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Case No: 2002 Folio 304 [2003] EWHC 1956 (Comm)
THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 4th August 2003
THE HONOURABLE MR JUSTICE LANGLEY
Claimant: JORDAN GRAND PRIX LIMITED (Mr A. Boyle QC and Mr F. Tregear QC for the Claimant)
Defendant: VODAFONE GROUP PLC (Mr C. Aldous QC and Mr M. Griffiths for the Defendant)
Hearing dates : 16th June to 3rd July, 14th, 15th , 28th and 29th July 2003
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Honourable Mr Justice Langley:
INTRODUCTION
It is the claim of Jordan Grand Prix Limited ("Jordan") in these proceedings that in the course of a telephone conversation held shortly after 6pm on 22 March 2001 and lasting some 10 to 15 minutes between Eddie Jordan, the managing director of and majority shareholder in Jordan, and David Haines, then global brand director of Vodafone Global Commercial Services Limited ("Vodafone Global"), a wholly-owned subsidiary of Vodafone Group plc ("Vodafone Group"), Vodafone Group agreed to be the Formula One (F1) grand prix title sponsor of Jordan for the three seasons 2002 to 2004 for payments by Vodafone Group to Jordan of US$ 39m in 2002, $50m in 2003 and $52m in 2004, plus bonuses of $9m, a total of $150m. Jordan claims damages for breach of this alleged contract. In the alternative Jordan claims damages for misrepresenting in the same conversation that Jordan would be sponsored by Vodafone.
Vodafone denies that any such agreement was made and contends that even if there was some accord it was incomplete and far too uncertain and in any event Mr Haines had and indeed was known by Jordan to have no authority to commit Vodafone Group to such a contract.
The inherent improbability of an agreement of such a nature for payments of such a size being made in such a manner is obvious. At the conclusion of the evidence the inherent improbability was more than fully matched by the reality. Jordan's claim was in my judgment plainly demonstrated to be without foundation and false.
BACKGROUND AND CAST LIST
Jordan
Jordan has been a participant in F1 for many years. In terms of size it is one of the smaller teams. It is also one of the few teams which is not owned or part-owned by a major motor manufacturer. Sponsorship is of great importance to all teams. "Title" (or "team") sponsorship in general terms entitles the sponsor to have its name associated with the team and to dominate the space on the car and drivers' clothing with the sponsor's name and brand. For the 2001 F1 season Jordan's title sponsor was Gallaher plc, and the team name was "Benson & Hedges Jordan Honda". Honda supplied the engines for the cars. "Secondary" sponsorship, again in general terms, entitles the sponsor to limited space on the car and clothing and other benefits as may be agreed.
The main players involved at Jordan are, and were in 2001, Eddie Jordan and Ian Phillips, the director of business affairs. Both gave evidence. Others whose names appear in the documents are Mark Gallagher, sponsorship manager, and Dominic Shorthouse, the representative of Warburg Pincus on the Jordan board. Warburg Pincus owned a substantial minority shareholding in Jordan.
Vodafone
In 2000 Vodafone Group's business consisted of a number of telecommunications companies operating under different brand names in many countries. Two of the major operating companies were Mannesmann/D2 in Germany and Omnitel in Italy. The managing director of Omnitel was Mr Colao. It was Vodafone Group's aim to "globalise" the Vodafone brand. F1, with its worldwide audience and grand prix in several countries in each year, was seen as a potential component in achieving that aim. D2 as such was a secondary sponsor of the Renault Benetton team in 2001.
The main players involved at Vodafone at the time were Thomas Geitner, David Haines and Peter Harris, all of whom gave evidence. Mr Geitner is and was chief executive officer of Vodafone Global and an executive director of Vodafone Group. He was also until 1 April 2001 chief executive officer of Vodafone Europe Ltd. David Haines was recruited by Vodafone Global in late 2000 as global brand director (a new post) for the purpose of co-ordinating the globalisation of the Vodafone brand. Peter Harris was officially employed from April 2001 as director media and sponsorship, but was assisting Mr Haines on some F1 matters from late February. Mr Haines reported to Mr Geitner and Mr Harris reported to Mr Haines. They were based in Dusseldorf. The chief executive officer of Vodafone Group was Sir Christopher Gent. Others who play some part in events are Andy Moore, consumer insights director and Jost Schulte, global brand manager. Mr Moore and Mr Schulte gave evidence about the 22 March telephone conversation. Vodafone's head office is and was in Newbury, Berkshire.
It is, as stated, part of Vodafone's case that even if there was a sponsorship agreement Mr Haines was not authorised to make it and that both in fact and as a matter of commonsense Jordan knew Mr Haines did not have such authority. It should therefore be recorded that the unchallenged evidence is that the relevant corporate structure of Vodafone Group included a Brand Steering Committee chaired by Mr Geitner (of which Mr Haines was a member), which had its last meeting on 29 March 2001. The Brand Steering Committee was succeeded by the Brand Council which, although it had its first meeting on 15 March 2001, had not then succeeded to the functions of the Committee. Mr Haines was chairman of the Council. The members of the Brand Council included representatives of the Vodafone operating companies. Neither the Committee nor the Council was empowered to make a decision on a contract of the magnitude under consideration for F1 sponsorship. Vodafone's written procedures provided for a recommendation to be made by the Committee to the European Operations Integration Committee (EOIC), the Group Operational Review Committee (GORC) and the Executive Committee, a delegated committee of the full board of directors of Vodafone Group. Mr Haines' personal authority to enter into contracts of the nature of the one in issue in these proceedings was limited by a formal "Schedule of Authorisations" to £3m. Mr Haines had received a copy of the written procedures both by e-mail and in hard copy by (at the latest) 2 February 2001.
Brown KSDP ("Brown")
Brown was a global branding and design network. Its parent company was Tempus Group plc (Tempus). In 2000 Tempus was already engaged by Vodafone to assist it on the global branding exercise. It is not as clear as it should be what Brown's precise role was save that Brown was undoubtedly appointed by and to act for Vodafone and in general terms the brief was to identify and evaluate the opportunities which might be available to Vodafone in F1. There was no letter of engagement. Mr Haines said it was agreed that Brown should be paid on the same basis as Tempus, effectively a time cost plus arrangement. Those at Tempus and Brown who played a significant part in events were Mr Joe Kieser (whose agency KSDP had recently been acquired by Tempus) the chief executive, and an account director, Charles Perring. Mr Kieser reported to Peter Dart, the president of Tempus. Mr Perring reported to Mr Kieser. Mr Dart had worked with Mr Haines before and they had become personal friends. Mr Kieser gave evidence at the instance of Vodafone. Mr Perring, whose witness statement was dated 12 June 2003, did so at the instance of Jordan. Brown also, through Mr Perring, involved outside solicitors (Townleys) to act on behalf of Vodafone. Those concerned were a partner, Stephen Townley, and an assistant solicitor, Jeremy Summers.
Gallaher
Jordan's 2001 title sponsor was Gallaher. Nigel Northridge was chief executive officer and Barry Jenner the UK managing director of Gallaher. The sponsorship was the subject of a substantial written contract plainly drafted by lawyers and signed by Mr Northridge and Mr Jordan dated 29 January 1997. The term of the contract expired on 31 December 1997 but with an option exercisable by Gallaher no later than 31 July 1997 to extend the term to 31 December 1999 and options in July 1999 and each subsequent July to extend the term for further successive periods of 1 year, subject to agreement on the fee payable. If a fee was not agreed, Jordan could not offer title sponsorship to another party on more favourable terms than those offered to Gallaher without first offering those terms to Gallaher. The Agreement contained detailed provisions for such matters as advertising and promotion, intellectual property rights, the livery to be used on the cars, drivers and team clothing, race tickets and hospitality and restrictions on the rights which could be granted by Jordan to secondary sponsors. It also contained both fixed fees and bonus provisions dependent on the level of success achieved by Jordan in F1 races.
The Agreement was duly extended so that for 2001 the fixed fee was £13m and the maximum bonuses which could be earned were £3m. It was also agreed in July 2000 that Gallaher's option to extend the Agreement for the 2002 season could be exercised at any time until 28 September 2000. In December 2000 the Agreement was further varied so that the fixed fee was £16m and no bonuses were payable, but if Jordan's performance was not such as would have earned a bonus under the earlier agreement up to £1.5m could be deducted from the fixed fee of £14m for 2002 should Gallaher exercise its option to renew the agreement for that year. Gallaher's option for 2002 was also varied so as to be exercisable at any time until 28 February 2001.
On 28 February 2001 Gallaher (Mr Jenner) wrote to Jordan (Mr Phillips). The letter states that at a meeting on 13 February (which, on the evidence was attended by both Mr Jordan and Mr Phillips) Mr Jenner had advised Jordan that Gallaher was "not in a position to continue as title sponsor in 2002/3" but, to preserve Gallaher's position, and in the interests of confidentiality, it was proposed that the right to exercise the option to extend the Agreement should be further extended to 31 March 2001. The letter proposed that Gallaher should become "the principal secondary sponsor for the 2002 and 2003 seasons" for fees of £10m and £11m respectively.
Jordan did not, despite Gallaher's request, sign and return this letter to confirm agreement to the extension of the option. Mr Phillips said in his fifth witness statement that whilst he was quite happy to extend Gallaher's option he was not happy with the terms for secondary sponsorship as he did not want to commit Jordan to numbers at the time. Mr Phillips said he spoke to Mr Jenner and told him as much but in effect had agreed orally to the extension. Had that been the case I would have expected Jordan or Gallaher at least to have confirmed it in writing and that the terms of Jordan's delayed response dated 20 March 2001 (paragraph 104), would have been different. In any event by 28 February 2001 both Gallaher and Jordan had made clear that Gallaher was not to continue as title sponsor.
Honda
Honda and Jordan (by Mr Jordan) entered into a formal Agreement dated 14 June 2000 for the supply by Honda to Jordan of engines for the F1 cars. Although the "contract period" was expressed to be 5 years starting with the 2001 season both parties were entitled to terminate the Agreement for the 2004 and 2005 years "without any cause and obligation to compensate" on giving notice to that effect by the end of December 2002. Further, whilst the supply of engines for 2001 and 2002 was agreed to be free of charge to Jordan, that was not the case for subsequent years. In effect as at early 2001 Jordan had free Honda engines for the 2001 and 2002 seasons and a contractual right to Honda engines only for those seasons and, provided a price could be agreed, 2003. Honda also supplied engines to the BAR F1 team in 2001 and 2002.
Deutsche Post (DP)
DP was a secondary sponsor of Jordan in 2001 under the terms of a formal Agreement dated 6 December 1999 signed by Mr Jordan. The Agreement continued until the end of the 2002 season, with options for Deutsche Post to extend it for 3 further years. The fee in 2001 was $17m and bonuses were payable up to a maximum of $2m for results. The Agreement scheduled drawings showing the approved DP logo and "display rights" on the cars and clothing. To quote the Amended Particulars of Claim, without accepting their accuracy, DP was "not entitled to determine the colouration of the Jordan car but has a known preference for the existing yellow colouration on which its logo appears in black". By an Agreement signed in February 2002 DP (in the name of DHL) became Jordan's title sponsor for 2002.
Lucent
Jordan also had a secondary sponsorship Agreement with Lucent Technologies Inc for a three-year term ending with the 2001 season. The fee payable by Lucent for 2001 was $1.201m. Lucent and Vodafone were involved in a legal dispute in early 2001.
Infineon/Mastercard
Infineon Technologies AG (a subsidiary of Siemens) and Mastercard were also secondary sponsors of Jordan in 2001 and 2002. Dr Volker Jung, a managing board director of Siemens and chairman of the supervisory board of Infineon, gave evidence at the instance of Vodafone. Ferrari
In the event, Vodafone became principal non-title sponsors of Ferrari for the 2002 and subsequent F1 seasons. Phillip Morris (Marlboro) were Ferrari's title sponsors in 2001 and 2002. Jean Todt, Ferrari's team principal, gave evidence at the instance of Vodafone. The chief executive of Ferrari was Mr Montezemolo.
Other F1 Teams
Benetton
In the course of the material events, apart from Jordan and Ferrari, other F1 teams became involved as potential subjects of sponsorship by Vodafone and it is convenient to refer briefly here to those which played some significant part in events. Benetton's title sponsor in 2001 and 2002 was "Mild 7" another tobacco company. The team principal was Flavio Briatore. Paul Jordan was from 2000 until early 2001 commercial director of Benetton. A witness statement by Paul Jordan was served by Jordan and accepted in evidence as such. Paul Jordan had been Jordan's sponsorship manager until 1999. Ted Brezina was Benetton's business development manager.
McLaren
McLaren's title sponsor in 2001 and 2002 was "West", another tobacco brand. The managing director was and is Ekrem Sami who gave evidence at the instance of Vodafone.
THE CLAIMS
The Primary Claim
The primary claim by Jordan is to be found in paragraph 28 of the Amended Particulars of Claim (APC) which reads:
On 22 March 2001 at about 6.20pm Mr Haines telephoned Jordan and spoke to Mr Jordan on a loudspeaker telephone in the presence of Mr Phillips. He informed Mr Jordan that Vodafone would sponsor Jordan for the three Grand Prix seasons in 2002 to 2004. In the course of the conversation and in response to Mr Jordan, Mr Haines said "Eddie, stop, stop, you've got the deal". Mr Jordan thanked Mr Haines for his confidence in Jordan. Mr Haines told Jordan to sort out any formalities with Mr Harris. Mr Haines had asked for a list of Jordan's bankers, shareholders and professional advisers as references but explained that this was a "formality".
It is Jordan's case that "the deal" to which Mr Haines was agreeing is to be found in and was established by: i) A document provided by Mr Perring to Jordan on about 1 February 2001 which has come to be known as "the benefits wish list"; ii) A meeting on 6 February 2001 at Jordan's premises in Silverstone between Mr Jordan, Mr Phillips, Mr Perring and Mr Haines when it is said Mr Haines offered "a deal" then and there if Jordan would commit to a particular car design and said that "all matters of detail should be dealt with between Jordan and Brown"; iii) A meeting on 14 February at the Hilton Hotel at Heathrow between Mr Jordan, Mr Phillips, Mr Kieser and Mr Perring when it is said "agreement was reached in principle" that a total payment would be made by Vodafone of $150m over three years, additional bonuses "may be" payable for results, the team name would be Vodafone Jordan Honda, as to "the exclusive rights to be enjoyed in respect of telecommunications equipment" and the team title logo. iv) To quote paragraph 25 of the APC:
The only outstanding matter yet to be fully agreed in principle at that stage was the colouration of the car. This was agreed in principle on 19 March 2001 when Mr Perring sent a design to Mr Phillips which was acceptable to Jordan and of which DP could not disapprove. At that stage all the necessary terms for a sponsorship agreement had been agreed in principle.
v) To quote paragraph 31 of the APC:
"31. By reason of the matters set out above a binding sponsorship agreement had been formed pursuant to which Vodafone was to sponsor Jordan for three years starting in the 2001 season:
31.1 paying $42,000,000 in 2002 (being $39,000,000 plus $3,000,000);
31.2 paying $53,000,000 in 2003 (being $50,000,000 plus $3,000,000);
31.3 paying $55,000,000 in 2003 (being $52,000,000 plus $3,000,000);
31.4 on the terms set out in the benefits wish list;
31.5 with a colouration for the car similar to the artwork submitted by Brown on 19 March 2001."
There is no dispute that on 25 May 2001 Ferrari and Vodafone announced their agreement for sponsorship for the three years 2002 to 2004. Jordan's claim is for the loss of $150m less "sums received by way of title sponsorship which would not have been received if Vodafone had abided by the terms of its agreement with Jordan". There are no particulars of what that loss might be nor was any evidence given about it in any witness statement. Had it been relevant to do so no doubt that could have been addressed later.
The alternative claim
The alternative claim is to be found in paragraph 40 of the APC. If there was no concluded contract formed on 22 March 2001 it is there alleged that:
"Mr Haines represented that a contract would definitely be entered into between Jordan and Vodafone shortly after 22 March 2001."
The words relied upon are the same as those relied upon in paragraph 28 of the APC.
Jordan is said to have relied upon this representation "in ceasing to negotiate any sponsorship (until 26 May 2001) with Gallaher for the 2002 season" with the alleged consequence that "Gallaher lost all interest in being title sponsor of Jordan and reduced the amount that it was prepared to pay" for the 2002 season "to a significantly reduced sum as a secondary sponsor in 2002". The claim is for the difference between £17m or £18m in 2002 plus 50% of that amount for the loss of the chance of the same sum being agreed for 2003 and the sums Gallaher in fact paid in those years (£7.1m and £6.5m) alternatively between £10m plus £11m and the sums in fact paid on the basis that had Gallaher been offered secondary sponsorship at an earlier stage it would have paid more for it in each of the years 2002 and 2003.
THE DEFENCE
Vodafone's defence denies Mr Haines's authority to commit Vodafone to the alleged agreement and avers that: only the Vodafone Group Board had such authority; "a vast range of points of substance which would be incorporated into a final contract" would have required detailed negotiation; no "livery proposal" was ever agreed; and other F1 teams were always under consideration. On 22 March 2001 it is said that "at most Mr Haines conveyed the impression, which was in his reasonable opinion correct, that Jordan was the most likely partner."
Authority
It should be noted that in a response (dated 10 July 2002) to a request for further information Jordan made it expressly clear that it was not its case that Mr Haines had actual authority to bind Vodafone. The case was then (and until the trial began) only one of ostensible authority. Save for alleged conduct and representations by Mr Haines himself about his own authority (which, in law, cannot sustain such a case) the representations by Vodafone relied upon to support that case were by conduct in permitting Mr Haines "to approach [Jordan] with a view to concluding an agreement pursuant to which Vodafone would sponsor Jordan" and by "holding Mr Haines out as its Global Brand Director and permitting Mr Haines to negotiate" with Jordan in that capacity. In addition reliance was placed on an alleged representation made by Sir Christopher Gent to Dr Jung (Infineon) in March 2001 that Mr Haines "was the person who would select the Formula One team" to be sponsored by Vodafone. That representation is said to have been relayed by Dr Jung to Mr Jordan and Mr Phillips in Malaysia when they were there for the Malaysian Grand Prix which took place on 18 March.
On 23 May 2003 Jordan's solicitors wrote to Vodafone's solicitors enclosing proposed amendments to the further information supplied. The amendments were to seek to make a case of actual authority. That case ran to 19 sub-paragraphs. Essentially it came to an allegation that Mr Haines would not have claimed the authority to make agreements it is alleged he did claim nor made the statements it is alleged he did make about Jordan having the deal unless authority had in fact been bestowed upon him to do that and so actual authority to that effect was to be inferred.
Mr Boyle QC for Jordan sought permission to make this amendment on the first day of the trial. Mr Aldous QC opposed the grant of permission on the basis that the proposed amended case was demonstrably unsustainable and hopeless. I did not rule on it at the time on the basis that if Mr Aldous was right it would be established in the course of the trial and need not delay its progress. In the course of his closing submissions Mr Boyle entirely properly said he could not in the light of the evidence pursue the application. Jordan's "real case on authority" he submitted was the one advanced in the written opening submissions and reiterated in the closing submissions that Mr Haines did have authority to communicate to Jordan that Vodafone Group had taken the decision to sponsor Jordan even if he did not have the authority to make that decision himself.
Disclosure
It should be recorded that in early April 2003 a Consent Order was made requiring Jordan to make further disclosure of specific documents including documents in electronic form. Some of the documents which were produced as a result of that order proved to be of importance as will become apparent. Further, in the course of the trial, orders were made for the examination of Mr Harris' computer and computers in use by Jordan at the time. Those examinations also produced significant material to some of which I shall refer. The examination of Mr Harris' computer was a specialist examination of the hard disk because, in circumstances to which no criticism attaches, certain e-mails sent and received by Mr Harris were no longer otherwise accessible. The examination of Jordan's computers revealed documents which were material and readily accessible as they had not been deleted. The documents disclosed as a result of these examinations were the subject of supplementary written submissions by both parties. Very substantial written closing submissions had `already been exchanged and submitted to the court. Mr Jordan and Mr Phillips also made further witness statements (in each case the 5th statement) to address some of the Jordan disclosures and the submissions of Vodafone about them. Both were recalled to be cross-examined on those statements. Oral closing submissions were made following that evidence.
THE KEY WITNESSES
Since it is a vital question in a case involving conflicting and irreconcilable accounts of events decisive of the issues I have to decide, I will summarise here my views of the key witnesses.
Mr Haines was an impressive and, in my judgment, plainly truthful witness. His evidence was consistent with the documents and the commercial reality and commonsense of events. He had a lot on his plate at the time with little support before Mr Harris arrived. Mr Haines relied on Brown as indeed he and Vodafone were entitled to do. That reliance was, I think, in fact significantly misplaced. Both Mr Kieser and Mr Perring saw an opportunity for Brown to earn a substantial sum by way of a commission from Jordan (and later through other work) for a concluded sponsorship agreement and seem, particularly in Mr Perring's case, not to have appreciated the obvious conflict of interest and plain risk that they might be used by Jordan for Jordan's purposes in the events which ensued. That said, I do not doubt that Mr Perring with, as will appear, a limited perspective on events, did believe that Vodafone's objectives would best be met by sponsorship of Jordan.
Mr Harris was also an impressive and straightforward witness. Again his evidence was consistent with the documents and commercial sense.
I regret to say that I found both Mr Jordan and Mr Phillips to be wholly unsatisfactory witnesses. As will appear, their evidence was in many instances in stark conflict with and indeed belied by the documents, often documents of their own making. On occasions even Mr Jordan was unable to offer an explanation and was reduced to embarrassed silence by the exposure of blatant inaccuracies in what he was saying. The evidence they gave and the claim Jordan makes became more and more contrived and unsustainable. Mr Haines said, in relation to the telephone conversation on 22 March, when asked in cross-examination by Mr Boyle how Mr Jordan could have come to think a contract had then been concluded, that the only explanation he could give to himself was that "Mr Jordan had heard what he wanted to hear and not what was said".. That was a restrained and courteous comment. For my part I have no doubt at all that where the substance of Mr Haines and Mr Harris evidence differed from that of Mr Jordan, Mr Phillips and Mr Perring on any issue of real importance the evidence of Mr Haines and Mr Harris is to be preferred.