement on the terms of a success fee and profit share were concerned, but it is common ground that there had been no agreement oral or otherwise in the case of Gorny Gigant. In my judgment it is inconceivable that Cifal would have written in these terms if there had been an oral agreement in December 2005 to the effect now alleged.

That conclusion is reinforced by the terms of a further letter from Cifal, dated 31 May 2006, to the Meridian Group. This letter also dealt with repayment of the €1 million advance. It reiterated that Cifal would like this to be transformed into a loan (clearly this was money which Cifal was anxious not to have to repay) and made the point that:

"Cifal has worked and participate in some projects, in particular real estate ones, and is expecting some bonuses on them. It is necessary to determine the remuneration of Cifal in that matter and to formalize it in an agreement too."

This was an unequivocal statement that Cifal's remuneration needed not only to be formalised in an agreement, but also determined. It is impossible to reconcile this with a case that this remuneration had already been determined so far as the Ligovsky Prospekt project was concerned by an oral agreement concluded in December 2005.

It appears that the defendants did not at this stage terminate the parties' relationship or press further for repayment of the advance and that the claimants continued to provide project management for the Ligovsky Prospekt project. The claimants continued to press for signature of a contract, but without ever suggesting that the terms of their remuneration for this project had been agreed. No such contract was ever signed.

Termination

On 1 October 2006 Mr Feld wrote to Mr Gaudron terminating Ginger's provision of project management services for the Gorny Gigant and Ligovsky Prospekt projects on the ground that those services had been unsatisfactory. There is an issue whether those services had in fact been unsatisfactory or (as the claimants say) this was merely an excuse to avoid payment of a success fee and a profit share to the claimants. I accept that, if there was a binding contract whereby the defendants were obliged to pay a success fee and profit share, the claimants have a case sufficient to go to trial that this letter constituted a repudiation of that contract so as to entitle the claimants to damages measured by reference to the success fee and profit share to which they would have been entitled if the contract had continued.

Later events

The claimants were unhappy about this termination of their services, but there was little they could do about it. Nevertheless, they made a number of attempts to obtain what they regarded as fair compensation. On 20 November 2007 Mr Jean-Luc Schnoebelen, the president of Ginger's board of directors, wrote to Mr Feld to protest at the way in which the relationship had been ended. Referring to the fact that Mr Gaudron had dedicated a significant part of his time to working on projects for the Meridian Group, Mr Schnoebelen said this:

"I accepted this because there was a cooperation agreement CIFAL/MERIDIAN that made this relation and these possibilities credible. Without this agreement, I would not have allowed Jacques GAUDRON to work on the files like Ligovski without a contract. That is also why the consortium agreement that binds us to CIFAL/AGS makes express reference to this agreement."

Although Mr Walford struggled to suggest an alternative interpretation, I have no doubt that the "cooperation agreement" referred to was the Strategic Partnership Agreement, which was in fact referred to in the Consortium Agreement between the three claimants, and that what Mr Schnoebelen was saying was that it was because of the Strategic Partnership Agreement that he had allowed Mr Gaudron to work on the Ligovsky Prospekt project despite the non-existence of a contract governing the claimants' remuneration for working on that project. That too is irreconcilable with such terms having been agreed orally in December 2005.

Mr Schnoebelen's letter went on to deal specifically with what he considered the claimants should be entitled to by way of success fee:

"Ligovski success fee: there is no doubt to anybody that MERIDIAN accepted to consider this investment on the insistent and repeated initiative of Jacques GAUDRON. It is also on the basis of the due diligence and the feasibility study carried out by the employees of GINGER that MERIDIAN decided to invest into this business. The information that we possess confirms the pertinence of its profitability. According to the international rules and practices, the fee that we have the right to expect is not less than 3 million USD."

According to the claimants' case in this action, the claimants were already entitled (if the project was a success) to a success fee of US $4.5 million, not US $3 million, as well as a share in additional profits if those profits exceeded US $375 million. In theory, I suppose, the claimants could have offered to forego that entitlement at a time when the ultimate profitability of the project was not yet known in exchange for an immediate payment of a lesser amount. Mr Walford suggested that this was the correct interpretation of this paragraph, but I do not agree. There is no evidence that this is what Mr Schnoebelen intended; it is contrary to the clear statement earlier in the letter that there was no contract for the Ligovsky Prospekt project; and if Mr Schnoebelen had believed that remuneration terms had in fact been agreed orally in December 2005, he would undoubtedly have said so rather than invoking a right to payment of a success fee according to unspecified international practices.

Similar considerations apply to a further letter almost a year later, dated 10 September 2008. This was from Mr Gaudron and appears to have followed a meeting with Mr Feld. After protesting at the termination of the claimants' services, Mr Gaudron stated:

"As a matter of fact, your decision was just a scheme with a view to not keeping your word and not paying Ginger and its partners the success fees and profit sharing fees that we had agreed upon. There is no way you can deny that when we agreed to provide you with analysis, development and management services at a much lower rate than the market rate, it was only in consideration of substantial success and profit sharing fees. Of course, you thought that, once a great part of the services had been rendered, you can keep going without us, so as not to pay the success and profit sharing fees."

So far this letter may be taken to suggest that there was some kind of agreement that a success fee and profit share had been agreed, although there is no reference to any particular terms which were agreed and the natural reading is that this is no more than a reference to the principle that such fees would be paid, as set out for example in the Strategic Partnership Agreement. That reading is reinforced by a further paragraph of this letter, which enclosed various invoices and spelled out what the claimants were claiming as a success fee and profit share:

"As for the last invoice ('Consultancy services on Ligovsky Project'), it addresses the fees that are owed by Meridian in consideration of the following. Mr Feld acknowledged that without Ginger, Meridian, would not have invested in the Ligovski project, since de facto this project was brought to Meridian by Ginger, and since Ginger analysed the feasibility of the project, conducted all necessary due diligence processes, and finally carried out project structuring services. At some point, Mr Feld who has always acted on behalf of Meridian in the context of our relationships, acknowledged that such services should receive compensation by way of an 'introductory' fee of 1.5% of the project expected profit. We therefore request payment of such fee."

The amount requested was US $4,895,511. This claim was put forward on an entirely different basis from the claim made in this action. There was no hint that a success fee of US $4.5 million plus a share of additional profit had already been agreed orally in December 2005. Instead there was a reference to a different method of calculation said to have been proposed (or "acknowledged") by Mr Feld at some unspecified time ("At some point"). In the French action referred to below it was explained that the meeting when Mr Feld had suggested this basis of calculation had been in March 2008.

The French litigation

Shortly after this letter, on 24 November 2008, Ginger commenced proceedings against the first defendant in the Paris Commercial Court. The French writ contained no hint of any oral agreement having been concluded in December 2005. Instead the claim was for the sums claimed in the 10 September 2008 letter.

The French action was stayed pursuant to Article 2 of the Brussels Regulation on the basis that, as an English company, the first defendant had to be sued in England. Accordingly, it did not result in a judgment on the merits. It is significant for the complete absence of any allegation by the claimants of the agreement on which they now seek to found their case here.

The letter before action

Before commencing proceedings here the claimants' solicitors wrote a letter before action dated 2 April 2012. This was addressed, not to the first defendant who had been the defendant in the French action, but to Meridian Capial CIS Fund, the Cayman Islands company which, it will be recalled, had been the intended counterparty on the draft Consulting Services Agreement. This letter is significant for several reasons. First, it seeks to hold the Cayman Islands company and not the defendants liable for payment of a success fee. Second, that liability is squarely founded on the terms of the Consulting Services Agreement on the basis that:

"Whilst we understand that you did not sign the Agreement itself you were involved in the drawing up of the terms and you approved and agreed the contents. The only reason the Agreement was not actually signed was because you had some internal taxation issues that you wanted to resolve before signing it. In any event, an agreement does not need to be signed to binding upon the parties."

Thus the claim was that the agreement in principle on a success fee contained in the Consulting Services Agreement was sufficient to give rise to a binding obligation.

Third, however, the letter before action went further in positively asserting that remuneration terms had not been specifically agreed:

"The percentage of the success fee has not been agreed but it should be a fair and reasonable amount to reflect the work carried out by our Clients. Your Mr Feld acknowledged that a fee of 1.5% of the project costs is commonly charged in the real estate industry. …"

Not for the first time, the claimants were putting their case in a way which is irreconcilable with what they now wish to say.

Conclusions on real prospect of success

The primary way in which the claimants put their case against the corporate defendants is as a claim for damages for repudiation of the oral agreement concluded in December 2005 that the claimants would be paid a success fee of US $4.5 million and profit share calculated in accordance with the formula set out above for their work on the Ligovsky Prospekt project, which they were prevented from earning by the defendants' wrongful repudiation. However, for reasons which will be apparent from the account given above, I have concluded, applying the principles summarised in Easyair Ltd v Opal Telecom Ltd and set out above, that there is no real prospect that the claimants will be able to establish that any such agreement was concluded. The pleading of the agreement is obscure and defective. There is no evidence other than mere assertion to support the conclusion of any such agreement. There is no suggestion anywhere in the documents prior to the commencement of this action that any such agreement was concluded. There are numerous statements by or on behalf of the claimants which are irreconcilable with any such agreement having been concluded. There are some positive statements to the contrary, that no agreement on the amount of any success fee or profit share was ever reached.

Perhaps recognising the difficulty faced by this primary way of putting the claimants' case, Mr Walford advanced an alternative contractual claim based on an agreement which (he said) may have been concluded at the December 2005 meetings. This was broadly to the effect that even if the claimants failed to establish the detailed agreement which represented their primary case, the meetings may nevertheless have resulted in some agreement which would entitle the claimants to a success fee and share of the profits calculated in some other way, perhaps by reference to what was fair and reasonable. However, such a case is not pleaded and there is no evidence whatever to support it. It is completely speculative.

A third contractual case, if there was no oral agreement concluded at the December 2005 meetings, was to the effect that the claimants were entitled to a success fee and share of profits pursuant to the draft unsigned Consulting Services Agreement. I have already explained the difficulties which such a case would face, whether advanced as a claim based on an oral agreement concluded at 2 November 2005 or a written agreement on the terms of the draft contract with Meridian Capital CIS Fund dated 1 October 2005 which came into existence some time later.

For these reasons the claim for damages for breach of contract assessed by reference to a success fee and profit share, however calculated, has no real prospect of success. It is therefore unnecessary to consider whether, if an agreement was reached, it was an unenforceable agreement to agree on the one hand or a legally binding agreement any gaps in which could be filled in by invoking the principles described in cases such as MRI Trading AG v Erdenet Mining Corp LLC [2013] EWCA Civ 156, [2013] 1 CLC 423 at [16] on the other. The claimants' primary contractual case does not need the assistance of those principles since, on that hypothesis, there was nothing left to be agreed, while their alternative contractual cases do not get as far as showing any real prospect that such an agreement in principle was ever concluded with the defendants, let alone that the parties intended any such agreement to be immediately enforceable notwithstanding that some matters remained to be agreed.

The claimants also advance a case based on estoppel by convention, but it is difficult to see how such a case could succeed if their contract claim is bound to fail. Mr Walford accepted in the course of argument that the estoppel case could only assist the claimants if there was at least some legally binding agreement which entitled the claimants in principle to a success fee and profit share, albeit that the terms by which the success fee and profit share were to be calculated were left to be agreed later. However, as already explained, I can see no basis on which such a claim could hope to succeed. It is not suggested or pleaded that such an agreement can be found in the Strategic Partnership Agreement. Any case based on the Consulting Services Agreement or equivalent oral terms faces the insuperable difficulties already mentioned, not least that this was never going to be an agreement with the defendants. There is no basis in the pleadings or the evidence to suggest that such an agreement was concluded at the December 2005 meetings.

It is therefore unnecessary to consider the claimants' estoppel case further.

Finally, the claimants wish to advance a claim for a quantum meruit for the work which they performed. Mr Walford accepted that such a claim could not entitle them to a success fee or profit share (or the equivalent amounts described as a quantum meruit) because the claimants never got to the stage of performing the services which would have entitled them to such amounts. Their complaint is that they were prevented from doing so. Rather the claim for a quantum meruit is for payment for the services which the claimants actually performed up to the time when their services were terminated. They were of course paid for those services, but they say that because they expected to be rewarded in due course with a success fee and profit share, they charged less for those services than they were actually worth. However, whether or not such a claim in theory might hope to succeed, no such claim is pleaded (the pleaded claim for a quantum meruit being in very general terms, with no pleaded case that the claimants provided their services at a discount to their true value) and there is no evidence to support it.

I conclude, therefore, that the claimants' claims in this action have no real prospect of success. That is sufficient to dispose of the challenge by the second and fourth defendants to the exercise of jurisdiction over them by this court. However, as the point was argued, I will go on to consider separately the position of the fourth defendant as well as the remaining issues as to jurisdictional gateways and convenient forum.

The claim against Mr Feld

The only basis on which it was sought to hold Mr Feld personally liable at the time of the application for permission to serve the claim form out of the jurisdiction was that one or other of the corporate defendants might deny that he had authority to act on its behalf. In that case, Mr Walford explained, there would be a claim against him personally, presumably for breach of warranty of authority. Despite that, however, no such claim was pleaded against Mr Feld in the Particulars of Claim, contingently or otherwise.

There was so far as I can see no reason to suppose that any of the corporate defendants would deny that Mr Feld had authority to act on their behalf. They had never denied his authority. Their position was that Mr Feld had never purported to conclude a legally binding contract on their behalf. They accepted, however, that if what he had said and done did amount to purporting to conclude such a contract, he had the necessary authority. This has now been confirmed in unequivocal terms by the defendants' solicitor Mr Bamforth in his witness statement:

"For the avoidance of doubt, and on the basis of express instructions which I have received on behalf of each of the First to Third Defendants, the First to Third Defendants confirm that in so far as Mr Feld was purporting to act as their agent or on their behalf, then he had their authority so to do. However it is the case of all the Defendants that no concluded agreement was reached with any of the Claimants."

This last sentence was qualified to a limited extent by Mr Morgan in the course of argument, because he accepted that at any rate those parts of the Strategic Partnership Agreement dealing with the advance of €1 million did give rise to binding contractual obligations. That, however, does not detract from the force of Mr Bamforth's evidence as to the authority of Mr Feld.

Accordingly (and even if it had been pleaded) a claim for breach of warranty of authority against Mr Feld has no prospect of success.

The amended claim against Mr Feld

The claimants now seek permission to amend their Particulars of Claim to hold Mr Feld personally liable on two alternative bases. The first is that he failed to negative his personal liability and is therefore personally liable on whatever contract or contracts he entered into. The second (which as it seems to me is inconsistent with the first) is that he purported to conclude a contract acting as an agent for a legal entity called "Meridian Group" which does not in fact exist and is therefore personally liable on the resulting contract. The defendants resist this application to amend on the basis that the amendment has no prospect of success.

The various ways in which an agent may conclude a contract with a third party were described by Donaldson J in Teheran-Europe Co Ltd v S.T. Belton Tractors) Ltd [1968] 2 QB 53 at 59 in a passage which now appears in Bowstead & Reynolds on Agency, (19^th edition, 2010) at page 542:

"An agent can conclude a contract on behalf of his principal in one of three ways:

(a) By creating privity of contract between the third party and his principal without himself becoming a party to the contract. The principal need not be named but the contract must show clearly that the agent was acting as such. Familiar examples are contracts made by X as agent and signed by X, the signature being claused "as agents only." The consequence of such an arrangement is that the third party can only sue, and be sued by, the principal.

(b) By creating privity of contract between the third party and his principal, whilst also himself becoming a party to the contract. The consequence of this arrangement is that the third party has an option whether to sue the agent or the principal, although this is of little practical value if he does not know of the principal's existence. Equally the third party is liable to be sued either by the agent of by the principal. Where both agent and principal are privy to the contract, questions of election can arise (see Clarkson Booker Ltd. v. Andjel) but no such question arises in this case.

(c) By creating privity of contract between himself and the third party, but no such privity between the third party and his principal. In other words, in relation to the third party he is a principal, but in relation to his principal he is an agent. The consequence of this arrangement is that the only person who can sue the third party or be sued by him is the agent. "

Where the contract is in writing, the question whether an agent is intended to be personally liable is a question of construction of the contract in accordance with normal principles for the construction of written contracts. Typically, an agent who signs a contract in his own name without qualification will be personally liable, but personal liability will be excluded by words which make clear that he is acting in his capacity as an agent. In the case of oral contracts, the question whether an agent is personally liable will depend on all the circumstances, as explained in The Santa Carina [1977] 1 Lloyd's Rep 478. Lord Denning MR contrasted two possible cases. Thus it may be that even though a person is known to be acting as an agent, it is to be inferred that the other party does not rely on the credit of the principal but is looking to the agent, for example if the identity of the principal is not disclosed. On the other hand the circumstances may show that even if the identity of the principal is not known, the other party is nevertheless content to look to the credit of the principal whoever he may be, as in The Santa Carina itself, where an order for bunkers was placed by brokers without disclosing for whom they were acting. The principle is that stated by Roskill LJ at 484:

"Therefore when one is dealing with an oral contract, the law is plain. As Chitty says, it is a question of fact in each case whether it was intended … that the agent should or should not be personally liable. Mr. Bullen contended yesterday evening that it was now settled law that where agents for undisclosed principals contracted as agents they were personally liable in the absence of some express disclaimer of liability. With respect, I do not agree that that principle applies when one is dealing with an oral contract. The question is always, what did these parties agree? There cannot in these circumstances be any question of presumption because if there were a presumption that would put the onus of proof upon defendants to prove that they were not personally liable. It is for plaintiffs to prove those facts from which an inference must be drawn on a balance of probabilities that the defendants are personally liable notwithstanding that the plaintiffs knew that the defendants were contracting as agents."

Applying these principles in order, the first contract to be considered is the Strategic Partnership Agreement, even though that is not a contract on which the claimant sues. Nevertheless it sets the scene so far as the role of Mr Feld is concerned. The Strategic Partnership Agreement is a written contract which Mr Feld signed on behalf of "Meridian Group", just as Mr Remy signed it on behalf of "Groupe CIFAL". Each of them was described in the contract as representing the party for whom they signed. It is obvious as a matter of construction that neither of them was to be understood as undertaking any personal liability. So far as this initial contract is concerned, therefore, Mr Feld did expressly negative his personal liability. (I consider below the separate question whether he nevertheless incurred liability because he was purporting to act on behalf of a non-existent principal).

The next contract or potential contract is the Consulting Services Agreement. Here once again the problem arises of identifying exactly what this contract is said to be. Is it the oral contract supposedly concluded in November 2005? Or is it the later draft contract identifying the Cayman Islands company as the proposed contractual counterparty. If it is the former, and even assuming that there is a real prospect of the claimants being able to establish that such an oral contract was concluded, they have made no attempt to identify any matters giving rise to an inference that Mr Feld was undertaking any personal liability. They merely assert that he did not negative such personal liability. As shown by The Santa Carina, that is not good enough. But in any event, it is not correct. The Strategic Partnership Agreement forms part of the background to any such oral contract, and itself demonstrates that there was no question of Mr Feld undertaking personal liability. The burden is clearly on the claimants to identify material giving rise to a reasonable inference with a real prospect of success that, in contrast to the Strategic Partnership Agreement, whatever oral contract was concluded in November 2005 was a contract on which Mr Feld was intended to be personally liable. On the other hand, if the relevant contract is the later draft contract (or a contract on the terms contained in the draft) it is clear that the intended contracting party was to be the Cayman Islands company represented by Mr Feld, just as Mr Gaudron was to represent the claimants.

What then of the oral Ligovsky Prospekt contract, allegedly concluded in December 2005, on which the claimants primarily rely? I have already concluded that there is no real prospect of the claimants being able to establish that such a contract was concluded. The question whether they have a prospect of being able to show that it was a contract on which Mr Feld incurred personal liability is therefore somewhat hypothetical. Once again, however, the claimants have made no attempt to identify anything, beyond the mere assertion that Mr Feld did not negative his personal liability, which could give rise to an inference that he was contracting personally.

I conclude, therefore, that the claimants have no real prospect of being able to show that Mr Feld is personally liable on any of the alleged contracts on which they claim on the basis that he failed to negative his personal liability.

That disposes of the primary way in which the claimants now wish to put their case against Mr Feld. In the alternative they say that he purported to act on behalf of an entity called "Meridian Group" but that in fact there was no such legal entity, and that he is therefore personally liable for purporting to contract on the behalf of a non-existent principal (see eg Kelner v Baxter (1866) LR 2 CP 174). This is, at first sight, a rather surprising case as hitherto the only pleaded basis on which it has been sought to hold the corporate defendants liable has been that they comprised the "Meridian Group" referred to in the Strategic Partnership Agreement, as appeared from the Agency Agreement dated 18 March 2004 between all four defendants. If in fact "Meridian Group" refers to an entity which did not exist, the whole basis of the claimants' case against the corporate defendants (who certainly existed) is misconceived.

As with the argument that Mr Feld failed to negative his personal liability, it is necessary to start with the Strategic Partnership Agreement. As before, that is not the agreement sued on, but it sets the scene. Mr Walford accepted that there is no evidence that Mr Feld ever represented that "Meridian Group" was a corporate entity, but pointed to the fact that it was described in the agreement as having a registered office, in fact the office of the first defendant, which (he says) indicated that it was. The question whether Mr Feld was purporting to act on behalf of a non-existent entity depends, therefore, on the true construction of the Strategic Partnership Agreement, and the only basis for saying that he was is the identification of a registered office. Clearly, however, "Meridian Group" cannot have been the full corporate name of an English registered company which would have (at least) a word such as "Limited" as part of its name. The Strategic Partnership Agreement cannot therefore comprise or evidence a representation by Mr Feld that "Meridian Group" was the name of a corporate entity.

In my judgment the natural meaning of the expression "Meridian Group" if the Agency Agreement is put to one side is that it referred to members of the group of companies represented by Mr Feld, the precise identity of which would in all probability have been a matter of indifference to the claimants at that stage, but which at all events included the company with its registered office at the identified address in London (ie. the first defendant), just as "Groupe CIFAL" referred to Cifal and its unidentified subsidiaries, represented by Mr Remy. Once the agreement is read in that natural way, the argument that Mr Feld was purporting to act for a non-existent entity falls away. But once account is taken of the Agency Agreement, the position is even clearer. "Meridian Group" refers to the corporate defendants. It is not a case of an agent purporting to act for a non-existent principal but a man who was known to be acting as an agent and who was acting for a number of principals, not all of which had been identified at that stage.

The argument has even less validity in relation to the Consulting Services Agreement where, as already indicated, the claimants' proposed counterparty was to be the Cayman Islands company, which undoubtedly existed.

Coming then to the oral Ligovsky Prospekt contract, allegedly concluded in December 2005 on which the claimants primarily rely, the only basis (as I understand it) on which the claimants seek to contend that Mr Feld purported to contract on behalf of a non-existent entity is that during the meeting or meetings when this oral contract was concluded, he continued to act on behalf of "Meridian Group", just as he had done in relation to the written Strategic Partnership Agreement. Accordingly the claimants' argument cannot be any stronger here than it was in the case of the Strategic Partnership Agreement with which I have already dealt. Once again, however, and in any event, this case breaks down on the complete absence of any evidence as to what is supposed to have happened at this meeting or these meetings. In circumstances where, according to the claimants' case, a previous written agreement had been concluded on behalf of "Meridian Group" but a subsequent oral agreement had been concluded in November 2005 on behalf of the Cayman Islands company, there is no sensible basis for any conclusion in the absence of evidence as to the identity of the principal for whom Mr Feld purported to act in the December 2005 meetings. No doubt this is because in reality he did not purport to conclude a contract at all during those meetings.

I conclude, therefore, that neither of the ways in which the claimants seek to establish Mr Feld's personal liability in the proposed draft amendment has any real prospect of success. Moreover, the draft amendment is not even supported by the flimsiest of evidence. As pointed out earlier, Ms Bonnet's witness statement in support of the application for permission did not provide any account of what is said to have happened at the meetings in question, but merely referred to the Particulars of Claim in their unamended form. But the draft amendment does not have the benefit of even this inadequate support. Nor is it verified by a signed statement of truth. I was told that Mr Gaudron has approved the draft, but as the draft contains a number of factual assertions which are obviously wrong, and which Mr Walford accepted were wrong, I can attach no weight to that information. Thus, it asserts that "No communication was received by any of the Claimants from or on behalf of CIS Fund" (the Cayman Islands company), that "the Claimants have at no time had any direct dealings with CIS Fund", and that "Neither the Claimants nor the 1^st Defendant at any material time believed that the [Consulting Services Agreement] had been entered [into] with CIS Fund". But those statements take no account of the fact that repayment of the €1 million advance was requested on behalf of the Cayman Islands company and are flatly contradicted by the letter before action dated 2 April 2012 which must have been approved by Mr Gaudron or written on his instructions.

Jurisdictional gateways

If I had concluded that the claim in this action against the second and fourth defendants had a real prospect of success, it would have followed that those defendants were necessary and proper parties to the claim against the first and third defendants. Mr Morgan did not dispute that this would be so, at any rate so far as the second defendant is concerned. As it is, however, the point does not arise.

If I had held that the claimants' contractual claim based on an agreement concluded at the December 2005 meetings had a real prospect of success, I would not have concluded that the claimants have a good arguable case that this oral contract was governed by English law. There is no evidence that the question of the governing law was addressed in those meetings. The only basis for an argument that English law was to apply was the choice of English law and arbitration in the Consulting Services Agreement. Based on the choice of law in that agreement, the claimants say that the oral agreement dealing specifically with the Ligovsky Prospekt project must also be taken to be subject to an implied choice of English law.

While there may be an argument to this effect, I do not accept that the claimants have "much the better of the argument." I think it unlikely that the question of governing law had been agreed orally in the meeting in November 2005 at which it is alleged that the terms of the Consulting Services Agreement were agreed. It seems to me to be much more likely that this was a term included in the later written draft which was either never agreed (and in any event not by the defendants as distinct from the Cayman Islands company which was to be the counterparty on the Consulting Services Agreement) or at any rate had not been discussed or agreed by the time of the December 2005 meetings. If that is so, there is no basis to conclude that any oral agreement reached in December 2005 was governed by English law.

Convenient forum

In view of the conclusions already reached, the question of convenient forum does not arise. Very briefly, however, if I had held that the claimants had a real prospect of success, and on the basis that the second and fourth defendants would then be necessary and proper parties to the claim against the first and third defendants which, on that hypothesis, would go to trial here, I would have held that England is the convenient forum. Mr Morgan submitted that, although Russia was not the domicile of any of the defendants, it was the appropriate venue for a trial as the defendants were amenable to Russian jurisdiction, the case was concerned with events in Russia (including not only the question whether any binding agreement was concluded but also, if it was, whether the services provided by Ginger were unsatisfactory so as to entitle the defendants to terminate them), and much of the relevant evidence was likely to be located there. There would be force in that submission, if it were not for the existence of proceedings here against the first and third defendants, in part as a result of the position successfully adopted by the first defendant in the French action that it ought to be sued in England, the place of its domicile.

The position would then have been materially the same as it was in Erste Group Bank v JSC "VMZ Red October" [2013] EWHC 2926 (Comm), where Flaux J held at [156] that "it would be verging on the perverse" to require a claimant who was pursuing and was entitled to pursue claims against some defendants here to litigate the same claims in Russia against other defendants, when those other defendants were necessary or proper parties to the claims here and were in the same corporate group as the defendants to the English action. Had the point arisen, I would respectfully have followed that approach. It is therefore unnecessary to consider what, if anything, is the significance of the fact that a claim in Russia would have become time barred after three years.

Full and frank disclosure

Mr Morgan made extensive submissions in opening to the effect that there had been a failure of full and frank disclosure by the claimants in the without notice application for permission to serve the claim form out of the jurisdiction. Although I had not reached a final view, my impression was that there seemed to be little or nothing in these points. However, in the course of Mr Walford's submissions Mr Morgan abandoned this as a ground for setting aside the order for service out. I need therefore say no more about it in this judgment, save to observe that an undue focus on arguments about disclosure when the real burden of a defendant's jurisdictional challenge lies elsewhere risks weakening the impact of that challenge.

The application to amend

I have already concluded that the basis on which the draft amended Particulars of Claim seeks to hold Mr Feld personally liable has no real prospect of success and for that reason I refuse permission to amend, save in the relatively minor respects to which the claimants did not object, namely the change in Ginger's name and the deletion of the assertion that the Cayman Islands company did not exist. It is therefore unnecessary to extend this judgment further by considering whether the amendment introduces a new claim after the expiry of the limitation period, although I am inclined to think that it does, and if so, whether the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the claimants have already claimed a remedy: see CPR 17.4(2).

I should record, however, that in the course of his submissions Mr Walford referred to the possibility that, if the present draft amendment was held to be inadequate, a further application to amend might be made in the future. I made clear that I did not regard that as satisfactory so far as the position of the second and fourth defendants is concerned. So far as they are concerned, I made clear that they are entitled to know now the pleaded basis on which it is sought to join them to these proceedings, and that I was not prepared to give the claimants a further opportunity to plead a new case against them if I were to hold (as in the event I have) that neither the original nor the current draft amended Particulars of Claim disclose a case which has a real prospect of success. Mr Walford confirmed that so far as the second and fourth defendants are concerned, the claimants would take their stand on the current draft Particulars, with the consequence that if those defendants' application succeeds, they will cease to be parties to this action regardless of what future applications to amend may be made against the first and third defendants.

Further directions

Because the claimants wished to demonstrate a real prospect of success for jurisdictional purposes against the second and (in particular) the fourth defendants by reference to the case pleaded in the draft amended Particulars, it made sense for the application to amend to be dealt with in the same hearing, as the second and fourth defendants' jurisdictional challenge. Mr Morgan's submissions objecting to the application to amend were made after he had made his submissions in support of the second and fourth defendants' jurisdictional challenge and, as he made clear, were made on behalf of all four defendants. Having explained why, as he said and as I have now accepted, the amended claim had no real prospect of success, Mr Morgan invited me to consider exercising my case management powers either to dismiss the entire claim summarily or (more realistically) to give the claimants a final chance to plead an arguable case, failing which the claim would be summarily dismissed.

Mr Walford's first response to this suggestion was to say that by making it Mr Morgan had submitted on behalf of the second and fourth defendants to the jurisdiction of this court, thereby rendering their entire application academic. With respect, that response seems to me to be absurd. The whole premise for Mr Morgan's suggestion was that I would have decided that the claims pleaded both in the original and in the draft amended Particulars had no real prospect of success and that, in consequence, the second and fourth defendants' jurisdictional challenge would have succeeded and they would cease to be parties to the action. Accordingly his suggestion could not affect the second and fourth defendants' position, but only that of the first and third defendants, who will remain in the action in any event. Nobody could reasonably have thought that the second and fourth defendants were intending to submit to the jurisdiction of this court.

Turning to the merits of Mr Morgan's suggestion, my conclusion (reached after hearing full argument) that the claim against the second defendant has no real prospect of success necessarily means, not only that the order for service on the second defendant must be set aside, but that as matters stand an application by the first and third defendants for summary judgment would inevitably succeed. In such circumstances I consider that it is appropriate to direct that unless within 28 days of hand down of this judgment the claimants make an application to show cause why their claim against the first and third defendants should proceed, there will be summary judgment for those defendants on the claim.

Disposal

For the reasons given above:

i) the order for service out of the jurisdiction on the second and fourth defendants is set aside;

ii) permission is granted to the claimants to amend the Particulars of Claim by amending the name of the second claimant and deleting the assertion that Meridian Capital CIS Fund does not exist, but otherwise the claimants' application for permission to amend their Particulars of Claim is dismissed; and

iii) unless within 28 days of hand down of this judgment the claimants make an application to show cause why their claim against the first and third defendants should proceed, there will be summary judgment for those defendants on the claim.

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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> CIFAL Groupe S.A. Grontmij Investment Management S.A.S. & Ors v Meridian Securities (UK) Ltd & Ors [2013] EWHC 3553 (Comm) (15 November 2013) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2013/3553.html Cite as: [2013] EWHC 3553 (Comm)