Vedatech Corporation & Anor v Crystal Decisions (UK) Ltd & Ors

This is an application by Vedatech Corporation (“Vedatech”) and Mr Mani Subramanian for permission to appeal from three orders made by Pumfrey J in an action brought against them by Crystal Decisions (UK) Ltd (“Crystal UK”), Crystal Decisions (Japan) KK, a Japanese company (“Crystal Japan”), and Crystal Decisions Incorporated, their American holding company (“Crystal US”). I shall refer to the claimants collectively as “Crystal”. The first of the three orders was made on 19 May 2004; the second and third were made on 3 August 2004.

By his order dated 19 May 2004 the judge dismissed with costs an application by Vedatech and Mr Subramanian to reopen the argument which had taken place before the judge in March 2004 on which the judge had reserved his judgment and which led in due course to his orders dated 3 August 2004. By the first of his two orders dated 3 August 2004, the judge dismissed the application of Vedatech and Mr Subramanian for an order that service of the proceedings be set aside and the action struck out. By paragraph 1 of his second order of that date, the judge granted Crystal injunctive relief restraining Vedatech and Mr Subramanian from continuing, prosecuting or assisting in the prosecution of proceedings commenced by them against Crystal in the United States District Court, Northern District of California (“the Californian proceedings”) save to the limited extent specified in paragraph 4 of that order. Each of the two orders dated 3 August 2004 contains an order for costs against Vedatech and Mr Subramanian. In each of those orders, the judge refused permission to appeal.

At the conclusion of the hearing we indicated that permission to appeal would be refused in respect of each of the three orders, but that we would give our reasons in writing at a later date. I now do so.

Vedatech is a US corporation, which was founded in 1991 by Mr Subramanian. Mr Subramanian, who lives in Seattle, is its principal officer, and he has appeared on its behalf both before the judge and before us. In the course of its business, Vedatech assists non-Japanese companies to market software in Japan.

Crystal UK, as its name indicates, is a UK company. It was incorporated in 1991 and specialises in business intelligence software. In the mid-1990s Crystal UK had dealings with Vedatech. During that period, Crystal Japan was formed. Subsequently, Crystal UK and Crystal Japan were taken over by Crystal US (a multi-national, then called Seagate Technology).

Following the take-over by Crystal US, a dispute arose as to what (if any) obligation was owed by Crystal UK to Vedatech in respect of services rendered by Vedatech to Crystal UK prior to the take-over. The dispute led to Vedatech commencing an action against Crystal UK in England. Following a trial on liability in May 2002 Jacob J gave judgment in favour of Vedatech, holding that Vedatech was entitled to reasonable remuneration on a “time and success” basis. He directed an inquiry as to damages. The parties agreed to mediate the issue as to the amount of damages.

On 29 August 2002 a Mediation Agreement was entered into. The Mediation Agreement is in a CEDR (Centre for Effective Dispute Resolution) standard form. Among the parties to it are Vedatech and “Crystal Decisions, c/o Freshfields Bruckhaus Deringer, 65 Fleet Street, London EC4Y 1HS”. Clause 3 of the Agreement provides that the lead negotiator for Vedatech is to be Mr Subramanian; and for “Crystal Decisions” Ms Susan Wolfe. Clause 4 of the Mediation Agreement provides as follows:

Clause 8 of the Mediation Agreement contains an exclusive jurisdiction clause in the following terms:

The Mediation Agreement is signed by Mr Subramanian on behalf of Vedatech and by Ms Wolfe on behalf of “Crystal Decisions”.

The mediation resulted in the signing of a Settlement Agreement dated 30 August 2002 and expressed to be made between Vedatech, Crystal UK and Crystal Japan. The recitals to the Settlement Agreement are in the following terms:

Clause 2 of the Settlement Agreement contains “definitions and interpretations”, including the following:

Clause 3 of the Settlement Agreement provides for the mutual release of all claims and liabilities on payment of a sum (“the Settlement Sum”) by “the Defendants” to “the Claimant” in accordance with clause 4. Clause 4 provides that the payment is to be made “by telegraphic transfer to such bank as the Claimant may notify to the Defendants within 14 working days of such notification …”. Clause 8 contains warranties of authority by each of “the parties to this Agreement”. Clause 11 is an ‘entire agreement’ clause. Clause 12 contains an exclusive jurisdiction clause in the following terms:

The Settlement Agreement is signed by Mr Subramanian “personally and on behalf of Vedatech”; and by Ms Wolfe “by and on behalf of Crystal Decisions Inc” (i.e. Crystal US).

In September 2002 Mr Subramanian raised various challenges to the Settlement Agreement (but not, at that stage, to the Mediation Agreement) based on fraud, innocent or negligent misrepresentation and duress. In October he served a notice purporting to rescind the Settlement Agreement. He served a further such notice in November 2002, in which he also purported to accept a repudiatory breach of the Settlement Agreement by reason of Crystal’s alleged failure to pay “the Settlement Sum” in accordance with clause 4 of the Settlement Agreement.

As to the alleged repudiatory breach by Crystal, the judge said (in paragraph 17 of his judgment):

Mr Subramanian applied to the court to set the Settlement Agreement aside. For its part, Crystal applied for the action to be dismissed, on the footing that the Settlement Agreement was valid and enforceable.

The applications were heard by Jacob J on 25 November 2002. He ordered that the original action should be stayed. Vedatech appealed the order (pursuant to permission granted by Aldous LJ), but on 3 July 2003 its appeal was dismissed.

In the meantime, in April 2003 Crystal commenced the present action, in which it seeks to enforce the settlement agreement. Initially, only Vedatech was joined as defendant, but Mr Subramanian has since been added.

On 17 April 2003 the proceedings were sent to Mr Subramanian (as the person acting for Vedatech within the jurisdiction).

On 21 April 2003, notwithstanding that their appeal against Jacob J’s order was pending, Vedatech made a separate application to lift the stay granted by Jacob J. Vedatech and Mr Subramanian have subsequently renewed that application, together with an application for a preliminary issue to be tried summarily as to Crystal’s alleged repudiation of the Settlement Agreement.

In May 2003 Crystal made a Part 36 offer in the present action, accompanied by a payment into court. The offer was on terms that all outstanding claims were withdrawn. In making the offer, Freshfields (for Crystal) made it clear that acceptance of the payment into court would be treated by Crystal as an affirmation of the Settlement Agreement. The offer has not been accepted; indeed, Mr Subramanian contends before us that Crystal’s conduct in making the offer constitutes further repudiatory conduct on Crystal’s part.

Mr Subramanian was added as a defendant in the present action in October 2003. The proceedings in the present action were served on him by e-mail in October 2003, pursuant to an order made by Master Bowman on 15 September 2003 granting permission under CPR Pt 11 for the proceedings to be served on both defendants out of the jurisdiction (attempts to serve Vedatech through formal diplomatic channels having failed). Master Bowman’s order permitted alternative service on Mr Subramanian by e-mail and by post on the lawyers assisting him.

Mr Subramanian has since served further notices purporting to rescind the Settlement Agreement.

On 9 October 2003, without any prior notice (either to Crystal or to Freshfields), Vedatech and Mr Subramanian commenced the Californian proceedings. In the Californian proceedings, Vedatech and Mr Subramanian allege that the Mediation Agreement and the Settlement Agreement “were procured by and were products of fraud, duress (coercion), and over-bearing”; and that such agreements “have been validly rescinded both under Californian Law and the foreign law that they purport to incorporate”. As to the Mediation Agreement, it is alleged that Mr Subramanian would not have signed it but for assurances by Crystal that “its sole purpose was to protect the mediators and to regulate the mechanical aspects of the conduct of the mediation itself”. As to the Settlement Agreement, it is alleged that in the course of the mediation misrepresentations as to the profitability of Crystal Japan were made orally by Ms Wolfe and in financial reports supplied to Vedatech by Crystal, and that Mr Subramanian signed the Settlement Agreement in reliance on those misrepresentations. It is further alleged that Mr Subramanian signed it under duress in that “he was told that he could not have time to think over it and that the document had to be signed then and there or not at all”.

The Californian proceedings also include claims for conspiracy, and a claim under the Californian Business and Professions Code for damages for unfair competition in relation to the events leading up to the signing of the Settlement Agreement.

Crystal responded to the commencement of the Californian proceedings by applying for an anti-suit injunction requiring Vedatech and Mr Subramanian to discontinue the Californian proceedings, on the ground that they had been commenced in breach of the exclusive jurisdiction clauses in the Mediation Agreement and the Settlement Agreement; alternatively, that in any event, leaving aside those clauses, the interests of justice required the granting of such relief.

Crystal’s application for an anti-suit injunction was heard by Pumfrey J on in March 2004. Before the judge (as before us), Mr Subramanian appeared on his own behalf and on behalf of Vedatech, and Mr Robedrt Hildyard QC appeared for Crystal. At the conclusion of the argument, the judge reserved judgment.

Following the hearing, but before the judge had delivered judgment, Vedatech and Mr Subramanian applied to reopen the argument in order to enable them to argue two further points. That application was heard by the judge on 19 May 2004, when he made the first of the orders in respect of which permission to appeal is sought: that is to say, he dismissed the application with costs.

The judge delivered judgment on Crystal’s application for an anti-suit injunction on 3 August 2004, when he made the other two orders in respect of which Vedatech and Mr Subramanian seek permission to appeal.

Before the judge, Mr Subramanian had submitted that the court had no jurisdiction to hear Crystal’s application since the proceedings had not been properly served. The judge addressed that submission in paragraphs 20 to 22 of his judgment, saying this:

The judge returned to this point in paragraph 26 of his judgment, saying this:

I respectfully agree with the judge’s conclusions as to service. I cannot see any arguable basis for contending that the court had no jurisdiction due to defective service of the proceedings. I would accordingly refuse permission to appeal from judge’s rejection of the allegation of defective service. I will return below to the challenge to the judge’s costs order.

I turn next to the second of the judge’s orders dated 3 August 2004, whereby he granted injunctive relief in relation to the continued conduct of the Californian proceedings by Vedatech and Mr Subramanian.

At an early stage of the hearing, Mr Subramanian invited the judge to grant summary judgment striking out the action on the basis that there was clear evidence justifying the conclusion that the Settlement Agreement ought to be set aside ab initio. However, the judge accepted Mr Hildyard’s submission that the allegations of fraud – albeit strenuously denied by Crystal – would, if pursued, raise issues which could not be determined on an application for summary judgment. Plainly, the judge was right to do so.

The argument was accordingly focused on the question whether the judge should exercise his discretion by granting injunctive relief to restrain the Californian proceedings.

In his submissions to the judge on that question, Mr Subramanian placed considerable reliance on the fact that it had come to his knowledge that there was a company incorporated in Delaware with the same name as Crystal UK (the so-called “Delaware double”). Mr Subramanian contended that Crystal’s failure to disclose the existence of the Delaware double at the time of the mediation was another reason why the Settlement Agreement should be set aside.

Mr Subramanian also submitted that the unfair competition claim in the Californian proceedings could only be tried in California; alternatively that the desirability of that claim being tried in California was a decisive factor in considering whether the Californian proceedings should be allowed to continue.

He also submitted (among other things) that he was not a party to the Settlement Agreement and accordingly, even if his claim to set aside the Settlement Agreement failed, he was not bound by the exclusive jurisdiction clause contained in it.

In his judgment, the judge addressed first Crystal’s case for an anti-suit injunction based on the exclusive jurisdiction clauses in the Mediation Agreement and the Settlement Agreement. After citing a passage from the speech of Lord Goff of Chieveley in Seaconsar v. Bank Markazi [1994] AC 438 to the effect that the question of forum conveniens is generally to be decided without reference to the apparent strength or weakness of the claim, the judge said this (in paragraphs 29 to 31 of his judgment):

I can detect no error of principle or of approach in those paragraphs: indeed the judge’s conclusion in the last sentence of paragraph 31 seems to me to be plainly right.

In paragraphs 34 to 37 of his judgment the judge addressed the question whether the allegation of fraud in relation to the Settlement Agreement would, if established, have the effect of avoiding the exclusive jurisdiction clause. Relying on Mackender v. Feldia [1967] QB 590 at 598per Denning LJ and Harbour Assurance Co (UK) Ltd v. Kansa General International Insurance Co Ltd [1993] Ll LR 455, the judge concluded that it would not.

Had that been the determinative issue, I might have taken the view that it was arguable. But it is not the determinative issue, for (as will appear) later in his judgment the judge considered the position on the alternative footing that the exclusive jurisdiction clauses were not binding on Vedatech and Mr Subramanian.

The judge turned next to unfair competition claim, saying this (in paragraphs 34 and 35 of his judgment):

The judge’s canine analogy seems to me to be entirely appropriate in the circumstances. At the very least, it represents a conclusion which he was fully entitled to reach.

As to whether Mr Subramanian was party to the Settlement Agreement, and thus bound by it, the judge found no difficulty in concluding that he was a party to it (and, for that matter, to the Mediation Agreement also). Once again, I cannot see any arguable basis for challenging those conclusions on appeal.

In paragraphs 38 to 40 of his judgment the judge considered the position on the footing that the exclusive jurisdiction clauses were not binding, concluding that England is the natural forum for the dispute.

In the result, the judge granted somewhat more limited relief than that sought by Crystal.

Before us, Mr Subramanian has elaborated on the submissions which he addressed to the judge in relation to the two orders dated 3 August 2004, both in writing and orally. If I may say so, he has done so with commendable courtesy and clarity.

He submits that the misrepresentations which (as he alleges) are contained in the financial reports relating to Crystal Japan were generated in the United States, and that that is an additional reason why it is appropriate that the dispute as to the validity of the Settlement Agreement be litigated in the Californian proceedings. He also made submissions based on the principle of international comity. He also seeks to challenge the orders for costs in those orders.

Mr Subramanian raised a number of further points in relation to the two orders dated 3 August 2004, which I have also considered.

However, despite all that Mr Subramanian has said, I remain entirely unconvinced that there is any arguable ground for challenging the exercise of the judge’s discretion in this case. Far from the judge having erred in principle or reached a conclusion which is clearly wrong, the judge’s approach to the exercise of his discretion seems to me to be entirely in accordance with principle, and his conclusion (and the relief that he granted) seems to me to have been clearly right. Nor can I see any basis for challenging the costs orders contained in the orders dated 3 August 2004.

Lastly, I turn to the judge’s order dated 19 May 2004. Once again, I am wholly unable to discern any basis for an appeal against this order. The judge’s dismissal of the application before him was inevitable, as was his costs order.

For those reasons, I would refuse permission to appeal in respect of each of the three orders.

For completeness, I should make it clear that this refusal of permission to appeal operates as a dismissal of each of the various satellite applications listed before us at this hearing.

I agree.

I also agree that permission to appeal in respect of each of the three orders should be refused for the reasons given by Lord Justice Jonathan Parker.