Whitehead Mann Ltd v Cheverny Consulting Ltd

Whitehead Mann plc (“WMplc”) is a publicly quoted company engaged, by itself and through its subsidiaries, in the executive search industry in the United Kingdom and elsewhere. One of its subsidiaries is the defendant Whitehead Mann Ltd (“WML”). M.Jean-Michel Beigbeder (“M.Beigbeder”) has been engaged in such industry in France for many years, since 1986 though Beigbeder & Partners SA. In the summer 2000 there were negotiations for the acquisition of the business of Beigbeder & Partners SA by the Whitehead Mann Group. The negotiations led to the incorporation or acquisition of two companies and the execution of three agreements.

The two companies were Whitehead Mann SARL (“WMSARL”) and the claimant Cheverny Consulting Ltd (“Cheverny”). WMSARL was incorporated in France to carry on the business of the Whitehead Mann Group in France formerly carried on by a branch office in Paris. Thus it was a member of the Whitehead Mann Group. Cheverny had been incorporated in England in 1999. It was acquired by or on behalf of M.Beigbeder in the summer 2000 but he did not become a director until 3rd November 2000.

The three agreements were:

The consideration set out in clause 3 of the Consultancy Agreement comprised the retainer fees prescribed by clauses 3.1 to 3.4 and the stock consideration set out in paragraph 3.5. Clause 3.5 provided, so far as material, that:

Clause 12.5 of the Consultancy Agreement provided that:

During the negotiations to which I have referred consideration was also given to a side letter (“the Side Letter”). It was written on the headed writing paper of WMplc and in French. The agreed translation is as follows:

At the end of the period for which the Consultancy Agreement provided Cheverny claimed to be entitled to all the 162,295 shares in WMplc for which clause 3.5 provided on the footing that the Side Letter had varied the Consultancy Agreement so as to remove the limitation on the relevant services to those performed outside France imposed by clause 2.1. The Whitehead Mann Group did not agree and these proceedings were instituted by Cheverny against WML on 30th July 2004. It sought damages of £501,393 for breach of contract.

The claim was heard by Mr Nicholas Davidson QC, sitting as a deputy High Court judge of the Chancery Division, on 13th, 14th and 15th June 2005. The deputy judge handed down his judgment on 8th November 2005. I shall refer to his findings and conclusions in some detail later. For present purposes it is sufficient to record that he considered (paragraph 98) that it was

WML appeals with the permission of Latham LJ. It contends that the judge’s conclusion quoted in paragraph 8 above cannot stand as he placed substantial reliance on the written witness statement of a witness for Cheverny, M. Dominique Rongier, which that witness himself materially qualified in his oral evidence. It also contends that the judge’s conclusion that the entire agreement clause did not preclude the Side Letter from contractual effect is untenable in the light of his own conclusion that “there was agreement all round that those concerned....would enter into four, not three, agreements”. (emphasis added) Finally WML contends that the Side Letter, even if signed, could not have effected a variation of clause 2.1 of the Consultancy Agreement because the parties were different. Thus there are three issues:

M. Gérard Cléry-Melin and M. Beigbeder had known each other since 1974. M. Cléry-Melin had been running the Paris Office of WML when the negotiations with M. Beigbeder started. Shortly thereafter he was appointed the Chief Executive Officer of WML and Mr Jeremy White took over the running of the Paris Office. In the initial stages the negotiations were conducted by M. Cléry-Melin for WML and M. Beigbeder for his firm. On 21st February 2000 WML sent a draft proposal to M. Beigbeder. It envisaged that three consultants from Beigbeder & Partners SA, including M. Beigbeder himself, would work for WML and the business of Beigbeder & Partners SA should be bought by WML for Fr.F 10m but with provision of reduction in the price if the fees earned by WML through the three consultants failed to reach a target figure of Fr.F 10m in the first year and more in subsequent years.

The proposal was broadly acceptable to M. Beigbeder and lawyers were instructed on both sides. M. Beigbeder consulted the French Law Firm of Latournerie Wolform & Associates in the person of M.Pascal de Moidrey. WML retained Clifford Chance through M.Olier and M.Billam in its Paris Office. Also concerned on behalf of WML was M. Rongier. He was an independent financial consultant based in Paris. He had been at business school with M. Cléry-Melin and was asked by him for advice in connection with the acquisition by WML of the business of Beigbeder & Partners SA.

M.Olier contacted M. de Moidrey on 16th March 2000. On 30th March 2000 Clifford Chance sent a draft letter of intent acceptable to WML to Latournerie Wolform & Associates. The proposal at that stage was that the assets of Beigbeder & Partners SA would be bought by WML for Fr.F 5m in cash and that M. Beigbeder would enter into a three year service agreement with WMSARL. Under the service contract M. Beigbeder would be entitled to a salary, bonus and stock grant subject to reduction if the business he generated over the three years of the service agreement was less than Fr.F 15m. Neither the original draft proposal nor the draft letter of intent excluded France as a relevant source of fee income on which the consideration or stock grant depended.

On 4th May 2000 Clifford Chance circulated to M.Rongier a draft proposal which envisaged M. Beigbeder being offered (1) a consultancy agreement between WML and an English Company entitled to supply the services of M. Beigbeder, (2) an agreement for the sale of the assets by Beigbeder & Partners SA to WMSARL and (3) an employment contract between M. Beigbeder and WMSARL. The first agreement would be governed by English law the other two by French law. A draft letter included with the proposal introduced for the first time the exclusion of France both from the scope of the consultancy services and from the sums to be taken into account in calculating the stock grant. At about this time M. Beigbeder made a note of the proposals. He recorded that there would be two service contracts, the second of which (he made no note in respect of the first) would be made with a new English entity for the purpose of supplying his services for international activity outside France. Under that contract the remuneration would include a stock grant conditional on Fr.F 5m business being generated over three years.

On 29th May 2000 Clifford Chance sent to Latournerie Wolform & Associates a draft consultancy agreement for the supply of the services of M. Beigbeder outside France. The next substantive communication between the lawyers, probably due to the holidays of M.Olier and M.de Moidrey, occurred on Thursday 22nd June 2000. On that day the former sent the latest drafts of the three contracts to M.de Moidrey, with copies to M.Rongier and M.Billam. On the copy of the covering letter received by M.de Moidrey he noted, in French, that “the side letter is missing”. The following Monday, 26th June, M.Olier sent to M.Rongier and M.Billam the draft side letter for their comments.

On 27th June 2000 M.Olier wrote to M.Rongier, M.de Moidrey and M.Billam setting out the agenda for the meeting the following day at 9am. The English translation states:

The meeting took place on 28th June 2000. Those present were Mr White, M.Olier, M. Beigbeder, M.de Moidrey and the escrow agent M.Dubois. Mr White signed the Asset Sale Contract and the Employment Contract on behalf of WMSARL. M. Beigbeder signed the Asset Sale Contract on behalf of himself and Beigbeder & Partners SA and the Employment Contract and the Consultancy Agreement on his own behalf. M.Dubois signed the Asset Sale Contract as the escrow agent.

From 6th July 2000 the business of Beigbeder & Partners SA was carried on as part of WMSARL. On the same date M.Olier wrote to Mr McAvilley of Cheverny enclosing three originals of the Consultancy Agreement for execution of behalf of Cheverny. He asked him to forward the three documents, when executed by Cheverny, to Mr Brassington, a director of WML, for execution on behalf of that Company. On the same day M.Olier wrote to Mr Brassington, with a copy to M.Rongier:

On or shortly before Monday 17th July 2000 the three originals of the Consultancy Agreement were received in Mr Brassington’s office duly executed by Cheverny. On or shortly before 4th August 2000 they were executed by M. Cléry-Melin and Mr Brassington on behalf of WML and returned to Clifford Chance. With regard to the two originals of the side letter the judge concluded (paragraph 71):

The next documentary reference to these transactions is an inter-office memo of 5th August 2002 from M. Cléry-Melin to Mr Brassington recording his understanding that M.Beigbeder

On 8th October 2003 Mr Brassington e-mailed M.Beigbeder concerning a conversation he had had with a senior figure in the Whitehead Mann Group, Mr Stephen Lawrence. He wrote:

On 30th October 2003 M.Beigbeder wrote to another senior figure in the Whitehead Mann Group seeking his support and to M. Cléry-Melin and Mr Brassington. He described the Side Letter as “part of the comprehensive package of 4 Agreements signed between us” and “agreed in good faith as an integral part of the deal relative to the purchase of my practice in Paris”. He sought, but did not get, confirmation that it had been so agreed. The reply from Mr Brassington to M.Beigbeder dated 5th November 2003 stated:

The claim form in this case was issued on 30th July 2004. In paragraph 2 of the particulars of claim Cheverney averred that the “Consultancy Agreement was varied by and/or subject to” the provisions of the Side Letter. In paragraph 3 of its defence WML admitted that an unsigned Side Letter did exist but denied that any concluded agreement was reached between M.Beigbeder and WML in the terms of the Side Letter or in any like terms. In its reply Cheverny contended that there was a concluded agreement between Cheverny, WML and M.Beigbeder in the terms of the Side Letter as evidenced by the unsigned document. It maintained that even if the Side Letter had not been signed that would not entail that there was no concluded agreement. In addition it relied on the subsequent events I have summarised above as recognition by WML of an agreement in the terms of the Side Letter.

In paragraph 22 of his judgment the Deputy Judge explained the paucity of the documentary evidence before him in these terms:

I have set out the judge’s conclusions in paragraph 8 above. I shall, as necessary, amplify them in connection with the specific issues summarised in paragraph 9 above. The first relates to the evidence of M.Rongier and the judge’s conclusions based on it.

On 25th April 2005 M.Rongier made a witness statement which was adduced at the trial by Cheverny. In paragraphs 3 and 4 he described his professional background and occupation. In paragraphs 5 to 10 he related how M. Cléry-Melin had sought his advice and why he had advised that WML should acquire the assets of, rather than the shares in, Beigbeder & Partners SA so as to limit its exposure to the liabilities of Beigbeder & Partners SA. He covered but in the most general terms his involvement in the negotiations. In paragraphs 11 to 13 he said:

M. Rongier gave oral evidence on 13th June 2005. In supplemental evidence in chief he indicated that he could not remember if anyone other than M. Cléry-Melin and Mr Brassington had been present at the meeting he described in paragraph 11 of his witness statement. He said that after the meeting he had given instructions for the preparation of the Side Letter to deal with the problem which had arisen necessitating the exclusion of French business from the Consultancy Agreement. M.Rongier was then cross examined by counsel for WML. In the course of that cross-examination the following exchanges occurred (references are to the pages of the Transcript):

Counsel for Cheverny returned to the topic in re-examination. Mr Rongier confirmed his understanding that it was a member of Clifford Chance who first suggested that France should be excluded from the source of business for the purposes of the Consultancy Agreement and that the suggestion was prompted by tax considerations relevant to Whitehead Mann. At pages 55 and 56 of the transcript the following exchange is recorded:

On 15th June 2005 counsel made their closing submissions. Counsel for WML pointed out that M.Rongier departed, to some extent, from what he had said in paragraphs 11 and 12 of his witness statement both with regard to the number meetings and as to the extent that Mr Brassington participated in the negotiations. Later, in the light of a submission from counsel the judge read back his note of the evidence quoted in paragraph 26(4) above and suggested that the other participant was Mr Brassington. When counsel questioned the reference to Mr Brassington, the judge commented that if necessary he could go back to the tape. I do not think that he can have done. It can now be seen from the transcript of a later question and answer that the reference was to Mr Billam, the tax lawyer at Clifford Chance, not Mr Brassington, the director of WML.

The deputy judge referred to the evidence of M.Rongier in his judgment in a number of passages. In paragraph 50 he said:

In paragraph 58 the judge considered a suggestion that M.Rongier might have given instructions to Clifford Chance for the preparation of the Side Letter without himself having got the requisite authority or instructions from Mr Clery-Melin or Mr Brassington. He continued:

In paragraph 59 of his judgment the judge added:

Later the judge considered a theory that the Side Letter was not an essential part of the overall deal. He said (paragraph 96):

Before I consider the submissions of counsel it is convenient to consider some of the other evidence before the Deputy Judge. Witness statements were provided by, amongst others, Mr Brassington, M. Beigbeder and M. Cléry-Melin. Mr Brassington had moved to Australia by the time of the trial and was not cross-examined. Both M. Beigbeder and M. Cléry-Melin gave oral evidence. For present purposes it is unnecessary to refer to either the witness statement or oral evidence of M. Beigbeder.

M. Cléry-Melin made a witness statement dated 20th April 2005 which was adduced at the trial by WML. In paragraphs 13 to 16 he said:

The deputy judge dealt with the evidence of M. Cléry-Melin in paragraphs 67 and 68 of his judgment. In relation to the episode described by M. Cléry-Melin in paragraph 16 of his witness statement he considered that it must relate to the occasion when Mr Brassington received from M.Olier the letter dated 6th July 2000 to which I have referred in paragraph 17 above. But the deputy judge was sceptical of this description anyway for the detailed reasons given in paragraph 68 of his judgment.

The deputy judge referred to the evidence of both M. Beigbeder and M. Cléry-Melin in paragraph 97 of his judgment. He said:

Counsel for WML submits that the deputy judge was faced with two factual questions (1) how did the Side Letter come to be produced? (2) did the absence of signature show that its terms had not in fact been agreed? He suggests that the judge found that the genesis of the Side Letter was as described by M.Rongier in his witness statement, namely at a meeting held before 4th May 2005 between himself, Mr Brassington and M. Cléry-Melin at which two new elements relating to the Consultancy Agreement were agreed, that is the use of (a) a company incorporated in England as the provider of the services of M.Beigbeder and (b) the Side Letter. Counsel suggests that if this conclusion is not justified by the oral evidence M.Rongier gave then the judgment as a whole cannot stand.

Counsel for WML submits that paragraphs 11 to 13 of the witness statement of M.Rongier highlight five key features, namely (1) a single meeting, (2) occurring before the first draft of the Consultancy Agreement to which Cheverny was a party, (3) at which Mr Brassington suggested the use of a company incorporated in England as the vehicle for the provision of the services of M.Beigbeder, (4) both Mr Brassington and M. Cléry-Melin agreed to the use of a side letter by which to include in the Source of Business calculations under the Consultancy Agreement fees earned in France and (5) M.Rongier approved the draft of the Side Letter sent to him by M.Olier as reflecting “exactly what we had agreed at our meeting”.

Counsel submits that not one of those key features was born out by the oral evidence of M.Rongier as summarised and quoted in paragraph 216 above. Thus:

Counsel for WML points to the passages from the judgment of the deputy judge I have quoted in paragraphs 30 and 31 above and asks rhetorically how the judge could have come to those conclusions in the light of the scale and importance of the departures of M.Rongier from the material parts of this witness statement. He comments with reference to the part of the judgment quoted in paragraph 32 above that if the evidence of M.Rongier as to the genesis of the Side Letter is rejected then it could well have been an afterthought or ‘try on’ by M.Beigbeder to which WML refused to agree. Counsel for WML suggests that the judge could not properly accept the evidence of M.Rongier without acknowledging and explaining the discrepancies. And without the evidence of M.Rongier, as set out in paragraphs 11 to 13 of his witness statement, the factual edifice supporting the judge’s conclusion collapses.

Counsel for Cheverney accepts that M.Rongier departed from his witness statement when giving oral evidence. He disputes the extent of the disparity and its significance. He took us through the events leading up to the execution of three of the four alleged agreements and the aftermath by reference to the undisputed documents to which I have already referred. The burden of his submissions came at the stage of the completion meeting on 28th June 2000. He submitted that whatever had gone before Clifford Chance must by then have had their clients’ instructions to set up the completion meeting for the execution of the documents referred to in the notice dated 27th June 2000 to which I have referred in paragraph 15 above. He pointed out that all necessary parties then executed the Asset Sale Contract and the Employment Contract and M.Beigbeder executed the Consultancy Agreement. What then remained, namely the execution of the Consultancy Agreement by Cheverny and WML and the signature of M. Cléry-Melin to the Side Letter was, he submitted, unnecessary because execution of one binds that party to execution of all of them. Thus, so he submitted, the execution of the Asset Sale Contract and the Employment Contract by WMSARL obliged WML to procure the signature of M. Cléry-Melin (or presumably some other person authorised to sign on behalf of WMplc). He contended that the failure of WML to procure any such person to sign the Side Letter was immaterial because WML was bound by its terms because of the execution by Mr White on behalf of WMSARL of the Asset Sale Contract and the Employment Contract. This is said to be the conclusion at which the judge arrived in paragraph 98 of his judgment quoted in paragraph 8 above.

Before expressing my conclusions on these submissions it is necessary to deal briefly with some basic propositions relating to the formation of contracts. With exceptions immaterial to this case, it is possible to make a contract orally. But the more complicated the subject matter the more likely the parties are to want to enshrine their contract in some written document to be prepared by their solicitors. This enables them to review all the terms before being committed to any of them. The commonest way of achieving this ability is to stipulate that the negotiations are ‘subject to contract’. In such a case there is no binding contract until the formal written contract has been duly executed, see The Chinnock v Marchioness of Ely 4 De GJ&S 638. But it is not essential that there should have been an express stipulation that the negotiations are to be ‘subject to contract’. As Jessel MR pointed out in relation to negotiations conducted through correspondence in Winn v Bull (1877-78) LR 7 Ch.29, 32:

In Sociedade Portuguesa de Navios Tanques Limitada v Hvalfangerselskapet Polaris A/S [1952] 1 Ll.L.R 407 the court was concerned with protracted negotiations for a charterparty which one side claimed had resulted in a concluded contract though no formal charterparty had been executed. The other side contended that not all terms had been agreed but even if they had been it was the common intention of the parties that there should be no binding contract unless and until a charterparty had been executed by both sides. All three members of the Court of Appeal upheld the decision of the judge to the effect that not all the essential terms had been agreed with the consequence that the parties were not ad idem. Thus, strictly, the other point did not arise. Nevertheless all three members of the court agreed with the judge that the correspondence showed that the parties did not intend to be bound except by the actual signature of both of them to a charterparty. Somervell LJ recognised (p.417) that in a complicated commercial transaction parties may finally become ad idem “so that their intentions on this point might well take a new turn”.

That case was considered by the Court of Appeal in New Zealand in Concorde Enterprises v Anthony Motors (Hutt) Ltd [1981] 2 NZLR 385 in which there was a claim for damages for wrongful repudiation of a contract relating to the manufacture and sale of an emulsion-producing gun. The Court of Appeal in New Zealand held on the evidence that the negotiations had been conducted partly between the parties’ solicitors and partly between the parties themselves with a view to the production of a commercial agreement of some complexity to be executed by all parties. It concluded that, in such circumstances, the normal inference in New Zealand is that the parties do not intend to be bound until the written agreement is executed. Cooke J, giving the judgment of the court, said at page 389:

Obviously each case depends on its own facts but in my view where, as here, solicitors are involved on both sides, formal written agreements are to be produced and arrangements made for their execution the normal inference will be that the parties are not bound unless and until both of them sign the agreement. In a sense this case is an a fortiori case in that on any view there are at least three agreements to be executed and the respective parties are not the same.

Similar principles apply to the execution of documents as deeds. They may be executed in escrow, the condition being due execution by all the other parties. In such a case the executing party is not bound until the condition is performed. Deeds may be executed unconditionally by some only of the intended parties to them. In such a case equity will relieve the executing parties if non execution by the others substantially alters the obligations assumed by the executing party, see Lady Naas v Westminster Bank Ltd [1940] AC 366 at pp. 391, 405 and 410. Thus whether one considers the matter prospectively or in retrospect the result is the same, namely, the contractual obligations are not binding unless and until either (1) the contractual documents have been executed by all parties, (2) it can be objectively ascertained that the continuing intention of the parties changed or (3) subsequent events have occurred whereby the non-executing party is estopped from relying on his non-execution.

It is in that context that I now return to the submissions of counsel for the parties. There is no doubt that, as counsel for WML submitted, in his oral evidence M.Rongier so qualified and departed from paragraphs 11 to 13 and 16 of his witness statement as to deprive them of any evidential value. I do not consider that it was open to the judge to put any weight on them unless he explained why, notwithstanding all the qualifications and withdrawals, he considered that he could. The judge made no attempt to do so. In my view it follows that the conclusions of the judge based on those paragraphs cannot stand unless they are justified by other evidence. The difficulty is compounded by problems identifying which findings are so contaminated. For example would he have still rejected the account of M. Cléry-Melin in the terms in which he did in paragraphs 67, 68 and 97 of his judgment or at all?

As I have already indicated, counsel for Cheverny submits that the judge’s conclusion is amply justified by the contemporary documents. Thus, by 26th June 2000, at the latest, a draft of the Side Letter had been produced and circulated by M.Olier. The Side Letter clearly envisaged the signature of M. Cléry-Melin on behalf of WMplc. Further on 27th June 2000 M.Olier circulated an agenda for the completion meeting to be held on 28th June 2000. He evidently envisaged that M. Cléry-Melin would attend and sign the Side Letter. Counsel invites us to infer that no reasonably competent solicitor would have done that without having satisfied himself that his client had authorised it. None of this is dependent on the evidence written or oral of M.Rongier.

There is force in this argument. But it presupposes that the judge would still have rejected the evidence of M. Cléry-Melin even if he had appreciated that his reliance on M.Rongier was misplaced. For the moment I will assume that the presupposition is justified. What then? The conclusion at which counsel for Cheverny invites us to arrive is that the signature of Mr White on behalf of WMSARL at the meeting in Paris on 28th June 2000 was effective, without more, to commit WMplc by its authorised signatory to sign the Side Letter. No doubt he would (though in fact he did not) make the same point as at or shortly before 4th August 2000 when WML executed the Consultancy Agreement.

I do not accept that conclusion. The previous history shows clearly that all parties contemplated and intended that the solicitors should draft and approve appropriate written agreements. I see nothing to displace what I consider to be the normal inference in a case such as this that the parties intended to be bound when all documents had been signed or executed by all relevant parties and not before. That never happened because no one signed the Side Letter on behalf of WMplc. It might have been that subsequent events created an estoppel precluding WML relying on the absence of such a signature, but no such an estoppel was pleaded. In any event the findings of the judge would not enable us to deal with such a claim.

It is true that in paragraph 100 of his judgment the deputy judge said:

For these reasons I would reject the conclusion to which counsel for Cheverny invites us to arrive. Accordingly, as explained in paragraph 49 above, everything depends on whether in view of his misplaced reliance on the evidence of M.Rongier the deputy judge was right to have rejected the evidence of M. Cléry-Melin. I do not see how this court can answer that question. Nor do I see how, unless it is answered and a proper conclusion can be reached as to what contracts were concluded and when, the other points raised by WML can be properly determined. In the circumstances I see no alternative to allowing the appeal and ordering a new trial.

For all these reasons I would allow the appeal of WML and order a new trial before another judge. I would invite counsel to agree a timetable to enable such a trial to take place as soon as possible.

If the other members of the Court agree that we should order a new trial and such a trial takes place I hope that the judge will be provided with a fuller and more compelling explanation than the deputy judge was at the first trial as to why more contemporary documents were not available. It seems to me to be more likely than not that the files of Clifford Chance, formerly in Paris, contain documents which would show clearly what happened and when. If that is so then the court on a retrial would not be faced with all the uncertainties that the judge had to cope with in the first trial. I do not understand why any question of French Lawyers’ Code of Ethics arises. It would be a case of a company incorporated in England instructing its English solicitors, through whom it is defending this claim, to repatriate the file to England so that it may comply with its disclosure obligations. Nor in the absence of a statement to the court from some one authorised to speak for the professional body responsible for applying the Code of Ethics to lawyers in the positions of M.Olier, M.Billam or M.de Moidrey should he accept that such a professional body can prevent its members providing evidence on behalf of his client at that client’s request.

I gratefully adopt the Chancellor’s account of the factual history, but as will be seen I am in respectful disagreement with his conclusions.

At the outset I observe that the judge was well aware of the many gaps in the material before him: in particular, the shortage of contemporary records, the supposed (but unproven) inhibitions on evidence from the French lawyers (para 22), the apparent reluctance of the parties to disclose in detail the precise reasons behind the complicated form of the agreements (paras. 24, 96), and the lack of any explanation for the failure of M Beigbeder or his advisers to follow-up the side-letter (para 71). He was also constrained by the pleadings. There was no alternative basis of claim, such as estoppel or rectification, which might have provided a welcome escape route from the factual and legal problems raised by the narrow issue of contractual interpretation. We are faced with the same difficulties. However, like the judge, we must take the case as we find it, and as the parties have chosen to present it. We should only interfere if his decision was wrong or procedurally unjust (CPR 52.11(3)).

The dispute in the appeal comes down in essence to two issues: (i) was there by 28^th June 2000 agreement between the parties that the side-letter should be included in the package of documents then to be executed? (grounds 1 and 2) (ii) if so, did that letter have contractual effect, even though (apparently) never signed, and notwithstanding the “entire agreement” clause in the Consultancy Agreement? (ground 3) The first issue is factual; the second is mainly legal. (Ground 4 in the notice of appeal raised a separate point that the side-letter was addressed to M Beigbeder himself, rather than the claimant company. The appellants did not press that point in argument; insofar as I understand it, I think they were right not to do so.)

The appellants’ principal criticism relates to the weight placed by the judge on M Rongier’s evidence, particularly in relation to the claim that the side-letter had been agreed by M Clery-Melin and Mr Brassington at a meeting in Paris. For the reasons given by the Chancellor those criticisms seem to me valid. The transcript shows that this aspect of his written evidence was seriously undermined in cross-examination. Although the resulting inconsistencies in his evidence were discussed in closing submissions at the trial, the judgment contains no reference to them. This is an unfortunate omission. But it is not enough by itself to show that his overall conclusion was wrong.

As to that, I do not agree that M Rongier’s evidence was, or needed to be, central to the judge’s overall conclusion that the side-letter was part of the agreed package. As the judge acknowledged, in the absence of any contemporary notes, memories of the nature or content of particular meetings were inevitably unreliable. A case resting on M Rongier’s evidence alone would not have been strong. At best it provided some explanation of how and why the side-letter came into existence.

The judge’s treatment of this evidence must be read in context. It is a small part of a closely reasoned discussion (running to some 50 paragraphs) of all the evidence, oral and written, relating to the existence of the side-letter and its consequences. Central to that reasoning was his analysis of the limited contemporary documents, both in themselves, and in the light of the witnesses’ treatment of them. In my view, that analysis provided ample support for his overall conclusion, with or without M Rongier’s evidence.

I would start from the agenda for the meeting on 28^th June 2000, circulated by M Olier of Clifford Chance on the previous day. He was acting for all the WML parties, and as such was responsible for the execution process. In the absence of evidence to the contrary, we are entitled to assume that he had obtained the necessary instructions for what he was doing. The sole purpose of the meeting, as appears from his prepared agenda, was to secure the execution of the contractual documents making up the agreed package. The only outstanding issue of substance mentioned in the letter, for which special provision was made, was proof of the existence of the English company. Apart from that, there is no suggestion that there was anything left to be agreed. The side-letter was referred to, like the other contractual documents, as a matter simply for “signature”. M Olier’s agenda letter, in my view, is reliable and unambiguous contemporary evidence that the agreed package, as accepted by his clients, included the side-letter.

That evidence is corroborated by what happened at the meeting and immediately thereafter. The completion meeting was attended by representatives of both sides, who started the process of executing the necessary documents. The judge found that both the Asset Sale Contract and the Employment Contract were probably executed at that meeting, even though both are expressed to have been made on 1^st July. (Footnote: ¹) He also considered it likely that M Beigbeder himself signed the Consultancy Agreement at the same meeting, although the signatures of the other parties were added later (judgment para 6). We are entitled to assume that those present, on both sides, were aware of the agenda, and that they signed on the understanding that the side-letter was also part of the package. There is no evidence of any dissent from that position.

That process was continued by M Olier’s letter to Mr Brassington on 6^th July. That enclosed two originals of the side letter for execution by M Clery Martin, and also explained the remaining steps necessary to complete the consultancy agreement. The side-letter was referred to in the letter without either comment or invitation to comment. The only possible inference, in my view, is that M Olier saw the letter as dealing purely with the mechanics of finalising the documentation, of which the side-letter was an agreed part. That was the judge’s view (para 66), and I agree with him.

None of this depends on M Rongier’s evidence. The source is WML’s own legal representative, who was orchestrating the arrangements, and therefore was best placed to know the true position. In the absence of direct evidence from him (whatever the reasons), there is nothing to contradict the obvious inference to be drawn from his letters.

It is true that at various points in his analysis the judge returns to M Rongier for support, even where there is no need to do so. For example, at paragraph 96, he refers to the “theoretical” possibility that the side-letter was an “optional” extra, to be included at the option of the defendants, but comments: “but that would involve rejecting M Rongier’s account of the genesis of the letter, and that I am not prepared to do.” The only curiosity about that comment is that the judge thought it necessary to refer to M Rongier at all. Had rejection of the side-letter been even a theoretical option, it is inconceivable that M Olier would not have mentioned that possibility in his letters.

The judge’s reading of the contemporary documents was confirmed by Mr Brassington’s later recollection. In an e-mail in October 2003, responding to an internal inquiry (unprompted by anyone on M Beigbeder’s side), Mr Brassington recorded his understanding that there had been a side-letter including France in the calculation. Although he claimed not to have seen the actual side-letter (notwithstanding M Olier’s letter to him of 6^th July), the judge found this unsurprising, given that the side-letter was sent to him simply to be passed on to M Clery-Melin, and that his mind had been on other things at the time (judgment para 81-85).

The only significant evidence to the contrary was that of M Clery-Melin. That was rejected by the judge, in my view rightly. His treatment of M Clery-Melin’s evidence (para 97) did not in terms depend on its inconsistency with that of M Rongier, nor did it need to do so.

The evidence was both internally inconsistent, and inconsistent with the contemporary documentary material. M Clery-Melin’s made two comments on the side-letter, both long after the events in question. The first was in his e-mail response to M Beigbeder’s query in October 2003. He said:

The judge commented that this evidence had “a number of problems” (para 68). I agree. M Clery-Melin’s account of the dramatic circumstances of his first sight of the side-letter had no support from Mr Brassington himself, who surely would have remembered such an episode. It was not consistent with his earlier email statement, which implied that it had never seen it. It ignored the fact, clear from the contemporary documents, that the letter had been sent to him for signing, not by M Beigbeder’s advisers, but by his own solicitor, on the clear basis that it had been agreed. It gives no explanation of why, if that was his reaction at the time, there is no record of it having been made known to M Olier or anyone else. As the judge said: “His witness statement simply does not address the role of Clifford Chance and interplay between the Defendant and Clifford Chance.”

There were other factors which the judge properly took into account in assessing the credibility of the defendants’ case. The first was that M Beigbeder’s importance to WML was principally as a major figure in the French market, where they wished to establish a significant presence (para 99). It would be surprising to find that market specifically excluded from any formula based on performance. There was also some evidence that, after M Beigbeder had entered their service, WML themselves proceeded on the assumption that the French market was to be included in the calculations. The judge referred to a memorandum from Mr Brassington to M Clery-Melin in August 2002 calculating the entitlement on a basis which could only make sense if France were included (para 77).

Taking all these factors together, and even allowing for his failure to take account of M Rongier’s inconsistencies, I see no reason to overturn the judge’s conclusion that the side-letter was part of the agreed package. On the contrary, it seems to me the only reasonable conclusion on the evidence before him. Accordingly, I would dismiss the appeal on grounds 1 and 2.

The claimant faced two potential problems: first, the side-letter, alone of the documents included in the agreed package, was not signed (“the signature point”); secondly, its effect was arguably excluded by an “entire agreement” clause in the consultancy agreement itself (“the entire agreement point”). Only the second was treated by the judge as a live issue.

On the signature point, he noted what he understood to have been a concession by counsel for WML (para 100):

On the second point he referred to the wording of the entire agreement clause (Clause 12.5 of the Consultancy Agreement) which provided:

The judge did not regard this clause as an obstacle for the claimants, for two reasons. First, if the side-letter had been signed, the statement that the “Agreement” constituted “the entire agreement” would have been “literally untrue”. In those circumstances, the Agreement should be treated as “including the associated document”; and the absence of a signature should not be regarded as fatal (para 102- 103). Secondly, the reference to documents “preceding” the date of the agreement was not intended to exclude “reference to a document forming part of the suite devised for execution on the same occasion” (para 104). Uncertainty over the precise date of execution of the various agreements was not a problem; he said:

He concluded accordingly that the side-letter must be treated as having contractual effect, and as qualifying the relevant parts of the consultancy agreement.

In this court, I have not found the appellants’ case entirely clear. The judge’s understanding of their concession on the signature point was not in terms challenged in the grounds of appeal, which focus on the entire agreement point. However, it was pointed out to us that the judge’s understanding is not consistent with counsel’s closing submissions as recorded in the transcript. The transcript for 15^th June 2005, during closing submissions, records the following exchange between the judge and Mr Barklem (for WML):

In the appellants’ skeleton argument, on the basis of which permission to appeal was give, the two points were conflated. Because the agreement was never signed, it cannot be said to have been made concurrently with the consultancy agreement. The most that can be said is that there was a prior agreement of some kind, and this would be excluded by the entire agreement clause. Further, in view of the uncertainty over whether agreement was in fact reached, this is precisely the kind of dispute which an entire agreement is designed to exclude.

It seems to me that the two points are logically distinct, and need to be considered as such. Even if the signature point was not directly raised by the grounds of appeal, I find it difficult to arrive at a reasoned conclusion on the effect of the issues raised in relation to the entire agreement clause, without first considering what the contractual position would be in its absence.

There is nothing unusual about a commercial arrangement in the form of a series of linked agreements, as in this case, nor in the procedures adopted. The parties agree on the basic principles of the deal; the lawyers advise on the appropriate legal framework, taking account of tax and other factors, and draft the necessary documents; they obtain their respective clients’ agreement on any outstanding issues; and arrangements are made for formal execution, either at a special meeting or by circulating the documents to those required to sign. Given the familiarity of the process it seems surprising that there appears to be so little authority on the legal consequences of something going wrong at any stage. Nor were we referred to any discussion in the textbooks.

The cases to which the Chancellor has referred show that there is no general rule as to the stage at which a binding contract comes into existence. It all depends on the circumstances, and the intention of the parties as inferred from them. I would agree with him that, as a general rule, where solicitors are involved on both sides, and the agreement is put by them into written form with a view to formal execution by the parties at a completion meeting, the normal inference will be that the parties are not bound until that stage. That is supported by the statement of Cooke J, quoted by him, in Concorde Enterprises v Anthony Motors (Hutt) Ltd [1981] 2 NZLR 385, 389.

However, I do not, with respect, accept that this approach can be applied without modification to a case, such as the present, where the arrangement consists of a package of linked agreements, and by the end of the completion meeting some but not all have been executed. I know of no direct authority on this point. However, there is no reason why the proper inference as to the intentions of the parties should remain the same throughout the process. As was said by Somervell LJ in the Sociedade Portuguesa case [1952] 1 Ll.L.R 407, 417 (cited by the Chancellor) there may come a stage where the intentions of the parties “take a new turn”.

I agree with the Chancellor that up until 28^th June no contractual commitment had been entered into. The clear intention was that the agreements should be embodied in formal documents to be executed by the parties. However, on that day, as previously arranged, the process of execution was begun by parties on both sides, in the presence of solicitors acting for everyone. The process was fully completed in relation to two of the linked agreements (the Asset Sale Contract and the Employment Contract). The Consultancy Agreement was signed only by M Beigbeder, but steps were put in hand to secure the remaining signatures to that agreement and to the side-letter. By the end of that day, therefore, events had taken a new turn, in that two of the four agreements were now, at least on their face, fully executed agreements.

It is necessary to consider the legal consequences of that position. As I see it, there are only three possible interpretations:

That the two executed agreements, though duly executed, were not to take effect unless and until the other two were executed;

That the two executed agreements were intended to be binding and of full effect, and that would remain the position whether or not the others were ever executed (that is, the parties were “at risk”);

That by allowing the process of execution to begin, the parties had committed themselves to complete the process, and were therefore contractually bound to the whole package from that time.

The first, as I understand it, has not been advocated by anyone. That is not surprising, since those agreements were as I understand fully implemented, and no-one is asking to unravel them. The second is that advocated by WMD before the judge, in the exchange I have quoted. The third is the approach adopted by the judge, on the mistaken understanding of a concession to that effect. In choosing between them we get no help from the evidence or contemporary documents. Our guide must be the presumed intention of the parties, having regard to the previous dealings of the parties, to the commercial context and to common sense.

Viewed in that light I have no hesitation in rejecting the second approach. It has to be borne in mind that the only person “at risk” was M Beigbeder. He had done everything needed to execute all the agreements, including the consultancy agreement. It is inconceivable that we would have done that, or that anyone would have believed he was doing that, except on the mutual understanding that the other parties would as soon as practicable do the same. Otherwise he was leaving it entirely to the choice of the WMD parties not only whether to sign the side-letter, but whether to sign the Consultancy Agreement itself.

The Consultancy Agreement was in fact signed. However, it is important to bear in mind that the point, if it is a good one, applies to that as well as the side-letter. If following the 28^th June meeting the WMD parties had simply refused to sign that agreement, Mr Beigbeder would have had no contractual redress. By the same token, if his advisers had at any time woken up to the M Clery-Melin’s failure to sign the side-letter, there was nothing in law that they could have done to compel him to do so. Such an interpretation of the dealing between the parties, to my mind, is contrary to commercial sense, and must be rejected. It is immaterial, in my view, that M Clery-Melin, as the formal representative of the parent company, was not in fact present at the meeting. M Olier was present as the representative of all parties, and through him all parties must be taken to have been aware both of the nature of the meeting, and of the basis on which M Beigbeder was signing the agreements.

Although it was not so argued, the facts could also perhaps be analysed as a simple matter of offer and acceptance. M Olier’s agenda letter can be seen as an offer, made on behalf of all his clients, to complete the formal agreements on the basis set out in the letter. That offer was accepted by M Beigbeder by signing those agreements to which his signature was required. There was thereafter a binding obligation on the other WML parties, including M Clery-Melin, to do the same.

Whichever is the correct approach, I am satisfied that from 28^th June 2000 all parties were contractually committed to the whole package of agreements, including the side-letter.

I turn to the “entire agreement” clause. The judge’s first reason for not applying the clause is that it was “literally untrue”. That with respect seems beside the point. The whole purpose of such a clause is to exclude any factual inquiry into what other agreements or understandings there might be. That is apparent from the comments of Lightman J, cited by the judge (in the Inntrepreneur case [2000] 2 LlR 611, 613). As he said, such a clause “constitutes a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere…”

I agree with the judge, however, that the wording of the clause is important, and that it must be read in its context, against the background that it was designed as one part of a package of agreements intended to be concluded at the same time, and (on the view expressed above) in fact so concluded. Against that background, the words “any other agreement preceding the date of this agreement” are to be read as not excluding agreements which were part of that agreed package. I do not see it as material that the final signatures on the consultancy agreement were not achieved until some time later; that was a matter of mechanics not substance.

I conclude therefore that the judge’s overall conclusion was correct, and that the appeal should be dismissed.

I am happy to reach this conclusion, which is in accord with what I sense to be the merits of the case. I would add that, had I agreed with the Chancellor on the legal issues, I would not with respect have considered the appropriate order to be a direction for a new trial, as proposed by him. That might be appropriate if the only problem were that raised by the judge’s defective treatment of M Rongier’s evidence; but the resolution of that issue in the claimant’s favour would not get over the signature problem. On the Chancellor’s view of the law, as I understand it, that would be fatal to the claimant’s case in any event. It could only be overcome by widening the basis of the claim, for example to include estoppel by convention (as counsel for the claimants suggested). The Chancellor has also suggested how in the event of a new trial steps might be taken to fill the gaps in relation to the evidence of the French lawyers. I am sympathetic to both suggestions, but I do not think it is properly open to us to accept them. The claimants had their opportunity to plead their case on a wider basis, and both parties had their opportunity to fill the gaps in the evidence. They did not take those opportunities before the trial. I see no principled basis for us as an appellate court to give them a second chance. If the claimants have failed to prove the contract on which their pleaded case relied, the proper order in my view is judgment for the defendants.

However, for the reasons I have given, I would dismiss the appeal.

I agree that the appeal should be allowed, for the reasons given by the Chancellor, and that we should order a new trial. I acknowledge the need for a new trial with reluctance. The events to which the proceedings related took place nearly five years before the trial. No resolution was achieved until four and a half months after the hearing. I have, therefore, considered whether it is possible to reach any definite conclusion, in favour of one party or the other, as to what had been agreed. In particular, a bystander, hoping for expeditious justice in commercial transactions, might have thought it possible, to resolve , on the face of the documents and the behaviour of the parties, whether there was a shared intention that all the different parties should be bound, notwithstanding that all the agreements had not been signed.

But such a bystander would not have borne in mind the code of intransigent silence said to emanate from the French Lawyers’ Code of Ethics, which, as I understand, it was merely asserted, never proved and could, in the manner explained by the Chancellor, have been finessed. The purpose of the side letter, and in particular for whose benefit it was intended, thus remained without explanation. French tax linked to a French employment agreement was avoided by the use of Cheverny, an English company. Rongier’s evidence, flawed, for the reasons given by the Chancellor, did not provide any explanation whatever. It is, accordingly not possible to infer, from an objective assessment of the probabilities, to whose advantage such an agreement redounded, still less that both parties agreed that all agreements should take effect, once some of them had been signed.

Nor is it possible to infer from those few documents which were produced that M. Cléry-Melin and Mr Brassington had agreed that M. Beigbeder’s services in France should be rewarded and had instructed M. Olier to prepare a side letter, sent to and approved by M. Rongier. Such a finding (paragraph 50) was crucial to the judge’s reasoning. But it is not open to this court to reach such a factual conclusion, once M. Rongier’s written evidence had been so seriously undermined.

The agenda for the completion meeting, circulated by Clifford Chance, on 27 June 2000, was not regarded by the judge as independent evidence of a prior agreement of the side letter. At paragraph 56, he considers the agenda in the context of the evidence of M. Rongier. It is evidence that Clifford Chance were expecting its contents to be agreed, it is not evidence that it had been agreed. The same may be said of M.Olier’s letter dated 6^th July 2000. But neither of those two documents nor Mr Brassington’s e-mail response, on 8^th October, provide the necessary evidential basis that all parties had agreed to be bound before all agreements were executed.

Any such conclusion is further inhibited by the evidence of the lack of any comment on the absence of the side letter, when the originals of the consultancy agreement were produced. (paragraph 71 of the judgment). Even if one were to attribute M. Begbeider’s insouciance to the speculative explanation of the judge, it does not explain his lawyers’ jemenfichiste attitude to its absence. M. Begbeider does not seem to have had any concern at all at the absence of agreement (see paragraph 83).

If any doubts remained as to the significance of M. Rongier’s evidence, they must surely be dispelled by the judge’s own reliance on the credibility of that witness in dismissing the possibility that the side-letter was optional.

In short, the judge regarded M. Rongier’s evidence as central to his conclusions. Once his reliance on that evidence has been demonstrated to be erroneous, it seems to me impossible to resurrect the claimant’s case by alternative means; this was not an approach the judge himself felt able to adopt.

Accordingly, I am unable to find any basis for upholding the claim on an alternative basis, estoppel not having been pleaded.