Wright v Deccan Chargers Sporting Ventures Ltd & Anor [2011] EWHC 1307 (QB)

Judgment concerning jurisdiction and forum arising from breach of contract proceedings where the claimant was based in England and the respondent in India. The original decision to allow service of proceedings outside India was upheld.

The claimant, who had considerable experience in sports management, had been hired by the Deccan Chronicle, owners of the Deccan Chargers cricket team, to develop the commercial interests of the team and a "sports city" in Hyderabad. The agreement set out that the claimant would be based in London, and an office would be created to support his efforts, and travel to Hyderabad as necessary. The agreement also stated that it was governed by English law. The relationship soon broke down in particular over where the claimant should work, with the employers directing him to move to Hyderabad. This was one of eighteen alleged breaches of contract cited by the claimant. Permission to serve the proceedings in England was granted by Master Fontaine.

In this review of that decision, Tugenhadt J reviews the Master's judgment and the principles and case law relating to choice of law and place of residence. He concludes among other things that a) the Master had not been shown to have erred on choice of law, despite similarities between English and Indian employment law, as "English law was not so straightforward as to be neutral" when making a decision and b) that there was no error in finding that, as the employers had been seeking to establish an office in London, it supported the conclusion that England was "the place best suited to resolving the disputes to which obligations under the contract of employment may give rise".

___________

Case No: HQ09X05107

Neutral Citation Number: [2011] EWHC 1307 (QB)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 25/05/2011

Before :

THE HONOURABLE MR JUSTICE TUGENDHAT

Between :

TIMOTHY WRIGHT (Claimant/ Respondent)

- and -

(1) DECCAN CHARGERS SPORTING VENTURES LTD (2) DECCAN CHRONICLE HOLDINGS LTD (Defendants/ Appellants)

Richard Salter QC and William Edwards (instructed by Reynolds Porter Chamberlain) for the Appellant

Victor Joffe QC and Thomas Raphael (instructed by Maitland Hudson) for the Respondent

Hearing dates: 11, 12 May 2011

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 TUGENDHAT

Mr Justice Tugendhat :

  1. On 24 and 25 May 2008 the parties entered into an agreement ("the Agreement") whereby the First Defendant ("Deccan Chargers") employed the Claimant ("Mr Wright") as Chief Executive Officer. Deccan Chargers is a subsidiary of the Second Defendant ("Deccan Chronicle"). They are both Indian companies. In April 2008 Deccan Chronicle had entered into a franchise agreement with the Board of Control of Cricket India ("BCCI") by which it acquired from the Indian Premier League ("IPL") the rights to the Hyderabad IPL franchise known as the Deccan Chargers cricket team. Deccan Chronicle transferred those rights to Deccan Chargers in August 2008. Deccan Chargers is also the name of a cricket team based in Hyderabad, India. The IPL is a domestic Indian 20/20 cricket league involving eight teams from all over India.
  1. There very soon arose a dispute between Mr Wright and the Defendants. It is Mr Wright's case that by its conduct between 1 June 2008 and 26 January 2009 Deccan Chargers renounced the Agreement, and that by letter dated 26 January 2009 Mr Wright accepted that conduct as bringing the agreement to an end. Deccan Chronicle had signed the Agreement as guarantor of Deccan Chargers' obligation.
  1. Master Fontaine gave permission to Mr Wright to serve the proceedings out of the jurisdiction in India. There is no dispute that CPR Practice Direction 6B paras 3.1(6)(a) and (c) gave the court the power to make such an order. The claim is in contract where the contract was made within the jurisdiction (the Agreement was made in London), and the Agreement expressly provides that it is governed by English Law.
  1. For the purposes of this appeal the critical provision is CPR 6.37(3), which provides that in such a case:

"The court will not give permission unless satisfied that England and Wales is the proper place in which to bring the claim".

  1. The Master was satisfied that England and Wales is the proper place in which to bring the claim. She dismissed the Defendants' application that she set aside the order she had previously made by which she had given permission to serve the proceedings in India.
  1. There had been earlier proceedings ("the first proceedings") in which Mr Wright claimed very similar relief, and which he has subsequently discontinued. The progress of the first proceedings was relevant to the application to set aside, and to this appeal, in two ways. First, the evidence adduced in the first proceedings was also relied on in these proceedings. Second, Mr Wright encountered difficulties in the first proceedings upon which he relied as showing that India was not the proper place in which to bring the claim.
  1. There were two additional points raised before the Master in the application to set aside service, in respect of which the Defendants were successful. The first of these was that Mr Wright had advanced an alternative case that there was an express agreement made orally by Mr Iyer for the Defendants to submit to the jurisdiction of England and Wales.
  1. The second point on which Mr Wright had been unsuccessful was that he claimed that he did not in fact need permission to serve the proceedings out of the jurisdiction. The basis for this contention was that he was entitled as of right to serve the proceedings under Council Regulation (EC) No 44/2001 ("the Judgements Regulation"). Although he lost on that point, the Judgments Regulation is relevant to a point on which he won, so it needs to be set out, so far as relevant.
  1. The Judgments Regulation creates a special regime for jurisdiction over individual contracts of employment which is set out in Section 5, Articles 18 and 19, of that Regulation. These are, so far as material, as follows:

"18 ..

  1. Where an employee enters into an individual contract of employment with an employer who is not domiciled in a Member State but has a branch, agency or other establishment in one of the Member States, the employer shall, in disputes arising out of the operations of the branch, agency or establishment, be deemed to be domiciled in that Member State.
  1. An employer domiciled in a Member State may be sued:
  1. In the courts of the Member State where he is domiciled; or
  1. in another Member State:

(a) In the courts for the place where the employee habitually carries out his work or in the courts for the last place where he did so,…"

THE APPEAL

  1. This is an appeal brought by leave of a judge, in accordance with CPR 52.11. As Toulson LJ said in WPP Holdings Italy SRL v Benatti [2007] EWCA Civ 263, [2007] 1 WLR 2316 at para [45]:

"It is important to recall that this is not a rehearing but a review. The fact that permission to appeal has been given does not mean that this court should therefore carry out a fresh examination of all the evidence in order to determine whether it would independently have arrived at the same conclusion as the judge. As Rix LJ emphasised in Royal and Sun Alliance Insurance plc v MK Digital FZE (Cyprus) Limited [2006] EWCA Civ 629, [2006] 2 Lloyd's Rep 110, at para 52, the question is whether the judge erred".

  1. The Master delivered a carefully considered and detailed judgment over twenty-six pages long. I am indebted to her for the account of the relevant facts which she gave, and from which the following summary is derived.

THE FACTS

  1. These, the second, proceedings were commenced by a claim form issued on 19 November 2009. Permission to serve it out of the jurisdiction was granted on 24 November 2009. It is not in dispute that it was subsequently served on the Defendants on 23 June 2010 pursuant to an order for service by an alternative method which had been made on 24 May 2010.
  1. The evidence before the court includes, for Mr Wright, the five witness statements made by his solicitor Mr Gomez, and three witness statements made by himself. For the Defendants there is a witness statement from Mr Alexander, who was the solicitor formerly instructed by the Defendants, and the witness statement of Mr P K Iyer, who signed the Agreement on behalf of the Defendants.
  1. Mr Wright has had a successful career in the field of sports management. He has at all times resided in London. He was formerly employed, through his company TW Sports Limited, as a consultant to International Management Group ("IMG").
  1. Deccan Chronicle is a large printing and publishing company which, among other things, publishes the Deccan Chronicle. This is the largest circulation English language newspaper in South India.
  1. The Agreement provides as follows:

"The Company (as defined below) has described to TW [Mr Wright] its plans to create a "sports city" in Hyderabad. This may be summarised as a multi-use stadium, arena and hotel complex with state of the art facilities to showcase sports, music and other entertainment.

The Company wishes TW to help engage the services of certain sports and music industry companies and to collaborate with them in the development of a business model and a business plan that will be key documents to support an Initial Public Offering ("IPO") for the Company's stock on the London Alternative Investment Market or other investment exchanges ("listing exchange").

TW will be expected to lead an executive team he will identify and engage as well as the Company's various external agencies and other out-sourced project management, architects and constructors. TW is to play a pivotal role in the development of the sports city brand and all of the commercial and other associated opportunities.

It is understood and agreed that TW will have responsibility for the strategic management of the Hyderabad IPL franchise currently known as the Deccan Chargers. TW is to advise the Board on issues to include, but not be limited to: transfer targets, player contracts, coaching, staff acquisitions and management, marketing & media management, commercial exploitation and other brand building worldwide.

It is agreed and understood that certain of TW's fellow Directors will act as "Promoters" of the IPO and noted that they have a proven track record in this regard. It is further understood and agreed that the Company will not look to TW to take a lead role in the acquisition of a suitable property site in Hyderabad or in obtaining all necessary planning approval and other permissions.

TW agrees to cooperate and collaborate fully and closely with the Managing Director of Deccan Chronicle Holdings Ltd and with any and all other Directors of the Company from time to time.

It is agreed that, unless and until otherwise agreed in writing, this role is to be TW's exclusive executive employment activity.

EmploymentEmployer: Deccan Chargers Sporting Ventures Limited (or such other entity as is the owner of the Hyderabad IPL franchise (currently known as 'the Deccan Chargers')) ("the Company")Title: Chief Executive Officer of the Company, reporting to P K Iyer.Start date: 1 June 2008Board A member of a board of the CompanySalary: £300,000 until such time as the Company is generating revenue, at which point rising to £500,000 per annum payable monthly in arrearsTerm: Initial fixed term of three (3) years and thereafter 12 months rolling notice on either side.Bonus Arrangements:
  1. Signing-on bonus - £250,000 to be due within seven (7) days of signature of these Heads of Terms.
  1. Annual bonus – to be agreed, amount to be dependent on achievement of personal and corporate objectives to be agreed at outset of each bonus cycle.
Benefits

(a) Private medical and dental cover (international) for self and immediate family at BUPA Scale A level (or equivalent)

(b) Penision – 20% of salary to be paid to pension scheme of TW's choice

(c) Life assurance cover – 8 times salary

(d) Permanent health insurance- providing cover at ¾ths salary on disability

(e) Critical illness insurance

Holiday

Annual entitlement to 5 weeks' paid holiday plus statutory and English Bank holidays.

Location, Office Facilities and Expenses

(a) Understood primary home of TW and family remains London ( or such other place as TW decides)

(b) TW will be based initially in London and will travel to Hyderabad and elsewhere as necessary in connection with his duties

(c) Company to provide an office and office support in London and Hyderabad for TW. In case of London, office budget to be agreed in advance with the Company. [Note: TW expects this to be modest.]

(d) Business expenses to be paid/reimbursed in accordance with normal Company policies for its senior executives.

Equity

(a) Initial

As soon as is practicable after the date on which these Heads of Terms are signed, TW to acquire 3.5% by value of shares in the Company (such shares with rights equal to those owned by founding shareholders). The shares are to be acquired for a price equal to their unrestricted market value at the date of acquisition (determined in accordance with normal UK unlisted company share valuation principles), but on terms such that payment is deferred until the cessation of TW's employment (pursuant to these Heads of Terms) or the sale of the shares, whichever comes first. Subject to TW's performance and that of the Company, the Directors may decide to waive TW's obligation to pay the deferred purchase price in whole or in part at any time.

The holding of 2% of the Company's shares (the "2% tranche") will vest immediately, with the remaining 1.5% (the "1.5% trenche") vesting once the Company produces an operating profit.

The shares to be subject to a put option between the Company (or nominee) and TW whereby:

Subject as above, TW shall be able to exercise a put option for the whole or any part of his shareholding by notice in writing to the Company and the Company shall make payment for the same within seven (7) days of the value of such shareholding as at the date of exercise being determined. For these purposes, the value of any shareholding of TW shall be the value of such shares on a listing exchange (if listed) or, if not listed, as determined independently in accordance with normal UK unlisted company share valuation principles by one of KPMG, Deloitte, Ernst & Young or PWC (as agreed between the parties, and not being the Company's auditors), within 60 days of being instructed, the cost of such valuation to be borne by the Company and the result to be binding on the parties (save in the case of manifest error).

TW to be subject to any listing or regulatory rules as affect all shareholders.

(b) Future

TW to participate at level commensurate with his role in any future stock option restricted stock or other incentivisation schemes for Directors.

Severance Guarantee

In the event that TW's employment is terminated by the Company (to include as a result of a constructive dismissal) at any time, TW will receive immediate payment (to include contractual notice entitlement and payment for any then vested equity ("total package")) of the higher of the then value of his total package and £10 million. If the shares are not listed at that time their value for this purpose shall be as determined independently in accordance with normal UK unlisted company share valuation principles by one of KPMG, Deloitte, Ernst & Young or PWC (as agreed between the parties and not being the Company's auditors) within 60 days of being instructed, the cost of such valuation to be borne by the Company and the result to be binding on the parties (save in the case of manifest error). Any unvested equity then held by TW shall be forfeited for an amount equal to the acquisition price paid or still to be paid, and any vested equity shall be transferred by him to the Company or its nominee as soon as is practicable after such payment is made.

Tax efficiency

The parties will cooperate in the structuring of these arrangements to achieve optimal tax efficiency for TW.

Guarantee

Any financial obligations to TW arising out of these arrangements to be guaranteed by Deccan Chronicle Holdings Limited.

Law

These terms to be governed by English law."

  1. The claim as originally pleaded was for the £10m Severance Guarantee and damages. By amendment there were added two further claims. The third claim, added by amendment, is for salary in the sum of £133,333 said to have been under paid. This arises out of Mr Wright's contention that Deccan Chargers did generate revenue, so that he should have been paid at the rate of £500,000 per annum from that point, instead of at the £300,000 per annum which was the rate at which he was in fact paid.
  1. The fourth claim, also added by amendment, is for a declaration that

"the use of the words 'English law' in the 'Law' clause means 'These terms are to be governed by English law and the parties hereby submit to the exclusive jurisdiction of the English Court'; alternatively that there be rectification of the Agreement by the addition to the clause entitled 'Law' of the words 'and the parties hereby submit to the exclusive jurisdiction of the English Court'…".

  1. Mr Wright pleads eighteen breaches of express and implied terms of the Agreement. These included the following: Deccan Chargers failed to provide any of the benefits due under the Agreement; failed to appoint Mr Wright to be a member of the Board; failed to transfer to him the 3.5% by value of the shares as soon as was practicable after 24 May 2008 or at all; retained Mr J Krishnan as the CEO of the team wholly owned by Deccan Chargers, which significantly undermined the authority of Mr Wright as CEO; and various other acts which he alleges undermined or interfered with or conflicted with that which he was doing or attempting to do in performance of his obligations under the Agreement.
  1. Of particular relevance to the matters which the Master had to decide was Mr Wright's allegation that in late November 2008 Deccan Chargers instructed him to work exclusively from London until 1 March 2009. But by a letter dated 17 January 2009 Mr Iyer wrote that Mr Wright was required to work in Hyderabad, but that he risked arrest if he did. The letter included the following:

"… Your long absence from Hyderabad is making things difficult at Chargers. I have also taken a conscious decision in view of the liquidity crunch not to make additional investments in Chargers during the year but to keep the show going…. What disturbs me most is the organised effort from unknown quarters to close in on IMG and through it IPL-BCCI. I learn … that the immigration authorities in Hyderabad have opened up a dossier on your extended stay in India during IPL team auction and would soon launch criminal prosecution, if prima facie case is made out that you stayed on without a valid visa…. Once arrested it would be too difficult to extricate out of the situation. … Tim I have full faith in your abilities to turn Deccan Chargers not only into a winning team but also enhance its profitability and enterprise value. This not only requires commitment which you have, but relocation to Hyderabad permanently which in the present circumstances is loaded with risk. The Board of [Deccan Chargers] have also resolved to direct your relocation to Hyderabad immediately…"

THE PRINCIPLES TO BE APPLIED

  1. There is no dispute between the parties as to the main principles to be applied by the Court in deciding whether or not it is satisfied, in accordance with CPR 6.37(3), "that England and Wales is the proper place in which to bring the claim". Those principles are to be found set out in Spiliada Maritime Corp v Cansulex Limited [1987] AC 460 at pp 478 to 482. These principles have recently been summarised in terms approved by the Court of Appeal in Cherney v. Deripaska (No 2) 2009] [EWCA Civ 849 [[2010] 2 All ER (Comm) 456 at para [20]. The Master set these out in her judgment, and they are as follows:

"(i) The burden is upon the Claimant to persuade the court that England is clearly the appropriate forum for the trial of the action.

(ii) The appropriate forum is that forum where the case may most suitably be tried for the interests of all the parties and the ends of justice.

(iii) One must consider first what the 'natural forum' is; namely that with which the action has the most real and the substantial connection. Connecting factors will include not only factors concerning convenience and expense (such as the availability of witnesses), but also factors such as the law governing the relevant transaction and the places where the parties reside and respectively carry on business.

(iv) In considering where the case can be tried most 'suitably for the interests of all the parties and for the ends of justice' ordinary English procedural advantages such as a power to award interest, are normally irrelevant as are more generous English limitation periods where the Claimant has failed to act prudently in respect of a shorter limitation period elsewhere.

(v) If the court concludes at that stage that there is another forum which is apparently as suitable or more suitable than England, it will normally refuse permission unless there are circumstances by reason of which justice requires that permission should nevertheless be granted. In this inquiry the court will consider all circumstances of the case, including circumstances which go beyond those taken into account when considering connecting factors with other jurisdictions. One such factor can be the fact, if established objectively by cogent evidence that the Claimant will not obtain justice in the foreign jurisdiction. Other factors include the absence of legal aid or the ability to obtain contribution in the foreign jurisdiction.

(vi) Where a party seeks to establish the existence of a matter that will assist him in persuading the court to exercise its discretion in his favour, the evidential burden in respect of that matter will rest upon the party asserting it".

  1. The Master further recorded the agreement between the parties that the correct approach to this issue is to identify the issues to be determined and consider the competing jurisdictions in relation to each issue, as stated by Lawrence Collins J (as he then was) in Sawyer v Atari [2005] EWHC 2351 (Ch) at para [54].
  1. It is common ground that the standard of proof required to be satisfied is that of a good arguable case: WPP Holdings paras [37]-[41], applying Bols Distilleries BV (trading as Bols Royal Distilleries) v Superior Yacht Services Ltd [2007] 1 WLR 12. The court is not conducting a mini trial. I shall refer to this standard of a good arguable case as "the relevant standard".

THE JUDGMENT

  1. In paragraphs 18 to 77 of her judgment the Master set out the submissions of the parties. In paragraph 78 and onwards she set out her conclusions. First, she found in favour of the Defendants on the two points already mentioned, namely the alleged oral or informal consent to jurisdiction in England and Wales, and the application of the mandatory jurisdiction provisions of the Judgments Regulation. There is a Respondent's Notice in respect of these points.
  1. She then turned to the issue whether she could be satisfied that England was the proper place in which to bring the claim. Before turning to the various considerations she had been invited to address, the Master reminded herself of the guidance in the authorities set out above. She also referred to the nature of the issues of fact which were likely to arise in the action.
  1. The evidence of the issues of fact is in the witness statement of Mr Alexander sworn in the first proceedings (but equally applicable to the second). It is clear from that affidavit that, in respect of a number of the alleged breaches of contract, the real issue is not whether the event referred to by Mr Wright occurred or did not occur, but whether it amounted to a breach of contract. For example, it is said that Deccan Chargers was in the process of arranging the contractual benefits, and in the process of planning the appointment of Mr Wright to the Board. Accordingly, as the Master found, there will have to be evidence at any trial as to these matters, and as to whether they amounted to repudiatory breaches or a renunciation of the Agreement. This will be a matter of mixed law and fact. There is also an issue between the parties as to whether the Severance Guarantee is enforceable, or whether it constitutes a penalty.
  1. Most of the matters which the Master was asked to take into consideration are ones which she found provided little assistance in deciding which jurisdiction is the proper one. Thus, in respect of documentary evidence, she considered that that did not provide any great support for either jurisdiction. Likewise in respect of factual witnesses, she found that that consideration pointed more towards India than to England, but not overwhelmingly so. In respect of expert witnesses she decided that that favoured neither forum over the other. Mr Wright had contended that there might be other parties joined to the litigation, but the Master did not consider that this was a factor in favour of the English court.
  1. Thus, in relation to all but two matters the Master found that the question was "relatively finely balanced", with the factor marginally in favour of the Defendants' case being the question of factual witnesses.
  1. The two matters which the Master found to be most significant were the provisions in the Agreement for the choice of English law, and that Mr Wright should remain resident in England, and that Deccan Chargers agreed to establish an office in London. What she said in relation to these two matters is set out in paragraphs 85 to 88, and 95 of her judgment, which read as follows:

"Choice of Law

  1. I accept the Claimant's submissions that this is always significant, although it is clear that it must not be assumed that by agreeing to English law, the parties must be regarded as having contracted to have chosen English jurisdiction (Novus Aviation Ltd v Onur Air Tasimacilik AS [2009] 1 Lloyd's Rep 576 at 584 paragraph 76). It is clear that the issue of choice of law has a different weight in different circumstances (Novus Aviation at 585, paragraph 77)…
  1. It is, of course, usually preferable that English law is applied by the English courts, rather than applied by foreign court hearing expert evidence on English law. I accept the Defendants' evidence and submissions, not demurred from by the Claimant, that India, whose employment law is largely based on English law, and in some respects similar, as can be seen from the evidence of Little & Co., and where there is frequent reference to English jurisprudence, is one of the countries which would be better placed to apply English law. Nevertheless, it is clear that English employment law and Indian employment law differ in may respects and that there are issues in this case in respect of which English law would not be straightforward. The issues as to repudiation will perhaps not pose any great difficulty, but the difference between the severance guarantee and liquidated damages is a matter that is of some subtlety and complexity and requires the applicability and consideration of questions of unconscionability and English public policy. There is no such concept in Indian law, according to the Defendants' evidence (Little & Co letter 17 July 2009; …).

Public Policy Considerations

  1. I accept the Defendants' submissions that there is no principle of public policy that an employee should be permitted to sue his employer in the country where he works that has been incorporated into the jurisprudence in respect of the principles of forum conveniens. Lawson v Serco was dealing with the applicability of section 94(1) of the Employment Rights Act 1996 in respect of unfair dismissal claims brought in an English Employment Tribunal. Diggins v Condor also concerned an unfair dismissal claim in an Employment Tribunal and was concerned with section 199(7) of the Employment Rights Act 1996…

Conclusion on Forum Conveniens

  1. I have concluded that, in terms of forum conveniens issues, the matter is relatively finely balanced, the factors in relation to the factual witnesses being marginally in favour of the Defendants. The factors that lead me to conclude that the Claimant has established that the balance is in favour of the appropriate forum being England, not India, are:

i) Choice of Law, which, in particular in relation to employment law, where domestic considerations are perhaps more than usually applicable, suggest that English courts would be preferable to apply English law on both repudiatory breach in the context of employment claims, and in particular severance guarantees in relation to employment claims.

ii) The fact that the Defendants agreed that the Claimant should remain resident in England, and that they agreed to establish an office of Deccan Chargers in London for the Defendant. If they had fulfilled this latter obligation, then this court would have had mandatory jurisdiction under the Judgments Regulation. It seems to me to be a matter to be taken into account in all the factors that the court should consider that (a), the Defendants accepted that the Claimant would be based in this jurisdiction and would require an office in London; and (b), because of the Defendants' breach of this obligation they have been able to put the Claimant to the burden of establishing that England is the appropriate forum."

  1. In case her conclusion in respect of those matters was found to be in error, the Master went on to consider other matters relied on by Mr Wright as making England the proper jurisdiction. These were two separate but related matters referred to as delay and obstruction. Mr Wright contended that the delays in the Indian courts are generally so great that India should not be held to be the proper place in which to bring the action. He also contended that Deccan Chargers had obstructed him in bringing both the first proceedings and these proceedings, including for example, by writing to him before any claim had been made stating that, if he returned to Hyerdabad, he would be at risk of arrest on immigration matters arising out of his visits to India for IMG (para 20 above) as a result of complaints which Mr Wright contended had been secretly instigated by Deccan Chargers themselves.
  1. The Master's conclusions on these matters are set out in paragraphs [97] to [99] of her judgment. She concluded at para [102], that for these two reasons, Mr Wright would not obtain a fair trial in India even if it were the most suitable forum. It is important to record that there is no suggestion that the Indian authorities are in any way implicated in any obstruction. The allegation is against Deccan Chargers and those managing its affairs. And the case on delay is based on public statements made by Indian judges, and no bad faith is alleged.
  1. Accordingly, the Master's overall conclusion was that pursuant to CPR 6.37(3), she was satisfied that England and Wales is the proper place in which to bring this claim against Deccan Chargers.
  1. The Master was also satisfied that the claim should also proceed against Deccan Chronicle in this jurisdiction for the reasons advanced by Mr Wright as recorded in para 57 of her judgment. If the court has jurisdiction in respect of Deccan Chargers then it is desirable in the interests of justice that the claims against the two defendants should proceed in the same court, even if it would otherwise have been the case that India was the most appropriate jurisdiction for the claim against Deccan Chronicle. There was no challenge to this reasoning.

CHOICE OF LAW

  1. Mr Salter appeared for the Defendants. Neither he, nor his junior or solicitors appeared below. Mr Salter submits that the choice of law in this case is a factor of little or no weight, because the dispute between the parties is about facts in areas where English law is well settled, so the English court would have no real advantage over the Indian court. He submits that the Master fell into error in respect of each of the two matters of law to which she referred. Her references to Indian law were irrelevant, save to the extent that they showed that the Indian courts would be better able than many other foreign courts to apply English law. Differences between English and Indian law had no bearing on this.
  1. One error of the Master, it was submitted, was to suggest that English law on penalties was not straightforward (paras [87]-[88] of her judgment). Mr Salter submits that the principles are well settled. He cited Lansat Shipping Co Ltd v Glencore Grain BV [2009] EWCA Civ 855; [2009] 2 Lloyds Rep 688 paras [31]-[35], which it is not necessary to set out in this judgment.
  1. Further Mr Salter submits that the Master conflated 'unconscionablity' with public policy. The reference in the Dunlop case (cited in Lansat) to the amount of the payment stipulated being 'unconscionable' was not a test of public policy, and there was no reason for thinking that the Indian court would have any difficulty in applying that test. And there is no special principle of employment law in relation to penalties, as appears from Murray v Leisureplay [2005] EWCA Civ 963; [2005] IRLR 946.
  1. For Mr Wright Mr Joffe submitted that the Master made no error. The choice of law is a relevant factor, as set out in Cherney at sub-para (ii) (cited above). *The Master had set out in her judgment the relevant law, which was set out by Lawrence Collins J in Novus Aviation Ltd v Onur Air Tasimacilik AS* [2009] EWCA Civ 122; [2009] 1 Lloyd's Rep 576 as follows:

77.

"In BP Exploration Co (Libya) v Hunt [1976] 3 All ER 879, 893 (in a passage which is not in the report at [1976] 1 WLR 788) Kerr J said that the fact that the contract was governed by English law was the predominating factor to be borne in mind. Unless there were other considerations of overwhelming weight which militated against the English courts, the appropriate forum for deciding the rights of the parties under English law were the courts of England. In Texas it would be necessary to adduce expert evidence on English law. But in The Elli 2 [1985] 1 Lloyd's Rep 107, at 118, May LJ said that he would not go so far as Kerr J in saying that the fact that the contract was governed by English law was a predominating factor. That factor would have a different weight in different circumstances. I agree.

  1. Factors which may weigh in favour of the English forum would include the fact that issues of English public policy may be involved (as in EI du Pont de Nemours v Agnew [1987] 2 Lloyd's Rep 585; Mitsubishi Corp v Alafouzos [1988] 1 Lloyd's Rep 191) or the fact that the foreign forum, notwithstanding the express choice of English law, may not apply English law, and may instead apply its own law: Coast Lines Ltd v Hudig and Veder Chartering NV [1971] 2 Lloyd's Rep 390, affd [1972] 2 QB 34."
  1. In Stonebridge Underwriting Ltd v Ontario Municipal Insurance Exchange **[2010] EWHC 2279 (Comm); [2010] 2 CLC 349, [2011] Lloyd's Rep IR 171 Christopher Clarke J said:

"39. Nevertheless there is a distinct advantage in having the issue of construction determined by the English Commercial Court which is the court (a) whose law applies (b) which has power to determine what are the relevant principles (as opposed to deciding, on the evidence of experts, what as a matter of fact they are); (c) which regularly applies them; and (d) which has a particular degree of experience and expertise in reinsurance matters, particularly those concerning Lloyd's. I note the unchallenged evidence of Mr D'Silva that there is little jurisprudence in Ontario relating to the interpretation and application of reinsurance contracts and that Ontario courts have limited experience in dealing with the present type of insuring arrangements. I note also that in Tryg Baltica International v Boston Compania de Seguros [2005] Lloyd's Rep IR 40,45 Cooke J said that "where points of construction of English law are involved, particularly those which involve reinsurance with conditions precedent ….the natural expectation of the parties must be for the English Courts to resolve such matters"."

  1. Mr Salter submits that Stonebridge is a case concerned with reinsurance, which is an area of law notorious for its complexity, and the issues were ones of the construction of a contract, rather than of English law. But Mr Joffe submitted that the approach of Christopher Clarke J, and so of the Master, is consistent with the view expressed, obiter by Lord Goff in Spiliada at p 486F-G and by Brandon J (as he then was) in The Eleftheria [1970] P 94, 105B.
  1. Mr Joffe submits that Murray v Leisureplay illustrates that the doctrine of penalty is not straightforward in relation to employment contracts. In that case, the Court of Appeal allowed an appeal against a decision of Stanley Burnton J on the question whether a stipulation was a penalty, but Arden LJ and Buxton LJ, in detailed judgments, took different approaches to the issue. Arden LJ at paras [29]-[30] described the penalty issue as "one of considerable jurisprudential interest" and noted that "English law has not always taken a consistent approach". Clarke LJ preferred the broader approach of Buxton LJ (para [105]). Buxton LJ said at para [115] that "the traditional learning as to penalty clauses is very unlikely to fit into the dynamics of an employment contract, at least when the penalty is said to be imposed on the employer".
  1. Mr Joffe also referred to Mitsubishi v Alafaouzous [1988] 1 Lloyds Rep 1891 (a case on an allegedly illegal contract) and Euro London Appointments Ltd v Claessens International Ltd [2006] EWCA Civ 385; [2006] 2 Lloyds Rep 436. That is a case where the doctrine of penalty was considered in the context of an employment contract. But neither of these cases seemed to me to provide additional assistance.
  1. Further Mr Joffe relied on the relatively recent recognition in English law of the implied term relating to trust and confidence (Mahmud v BCCI [1998] AC 20). But the Master did not found her conclusion upon that, and that line of authorities was relied on in support of the Respondent's Notice.
  1. Mr Salter also relies on the evidence of Mr Khatlawala, a partner in Little & Co. While he does state, as the Master recorded, that "Under Indian laws there is no specific provision of 'Severance Guarantee'", he goes on to set out relevant provisions of Indian law. These include s.74 of the Indian Contract 1872 which relates to "compensation for breach of contract where penalty stipulated for". I accept that the shared history of English and Indian law would make it easier for an Indian court than for some other foreign courts to apply English law. The similarities or differences between English law and Indian law are relevant to that extent, but not otherwise. But I do not understand the Master to have meant anything else in her judgment when she referred to Indian law.
  1. The question I have to decide on this appeal is not directly a question of English law of penalty clauses in employment contracts. It is whether the Master was entitled to reach the view that she did, or whether she made an error of law. In my judgment, the submissions of Mr Salter do not establish that English law on this point is so clear that the Master fell into the error which he attributes to her. The exercise she was engaged in was not one that can be reduced to units that can be counted or weighed precisely. The fact that there is an English choice of law clause could not be said to favour India as the proper place to bring this action. At best from the Defendants' point of view it could be neutral, favouring neither jurisdiction. The Master held that English law was not so straightforward as to be neutral, and I can see no basis for concluding that she erred in law in reaching that conclusion.

PLACE OF RESIDENCE AND EMPLOYMENT

  1. Mr Salter submits that on the true interpretation of the Agreement, and the evidence of the factual circumstances in which it was entered into, the Agreement had little to do with England and Wales. It provided that Mr Wright was to be "based initially in London", but he placed emphasis on the word "initially", and upon the provision that he was to "travel to Hyderabad and elsewhere as necessary".
  1. Mr Salter submitted that the Master was in error in regarding these provisions, and the provision relating to the office in London, as supporting a conclusion that England and Wales is the proper jurisdiction.
  1. Mr Joffe submitted that if the office contemplated in the contract had been established, then it would have been an establishment within Art 18.2. As a result, if it remained open at the time the proceedings were commenced, Deccan Chargers could have been served with the proceedings under CPR 6.9(2), which, in case 7, permits service on "any other company or corporation" at

"Any place within the jurisdiction where the corporation carries on its activities; or any place of business within the jurisdiction".

  1. If on the other hand the office did not remain open (and it did not), then service could have been effected without leave in accordance with the Judgments Regulation.
  1. As the Master recorded in her judgment at paras [54]-[58], the submission went further, to the effect that the words "has a branch" cover the situation where the creation of that establishment was envisaged in the Agreement, with the effect that Deccan Chargers was deemed (by Art 18) to be domiciled in England and Wales, thereby giving rise to the application of Art 19. Thus on Mr Joffe's submission, where an employer who does not have a domicile in a Member State agrees with an employee to set up an establishment in a Member State, then the agreement has an effect analogous to an agreement as to "prorogation of jurisdiction" within Art 23 of the Judgments Regulation. This is the point the Master rejected for reasons given in para 80 of her judgment. She did not accept that the fact that Mr Wright worked at home for eight months meant that Deccan Chargers had set up an establishment within Art 18.2.
  1. However, as already noted, in para [95(ii)] of her judgment the Master accepted that if Deccan Chargers had fulfilled the contractual obligation to set up an office, then that would have led to mandatory jurisdiction under Arts 18 and 19.
  1. The first point taken by Mr Salter on this topic is that even if Deccan Chargers had set up the office in London referred to in the Agreement, that would not have been a basis for jurisdiction against Deccan Chronicle. Mr Joffe accepts that Deccan Chronicle could not have been served under the Judgments Regulation Arts 18 and 19, even if Deccan Chargers could have been.
  1. Next Mr Salter submits that the office contemplated by the Agreement would not have been a "branch, agency or other establishment" within the meaning of Art 18 of the Judgments Regulation, with the result that the Master's assessment of this issue was based on an error of interpretation of the Judgments Regulation.
  1. In support of this proposition Mr Salter cites Somafer SA v Saar-Ferngas AG [1978] ECR 2183, where the court said:

"12. … the concept of branch , agency or other establishment implies a place of business which has the appearance of permanency, such as the extension of a parent body, has a management and is materially equipped to negotiate business with third parties so that the latter, although knowing that there will if necessary be a legal link with the parent body, the head office of which is abroad, do not have to deal directly with such parent body but may transact business at the place of business constituting the extension".

  1. That was a case on the interpretation of the Convention of 27 September 1968 on jurisdiction and the enforcement of judgments ("the Brussels Convention") Art 5(5), which provided that:

"5. A person domiciled in a Contracting State may, in another Contracting State, be sued … (5) as regards a dispute arising out of the operations of a branch, agency or other establishment, in the courts of the place in which the branch agency or other establishment is situated".

  1. The Master applied Somafer in para 80 of her judgment in reaching the conclusion that Art 18 did not give mandatory jurisdiction in the present case. It is implicit that she was also applying Somafer in para [95(ii)] of her judgment when she found that if the contractual obligation to establish an office in London had been performed, then this court would have had mandatory jurisdiction. It must be implicit that that would have been because the office would have been an establishment within Art 18.
  1. In any event, in my judgment these findings were open to the Master if she was applying Somafer and the relevant standard of proof, and her findings cannot be challenged as showing an error of law.
  1. In para [95(ii)] the Master refers to "the Defendants' breach of this obligation". In my judgment she was entitled to find such a breach to the relevant standard of proof. But it does not seem to me that her conclusion is dependant upon a finding of breach. It is the fact of the contractual promise, together with the fact that the office had not yet been set up, that seems to me to be logically sufficient to lead to the Master's conclusion, whether or not these facts amounted to there being a breach of the promise.
  1. Mr Salter also submitted that the Master fell into error at para [94] of her judgment in finding that the fact that Mr Wright was to be based in, and carry out a major part of his work in, England balanced the connection to India of the work he was required to do concerning the proposed development of a sports city in Hyderabad. Mr Salter submitted that the whole purpose of the Agreement is the development of the business of an Indian company in India, so the Master should have concluded that the Agreement was closely connected with India and had only a limited connection with England.
  1. Mr Joffe submitted that the requirement to work, even initially, in London does establish a connection with England which supports the Master's conclusion on this point.
  1. The Brussels Convention contained no specific provision relating to individual employment contracts, but there was case law on its impact on employment contracts. Mr Joffe submits that this demonstrates the existence of a recognised policy in the law, as set out in Mulox v Geels [1993] ECR I-4075. That case concerned the interpretation of the Brussels Convention Art 5(1) which includes the words;

"5. A person domiciled in a Contracting State may, in another Contracting State, be sued: (1) in matters relating to a contract, in the courts of the place of performance of the obligation in question…"

  1. In Mulox the court said this in relation to contracts of employment:

"14 … The Court has consistently held that, in view of the specific nature of contracts of that kind (Case 133/81 Ivenel v Schwab [1982] ECR 1891, paragraph 20, Case 266/85 Shenavai v Kreischer [1987] ECR 239, paragraph 11, and Case 32/88 Six Constructions v Humbert [1989] ECR 341, paragraph 10), the obligation to be taken into consideration for the purposes of the application of Article 5(1) of the Convention to contracts of employment is always the obligation which characterizes such contracts, namely the employee' s obligation to carry out the work stipulated.

15 The Court found in Ivenel, Shenavai and Six Constructions, cited above, that such contracts display certain particular features compared with other contracts in that they create a lasting bond which brings the worker to some extent within the organizational framework of the employer' s business and they are linked to the place where the activities are pursued, which determines the application of mandatory rules and collective agreements protecting the employee.

16 It follows that, in the case of a contract of employment, it is appropriate to determine the place of performance of the relevant obligation, for the purposes of applying Article 5(1) of the Convention, by reference not to the applicable national law in accordance with the conflict rules of the court seised but, rather, to uniform criteria which it is for the Court to lay down on the basis of the scheme and the objectives of the Convention.

17 In order specifically to define the place of performance, it must first be noted that, in Ivenel and Shenavai, the Court held that the rule on special jurisdiction in Article 5(1) of the Convention was justified by the existence of a particularly close relationship between a dispute and the court which may most conveniently be called on to take cognizance of the matter. In its judgments in Shenavai and Six Constructions, the Court added that, in view of the particular features of contracts of employment, it is the courts of the place in which the work is to be carried out which are best suited to resolving the disputes to which one or more obligations under such contracts may give rise."

  1. Mr Salter submitted that Mulox and Art 5(1) of the Brussels Convention were concerned with allocation of jurisdiction between the Contracting States, and that has nothing to do with whether there is jurisdiction to serve proceedings out of the jurisdiction upon a company which is not domiciled in a Member State.
  1. As a matter of construction of Mulox and Art 5(1) of the Brussels Convention, there is force in Mr Salter's submission. But the Master was not engaged in that exercise. She was considering the different factors which pointed towards one jurisdiction or another as the proper one for the purposes of CPR 6.37(3).
  1. The Master had found that Mr Wright's residence in London and the contractual places of performances were evenly balanced factors: see para [94] (referred to in para 58 above). That was an assessment which discloses no error of law. The contractual obligations were not to work only in London and Hyderabad: They included that Mr Wright should travel "elsewhere" as necessary. The development of the business model that was to support the IPO in London is the first item mentioned in the Agreement in relation to which Deccan Chargers required Mr Wright's services.
  1. I see no error on the part of the Master in adopting the view that "The fact that the Defendants agreed that the Claimant should remain resident in England, and that they agreed to establish an office of Deccan Chargers in London for the Defendant" led to the conclusion England is the place best suited to resolving the disputes to which obligations under the contract of employment may give rise. A similar view is implicit in the inclusion of Art 18 in the Judgments Regulation. That is also noted in the Explanatory Memorandum to the Regulation ("Com (1999) 348 Final") to which Mr Joffe referred.

OTHER POINTS

  1. Mr Salter challenged a number of the other findings of the Master in so far as she had held that issues were finely balanced. I do not find it necessary to deal with these individually. There was in my judgment no error of law on the part of the Master. Moreover, there were other factors, most notably the convenience of expert witnesses, where Mr Joffe also wished to challenge the conclusion of the Master that the factors were finely balanced. These were all matters for her assessment. Whether or not overall another judge might have come to a different conclusion is not the point, and I do not say that I would myself have come to a different conclusion.

CONCLUSION

  1. Accordingly, in my judgment the Defendants must fail in this appeal. It follows that I do not need to consider the points on delay and obstruction upon which the Master found against the Defendants, or the points on which she found against Mr Wright, and which are the subject of the Respondent's Notice.

Published: 30/05/2011 16:19

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